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COMMITTEE ON BANKING ,HOUSING,AND URBAN AFFAIRS
JAKE GARN , Utah, Chairman

1

JOHN HEINZ, Pennsylvania

WILLIAM PR OX MIR E , Wisconsin

WILLIAM L. A RM S TR O NG , Colorado
AL F ON SE M. D'AMATO , New York
SLA DE G OR TON , Washington

ALAN CRANSTON ,California
DONALD W. RIEGLE,JR.,Michigan

MACK MATTINGLY,Georgia

CHRISTOPHER , J. DODD , Connecticut

CHIC H E C H T , Nevada

A L A N J. DIXON , Illinois

PHIL G R A M M ,Texas

P A U L S. SARBANES , Maryland

JIM SASSER,Tennessee
M. DANNY WALL, StaffDirector
KENNETH A. McLEAN, Minority StaffDirector
W. LAMAR SMITH, Economist
(II)

IV
Page

Int
rasession recess appointments by the lastfour Presidents,submitted by
Senator Garn from Congressional Research Service......

95

Lettersreceived insupportofnominee:

Credit Union National Association.......

108

Michigan Credit Union League .....
U.S. Representative in Congress, William S. Broomfield

109

Michigan Retailers Association
Union Carbide Corp ......
Society ofConsumer Affairs Professionals in Business
. .. . .

National Association of Federal Credit Unions ....

110
111

112
113
114

Letter in support of: The American Bankers Association, Credit Union
National Association ,National Association of Federal Credit Unions,
Association of Bank-Holding Companies, Independent Bankers Associa
tion of America,and U.S. League of Savings Institutions

115

NOMINATION OF M A R T H A R O M A Y N E SE G ER TO
BE A M E M B E R OF THE BOA RD OF G O V E R
NORS OF THE FEDERAL RESERVE SYSTEM
WEDNESDAY , M ARCH 27, 1985
U.S. SENATE,

COMMITTEE ON BANKING,HOUSING,AND URBAN AFFAIRS,
Washington,DC.
The committee met at 9 a.m., in room SD-538, Dirksen Senate

Office Building, Senator Jake Garn (chairman of the committee)
presiding.

Present:Senators Garn, Gorton,Mattingly,Hecht, Gramm,Prox
mire,Cranston, Riegle, Sarbanes, Dodd, Dixon, and Sasser.

Also present,William S.Broomfield, U.S. Representative in Con
gress from the State ofMichigan.
OPENING S T A T E M E N T O F C H A I R M A N G A R N

The CHAIRMAN.The Banking Committee will come to order.

Dr. Seger, lastyear in 4 days of hearings beforethis committee
we had one of the most thorough examinations of a Federal Re
serveBoard nominee inrecent memory,certainly since Ihave been
on this committee in the last 10 years. That nominee, of course,

was you to be a member ofthe Board of Governors of the Federal

Reserve System.Questions were asked about your qualifications to
be a Governor ofthe Federal Reserve System , on your views on

monetary policy,the importance ofdeficitreduction,the independ
ence ofthe Fed, the situation with Continental Illinois,internation

al lending, and banking legislation. The hearing record spanned
345 pages:
I said last year that I think the President made an excellent

nomination, that you have a finebackground and experience,that
you have been an excellent member ofthe Federal Reserve Board
since your appointment last summer.I again support your nomina
tion .

At this time we are happy to turn to Congressman Bill Broom
field.We are happy and honored to have youhere this morning for
any purpose thatyou would like, and I would assume it is to make
a recommendation and an introduction.

Senator PROXMIRE. Mr. Chairman, I have an opening statement.
I will make itany time you wish,but go ahead.

The CHAIRMAN. Excuse me.I didn'tintend to,but I ignored my
distinguished colleague from Wisconsin,and I will turnto him for
his opening statement. I was getting ahead of myself in order to
(1)

2

accommodate Senator Hecht who has to run off to the Intelligence
Committee .
.

OPENING STATEMENT OF SENATOR PROXMIRE
Senator PROXMIRE. I understand he has to run off and he's a

very faithful member ofthiscommittee.
Mr. Chairman, this marks the second hearing of the Senate

Banking Committee on thenomination ofMartha Seger to the Fed
eral Reserve Board. Last June, our hearings were concerned with

whether Dr. Seger was qualified for the job. Her appearance today

raises a new issue that goes well beyond her qualifications and
that is the growing misuse ofthe recess appointment authority by
President Reagan.

According to a study prepared by the Library of Congress,
Ronald Reagan isthechampion recess appointer ofany President
in recent history. During his first term,he averaged 28 recess ap

pointments per year,breaking the old record of 25 held by Presi
dent Harry Truman during his almost two terms. Jimmy Carter

averaged 15 recess appointments per year during his tenure,
Gerald Ford averaged only 3,and both Richard Nixon and Lyndon
Johnson averaged only 7.

The tendency of President Reagan touse recess appointments
seems to have accelerated sharplyin 1984 when he made 58 recess
appointments.Thisbreakstheall-time 1-year record previously set
by President Eisenhower in 1953. Mr. Chairman, I ask that this
reportbe made part oftoday's hearing record.
[See p.65.]

What arethe facts in the case ofDr. Seger? On June 4,1984,her
nomination was submitted to the Senate.The Banking Committee
promptly held hearings on June 19,20,21,and 22. The committee

then met on June 28and ordered her nomination reported to the
Senate on a straight party line vote of 10 to 8. The next day, a
Friday,the Senate adjourned for 3 weeks for the Democratic N a
tional Convention .

As soon as the Senate adjourned, President Reagan moved swift

ly to take advantage ofourabsence.On Monday,he gave Dr. Seger
a recess appointment to the Board before the full Senate even had
an opportunity to consider the nomination. There was no official

explanation ofhis actions.
The Constitution gives the President the power to make recess

appointments.However, the Constitution was drafted nearly200

years ago at a time when Congress was expected to be in recess for

as long as 8 or 9 consecutivemonths. Obviously, under those cir
cumstances, a President must be able to make appointments to
keep the Government running.But there isno evidence the Found
ingFathers ever contemplated recess appointments would be used
during a 3-week recess.Nor was there any emergency in the Feder

al Reserve System that required Dr. Seger's immediate appoint

ment. Paul Volcker has testified that he did not ask for a recess
appointment and saw no need for it.

Why then thebigrush?In the absence ofany explanation bythe

President,thisSenator can only surmise that he wanted to avoid a
difficult floor debate over her nomination. In effect, the President

3

misusedhisrecess appointment authority tofrustrate the abilityof

a Senate minority, acting under the rules of the Senate, to chal

lenge and possibly defeat a Presidential nomination. Once Dr.
Seger was a sitting Board member it became far more difficult to
persuade a majorityofthe Senate that she was not qualified.
Some Members of themajority party professto see nowrong in
the President using his recessappointment authority to slip a con
troversial appointment through the Senate in orderto circumvent

the opposition politicalparty. But this issue far transcends parti
san politics. This President has shown an increasing contempt for

the constitutional prerogative of the Senate and issetting prece
dents that will one day come back to haunt the Members of the
majority party

Every Member of the Senatemustlook to his or her own con
scienceto determine what isright in this case.All Ican say isthat
had the shoe been on the other foot when I was chairman of this

committee and had President Carter tried to slip a controversial

nominee throughthe Senatethrough a bogus recessappointment,I
would haveraised theroof,both privatelyand publicly, regardless
ofwhether Isupported the nomineeor not.Itisnot simply the mi
nority party's rights that are being trampled,itisthe rightsofthe
Senate under our Constitution that are being infringed.Pushed to
its logical extreme, recess appointments can render the Senate's
power to adviseand consent onnominationsa virtual nullity.
I have nottalkedto any of my Democraticcolleagues about this
nomination.But I for one intend to oppose it— notonly because I
believe Dr.Seger is notqualified,but more importantly, because I

strongly believe a votefor her nomination willmake the Senate a
willing accomplice to President Reagan's outrageous misuse of his
authority. Ifwe want the respect that isdue tous under the Con
stitution,then we mustbeginacting likeSenators.We must say no
to the President when heis wrong. And we must not let political
expediency cloud ourjudgment about upholding the proper role of

the Senate.

The CHAIRMAN.Senator Hecht.
OPENING STATEMENT OF SENATOR H EC H T

Senator HECHT.Thank you,Mr. Chairman.Iam pleased todayto
endorse the nomination of Martha Seger to be amember ofthe
Board of Governors of the Federal Reserve and urge quick approval

so that she can get on with thejob for which she came to Washing
ton .

Mr. Chairman, from the first timeI met Dr. Seger I was deeply
impressed by her straightforward attitudeand practical experience.
She has been a State banking commissioner,hashands-on banking
experience, taught at a variety of institutions ofhigher education,
worked for General Motors, worked in the capital markets division

of the Federal Reserve here in Washington,and the Federal Re
serve ofChicago.

These typesof practical experiences should be prerequisites for a
jobat theFederal Reserve. It is far too often the people in such
positions lack this necessary exposureto the real world outside of

Washington's Hallowed Halls. One might say that she has got a

4

Ph.D. suma cum laude from the school of hard knocks and has an
understanding and sensitivity to the economic needs of the busi
ness community .

As I statedlast year during her nomination hearing, Dr. Seger

definitely bridgesthe gap between the coldnessof economics and
the reality that is thebusiness world. Over these past several
months during which she has been exercising her duties at the

Federal Reserveon a temporarybasis she has strengthened my
faith in her ability to serve this Nation with dignity,honor, and

accomplishment

Again, I endorse thisnomination unconditionally and urge my

colleagues on the committee to do the same.

Dr.Seger,Ilookforward toworkingwith you in the future.
Thank you,Mr. Chairman.
The CHAIRMAN . Senator Dixon .

Senator Dixon.Mr. Chairman,I would like to advise you that I
have two other meetings right now pending — the Agriculture Com

mittee meeting and the Armed Services Committee meeting —so
with the leaveof the Chair, I am going to put a statement in the
record.

The CHAIRMAN.Without objection,so ordered.
STATEMENT OF SENATOR DIXON

Senator DIXON. Mr. Chairman, I am pleased to be here this

morning to hear from Martha Seger, who has been nominated by

the President to serve as a Governorof the Federal Reserve Board.
As everyone knows,Martha Seger is currently serving on the
Federal Reserve Board; she was given a recess appointment by
President Reagan afterthe Senatefailed to act on her nomination
last year.

It is,for me,therefore,a rather unusual nomination.Ihave not
run across any other situation since I came to the Senate where

the Senate is being asked to advise and consent to the nomination
of a person who iscurrently holding the office, but who has never

been previously confirmed by the Senate. This nomination, there
fore, raises additional issues unrelated to the qualifications ofthe
nominee .

On the other hand, this fact gives the committee additional evi

dence regardinghow Dr. Segerwouldperform inofficeifconfirmed

that is not ordinarily available.
I have to confess that,when the committee considered this nomi

nation last year,I didnot believethat the Senate should give its
advice and consent. However, as I stated earlier, the committee

now has the additional evidence ofMartha Seger's actual perform
ance in office. I am not closeminded on this nomination,therefore,

Iwill say to the nominee,I look forward to her testimony before
the committee.

The CHAIRMAN.Congressman Broomfield.
STATEMENT OF WILLIAM S. BROOMFIELD ,U.S.
R E P R E S E N T A T I V E IN C O N G R E S S F R O M T H E S T A T E O F M I C H I G A N

Representative BROOMFIELD. Thank you very much,Mr. Chair
man .

5

Iwant tothank you forthe opportunityto appearbeforeyoufor
a second time in support ofm y constituentand good friend,Feder
al Reserve Board member Martha Seger.

Inview ofthe hearingsthiscommitteeconducted last summer on
Dr. Seger's nomination, Icertainlywon't take the time to repeat
her outstanding qualifications which are well known to all ofyou.
Since those hearings were held, Dr. Seger hasdemonstratedher

credentials by serving very ably as a voting member ofthe Federal
Reserve.

In addition, the problems which have surfaced recently in some

ofour State banking systemsmakes Dr.Seger anespecially impor
tant and timelyaddition to theFederal Reserve. Her experience as
Michigan State Banking Commissioner gives Dr. Seger a unique in
sight and certainly understandingofthose problemsand makes her
confirmation even more urgent.

Mr. Chairman,in view of all these considerations,I respectfully
urge that these hearings be completedas quickly as possible so

that Dr. Seger can focus her talents and energyon the important
work she isnow doing as a member ofthe Federal Reserve.

I thank you very much for this opportunity to appear this morn
ing.

The CHAIRMAN.Thank you.We appreciate your attendance here.
Dr. Seger,do you have a statement?
Dr. SEGER. I do have a short statement to make.

The CHAIRMAN.Please proceed with yourstatement.
STATEMENT OF MARTHA SEGER,NOMINATED FOR M E M B E R OF
THE BOARD OF GOVERNORS,FEDERAL RESERVE SYSTEM
Dr. SEGER. Chairman Garn, Senator Proxmire, and other m e m

bers of the committee, thanks so much for giving me a chance to

take a few minutes to share with you my views on the economy,

monetary policy,and some regulatorymatters.
B U S I NE S S S T R E N G T H E N E D IN L A T E 1984

After a slowdown in overall economic activity last summer and

early fall, businessstrengthened in late 1984,wrapping up the
second yearofour Nation's recovery.To be specific,growth in real
GNP picked up to an annual rate of444 percent from about 142

percent in thethird quarter. Althoughthispattern wasinfluenced
bythe auto strikein September and the resumption ofoutput in
October, thereduction in the current account deficit with foreign
countries had a greater impact. Other measures of performance
such asthe industrial production index, housing starts, and retail
sales - also showed apause followed by a rebound.

Today,a cursory view ofthe American scene suggests thatthings
look quite good. Total employment, personalincome, and retail
sales are all—using February data -at record high levels while

popular price indices suggest that inflation remains rather sub
dued. And on the financial side,interest rates are far below their
1981-82 record highs.

Butas March draws to a close, new signs are appearingthat the
growth of domestic output is slowing once again. The flash esti
mate of real GNP growth for the first quarter was a modest 2.1
45-819 0 - 85 - 2

6

percent,roughly halfthat ofthe previous quarter.While flash esti
mates are very tentative and subject to substantial revision over
the next few months,recent behavior of the industrialproduction
index also suggests some weakness. Indeed,output of the Nation's
factories andmines declined one-half percent in February, follow
ing three small monthly gains,and now is below the levels of last
summer. Unemployment also is no better than its June 1984 rate.

Domesticspending,especially by consumers,hasnot shown a com
parable slowdown but has continued robust as foreign imports re

place more and more domestically produced goods.Monetary pol
icymakers must carefully monitor the economy's overall perform
ance to detect further signs of deterioration and to prevent a slow
down from becoming a downturn.
THRIFT INDUSTRY IS FRAGILE

There are,however,some specific sectors ofthe economy already

faced with bigproblems,and Iwant to assure you thatI am not

only aware ofthem but also concerned about them .First,the Na

tion's thrift industry is veryfragile. Although the news from Ohio

the last few weeks concerned some 71 small institutionsin a single
State, the plight of the thrifts is far more general and widespread.
In 1981 and 1982, most U.S. thrifts lost money because of a mis

match between maturities ofassets and liabilities, the so-called gap
problem . As interest rates and cost of funds fell, the institutions

that survived that period experienced some turnaround.But not
enough time has been allowed for the healing process to be com
pleted; net worth positions areon average very skimpy; some gap
problemsstill exist; and, for the first timein decades, problems

with creditquality are cropping up.As the No. 1provideroffunds
to our Nation's housing industry,S&L's are worth preserving in a
viable form .

Another sector I am deeply concerned about is agriculture.
Farmers with heavy indebtedness are having a difficult time meet
ing their obligations in the face of depressed commodity prices,
weak export demand, and a deflation in farm real estate values. As

more and more default on their debt obligations, small towns in
rural areas feel the tremors and farm lenders are weakened . In

fact, about a dozen agricultural banks have failed so far this year.
Numerous nonagricultural banks are also experiencing asset
quality problems.Those who hadbeen activelenders to energy-re
lated companies,real estate,and ThirdWorld nationshave report
ed surges in nonperforming loans and big loan writeoffs.
THIRD W O R L D DEBT

Speaking of Third World debt,significant progress has been
made by commercial banks during the past year in restructuring a

large chunk ofthis debt,but the job is not yet finished, and the
IMF isstillworking withindividual countriesto get their financial
houses in order.The numbers are huge and,since the rates tend to
float, even a 1-percentage point rise in interest rates has a tremen

dous effect on borrowers. In the case ofBrazil,that uptick would
add roughly $1 billion a yearto debt service requirements.

7

Moreover,the so-called American superdollar ischallenging pol
icymakers and making life difficult fornumerous companies in var

ious industries. The cumulative rise ofthe dollar- roughly 75 per
cent- over the past 4 years has priced more and more American

exporters out of the world markets. The group includes such di
verse entities as farmers, machine tool builders,auto parts makers,
construction machinery producers, and others. At the same time,
the strong dollar has led to a surge of imports and tremendous
competition for American firms in domestic markets. I have heard

thesestoriesfirst hand from people in Cincinnnati,OH ; Racine,
WI; Detroit, Kalamazoo, and Muskegon, MI;Louisville, KY; Pitts
burgh, PA ;and Peoria, IL.

Given the economic conditions mentioned earlier and the long

list of specific challenges, what has been going on in the realm of
monetary policy ?Monetary policy was eased late lastsummer fol
lowing a dramatic slowdown in monetary growth and substantial
evidence of weakness in economic activity.Interest rates declined
rather generally from summer until January, with the drop in
short rates a significant 2 to 3 percentage points and in long rates
a more moderate 1-plus points.

By November,monetary aggregates were expanding rapidly once
again andthe economic pause seemed to be coming to an end.

Thus, as Chairman Volcker reported to Congress last month, the
Fed's easing moves ceased in late January. The Chairman also re

ported on theFed's monetary targets for 1985 — aset not much dif
ferent from those for 1984 and designed to be consistent with fur

ther sustainable economic growth and progress toward reasonable
pricestability over time.

It is my personal view that the Fed must strive to keep the re
covery goingat a reasonable pace of3to 4 percent– because a re

cessionat this time would make our already gigantic budget defi
cits even more gigantic; because the seriousproblems ofour finan
cial institutions could reach crisis proportions; because the Third

World nations would experiencetrade deterioration as their major

market becomes weak and this in turn would impair their ability

to service their outstanding debt;and,because protectionist actions
would become all the more likely, risking retaliatory moves anda
worldwide recession.

At the same time, the Fed certainly has to be on the lookout for

signsofa resurgenceofinflation.Butwe also cannot overlook signs
of deflation today. Most industrial commodity prices are actually

below 1 year ago by an average of nearly15 percent. Other com
modity prices are also down:lumberby 24 percent;soybeans and
broilersby 23 percent;farmlandhas dropped25 to 40 percent; and
there arereports ofselected deflation inhousing. This is a rather
new challengeto policymakersbecause we have to go back many
decades to find aperiod ofdeclining prices. Also, most of today's
businessmen and financiers have nothad experience doing business

without inflation to influence decisionmaking. Therefore,it is im
perative thatwe proceed cautiously andweigh carefully the poten
tial impact of higher interest rates on the value of the dollar and
the other specialtrouble spots I described earlier.

Finally, let me say a few words about regulatory matters. Be

cause ofmy interestin supervision and regulation offinancial in

8

stitutions and my 2-year experience as a regulator ofall State-char
tered institutions in Michigan, Chairman Volcker selected me for
the Board's Supervision and RegulationCommittee.In this role,I
have tried to increase contact with the Examination Council and to

improve cooperation among the Federal regulatory agencies. The
problems todayareso critical that we have to cooperate and coordi
nate our activities better in order to get prompt solutions.
N E E D TO S TREAM LINE R E G U L A T O R Y ST RUC TUR E

This reminds me of the need for legislation to simplify and

streamline the whole regulatory structure to reduce overlap and
make accountability more clear.
Since I am a supporter of the dual banking system , I have made
an effort to meet with some State regulators and to work on ways

to increase Fed cooperation with them -primarily in areas of ex
amination and training. This is a part of a bigger interest
namely, studying the whole approach to supervision in order to
more promptly discover problems in financial institutions and to
deal with them swiftly and smoothly.As a member of the Board's

Committee on Federal Reserve Bank Activities,Ihavepushed for
additional resources for supervision and regulation primarily for

hiring,training,and equippingexaminersfortoday'schallenges.

Thank you very much for giving me time to present some ofmy

views on issues and recent activities,and nowI would be glad to
tryto answer your questions.
The CHAIRMAN.Thank you.
Senator Hecht.

Senator HECHT.Thank you,Mr. Chairman.

Governor Seger, we are all interested in our insurance system

right now because of the recent failures and closings. How would
you improve our insurance system ?

Dr. SEGER. To begin with, we have a Federal system of deposit
insurance for banksthat is handledby the FDIC.We have a sepa
rate one for depositsin savingsand loans that is handled by the
FSLIC.Let me just talk about FDIC to shorten the answer.
I think the best thing that we can do is to make a careful study
of the whole deposit system and to think through how we assess

premiums on the banks whose deposits areinsured to see ifthere
is a betterway,a more efficient way, to relate the premiums that
are charged tobank behavior. In this way,we could get higher pre

miums out of those banks that want todo more risky things, and
yet not penalize the banks who choose to run more conservatively.
This way, we would not only add to the reserves of the system

throughcollecting premiums,which is what's done now,but also

provide an opportunity to influence behavior.And we would hope
that this would have an impact on the number ofbank failures and

ultimatelythe number oftapson the depositinsurancesystem.
E ND OF V OL U N T A RY QUOTAS

Senator HECHT. Governor Seger, do you agree with the Presi
dent's decision not to extend the voluntary quotas on import of
autos ?

9

Dr. SEGER.Yes,I do.Iam a resident ofa major auto-producing
Stateand lived a long time in Detroit, which is certainly motor
city. But at the same time, I believe in open markets and free
trade.We have had theselimits on auto imports for4 years and,in
that period,Ithink that the domestic auto industrywas given time
to get their act together,so to speak,and to alterthe lines ofcars
that they are offering to produce more energy-efficient orfuel-effi
cient cars, and to improve the quality of cars, which I thinkwas
very important. By the way,the American auto industry has done
a tremendousjob in these 4 yearsin making theseadjustments and
trying to change their way ofproducing autos, trying to do it more

efficiently.They havereally pushed for productivity.
I visited a General Motorsplant in Lake Orion near where Con

gressman Broomfield and I live and this plant uses state ofthe art

manufacturingtechniques.Itwasvery impressive,and Ithinkthat
the domestic auto industry should now be able to make it on its
own .

But I will quickly add that I still think we should put pressure
on the Japanese to make trade a two-way street;we haveour mar
kets open, and they should be pushed very very strongly to get

their markets wide open.

Senator HECHT.Governor Seger,how much isthedollar overval
ued today and could the Fed take action to lower the value of the
dollar ?

Dr. SEGER. In a very technical sense,an economist would argue

that the dollar is not overvalued today because exchange rates are
prices of currency, and if these prices are establishedin markets

that are freely functioning, and the participants in those markets
are acting independently and are well informed, then one would

assume—as Isaid,usinga stricteconomic argument— that the cur
rency - in other words, the exchange rate-is reflecting market
conditions and therefore the value of the dollar is what the market

says itis.That's the narrow ,technical argument.

There are other ways oflooking at this. Ifyou look at the funda
mental things that textbooks used to tell uswere supposed to influ
ence values of currency, we -or any number of economists— can

look at theseold relationshipsand they suggest that in fact what's
goingon in the markets today isdepartingfrom those old,expected
numbers. Looking at it thisway, I haveseen numbers in a band

from 20 percent overvalued up to40 percent overvalued.Itjust de
pends on whose numbers you use and what technique you use in

your calculations.

Senator HECHT.Thank you very much.
Thank you,Mr. Chairman.

The CHAIRMAN.Senator Proxmire.
Senator PROXMIRE.Dr. Seger, last October you gave a talk to the
Women's Round Table. The American Banker asked many of the

participants what they thought about your speech. According to
the American Banker,here'swhat they said:

She gave a brief history ofthe deregulation but I don't think the importance of
business was covered at all. She was not responsive to questions and I heard the
same comments from people nearby.

One woman who asked that she not be identified said:

10

Iwas surprised she didn't have a betteroverall understanding offinance and the
economy.

Doyou think those comments are a fair characterization ofyour
speech to that group?

Dr. SEGER.Idon'tthinkit'sfairat all,sir.
Senator PROXMIRE.Why ?

Dr.SEGER. First ofall,the talk was to a general women's group
in New York, as you identified. Their approach was to ask the
speaker -notjust mebut any speaker -togive a short statementof
about 10 minutes and then respond to questions from thecrowd. I
did talk about, what I called the revolution in the financial services

industry, all these exotic changesthat are going on,and then two
or three peoplewho sat rightnext to me askedquestions. Frankly,

the questionsthat were posed were so technicalthat Ithought for
a general audience of women -these were not bankingwomen in
the audience,they were a mixture of professions- it did not seem

appropriateto be giving verybank-likeanswers,or the kind of an
swersI would give if Iwere talking to say,a banking seminar or

giving a lecture at banking schools—which I have done numerous
times—because itwas abroad-basedgroup.
Senator PROXMIRE. On January 10, the Wall Street Journal re
ported on a privatetalkyou gave to a group ofbusinessmen. A rep
resentative from Manufacturers Hanover said, "She made it clear

she regarded herselfand Mr. Martin unmistakably, as she put it,
on the Reagan team ."

Do you regard yourself and Mr. Martin as being on the Reagan
team and, if so,what does being on the Reagan teammean to you?
Dr. SEGER. To begin with, Ihave not called myself part of the

Reagan team. Thishasbeen said ofthe two ofusbecausewe were
bothappointed by President Reagan, as was Chairman Volcker,he

was reappointedbyPresident Reagan.
This has been said of us,but it'snot a term that I coined.

Senator PROXMIRE. Do you think that's an unfair characteriza
tion?
Dr. SEGER.I think it is;yes.

SenatorPROXMIRE. Do you disagree with President Reagan on
some policies? Can you tell me oneor two orthree important poli
cies on which you disagreewith the President?

Dr.SEGER.As I said,
there were actuallythreeofusappointed by
President Reagan.But in the context,Mr. Martin and Ihave been
calledthe Reagan team because we are the two appointed by Presi
dent Reagan,and I guess the sort of expectationis that we would
take a different stand on monetary policy than the others and that
we would sort ofact as rubber stamps.
Senator PROXMIRE. I understand that, but can you cite one in

stance,
o ne area,in which you disagree with the President?
Dr. SEGER. I don't know what his specific views on monetary

policy are now on a day-to-day basis.Ihaven't talked to him about
it.

Senator PROXMIRE.Well,on economic policy?
Dr. SEGER.Just in general?
Senator PROXMIRE.Or on the effect of the deficit on monetary

policy, for instance, ortheeffect of the Reagan fiscal policy on
monetary policy, letme putitthatway?

11

Dr. SEGER. As I think I said last summer, I am very much in
favor of bringing the deficit under control. I was in favor of it
before I cameto town and I still am in support ofit.
Senator PROXMIRE. Everybody is. The President is, too, but his

policies obviously aren't doing it.Where do you think his policies
ought to be changed?
Dr. SEGER. I think the debate involves which specific programs
are going to be the ones to cut on the expenditure side and,as I

said,Ihave not discussed that with the Presidentpersonally butas
Iread the papers and hear inpress conferences, Ithink his prefer
ence is to take more on the domestic spending side and take less
from defense.

Senator PROXMIRE. Do you agree with that or disagree with it?
EQUALITY OF SACRIFICE

Dr. SEGER. I am not a defense expert. I think if you made me
God and said I could do anything to the budget I wanted to, I
would say there should be equality of sacrifice, which means that

everybody gives something inthe process ofsolving thisgreat prob
lem and,therefore, that allprograms and all expenditure catego
ries would give some dollars back.
Senator PROXMIRE.Let me ask you something about how fast the

economy could grow. Mr. Blausteinof the Wall Street Journal
quoted you as saying theeconomy could grow at 4 to 5 percentover
the next 10 years.Now that would seem toput you far out of line
with mainstream economists at the Fed, whichwas the comment
Mr. Blaustein at the Wall Street Journalimplied.
How do you account for your extreme views?
Dr. SEGER.A lot ofpeople don't report accurately and the discus
sion involved -he was in for a story on the Federal Open Market
-

Committee [FOMC] and wewere talking about that andwe got

going on productivity and this is one of my interests and I was

talking about some ofthe exciting things I saw going on out in the

private sector and the autoindustry and otherkinds of industries
where they are really makinggreatstrides to become more effi
cient,trying to imitate some ofthe Japanese manufacturing tech
niques,for example,sothat they can get their productivity up,and
I said that as this kind of action takes place,then I think we are

going to see this in our overallproductivityperformance in this
country and that productivity — ifyou're talking about our econo
-

my's potential for growth - and thisis what he missed
Senator PROXMIRE. Let me just get back to the one question I
wanted to ask you with respect to this.You saw no reason why the

economy could not grow ata real annual rate of4 to5 percentover
the next 10 years.Is that your position?
POTENTIAL G R O W T H OF 4 TO 5 PE RC EN T

Dr. SEGER.This is what I'm saying.I said that ifyou get produc
tivity growth back to what we used to think of as normal — I've
been around a long time so 3 percent per year was not considered a

way-out view — itwas sort ofa normal ora typical estimate of pro
ductivity-I said ifwe got back to that because of these exciting

12

things going on,then that would mean that our economy's growth

potential would be somewhere between 4 and 5 percentper year.
Senator PROXMIRE. You're talking about 10 years without any

kind ofrecession sothat we would repealthe business cycle?
Dr. SEGER.Sir,Ididn't say that.I'mtalking about long-range po
tential and this is an average. We talked on these matters you're

talking about as trend lines. You can have a trend line and still
have cyclical movements around the trend line.
Senator PROXMIRE.If the economy should grow 4 to 5 percent for

10 years, what are the implications for monetary policy? Doesn't
that mean that we can andshould have a far more expansive mon
etary policy than the Fed has been willing to follow,ifthat's a fea
sible possibility?

