[Federal Register Volume 68, Number 25 (Thursday, February 6, 2003)]
[Rules and Regulations]
[Pages 6061-6062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2582]



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 Rules and Regulations
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  Federal Register / Vol. 68, No. 25 / Thursday, February 6, 2003 / 
Rules and Regulations  

[[Page 6061]]



FEDERAL RESERVE SYSTEM

12 CFR Part 272

[Docket No. R-1142]


Federal Open Market Committee; Amendment to Rules of Procedure

AGENCY: Federal Open Market Committee.

ACTION: Final rule.

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SUMMARY: The Federal Open Market Committee has amended its definition 
of a quorum of the Committee. The amendment is designed to enhance the 
Committee's ability to perform its functions in the event of a national 
emergency.

DATES: The rule is effective February 6, 2003.

FOR FURTHER INFORMATION CONTACT: Kieran J. Fallon, Senior Counsel (202-
452-5270), Legal Division; Board of Governors of the Federal Reserve 
System; or Normand R.V. Bernard, Deputy Secretary (202-452-3606), 
Federal Open Market Committee, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551. Users of Telecommunication Device for Deaf 
(TTD) only, call (202) 263-4869.

SUPPLEMENTARY INFORMATION: The Federal Open Market Committee 
(Committee) is composed of (1) all of the members of Board of Governors 
of the Federal Reserve System (Board), and (2) five representatives of 
the Federal Reserve Banks elected in the manner provided in the Federal 
Reserve Act (Act).\1\ Because the Board has an authorized membership of 
seven Governors, the Committee has a maximum authorized strength of 12 
members (7 Board members and 5 Federal Reserve Bank representatives).
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    \1\ See 12 U.S.C. 263(a). Pursuant to the Act, the Federal 
Reserve Banks also elect an alternate for each primary Federal 
Reserve Bank representative on the Committee. Each alternate is 
authorized to serve on the Committee in the absence of the relevant 
primary representative. Each primary and alternate Federal Reserve 
Bank representative on the Committee must be a President or First 
Vice President of a Federal Reserve Bank. Id.
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    The Act does not define a quorum of the Committee. Since the 
current structure of the Committee was established in 1936, the 
Committee itself has defined a quorum of the Committee to be seven 
members, including alternates serving in place of a primary Federal 
Reserve Bank representative.\2\
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    \2\ See 12 CFR 272.3(c). From 1936 to 1973, the Committee's 
quorum rule was reflected in the Committee's By-Laws. See Minutes of 
the Committee's Meeting of March 18, 1936. In 1973, the Committee's 
By-Laws were rescinded and the Committee's quorum rule was 
incorporated into the Committee's Rules of Procedure. See 38 FR 
2754, Jan. 30, 1973.
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    The Committee's current quorum rule would prevent the Committee 
from taking action, including adjusting the Committee's target for the 
federal funds rate, if an act of war, terrorist attack or other 
catastrophic event reduced the membership of the Committee to below 
seven members (including alternates). In light of this possibility, the 
Committee has amended its definition of a quorum of the Committee. 
Under the Committee's amended rule, a quorum of the Committee will 
continue to be seven members unless there are fewer than seven members 
of the Committee in office, in which case a quorum of the Committee 
will consist of the number of members in office. As under the current 
rule, alternates serving in place of an absent primary Federal Reserve 
Bank representative are considered members for purposes of determining 
whether a quorum of the Committee is available.
    The Committee believes that the revised quorum rule will enhance 
the Committee's ability to fulfill its critical monetary policy 
responsibilities in a national emergency. At the same time, the revised 
rule should not alter the functioning of the Committee in normal 
operating environments. As noted above, under the revised rule, a 
quorum of the Committee would continue to be seven members whenever 
seven or more members of the Committee are in office. The Committee 
notes that the Securities and Exchange Commission (SEC) has revised its 
quorum rule in a similar fashion to ensure that the SEC could continue 
to function if the 5-member SEC ever had fewer than 3 commissioners in 
office.\3\
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    \3\ See 17 CFR 200.41; 60 FR 17201, Apr. 5, 1995. The enabling 
statutes of the SEC, like those of the Committee, do not define a 
quorum of the SEC. The SEC's revised quorum rule has been upheld by 
two separate Federal courts. See Falcon Trading Group, Ltd. v. SEC, 
102 F.3d 579 (D.C. Cir. 1996); SEC v. Feminella, 947 F. Supp. 722 
(S.D.N.Y. 1996).
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    The amended rule relates solely to the internal procedure of the 
Committee. Accordingly, the public notice, public comment and delayed 
effective date provisions of the Administrative Procedure Act do not 
apply. See 5 U.S.C. 553(b) and (d). Because public notice and comment 
is not required, the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
also does not apply to the amended rule.

List of Subjects

    Administrative practice and procedure, Federal Open Market 
Committee, Organization and functions (Government agencies).
    For the reasons set out in the preamble, the Federal Open Market 
Committee amends 12 CFR part 272 as follows:

PART 272--FEDERAL OPEN MARKET COMMITTEE--RULES OF PROCEDURE

    1. The authority citation for part 272 continues to read as 
follows:

    Authority: 5 U.S.C. 552.


    2. Section 272.3(c) is revised to read as follows:


Sec.  272.3  Meetings

* * * * *
    (c) Quorum. Seven members constitute a quorum of the Committee for 
purposes of transacting business except that, if there are fewer than 
seven members in office, then the number of members in office 
constitute a quorum. For purposes of this paragraph (c), members of the 
Committee include alternates acting in the absence of members. Less 
than a quorum may adjourn a meeting of the Committee from time to time 
until a quorum is in attendance.
* * * * *


[[Page 6062]]


    By order of the Federal Open Market Committee, January 30, 2003.
Vincent R. Reinhart,
Secretary, Federal Open Market Committee.
[FR Doc. 03-2582 Filed 2-5-03; 8:45 am]
BILLING CODE 6210-01-P