WASHINGTON -- House Banking Committee Chairman Henry B. Gonzalez has introduced a bill to require greater disclosure of the Treasury Department's intervention in foreign currency markets.
The bill also would require the Federal Reserve to report to Congress on the impact of exchange rates on monetary policy, as part of its semiannual report.
"Exchange rates have a significant impact on our economy, yet there is little public discourse on the goals of the administration's exchange rate policy and how that policy impacts monetary policy," the Texas Democrat said.
Rep. Gonzalez has been an outspoken critic of the Fed, repeatedly calling on the central bank to disclose more information about their actions. The latest proposal comes as part of the lawmaker's strategy for strengthening oversight of international financial markets, which includes closer oversight of banks' derivatives activities.
Sees Swaps as Loans
The banking committee chairman has been hounding the Fed for months on its foreign-exchange swap arrangements, which enable the Fed to intervene in currency markets through the purchase or sale of dollars to a foreign government.
As part of the deal, the two agree to reverse the exchange of dollars and foreign currency through a swap - at a later date.
The lawmaker characterizes the swap deals as billion-dollar loans backed by taxpayer money.
He has questioned whether the central bank has legal authority to establish these arrangements without congressional approval.
"The Federal Reserve essentially uses its $30 billion swap fund to make loans to foreign countries without any Congressional approval or oversight and American taxpayers are left to wonder whether their monies now in the hands of a foreign government - are indeed safe,' he said in a recent letter to Fed Chairman Alan Greenspan.
But Mr. Greenspan, also in a letter, dismissed characterization of the deals as loans, and said they are used by many central banks. He also said the Fed has authority to establish the swap network through the Fed eral Reserve Act.
The lawmaker has demanded more information from the Fed about the fund.
In addition to requiring greater disclosure about these arrangements and their implications for monetary policy, Rep. Gonzalez's bill would modify the Humphrey-Hawkins Act to require the Treasury secretary to appear along with the Fed chairman at monetary policy hearings twice each year.
The secretary would be required to discuss the goals of the administration's exchange-rate policy, along with its impact on employment, growth, inflation and international competition.
In addition, the administration would be required to notify Congress within 24 hours of intervening in foreign currency markets.