Dr.SEGER.Well,the Fed determines monetary policyonan ongo
ing basis,so what we have announced and Chairman Volcker testi
fied on for our plans for this year- our broad plans for this year
itis to provide sufficient monetary -Imean,credit growth for real
output growth for somewhere - again using a wide range of4 to 5
percent
this year— and we think we are supplying enough for that.
Senator PROXMIRE. Now let me remind youthat this is the third
year ofan economic recovery and so this 3 to 4 percent we are talk

ing about follows on the heels ofabout 6-percent growth last year

and a little above6-percentin 1983 as we werejust coming out of
the recession.So thisisa point wherewe talk about-

Dr. SEGER.Well,real growth in 1984 was higher than it had been

in 3 or 4 years.
Senator PROXMIRE.It was higher than 1983?

Dr. SEGER.We were calculating itfrom fourth quarter to fourth
quarter and it was 5.9 percent,and in 1983,again calculating it
fourth quarter to fourth quarter, it came out to roughly 6.5 per
cent.

Senator PROXMIRE. Now in the same interview with Mr. Blau

stein you were quoted as saying, "I didn'tchoosethe questions,"
making me feel and the restofus feel as ifwe didn't- in spite of
the fact that the chairman said it was a very thorough investiga

tion —we weren't as thorough as we should have been. So let me
ask you about the implication. You feel you have no obligation to
reveal to this committee your economic philosophy, that the
burden is on us to ask the questions as precisely as possible to elicit

your realeconomic philosophy?The burden ison us toelicit itand
ifwe don't ask the questionsthere's no reason to reveal it?
Dr. SEGER.No,I don't feel that way at all. I just was not given

that specific question last year.I certainly would have answered

any question that you asked me.
Senator PROXMIRE. My time is up, but let me just say that it

seems to this Senator that if you have a philosophy that we can

grow and should grow at a 4-to 5-percentrate that we shouldn't
have to pull it out, that you should tell us that that's your view.

It's a view we might respect or object to,but we shouldknow it if

we are going to act on your confirmation with full knowledge of

your attitude.

Dr. SEGER.But again,I thinkyou misinterpreted what I said.I
didn't say we would grow 4 to 5 percent a year. I didn't say we

13

should grow 4 to5 percentayear.Iwas just talking about poten

tial for growth,which is a little different.

Senator PROXMIRE.My time is up,Mr. Chairman.Thank you.
The CHAIRMAN.Governor Seger,Senator Hecht had to get to the

Intelligence Committee because of his work there and I failed to
have you sworn .

[Whereupon the witness was duly sworn.]

The CHAIRMAN. Governor Seger, will you make every effort in
yourservice at the Federal Reserve Board not only to avoid any
conflict ofinterest but avoid even the appearance ofany conflict of
interest ?

Dr. SEGER.Yes,sir.

The CHAIRMAN. Do you agree to appear and testify before this
committee and other duly constitutedcommittees ofCongress when
requested to do so?
Dr. SEGER.Yes,sir,Iwould.
RECESS A P P O I N T M E N T S

The CHAIRMAN. Governor Seger, I will have some additional

questionsforyoubut Ithink I'llleavethe restofmy firstquestion
ing period to go over part ofthe controversy over your nomination

which has nothing todo with you personally. That is the issue of
the so-called recess appointmentwhich Senator Proxmire and
other members of the committee have brought up and I think it

would be interestingjust from a factualstandpoint to have for the
record some ofthe history ofrecess appointments.
It is one that is certainly not goingto be determined by this com
mittee or by the Congress. What is a fair recess appointment is
going to have to be determined in the court.I don't know whether
my colleagues wish to pursue that and file a suit,but not being an
attorney, it's still veryclear to me from the legalhistory ofthesit
uation that we are not going to determine whether 23,or 31,or 16

days isproper.TheConstitution doessay that the Presidentcan fill
up vacancies which may happen during a recess of the Senate,
period.

And over the history of this, how you determine exactly how

many days or what purpose that is,I don't know .However,thereis

somehistoryof recess appointments, mostly in the form of Attor
ney Generals'opinions,and the onlyonethat isreally clear isthat
the recessmust probably be longer than 2 to 10 days.Dr. Segerwas
appointed in a 23-day recess.
In 1904,President TheodoreRooseveltattempted tomake 168 ap
pointments in a 1-second recess. The Senate officially adjourned

and the second session immediately began a special sessionof Con
gress and the Presidentasserted the right toappoint during this
constructiverecess.The Senate instructed the Judiciary Committee
to examine the constructive recess and the Judiciary Committee in
a report which was adopted and cited later by the Attorney Gener
als'opinions,rejected the constructive recess notion.The commit
tee report defined the recess as the:
period of timewhen the Senate is not sitting in regular or extraordinary
session asa branch ofthe Congress or an extraordinary sessionfor the discharge of
executive functions, when its Members owe no duty to attend, when its Chamber is

45-819 O - 85 - 3

14

empty, when because of its absence it cannot receive communications from the
President or participate as a body in making appointments.

Well, if that 1904 opinion of the Senate Judiciary Committee
meansanything,we were not in session for those 23 days.We were
not here. W e were off at conventions. The Senate Chamber was

I suppose we can play legal niceties and say that there's no
empty. I

mention ofdays, but those conditions arise.

SubsequentAttorney Generals'opinions elaborated on this defi
nition recognizing the recess termhad to be given practical con
struction and doubting whether recesses of2 oreven 10 days would

constitute a recess for constitutional purposes.That's where we

come up with 2 or 10days.That is the only reference of days in
these Attorney Generals'opinions.
The validity of the recess appointment of Martha Seger to the
Federal Reserve Board depends upon whether the 23-day recess of
the Senate over the Fourth of July holiday and Democratic Con

ventionis a recess for purposes ofthe constitutionalrecess appoint
ment clause. The constitutional provision was adopted without
debate. Most of the legal authority on the interpretations of the

recess-appointment clause iscontained in Attorney Generals'opin
ions.These opinions have approved of recessappointments during
comparablesummer recessesof the Senate of29, 33, and 36 days.
So my colleagues might think that 29 days is all right,but23
days isnot.Ithinkwe're playinggamesandI can'tmake adistinc
tion ofwhether 29 days isallright and 23 days iswrong.
E X A M P L E S O F R EC ES S A P P O I N T M E N T S

Now let me give some examples. My good friend and respected

colleague from Wisconsin said that hewould vigorously oppose
thesetypes of recess appointments. It is interesting that under
President Nixon,there weresix appointments in a 31-day period. I
have found no one on the Democratic side who thought that was
terrible.I realize that is8 days longer than Dr. Seger's.

On June 30 to July 17,1972, oneappointmentwas made duringa
16-day recess.There is also no record ofviolent opposition to that
16 daysand that is7 days shorter than yours.
So ifthe argument issimply on thebasis ofthe President's right
to do this,I would suggest itshould have been challengedwith
President Nixon. It wascertainly challenged with President Roose
velt in his 1-second recess.
All recess appointments of President Ford were sine die. Obvi

ously, there would be no objection there. He did not make any

during intra-session.

President Carter made one appointmentin a31-day recess.That
is 8 days longer and I guess that is all right.If it were 23,I don't

know whether itwouldhave been opposed or not,but that was an
appointmentthat happened to be a rather important one for the

Secretary ofTransportation,Neil Goldsmith,an old friend ofmine,
former mayor ofPortland. Nevertheless, ifthe principle applies,Í
would wonder why my colleagues did not object because we have
had situations where we have had Cabinet Secretaries when there

have been vacancies,but I happened to be serving at that time and

Idid not object to Neil.Ithought he was a good appointment.

15

But the pointof it is there was no necessity for him to be ap
pointed during thatrecess that Icould see.The Transportation De
partment wasrunning when we got back fromour August recess.
That was the statutory August recess in 1979 and only 8 days
longer.

The onlypoint I'm trying to make here isthatifmy colleagues
have objections to you andyour qualifications,that is whatthis

process isallabout.I pointedthat out last fall.They are entitled to

ask you all the questions they want to about your views and your
qualifications forthe office. But Ireally think talkingabout recess

appointments,in lightofthe legalhistory and inlightofrecessap

pointments by other Presidents— ifthis principle is incorrect if
the Presidentshould not be allowed to dothis,it should have been
taken up in court and everyone of these appointments during

short-term recesses from 16 to33 days should have been challenged

on the same basis.

There are two different issues here that we are talking about

your qualifications versustheright of a President to appoint you
during a recess.That is a legal question thatneeds to beanswered
and we're not going to answer ithere politically.

President Carter also happened tomake 16 appointmentsintra
session from October 2 to November 12, aperiodof39 days.That's
an extra couple weeks, but looking over the list of appointments ,
and I have all the names here and I'm not going totake the time

to go through them —there isn't1 ofthose 16who was necessary to
beappointed during that period of time,simply no real necessity
thatthey couldn't have waited until we got back into session after
the 1980 election.

Under President Reagan, there are a list of recess appointments
and that has already been mentioned by Senator Proxmire. Two of
them were for shorter periods oftime. The others were longer, 35,
39 days.There was oneof 18 and one of20 days which were shorter
than yours.Again, I am aware of no objections to those.
I want to make the point that this is something I believe would
have to be determined in court,to have a legal interpretation of

what is a President's right,whether itisthis Presidentor not,and
whether there is a length of time other than that 2- to 10-day

period which apreviousJudiciaryCommittee decided was probably
not long enough. Other than that, there is no legal precedent in

anything thatI've been able to find. If we apply the principle in

your case it should have been applied uniformly toall of these
other short-term appointments through three different Presidents,

President Ford being the only totallyclean President in exploring

this gray area.

Senator PROXMIRE.Would the chairman yield?
The CHAIRMAN.Certainly.

SenatorPROXMIRE.Mr. Chairman,you have made a very power

ful case,butyou have hung the whole case on my argument that

there was only a 23-day recess here and there were several other

points that I made.The principal one was thatthis was a highly
controversial appointment in which the minority membersofthe
committee unanimously opposedthe appointment- a 10-to-8 vote.

These other appointments,I would ask if you could document any
other appointments that were this controversial,where the Demo

16

crats on the committee unanimously opposed the nomination.
There were only 23 intervening days and yet the President made a
recess appointment. This is an extraordinary kind ofsituation that
does seem to override our rights. We were prepared to contest the
nomination on the floor and it seems to me that ifwe had only one

or two objections that would be one thing,but we had every single
member of the committee on the Democratic side opposed to the
nomination.I think that's quite a different context.
The CHAIRMAN. Senator,you nor I,neither one of us are attor
neys,but you can always find a reason for what you want to do,

but if we play the attorney game, which my colleagues are over
here,the record I cited is very clear and no court is going to get

involved in making a decision over the principle ofwhat isa recess
appointment whether a nomination is controversial or not.
QUALIFICATION MAT TER

Now we're getting into the other side ofthe argument that Isaid
isclearly a different argument,ofwhether you believe she isquali
fied or not or anyothernomineeisnot.Therewere plenty oftimes
after the recess for you to make your case on the floor of the

Senate and I offered to bring this nomination up and grant as
much time as the minority wanted on the floor, which is the

normal process ofthe Senate.And I accommodatedthis committee
as longas anyonewanted to ask questions. I never once tried to
shorten that period of time last year. Every one of my colleagues
would have to agree with that. I allowed as much time as was nec

essary to do thatand offered the same thing on the floor.
Senator PROXMIRE. Mr. Chairman, I'm not talking about your

fairness. I think you're very fair. I'm talking about the President

who made a recess appointment during a relatively brief recess
when we had unanimous opposition by every minority member of
the committee.Itwas aclearpartisan actionon his part.
Senator SARBANES.Would theSenatoryield at thatpoint?
The CHAIRMAN. I have the floor at the moment. I will turn to

you injust a
a minute.I am trying to make a distinction between the

controversy over the qualifications of the nominee and making a
legal point that the President is right during a recess to make the

appointment.Those are two different issues,and the only point of
my fairness in trying to accommodate this is willingness togive all
the time this committee and the Senate wanted to debate the nomi

nee's qualifications. So I'm clearly separating the issues,Senator,
and I don't think it makes a difference unless I as chairman was
trying to limit debate or your opportunity to question the appoint

ment on thequalifications,which I clearlyat nopointwas attempt
ing to do. We cannotsolve this legal problem ofwhether it's more
than 10 days or 23. We're really looking at two different issues.
Senator Sarbanes.

Senator SARBANES. Mr. Chairman, no one is accusing you of

making the recess appointment. The recess apppointment was
made by the President.

The CHAIRMAN.No;Ihave no right to make appointments ofany
kind.

17

Senator SARBANES. The issue that we take is with the President.

The other point I want to make here— and I don't know whether
any of those appointments were included here, but this was a

recess appointment for a term that extends to 14 years. That's a
significant difference aside from the time period which you cited of
a recess appointment that is for a position that runs with the
President'sterm.This was an appointment thatruns not only
beyond this President's term but would run beyond the term ofa
subsequent President and the reelection of that subsequent Presi
dent.In other words,itwould extend into1998,almost to the very
end of the century, and it seems to me that fact underscores an
even larger questionwith respect to this appointment.
The CHAIRMAN. Ifthe Senator would allow me— and my time is
up — the Senator would be correct and I would agree with him if

this were an appointment, but no recess appointment under the
Constitution is good except until the end ofthe next session,so the
President could not, under any circumstances, appoint someone for

a 14-year term on a recess basis. She would have had to reappear
for confirmation during this session ofthe Congress.
Senator SARBANES. Well,that's true,but they appear as a sitting
member and not as a nominee .

The CHAIRMAN.Well,there may be some advantages that come

ofthat.Itisn'tcorrectthat the President made a 14-year appoint
ment.A recess appointment for anybody ismade onlyuntil the end
of the next session. M y time is up.
Senator Riegle.
OPEN ING S T AT E M E N T O F S E NA T O R RIEGLE

Senator RIEGLE.Thank you,Mr. Chairman .
Let me welcome both Dr. Seger and Congressman Broomfield to

the table here.We are also meeting in the Commerce Committee
this morning when I serve as the ranking member on the Science

and Space Subcommittee.We arehearingthe NASA budget today
and Iwant to make sure,for the chairman's sake,that aswe listen
to the NASA budget request over in the Commerce Committee that

we have enough money in there to take him out and bring him
back safely. Therefore,if I have to leave at different times this
morning to be present at bothcommitteehearings
The CHAIRMAN.May Isay that Iwould appreciate itifyou would
make sure ofit.[Laughter.]
Senator RIEGLE.That hearing isover in the Russell Building and

we are in the Dirksen Building, so I may have to leave at some

point.

Senator PROXMIRE. If the Senator from Michigan would yield,
we'll provide enough money to take him out, but bringing him
back issomething else.[Laughter.]
The CHAIRMAN . That reminds me,once - and we won't take this
out of your time— when I was mayor of Salt Lake City I went to a

National League of Cities Convention in Houston and my board of

citycommissioners passed aresolution wishing me Godspeed and a

safe return.The only thing that bothered me is itonly passed 3 to

2.

18

Senator RIEGLE.Mr. Chairman,you have my wish that you both
go out safely and come back safely because we have been friends
for many years.

I wantto particularly welcome the senior Republican in the
House of Representatives, Bill Broomfield, who's here with us

today andanoutstanding Member ofthe House and agood person
al friend. He's been here before and we are delightedto acknowl

edge him andhis patience as you sit here and listen to the cross
examination discussion.

Governor Seger, I welcome you also this morning. We've had
some occasionsto talk as recently as last evening,atleastin pass

ing,and other occasions in my office recently andpreviously, so we
have had some opportunity to discuss some of the things that we
will touch on today.

I think it'simportant,particularly becauseof thecircumstances
that surround your nomination and what's already been said this
morning aboutthe recessappointment,that Itakejusta minute to
review what took place last year in addition to what's been said
here.

I think a major point ofcontroversy,one which is important for

everybody tounderstand isthe issueof anyappointmentby any

sitting President to a 14-year term 4 months before aPresidential
election. You happen tohave been in that situation but it is ex

traordinary. It isvery unusual and I don't know of another occa
sion in our modern history where any President has attempted to

lock in amajor appointment,which certainly the FederalReserve
Board membership is,forsuch a long period of time right on the
eve ofa national election. Even the people who are being submitted

for Federaljudgeships that are held over then until theelection is
settled and broughtback up as is going to happen this spring,so,

understandably,there wasa concern on the part of many as to
whether itwas appropriate totake that step atthattime.
The recess appointment activity of the President has been dis

cussed.Iwill not get into that here right at the present time,but
that may come up again a little later.
PREPARED STATEMENT SUBMITTED

When we went through the discussions with you before,someof
the problems that arose concerned -and Ijust want to go down the
list here— the fact that when you came before the committee the
first time you did not have a prepared statement to offer. Today

you have a statement and Ilistened toyou deliver it,and I'veread
it,and I think it's a good statement.Ithink that's a very helpful
step.

Ithink that nothaving astatement ofany sort for theprevious
hearing left everybody wondering what kind of a beginning point
to make .

In addition,as you know and we discussed this both here in the
committee and privately,whenthe committee asked you ifyou had
any written material that you had done yourselfover the years on
any aspect of monetary policy,financialpolicy, economic theory,

during thetime that you werein academic lifeor in business life,
anything that would reflect upon your views, there were no such

19

writings of any sort.So we did not havethat either as a basis for
understanding better your views and what expertise they might
represent that you would be bringing to the Federal Reserve Board.

I think,too,that it's important to say thatI have watched the
Congress now over a period of years come to view Federal Reserve

appointments as being moreand more important and being sepa
rate from appointments to other areas ofGovernmentservice such
as the FCC , the Consumer Product Safety Commission or other

agencies. The Federal Reserve Board has really become a critical
linchpin in the financial system and as I have said before, Paul
Volcker now asthe Chairman has taken on enormous importance
in people's mind as a figure whose conduct,expertise, and the con
fidence which people have in him provides a very important compo

nent to international confidencetoday in U.Š. monetary policy.
Frankly, if something were to suddenly happen to him -and God
a lot of anx
forbid that itwould - itseems to me that we would see a

iety in a hurry.

Šo whoever else serves on that Board I think serves in an enor
mously important capacity. I view the Federal Reserve Board deci

sions today as being just as important to our future as decisions
made over at the Defense Department or any other agency of the
Government. I think it's that key.

So I think,as well,you werelooked at in that context far more
carefully than you might have been ifyou were appointed to virtu
ally any otherassignment in Government,
including a Cabinetjob
that would only run for the length of the Presidential term rather
than for 14 years -nearly to theyear 2000.
Finally,one other point that I think is worth noting,just to sort

ofbring us up to date as to where we are today, andthat is there
was some concern about the way the selection was made at the

time by the administration for the seat that younow occupy.We
learnedin the course ofthe discussion with you here in the com
mittee that you had nothad a chance to be interviewed by Chair
man Volcker,which is the normal practice,but instead had been
interviewed by people at the White House which, correctly or not,

gave the impression ofpoliticizing the nomination process.Because
people are veryconcerned aboutnot seeing the Fed's decisions po

liticized also added importantly to the questions about your views,

your independence,and whether or not you wouldin factsomehow

be beholden to the White House as opposed to being an independ

ent person inyour own rightin trying to make independentdeci
sions for the Federal Reserve Board.

So briefly, those weresome ofthe issues thatare the background

ofthis nomination which I'm sure you recall.When you and I had

the occasion to meet before your first hearing,I'm sure you remem
ber that we met in my office for certainly longer than 1 hour and I
would think it was probably closer to 2 hours. Would that square
with your recollection ?

Dr.SEGER.Yes,something longer than 1 hour.

Senator RIEGLE. And I recallthat conversation as being what I
felt was friendly and constructive in which we talkedabout a

number ofthings and I certainlymade an effort to try to indicate

to you some of
t he areas that I have a concern about and that I

20

might in factbeaskingyou questionsabout—the auto industryand
other issues.I'm sure you recall that.

In any event, you mentioned the auto industry today in your
statement and you touched on it in terms of your concern about
the economy and,as I say, Ithink it's very helpful to us to have
that statement.I want togo directly to thesituation that faces the

auto industry today because youare a regional appointee and

therefore your purpose ofbeinga regional appointee isto try to re

flect the unique circumstances going on in our partof thecountry
and that's avery valuable aspect of Fed membership. It's some
thing important that you must bring for our region, the entire
region, and the needs we have there.

So Iwould like to reflectjust for a minute on the industrial base

problems that we're facingandyour comments a minute ago that
you feel that the removing ofthe import limitations on theJapa
nese cars is probablyappropriateatthis time, that the industry
hashad its time to adjust. We had talked about this before so this
will not be unfamiliar to you,but are you informed at the moment
in terms ofhow General Motors, Chrysler, and Ford are doing with

relation to their market price and multipliers,theprice-earnings
ratios that they're sellingpresently at onthe New York Stock Ex
change?
Dr.SEGER.I haven't checked them out recently. I know they had
good profit rebounds in 1984.
Senator RIEGLE.That's right.
Dr. SEGER.And the prices oftheir stocks did not rebound accord

ingly.So the price/earnings are relatively low.Iwould be lying ifI
saidI knew what they were.
PRICES O F A U T O S T O C K E X T R A O R D I N A R I L Y L O W

Senator RIEGLE. Well, let me tell you where they are because

they are not only low,they are extraordinarily low.They are lower
than I have ever seen them bein comparable economic conditions
when asyou were just saying,the salesand their profits have been
good and the economy isrelatively strong. One would assume that

iftheautoindustry isoutofthe woods that itwould be reflected in
the market price ofthe shares ofthe stock and the multipliers.

But at the present time,the closing prices yesterday on the New
York Stock Exchange, General Motors- over half the industry ,
was selling at five timesearnings;Chrysler and Ford,also showing
impressiveprofits and sales figures,selling at three times earnings.
Now other Michigan companies,just by comparison, Dow Chemical
selling at 9timesearningsyesterday;Kellogg at 15times earnings;
even Detroit Edison, which is a troubled sector, selling at 7 times

earnings;Burroughs 11 timesearnings; KMart9 times earnings— I
can't find any other sector ofthe economy that isselling anything
like the depressed multipliers that we'reseeing in the autoindus
try.

It concerns me because Isee themarket prices being a composite
ofnational opinion essentially worldwide because anybody can buy
in the U.S. market, and I'm wondering, knowing now what those

multipliers are today in light ofthe fact that you feel theauto in

dustry ispretty much backand able tocompete with the Japanese

21

and so forth, what do you think accounts for the fact that the auto

stocks are selling atthese all-time low price/earnings ratios in
light of their general performance and the performance of the
economy ?

What are we to make ofthis and what do you make ofthis?

Dr. SEGER. After our discussion last summer, I did make apoint
of talking to a couple of security analysts to see how my veiw on
the price/earningsmatter compared with that of peoplereally in

fluencing the decisions ofmajor investors. The message I got was
that the typicalanalystofthe auto industry wasimpressedby the
strong profit rebound during the first half of 1984. However, he

was notconvinced thatthis was indicative ofthelong-term earning
power ofthe industry.Rather, abig reason for the tremendous re
boundwas theemergence from thesevere recession which generat

ed cyclical profitability,something thathe could not counton over
the next 3years or so.And we know that professional or institu
tional investors typically make their valuejudgments on expecta
tions of future behavioror profitability rather than acting to that
of the past.

So Ithink that ifyou look at today's pricerelative toprofit ex
pectations—which are below last year'searning— then the result

ant price/earningswould lookbetterthan those published in the
Wall Street Journal. But clearly, theinstitutionalinvestorhas not
identified the auto industry as one of this Nation's industries with

high potential for future growth, unlike,say,computers or high
technology

SenatorRIEGLE.Don't you think itperhaps goes a littledeeper
than that? If they were not expected to seelarge growth, Iwould
think we would still see multipliers higher than these. When a

major company stock, say Ford Motor Co.,selling atthree times
earnings, or Chryslerwith Lee Iacocca on the front ofTime maga
zine this week, selling at three times earnings, that means for 3

yearstheycan maintain theirearning record andthe person would
earn back the price of the stock just in earnings alone,not to think
about residualbook value and so forth.

I think those numbers are so extraordinarily low that it would

seem to me that the market isexpressing a kind ofpessimism -it's
not a neutrality — and that's why I gave you the other price/earn
ings ratios for other stocks thatarenot in the glamourstock cate

gory with an extraordinarily highmultiplier.
Itseems to me what the financial markets are sayingisthey are
pessimistic about the future. Do you disagree with that? That's
what Iwant to try to establish,how you seeit and where you think
the industry isheading?

Dr. SEGER. Even going back 10 years ago when I was still in
banking and working with people in trust departmentsin Detroit,
there was the typicalview then - and things in general for the auto

industry were very different than they aretoday— thattheauto in
dustryhad seen itsmajor expansion,that thatwas behind us,and
that ifyou were goingto buy those stocks in an institutionalport
folio,that you boughtthem for what we call the cyclical play;that
is, you would buy them when business was disastrous and the
prices were even more depressed thanwhat we're talkingabout,
you would hope to identify the low point of the cycle, and then,
.

45-819 0 - 85 - 4

22

hopefully, you could establish a position such that as prices re
bounded in the cyclicalfashion you would sell at something you
think is near the top of the cycle. That was in 1973-74 thatI re
member having had those discussions.I think that the basic assess

ment of the auto industry as a mature industry, one whose major
growth spurt was behind it,goes back a while.Furthermore, inan
industrythat isvery cyclical— and we all knowthat that certainly
is one— the investors are,for example, less willing to pay a high
price/earnings than they would be for a stock that sort of year
after year sort ofplugs away and shows

Senator RIEGLE.Detroit Edison at seven timesearnings. That's
50-percent better than the multiplier on General Motors.
Dr. SEGER. Electric utilities,almost by definition, are a more
stable kind ofbusiness to be inthan manufacturing cars.

Senator RIEGLE.Well,let me ask you

this.

Dr. SEGER.I'm notminimizingthis.
Senator RIEGLE. That's what Iwant to get to,as to how serious
you think the problems are or ifthe problem is over in the auto
industry. You have followed financial trends over the years as I
have.Do you recall a time when the multipliers,the price/earnings
ratios,on the automobile stocks at a timeofhigh sales, high prof
its,strong economy,have ever been this low?
Dr. SEGER. I think they have been on the low end.

Senator RIEGLE.Threetimes earningsfor Ford orChrysler?
Dr. SEGER. I do not remember them being exactly this low,but

when

Senator RIEGLE. They just haven't been.You don't recall them

being that low ?

Dr.SEGER. Idon't remember them being this low.I remember
them being on thelowend ofa range ofindustry performarice,but
on an absolute scale I do not remember.

Senator RIEGLE.I can't take the time right now because I'm im

posing on other colleagues,so I willjustpose a point and then take
it upwith you in ournext round.That is, it seems to me what we
have to try to figure out here is what the financial markets are

saying about their apprehensions about the industry and try to un
derstand whether thoseapprehensions arewell founded because if
they are,then it plays back into some of the financial policy deci
sions we are going to have to make and some of the decisions the
Fed isgoing to have to make.
My concern is that ifyou think the industry isback, and solid,

andsquared away, and that it's sort of clearsailing ahead, that

seemsto be quite at odds with what the financialmarkets are
saying and I would want to try to reconcile those two things be

cause ifwe go offin different directions and the financial markets
turn out to be right- and Ihope they arenot- and your view turns
out to bewrong,we could findourselves in a far more serious con
dition in Michigan and it would affect everybody, including banks,
individuals,other businesses,you name it.
So maybe we can come back to that.

Dr.SEGER. Ijust want to saythat I'm not taking a utopian view
of this.I am only saying that in the 4years that we are talking
about,the last4 years,they have made dramatic strides.That's not
the same assaying they have reached theirgoal.

23

The CHAIRMAN. If I could ask my colleagues and the witness to
confine themselves to 10 minutes, we will have as many 10-minute
periods as necessary, but in trying to accommodate Senators and

their other committee schedules Iwould appreciate it ifwe could
stick to the 10minute rule and,again, I will stay as long as neces
sary .

Senator Mattingly.
Senator MATTINGLY.Thank you,Mr. Chairman.
I welcome you to the committee,Dr. Seger.
Dr. SEGER.Thank you.

Senator MATTINGLY. And I hope you get confirmed soon.I hope
the vote is not as close as the M X .It probably will be unfortunate
ly.
JOINT V E N T U R E S OF A U T O INDUSTRY

I would just like to follow up on what Senator Riegle was men
tioning and then Ihave to leave. He was referringtothe impact of
financial marketson this in referencetothe auto industry.I'm not
sure we can say how the automobileindustry is doing. Obviously,
the salaries they have been paying their management must mean

that the industry must be doing pretty well.Ithinkthat may be
something that they may want to call in question. I understand

they have got problemsin Michiganas far as unemployment is
concerned.But you may want to consider in that automobile indus
try question that he's talking about what impact the imports that

arereally jointventures by General Motors and Chrysler are
having on the industry.
Sometimes they refer to this automobile industry in an isolated
case when they start talking about the automobile industry in
Michigan.They act likeGeneral Motors and Chrysler are not in
volvedinjointventures.I think it's sort ofa bad misrepresentation

that Ithink iscoming about in our country when they keep talking
aboutall the cars coming from Japan and really a lot ofcars that
come in arevia ajointventure by thosesame companies.So maybe
the financial markets take that into consideration.We in Congress
are not economic specialists— if we were economic specialists we
would probably already have a balanced budget. If Senator Garn
and I could run the country for 30 days we could solve its prob
lems,but I don'tthink that's going to happen.

Anyhow,Ido welcome you to thehearingonce again and Ireally
do hope you a speedy confirmation becauseI knowit'ssort ofa la
borioustypeprocessyou've gotto go through,but at the same time
I guess it'sthe best process we have.
Dr. SEGER.Thank you.
The CHAIRMAN .Senator Sarbanes.

Senator SARBANES.Thank you,Mr. Chairman.

Dr. Seger,I want to pursue the question ofthe recess appoint

ment thingfor just a moment. Were you involved in any way in
the recess appointment? Were you consulted about it or did it
simply happen ?
Dr. SEGER. This is the first Presidential appointment I've ever

had.Ihave had a political appointment in Michigan, which isafar
different system to go through. I was contacted on the Friday

24

before the decision asking ifIwould take the recess appointment.

At that point,Ihad toask:“What isa recess appointment?” Again,
I'm not an expert on this,and Ihave not been through this before.
Ijust assumed there werejobs the Presidentnominates people for,
and there are Presidential appointments;and thenomination proc
ess occurs;and the Senate confirms; I didn't understand the proc

ess and I probably stilldon't. Iwasasked if Iwould accept suchan
appointment.Then, the following Monday,the next business day,
late in the afternoon, I got a call sayingthe President gave mea
recess appointment.

