WASHINGTON -- Sixteen top Federal Reserve officials Tuesday vehemently defended the central bank's veiled disclosure of key monetary policy decisions.
In a unified rebuttal to congressional proposals for greater openness, Federal Reserve governors and district bank presidents said that limited and delayed disclosure of their deliberations is needed to ensure flexible, sound decision-making.
"We would like to have everything out in the open," said Fed Chairman Alan Greenspan. "The only trouble is: Were we to do that, we wouldn't be able to do our jobs."
Gonzalez's Legislation
Fed officials appeared before the House Banking Committee, which is holding a series of hearings on a proposal to improve disclosure and accountability at the Fed. Committee Chairman Henry B. Gonzalez, D-Tex., has introduced a bill to require presidential appointment of district bank presidents, as well as expanded and more timely release of monetary policy decisions.
Currently, Fed presidents are named by their district boards, with the approval of the Washington board. Monetary policy decisions are released about 45 days after they are made, along with a summary of the meeting.
"If the White House, the Supreme Court, the Defense Department, and every other government agency [can] keep accurate records of what they are doing, why not the Federal Reserve?" Rep. Gonzalez asked. "Are decisions by these parts of our government less sensitive than those made at the Federal Reserve?"
Fed officials told the committee that earlier disclosure of monetary policy decisions would deny them the flexibility of setting contingency plans for varying economic conditions.
"Immediate disclosure of the directive would change the nature of monetary policymaking," Mr. Greenspan said, "and it would not be a change for the better."
And complete disclosure of Federal Open Market Committee deliberations -- through videotape or transcript -- would hinder frank and open discussion of the economy and possible Fed responses, they said.
"We currently don't posture for the record or for the camera," said Dallas Fed President Robert McTeer. "There is no playing to the gallery or to the folks back home. This, I'm afraid, would all change with videotaping or its equivalent."
The hearing was the first to which the entire top echelon of Fed policymakers -- both governors and district president -- had been summoned. Only two top officials -- Vice Chairman David W. Mullins and New York Fed President William J. McDonough -- did not attend. Both submitted testimony, however.
Earlier this year, all 12 district presidents appeared together for the first time before the Senate Banking Committee. And Rep. Jim Leach, R-Iowa, hinted that such hearings could grow more common.
He suggested that the committee invite the entire pack back during Mr. Greenspan's semiannual report to Congress on monetary policy.
Lawmakers have said they are concerned that because district presidents are appointed by their local boards -- which include bankers -- they are beholden more to the banking industry than to the public.
"It simply is unacceptable for regulators, in any sense, to be accountable to boards which, in turn, are controlled by the regulated," Rep. Leach said.
But one by one, Fed officials decried proposals to change the selection process, saying it would centralize the institution's uniquely regional nature.
Jordan Wouldn't Want Job
Cleveland Fed President Jerry L. Jordan offered the strongest response: "If you make your changes, this is a job I would not want," he said. "It would destroy the system."
While Rep. Gonzalez's far-reaching proposal is not expected to pass Congress in full, sentiment appears to be growing on Capitol Hill that the Fed should open its doors to the public at least a little.
After hearing of Fed precautions against leaks of monetary policy decisions -- including taping over audio records of the meetings, destroying notes, or locking records in safes -- some lawmakers expressed even more concern.
"I was a little shaken by the testimony today," said Rep. Toby Roth, R-Wis. "I think we're coming to a point where all these things are going to have to be made public, whether we like it or not. I think the public is going to demand that."
