MAINTAINING AND MAKING PUBLIC MINUTES OF FEDERAL RESERVE MEETINGS HEARINGS BEFORE THE SUBCOMMITTEE ON DOMESTIC MONETARY POLICY OF THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS HOUSE OF REPRESENTATIVES NINETY-FIFTH CONGRESS FIRST SESSION ON H.R. 9465 A BILL TO AMEND THE FEDERAL RESERVE ACT TO REQUIRE THAT DETAILED MINUTES OF FEDERAL OPEN MARKET COM­ MITTEE MEETINGS BE RELEASED TO THE GENERAL PUBLIC THREE YEARS AFTER THE DATE OF THE MEETING TO WHICH THEY RELATE H.R. 9589 A BILL TO REQUIRE THAT THE FEDERAL RESERVE BANKS SHALL KEEP VERBATIM TRANSCRIPTS OF ALL MEETINGS OF THEIR BOARDS OF DIRECTORS AND MAKE THEM PUBLIC UNDER CERTAIN LIMITATIONS OCTOBER 27, 28; NOVEMBER 17, 1977 Printed for the use of the Committee on Banking, Finance and Urban Affairs U.S. GOVERNMENT PRINTING OFFICE 99-331 O WASHINGTON : 1977 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS HENRY S. REUSS, Wisconsin, Chairman THOMAS L. ASHLEY, Ohio J. WILLIAM STANTON, Ohio WILLIAM S, MOORHEAD, Pennsylvania GARRY BROWN, Michigan FERNAND J. ST GERMAIN, Rhode Island CHALMERS P. WYLIE, Ohio HENRY B. GONZALES, Texas JOHN H. ROUSSELOT, California JOSEPH G. MINISH, New Jersey STEWART B. McKINNEY, Connecticut FRANK ANNUNZIO, Illinois GEORGE HANSEN, Idaho JAMES M. HANLEY, New York HENRY J. HYDE, Illinois PARREN J. MITCHELL, Maryland RICHARD KELLY, Florida WALTER E. FAUNTROY, CHARLES E. GRASSLEY, Iowa District of Columbia MILLICENT FENWICK, New Jersey STEPHEN L. NEAL, North Carolina JIM LEACH, Iowa JERRY M. PATTERSON, California NEWTON I. STEERS, Jr., Maryland JAMES J. BLANCHARD, Michigan THOMAS B. EVANS, Jr., Delaware CARROLL HUBBARD, Jr., Kentucky BRUCE F. CAPUTO, New York JOHN J. LaFALCE, New York HAROLD C. HOLLENBECK, New Jersey GLADYS NOON SPELLMAN, Maryland LES AuCOIN, Oregon PAUL E. TSONGAS, Massachusetts BUTLER DERRICK, South Carolina MARK W. HANNAFORD, California DAVID W. EVANS, Indiana CLIFFORD ALLEN, Tennessee NORMAN E. D’AMOURS, New Hampshire STANLEY N. LUNDINE, New York HERMAN BADILLO, New York EDWARD W. PATTISON, New York JOHN J. CAVANAUGH, Nebraska MARY ROSE OAKAR, Ohio JIM MATTOX, Texas BRUCE F. VENTO, Minnesota DOUG BARNARD, Georgia WES WATKINS, Oklahoma P a u l N e l s o n , Clerk and Staff Director W i l l i a m P . D i x o n , General Counsel M i c h a e l P . F l a h e r t y , Counsel G r a s t y C r e w s II, Counsel M e r c e r L . J a c k s o n , Minority Staff Director G r a h a m T. N o r t h u p , Deputy Minority Staff Director S ubcommittee o n D o m e s t ic M o n e t a r y P o l ic y PARREN J. MITCHELL, Maryland, Chairman STEPHEN L. NEAL, North Carolina GEORGE HANSEN, Idaho NORMAN E. D’AMOURS, New Hampshire HAROLD C. HOLLENBECK, New Jersey DOUG BARNARD, Georgia BRUCE F. CAPUTO, New York WES WATKINS, Oklahoma BUTLER DERRICK, South Carolina MARK O. HANNAFORD, California (II) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis CONTENTS Hearings held on— Pnjf© October 27, 1977-'_________________________________________________________ 1 October 28, 1977__________________________________________________________ 39 November 17, 1977________________________________________________________ 47 Text of— H.R. 9465_________________________________________ _________________ 3 H.R. 9589__________________________________________________________________ 5 Statements Burns, Hon. Arthur F., Chairman, Board of Governors of the Federal Reserve System______________________________________________________________ 49 Cavanaugh, Hon. John J., a Representative in Congress from the State of Nebraska---------------------------------------------------------------------------------------------------- 15 Hannaford, Hon. Mark W., a Representative in Congress from the State of California_________________________________________________________________ 8 Vento, Hon. Bruce F., a Representative in Congress from the State of Minnesota __________________________________________________________________ 39 A dditional I nformation Submitted for the Record Burns, Hon. Arthur F., letter dated July 27, 1977, expressing views on the Cavanaugh amendment to H.R. 8094_______________________________________ 51 Hannaford. Hon. Mark W .: Letter to Chairman William Proxmire of the Senate Banking Commit­ tee regarding H.R. 9465, with attached reply—._____________________ 13,14 Prepared statement______________________________________________________ 11 Mitchell, Chairman Parren J., opening statement___________________________ 7 Neal, Hon. Stephen L., Representative in Congress from the State of North Carolina and member of the subcommittee, statement____________________ 20 Dakar, Hon. Mary Rose, Representative in Congress from the State of Ohio, statement with attachments________________________________________ 25 Vento, Hon. Bruce F., excerpt from “ Shadows Over the Sunshine Act”, a Common Cause Study of Federal agency compliance with the Govern­ ment in the Sunshine Act of 1976 (September 1977)_____________________ 65 Williams, Prof. Walter of Temple University, statement_________ ____ ____ 49 A ppendixes Appendix I.