Senator SARBANES.Soyou were simplytold late on a Friday that
they were considering giving you an appointment?
Dr. SEGER. At least if I would consider one and, as I said, I

needed to have explained to me what it was.
Senator SARBANES. I take it that was by the White House person
nel official?

Dr. SEGER.Yes;there isa White House personneloffice.
Senator SARBANES.And that's who contacted you?
Dr. SEGER.Yes,sir.
AM ER IC AN B A N K ARTICLE

Senator SARBANES. I wanted to pursue the article from the
American Banker that Senator Proxmire was asking you about. As

I understood your response to him,you didn'tanswersome ofthese
questions because you thought they were highly technical.Is that
correct ?
Dr. SEGER .Yes.

Senator SARBANES. Now that same article says, for instance,
when asked if regulators should have taken steps earlier to hold

down the level ofinternationallending to countries that are now
threatening to default, you replied that you didn't tend to have an

answer to that. That seems tome not tobe a highly technical ques
tion and one that's very much on the point.

I wondered why you felt you couldn't respond to that question.
Dr. SEGER.I think thatquestion covers a lot ofdifferentspecific
cases;not all banks are alike,not all international loans arealike,
and-

Senator SARBANES.Let me put the question to you.Do you think
that regulators should have taken steps earlierto hold down the

level ofinternational lending in countries that are now in serious
potential default?
Dr. SEGER.I think that smacks ofcredit controls,where you give

individual banks directions on how many loans they can make in
any certain industry or of a certain type. Philosophically, I'm op
posed to that.The regulators are inthese banks on an ongoing
basis as examiners, checking many things, and one of the key
items that they always consider is assetquality. They look at vari
ous kinds ofloans, not just loans to foreign countriesor to so-called

Third World nations,butalso at the quality of consumer loans, at
the mortgage loan portfolio, at loans to domestic business.Thereis
a real effortmade to determine quality,because theyare interested
in an overall assessment ofthe safetyand soundness ofthe institu
tion.This isjust a portion ofthat assessment.

25

Now , as part of good management, the people who run those
banks should be looking at things like diversification, and they
should be wanting to avoid heavyconcentrations or overconcentra
tions in any specific area.

Senator SARBANES.But you think the regulators have no role to

play here,as Iunderstandthe answer you're givingme.

Dr. SEGER. It'sone thingto be a Mondaymorning quarterback

and, after there's a big problem, to go back and say, "Obviously,
they made too many loans to foreign countries.” Buton an ongoing
basis, as the examiners were in these institutions, I think that

their main approach was toassess the quality of these individual
loans. Certainly in theirwriteups and the reports that come out

when the examiners finish the onsite visit they take great pains to

comment on various appearances of weakness orpolicies that
should be changed or tightened. Again, I haven't seenall those ex
amination reports during those years; that's why it's a little hard
to discuss this in a general way. But I would imagine that in the

case of some of theseinstitutions that were very,very heavilyin
volved in foreign lendingthat the examiners may have notedthat
and said — which is basically a messageto the top management and

ultimately to thedirectors— that theyhad a very heftyconcentra
tion ofloans ofthis particular area,but theprocess
Senator SARBANES. How much money did the Federal Reserve

putout inthe Continental IllinoisBankcasetokeep itgoing?
H I G H P O I N T A T $7 BILLION

Dr. SEGER.Ijustwantto make sure Iunderstandwhat you mean
by the term “put out.” Ifyoumean the lending that the Fed did to
Continental through the traditional use of the discount window, I
think at the high point that was something in the neighborhoodof
$7 billion.

Senator SARBANES.$7 billion?

Dr. SEGER. I thinkthat was the high point,sir.It's now down

way below that.

Senator SARBANES. Do you feel as a member of the Board ofthe

Fed that you have any responsibility to take action to preclude a
situation arisingin which the Fed will have to put out $7billion,at
its high point,to an institution in order to keepitgoing?

Dr. SEGER.Iguess Ididn'tsayiteloquentlyenough,buttheregu
lators, including the Fed, use this approachof examining financial

institutions to look at a multiplicityoffactors. Certainly,the objec
tive at that time is to assess the safety and soundness ofany insti
tution, whether it's a giant one, such as Continental Illinois

which I think at the time was the seventh or eighth largest bank
holding company in the country — or whether it'ssome little bank
in rural Michigan that has $5 million in deposits or assets.There is
an effort made to go in and to look at the various aspects of the
institution and to assess the safety and soundness and,as a matter

of fact, actually to give them a rating.They have identified five
factors that they think arekey ones to look at in any institution;
it'scalledthe camel rating.Theylook atthingssuch as capital ade

quacy,and they look at asset quality, and they look at what kind of
management they have— are they competent,do they have backup,

26

et cetera -what's happening to their earnings and what their li

quidity situation is.Those are the key factors that they look at,
and they actually dig into this and tryto assign numerical grades
to each one of those indicators and then give them a composite
rating.

Senator SARBANES. So it'syour view that the role of the regula
tors is after the fact to rate the institution on the basis of what it's

doing,not to seek to take any preventive action ahead of time to
preclude a difficultsituationfrom arising?

Dr. SEGER.I don't think that the regulators are either able to or
authorized to manage these various institutions. Now there is a
broad set of laws, rules, and regulations that banks and other fi

nancial institutions abide by. If you have a State charter, the
States are involved with their laws; ifyou have a charter from the
Federal Government,ifyou're anational bank, in other words,you
have a different setof rules and regulations. There are a tremen
dous number of laws that apply,and that's the overall framework
in which these institutions operate.
Senator SARBANES. I must say, in light of these responses, the

statement on page 4 of your opening presentation to the commit
tee,where you say that the serious problems of our financial insti
tutions could reach crisis proportions— that's your language - takes
on an added significance.
,
Letme askyou,what
are the seriousproblems which could reach

crisis proportions?
Dr. SEGER. One of the things I was referring to is, again, the

asset quality, lookingspecifically at some ofthe loansthat the
banks have on theirbooks that today are of good quality. But
banks do not operate in a vacuum;they operate in therealworld.
They make loans to businesses who areoperating in the real world.
They make loans to individuals who may or may not keep their
jobs, et cetera.

I didn't lay this all out,but what I was alluding to was ifwe had

a severe recession - and the typical fallout ofthat is thatyou have
rising unemployment— then people whose loans now look very
good, may at some point have problems meeting these monthly
payments ifthey're laid off.Therefore, good loansnow become bad
Ioans, in that kind of a recession environment. The same would go
for loans to businesses that today look fine, but can turn bad ifwe
went into a recession and these individual businesses started losing
money or maybe going bankrupt.The other end of that transaction

isthelender,thebank that has lent the money.
H E A V Y O N EN ER GY LOANS

Ifyou want to getback toContinental,theymade a lot ofenergy
loans.I can remember back in the late 1970's that practically every

communique out ofWashington wastalking aboutthe tremendous
shortage ofenergy and thatwe should takeall the stepsnecessary
to provide sources of energy so that we wouldn't beso dependent

onOPEC and othercountries.The way thatsome ofthesedomestic
sources were developed was through American firms down in
Texas and Oklahoma, and other places borrowing money from
their banks togo and drill for new oil and to processit.

27

I don't think at the time that many of those loans were made in

thelate 1970's or early1980'sthat that was viewed even by people
in Washington as reckless behavior.It was viewed as beingtuned
in to addressing thekey problem of that era,which seemed to be

energy shortages and establishing American energyindependence.
Senator SARBANES. In the speech that SenatorProxmire made

reference to,you were also asked to explainstatements attributed
to you that economic growth in excess of 3.5 percent should be

maintained and the article said that you flatly declined to answer
that question.

Do you regard that as a highly technical question to which,as I
understand it, a general audience of businesswomen would not be
able to understand the response?

Dr. SEGER.As I recall the date of that speech- I'm trying to re
member-

SenatorSARBANES.I'm notplaying games with you. The article
appeared in the October 20 issue of the American Banker, so it

wouldhave been theFridaypredatingOctober 20.

Dr. SEGER.Just prior to F O M C —
Senator SARBANES. The 20th was a Saturday, so it would have

been the day before, October 19.

Dr. SEGER.Just prior to FOMC meetings and for a week after
FOMC meetings at the Fed, there are numerous matters you are

not supposed todiscuss with the media norwith thepublic and,in
my judgment, that fell into that category,because Ifelt that any
comments I made on that specific question that day would have or
could have been interpreted as being a lead to some monetary

policy move;and that'swhy Ijust saidIpreferred not to answer it.
Senator SARBANES. So your response then to Senator Proxmire,
at least to the extent itruns to that question,was incomplete.It
wasn't that you didn't think that the audience would understand

your answer;is that correct?

Dr. SEGER.In general, that was the reason that I did not fully
answer a numberofvery technical questions,which Ithought were
inappropriate for the group; there wereother questions I did not
answer because theseare matters we don't discuss after FOMC.
Senator SARBANES. Did you regard either of the unanswered two
questions cited in this article as being technical?
Dr. SEGER. I'm referring back to Senator Proxmire's comments,

and I'm sayingthat a large number ofthe questions that came to
me were too technical for a general audienceof women .

Senator SARBANES.I'm quoting the same article;I'm quoting the
questions cited in the article; with respect to your declining to

answer; I'm suggestingto you that thosequestions certainly do not

strike me as technical. My guess is that this audience probably
couldhave digested any answer that you gaveto the question,that
they had the capacity to understand and digest your response,
would be my guess.But leaving that to one side, since Idon'tknow
all ofthe questions that were put-

Dr. SEGER.That was going to be my point,that there was halfan
hour worth ofquestions.

Senator SARBANES.I'm askingyouwhether youregard eitherone

of the two examples cited asbeing highly technical, questions to
which I take it an intelligent businesswoman would not be able to

28

understand the answer.These are thetwo questions:Should regu
lators have taken steps earlier to hold down the level of interna

tionallending in countries thatare now threatening to default;and
the other question: explain statements attributed to you that eco

nomic growth in excess of 3.5 percent should be maintained.Do
you regard either ofthose as a highly technical question ?
Dr. SEGER. I think the first one gets into technical matters of

bank supervision and regulation. Iexplained my answer to the
second question.

Senator SARBANES. Now in the fall of last year you,along with
two of your colleagues,dissented from a majority decisionof the
Fed to ease monetary policy.

Dr. SEGER.Three ofus dissented inthe October 2meeting.
Senator SARBANES.AttheOctober 2 meeting;isthat correct?
Dr. SEGER.That was the FOMC meetingonOctober 2.

Senator SARBANES. And is that the date of the meeting that you
were using to justify-

Dr. SEGER. No,sir; what I was referring to was being within the
ban of the upcoming meeting,not the one that we had just com
pleted.
DISSENTING OPINION

Senator SARBANES.Now it was your view then that on October 2
that we did not need to ease monetary policy?

Dr. SEGER. No, sir; my dissent was published and my position

was that,given the slowdownin monetary growth that we were
seeing atthat time,given the slowdown intheeconomy—again I'm
particularly conscious ofbusiness in the Midwest - itseemed to me

that it was appropriate to ease,and I thought we ought to ease
more and more rapidly than we were doing.That wasthe reason
for my dissent.I also

Senator SARBANES. So your dissent from the Board's decision to

ease monetary policy was because you felt that they didn't ease it
enough ?
Dr. SEGER.Yes,sir.

Senator SARBANES.That they should have done even more?
Dr. SEGER.Yes,sir;and those minutes are published.Those min
utes are out.

Senator SARBANES. Then in December, very shortly thereafter,

you stated thathigh-interest rates and the high valueofthe dollar
could not be alleviated over any meaningfultime period by unre
strained money creation. Reliefwould beshort lived at best, would

heighten inflationary expectation; and greater actual inflation
would be reflected in irresistible pressure on interest rates. I'm
quotingyou.

Wouldyou please explain howyou reconcile your October dissent
and the reasonsgivenwith yourDecemberstatement?
Dr. SEGER.I think the reconciliation is that they involve two dif

ferent matters.In early October,as I indicated,wewere looking at
an economy that was experiencing a rather significant slowdown.
In fact,welooked at M1 andit had actually declined last July and

grown slowly in August and September,and itlooked as ifinOcto
berwe wereeithergoing to have extremelyslow growth or possibly

29

a decline- it turns out,after the fact to have been a decline -and I

felt itwas appropriate to ease monetary conditions to prevent that
slowdown from carrying on and becoming a full-fledged recession.
There were some economists in some of these Wall Street firms,as
a matter of fact, that had a recession forecast.

That's what I was talking about then,and I also discussed some

ofthe special problems thatwe had;again, I mentioned the plight
of the thrift institutions, and some of the same points I justmade
in my prepared statement this morning; I mentioned the Third

World debtmatter,and all these special issues that Ifeltwe had to
be conscious of.

In early December,what Iwas referringto— ifyou had heard the
whole talk, Ithink this would maybe make more sense in context

was the impropriety of the Fed just sort ofgunning the monetary
engineto artificially depress interest rates.That'swhat we were
talking about then because

Senator SARBANES. So in October you thought they should be
easing monetary policy significantly more than a majority of the
Boardwas prepared to do.
Dr. SEGER.Somewhat more .

Senator SARBANES. And in December you were sounding warn

ings about gunning themonetary accelerator.Is thatcorrect?
Dr. SEGER.You're misunderstandingwhat I'm saying.Iwas talk
.ing about some ofthe suggestions thathad been madethat the Fed
could solveour balance-of-payments problems,could bring down
the value ofthe dollar by somesort ofdramatic and rapid move
toward pushing down interestrates.In other words, that the objec
tive would beto push down interest rates and that would bed e

signed to weakenthe dollar and ultimately to reduce imports and
stimulate exports.

I disapprovedof that then,and Idisapprove of ittoday,tojust

gun theengines to push down interest rates.
That's not the same as saying that in a certain period, when the

overall economy isslowing down and the monetary aggregatesthat
we monitor are showing not only slow growth but actual declines,
that itseemed to me appropriate to change course. I'm not talking

about 180 degrees. I'm talking about changing a few degree but a
littlemore than the majoritythoughtwasappropriatethat day.
Senator SARBANES. Do you think the Fed is on the right course

now ?

The CHAIRMAN.Senator Sarbanes,you're more than double over
unless Senator Sasser wishes to yield.
Senator SARBANES.I don't want to impose on Senator Sasser.
The CHAIRMAN.Senator Sasser.Again, ifyou will hold to 10 min

utes,Iwill repeat as many sessionsas you want,but out ofcourte

sy to our colleagues, Senator Sasser.

Senator SASSER.Thank you verymuch Mr. Chairman.
A number ofissues that we discussed in this committee last year
with regard tothenomination ofDr. Seger arestill very current I
believe, and I don't anticipate that we will get into these issues in

the same degree ofdetailas we did last June,but thefact remains
that we have a nominee for the Board ofGovernors of the Federal
Reserve System who has no background in small business and no
background in agriculture.

45-819 0 - 85 - 5

30

There are some new and very troublesome issues that we've

gotten into earlier today involving the question of recess appoint

ments.After4 days ofrather contentious hearings, duringwhich
some doubt developed — at least on the part of eight members of
this committee — as to whether the nominee was prepared to
assume the responsibilities of a Governor of the Federal Reserve
Board, after 4 days ofhearings, the President chose to take advan

tage ofthe Fourth ofJuly recessto make the appointment.
Now , I would expect that the nominee has had an excellent op

portunity in these intervening months to make good use of the
staff resources of the Fed andI would anticipate that the answers
we receive today would show a new appreciation of regulatory and
policy functionsofthe Fed.

But my concern over the failure ofthis administration to appoint

an individual with a small business or agricultural background,re
mains and I might say doubly so sincethis is the second time in
less than 1 yearthat a nomination has come forward that fails to

fill the gap in the Federal Reserve Board with regard to there
being no member with an agricultural background and no member
with a small business background as required by a resolution

passed by an overwhelming vote here in the U.S. Senate not too
long ago.

Dr. Seger,in your opening statement you alluded toproblems in
the economy and you indicatethat adozen agriculturalbanks have

failed so far this year. We're hearing reports from various and
sundry individuals, including the banking superintendent of one
Midwestern State,a farm State,that many,many more agricultur
albanks may fail before this year is out.
HEA LTH OF F A R M B ANKS

Do you have any information which would indicate how many
additional agricultural-related banks oragricultural-lending-relat
ed banks wemight expecttoexperience failurethisyear?

Dr. SEGER.I don't have exact numbers because I don't think that

even our staff in supervision and regulation can come up with a

specific hit list,or saythat this one,andthis one,andthis one are
doomed for 1985,and this other group is doomed for 1986.
The comments I made earlier were about the factors that we
look at when we evaluate the health of a bank. Once those deter
minations are made and these institutions are rated, we have a

healthy end of the scale and we have a not so healthy end of the
scale,the so-called problems. On our problem list,some will go on
to fail and others—whether they're agricultural or nonagricultural
banks — can be merged into other institutions before failure; some

of them can be righted about by capital infusion and maybe get
some new management and change their ways ofdoing things and

can be rescued.

There are a large number of institutions in fact, I think I read
an FDIC number that there were close to 1,000 banks in this coun

try, both agricultural and nonagricultural— that are on the prob
lem list,and some ofthose wouldbe agricultural banks.

31

Senator SASSER.What role do you perceive the Fed to have in as
sisting with what many are coming tocall a crisis now in agricul
turalcredit and in theagriculturalbanking system ?

Yesterday, we heard testimony before one ofthe subcommittees
on appropriations fromthe Governor of the Farm Credit Adminis
tration that indicated that some 15 percent of their loans are now

nonperforming andI don't think it's a stretch of his testimony to
saythat he was indicating rather a profound concern about what
may be in the future,in the near-term future,with regard to many
ofthe agriculturallending institutions across the country.

What role can the Fedplay,in your judgment, ifany, to assist
during this crisis in the farm crediteconomy,particularlythecrisis
as it dealswith lending institutions that lend to agriculture?
Dr. SEGER.There are a couple ofareas that I would like to men
tion inresponse to this question. One is that the Fed for years has

had what we call a seasonalborrowing program ,meaning that
banks in areas thatare primarily agriculture,whose businesstends
to be very seasonal in nature, cancome to the Fed and borrow at
the discount window , taking advantage of this seasonal facility.
This allows them to get the liquidity tomeet the demands from the

farmers in that area,whoseneeds are, again, very seasonal,to get
the liquidity to make those loans to the farmerswith the assump
tion that at the end of the growing season or after the harvest is
done in the fall the farmerswill presumably be paying off someof
these loans, and then the bank can turn funds into the Fed and
paythoseborrowings off.

That's been a regular seasonal program we have had. In early
March, the Fed liberalized that program to make it easier for
small-and medium -sizebanks toqualify for it,to take advantageof
it, and then the Fed put together a special program that would
apply this year only and woulddie, Ithink,at the end of Septem
ber that offers still different kinds of short-term accommodation,
again, to these small banks, to help supply them with funds which
would take care of about half of theirexpected increase in farm
loan demand for this summer.

Senator SASSER.Would you agreethat there is a severeproblem
in the farm credit system, particularly with the farm banks or
banks that lend to farmers?I think they become an agricultural
bank when 25 percent of their loans or more are lent to farmers.

Dr. SEGER.Yes;Icertainly do think there isa problem.
A 75 -PERCENT INCREASE IN THE V A LU E OF THE DOLLAR

Senator SASSER.Dr. Seger, you indicated that there's been about
a 75-percent increase in the value of the dollar over the past 4
years in your opening statement, and also detailed some of the
problems that's caused not just to agriculture but in other sectors
of our economy .

Now I understand that there's going to be an economic summit
in Bonn in May ofthis year and our major partners in the interna
tional monetary system feel that theproblem ofthe very high U.S.
dollar issomething thatshouldbe addressed in very earnestterms.
As a matter of fact, I think it'sone ofthe most serious problems
that we presently have, the problem of the overvalued American

32

dollar and how it's affecting our exporters and also how it is affect
ing imports.

Now , has the administration indicated any pattern ofattempting
to deal with this overvalued dollar from your vantage point as a
member ofthe Board of Governors ofthe Federal Reserve and have

you gotten any cluesor signalsfrom the administration as to how
they would wish the Fed to deal with the problems ofthe overval
ued dollar?

Dr. SEGER.Ipersonally have not dealt withthis because the way
the Fed is organized, the Chairman -Mr.Volcker- is the one who
works individually with the Treasury on this.

SenatorSASSER. Ithought, with your special relationship with
the administration,that theymight have sentyou some signal that
others did not get.

Dr. SEGER.I'm sorry.That's an improper assumption. Mr.
Volcker has breakfast,Ithink once a week with the Secretary of
the Treasury; Idon't.They communicate with each other ona very
regular basis.There was also a big meeting back in January by the
Americans and four other major industrial nations to address this
whole matter ofthe value of the dollar.Anything that we do from
the American side would be a joint effort between the Federal Re
serve and the Treasury.

As Isaid,Ipersonally have notbeen involved with it.
Senator SASSER.Well,my timeis up.Mr. Chairman,I've got a
Defense Appropriations Subcommitteeand I'm going to have to go
to that meeting.

The CHAIRMAN.Certainly.I have to go to the Defense Appropria

tions,too,but as chairman I can't leave.

Senator SASSER.Well,I'll tell them that you'll get there as soon
as y o u can .

The CHAIRMAN.Governor Seger, as you're well aware,in the na

tional news the last few weekshave been the problems experienced
by the Ohio savings and loan institutions that are State insured

andsome people aresuggesting that weeliminate State insurance
funds as aresult of that and a great deal of discussion about revis

ing the entire Federal Deposit Insurance System as well as the
FSLIC .
IM P L I C A T IO N O F S T A T E I N S U R E D F U N D S

Do you have any comments — you're a former State regulator —do
you have any comments on notso much thatparticular situation
in Ohio but the implication for State insured funds and the impli
cations for the Federal insurance funds ?

Dr. SEGER. Just to get the facts on the table, Michigan did not
have a State fund,butOhio,whichwas our neighbor, did,and so I
was very much aware ofthe fund.The sad thing to me about this
whole matter isthat many institutions could just call themselves
insuredand the innocent person in the street who wentinto make
a deposit didnot distinguishbetween an organization that was in
sured by this private fund in Ohio — the State-chartered fund
there -and thought, since these were savings and loans,the FSLIC

would be theFederal agencythat would deal with that.There were
many individuals who got the shocks oftheir lives to find out that

!

33

the deposits that they hadleft— andthat they thought were very
safe,because they had this insurance by the Federal Government
were not safe,and I think thatthat's very tragic.
There are five or six States thathave an alternative system ;this
is, for some States, tied into a States rights issue, because they

want to have the opportunity to charter financialinstitutions,
which ofcourse they all do.What has been discovered is that many
times the additional latitude that a State would give State-char

teredinstitutions is diluted when they getinsurance from the Fed
eral Government,because along withthe insurance comes a whole
raft ofrulesand regulations. Therefore,States rightsto the fullest
extent would mean setting up some sort of a State fund to allow

State-chartered institutions to escape those rules and regulations
that are imposed orwould have been imposed by the Federal insur
ance organizations.

I don'twant to sit here and propose automatically doing away
with these State funds,but I think it is important that iftheStates
are going tooffer thisalternative that they be required first,to di

vulge very clearly on the doorsand on their literature very clearly
who the insurer is; and second, I think that there has to be an
effort made to strengthen the State insurance funds so that they

would be adequate to handle a major failure. If they cannot do
that,ifthey cannot provide that strengthening and provide a rea
sonable alternative to Federal insurance, thenI think that you in

Congress should force aconversiontoFederal insuranc
whether
e,

it'sFDIC or FSLIC.But there should be the opportunity given to
the Statesto improve their situations.

The CHAIRMAN.My next questionis:Do you have any recommen
dations or ideas on what we should do with the Federal insurance

as far asrevisions there?Specifically,as an example,this commit
tee is going to be looking into risk-related premiums. I can't buy
life insurance at my ageat the same premium my 27-year-old son

can.Obviously, he's going to live longer. I certainly can buy auto
mobile insurance a great deal cheaper than my 18-year-old son.

The whole principle of insurance isbased on risk and yethere we
have an entiresystem of financial institutions that paythe same
premium regardless ofwhether they are the old-line,staid,conserv

ative banking institution that couldn't get in trouble in the worst
recession or the go-go operators.
Dr. SEGER.Right.

The CHAIRMAN. What areyour feelings? I don't expect you to
have a detailed itemization, but do you feel we need to goin the
direction of revising the Federalsystem as well?

Dr. SEGER.In a nutshell,yes,I certainly do think we have to look
at this whole thing and come upwith some revisions.Ijust want to

mention, too, that astronauts have higher insurance premiums
than State school teachers.

The CHAIRMAN. Not ifyou buy your insurance before they know
you're going.[Laughter.]
There isno astronautwaiver provision in my life insurance.My
wife checked that out:

Dr. SEGER. To be serious aboutthis whole thing, I think that
there has to be some notice of difference in risks because, as you

say, not all institutions are alike. Some managements have been

34

described as kamikaze pilots,which also is a rather high-risk occu
pation.And then you have the other extreme which,are the fuddy

duddies. I think that some effortto relate premiums to risk isa
good idea.Yet when Isitdown and think aboutthe specifics ofhow
you would do itand what you would use as a measure ofrisk and
how much of a differential you would have to introduce between

the premiums you charge the fuddy-duddies andpremiums you
charge the institutions headed bykamikaze pilots,I'm not content
withm y ability to put a figure on it.

I think that youhaveto makea higher premium charge to the
, but again,the specifics have not yet been worked out
riskier ones,
in my mind.I think it's a great,general idea,and I think it's some
thing we need to work on.
DISINCENTIVES TO THE HIGH FLYERS

Another point that came up while I was trying to put some of
thison paper was that so many ofthe ways that regulators have of
evaluating institutions and giving them these so-called camel rat
ings are after the fact, and itseems to me that if this is going to

work —iftherisk-related premium isgoing towork to influence
the
behavior ofthe management offinancial institutions, which Ithink
is what we want to do,so that ultimately we do not have as many

failures and so many taps on the insurance system -then I think
we've got to get that disincentive put into the system for the high
flyers.We've got to get that put into the system before they get
into trouble and before they have made all these risky loans.Oth

erwise,all we do isjust push them down the hill faster because
theywill have thehigher premiums to pay and they are already in
trouble,and I think that would be counterproductive.

While Icertainly think it'sa great idea,I haven'tworked out the
details in my own mind,nor have I seen aproposal from anybody
else that has come up with the details on how we should do this.

The CHAIRMAN. There's no doubt there's problems in working
out the mechanics of it, but money is a very powerful tool. I have
often felt that in pollution control, having worked with EPA for a

long,long timeasa mayor and chairman ofEPA's subcommittee,
that when we impose arbitrary standards which everybody has to

meet,regardless of their individual circumstances, we oftenwaste
a greatdeal ofmoney in those control strategieswithout producing
the environmental result we want.

Ihave always been sorry that we didn't go to penalties on pollut
ers.In other words, saying, “W e don't care how you do it,whether

it'sa temporary shutdown orwhat kind ofcontrol strategyyou use,
but ifyou violate the air standards that are set up or whatever
theyare,you will pay a very heavy price.” It's an incredible incen
tive for people to stay below thosestandards without making it ar
bitrary.I think you might find it is worth looking to and trying to
work out the details of that, and I think you would find that it
would have a prospective benefit even ifit came after the fact as a

result ofexaminations,operations,diminished capital or whatever
standardsyou use,thattheywould consider someofthe loans they

make more carefullybeforetheymake them.
1

35

So I certainly have not made up my mind on exactly how it
should work, but it's certainly something the committee will
pursue to see if we can improve that insurance system and put
even more confidence in it than there is already in the national
system .

Senator Riegle.

Senator RIEGLE.Thank you, Mr. Chairman. I want to report to
you that over in the NAS hearingin the CommerceCommittee I
was able to secure an understanding that you will be given a

deluxe parachute forthe space ride and on the parachute will be
written the words: “When this man is found, return him to the

United States Senate.” So I want you to know that we have taken
care of your interests over there.

The HAIRMAN.It'sgoing tobe an interesting parachute because
parachutes don'tworktoowell where there'sno atmosphere.
SenatorRIEGLE.Well, that's why I thought we'd better have a
return address on there.

The CHAIRMAN.It'sgoing to be alongfree fallbefore itopens up.
Senator RIEGLE.Well, I promise tojoin the search partyifthat's
needed.

In any case,Dr. Seger,we have many mutual friends in the audi

ence today. We havemany people from Michigan here today that

are interested in your confirmation that happen to be in town and
I'm delighted that that is the case and that they're here I think
generally to show their support for you,but it gives them a chance
to see how this process works.
It's now a little after 11 o'clock and we started at 9 —

Dr. SEGER.It seems like only 5 minutes.
Senator RIEGLE.Yes,I'm sure. You've been in the chair all that

time andyou and Ihave had an opportunity totalk for10 minutes,
half of which I felt I needed to use to review where we were before,

so it's difficult to carry out a line of discussion in any meaningful
way backand forth within the time constraints, as peopleare
having a chance tosee here.
Imightjustsay,Mr. Chairman

TheCHAIRMAN.IfI could interrupt, I understand that none of

your colleagues willbecoming back,soratherthan imposing a 10

minute rule on you,please finish your line of questioningin the
time you feel is necessary.

Senator RIEGLE. I thank the chairman. I might also say that

what I'm going toget into isfairlyroutine.I don'twant to suggest
that the chairmanleave, but I know he needs to be somewhereelse
and if he felt he needed to,I'm going to finish up in due course,so

he may want to playthat by earbecause I'm reluctant to keep him
from gettingtohis otherassignment.
I foundmyself,as you might imagine, in a situation where many
of my colleagues have come to m e to ask about you and,because

you and Iwere not professionally orpersonally acquainted prior to
your nomination,I had not been able to saymuch until we went
through our hearings the last time.I might say that in reviewing

those hearings today — and I've got thehearingbook here— Iwould
say that anybody,includingthose in the audience who are really
interested in the detailed discussions that went on which are far

more detailed than they will be able to be today really ought to get

36

this and read this because I think it's instructive of the kinds of

issuesthat were raised and the questions on people's minds,your
responses, and so forth.

So Iwant to touch on three or four more areas here to give you
an opportunity to sort of build a record here where you have the
chance to pick up some additional votes so that you're not just

going to be confirmed on the basis ofpretty much a straight party
linevote.Idon't think that's a good thing to have happenand soI
think to the extent that you can go out of this committee with a

committee recordthat other members can read and find reassuring
to them I think helps you,and so I want to touch on some areas

along that line.

