Bill Would Scrap Fed's Open Market Committee
WASHINGTON - In the latest move by Congress to reform the management of monetary policy, Sen. Paul Sarbanes, D-Md., has introduced a bill to disband the Federal Open Market Committee.
His Monetary Policy Reform Act of 1991 would place "full responsibility for the conduct of monetary policy with the Federal Reserve's Board of Governors," Sen. Sarbanes said at a hearing of the Senate Banking Committee.
Advisory Panel Proposed
Five regional Federal Reserve Bank presidents now sit with the seven governors on the committee that oversees monetary policy.
Sen. Sarbanes' bill would put the regional presidents on a Federal Open Market Advisory Committee, which would have no formal policy vote.
The bank presidents, who are not subject to congressional confirmation as are Fed governors and other presidential appointees, "are not public officials," Sen. Sarbanes said.
He said the FOMC exercises "enormous power [but] does not conform to normal standards of government accountability."
Rep. Lee H. Hamilton, D-Ind., who introduced a similar measure in the House last August, applauded Sen. Sarbanes' proposal.
Rep. Byron Dorgan, D-N.D., who cosponsored the House bill, said supporters are not "Fed bashers" but want to revise the system to meet conditions.
"The recession falls on the heels of almost dangerous and reckless fiscal policy," Rep. Dorgan said. "The result is that monetary policy has to carry the load" - and the people who set the policy should be answerable to the public.
Preston Martin, a former Fed vice chairman, agreed with the legislators that the system needs reform, but he saw no need to "shake up the Fed too badly."
"Once you're sitting on the Board of Governors, you play it straight," said Mr. Martin, who is chief executive officer of WestFed Holding Inc.
Ms. Hockstader writes for the Medill News Service.