WASHINGTON -- Comptroller General Charles A. Bowsher told Congress Wednesday that his agency could expand its role in auditing the Federal Reserve, but said safeguards should be legislated to maintain the central bank's independence.
Among other precautions, Mr. Bowsher said the General Accounting Office should be prohibited from disclosing confidential documents and should be subject to certain time delays in receiving access to some information from the Fed.
"With these safeguards, we could not use our expanded authority to undertake contemporaneous reviews of the Federal Reserve's monetary policy decision-making functions," he said.
Disruption of Markets
"Also, immediate disclosure of information about Federal Reserve decisions in a situation such as the stock market break of October 1987, might not be in the public interest because it could disrupt the financial markets," he added.
Mr. Bowsher did not urge expansion of the GAO's role in auditing the Fed, saying only that its access to information should be "commensurate with the types of audits Congress wants us to do."
He did say, however, that a proposal to require financial audits of the district Federal Reserve banks and the board of governors would be useful.
"If the restrictions on our access were removed, we would be better able to assess the quality of financial controls and auditing in the Federal Reserve System and make recommendations for improvements," he said.
House Banking Committee chairman Henry B. Gonzalez, D-Tex., has introduced legislation that would increase disclosure of monetary policy decisions and give the GAO wide-ranging access to information about the Fed, including open market operations, transactions with foreign banks, and discount window operations.
Wednesday, one key banking committee Republican made it clear that his support for Rep. Gonzalez's efforts to overhaul the Fed does not include proposals for congressional audits of the central bank.
Rep. Jim Leach of Iowa, the banking committee's ranking Republican, said he is sympathetic to calls for greater public accountability of Fed decision-making and supports early release of Federal Open Market Committee minutes.
"However, I have grave reservations about the potentially more draconian action of expanding GAO investigation -- some call it audit -- authority to the monetary policy functions of the of the Fed," he said. The General Accounting Office is the investigative arm of Congress.
Most observers believe prospects for Rep. Gonzalez's legislation are dim. But support from Rep. Leach would likely be crucial.
Rep. Gonzalez also criticized the Fed for permitting employees to accept meals and gifts "from the very banks they regulate," and said the practice proves the need for increased audits.
New York Federal Reserve Bank president William J. McDonough said the bank is "sensitive to the appearances of such things."