I might say further, while we received a number of letters in

your behalf and some from people in the room today,the person

who appointed you bankingcommissionerin Michigan, Governor
Milliken, has not sent such a letter. That'snot appeared part of
the record and if itwere I think thatwould be something that
would help you.So there's a lot to consider in terms ofwhere we
find ourselves today in light ofeverything that was said in the ear

lier rounds ofdiscussionaswell about the nature ofrecess appoint
ments and so forth.

STATE-INSURED S&L's

I want to follow up where the Chairman left offa minute ago on
the State-insured S& L's, such as the case in Ohio.

Do you think maybe we're at a point where we ought to,either
by Federal law or by very powerful requirement, bring those other
States in under the Federal insurance system ?

Dr. SEGER. My suggestion was, because there are very strong

feelings on States'rights,that we give the States an opportunityto
beef up their own funds, so to speak, and if they cannot do that ,

cannot raise the capital or are not willing to— then you should
followthrough with what you're saying.

Senator RIEGLE. Are you particularly concerned one way orthe

other about how solid the other five or six States are other than

Ohio?Do you haveany particular concerns about the strength of
their insurance fund situation at the moment ?

Dr. SEGER.Ihave not talked to any ofthe other State regulators,
but the reports Igeton activity at savings and loans in these vari
ous Statessuggests that all is calm .

Senator RIEGLE. There have been no runs, but I'm wondering
about it interms oftheir insurance fund capability. When things
like this ESM goes offitgoes offwithout warning in the bank and
it has an impact that people would never have been able to antici
pate,partlybecause Ithink our monitoring system is very incom
plete.

Dr. SEGER.Isuspectthatany of theprivatefunds,just looking at
numbers, are notof thesizeof the Federal funds;therefore,the
bigger the casualty, the less likely a State fund would be able to
handle it.

Senator RIEGLE.But I take itthatyou feel that there isno press
ing urgency in these other States right now that you're aware of
and that you have time to sort oftake a measured approach to this

37

rather than move quickly to try to get them into a Federal insur
ance system .

Dr. SEGER. That's the impression Iget.
E S M SITUATION

Senator RIEGLE.OK .How about any further Government regula
tion ofthe government securities market to try to get at the situa

tions like ESM Government Securities, Inc. (ESM )? Do you feel
that we need something more in that area and,ifso,who might
have that regulatory authority in your view?
Dr. SEGER.This is something which the Fed is very interested in,
as you might imagine,because,for reasons of monetary policy and

also as official agent for the U.S. Treasury,we have a lot ofdeal
ings with the government securities markets, and we have a very
close relationship with the seven so-called primary dealers; these
are the Solomon Bros. of the world,and they're the ones that the
Fed does most ofits market operations with.We collect very exten
sive information from that handful on an ongoing basis, and our

concern there is that they are in fact bigenough, and well enough
run,and well enough capitalized to handle the volume of transac
tions that we're doing with them .

The problem has been thesmallergovernment securities dealers,
the ones that are not called primary, the ones that are not one

which we deal with;these are the Drysdale's and the ESM's.
Senator RIEGLE.Do we need to fence them in somehow ?
Dr. SEGER. I think we have to look at these two layers different

ly.Ithink with the primary dealers it isworking well. The issue is
how do we deal with these peanuts that are getting into trouble.
As I understand it-and I'm not a lawyer — the SEC has the au

thority now to go in and look for things like fraud and criminal
behavior in theinstitution,but we are not regulating them on ordi

nary transactions and on ordinarybehavior.And Ithink that prob
ably ESM was the straw that broke the camel's back,because if it

had just been a small government securities firm in Fort Lauder
dale,FL,that went under, then I think you could say:"Well,that's

unfortunatebut it'sa statistic.” Butwhen you see the ripple ef

fects,which Ithinkhavebeen tremendous

Senator RIEGLE.Yes,they have been.They are of concern to me
as well.

Dr. SEGER.Exactly. Even though the nucleus ofthe disaster was

a little pinpoint down here,when it could go to a major industrial
area inthe Midwest and close down a major State-chartered insti

tution there and then have the followup on the other savings and

loans and finally produce a bank holiday,Ithink itwas sufficiently
severe that we have to look at this.

Senator RIEGLE. And is it your thought then that the SEC has
some authority now ?Does itlook like that's sufficient, or are we
goingto have to increase that authority,or are we goingto have to
get somebody else in the act to run down these secondary folks to
make sure that they are not behaving in an illegal fashion or that
they've got adequate security for thecommitments that they have
made ?

38

Dr. SEGER.As Isay,Ihave not studied thiscarefullysincethis is
a rather recent problem , but my gut reaction is to say that ifI be
lieve in the function of regulation, which I do,then the SEC would

be the logical one to do this,because they do have fundamental
regulatory power inthe securities area and there are laws that
give the SEC authority to go in and dealwith corporate securities
dealers or people who deal with equities.They haven't talked to me

nor I to them ,but they might beat least a starting place for deal
ing with this problem .
I suspect that because there are a lot more of these tiny institu

tions thanthereare thegiantsthat itwould probably mean more
resources thantheynow have.I'm not sayingthat they can doitat
the moment. I don't know what their staffing situation is. But I
think my initial reaction would be to say,first, that we do needto

pay more attention to these smaller firms because ofthe potential
fallout of their getting into trouble and, second, that the SEC is
maybe at least the place to start.
Senator RIEGLE.I've been told informally by people who would
seem to have the proximity to know that therehave been some cer
tain quiet runs on some of these State-insured S& L's in other
States of big depositors, not the little depositors but the $100,000

plus deposits apparently are beginning to sort of disappear. And
the reason I heard thisis that they are reappearing in FDIC- and
FSLIC -insured institutions.

Have you seen anything like that and are you in a position to
monitor that at all?

Dr. SEGER.As you know,we have these 12 Federal Reserve banks
that are strategically located around thecountry and they have

been carefully monitoring the events in theirrespective districts.
Yesterday,I happened tohave occasion to speak with presidents of
two of the Federal Reserve banks from two areas that have these

other private insurance funds, and the word from thema n d I
don't know how thorough a studythey have done,so I'm just re
porting what I heard -was that things seem to be under control,
and that in one State- Massachusetts— there apparently has been
a savings bank, at leastone I can think of that they mentioned,
that had applied to FDIC for Federal insurance. That was the
extent of what I was told .

Senator RIEGLE.SenatorDodd has come in. Iwant toget into a
couplemore areasand my 10-minute time period has expired.
The CHAIRMAN. Senator Dodd.

Senator Dodd.Thank you very much.Iwon't take a great deal of
time and I apologize toDr. Seger and the chairman for being late

in getting here. Ihaven'thad the opportunityto readyour testimo
nyso if Iaskyou questionsthat havealreadybeen asked Iwilljust
defer to the chairman and get the information.
DEFICIT REDUCTION

When you appearedbefore this committee on a previous occasion
and were asked about deficit reduction, you indicated that deficit
reduction should include both spending cuts and tax increases.

In a speech last December beforethe Economic Club ofmy home

State ofConnecticut- and I'm quoting you here if I may - you said

39

that the raise in taxes isan idea “of limited economic appeal” and
that a tax increase would "work against both efficient resource al
location and strong economic growth.”
>

I have two questions inrelationship to this. One,the President

and the Chairman of the Fed have indicated that a $50 billion defi

citreduction shouldbe the target for thisbudgetcycle.

If we are incapable of achieving the $50 billion reduction

through spending cuts alone, whichwould you recommend as a
preferabledecision on the part of Congress: to accept a $30 to $35

billion reduction in spending cuts or a $50 billion deficit reduction
ifthat included some tax increases to make up the remaining $15

to$20 billiongap that would notbe achieved throughjustspending
cuts ?

Dr. SEGER.I have been committedto fiscal responsibility for a
long time, and I am supportive of bringing the deficit under con

trol.My preference isthatwe hit the expenditure side firstand,to
the extent that that doesn't come up with enough, ifit takes a tax

hike to make up that difference,then Iwould bein favor ofit.This
is a sequential matter.
And I think that in the testimony I've read by Chairman
Volcker, he was talking about $50 billion as sort of the absolute
bare minimum.I don'twant to put words in his mouth, but that's
what I recall from my reading of his words. I know he feels very
strongly about that.We all feel very strongly about it,but I just

thinkyou have to start someplace - expenditures first and then,to
geta reasonable total impact,beefingup taxes.

Senator Dodd. In other words,you wouldn'tnecessarily praise

the President's statementabout “Make my day”when it comes to
tax increases, that we need that?

Dr. SEGER.I guess I didn't hear his statement.

SenatorDODD.Iappreciateyour statement and that's an accu

rate reflection ofwhat many of usfeel.

In January 1984, the Vice President completed his work on a
task force on the revisions in the regulatory practiceswith regard
to financial services. One of the recommendations there was to

move the day-to-day operations of the FDIC to State nonmember
banks to the Fed.Idon't know ifyou're familiarwith that recom
mendation or not,but Iwould be very interested in your appraisal
of that recommendation .

Is this something the Fed would welcome in addition to its al
ready significant responsibilities?
CENTRALIZING TH E SUPERVISORY SYSTEM

Dr. SEGER.I'm very much in favor of getting the whole regula
tory,supervisory system pulled together to function better. That's
m y ultimate goal.I think the Bush task group had a similar goal.

One oftheproblems is that thisresponsibility is diffused and in
little pieces invarious areas,and when youget into a crisis ornear
crisis,then it gets complicated dealingwith it just because there
areso many people involved.

The State-chartered banks are now split:The Fed has those that
are members in the Federal Reserve System , and the FDIC is the
Federal regulator for the nonmembers. These institutions also all

40

have supervisory and regulatory instructions coming from their in
dividualState banking commissions.

Itis very,very complicated. In order to pull it together,you

could either go one way or the other.You could eithertake what

the Fed now has— the Statemember banks —and pull them into
the FDIC,or you could take what the FDIC now hasand pull them
over to the Fed .

Iam notviewing this asa turfthing atall.My interestisto sim
plifythings and get thejob going and getitgoingwell,so thatwe
can deal promptly withallof these problems offinancial institu
tions thatwe were talking about a few minutes before you came in.
I didn't sit in on the Bush task force meetings, but as I under

stand it,thefeeling was thatthe FDIC should be left doing the in
surance business,dealing withthe deposit insurance, and the im
mediate things that surround that, and that,with the exception of

the problem institutions—which the FDIC might be having to deal
with ifthey reach a failure stageand which the FDIC would still
have freedom to examine— that the responsibility would be given
to the Fed.That was the waythe proposal finallycame out.

Frankly,as an individual,I couldgo either way, with the objec
tive ofdoing the whole thing better.
Senator DODD.I appreciate that response.Part ofthe issue- sim

plification is clearlysomething that again Ithink there's unanimi
ty ofthought of,but there are a couple of wordsthat arenot that
often mentioned in a discussion of regulation of financial institu

tions that Ithink should bethe first words we talk about.Simplifi
cation is obviously a very desired goal, but safety and soundness

are the pillars really thatare the underpinningsof much ofwhat

was decided sometime back - in fact, it was decided sometime back
under the guise of safety and soundness,but the common denomi
nator thatought to determine these issues is safety and soundness
more than simplification.I assume you would agree with that.

Dr. SEGER.Although Idid not use the words,that wasbehind my
first sentence, which was that my main interest is to do it better,

meaning that we deal more competently with problems of safety
and soundness which is our ultimate goal certainlyin supervision.

We want to get intothese institutions quickly and findout what
theproblemsare,and we want to deal with them swiftly and effec
tively.

Senator Dodd. I agree with that.I was just telling you that
during the last year or so those aren't words you often hear- sim

plification and so forth ismuch morecommon.

Dr. SEGER.That's why Isaid Idon't want this to be a turffight,

because I think our objective ought to be just to improve the way
the whole financial system works.

Senator Dodd.Do you have any opinion,ifsafety and soundness
are the primary objectives, which institution the FDIC or the Fed
is a better guarantor of the perpetuation of those two principles
with regard to the nonmember banks?

Dr.SEGER. It's hard to answer this without looking like I'm self
serving,which I'm not.

Senator Dodd.There's nothing wrong with being a littleselfserv
ing.

41

Dr. SEGER.Ithink there isa certain advantage from a safety and
soundness perspective, which is what you're driving at,in having
the Fed have a larger say in this, because the Fed,in wearing its

other hat — the central banking hat or its monetary policy hat
does have something known as the discount window. We do have
this role as lender oflast resort and that ties in rather neatly with
dealing with these institutions on a supervisory basis, because if
they are going to come in and use thediscount window, come in
and borrow, to the extent that we have been dealing with that on

an ongoing basis we know what shape they're in,we have the
records. This may sound like very technical stuff, but it does turn

out to be ratherhelpful. We know what their collateral isbecause
these loans at the discount window are collateralized.They don't
just come in and sign a papernote without leaving anything there.
So, practically speaking, I think that there are advantages to
having the Fed have that additional access to them so that in a

time of real need, when these institutions would want to come in
and use the Fed's discount window —again in a liquidity crunch or
something like that — that we would besortofall set to go.
Senator Dodd.So you would opt for the Fed.

Let me just ask one last question and itrelates to this last ques
tion. There's also been a recommendation with regard to the inter

pretation ofthe Bank Holding Company Act’s limitations on limit
ed activities that that power go to a new agency or person within

the executive branch directly accountable to the President,and I
presumebased upon whatI've seenthat this responsibility in addi
tion todeveloping regulations would include defining the manner
in which activities could be conducted .

How doyou feel about that,again,onthe grounds ofsafety and
soundness?Do you think that ought to be agoal of theexecutive
branch directly on the Presidentor should itremain where it is?
R E C O M M E N D A T I O N OF B U S H TASK G R O U P

Dr. SEGER.The ultimate responsibility for regulating and super
vising bank holding companieswas given tothe Fed, asyou said.
Again, from what Ihaveseen,based on the 10 months I have been
there,based on the safety and soundness perspective, I think the

overlapin responsibilities can interferein that if, let's say,thelead
bank ofa small bank holding company or even a big bank holding

company has a national charter under the control ofthe Comptrol
ler of the Currency, but we, as the regulatory supervisor of all
holding companies, have the responsibility for the umbrella above

the holdingcompany, and if you get into a problem situation - if
things are going well, nobody cares — then itcomplicates matters
having the split authority and the split responsibility. Who should
move first?Should itbe the holding company regulator or should it

be the regulator of the bank?These are someof the problems I
have .

I think that the Bush task group, other than for maybe the top

50 international class banks,would give the responsibility for the
bank holding companies to whomever the regulator is ofthe lead

bank,so that you would get rid ofthis problem that we now have.I

42

think that would be important from a safety and soundness stand
point.

On the veto power,which is the secondpartof yourquestion,
again the Fed has had the authority to publish thisso-called laun
drylistofactivities whichare related tobanking and are onesthat
make sense for bank holding companies to engage in. The Bush
group,as I recall the proposal,wanted togive thatauthority to this
new Federal banking agency, because they wanted the consider
ation of these new powers to be more reflective of, let's say,senti
ment out in the real world; they wanted to be able to bring some

pressure to bear from thepolitical side,from Congress or whoever,

on these appropriate activities. And they left the Fed with the

right to veto thoseproposedpowersthat they feltwould impairthe

safety and soundness of the institution.

Senator DODD.My time has expired.I thank you.
The CHAIRMAN .Senator Gramm .

Senator GRAMM . Dr. Seger, as I look at your resume, I guess
there's one thing that I see in it that I findappealing aboveany

thing else,and that is that you were commissioner of financial in
stitutionsofthe State ofMichigan.
At a time when we face problems related to working with the
States as financial institutions go through economic stress, it seems

to me that that experience could be a valuable addition to the Fed
eral Reserve Board.And I'd like to give you an opportunity totell
us your experiences there as they related to financial difficulties
that institutions had and how you dealt with them .

Dr. SEGER.Thank you.II personally feel that that experience was

relevant and to the extentthat we at the Fed do dealwith regula

tion and supervision that there issome carryover from that experi
ence .

The first thing I would point out is that I did have to,shall we

say,put away one bank.We had onebank failure in thatperiod,
and I must say that it taught me that it is possiblethrough some

careful planning to work things out together.In this case, it was
the FDIC,we also had people from the Fed in Chicago, andwe had

people from the Comptroller'soffice.At the time,wewere tryingto
determine a pain-free, or nearly pain-free, way ofdealing with this,

because in 1981-82 in Michigan we didn't need any more bad news
on the front page ofthe newspapers.We didn't want to set offone
ofthese runslike we'vejust seen in Ohio.We were trying to think
of a way to get the bank closed but,to assure no negative impact
on the individuals who had funds in that bank,and we did work it
out.We had these Federal regulators in,and we were able to meet
with about 30 banks in the area and lay out what the situation was

at this institution that was goingtobeclosed.To make a longstory
short,on a Saturday we gotthebids for the particular assets that
theFDIC put in thispackage and oneofthe Michigan holding com
panies chose to acquire these selected assets and assume the liabil
ities,and on Monday morning,as far as the depositors knew,noth
ing had happened.Their checks were honored.
think that convinced me that these failures can be handled

smoothly ifyou do some planning and ifyou cooperate with these
other institutions.

43

We also had several savings and loans in Michigan that were in
deep trouble in 1981-82.One of them we were able to get merged
into a healthier — that doesn't sound too accurate for those days— a
less sick institution, and we did it so that we didn't have tohave

this fallout on theindividual citizens of a State that was taking
plenty ofhard knocks already.
Then there was a federally chartered savings and loan, which of
course I wouldn't have had responsibility for, that was failing. It
got in the media that there was a problem,and I remember actual
ly getting a call from a reporter at a Detroitnewspaper saying,

"I'm disappointedbecause Idrove down to a Detroit suburb”-I
willnotidentify which one-"and Isat out in the parking lot wait
ingfor therunto take place and ithasn't happened.
"
I think thatsuggeststhatyou can,ifyou are careful,keep down
the media value of these things and in the process contain the

damage. You can deal withthe specific problem, but you don't
have that one bank bringing down 1,or 2,or 70 others with it.

Ithink thiswholenotionofhaving aplan,beingdedicated to get

ting these things solved in a very effectiveway,in my judgment,

pays tremendous dividends.

Šenator GRAMM.I want toask you a final question. I see from
lookingat thisprevious recordofyour hearings that you have been
askedplenty ofquestions,but I do want to ask you one final ques
tion .
C O N T R O V E R S Y IN A C A D E M I A

As youare aware,there was a raging controversy in academia in
the 1970's as to the objective ofthe Federal Reserve System.
Should the Federal Reserve System follow a policy of trying to con

trol the money supply or a policy of trying to controlinterest
rates?

Now we're talking about an appointment for a long period of
timewhere obviously we're goingto have another administration.
We don't know whether they'regoing to be Democrats or Republi
cans and we're likely to bemaking very difficult choices.I'm not

asking you toget involved in anacademic debate,but Iwould like
to ask you to comment on your feelings about a relative weighting
at the Federal Reserve System in terms of monetary policy deci
sions with regard to the objective of controlling the money supply

relative to theobjective of controlling interest rates.
Dr. SEGER.Just as an aside,that debate isstillgoingon in acade
mia .

W e at the Fed - and my own personal preference — is to concen

trate our intermediategoalson controlling themoney supplyand,
frankly, we have problems doing this. People from the outside, Í

think,have an impression of our being able tospin dials and pull
levers more effectively than we in fact do. Nevertheless, we do
have as an objective controlling the money supply and,of course,
Chairman Volcker comes here and reports on the results under the

Humphrey-Hawkins Act about our FOMC meetings, and he lays
out the longer term monetary growth targets that we have set at

these FOMC meetings,and we really do take those targets serious
ly.

44

In addition,we have more short-term targets for 2 or 3 months,
so by the time 12 months goes by we hope to be hitting the longer
term targets but we also have a succession of shorter ones thatwe
look at.

Our ultimate objective - and I think there are people in acade

mia who lose sight of this- is that what we're really concerned
about is to have a monetary policy that we formulateand imple
ment that is going to be good forthe real economy. We want to
influence the realeconomy in such a way as to have nice healthy

growth at some sort ofsustainablerate.We werediscussingearlier
that there's some debate about what is sustainable and what our

potential is,nevertheless, our ultimategoal is to have this growth
take place.W e realize that ifthat healthy growth takes place there

are a lot ofjob opportunities for peoplecoming out of college and
coming out ofhighschools and forhousewives who want to go back
to work .

We have those objectives for the real performance of the econo
my.We also have averydeepcommitment to keepinflation under
control,because Ithink there's more andmore evidence that price
stability iscritical to good economic performance. Ifyou let infla
tion run wild,itmesses things up,to put it mildly.
These are the things we are looking at out in the long term ,and

our monetary growthtargetsare sort ofan interim step which we
hope helps us get to thesereal world objectives.

As I said,we are not perfect. I willalso say that it looks a lot
tougher being there thanit was teaching about it or talking to
banking groups about it.There's a littlegap between the theory
and the practice.
Senator GRAMM . Thank you.
The CHAIRMAN.Thank you. Senator Riegle.

Senator RIEGLE. You have been sitting here 242 hours plus.
Would you like to stretch your legs?
Dr. SEGER.Could Ijust stand up for 1 minute ?
[Recess.)

The CHAIRMAN.The committee will come to order.
Senator Riegle.
Senator RIEGLE.Thank you,Mr. Chairman.

Iwant to try to move as rapidly as Ican through several subjects
here that I know our othercolleagues are interested in your views
on,asIsay,togiveyou a chance to put a record together here that
Ithink may behelpful toyou.
In your view,how much maneuvering room does the Fed have at
this time for monetary expansion? In other words, assuming that

you take thedeficit paralysis as itexists today, ifit'snot resolved,
if we just drift along on the present course,in your view, does the

Fed have much room leftformonetary expansionas you would see

things now ?

Dr. SEGER. First of all, we really hope that the deficit is dealt
with .

Senator RIEGLE.So do I.

Dr. SEGER.We will come up with a lot better monetary policy if
that's done.

Senator RIEGLE.I agree with you.

45

Dr. SEGER.We do have some latitude for doing our job primarily

because the monetarygrowth, as Isuggested earlier-we haven't
fine-tuned itso muchthat we have thesenice,even,monthly incre
mental growthnumbers— isslowing down from this very rapid No
vember-December, even January,pace, no matter which aggregate
.

you look at. We are coming down. As I mentioned, we do have
these longer targets that Chairman Volcker presents to the Senate
and the House, and what we see is that probably by late this

month or for sure in April themonetary growth numbers will be
within those bands as announced by Chairman Volcker.

I think that that's good news andit gives us some latitude to
keep monetary growthgoing. We don't want it to go up to 37 per
cent,but wecan keep itgoing.
Another thing that I believe is helpful at the moment is there
seems to be some evidence which I believe you referred to,ofsome

slowing down of economic activity, particularly on the industrial
side.

Consequently, I think that
Senator RIEGLE.That's hardly cause forjoy.
-

Dr.SEGER.No,no, and I'm not sayingthat. I'm just saying the

fact that we are seeing this slackening,because we do lookat those
things,gives us some room for monetary expansion because we do
want to make sure that there is sufficientmoney and credit out

therefor businesses, consumers,and Stateand local governments,
and allthose participants in economic activity.

Senator RIEGLE.The reason Iasked youthe question isbecause it
does relate directly to what islikely to happenon deficit reduction.
There aresome inthe Congresstoday who feel that thekey todefi
cit reduction isan expansion ofmonetary policy.I'm talking about
prominent people who are saying this, including people like Jack

Kemp who's well known on thesetopics,whofeelthatthe real key

now is not some sortofmassive budget deficitreductionbut rather
that the Fed has its foot down too far on the brakes and we really
need a burst in monetary expansion and ifwe got the monetary ex
pansion we would get the growth, and thatthis anemic output
number, the advance number, for the first quarter would start to
move up more rapidly.

I don't think that represents the consensus view but there are
influential people in the Congress who hold that view.
To the extent that they prevail,then that makes it tougher to
get a deficit reduction package in place and it does put more ofthe
burden on the Fed to somehow do it all, somehow through the
management of monetary reserves.
POSSIBLE F E D M A N E U V E R I N G R O O M

What I'm asking you is, if we don't crackthe deficit problem ,

does the Fed havea lot ofmaneuvering room leftto somehow perk
the economy up, produce growth, get the economy moving at a

much more rapidrate,bring deficits down on the basis of some
cleverstrategyin managing the monetary aggregates?

Dr. SEGER.
Well,we havetwomajorpolicytools which are mone

tary policy and fiscal policy,and ideally these should be coordinat
ed.

45-819 0 - 85 - 6

46

Senator RIEGLE.I agree with you.

Dr. SEGER.And ifwe have them going at cross purposes,if,let's

say,on any given day itwould beappropriate as anobjectivejudg

ment to have some sort ofrestraint-by theway,it's not my posi
tion today;I use this as an example — then iffiscal policy— that is
the Federal deficit—isway offsomeplace in astimulativeor super
stimulative mode because of the big deficit, then what this means
is we who do monetary policy onthis side haveto do our job plus
offset these stimulative effects. Therefore, arithmetically, you're
going toget tightermoney when you've got that big deficit.
Ithink that having that deficit out there is going to limit the

Fed's maneuverability because,as I said, we have to look at the
overall impact ofthetwo - fiscal and monetary policies— combined.
SenatorRIEGLE.Well,we're headed for thesame place hereand
that's why I'm asking you how much maneuvering room is left.If
the Fed were to say,“Look, we're running outof maneuvering
room.We can't carrytheburden ofoffsettingan out-of-control Fed
eral deficit and even with all ofthe moves that the Fed can make,

and it is now urgent in theextremethat the deficit be brought
down and ifitisn't brought down don't counton us to produce an
answer that's beyond our capacity,” —I think ifyou said that or if
the Fed was saying that,that would actually help us get a deficit
reduction package. That'swhat I'm tryingtoelicit.
Dr. SEGER.I think you and I are on the same side on this par
ticular issue.Let me give you a specific example. Today's deficit in
such large proportions ishaving a tremendous negative impact on

areas that youand Iare both interested in,and theextent thedefi
cit is there it forces us to have a tighter monetary policy than we

normally would. This means interest rates are higher than they

normally would be,although they are certainly below their peaks,
but they could be lower.And to the extentthatthathappens, then
we are influencing the dollar,and when the dollar is strong,then
that,ofcourse,showsup inour trade figures;we have sucked in all

of these imports, and the high dollarhas made life difficult for
American firms that usedto like to export.

If you work through the impact of the deficit that way, it is

having a tremendous impact.I don't think it's healthy, and I'm
sure you agree with me -to have these gigantic trade deficits of

over $100 billion.
Senator RIEGLE. Then it does follow that the size of the Federal

deficitreducesthe maneuvering room oftheFed ?
Dr.SEGER. I'm giving that specific example of how I think it is
reducing our maneuverability,because we have to be somewhat
more tightthan we normally would be on any given day to offset
this big bulge ofthe deficit.

Senator RIEGLE.Statingthat another way,itwouldbeyour view
that ifwe suddenly shifted gears and sort ofopened the flood gates
of monetary policy and flooded reserves into the system , thatthat
isnot goingtosolveourbasic economicproblem ?
Dr. SEGER. Not as Ianalyze it.In fact, I think it would create a
couple ofother big problems.

Senator RIEGLE.Well, that's important and I appreciate your
saying that because the question iswhetheror not that's the quick
and easy way to fix the deficit problem , although that's very at

47

tractive to some people because it'srelatively painless, especially if
you're inthe Congress and you can simply pointover to the Fed
and say,“Just dothus and so,and giveus the solution over here
that w e want.

But your view is that that strategy will not work?

Dr. SEGER.Yes, sir.To repeat something I mentioned earlierto
you,I'm verycommitted togetting the deficit down, getting the
problem solved, and I think that there isn't any gimmickyway to
do it,ifyou want to put itthat way.Itinvolvesaction on eitherthe
expenditure side orthe revenueside or a combination of the two,
and I don't know of any other gimmicky or pain-free way to solve
that problem .

Senator RIEGLE.Now yesterday, I noticed that short rates were
offand yetlong rates pulled up there pretty high in the 12-percent
range on the 20- or 30-year maturities and even though the infla

tionhas remained relatively low and we have notseen any resur
gence ofinflation yet worthnoting,any broad-based.

Why isitthat thelongrates are staying up there sohigh,espe
ciallyin real terms ifyou're looking attheinflationrate ofmaybe
3.5percent and a long rate of 12 and looking at real interest rate

differentialsthatareas high as we've seenin a strong economic
period probably since the Civil War on a sustained basis.It really

is extraordinary.

What do youthink isaccounting for that?Why aren't those long
rates coming down ?

Dr. SEGER. My analysis is— and I suppose you could get four
economists or economic analysts who would give you other
views

Senator RIEGLE.They would give us five answers.
L O N G E N D O F T H E M A R K E T IS SENSITIVE

Dr. SEGER. Five answers from four people — that's about it,yes.
My analysis is thatthe long end ofthemarket is much more sensi
tive to inflation both to actual inflation and also to expectations of

future inflation, and a lot of people are not paying enough atten
tion to this;that is,that there are substantialnumbers of people

out therewho aremaking loans,buying stocks,buying bonds, par

ticipants in financial markets in various ways, who- even though
they look at the CPInumbersas they arereleased monthly orat
theproducer priceindex or at the CPIresults lastyear andsay,“4

percent consumer inflation,that'sterrificcompared towhat wegot
in May,which was about 12 percent”-deep down in their stom
achs don't think that's going to last.

Yes,it's 3 or 4 percent now,but they areprotecting themselves
against the future. They're worried some day that the inflation

rate is going to kick back up and the 3 and4 percent isgoingto

disappear, and we're going to be back at 9,10 percent, and double
digits—maybe 12 or 13 percent like we had in 1979and 1980. I
think thatthat's keeping long-term ratesup.

Senator RIEGLE.Isthat another way ofsaying that there's a lack
oflong-term confidencein keepinginflationunder control?
Dr.SEGER.Yes,and Iwould tiethat back into the topic we can't

seem to get offof, and that's the deficit.