— “Correspondence and material of Chairman Henry S. Reuss, House Banking, Committee regarding the negotiating with Chairman Arthur F. Burns of the Federal Reserve Board for the acquisition of minutes of the meetings of the Boards of Directors of the 12 Federal Reserve regional books_____________________________________________________ 69 Appendix II.— “Public Access to Records of Federal Open Market Com­ mittee Deliberations: Evolution of Policies Preceding the Decision to Terminate Maintenance of Detailed Records”, paper prepared by Roger S. White, analyst in money and banking, Economics Division, Congres­ sional Research Service, Library of Congress____________________________ 131 Appendix III.— Compilation of opinions received from prominent business leaders and economic professors 011 H.R. 9465 and H.R. 9589___________ 187 ( h i ) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis MAINTAINING AND MAKING PUBLIC MINUTES OF FEDERAL RESERVE MEETINGS THURSDAY, OCTOBER 27, 1977 H ou se of R epresentatives , S ubcommittee o n D o m e s t ic M o n e t a r y P o l ic y of t h e C o m m it t e e o n B a n k i n g , F in a n c e a n d U r b a n A f f a ir s , Washington, D.C. The subcommittee met at 8:35 a.m. in room 2222 of the Rayburn House Office Building; Hon. Parren J. Mitchell (chairman of the subcommittee) presiding. Present : Representatives Mitchell, Barnard, and Hansen. Chairman M i t c h e l l . Ladies and gentlemen, the hearing w ill come to order. I work under the theory that neither late night sessions nor early morning rain should delay the beginning of a hearing, so we will now commence the hearings of the subcommittee. This morning the Subcommittee on Domestic Monetary Policy of the Committee on Banking, Finance and Urban Affairs will hold hearings on H.R. 9465 and H.R. 9589. These bills require mainte­ nance of detailed records of meetings of respectively, the Federal Open Market Committee (FOMC) of the Federal Reserve System and the Boards of Directors of the 12 Federal Reserve Banks. Specifically, H.R. 9465, which was introduced by our colleague, Hon. Mark W. Hannaford of California, provides for reinstatement of the FOMC’s “Memoranda of Discussion” for all FOMC meetings, with its release for public consumption scheduled 3 years after the meeting is held. H.R. 9589, the Federal Reserve Public Information Act, which was introduced by our colleague, Hon. John J. Cavanaugh of Ne­ braska, requires maintenance of verbatim transcripts of all meetings of the Boards of Directors of the 12 Federal Reserve Banks, and provides for their submission to the Congress after a lag time period of 1 year. The legislation before us is controversial. The question of whether to keep and publish minutes of FOMC meetings has been embroiled in controversy since the creation of the FOMC by the Banking Act of 1935. It was only after prolonged and sometimes heated debate that the Open Market Committee finally decided in 1964 to release the discussion memoranda, which are based on the FOMC minutes, for the first time, and then only for 1959 and earlier years. So you can see that these hearings are not breaking new ground. The intro­ duction of H.R. 9465 and H.R. 9589 reflect growing concern that the (l) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 2 public is not now getting all the information it needs to monitor and evaluate the performance of the Nation's money managers: the per­ sons to whom the Congress has delegated its awesome constitutional powers to control the supply of money and regulate its value. The Federal Reserve is the delegate through which our monetary policy is carried out. Within the Federal Reserve, the Federal Open Market Committee is the body primarily responsible for the formula­ tion and implementation of that policy. Any effort by the public to monitor and assess monetary policy necessarily requires information dealing with the FOM C’s decision processes and the underlying rea­ sons for its actions. There are three elements common to H.R. 9465 and H.R. 9589 on which our deliberations will focus. These are: one, the nature of records maintained; two, their availability to the public; and three, if they are made available, the timing o f their release. [The text of H.R. 9465 and H.R. 9589 follow :] Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 3 95t hteS- CONGRESS H.* • R. 9465^ j IN THE HOUSE OF REPRESENTATIVES October 6,1977 Mr. H annaford (for himself, Mr. C avanau gh , Mr. H a n le y, Mr. M attox, Mr. M itchell of Maryland, Ms. O akar, Mr. P atterson of California, and Mr. V ento) introduced the following bill; which was referred to the Committee on Banking, Finance and Urban Affairs A BILL To amend the Federal Reserve Act to require that detailed minutes of Federal Open Market Committee meetings be released to the general public three years after the date of the meeting to which they relate.