48

I had theopportunity to talk socially with some Wall Street ana
lysts recentlyand the conversation gets dull,in fact,because the
deficitisover and overagainthedrumbeat. Iknow thatit'saffect
ingtheir views, and Iknow it'saffectinghow theyoperate.
Senator RIEGLE.What I'm trying to do is lay these out and con

nect them all so we've got sort ofa nice symmetry to this discus
sion which sort ofgivesyou a chance to put your views together in
sort of a whole context.

We've got deflation going on now in some areas,you mentioned
it in your statement and we're seeingit in farm pricesand we're

seeing itin certaincommodity prices.It's uneven,but it'sa pretty
breathtakingdeflation ifyou happen to be caughtwith it.
Dr. SEGER.That'swhy Imentioned it.

Senator RIEGLE.Iwas out inLansing over theweekendmeeting

with farm groups and farm credit people and agricultural banks in

theruralareas ofMichigan,someofwhichyou would befamiliar

with,talking about what's happening to landvalues in agricultural
Michigan -not as severe an erosionas you see in Iowa but never
theless enough to take your breath away,especially ifit isn't over.
What I'mwondering is,as we watch thisdeflation that's going

on now replace the inflation -we stillhave some inflationbut we
now have major pockets ofdeflation -how would you speak to the
issue of when that deflation in a sense stops or settlesout or are

we likely in for a further ride down into a deflationthat may hit
other sectors? Some people talk about commercial office buildings,
that there's an oversupplyof those and that sector hasn't been hit
the same way that oildrilling has been hit or farmland has been

hit but its ticket is comingup and it's going to get whalloped
pretty good.

Asyou look at the deflationary pressures,are there other major

sectors that you think are going to experiencethis and how far
down are we likely to see pricgeso for farmland or someof these
other areas that are reallyseeinga disappearance ofvalue?
Dr. SEGER.Let me just beginby sayingthat beforeI saw you I
happened to see some bankers from theSouth and I brought this

question up with them aboutdeflation in farm real estate, and I
got a 35- to40-percent fall as the number from them ;Alabama was
the State.

Senator RIEGLE.That's what's fallen already?
Dr. SEGER. That's what they said has happened in their State.

Again, not all States are identical. Lexington, KY, in the horse
farm area has probably seen landappreciate.
On these areas where there is deflation,with a capital “ D,” part
of it is from import competition in some ofthe industrial commod

ities I mentioned.Lumber forexample,is one area;there'sa sub
stantial amount offoreign-producedlumber that's now sold in this
country.It's comingin from Canada and,I guess,given the strong
dollar, it's now feasible tobring lumber in from way over in the
Far East, you can pay all that transportation cost, deliver it to
America,and still have the prices equal to or below what Ameri

can producers can charge for it.I think that's part of theanswer.
Senator RIEGLE. But how much further could that go down, do

you think,in those areas that are under pressure? Do you have a
sense for that?

49
TIED T O T H E D O L L A R S I T U AT I O N

Dr. SEGER. The reason I mentioned it is I think it's tied to this

dollar situation.If we seethat the dollar does not appreciate sig
nificantly further from where it isnow , and maybe even calms
down a bit and moves in the other direction, then I think that
Senator RIEGLE.That that may end the deflation ?

Dr. SEGER.Yes;farm commodities,again one ofthe things Imen
tioned, are also tied in herein a way, becausethe farmers, too,
have been very sensitive to the superdollar particularly as far as

grains.They used to count on exporting a big portion oftheir har
vest, and,with the combination of a couple ofembargoes that took

place in the 1970's and then the strongdollar,they have seen these
markets evaporate.

Furthermore,there are signs now that these foreignagricultural
crops are being brought into America; things like Brazilian or
anges, wheat from Argentina, and soybeans from various countries.

Again, depending upon your assumption of what's going to
happen withthe dollar,I thinkthis could either sort ofcometo a

haltor itcould go stillfurther.Icertainly hope that itdoes not go
further.

A third area is the deflation in farm real estate and the deflation

of the values of some office buildings.I think that this is the flip
side of the coin when we're talkingabout why long-term interest
rates are so high.There were people in the seventies, particularly
when inflation was raging, who assumed it was going to last for

ever,thatwe were goingto see these double-digit numbers.You see
articles all the time from gurus who were telling people to buy

farmland, buy antiques,buy collectibles,buy gold,
b uy impression
istpaintings because you have to hedge against inflation;and there
was a lot of this kindof transaction that took place. Much of the
puffor the upward influence on farm prices,I think, was the result
ofthe actualinflation and the fact that there was a strong feeling
among individuals that that was going to last. We used to call it

the great fool theory in thestock market:Youdon't really have to
paya lot of attention to what you're paying for something today
because you assume in a few weeks, or a few months, or a few
years you will findsomebody else who will be willing to pay more
for it than youpaid for it.
So,a lot of that tremendous rise that we saw in farmland values

in the 1970'swas based on that kind ofassumption,and those deci

sions were made in that environment.

Now what we're seeingisthat,after theFed has pursued -itpre
dates me by theway - a fairly credible monetarypolicy-starting

back in late 1979 when it was announced that they were really

going to take on inflation, and I think the results show that they

have —there is,ina lot of these areas,a sort of a wringing out of
that inflation psychology from those asset values.

Senator RIEGLE. IguessI would tendto agree with your descrip

tion and it seems tom e the question of where we gofrom here is
whether the wringout is over or there's a small amount left to be
done or whether we are ona downward slide that's likely to contin

ue for a period of time.It's sort of like an elevator coming down

50

and you're notquite sure where the basement isand where you are
in relationship to the basement.
I mention that because in this committee, as you know , we are

concernedabout the health ofthe savings and loan industry as
well as other financial institutions, banks, and so forth, but the
S & L's are finding that they still have tremendous balance sheet

pressures.Increasingly, banks are showing that.It's uneven.Conti
nental Illinois, andwhat we're seeing down in Texas in some of
those banks, is evidence of a very uneven pattern. But even the

Bank of America with major agricultural loansin their sector of
the countryare showing lotsof signs ofstress and strain.There are
a lot ofhealthy institutions that are not.
But if we were to have a material additional deflation that
erodes the asset values that are collateralized against loans, and
then with foreign loans thrown in on top ofthat,and the inability

offoreign borrowers toremain current,all ofa sudden you would
get an incredible additional buildup of stress on the credit struc
ture and on confidence.I don't want to test those outer limits.I am
concerned that we are closer to those outer limits now than we

should be because ofthe fiscal deficitwhich we haven't solved,and
because of the sectoral deflation, and partly because of the trade

deficit which is probably going to run as much as $150 billion this

year,and partly theforeign loanproblem.There were two major
stories on thisjust within the last 2days.

There was an article in the New York Times yesterday, “Rekin
dling the Scene of Latin Debt Crisis” isa very tough and very
alarming piece. The Wall Street Journal this week has a piece on
thesamesubject,a littlesofter in tone, “Debt Crisis Is Waning but

ItMay Hit Again,”and theygo through their analysis.
Dr.SEGER.That's why I mentionedit in my statement too, allud
ing to that.

Senator RIEGLE.Exactly; what I'm tryingtodo is connect allof
these points together here so that we really have a sense of the
overall dynamics.

I takeit then,it be your view that stresses on the credit struc
ture and on the financial structural system from a combination of

these factorsthat we were mentioning probably isabout asmuch

as we ought to apply at this point and rather than move in the di

rection ofa policythat applies more stress we oughttobe moving

in a direction to take some ofthe stress offthe financial and credit
structure?Would that be your view?

Dr. SEGER.Absolutely.
INDUSTRIAL COMPETITIVENESS

Senator RIEGLE.Let me ask one more thing here.I don't know if
you have yet had a chance to see this. It'sa book called “Global

Competition, a New Reality.” It's a report of President Reagan's
Commissionon Industrial Competitiveness.
Dr. SEGER. I ordered it and I haven't received it yet. This is the
Young group from Hewlett-Packard.

Senator RIEGLE. Yes;Ijust want to touch on itfor a minute be
cause this isprobably themost important thing we're going to talk

51

about in here today.Ifword of it gets outside this room I'll be sur
prised and impressed.
John Young, as you know,was the Chairman ofthis Presidential
commission that President Reagan named last year and he is the

president and CEO ofHewlett-Packard in California.But thereare
roughly 40 people that served on this commission and they include
such peopleasDr. George Keyworth, who was thescience adviser
to President Reagan. Itincludes the president of Westinghouse
Electric's energyand advanced technology group; Dr. Ross, the
president of AT & T Bell Labs; Mark Sheperdwho's the chairman
and CEO of Texas Instruments; and an equally impressive array of

business leaders,many ofthem in the high-tech areas and so forth,

and they have produced a document here that I think hasjust tre
mendous power and relates fundamentally to what we have been

talkingabout here because itnow goes totheworld trade dynamics
whichwe have not yet discussed.
On the first pagethey pose this question:
Are we meetingthe competitive challenge?

Ijustwant to quote a few things verybriefly.Theiranswer is:
Not well enough.Our abilityto compete in world markets andthe growth in U.S.
productivity lagsfar behind that ofour foreigncompetitors.Real hourlycompensa
tion of our work force isno longer improving. U.S.leadership in worldtradeisde
clining.Pre-tax rates of returnon assets invested in manufacturing discourage in
vestment in this vital core of our economy.

That connects to some of our earlier discussion.

Then they go on to say,
Even our lead in high technology is slipping.

They point out in here that this year our trade deficit with

Japanwhich isgoingto approach$40 billion,that despite thehem
orrhage for carsand trucks that thoseof us in Michigan are famil
iar with, that our trade deficit with Japan in electronics will be

higher than our trade deficit in cars and trucks. There's a very
powerful signal there in terms ofthe futurebecausewe're counting
on high technology to provide a lot ofthe futurejobs. The problem

is it looks likethosejobs are going to be in Japan and Korea, not
in the United States.

They go on to point out that Japan, for example, is producing
twice the number of engineers than we are with a smaller popula
tion than ours.And they go on in this vein.
But I want to draw your attention to one chart here and make
one point and then I'mgoing to ask your response to it.

On the chart on page 16 they take 10 high technology export
product areas for 1965-80 and they cut it off in 1980 because they

didn't want to get tangled up in the value ofthe dollar which has
exploded sincethat time and throw off the data.These categories

include such things as aircraft and parts, office computing and ac
counting machines,engines and turbines, agricultural chemicals,
professional and scientific instruments, electrical equipment and

components, opticaland medicalinstruments,drugs andmedicines,
plastics andsynthetic materials,industrial chemicals.
Itshows that ofthese 10 majorcomponentareas we have lost po

sition in8 ofthe 10. We're just barelyholding our own in twoof
them.This is far removed from cars and trucks.

52

They go on to say, however, that the strong dollar is not the

reason for this underlying deterioration ofourcompetitive position
and,therefore, to basically assume that somehowwe canhit the
right policy buttons and get the value ofthe dollar down and stabi

lize it that somehow magically our competitive situation is re
solved.

They say quite to the contrary, that our problems go much
deeper than that, that they are much more fundamental,and as a
matter of fact, the notion of the high dollar is a misleading factor,
an important one with its own implications,but that that has to be

seen as not the cause of the dimension of this problem and at the
same time not the solution to it.

Unfortunately, when this report was made public, because their

recommendations were so hardnosed and so factual,and because it
upset the people around the President who don't want to believe
that this is the set ofcircumstances and the implications that flow
from them , the members of this Presidential commission were not

invited tocome to the White House to present their findings,
which,as you know,is the ultimate way tokind of stiff-arm some

body who was sayingsomethingyou don'tlike,even though George

Keyworth, who was the President's science adviser, was on this
group and this was a unanimous presentation ofthe group.
They were sent down to the Commerce Department and Mack
Baldrige who has an interest in the trade issues was the one who
profiled the report.

I would like to urge you— and I'm glad to hear that you've or
dered it,to carefullystudy this report.I really think thatin here is

information related to these fundamental economic relationships
and itties back to the question ofwhy the auto companies are sell
ing at three times earnings and five times earnings in terms of
what people think the future holds.
And I think it also has something to do with why long-term rates
are high and short-term rates are low because more and more
peoplefeel more and more comfortable being in short-term securi

tiesand,better yet,ifthey're government securities,not even CD's
through their local bankor savings and loans.We're seeing more
and more ofthat happen .

That's an erosion of confidence and that worries me because I
think our system runs on confidence and it has to be confidence
based upon fact and not magic solutions that aren't real.
So I think it's very important that the findings that are in here

aretaken seriously.Withthetrade deficitrocketingthisyear upto
$150 billion and that being added to the fiscal deficit which is going

to be above $200 billion,and we're a long way from a breakthrough
on the budget deficit reduction effort this year,itseems to me to be

a kindof witches'brew that's building up herethat's going to put
incredible stress on the Federal Reserve and a lot of other people.

Especially as we get closer to the next election and everybody
who's running are going to be saying, “Well, you know,don't
blame us.Look over here at the FederalReserve because they have
got the power somehow to wave the monetary wand in such a way
as to somehow make all these things sort ofwork out."

53
T I M E IS R E A L L Y S H O R T

I would hope that the Fed would find a way,in addition to Paul
Volcker's strong voice,to become more visible on helping everyone
understand the nature of this economic puzzle and how time is
really quite short.

When Paul Volcker was here before the committee he said,

“We're living on borrowed time and borrowed money.” He did ev
erything butyell “Fire” ina crowded theater, which obviously he

shouldn't do andcan't do.Just short ofthat,hetried in every way
he could to say,“Look,we've got to do some things and we've got
to do them now and we don't have any more time to fool our
selves.”

I will conclude with that,but I would ask, does that generally
trackwith your sense ofthe problem and your feeling?Iwould like
to hear youfinish by sort ofgivinga summary ofhowyou see the
way these things connect andwhat your own sense ofurgency is
and what you think needs to be done at this point to give usthe
kind of future that we all want to see.

Dr. SEGER.Let me just clarify something that Isaid earlierabout
the impact of the super dollar. I referredto it in connection with
farm product exports and things like lumber which, as I under

stand it— and I've read a lot ofstudies on this— are more impacted

by that than these high-technology products. I haven't seen that
study butI understand itwaslimited to thehigh-technology area.
So,forthem ,Iwould certainly agree that,ifthis countryisgoing
to have long-termprosperity, we have to be concernedwith our
education system. I'm very interested in getting people coming off
ofcollege campuses and out ofhigh schools who can read and write
and have the tools to deal with modern America,who are trained
to work with computers,who have math skills,etcetera.

Friends of mine in Japan tell me thatthey are head and shoul
ders aboveour typical high school graduate or college graduate.
I'm very interested in thatbecause Ithink that's fundamental. It's

not directlymy responsibilitybutI'm certainlyinterested in it.

Anotherthing isthat I believe that American industry does have
to make a bigger commitment to R & D, hoping that there would be
new productsthat would come out of that,because the way we

keeptheeconomy dynamic istohave new and better products and
new and better ways ofdoing things.

The Japanese have done that exceptionally well. In consumer
electronics, they're tremendous.And Ithink we have to do some of
that.

Maybe Congress gets tied in here in the sensethat thereare in
centives which canbe given to business to do R & D and to look for
these new and better ways.

Senator RIEGLE.Theysuggested things like that and that is not

thevogue,by the way,ifyoulook atthebudget.

Dr. SEGER.Again, I haven't read it,but I do think it would be
relevant to what we have been talking about.
The third thing — and my colleagues at the Fed are frankly tired

ofmy talking about it— isthat I'm on a productivity kick. There's
no country better than America in my judgment, and I think the
way we are going to not only survive but thrive is to do things

54

better andto getour manufacturing industry committed to effi
ciency. This involves productivity improvements; this involves
things like putting in state of the art equipment, such as in the
General Motors plant that I mentioned.

Senator RIEGLE.Which isexpensive.It takes a lot ofcapital,and
high-interest rates sure discourage that.

Dr. SEGER.Absolutely.I still think,though, that it is a better
answer to have this new plant here in the Detroit suburbs, and to

have people employed in that plant,and ifGM hadn't gotten them
selves together on this,thenI think a lot more jobs in my city
would have been exported once the controls on auto quotas came
off.

Ithink that there are some thingswe can do ofa positive nature
that will not only help the industry but also the consumers. We're

allconsumersand we all benefitfrom having products that are
high quality,that are up to speed;in the new electronics area we
like newand betterstereos and optical equipment,and Ithinkthat
we would benefit from that.

And finally, the individuals,the employeeswho produce these
goods,will also benefit from this sort ofrevitalization ofAmerican
industry.
The Fed can't get in and set interest rates,but we can certainly

be aware of interest rates and,as you say, maybe we should be
more visible and more willing to beat the drum to get things done

on the fiscal policy side, which would allow for a drop in interest
rates,and make possible some of these projects that American in
dustry is now looking at but which aren't being done because they
don't pass the capital budgeting test sincethe return on invest
ment is below what they have to pay for funds.
Given some sort of a cut in interest rates, then more of those

projects might flipover intothe acceptable pile ratherthan the un
acceptable pile.
TAX REFORM

Another thing that I would mention that I am deeply concerned
about is this whole issue of tax reform , because I certainly under

stand thatwe need to simplify thesystem and make itmore equi
table,and Ithink those aretremendous objectives.
But at the same time,the fact thatwe announcedthe proposal to
do something on taxes but no one knows what will happen and
whether theywill be changed and ifthey are,how,has created an
uncertaintythat is hanging like a cloudover a lot ofbusiness peo
ple's heads.They don'tknow how to compute.Should we goahead
with this major expansion. Shouldwe remodel that factory? Should

we do something else?I'm not saying taxes should drive the econo
my,and I don'tthink they do,but at least you have to know what

numbers to put in when you do the computation, and the uncer
tainty is holding a lot ofprojects on the back burner or on the
shelf.

Senator RIEGLE.It certainly is.I'm hearing that every day.
Dr. SEGER.I'm concerned about that, and it's tied into this prob
lem .
.

55

Also,whatever evolves,above and beyondthe uncertainty ques
tion,I hope that there is much attention paid to this whole issue of
investment incentives and incentives for R & D .

Senator RIEGLE.Savings incentives,also.Would you put that on

the list?
Dr. SEGER.Yes.

Senator RIEGLE.The Japanese are so much better at that than
we are.I think their prime rate is about 6.5 percent.
Dr. SEGER.They save about 20 percent while our savings rate is
between 5 and 6 percent.

But these are some very fundamental ideas.As I said,I am very
interested in them.I am very supportive of them.I wish that we

could get more people thinking about things likeproductivity be
cause the Japanese, I think,are a real miracle in the waythey
made a comeback from World War II and a rather decimated econ
omy to now riding high.

Senator RIEGLE.They are taking$40 billion ofour equity capital
out this year,which isa pretty good performanceon theirpartand
not very good on our part, and that's money that could be well

used inthis country for other things.

Well,you have been very patient today.Mr. Chairman,you have,

too,and I am finished.

The CHAIRMAN.Thank you very much.

Senator Cranston was here briefly.He has a statement to put in
the record.

[The complete prepared statement of Senator Cranston follows:)
STATEMENT OF SENATOR CRANSTON

Senator CRANSTON.The position of Governor of the Federal Re
serve System isofcrucial importance to our Nation's economy and
financial structure,with an awesome 14-year term.Persons appoint

ed to this position must be qualified, must understand monetary
policy and have a track record in monetary policy, and must

demonstrate on the basis oftheir record that they understand the
economy

Dr. Seger has less than an illustrious background in her field.

She has never published,nor has she taught—which has been pri
marily her liftime profession - long enough atanyone place forher
to gothrough the rigor of attaining tenure.So we must try to de
termine her philosophyon the economy and other issuesby conjec

ture,news quotes,public quips,and soforth.This disturbsme.Dr.
Seger's record isundistinguishedwhen compared with others who

have served on the Board, and those persons now serving on the

Board,like Paul Volcker,Preston Martin, Henry Wallich, Nancy

Teeters, all of whom had distinguished backgrounds and accom
plishments prior to being considered for the Board.

The sense of the Senate resolution passed March 1, 1984, says
that this seat on the Board must be filled by a person of demon

strable experiencein small business or agriculture. Dr. Seger has

exhibited no qualifications of this nature.Her nomination is a de
liberate slap in the face of farmers, small business men and
women ,and the Congress by the President.

This administration has made a habit of appointing persons to

positions who are opposed or insensitive to thedefinedresponsibil

56

ities of a particular position. That's how they stifleprograms and
gut agencies. I'm afraid that's what we have here — the administra
tion appointing someone who doesn't meet the specifications for
the job.

Dr. Seger,during extensive hearings,has made statements sup
porting almost every side ofthe issues she has been questioned on.
Indeed, she appearsto have no grounded philosophy ofher own.In
these troubling economic times we need persons on the Fed who

are seasoned,independent thinkers who can bring some new ideas
to the table.Dr. Seger does not fit that description. For these rea
sons,I voted against her being reported out ofthis committee.My
judgment on Dr. Seger's nomination has notchanged.
Additionally, thePresident,by appointing Dr.Seger during the
recess has added fuel to an alreadydifficult matter.There appears

tohave been no overwhelming reason,no known emergency forthe
President to rush and make a recess appointment of Dr. Seger
except to thwart the ability of the Senate to have a full and open
debate on Dr. Seger's nomination.

The CHAIRMAN. Senator Gorton was also here. And by unani
mous consent, Senator Proxmire has a chart on recess appoint
ments that he wishes included in the record and I have some sub

missions from the Congressional Research Service on intrasession
recess appointments by the last three or four Presidents which I

will alsoput in the record, as well as to save time a closing state
ment .

I would like to close by making a few points about the Presi
dent's recess appointment power.

One, the President has thepower to make a recess appointment
of a Federal Reserve Board Governor under the Constitution and
under a statute;

Two, Presidents have been making intrasession recess appoint
ments during the summer months when Congress is not in session
since 1921. Recently, President Nixon made7 such appointments
and President Carter made 17;and finally

Three, the constitutional questionof whether a 23-day recess is
long enough has not been definitively addressed.In fact, the con
clusion ofthe CRS report which Senator Proximare said he will
put in the Record states:
*** The validity of the recess appointment ofMartha Seger to the Federal Re
serve Board depends on whether the 23-day recess of the Senate for the Fourth of

July holiday and Democratic convention isa recess for purposes ofthe constitution
al recess appointment clause. The constitutional provision was adopted without
debate. Most of the legal authority on the interpretation of the recess appointment

clause is contained inAttorney General opinions. These opinions have approved of
recess appointments during comparable summer* *re*cesses of the Senate of 29, 33,
and 36 days.The question is one ofline-drawing

Ithank you very much for your patience.
The hearing is concluded.

[Whereupon,at12:20 p.m.,the hearingwas adjourned.]

[Biographical sketch of nominee andadditional material for the
record follows:)

1

57

STATEMENT FOR COMPLETION BY PRESIDENTIAL NOMINEES
Name:

Positiontowhich
nominated:

Dateof birth:

Ramayne

Martha

Seger

(U S T )

Governor

(OTHER)

FIRST)

Date of
May 31, 1984 and
nomination: January 2, 1985

Federal Reserve Board

17 Feburary
1932
Placeof birth: Adrian , Michigan, USA
(MONTH )
(YEAR)

(DAY)

Marital status:Sing le

Full name of spouse:

N /A

Name and ages
of children: N /A

Education:

Institution

Dates
attended

Degrees

Dates of

received

degrees

Leelanau Schools

1948-50

high sch. dip. 1950

University of Michigan

1950-55

BBA & MBA

1954 & 1955

University of Michigan

1958-64

Ph.D.

1971

Honorsandawards: Listbelowallscholarships,fellowships,honorarydegrees,militarymedals,honorarysociety
memberships,andanyotherspecialrecognitionsforoutstandingserviceorachievement.
High school valedictorian and National Honor Society
Phi Kappa Phi
Beta Gamma Sigma
1976 selected by Business Week as one of Top 100 Corporate Women in USA

Honorary Doctorate, Detroit College of Law,will be awarded June 3, 1985

58

Memberships:

Listbelowallmembershipsandofficesheldinprofessional,fraternal,business,scholarly,
civic,charitableandotherorganizations.
Office held

Organization

(ifany)

Dates

Economic Club o f Detroit
Women's Economic Club

National Association of Business Economists
American Finance Association
American Economics Association
Citizens for America
Michigan Co-Chair
Detroit Boat Club
Presidents Club Univ. of Michigan

Jan -June 1984

Employmentrecord: Listbelowallpositionsheldsincecollege,includingthetitleordescriptionofjob,nameof
employment,location of work,and dates of inclusiveemployment.
See attached sheets .

59

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61

Government
experience:

Listanyexperience inordirectassociationwithFederal,State,orlocalgovernments,in.
cludinganyadvisory,consultative,honoraryorotherpart-timeserviceorpositions.
1981 & 82 Commissioner of Financial Institutions, Michigan
U.S. Department of Commerce - Economic Advisory Board
(As shown under Employment, I worked at the Federal Reserve early in
my career .)

Published
writings:

Listthetitles,publishersanddatesofbooks,articles,reportsorotherpublishedmaterials
youhavewritten.

"Consumer Finance Companies in Michigan," Gies. Fricke & Seger.
Published by University of Michigan Bureau of Business Research in
1960 .

When I made a career change from banking, I was not primarily a
researcher or writer, but rather a teacher and lecturer.

Political
affiliations

andactivities:

List allmemberships and offices held in and services rendered to all political parties or
election committees duringthe last 10years.
I am a member of the Republican Party in Michigan and of the Bloom
field Hills Republican Women's Club . In 1983, I helped to launch a
women's group for the Michigan Republicans .

62

Political
contributions:

Itemize allpolitical contributions of$500 or more toany individual,campaign organiza.
tion,political party, political action committee or similar entity during the last eight
years and identifythe specific amounts,dates,and names ofthe recipients.
None .

Qualifications:

Statefullyyourqualificationstoserveinthe positiontowhichyou havebeennamed.
(attachsheet) I am a financial economist who specializes in financial

institutions and capital markets. I have roughly 10 years' experi
ence in commercial banking and 5 years at the Federal Reserve. In
addition, I was chief regulator of financial institutions in State
of Michigan for 2 hectic years.

Futureemployment
relationships:
1. Indicate whether you will sever all connections with your present employer,business

firm,associationororganization ifyouareconfirmedbytheSenate.
I was a professor and resigned last summer when I received my nomi

nation. Since July 2, I have been at the Federal Reserve.
2. Asfaras can beforeseen,state whetheryou haveany plans after completinggovern.
ment serviceto resume employment,affiliation or practicewith your previous em.
ployer,businessfirm,associationororganization.

Imay teach after completing government service, but I have no
agreement to return to my latest employer or any other college.
3. Has anybody made you a commitment toa job afteryou leavegovernment?
NO

4. Do you expect to servethefullterm forwhich you have been appointed?
Yes

63

Potential conflicts

ofinterest:

1. Describe any financial arrangements or deferred compensation agreements or other
continuing dealings with business associates,clients or customers who will be af.
fected by policies which you will influence in the position to which you have been
nominated.
None

2. Listany investments,obligations,liabilities,orother relationshipswhich might involve
potentialconflictsof interestwiththepositiontowhich youhavebeen nominated.
None

3. Describe any business relationship, dealing or financial transaction (other than tax.
paying)which you have had duringthe last 10years with the Federal Government,
whether foryourself,on behalfofa client,or actingasan agent,that might inany
wayconstituteorresultinapossibleconflictofinterestwiththepositiontowhichyou
have been nominated.
None

64

4. Listany lobbyingactivityduringthepast10yearsinwhichyou have engagedforthe
purpose ofdirectlyorindirectlyinfluencingthepassage,defeatormodificationof
anylegislationatthenational levelofgovernmentoraffectingtheadministrationand
executionofnational laworpublicpolicy.
None

5. Explain howyou willresolve any potentialconflictof interestthat may be disclosed by
your responses tothe above items.

If therewere any potential conflict of interest, I would certainly
resolve it .

Civil,criminaland
investigatory

actions:

1. Givethefulldetailsofany civilorcriminalproceeding inwhich youwereadefendant
orany inquiryorinvestigation bya Federal,State,orlocalagencyinwhichyouwere
thesubjectoftheinquiryorinvestigation.
None

2. Give the fulldetailsofany proceeding,inquiryorinvestigation by any professional
association includingany barassociation inwhichyouwerethesubjectofthepro
ceeding,inquiryor investigation.

None

65

NUMBER OF RECESS APPOINTMENTS (1933–1984)
Submitted by Senator Proxmire

Congressional Research Service
The Library ofCongress
Washington,D.C. 20540

March13,1985
T
O

: Senate Committee on Banking, Housing and Urban Affairs
Attention: Kenneth A. McLean

FROM

Rogelio Garcia
Analyst in American National Government
Executive Branch Organization and Operations Section
Government Division

SUBJECT

:

Number of Recess Appointments, by Administration, From 1933 to 1984

This memorandum is in response to your request for a listing of recess
appointments for the period 1933-1984, by Administration --from President
Franklin D. Roosevelt to President Ronald Reagan . As we agreed during our
initial conversation, the following types of recess appointments are excluded

from the list: Customs Directors and Collectors; Diplomatic and Foreign Service;
Judges and other Judiciary; Military, including Coast Guard; Postmasters;
U.S. Attorneys and Marshals; offices in the U.S. Coast and Geodetic Survey;
and offices in the U.S. Public Health Service .

It should be noted at the outset that it is virtually impossible to compile
a complete list of recess appointments for the period 1933–1965. Before July
1965, when the first issue of the Weekly Compilation of Presidential Documents
was published, recess appointments were recorded in a haphazard fashion.

Although the Congressional Record is the best source from which to compile
a list of recess appointments before 1965, it is neither complete nor wholly
reliable .

Recess appointments do not appear in the Congressional Record at

the time they are made because they do not have to be confirmed by the the

66

Senate .

It is only when the President wishes to change a recess appointment

into a full term appointment that he must submit it to the Senate. Only then

does the Congressional Record reflect the fact that a recess appointment was
made. As a consequence, if the President does not nominate for a regular
appointment someone who is serying a recess appointment,then that appointment
is not found in the Congressional Record.
Compiling such a list is further complicated by the fact that the

Congressional Record on occasion is ambiguous about whether a recess appointment
has been made. Sometimes, there is a notice accompanying a group of nominations

stating that certain recess appointments were made during the last recess of the
Senate. It is not always clear, however, whether all of the nominations in the
group were given recess appointments.

Finally, there are discrepancies between the Congressional Record and
the Executive Proceedings of the Senate regarding recess appointments and
numerous nominations submitted to the Senate. Often, the Congressional Record
lists recess appointment notations that are not listed in the Executive
Proceedings of the Senate, and vice versa .
For the period before 1965, officials at the Presidential Libraries have

stated that only by personally examining each of the appointment and nomination
files contained in each Library could a complete list of recess appointments
be compiled. In most cases those files have not been sorted out; each of the
thousands of nominations made each year are in chronological order.
It should be borne in mind also that the recess appointments vary greatly
in importance. While the list contains recess appointments to head Executive

Departments and independent agencies, it also contains recess appointments to
serve on advisory boards, commissions and committees as well as to serve in
other capacities that at tim

may be primarily ceremonial.

67

The above factors should be kept in mind when reviewing the list of
recess appointments made from 1933 to 1984.

SUMMARY OF RECESS APPOINTMENTS MADE BY LAST NINE PRESIDENTS, 1933-1984
The last nine Presidents (Franklin D. Roosevelt to Ronald Reagan) have
made a total of 783 recess appointments (exclusive of the categories excluded

and the recess appointments not included in the Congressional Record). These
appointments are listed in Table 1.
TABLE 1 .

Number of Recess Appointments Made by Last Nine Presidents

President

Years in office

Franklin D. Roosevelt
Harry S Truman

1933-1945
1945-1953

Dwight D. Eisenhower
Jack F. Kennedy
Lyndon B. Johnson

1953-1961

Richard M. Nixon
Gerald R. Ford
Jimmy Carter
Ronald Reagan

1961-1963

1963-1969
1969-1974
1974-1977
1977-1981
1981-1984

Number of recess
appointments

Average number

89
195
193

7
25
24
18
7
7
3
15
28

per year

53
36
41
8
59
111

Source: Congressional Record and Weekly Compilation of Presidential Documents
Three Presidents made more than 100 recess appointments during this
period -Harry S Truman , Dwight D. Eisenhower, and Ronald Reagan.
The recess appointments made by the nine Presidents are listed below

by year, name of nominee, and, when available, position and agency.

68

RECESS APPOINTMENTS : FROM PRESIDENT FRANKLIN D. ROOSEVELT
TO PRESIDENT RONALD REAGAN

President Franklin D. Roosevelt (1933-1945)
1933

Allen, George E. (Commissioner of the District of Columbia )
Amory , Henry R. (Assistant Director, Bureau of Foreign and Domestic Commerce,
Department of Commerce)
Bennett, Elbert G.

(Member , Board of Directors , Federal Deposit

Insurance Corporation)
(Assistant Attorney General, Department of Justice)
Cummings, Walter J. (Member, Board of Directors, Federal Deposit

Blair, Harry W.

Insurance Corporation)
Engle , Nathanael H.

(Assistant Director, Bureau of Foreign & Domestic Commerce,

Department of Commerce )
(Member , Board of Mediation )
Hazen , Melvin C. (Commissioner of the District of Columbia )
Keenan , Joseph B. (Assistant Attorney General, Department of Justice)
Landis, James M. (Member , Federal Trade Commission )
MacLean , Angus D. (Assistant Solicitor General, Department of Justice)
Mathews, George C. (Member, Federal Trade Commission)
Glass , Frank P.

Mitchell, Ewing Y. (Assistant Secretary, Department of Commerce)
Morgenthau, Henry Jr. (Secretary, Department of the Treasury)
Moore, R. Walton (Assistant Secretary, Department of State)
Sayre , Francis B. (Assistant Secretary, Department of State)

Thorp, Willard L. (Director, Bureau of Foreign & Domestic Commerce, Department
of Commerce)
Welles, Sumner (Assistant Secretary, Department of State)
1934

Ayres , W.A. (Member, Federal Trade Commission)
Brown , Thad H. (Member , Federal Communications Commission)

(Assayer of the U.S. Assay Office at New York City)
Caramalt, James W. (Member, National Mediation Board)
Carmody, John (Member , National Mediation Board)
Buford , Joseph S.

Case, Norman S. (Member , Federal Communications Commission )
Connor , Robert D. (Archivist of the United States)

Eccles, Marriner s. (Member , Federal Reserve Board)
Eddy, Lee M. (Member, Railroad Retirement Board)
Elgen, Riley E. (Member, Public Utilities Commission of District of Columbia)
Ferguson, Garland s. (Member, Federal Trade Commission)
Finch, John , W. (Director, Bureau of Mines, Department of the Interior)
Giegengack, August E.

(Public Printer)

Healy, Robert E. (Member, Securities and Exchange Commission)
Hoagland, Henry E. (Member, Federal Home Loan Bank Board)
Kennedy, Joseph P. (Member, Securities and Exchange Commission)

69

Landis, James M. (Member, Securities and Exchange Commission)

Latimer, Murray (Chairman, Railroad Retirement Board)
Leiserson, William M. (Member, National Mediation Board)

Mathews, George C. (Member, Securities and Exchange Commission)

McNinch, Frank R. (Member , Federal Communications Commission)
Miller, Adolph C. (Member , Federal Reserve Board)
Moffett, James A. (Administrator, Federal Housing Administration)
Payne , George H. (Member, Federal Communications Commission)

Pecora, Ferdinand (Member, Securities and Exchange Commission)

(Member, Federal Communications Commission )
Roche, Josephine A. (Assistant Secretary, Department of the Treasury)
Solomon , Sigmund (Superintendent of u.s. Assay Office at New York City)
Prall, Anning S.

Stewart, Irvin (Member , Federal Communications Commission )
Sykes , Eugene 0. (Member, Federal Communications Commission)

Walker, Paul A. (Member, Federal Communications Commission )
(Member , Railroad Retirement Board)

Williamson , John T.
1935

Adams, Annette A. (Assistant Special Counsel, Department of Justice)
Bell, Golden W. (Assistant Solicitor General, Department of Justice)
Carter, Milton E. (Assistant to the Commissioner of Internal Revenue,
Department of the Treasury)

McDonald, Stewart (Administrator, Federal Housing Administration)
Morris, James W. (Assistant Attorney General, Departmeat of Justice)
Pynchon , E.A.

(State Administrator for Florida ,

Works Progress Administration)
Sanders, Samuel D. (Cooperative Bank Commission, Farm Credit Administration )
Shaffer , Charles H. (Examiner in Chief, U.S. Patent Office, Department
of Commerce)
1936

Brown , Harry L. (Assistant Secretary , Department of Agriculture)
Catlett, Fred W. (Member, Federal Home Loan Bank Board)
Miller , Justia, (Member , Board of Tax Appeals )

Shafroth, Morrison, (Assistant General Counsel, Bureau of Internal Revenue,
Department of the Treasury)
Wilson, Milburn L. (Under Secretary, Department of Agriculture)
1937

Bull , George M. (Regional Director (V) of Colorado, Federal Emergency
Administration of Public Works)
Cole, Howard T. (Regional Director (III) of Georgia, Federal Emergency
Administration of Public Works)
Gilmore, Maurice E. (Regional Director (I) of New York, Federal Emergency
Administration of Public Works)
Gray, Howard A. (Assistant Administrator, Federal Emergency Administration
of Public Works )

70

Hockley, Claude C. (Regional Director (VII) of Oregon, Federal Emergency
Administration of Public Works)
Husband, William H. (Member, Federal Home Bank Board)
Kern, John W. (Member , Board of Tax Appeals)
Latimer, Murray W. (Member, Railroad Retirement Board)

Kennicott, David R. (Regional Director (II) of Illinois, Federal Emergency
Administration of Public Works)
Radford, Robert A. (RegionalDirector ( IV) of Minnesota, Federal Emergency
Administration of Public Works)
Wenchel, John Phillip (Assistant General Counsel, Bureau of Internal Revenue,
Department of the Treasury)
1938

, Department of the Treasury)
Delano, Preston (Comptroller of the Currency,

Hanes, John W. (Under Secretary, Department of the Treasury)
(Member of the Board of Governors, Farm Credit Administration )

Hill, Forrest F.

Hopkins, Harry L. ( Secretary, Department of Commerce)
Murphy, Frank (Attorney General, Department of Justice)
Reichelderfer, Francis W. (Chief of the Weather Bureau, Department of Agriculture)
Woodward , Ellen S. (Member, Social Security Board)
1939

Edison, Charles (Secretary, Department of the Navy)
1940, 1941 , and 1942
None

1943

Hopkins, Oliver F. (Assistant Director, Bureau of Foreign and Domestic
Commerce, Department of Commerce)
Miller, Raymond C. (Assistant Director, Bureau of Foreign and Domestic
Commerce, Department of Commerce)
Taylor, Amos E. (Director, Bureau of Foreign & Domestic Commerce,
Department of Commerce)
1944

(Director, War Mobilization and Reconversion)
Hines,Frank T. Brig Gen (Administrator, Retraining and Reemployment
Administration , Office of War Mobilization)
McElligott, Ricahard (Register of Land Office at Roseburg, Oregon)
Porter, Paul A. (Member, Federal Communications Commission)
Byrnes, James F.

1945
N on e

71

President Harry S Truman (1945–1953)
1945

Acheson, Dean G. (Under Secretary, Department of.State)
Braden , Spruille , (Assistant Secretary , Department of State)
McCarthy, Frank (Assistant-Secretary, Department of State)

Peterson, Howard C. (Assistant Secretary, War Deparment)
Patterson , Robert P. (Secretary, War Department)
Symington, W. Stuart (Administrator, Surplus Property Administration,
Office of War Mobilization and Reconversion )
1946

Bacher, Robert F. (Member, Atomic Energy Commission )

Clapp,Gordon R. (Member,Board of Directors of the Tennessee Valley Authority)
Creedon, Frank (Housing Expediter)
Fisher , Adrian S. (Solicitor, Department of Commerce)

Foley, Raymond M. (Administrator, National Housing Agency)
Foster , William C. (Under Secretary, Department of Commerce )
Harriman , W. Averell (Secretary, Department of Commerce)

Lasseter, Dillard B. (Administrator, Farmers' Home Administration,
Department of Agriculture)
Lauderdale, James W. (Member, District of Columbia Public Utilities Commission)
Lilienthal, David E. (Member, Atomic Energy Commission)
Long, Oren E. (Secretary, the Territory of Hawaii)

McGregor,DouglasW. (Assistant Attorney General, Department of Justice
Myer , Dillon S.

(Administrator, U.S. Housing Authority in the National
Housing Agency )

O'Dea, John (People's Counsel, District of Columbia Public Utilities Commission)
Perkins, Frances (Commissioner , Civil Service Commission)
Pike, Sumner (Member , Atomic Energy Commission )
Strauss, Lewis L. (Member , Atomic Energy Commission )

Thorp, Willard L. (Assistant Secretary, Department of State)
Villaronga, Mariano (Commissioner of Education for Puerto Rico)
Waymack, William W. (Member, Atomic Energy Commission)
Wilson , Carroll L. (General Manager, Atomic Energy Commission )
Young , Clarence M. (Member, Civil Aeronautics Board )
1947

Adams, J. Alston (Member , Federal Home Loan Bank Board)
Aiken , Paul (Second Assistant Postmaster General, Post Office Department)
Alison, John R. (Assistant Secretary, Department of Commerce)
Burrows, Arthur S. (Under Secretary of the Air Force, Department of Defense)
Bush , Vannevar (Chairman, Research and Development Board)

Ching, Cyrus S. (Director, Federal Mediation & Conciliation Service)
Coy, Wayne (Member, Federal Communications Commission )
Daniels, Joe E. (Assistant Commissioner of Patents, Department of Commerce)
Denham ,Robert N. (General Counsel, National Labor Relations Board)

72

Divers, William K. (Member, Federal Home Loan Bank Board )
Ewing, Oscar R. (Admistrator, Federal Security Agency)
Foley, Raymond, M. (Administrator, Housing and Home Finance Agency)
Gorlinski, Joseph S., Col. (Member, California Debris Commission)
Gray, Gordon (Assistant Secretary of the Army, Department of Defense)
Gray , J. Copeland

(Member , National Labor Relations Board)

Hargrave, Thomas J. (Chairman, Munitions Board)
Hill , Arthur M. (Chairman ,-National Security Resources Board )
Hillenkoetter, Roscoe H., Rear Adm (Director of Central Intelligence)
Kenney, W. John (Under Secretary of the Navy, Department of Defense)
Ringsland, Lawrence C. (Commissioner of Patents, Department of Commerce)
Kmetz, John T. (Assistant Secretary, Department of Labor)
Larson, Jess, (Administrator , War Assets Administration, Office for
Emergency Management )

Mather, Paul L, Rear Adm (Associate Administrator, War Assets Administration,
Office for Emergency Management)
Miller, Watson B. (Commissioner, Immigration and Naturalization Service,
Department of Justice )

Morse, David A. (Under Secretary, Department of Labor)
Murdock, Abe (Member, National Labor Relations Board)
Oliphant, Charles (Assistant General Counsel for the Bureau of Internal Revenue,
Department of the Treasury)
Richards, Franklin D. (Commissioner, Federal Housing Administration )
Sterling, George E. (Member, Federal Communications Commission)
Sullivan , John L. (Secretary of the Navy, Department of Defense)
Symington , W. Stuart (Secretary of the Air Force, Department of Defense)
Whitney, Cornelius V. (Assistant Secretary of the Air Force,
Department of Defense)
Woods, Tighe E.

(Housing Expediter )

Zuckert, Eugene M. (Assistant Secretary of the Air Force, Department of Defense)
1948

Blanding, Sarah (Member, Foreign Assistance Public Advisory Board)
Bolich, Daniel A. (Assistant Commissioner of Internal Revenue,
Department of the Treasury)

Boyd, James (Director of the Bureau of Mines, Department of Commerce)

Branscomb, B.Harvie (Member, u.s. Advisory Commission on EducationalExchange)
Buchanan , Thomas C. (Member, Federal Power Commission)
Carpenter , Donald F.

(Chairman , Munitions Board)

Coddaire, David J. (Member, U.S. Maritime Commission )
Compton, Karl T. (Chairman , Research & Development Board)
Compton, Karl T. (Member, U.S. Advisory Commission on Educational Exchange)
Daniels, Jonathan W. (Member, Foreign Assistance Public Advisory Board )

Delano,Preston (Comptroller of the Currency, Department of the Treasury)
Dodds,Harold W. (Member, u.s. Adisory Commission on Educational Exchange)
Foley, Edward H. Jr. (Under Secretary, Department of the Treasury)
Gillin , George B. (Superintendent of the U.S. Mint at San Francisco,
Department of the Treasury )

Goss, Albert s. (Member, Foreign Assistance Public Advisory Board)
Gilbert, Jesse J. (Assistant Registrar', Department of the Treasury)

73

Graham , John S. (Assistant Secretary, Department of the Treasury )

Hershey, Lewis B., Maj Gen (Director, Selective Service System)
Hinckley, Robert H. (Member, Foreign Assistance Public Advisory Board)
Houston, John M. (Member, National Labor Relations Board)
Johnston, Eric A. (Member, Foreign Assistance Public Advisory Board)
Kline, Allan B. (Member, Foreign Assistance Public Advisory Board)
Lehman, Herbert H. (Member , Foreign Assistance Public Advisory Board)

Loveland, Albert J. (Under Secretary, Department of Agriculture)
Lyon, Arlon E. (Member, Foreign Assistance Public Advisory Board)
McGuire , Martin P. (Member, U.S. Advisory Commission on Educational Exchange )
Mead , George H. (Member, Foreign Assistance Public Advisory Board)
Meany, George (Member, Foreign Assistance Public Advisory Board)
Mitchell , James M. (Member, Civil Service Commission)
Patton, James G. (Member, Foreign Assistance Public Advisory Board)
Roberts, Gilroy (Engraver in the U.S. Mint at Philadelphia, Department
of the Treasury)
Ryan, Oswald (Member, Civil Aeronautics Board)
Starr, Mark (Member, U.S. Advisory Commission on Educational Exchange)
Tobin, Maurice J. (Secretary, Department of Labor )
Willett, William E. (Member, Board of Directors, Reconstruction
Finance Corporation)
1949

(Assistant to the Secretary of Defense,
Mutual Defense Assistance, Department of Defense)
Chapman, Oscar L. (Secretary, Department of the Interior)
Burns, James H. , Maj Gen

Cook, Donald C.

(Member , Securities & Exchange Commission )

Crawley, William B. (Member, Board of Directors of the Commodity Credit
Corporation )

Friend, James E. (Assistant Director of Locomotive Inspection)
Hook, Frank E. (Member , Motor Carrier Claims Commission)
Hooker, John S. (U.S. Alternate Executive Director,
International Monetary Fund )
Hutchinson , Know T.
Kruse, Elmer F.

(Member of the Board of Directors,
Commodity Credit Corporation )

(Member of the Board of Directors,

Commodity Credit Corporation)
Lee, Josh (Member, Civil Aeronautics Board)
Loveland, Albert J. (Member of the Board of Directors,
Commodity Credit Corporation)
Martin , William M. Jr. (U.S. Executive Director of the International Bank
for Reconstruction and Development)

McCormick, Edward T. (Member, Securities and Exchange Commission )
Ohly, John H. (Deputy Director of Mutual Defense Assistance,
Department of Defense)
Trigg , Ralph S.

(Member of the Board of Directors, Commodity Credit Corporation )

Woolley, Frank K. (Member of the Board of Directors, Commodity Credit Corporation)

Young, John S. (U.S. Committee to the International Exposition for the
Bicentennial of the Founding of Port-au-Prince)

74

1950

(Member of the National Science Board,
National Science Foundation)
Barnard , Chester I. (Member of the National Science Board,
National Science Foundation )
Barnes, Robert P. (Member of the National Science Board,
National Science Foundation)
Bennett, Henry G. (Administrator of the Technical Cooperation Administration,
Aberle , Sophie B.
>

Department of State)

Bissell, Richard M. Jr (Deputy Administrator , Economic Cooperation Administration)
Bott, George J. (General Counsel, National Labor Relations Board)
Bronk , Detlev W.

(Member of the National Science Board ,
National Science Foundation )

Brown, Peter C. (Member, Subversive Activities Control Board)

Coddaire , David J. (Member, Subversive Activities Control Board)
Conant, James B. (Member of the National Science Board,

National Science Foundation)
Cori, Gerty T.

(Member of the National Science Board ,
National Science Foudation)
Cosgriff, Walter E. (Member of the Board of Directors,
Reconstruction Finance Corporation)

Creasey, Robert T. (Assistant Secretary, Department of Labor)
(Member of the National Science Board,

Davis , John W.

National Science Foundation)

Dollard, Charles (Member of the National Science Board,
National Science Foundation )

DuBridge, Lee A. (Member of the National Science Board,
National Science Foundation)

Foster, William C. (Administrator , Economic Cooperation Administration )
Fred , Edwin B.
Gross, Payul M.
Harber , W. Elmer

(Member of the National Science Board,

National Science Foundation)
(Member of the National Science Board,
National Science Foundation )
(Member of the Board of Directors ,
Reconstruction Finance Corporation)
(Member of the National Science Board
National Science Foundation)

Humphrey, George D.

Hyman , 0.W. (Member of the National Science Board,
National Science Foundation )

LaFollette, Charles M. (Member, Subversive Activities Control Board)
Loeb , Robert F. (Member of the National Science Board,
National Science Foundation)
Lovett , Robert A. (Deputy Secretary, Department of Defense)
McHale , Kathryn (Member , Subversive Activities Control Board)
McLaughlin , Donald H. (Member of the National Science Board ,
National Science Foundation)
Middlebush, Frederick A. (Member of the National Science Board ,
National Science Foundation)

Moreland, Edward L. (Member of the National Science Board,
National Science Foundation)

75

Morris, Joseph C.

(Member of the National Science Board ,

National Science Foundation )
Morse, Harold M.

(Member of the National Science Board ,
National Science Foundation )

Potter , Andrey A. (Member of the National Science Board,
National Science Foundation )

Remon, John A. (Member, District of Columbia Redevelopment Land Agency)
Reyniers, James A. (Member- of the National Science Board,
National Science Foundation )

Richardson, Seth W. (Member, Subversive Activities Control Board)
Rockefeller , Nelson A. (Chairman, International Development Advisory Board)
Rosenberg, Anna M. (Assistant Secretary, Department of Defense)
Rowe, C. Edward

(Member of the Board of Directors ,
Reconstruction Finance Corporation)

Small, John D. (Chairman, Munitions Board)
Spingarn , Stephen J. (Member , Federal Trade Commission )
Stakman, Elvin C. (Member of the National Science Board,
National Science Foundation)
Valentine, Alan (Administrator, Economic Stabilization Agency)
Wilson, Charles (Member of the National Science Board,
National Science Foundation)
Yancey, P.H. (Member of the National Science Board,
National Science Foundation)
1951

Coolidge , Charles A. (Assistant Secretary, Department of Defense)
Dickinson , Edward T. (Vice Chairman , National Security Resources Board)
Forbes, John J. (Director of the Bureau of Mines, Department of the Interior)
Gorrie, Jack (Chairman, National Security Resources Board)
Huggins, Edwin V. (Assistant Secretary of the Air Force, Department of Defense)
Kennedy, Mabelle

(Assistant Treasurer of the United States ,

Department of the Treasury)
Morrill, James L. (Member, u.s. Advisory Commission on Educational Exchange)
Overby, Andrew N. (Assistant Secretary, Department of the Treasury)

Putnam, Roger L. (Administrator, Economic Stabilization Administration)
Tannenwald, Theodore Jr. (Assistant Director, Mutual Security Agency)
Wells, Oris V. (Member of the Board of Directors,
Commodity Credit Corporation)
Wood, C. Tyler (Associate Deputy Director, Mutual Security Agency)
1952

Beutel, Clarence A. Sr (Deputy Administrator, Reconstruction Finance Corporation)
Bray, William J. (Assistant Postmaster General, Post Office Department)
Buchanan, Thomas C. (Member, Federal Power Commission )
Cummings, Walter J. Jr. (Solicitor General of the United States,
Department of Justice )

Disalle, Michael V. (Administrator, Economic Stabilization Administration)
Ferguson, Charles R. (Member, Federal Coal Mine Safety Board)

76

Freehill, Joseph A. (Director, Office of Price Stabilization ,
Economic Stabilization Administration)
Gurney, Chan (Member, Civil Aeronautics Board)
Horne, John E. (Administrator , Small Defense Plants Administration)
Johnson , Earl D. (Under Secretary of the Army, Department of Defense)
Kirks, Rowland F. (Assistant Attorney General, Department of Justice)

Lyon, Charles S.(Assistant Attorney General, Department of Justice)
· Malone, Ross L. Jr. (Deputy Attorney General, Department of Justice)
Merrill, Eugene H. (Member, Federal Communications Commission)
Miller , Alex U. (Member , Federal Coal Mine Safety Board)

Murray, Charles B. (Assistant Attorney General, Department of Justice)
Northrop , Vernon D. (Under Secretary, Department of the Interior)
Rossback, J. Howard (Member, Securities Exchange Commission)
Rubin, Seymour J. (Assistant Director , Mutual Security Agency)
Shackelford, Francis (Assistant Secretary of the Army, Department of Defense)
Solari , Joseph G. (Member , Federal Mine Coal Safety Board)

Townsend, Wilson L. (Member of the Board of Directors, Export-Import Bank)
Wedel, Paul J. (Member , Renegotiation Board)
Vogel, Herbert D Col (Member, Mississippi River Commission)
Wolfsohn, Joel D. (Assistant Secretary, Department of the Interior)

1

77

President Dwight D. Eisenhower (1953–1961)
1953

(Member of the Federal Farm Credit Board,
Farm Credit Administration)
Ahlgren, Mildred C. (Member of the Advisory Board,
Anderson , John D.

Foreign Operations Administration )

Boyd, Robert 0. (Member, National Mediation Board)
Bowditch, Richard L. (Member of the Advisory Board,
Foreign Operations Administration)
Briggs, Marvin J. (Member of the Federal Farm Credit Board,
Farm Credit Administration)
Brockman, Earl 8. (Member of the Federal Farm Credit Board,
Farm Credit Administration)
Brody, Clark L. (Member of the Federal Farm Credit Board,
Farm Credit Administration )

Brownell, Samuel Miller (Commissioner, Office of Education)
Clutter, H.W. (Member of the Federal Farm Credit Board,
Farm Credit Administration )
Connell, Arthjur J. (Member of the Advisory Board,
Foreign Operations Administration)
Denny, Harmar D. (Member, Civil Aeronautics Administration)
Douglas, Lewis W. (Member of the Advisory Committee on Weather Control)
Eberle, Alfred M. (Member of the Advisory Committee on heather Control)
Edwards, Marshall 1. (Member of the Federal Farm Credit Board,
Farm Credit Administration )

Ellis, J.H.S. (Member of the Advisory Board, Post Office Department)
Ely, William J., Col. (Member , California Debris Commission )

Fine, Golden F. (Member of the Federal Farm Credit Board,
Farm Credit Administration)
Frye, Arthur H. Jr., Col. (Member, California Debris Commission )
Gates, Thomas S. Jr. (Under Secretary of the Navy, Department of Defense)

George, Joseph J. (Member of the Advisory Committee on Weather Control)
Gould, Laurence M. (Member of the National Science Board,
National Science Foundation )

Hodge, Elbert J. (Member of the Federal Farm Credit Board,
Farm Credit Administration )
Irwin, Helen G. (Member of the Advisory Board,
Foreign Operations Administration)

Jacoby, Neil H. (Member, Councilof EconomicAdvisers)
Kline, Allan B. (Member of the Advisory Board ,
Foreign Operations Administration )

Lee, Robert E. (Member, Federal Communications Commission)
Leonard, Lucille (Member of the Advisory Board,

Foreign Operations Administration )

Leopold, Alice K. (Director of the Women's Bureau, Department of Labor)

Lyons, Eugene James (Assistant Postmaster General, Post Office Department)
McConnaughey, George C. (Member, Renegotiation Board)
Matthews, C.H. (Member of the FederalFarm Credit Board,
Farm Credit Administration )

7
8
Milton , Hugh M.

(Assistant Secretary of the Army, Department of Defense)

Mitchell, James P. (Secretary, Department of Labor)
Munger, Harlan B.
Newsom, Herschel

(Member of the Federal Farm Credit Board,
Farm Credit Administration )
(Member of the Advisory Board,
Foreign Operations Administration )

Orville, Howard T. (Member of the Advisory Committee on Weather Control)
Parker, Andrew (Member, District of Columbia Redevelopment Land Agency) Parker, Charles 0. (Assayer in the U.S. Mint, Department of the Treasury)
Patton, James G.

(Member of the Advisory Board ,

Foreign Operations Administration)
Ritter , L.V.

(Member of the Federal Farm Credit Board , Farm Credit Administration )

Rizley, Rose (Assistant Secrectary, Department of Agriculture)
Rizley, Ross (Member of the Board of Directors, Commodity Credit Corporation)
Robbins, Laurence B.

(Deputy Administrator ,
Reconstruction Finance Corporation)

Sayre, Raymond (Member of the Federal Farm Credit Board,
Farm Credit Administration )

Seaton, Frederick A. (Assistant Secretary, Department of Defense)
Squire , Franck C.

(Member , Railroad Retirement Board)

Steidle, Edward (Member, Federal Coal Mine Safety Board of Review)

Stewart , Walter W. (Member, Council of Economic Advisers)
Teetor, Lothair (Assistant Secretary, Department Commerce )
Toomer , Louis B. (Register of the Treasury, Department of the Treasury)

Tramburg, John W. (Commissioner of Social Security,
Department of Health, Education, and Welfare)
Washburn, Abbott M. (Deputy Director, United States Information Agency)
Weitzel, Frank H. (Assistant Comptroller General , Department of the Treasury )
Wolf, Morris (General Counsel, Foreign Operations Administration)
1954

Arey , Hawthorne , (Member of the Board of Directors, Export -Import Bank)
Blowers, George A. (Member of the Board of Directors, Export-Import Bank )
Brand , Vance (Member of of the Board of Directors , Export -Import Bank )
Burgess, Carter Lane (Assistant Secretary, Department of Defense)
Edgerton , Glen, E. (President , Export-Import Bank )

Campbell, Joseph (Comptroller General, Department of the Treasury)
Guill , Ben H. (Member , Federal Maritime Board)
Hall, John A. (Director, Locomotive Inspection)
Hayes, Albert J. (Member , National Security Training Commission )

Holle, Charles G., Brig Gen (Member , Mississippi River Commission)
Kendall , David W. (General Cour el, Department of the Treasury)
Libby, Willard F. (Member , Atomic Energy Commission )
McConnaughey , George C. (Member , Federal Communications Commission )
Minetti , G. Joseph (Member , Federal Maritime Board)

Peterson, Ervin L. (Assistant Secretary, Department of Agriculture)
Peterson , Ervin L. (Member of the Board of Directors ,
Commodity Credit Corporation)

Potter, William E., Brig Gen (Member, Mississippi River Commission)
Pratt , Albert

Ray, Philip A.

(Assistant Secretary of the Navy, Department of Defense)
(General Counsel, Department of Commerce )

79
Smith, David s. (Assistant Secretary of the Air Force, Department of Defense)
Stambaugh , Lynn U.

(First Vice President , Export -Import Bank )

Von Neumann, John (Member, of the Atomic Energy Commission)
1955

Lowen,Charles J.Jr. (Administrator, Civil Aeronautics Administration)
Minetti, G. Joseph (Member, Civil Aeronautics Board)

Mueller, Frederick H. (Assistant Secretary, Department of Commerce)
Murphy, Rupert L. (Member, Interstate Commerce Commission )
1956

Banta, Parke M. (General Counsel, Department of Health, Education and Welfare)

Berrigan, Paul D., Brig Gen (Member, Mississippi River Commission)
Bowring, Eva K. (Member, Board of Parole, Department of Justice)
Campbell , Arthur R. (Member, Renegotiation Board )
Chilson, Olin Hatfield (Assistant Secretary, Department of the Interior)
Derthick, Lawrence G. (Commissioner of Education,
Department of Health, Education, and Welfare)
Farrington , Robert L. (General Counsel, Department of Agriculture)
Goff, Abe M. (General Counsel, Post Office Department)
Habermeyer, Howard W. (Member, Railroad Retirement Board)
Leffler, Ross L. (Assistant Secretary for Fish and Wildlife,
Department of the Interior)
Lowe, Richard B. (Governor of Guam )
Lee, Dorothy M. (Member , Subversive Activities Control Board)

McCracken, Paul W. (Member, Council of Economic Advisers)
McGuinness, Aims C. (Special Assistant on Health &Medical Affairs,

Department of Health , Education , and Welfare)

McGuire, E. Pwerkins (Assistant Secretary, Department of Defense)
Nash, Frederick C. (General Counsel, Department of Commerce)

Pyle, James T. (Administrator, Civil Aeronautics Administration)
Rankin , J. Lee (Solicitor General of the United States,
Department of Justice )

Richardson, Elliott L. (Assistant Secretary,

Department of Health, Education, and Welfare)

Robertson, Albert J. (Member, Federal Home Loan Bank Board)
Tait, Edward T. (Member, Federal Trade Commission )
1957

Allen , George V. (Director, United States Information Agency)
Baird, Julian B. (Under Secretary for Monetary Affairs,
Department of the Treasury)
Battle, John S. (Member, Commission on Civil Rights)
Brown, Newell (Assistant Secretary, Department of Labor)
Carlton, Doyle E. (Member, Commission on Civil Rights)

80

Coughran, Tom B. (Assistant Secretary, Department of the Treasury)
(U.S. Executive Director of the International Bank
for Reconstruction & Development)
Fanning, John H. (Member , National Labor Relations Board)
Flanagan, Bernard L. (Member, Civil Service Commission )

Coughran , Tom B.

Flues, A. Gilmore (Assistant Secretary, Department of the Treasury)
Foote, Paul D. (Assistant Secretary, Department of Defense)
Galloway, Gerald E., Maj Gen •(Member, Mississippi River Commission)
Hannah , Joh A. (Member, Commission on Civil Rights)
Hardy, Royce A. Jr. (Assistant Secretary, Department of the Interior)
Harnett, John S., Col (Member, California Debris Commission )
Hesburgh, Theodore M., Rev (Member, Commission on Civil Rights)
Jones, Arnold R. (Member of the Board of Directors, Tennesse Valley Authority)
Kertz, Harold A. (Member , District of Columbia Public Utilities Commission)

McIntosh, Dempster (Manager of theDevelopment Loan Fund in the International

Cooperation Administration, Department of State)
Patterson, John S. (Deputy Director, Office of Defense Mobilization)
Rogers, William P. (Attorney General, Department of Justice)
Sessions, Edson 0. (Deputy Postmaster General, Post Office Department)
Storey, Robert G. (Member, Commission on Civil Rights)
Walsh, Lawrence E. (Deputy Attorney General, Department of Justice)
Welch, Frank J. (Member of the Board of Directors, Tennessee Valley Authority)
White W. Wilson (Assistant Attorney General, Department of Justice)
Whittier, Summer G. (Admistrator, Veterans Administration)
Wilkey, Malcolm R. (Assistant Attorney General , Department of Justice)
Wilkins, J. Ernest (Member, Commission on Civil Rights)
Wolcott, Jesse P. (Member of the Board of Directors,
Federal Deposit Insurance Corporation)
1958

Abbott, George W. (Solicitor, Department of the Interior)

Allen, John J. Jr. (Under Secretary for Transportation,
Department of Commerce )

Bailey, Malcolm F. (Examiner in Chief, U.S. Patent Office,
Department of Commerce )

Barney, Keith R. Maj Gen (Member, Mississippi River Commission )

Bell,John O. (Special Assistant for Mutual Security Coordination,
Department of State)

Bennett, Elmer F. (Under Secretary, Department of the Interior)
Brandt , Karl

(Member , Council of Economic Advisers)

Brewrink, James L. (Examiner in Chief, U.S. Patent Office,
Department of Commerce )

Bullis, Harry A. (Chairman, International Development Advisory Board)
Johnston , Edward E. (Secretary of the Territory of Hawaii)
Keely, James E. (Examiner in Chief, U.S. Patent Office ,
Department of Commerce)
.Latham , Dana (Commissioner of Internal Revenue, Department of the Treasury)
Lodge , George C. (Assistant Secretary, Department of Labor)
Manian , Joseph C. (Examiner in Chief , U.S. Patent Office ,
Department of Commerce)
Miller , Clarence L. (Assistant Secretary, Department of Agriculture;
and Member of Board of Directors of Commodity

Credit Corp.)

81

Mueller, Frederick H. (Under Secretary, Department of Commerce)
Oechsle, Carl F. (Assistant Secretary, Department of Commerce)

Pyle,James T. (Deputy Administrator, Federal Aviation Agency)
Quesada, Elwood R. (Administrator, Federal Aviation Agency)

Saccio, Leonard J. (Deputy Director of the International Cooperation
Administration , Department of State)

Strauss, Lewis L. (Secretary, Department of Commerce)
Upton, T. Graydon (Assistant Secretary, Department of the Treasury)
Upton, T. Graydon (U.S. Executive Director of the International Bank
for Reconstruction and Development)
York, Herbert F. (Director of Defense Research Engineering,
Department of Defense)
1959

Barnes, Bert B. (Assistant Postmaster General, Post Office Department)
Boyd, Alan S. (Member, Civil Aeronautics Board)
Craig , Winchell M. (Special Assistant on Health and Medical Affairs,
Department of Health, Education , and Welfare)
Davis, Thomas W.s. (Member, Foreign Claims Settlement Commission )
Douglas, James H. (Deputy Secretary, Department of Defense)

Fitzgerald, Dennis A. ( Deputy Director for Operations of the International

Cooperation Administration , Department of State)
Forsythe, Robert A. (Assistant Secretary, Department of Health,
Education, and Welfare)
Gates, Thomas S. Jr. (Secretary, Department of Defense)
Gilliland, Whitney (Member, Civil Aeronautics Board)
Rramer , Robert (Assistant Attorney General, Department of Justice)
Lincoln , Franklin B. Jr. (Assistant Secretary, Department of Defense)
McCallum, Phillip (Administrator, Small Business Administration)
McKibbin, John M. (Deputy Postmaster General, Post Office Department)
Moore , George M. (Asst Postmaster General, Post Office Department)
Sharp, Dudley C. (Secretary of the Air Force, Department of Defense)
Sterling, John E. W. (U.S. Advisory Commission on Educational Exchange)
Unander,Sigfrid B. (Member, Federal Maritime Board)
1960
Abbott, George W.

(Assistant Secretary, Department of the Interior)

Bartholomew, Harland (Member, Advisory Board of the National Capital
Transportation Agency )

Bicks, Robert A. (Assistant Attorney General, Department of Justice)
Burling, Edward Jr. (Member, Advisory Board of the National Capital
Transportation Agency )

Hyde, Donald C. (Member, Advisory Board of the National Capital
Transportation Agency )

Kimball, Arthur A. (Member, National Labor Relations Board)
King , Charles H. (Member , Federal Communications Commission )
Langdale, Noah N. Jr. (Member, U.S. Advisory Commission on Educational Exchange)
McCauley, Daniel J. Jr. (Member, Securities and Exchange Commission )

82

McConihe, F. Moran (Member, Advisory Board of the National Capital
Transportation Agency )

Mills, Edward K. Jr. (Member, Federal Trade Commission)
Moss, William H. (Member , Advisory Board of the National Capital
Transportation Agency)

Newbold, John L. (Member, District of Columbia Redevelopment Land Agency)
Schuler, William R. Brig Gen (Member, Mississippi River Commission)
Stevens, Theodore F.
Sullivan , Mark Jr.

(Solicitor, Department of the Interior)
(Commissioner of the District of Columbia )

Sweeney, Paul A. (Member, Federal Power Commission)
Vogel, 8. Holmes (Administrator, National Capital Transportation Agency)
Wallace, Walter C. (Assistant Secretary, Department of Labor)
Weitzel, John P.

(Assistant Secretary , Department of the Treasury)

Weitzel, John P. (0.S. Executive Director of the International Bank
for Reconstruction & Development)

1

83

President John F. Kennedy (1961-1963)
1961

Alexander, Donald W. (Administrator of the Maritime Administration,
Department of Commerce)
Ball , George W. (Under Secretary, Department of State)
Barrett , Ashton (Member, Federal Maritime Commission)
Behrman, Jack N. (Assistant Secretary, Department of Commerce)
Boutin, Bernard L. (Administrator, General Services Administration )
Dorfman , Ben D. (Member, U.S. Tariff Commission)
Dutton, Frederick H. (Assistant Secretary, Department of State)
Harllee, John (Commissioner , Federal Maritime Commission )
Farrell , Raymond F. (Commissioner of Immigration and Naturalization Service,
Department of Justice)

Fisher, Adrian S.

(Deputy Director, U.S. Arms Control and Disarmament Agency)
Foster , William C. (Director, U.S. Arms Control and Disarmament Agency)
Gaud, William S. (Assistant Administrator for Near East and South Asia ,
Agency for International Development)
Harlan, Neil E. (Assistant Secretary of the Air Force, Department of Defense)
Harriman, W. Averell (Assistant Secretary, Department of State)
Holland, Edwin T. (Member, Advisory Board of the National Capital
Transportation Agency)

Hutchinson , Edmond C. (Assistant Administrator for Africa and Europe,
Agency for International Development)
Janow, Seymour J. (Assistant Administrator for the Far East,
Agency for International Development)
Korth, Fred (Secretary of the Navy, Department of Defense)
McCann, Joseph A. (Administrator, St. Lawrence Seaway Development Corporation)
McCone , John A.

(Director of Central Intelligence )

McGhee, George C. (Under Secretary for Political Affairs, Department of State)
Moscoso, Teodoro (Assistant Admistrator for Latin America,
Agency for International Development )

Newbold, John L. (Member, District of Columbia Redevelopment Land Agency)
Patterson , John S. (Member, Federal Maritime Commission)
Reed, James A. (Assistant Secretary, Department of the Treasury)
Rostow, Walt W. (Counselor, Department of State)
Ruder , William (Assistant Secretary, Department of Commerce)
Stakem, Thomas E. (Member, Federal Maritime Commission)
Sura , Michael H. (Superintendent of the U.S. Mint, Department of the Treasury)
1962

Belin, Gaspard d'Andelot (General Counsel, Department of the Treasury)
Bell , David E.

(Administrator, Agency for International Development)

Benson, Homer L. (Member, Board of Parole, Department of Justice)
Bullitt, John C. (Assistant Secretary, Department of the Treasury)
Bullitt, John C. (U.S. Executive Director of the International Bank
for Reconstruction & Development)
Carr , James A. Jr. (Member, Board of Parole, Department of Justice)

84

Connor, John T. (Incorporator, Communications Satellite Corporation)
Culliton , James W. (Member, U.S. Tariff Commission )
Dale, William B. (Executive Director, International Monetary Fund)
Douglas , John W. (Assistant Attorney General, Department of Justice)
Fanning , John H. (Member, National Labor Relations Board)
Feldman, George (Incorporator, Communications Satellite Corporation)
Graham , Beardsley (Incorporator, Communications Satellite Corporation)
Harris, Sam (Incorporator,-Communications Satellite Corporation)
Kaiser, Edgar F. (Incorporator, Communications Satellite Corporation)
>

Kennedy, David M.

(Incorporator, Communications Satellite Corporation)

Keppel, Francis (Commissioner of Education, Department of Health,
Education , and Welfare )

Killion, George L. (Incorporator, Communications Satellite Corporation)
Litschgi, A. Byrne (Incorporator, Communciations Satellite Corporation)
Marks, Leonard -(Incorporator, Communications Satellite Corporation)
Moyers, Bill D. (Deputy Director, Peace Corps)
Sundlun, Bruce G. (Incorporator, Communications Satellite Corporation)

Weinberg, Sidney J. (Incorporator, Communications Satellite Corporation)
Woodcock, Leonard (Incorporator, Communications Satellite Corporation)

85

President Lyndon B. Johnson (1963-1969)
1963
None

1964

Aaron , Benjamin (Member, National Commission on Technology,
Automation , and Economic Progress)
Beirne, Joseph A. (Member, National Commission on Technology,
Automation , and Economic Progress)
Bell, Daniel (Member , National Commission on Technology,
Automation , and Economic Progress)
Bowen , Howard R. (Member, National Commission on Technology,
Automation , and Economic Progress)
Carver, John A. Jr. (Under Secretary, Department of the Interior)
Driver, W. J. (Administrator, Veterans Administration)
Haggerty , Patrick E. (Member, National Commission on Technology,
Automation, and Economic Progress)
Hayes, Albert J. (Member , National Commission on Technology,
Automation , and Economic Progress)

(Member, National Commission on Technology,
Automation, and Economic Progress)
Ignatius, Paul R. (Assistant Secretary, Department of Defense)
Jones, Mary G. (Member, Federal Trade Commission )
Land, Edwin A. (Member, National Commission on Technology,
Automation, and Economic Progress)
Okun, Arthur M. (Member, Council of Economic Advisers)
Reuther, Walter P. (Member , National Commission on Technology,
Automation , and Economic Progress)
Ryan , Robert A. (Member, National Commission on Technology,
Automation, and Economic Progress)
Snyder , John I. (Member , National Commission on Technology,
Automation, and Economic Progress)
Solow, Robert M. (Member, National Commission on Technology,

Hoffman , Anna R.

Automation , and Economic Progress)

(Member, National Commission on Technology,
Automation , and Economic Progress)
Young , Whitney M. (Member, National commission on Technology,
Sporn , Philip

Automation , and Economic Progress)

86

1965
Gorham , William

(Assistant Secretary, Department of Health ,
Education , and Welfare)

Hibbard, Walter R. Jr. (Director of the Bureau of Mines,
Department of the Intérior)
Howe, Harold II (Commissioner of Education, Department of Health,
Education, and Welfare)
Jaffe, Theodore (Member, Foreign Claims Settlement Commission )
Moe, Henry A. (Chairman , National Endowment for the Humanities)
Seamans, Robert C. Jr. (Deputy Administrator, National Aeronautics
and Space Administration )
1966 and 1967

None
1968

(Secretary, Department of the Treasury)
Brown, William B. III (Member, Equal Employment Opportunity Commission)
Davis, Ted J. (Member of the Board of Directors, Commodity Credit Corporation)
Garcia, Hector P. (Member, Commission on Civil Rights)
Lewis, Walter B. (Assistant Secretary, Department of Ecusing & Urban Development)
McKaldin , Theodore R. (Member, Indian Claims Commission )
Mitchell, Maurice D. (Member, Commission on Civil Rights)
Murphy, Patrick v. (Administrator of the Law Enforcement Assistance
Administration , Department of Justice)
·Pomeroy, Wesley A. (Associate Administrator of the Law Enforcement
Assistance Administration, Department of Justice)
Barr , Joseph W.

Sie, Ralph G.H.

(Associate Administrator of the Law Enforcement

Assistance Administration, Department of Justice)
Wood, Robert C. (Secretary, Department of Housing and Urban Development)

87

President Richard N. Nixon (1969-1974)
1970
Gibson, Andrew E.

(Assistant Secretary for Maritime Affairs,
Department of Commerce)

Hunter , Allan 0 . (President and Chief Executive Officer,

Federal National Mortgage Association)
Mardian , Robert C.

(Assistant Attorney General of the Internal Security Division,

Department of Justice)
Ruiz, Manuel Jr. (Member, Commission on Civil Rights)
(Assistant Secretary for Tourism, Department of Commerce)

Washburn , C. Langhorne

1971
Anderson, Glenn E. (Director, Securities Investor Protection Corporation)
Braun, Theodore W. (Member of the Board of Governors, U.S. Postal Service)
Carlucci, Frank C. III (Director, Office of Economic Opportunity)
Codding, Charles H. Jr. (Member of the Board of Governors, U.S. Postal Service)
Haggerty, Patrick E. (Member of the Board of Governors, U.S. Postal Service)
Holt, Andrew D. (Member of the Board of Governors, U.S. Postal Service)
Houser , Thomas J. (Member , Federal Communications Commissioner )
Johnson , George E. (Member of the Board of Governors, U.S. Postal Service)
Kappel , Frederick R. (Member of the Board of Governors, 0.s. Postal Service)

Klassen, E. T. (Member of the Board of Governors, U.S. Postal Service)
Kleppe, Thomas S. (Administrator, Small Business Administration)
Melton, Andrew J. ( Director, Securities InvestorProtection Corporation)
Mize , Chester L. (Member and Chairman , U.S. Tariff Commission)
Nevin , Crocker (Member of the Board of Governors, U.S. Postal Service)
Regan , Donald T. (Director, Securities Investor Protection Corporation)
Stigler, George J. (Director, Securities Investor Protection Corporation)
Walsh, Ethel B. (Member, Equal Employment Opportunity Commission)
Wells, Robert (Member, Federal Communications Commission)

Woodside, Byron D. (Director, Securities Investor Protection Corporation)
Wright, M.A. (Member of the Board of Governors, U.S. Postal Service)
1972

Erickson, Ralph E. (Assistant Attorney General for the Office of Legal Counsel,
Department of Justice)

Ervin, Charles W. (Associate Director for Policy and Program Development, ACTION)
Frizzell, Dale R. (Assistant AttorneyGeneral for the Land and Natural
Resources Division , Department of Justice)

Gottschalk, Robert (Commissioner of Patents, Department of Commerce)
Meyers, Tedson J. (Member, District of Columbia Council)

O'Donnell, Kevin (Associate Director for International Operations, ACTION)
Pearce,William R. (Deputy Special Representative for Trade Negotiations)
Petersen, Henry E. (Assistant Attorney General for the Criminal Division,
Department of Justice)

Wiley, Richard E. (Member , Federal Communications Commission )

88

1972

(Member of the Board of Directors,
Corporation for Public Broadcasting)
Fanning, John H. (Member, National Labor Relations Board)
Garlock, Lyle S . (Member and Chairman , Foreign Claims Settlement Commission)
Kristol, Irving (Member of the Board of Directors,
Corporation for Public Broadcasting)
McFarland , Alfred T. (Member , Interstate Commerce Commission )
Merriman, Russell F. (Federal Cochairman , New England Regional Commission )
Montejano, Rodolfo (Member , Interstate Commerce Commission )
Curtis , Thomas B.

9

1973 and 1974
None

President Gerald R. Ford (1974-1977)
1974 and 1975
None
1976

Garrett, Thaddeus A. Jr. (Member, Consumer Product Safety Commission )
Gorog, William E. (Executive Director, Council on International Economic Policy)
Knebel, John A. (Secretary, Department of Agriculture)
Paarlberg, Don (Assistant Secretary, Department of Agriculture)
Reifel, Benjamin (Commissioner of Indian Affairs , Department of the Interior)
Rogers, William D. (Alternate Governor, African Development Fund)
Simon , William E. (U.S. Governor, African Development Fund)

Wilson, James M. Jr. (Coordinator for Human Rights and Humanitarian Affairs,
Department of State)

89

President Jimmy Carter (1977-1981)
1978

.

Engelberg, Steven (Director, Legal Services Corporation)
Esquer, Cecilia (Director, Legal Services Corporation)
Hamilton, Charles V. .(Member , National Council on the Humanities)
Hector , Louis J.

(Member , National Council on the Humanities)

Holman , Carl (Member, National Council on the Humanities)
Howe, Kay (Member, National Council on the Humanities)
McGarry , John W. (Member , Federal Election Commission)
Neusner, Jacob (Member, National Council on the Humanities)
Norton, mary B. (Member, National Council on the Humanities)
Read , Sister Joel

(Member , National Council on the Humanities

Rodham , Hillary (Director, Legal Services Corporation)
Seignious, George M. Lt Gen (Director, U.S. Arms Control and Disarmament Agency)
Snyder , John W. (Director, Harry S Truman Scholarship Foundation)
Stein, Leon

(Member , National Council on the Humanities)

Trudell, Richard (Director, Legal Services Corporation),
White, John P. (Deputy Director, Office of Management and Budget)
Worthy, Josephine (Director, Legal Services Corporation)
Yarborough, Richard W. (Member, Foreign Claims Settlement Commission)
Zimmerman , Harriet M. (Member, National Council on the Humanities)
1979

Campbell, Alan K. (Director, Office of Personnel Management)
Dillman, James J. (Member, National Commission on Social Security)
Frazier, Harry B. (Member, Federal Labor Relations Authority)
Goldschmidt, Neil (Secretary, Department of Transportation)
Gwirtzman , Milton s. (Chairman, National Commission on Social Security)
Haughton, Ronald W. (Chairman , Federal Labor Relations Authority )
Lubbers, William A. (General Counsel, National Labor Relations Board)
McNaughton , Donald S. (Member, National Commission on Social Security)
Prokop, Ruth K. (Chairman , Merit Systems Protection Board)
Rodgers, David H. (Member, National Commission on Social Security)
Sugarman, Jule M. (Deputy Director, Office of Personnel Management)
Sullivan, William J. (Member of the Board of Governors,
United States Postal Service)
Swygert, H. Patrick (Special Counsel, Merit Systems Protection Board)
Wruble, Bernhardt K. (Director of the Office of Government Ethics,
Office of Personnel Management)

90

1980

Beckham, William J. (DeputySecretary, Department of Transportation)
Bracewell, Joseph S. (President, Solar Energy & Energy Conservation Bank)
Cleary, Catherine B. (Member of the Board of Directors,
U.S. Synthetic Fuels Corporation)
Coleman, Lynn R. (Deputy Secretary, Department of Energy)
DeButts, John D. (Member of the Board of Directors,
U.S. Synthetic Fuels Corporation)
Driver, William J. (Commissioner of Social Security,
Department of Health and Human Services)
Earle, Ralph II (Director, U.S. Arms Control and Disarmament Agency)
Emerson , Ralph W. (Member, Foreign Claims Settlement Commission )
Harris, Laird F. (Assistant Director, Community Services Administration )
Hyde , Wallace N. (Member of the Board of Governors, United States Postal Service)
Kirkland , Lane (Member of the Board of Directors,

U.S. Synthetic Fuels Corporation)
McDonald , Alice c. (Member, National Council on Educational Research)
Mercure, Alex P. (Under Sec of Agriculture for Small Community
and Rural Development , Department of Agriculture )

Savage, Frank (Member of the Board of Directors,
U.S. Synthetic Fuels Corporation)
Sawhill , John C.

(Member of the Board of Directors,

U.S. Synthetic Fuels Corporation)

Seignious, George M. II Lt Gen (Member of the General Advisory Committee,
U.S. Arms Control & Disarmanunt Agency)
Smith, William L. (Commissioner of Education, Department of Education)
Thomas, Harold L. (Assistant Director, Community Services Administration)
Truesdale, John (Member, National Labor Relations Board)
1981
Askanase , Reuben W.

(Member of the Board of Directors ,
Corporation for Public Broadcasting )

Beals, Melba (Member of the Board of Directors,
Corporation for Public Broadcasting)

Connell, John (Member, National Museum Services Board)
(Assistant Secretary, Department of the Interior)

Fredericks , Thomas M.

Graham -Wheeler, Dorothy (Member, National Museum Services Board)
Klyberg, Albert T. (Member, National Museum Services Board)
Thomson , Vernon

(Member, Federal Election Commission )

91

President Ronald Reagan (1981- 1985)
1981

Alkens, Joan D. (Member, Federal Elections Commission )
Bennett, William J. (Chairman , National Endowment for the Humanities)

Chambers, Terry (Alternate-Federal Co-Chairman of Eight"Regional Commissions) Dana, Howard H. Jr. (Member of the Board of Directors,
Legal Services Corporation )

Ellingwood, Herbert E. (Member and Chairman, Merit Systems Protection Board)
Elliot, Lee Ann (Member, Federal Elections Commission)
Harvey, William F. (Member of the Board of Directors,
Legal Services Corporation)
Hunter, Robert P. (Member, National Labor Relations Board)
McDonald, Danny Lee (Member, Federal Elections Commission)

(Member of the Board of Directors, Legal Services Corporation)
Sandstrom, Marc (Member of the Board of Directors, Legal Services Corporation)

Paras, George E.

Satterfield, David E. III (Member of the Board of Directors,
Legal Services Corporation)

Shattuck, Cathie A. (Member, Equal Employment Opportunity Commission)
(Member of the Board of Directors, Legal Services Corporation)
Stubbs, Robert S. II (Member of the Board of Directors,

Olson , William J.

Legal Services Corporation)

Van de Water, John (Member, National Labor Relations Board)
1982

Backley, Richard v. (Member, Federal Mine Safety and Health Review Commission)

Bentley, Orville (Assistant Secretary for Science and Agriculture,
Department of Agriculture )

DeMoss, Harold R. Jr. (Member Board of the Directors, Legal Services Corporation)
Donatelli, Frank J. (Member of the Board of Directors, Legal Services Corporation)
Feldstein, Martin s. (Member, Council of Economic Advisors)
Hesse, Martha 0. (Assistant Secretary for Management and Administration,
Department of Energy)

Hodel, Donald P. (Secretary, Department of Energy)
Hume, Caroline H. (Member, National Museum Services Board)

Johnson, Manuel H. (Assistant Secretary for Economic Policy,
Department of the Treasury)

Knapp, Edward A. (Director, National Science Foundation)
Lesher, William G. (Member of the Board of Directors,
National Consumer Cooperative Bank )

McKee, Clarence V. (Member of the Board of Directors, Legal Services Corporation)
Miller, John C. (Member, National Labor Relations Board)
Moffett, Kenneth E. (Director, Federal Mediation & Conciliation Service)
Nelson , L. Clair (Member, Federal Mine Safety & Health Review Commission)
Rathburn, Daniel M. (Member of the Board of Directors, Legal Services Corporation)
Slaughter , Annie L. (Member of the Board of Directors, Legal Services Corporation)

92

1983

Barksdale, Marice L. (Assistant Secretary and Federal Housing Administrator,
Bright, Simeon M.

Department of Housing and Urban Development)
(Commissioner, Postal Rate Commission )

Bush, Mary R. (U.S.Alternate Executive Director, International Monetary Fund)
DiSabato, Louis R. (Member, National Museum Services Board)
Frankum , Ronald B. (Member of the Board of Directors,
Legal Services Corporation)

Gersten , Linda Chavez (Staff Director, Civil Rights Commission)
Grose, Vernon L. (Member, National Transportation Board)
Hanley, William L. (Member of the Board of Directors,
Corporation for Public Broadcasting )

Lee-Miller, Stephanie (Assistant Secretary for Public Affairs,
Department of Health & Human Services )

Lenkowsky, Leslie (Deputy Director, United States Information Agency)
Masson, Milton M. (Member of the Board of Directors, Legal Services Corporation)
McCarthy, Robert E. (Member of the Board of Directors,
Legal Services Corporation)

Middendorf, J. William II (Member of the Board of Directors,
Inter-American Foundation)
Motley, Langhorne A. (Member of the Board of Directors,
Inter -American Foundation)

Patrick, Dennis R. (Member , Federal Communications Commission)
Peters , Ruth 0. (Member of the Board of Governors, U.S. Postal Service)
Phillips, Harold K.

(Member of the Board of Directors ,
Inter -American Foundation )

Santarelli, Donald E. (Member of the Board of Directors,
Legal Services Corporation)

Shapiro, E. Donald (Member of the Board of Directors,
Legal Services Corporation )

Tuttle, Donna F. (Under Secretary for Travel and Tourism,
Department of Commerce )

1984

(Member, National Advisory Council on Women's
Education Programs)
Allen, William B. (Member, National Council on the Humanities)
Adams, Elizabeth A.
Angrisani, Albert
Azcuenaga , Mary L.

(Member of the Board of Directors ,
Legal Services Corporation)
(Member , Federal Trade Commission )

Benavides, Hortencia (Member of the Board of Directors,
Legal Services Corporation)

Bernstein, LeaAnne (Member of the Board of Directors,
Bloch, Erich

Legal Services Corporation)
(Director , National Science Foundation)

Broadbent, Robert N. (Assistant Secretary for Water and Science,
Department of the Interior)

Buckley, Elliot R. (Member, Occupational Safety and Health Review Commission)
Collyer, Rose M. (General Counsel, National Labor Relations Board)

93

Corcoran , Maureen E. (General Counsel, Department Education)
Corcoran, Tom (Member of the Board of Directors,
U.S. Synthetic Fuels Corporation)
Cresimore, Mary J.C. (Member, National Council on the Humanities)
Dawson, Carol G. (Member, Consumer Products Safety Commission)
Durant , William C. III
Eaglin , Paul B.

(Member of the Board of Directors ,
Legal Services Corporation)
(Member of the Board of Directors,

Legal Services Corporation)
Elsner, Robert (Member, Marine Mammal Commission)
Ensley, Melvin A. (Member of the Federal Farm Credit Board,
Farm Credit Administration)
Ferrara, Peter J.

(Member of the Board of Directors ,

Legal Services Corporation)
Griesemer, John N. (Member of the Board of Governors, U.S. Postal Service)
Guiton, Henrietta F., (Member, Postal Rate Commission)
Hall, Marianne M. (Commissioner of Copyright Royalty Tribunal)
Hughes, Richard H. (Member of the Board of Directors, Export-Import Bank)
Jones, Richard H. (Deputy Administrator of the Federal Aviation
Administration, Department of Transportation)
Kass, Leon R. (Member , National Council on the Humanities )
Keisler , Peter D. (Member, National Advisory Council on Women's
Educational

cograms

Kennickell , Ralph E. Jr. (Public Printer and Head of
Government Printing Office)
Kilpatrick, Kathleen s. (Member, National Council on the Humanities)
Lastowka, James A. (Member, Federal Mine Safety and Health Review Commission )
Laxalt, Robert (Member, National Council on the Humanities)
Livingston , Dodie T.

(Chief of the Children's Bureau ,

Department of Health & Human Services)
MacAvoy, Paul W. (Member of the Board of Directors,
U.S. Synthetic Fuels Corporation )

MacDonald , Donald I. (Administrator, Alcohol, Drug Abuse & Mental Health,
Department of Health and Human Services )

McGinnis, William J. Jr. (Member, Federal Labor Relations Board)

Mendez, Pepe J. (Member of the Board of Directors, Legal Services Corporation)
Merklein, Helmut A. (Administrator of the Energy Information Administration ,
Department of Energy)
Miller, Lorain (Member of the Board of Directors, Legal Services Corporation)
Naftzger, Pauline C. (Member , National Museum Services Board)
Nitze, Paul H. (Special Representative for Arms Control
and Disarmament Negotiations)
Peden, Mae N. (Assistant Administrator, Agency for International Development)
Philbin , Edward J. (Member, Federal Maritime Commission )
Pryor, Karen (Member, Marine Mammal Commission )
Reichl, Eric (Member of the Board of Directors,
U.S. Synthetic Fuels Corporation)
Rowland, Robert A. (Associate Secretary and Director of Occupational, Safety,
and Health Administration, Department of Labor)
Schall, James V. (Member, National Council on the Aumanities).
Schlicher, Barbara W. (Member of the Board of Directors,
National Corporation for Housing Partnerships)

94

Seger, Martha R. (Member, Board of Governors, Federal Reserve System)

Shannon , John W. (Assistant Secretary of the Army, Departmentof Defense)
Silberman , Rosalie (Member, Equal Employment Opportunity Commission )

Smegal, Thomas F. Jr. (Member of the Board of Directors,
Legal Services Corporation)

Swafford, Claude G. (Member of the Board of Directors,
Legal Services Corporation)
Taylor, Helen M. (Member, National Council on the Humanities)
Uddo , Basile J. (Member of the Board of Directors, Legal Services Corporation)
Valois, Robert A. (Member of the Board of Directors,
Legal Services Corporation)
Waldman , Frieda

(Member of the Board of Governors , U.S. Postal Service)

Wallace, Michael B. (Member of the Board of Directors,
Legal Services Corporation)

Ward, John D. (Director of the Office of Surface Mining Reclamation and
Enforcement, Department of the Interior)
Zech, Lando W. Jr. (Member, Nuclear Regulatory Commission)

RG :db

95

INTRA-SESSION RECESS APPOINTMENTS BY THE LAST FOUR PRESIDENTS
Submitted by Senator Garn

Congressional Research Service
The Library of Congress

nap

Washington,D.C. 20540
July 11, 1984
TO

: Senate Committee on Banking, Housing, and Urban Affairs
Attention : Linda Zemke

FROM

: Richard Ehlke
Specialist in American Public Law
American Law Division

LEGAL ISSUES RAISED BY RECESS APPOINTMENT TO BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

This report highlights legal issues raised by the recess appointment
by President Reagan of Martha Seger to the Board of Governors of the Fed
eral Reserve System .

The President appointed Ms. Seger to the Board on July 2, 1984.

She

had been previously nominated by the President to replace Nancy Teeters on
the Board and her nomination was favorably reported by the Senate Banking
Committee by a 10-8 vote on June 28. The Senate adjourned for the July 4th
holiday and the Democratic convention on June 29 without acting on the non
ination . 30 Cong. Rec. S 8978 (daily ed. June 29, 1984). It will stand ad
journed until Monday , July 23 at 12 noon . Id .

The President can point to two possible sources of authority for the
July 2 appointment. Article II, Section 2, Clause 3 of the Constitution
empowers him "to fill up all Vacancies that may happen during the Recess of
the Senate , by granting Commissions which shall expire at the End of their

next Session." With respect to members of the Board of Governors of the
Federal Reserve System, he is also statutorily authorized "to fill all
vacancies that may happen on the Board of Governors of the Federal Reserve
System during the recess of the Senate by granting commissions which shall

expire with the next session of the Senate." 12-0.S.C. 245 (1982).

96

Members of the Board of Governors ofthe Federal Reserve System would
clearly seem to be the type of officers of the United States to which the
Constitution's recess appointment clause is applicable. Compare, McCal

pia v.Dana, C.A. No. 82-542 (D.D.C. Sept. 30,1982) argued on appeal, No.
82-2318 (D.C. Cir. Oct. 20, 1983) (recess appointment clause applicable to
Legal Services Corporation). The phrase "Vacancies that may happen during
the Recess of the Senate" has also been interpreted to mean "happen to exist“
during a recess. Therefore, whenever a vacancy may have occurred in the first
instance or for whatever reason, if it still continues after the Senate has

ceased to sit, the President nay fill it by recess appointment. In Re Farrow,
g

3 Fed. 112 (N.D. Ga. 1880); 41 Op. A.G. 463, 465 (1960) and authorities cited
therein .

The more difficult question in the case of this appointment is whether
the current 23-day recess of the Senate constitutes a "Recess" for purposes
of the Constitution . The Framers of the Constitution were silent as to the
Intended scope of the recess appointment clause . A recess for such purposes
was initially conceived to be the period after the final adjournment of Con
gress for the session and before the next session began. 23 Op. A.G. 599
(1901). However , it has more recently been Interpreted to laclude lengthy
adjournments during a session . The periods August 24 to September 21, 1921
(29 days), July 3, 1960 to August 8, 1960 (36 days ), and August 2 to September
1979 (33 days) have been seen as recesses during which appoiatments can be

made.;;33 Op. A.G. 20 (1921); 41 Op. A.G. 463 (1960); 1979 Opinions of office
O

of Legal Counsel 314 (Aug. 3, 1979).
The 1921 Attorney General's Opinion applied the definition of "recess"
12,70

97

adoptedbytheSenateJudiciaryCommitteein 1)
905, namely,“theperiodof
time when the Senate is not sitting in regular or extraordinary session as
a branch of the Congress, or in extraordinary session for the discharge of
executive functions, when its members owe no duty of attendance; when its
Chamber is empty; when, because of its absence, it can not receive commu
nications from the President or participate as a body in making appointments.'
s. Rept. No. 4389, 58th Cong., 3d Sess. 2 (1905) (emphasis in original).
The Attorney General recognized that the term had to be given a practical
construction and doubted whether short recesses of 2 or even 10 days would
constitute a recess for purposes of the constitutional provision. He ul
timately approved of the exercise of the recess appointment power during
the 29-day recess at issue. 33 Op. A.G. 20 (1921); 1979 Opinions of Office :
of Legal Counsel 314, 315; see also, 28 Comp. Gen. 30 (1948) (Comptroller
General noting approval of intra-session recess appointment ).

The pocket -veto case,Kennedy v. Sampson, 511 F. 2d 430 (D.C. Cir. 1974),
has apparently also influenced the view of the propriety of recess appoint
ments during short recesses of the Senate. The court in Kennedy struck down
the exercise of the President's pocket veto power during a 6-day intrasession

adjournment of the Congress. The Constitution provides that a bill becomes

law if not returned by the President after presentment within 10 days,"unless
the Congress by their Adjournment prevent its Return , in which Case it shall
not be a Law." Art. I, Sec. 7, cl. 2. The case cast doubt on the validity
of all intrasession pocket vetoes, not only those of short duration, and

presidents have since limited their pocket vetoes tobetween sessions or after
. Congress has finally adjourned . See, Barnes v. Carmen , 582 F. Supp. 163
(D.D.C. 1984) (upholding later-session pocket veto). Furthermore, the Depart
nent of Justice, while asserting the validity of a recess appointment during

98

a 33-day intrasession recess, nevertheless advised President Carter that
"In view of the functional affinity between the pocket veto and recess
appointment powers, Presidents during recent years have been hesitant to make

recess appointments during intrasession recesses of the Senate." 1979 Opinions
of Office of Legal Counsel 314, 316 (1979).
The upshot of the foregoing discussion is that the question whether a re
cess is one of sufficient duration during which a recess appointment can be
made is unresolved by the courts and executive branch legal officers . Avail

able authority would seem to cast doubt on the legitimacy of appointments
during very short recesses. Where to draw the line , however , is problematic
and definitive resolution of that question must await litigation.
Recess appointees' commissions expire "at the End of [the Senate's)
next Session." The reconvening of the Senate during the same session after
an adjournment is not regarded as the "next Session" within the meaning of the
constitutional provision. See , 41 Op. A.G. 463 , 470-1 (1960); 28 Comp. Gen.
121, 126 (1948). Thus, the terms of current intrasession recess appointees
run until the end of the 99th Congress , 1st Session which is likely to be in

late 1985. The President may remove a recess appointee before expiration of
his term , either by outright removal or having another nominee confirmed by
the Senate. Senate rejection of the recess appointee's nomination, however ,
does not constitute removal, and the rejected nominee may still hold office
under the Constitution until the termination of the session. In re Marshal
ship, 20 F. 379 (D. Ala. 1884).
Several statutes impact on the pay of recessappointees. In the above
situation of subsequent Senate rejection of the nomination of a person

holding a recess appointment, the Second Continuing Resolution for fiscal

1

9
9

year 1984 incorporated the terms of H.R. 4139, the Treasury,Postal Service
and General Government Appropriations Act, that, in turn, included a provision

(which has appeared in the law for several years) that "No part of any ap
propriation for the current fiscal year contained in this or any other Act
shall be paid to any person for the filling of any position for which he or
she has been nominated after the Senate has voted not to approve the non
ination of said person ." H.R. 4139, § 606, as incorporated in Public Law
a

98-151, § 101(f), 97 Stat. 973 (1983).
Congress has also prohibited paying the salaries of certain classes
of recess appointees until they are confirmed by the Senate. Payment for
services from the Treasury is barred if a recess appointment is made to
fill a vacancy that existed while the Senate was in session. 5 U.S.C. 5503(a).
However, the prohibition does not apply if (1) the vacancy arose within
30 days before the end of the session, (2) a nomination for the office (other

than the nomination of a person appointed during the preceding recess of
the Senate) was pending at the end of the session, or (3) if a nomination
for the office was rejected within 30 days of the end of the session and
a person other than the rejected nominee receives the recess appointment.

5 U.S.C. 5503 (a) (1)-(3). The law also requires nominations to fill the
above referred-to vacancies to be submitted to the Senate 40 days after
the beginning of the next session of the Senate. The term "session", in
this context, has been interpreted to mean the next time the Senate convenes
and does not have the same meaning as the term in the recess appointment
clause . See, 28 Comp. Gen. 30, 37 (1948); 41 Op. A.G. 463, 473–5 (1960).
Senate rules provide that in the case of a recess for more than 30 days,
nominations not acted upon are returned to the President and will not be
considered unless resubmitted . S. Rule 31(6). The Attorney General has

100

has advised that recess appointees' nominations be resubmitted upon the
reconvening of the Senate in order to preserve the pay of the nominees under
5 U.S.C. 5503(b) and to inform the Senate that a recess appointment had
beenmade . 41 Op. A.G. at 476-8.
The pay cut-off provisions must also be seen in conjunction with the

statutory prohibition on voluntary governmental service. 31 U.S.C. 1342.
Thus , continued service by a recess appointee until the end of his constitu

tionally prescribed term could run afoul of this provision if the appointee's
salary is terminated . See, 41 Op. A.G. at 480.
Thus, with respect to recess appointees, in general, whose nominations
were pending prior to the Senate recess of June 29, the salary bar in 5 u.s.c.
5503 would not apply. However, the salaries of Federal Reserve Board members
do not appear to be paid from appropriated funds but derive from assessments
levied by the Board upon the Federal reserve banks. 12 U.S.C. 243. Therefore,
neither the title 5 salary provisions (which relate to payments of salaries from
the Treasury) nor the Second Continuing Resolution (which speaks in terms of ap
propriated funds) would seem to be applicable to Federal Reserve Board recess
appointees.
Whether the President is required to actually resubmit a recess appointee's
nomination when the Senate reconvenes on July 23 is not clear.

The Senate

Rules indicate that the nomination would carry over the 23-day recess. In an
analogous situation , however, the Attorney General has recommended that such
nominations nevertheless be resubmittted . 41 Op. A.G. at 476. Finally, the
validity of these salary termination provisions, while seemingly assumed by
the Attorney General in the above cited opinion, has, nevertheless, not been
tested in court . An argument could be made that statutes that effectively

prevent a recess appointee from completing his or her constitutionally pre

101

scribed term interfere with the President's constitutional prerogative to make
such appointments. The question was noted but not answered in Staebler v.
Carter, a case upholding a recess appointment to the Federal Election Com
mission . 464 F. Supp. 585, 596 n. 24 (D.D.C. 1979). Again, the seeming in
applicability of the provisions to the Seger appointment would render that
question moot in her case .
II

The provision in 12 U.S.C. 245 is a unique statutory recognition of
recess appointive power . On its face, it differs from the constitutional

provision in providing that recess appointments expire "with the next ses
sion of the Senate" rather than "at the End of [the Senate's] next Session."
Thus, it might be argued that the statute delegates a recess appointive
power outside the constitutional provision, a power that may be more cir

cumscribed in terms of the duration of a recess appointee's term of office
but one that flows from statute and, therefore, need not carry the inter
pretive baggage that the constitutional provision may have .
However, the legislative history makes clear that the provision is
intended to track the constitutional appointive power. As originally enacted
in 1913, the law provided that recess appointments would expire 30 days after
language with the current language. The amendment was deemed "necessary to
make the provision conform with Article II of the Constitution of the United
States and has no other effect." H. Rept . No. 885, 67th Cong. 2d Sess 2 (1922);
See also, 62 Cong. Rec. 7502, 7519 (1972). No explanation was given as to why

the precise language of the Constitition was not utilized. While the language
of the provision is not as clear as the constitutional language with respect

to duration of appointment (1.e., "with the next session" could be read as

102
1

meaning with the commencement of the next session ), it can be interpreted , with
out doing violence to the terms of the statute , to mean expiration at the end
of the session . The legislative history confirms that that was the intent of the

provision. Given the intended conformity between 12 U.S.C. 245 and the consti
tutional provision, it is unlikely a court would interpret the statute as dele
gating authority that it is not already delegated by the constitutional provision.
III

In conclusion, the validity of the recess appointment of Martha Seger to
the Federal Reserve Board depends on whether the 23-day recess of the Senate

for the July 4th holiday and Democratic convention is a "recess" for purposes
of the constitutional recess appointment clause. The constitutional provision
was adopted without debate . Most of the legal authority on the interpretation

of the recess appointment clause is contained in Attorney General opinions.
These opinions have approved of recess appointments during comparable summer
recesses of the Senate of 29,33 and 36 days. The question is one of line
T

drawing and the opinionshave recognized that appointments during very short
recesses of 5 or 10 days would be suspect .
A recess appointee's term runs until the end of the next session of Con

gress. Thus, Ms. Seger's term, under her recess appointment, would not expire
until the end of the 99th Congress, 1st Session, late in 1985. Furthermore,

she may serve out that term even if the Senate rejects her nomination when
it reconvenes .

103

Since the Seger nomination was pending when the Senate recessed, 5 u.s.c.
5503 would not operate to prohibit her from receiving her salary pending Senate
confirmation .

Furthermore, since Federal Reserve members' salaries are not

paid from appropriated funds, that provision and the appropriations rider would

not appear to operate in the case of recess appointments to the Board. With
respect to other recess appointees, if the rider terminating salary upon Senate
rejection of the nomination is triggered, the recess appointee is confronted
with the prospect of completing his or her constitutionally prescribed term
without pay

Such service could run afoul of the statutory prohibition on

voluntary government service in 31 U.S.C. 1342. On the other hand, it could
be argued that pay restrictions imposed on recess appointees that effectively
prevent them from serving interfere with a constitutional prerogative of
the President and are therefore subject to challenge. We are not aware of

the pay cut-off having been triggered and, while the question of the validity
of such pay restrictions was noted in Staebler v. Carter, 464 F. Supp. 585
(D.D.C. 1979), it was not addressed.

dictulEliilia
Richard Ehl ke

Specialist in American Public Law
American Law Division

July 11, 1984
As amended , July 12, 1984

104

INTRA -SESSION_Recess appointees by President Carter:
Recess : moetonAugust 3, 1979 (4:40 pon.) - September 5, 1979 (11:00 a.m.) (31 days ):

58/10/79

Neil Goldschmidt, Secretary of Transportation

96th CONGRESS, SECOND SESSION
Recess :

October 2, 1980 (2:29 a.m.)

O

November 12, 1980 (11:00 a.m.) (39 days) :
1

10/3/80 : Donald F. Mcgenry, Representative to Taited Nations General Assembly 4/
William J. vandes Beuvel, Representative to United Nations General
Assembly 47
Hannah D. Atkins, Representative toUnited Nations General Assembly 4/
Nachan Landrow, Alternate Representative to United Nations General
: Assembly 4 7

Barbara Newsom, Alternate Representative to United Nations General
Assembly 4/

Richard W. Petree, Alternate Representative to United Nations General
Assembly 47
1. CarlMcCall, Alternate Representative to United Nations General
Assembly 47
10/5/80

John C. Sawhill, Director, Synthetic Puels Corporation
Lane Kirkland, Director, Syothetic Fuels Corporation
Frank Savage, Director, Synthetic Fuels Corporation

Catherine B. Cleary, Director, Synthetic Fuels Corporation

John D. DeButts, Director,Synthetic Puels Corporation
10/17/80

Laird F. Barris,Assistant Director, Community Services
Administracion

Harold L. Thomas, Assistant Director, Community Services
Administration

10/23/80

Alex P. Mercure,Under Secretary of Agriculture for Small Community
and Rural Development
John Truesdale, Member, National Labor Relations Board

105

INTRA -SESSION_Recess appointees by President Nixon :
91st CONGRESS , SECOND SESSION

Recess: October 14,
* 1970 (4:07pm) November 16, 1970 (12 Roon)( 31 days):
O

Andrew Edward Glbson, Assistant Secretary of Commerce for

10/21/70

Maritime Affairs .

C. LanghorneWashburn, Assistant Secretary of Commerce for
Tourism .

10/24770

i
u
l

Hubert Pair, Judgeof the District of Columbia Court of Appeals.
Walter Yeagley, Judge of the District of Columbia Court
of Appeals .

Gerard Reilly, Judge of the District of Columbia Court of
Appeals .
11/7/70

Robert C. Mardian, Assistant Attorney General la charge of the
Internal Security Division of the Department of Justice.

less than
92ad CONGRESS, SECOND SESSION
Recess : ? June 30, 1972 (9:29pm)

7/13/72

July 17, 1972 (12 noon) (16 days):

Thomas B. Curtis, Member of the Board of Directors of the
Corporation for Public Broadcasting.

seger's

23 days

106

INTRA -SESSION Recess_appointees by President Reagan :
97th Congress, First Session
Recess :August 3, 1981 (3:16pm) - September 9, 1981 (12 noon ) 35 days
8/7/81
8/13/81

Tersy Chambers, Alternate Federal Co -Chairman of eight Regional
Commissions (8/7/81)
John Van de Water, Member of the National Labor Relations
Board (6/18781)
Robert P. Hunter, Member of the National Labor Relations
Board (6/18/81)

8/19/81

Richard W. Murphy, Ambassador to Saudi Arabia (7/28/81)

97th Congress, Second Session
Recess :'August 20, 1982 (2:28 pm)- September 8, 1982 (12 noon)
9/7/82

RonWhich
@
1 8 days

Richard V. Backley, Member of the Federal Mine Safety and Health
Review Commission (9/7/82)

Recess: October 2, 1982 (2:12am) - November 29, 1982 (12 noon )

56 days

L. Clair Nelson, Member of the Federal Mine Safety and Health
Review Commission (9/15/82)
10/14/82 Martin S. Peldstein, Member of the Council of Economic Advisors
10/6/82

( 8/6/82 )

11/5/82

Donald B. Hodel, Secretaryof Energy (11/5/82)

98th Congress, First Session
Recess: 'January 3, 1983 (1:19pm) - January 25, 1983 (12 noon )
1/21/83

20
E days

Milton M. Masson, Member of the Board of Directors of the Legal
Services Corporation (1/21/83)
Robert E. McCarthy, Member of the Board of Directors of the
Legal Services Corporation (1/21/83 )

Donald Eugene Santarelli, Member of the Board of Directors of
the Legal Services Corporation (1/21/83)
E. Donald Shapiro, Member of the Board of Directors of the
Legal Services Corporation (1/21/83 )
Recess: August 4, 1983 (7:03pm) - September 12, 1983 (12 noon) 29 days
8/16/83

9/6/83

Linda Chavez Gersten, Staff Director of the Civil Rights
Commission (5/25/83)
J. William Middendorf, II, Member of the Board of Directors
of the Inter American Foundation (9/6/83)

Langhorne A. Motley, Member of the Board of Directors of the
Inter American Foundation (9/6/83)
9/12/83

William Lee Hanley, Member of the Board ofDirectors of the
Corporation for Public Broadcasting (9/12/83)
N.B.: The recess appointment was signed at 11:30 am
on September 12, 1983.

107

98th Congress, Second Session
Recess : June 29, 1984 (7:09pm)
7/2/84

de
ays
DuetoreconveneJuly23,1984(122001) d

Martha R. Seger, Member of the Board of Governors of the Federal
Reserve System (5/31/84 )
Robert N. Broadbent,Assistant Secretary of the Interior (Water
and Science ) 75/18/84)
William Barclay Allen, Member of the National Council on the
Humanities (4/13/84 )

Mas Josephine Coorad Cresimore, Member of the National Council on
the Humanities (4/13/84 )

Leon Richard Rass, Member of the National Council on the Humanities
(4/13/84 )

James Vincent Schall, Member of the National Council on the
Humanities (4/13/84)
Kathleen S. Kilpatrick , Member of the National Council on the
Humanities (4/13/84)
Helen Marie Taylor, Member of the National Council on the
Humanities (4/13/84)
Robert Laxalt, Member of the National Council on the Humanities
(5/17/84 )

Dodie Truman Livlagston, Chief of theChildren's Bureau, Department
of Health and Human Services (5/29/84)

* ErichBloch,Director oftheNational Science Foundation(6/6/84)
Melvin A. Ensley, Member of the Federal Farm Credit Boardof the
Farm Credit Administration (6/28/84 )
Marianne Mele Ball, Commissioner of the Copyright Royalty
Tribunal (5/8/84)

A
N
U
C

108

Credit Union National Association,Inc.
5710MINERALPOINTRD. BOX 431•MADISON,WI53701 608-231-4000
HAROLD T. WELSH
Chairman
544 Beckman Drive

Kankakee,IL60901
Business:815 /937-7449

Residence:815/933-1943

March 26, 1985

Chairman Jake Garn
U.S. Senate

Washington, DC 20510
Dear Senator Garn :

The Senate will soon be asked to confirm the nomination of Dr.
Martha R, Seger for a'14-year term on the Federal Reserve Board. On
behalf of the Credit Union National Association (CUNA), I strongly
endorse this nomination.
We in the credit union movement feel that Dr. Seger's academic
credentials and regulatory background comprise an extraordinarily
diverse blend of experience. As professor of finance at the Central
Michigan University and the University of Michigan, as Banking
Commissioner for Michigan's state-chartered financial institutions,
as financial economistat the Federal Reserve, and as a member of
the Federal Reserve Board, Dr. Seger has demonstrated an impressive
combination of analytical and practical expertise. During her
tenure as a state regulator, credit unions enjoyed a cordial and

productive working relationship with her. In addition, she recently
delivered an informative address at the largest credit union
gathering ever held.

CUNA represents 18,500 federally and state-chartered credit
unions, serving more than 50 million members. These credit unions,
specializing in the consumer credit needs of working America,
applaud the standards of excellence and public service demonstrated
by Dr. Seger in her professional career.
On behalf of the credit union movement, I ask for your

.expeditious approval of the Federal Reserve Board nomination of Dr.
Martha Seger.

Sincerely,

Pack Webek
Harold T. Welsh
Chairman

110

army

House of Representatives
Washington,D.C.20515
William S.Broomfield
IgthDistrict,Michigan

FarrierAffairs

February 20, 1985

Rankingfilember

Honorable Jake Garn
Chairman

Committee on Banking, Housing,
and urban Affairs
Room SD-534 Senate office Building
Washington, D. C. 20510
Dear Mr. Chairman :

It is my understanding that the nomination of my constituent and

goodfriend, Dr. MarthaSeger, has again been submitted to your
Committee for confirmation to a seat on the Federal Reserve Board.
In view of Dr. Seger's appearance before your Committee for four

days of hearings last year and her service as an active member of
the Board in recent months, Iwas wondering whether a date could be
set for whatever further hearings are required this year.
Needless to say, Dr. Seger is most anxious to have this additional
step behind her as expeditiously as possible so that she can con
tinue to devote her full energies to her work at the Federal Reserve.
I have followed the progress of your space flight training with

admiration and hope youhave asafe and productive journey aboard
the shuttle.
Sincerely ,

Aiomfuel

William S. Broomfield

Member of Congress

cca fileILS

111

MichiganRetailersAssociation
LarryL.Meyer
President
Chief ExecutiveOfficer

January 11, 1985
The Honorable Jake Garn

United States Senate
Chairman - Committee on Banking,

Housing and Urban Affairs
SB-534 Dirksen Building
Washington, D.C. 20510

Dear Senator :

On behalf of the board of directors of the Michigan Retailers Association,

We would like to urge your support of the nomination of Dr. Martha Seger
to be a member of the Board of Governors of the Federal Reserve System.
We have worked extensively with Dr. Seger and have found her to be except
ionally well qualified academically to deal with the complex problems and
issues associated with a position as Governor of the Federal Reserve
System. In addition, she possesses a great deal of practical knowledge

because of her experience in the private sector.
We have followed the extensive confirmation hearings which were held by

your committee last June, and feel that she has demonstrated in her hours
of testimony that she is capable of handling the appointment. We would
like to urge your committee to expeditiously reporther nomination to the
floor of the Senate for confirmation.
Thank you for consideration of this request.
Sincerely,

KaryhMuja
Meyer

LLM/mb

cc: The Honorable Donald Riegle
The Honorable Carl Levin

221North PineSt.Lansing,Michigan 48933 517/372-5656

112

UNION CARBIDE GIBRORATION OLDRIDGEBURYROAD,DPHONE:(
ANBURY
,CT06817
203)794-4645
JAMES F. SMITH
CHIEF ECONOMIST

CorporateStrategicPlanning

March 29, 1985

The Honorable Jake Garn
Chairman

Committee on Banking
United States Senate

Washington , DC 20510
Dear Senator Garn :

I read with surprise in yesterday's Wall Street Journal that Senator

Proxmire thought that one of the biggest problemswith confirming Martha Seger
as a member of the Board of Governors of the Federal Reserve System is her

belief that the U.S. economy can grow ata 4 per cent or better pace in real
terms for the next decade with productivity growth of 3 per cent over the

period. Many of us in the private sector, as well as such leading analysts of
productivity as Professor John Kendrick, believe that these targets are easily
attainable if the Federal Reserve provides money growth at a reasonably stable

and steadily declining pace and if you and your colleagues adopt something

like the current resolution from the Senate Budget Committee and continue to

restrain the growth of Federal spending.

Her forecast is no higher than mine and there are many others in this
sane range, which is not so high as the U.S. economy actually achieved in the
1950's and the 1960's .

Yours very truly,

/nd

113

Societyof Consumer AffairsProfessionalsinBusiness
SOCAP

1985 APR - ! PM 2:29

GreatLakesChapter

Otticers - 1985

March 28, 1985
President
Genell T Scheurell
Owner Relations Operations
Ford Partsand Service Division
Ford Motor Company
3000Schaefer Rd .Room 107
Dearbom MI 48121
(313)322-4337
Vice President

Catharine M Coraci
Community Employee RelationsManager
Young and Rubicam
200 Renaissance Center Suite 1000

Senator Donald Riegle
SD 105

Dirksen Senate Office Building
Washington , D.C.

20510

Senator Riegle:

Detroit MI 48243

(313)446-8770
Secretary
Kathryn A Reid
Consumer Representative
Pepsi-Cola Company
755 West Big Beaver
Troy MI 48084
(313)362-9110
Treasurer

Thomas Vicry
Manager Consumer Altairs
La-ZBoy ChairCompar.y
1284 North Telegraph Road
Monroe MI 4A161
(313)242 1444

As President of the Great Lakes Chapter of the Society of
Consumer Affairs Professionals in Business, I am writing to
solicit your support for the appointment of Dr. Martha Seger
to the Federal Reserve Board .

Dr. Seger's past experience and reputation leads me to
believe that she is a most qualified candidate. I,
therefore, ask you to take action to ensure the confirmation
of a fellow Michiganian to this important position.
Sincerely ,

Im me dia te Past President

AlbertO Horner
President& General Manager
Credit Counseling Centers inic
17000 W Eight Mile Rd Suite280
Southfield MI 48075
(313)569-3715

Genell T. Scheurell
Presidert

Great Lakes Chapter SOCAP
cc :

Senator Jake Garn
504

Dirksen Senate Office Building
Washington , D.C.

20510

114

SER

NAFC

National Association of

P.O. Box 3769

Federal Credit Unions

Washington,DC 20007

703/522-4770

April 3, 1985

The Honorable Jake Garn

Chairman
Committee on Banking, Housing
and Urban Affairs

534 Dirksen Senate Office Building
United States Senate

Washington, D.C. 20510
Dear Chairman Garn:

The National Association of Federal Credit Unions strongly endorses the
nomination of Dr. Martha Romayne Seger to the Board of Governors of the Federal
Reserve System .

Dr. Seger's academic accomplishments and professional capabilities are
highly regarded by numerous businesses and organizations, including credit
unions. She has distinguished herself in several positions, including Professor
of Finance at the Central Michigan University and chief regulator for state
chartered financial institutions in Michigan.

Dr. Seger is currently a member of the Federal Reserve Board by virtue of a
recess appointment made by President Reagan in July. However, we feel that
Dr. Seger's broad-based background and expertise fully qualify her for a 14-year
term to which President Reagan has nominated her.
On behalf of Federal credit unions and their 26 million members, NAFCU
urges the Committee on Banking, Housing and Urban Affairs to approve
expeditiously the nomination ofDr. Seger to the Federal ReserveBoard.
Sincerely,

&Hulihin

John T. Hutchinson
President
JJH :ew

115

A pril

4 , 1985

The Honorable Jake Garn
Chairman
Senate Banking Committee
SD 534
Washington , D.C. 20510

Dear Chairman Garn :

We , the undersigned , support the nomination of Martha

R. Seger to be member of the Board of Governors of the
Federal Reserve System . Her education and experience
provide an appropriate background for this assignment ,
especially her work as commissioner of Financial
Institutions for the State of Michigan .

Dr. Seger holds bachelor's and master's degrees from
the University of Michigan , as well as the doctorate in
finance and business economics from that institution . She
studied under Dr. Paul McCracken , a former Chairman of the

Council of Economic Advisors , who strongly recommends her
for the Federal Reserve appointment . She was elected to
Phi Beta Kappa and Beta Gamma Sigma .
Ms. Seger has both academic and business , as well as
government experience , serving as a Vice President of the
Bank of the Commonwealth in Detroit and on the faculties of
the University of Windsor , Oakland University in Rochester ,
Michigan , and at Central Michigan University .

In the recent Senate Banking Committee hearings to
consider her nomination she presented a balanced point of
view with respect to a variety of problems currently

concerning the American economy , including those related to
agriculture , third world debts , financial institutions , the
federal system of deposit insurance , international trade ,
import restrictions , plus others .

i