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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 N O S A R E O R F G N I V A E L E K R P Y O F T W O t n e m y o l p m E l a c i t i l o P S S E R D D A r o n r e v o G n o t g n i h . s C a . W D , . f o f r P o t n n l a a g s r i a t h v e n c . i I l t e i n P , C U . M R E Y O L P M E M O R F r e t s e c . h o f c s o I o s r P . , M R A e c n a n i F e d n r c a a n . m h a t s m c n p s r i u h e R S C F , . D l a c i t i l o P r r e t e t f f e B o h n y e c a a c r g e d n a i v i e h k a l s c n b f o e a i n L a o r t B H M i " , z l t o i w o n n r h o t a o f c e g R H D S , o E M & . s s l e a o n k o t i n n h s a r l c e u o L P D B , S y t i d s n r a e l v k i a n O U l e a v r d e r d s a e o F R B O T t n e m t n i o p p A s u o e g n a i l t e l r e u t c s c d s n o e n i l a , d m c . te r nn m a e o es a k n g mr i r n te v t h l e i n na w l c v e ir y o t f i n oh S o b t G W n ( l i M pT p n A a g i y h t c i C M , ) s r e n n o o l i i a t i s u c s t n i m a t m n s r o f i n s C a o F I f g n i s n I a M , L n a g e i t h a c f t i S o M e d n r t r l v en o e cy o d a n k a g t i b l e g i r a t na r a n m c c o n g h l c i l i a t e n 0 n t e i o e l t r n u v a k 8 a 1 i k e v s r h i p g b f n p o u h a n 9 8 e o a s r n p c o e f p h M G b t N , O i S 1 c w a 9 i z f b o e a w n i l 1 s , r j e a m t d J f t . M I y l o a t s i L C , o i e o r w n e t a n h d o g r e f g a i o c h t y R H D S , o E M & h I . s a y g t n n i h s a t c r g c l i t e u a n v h j s e t d c n b i o s f n i o r e a c j . U o M p w J r t g n n e c i s d h i g e t n c m n r l e o i u p a n k t s e d o n c s c n a e o a l o , e b c I r r e t s e c . h o f c o s I o r s M P . AR, r s o g d s s l s n e r o dn r e s i n o s n d o y i s e h t i s w a n h o t s r f c v t s e c o e c l s u u e o a e n c n r ) B S D Fi ( f o n a e h r d u f i o l . t c p a o w I y n j o s t o f s r u d n i C P . o A B e d d e g i n n c g h m i n s t d r i i e n o . h t w r I e c a s g r r i e o h v n b c i n r I f i n A M , o U y t i s d r n e a l v k i a n O U k o o l t u o . t n e s e r P y l 4 u 8 ' J e n 4 u 8 ' J y l 3 u 8 ' J . c 2 e 8 ' D . g 3 8 'u A . n 3 a 8 ' J n 1 a 8 ' , J y l 0 u 8 ' J . g 0 u 8 A ' y l 9 u 7 ' J e n 9 u 7 ' J . n 8 a 7 ' J . c 7 e 7 D ' . t 6 c 7 O ' h t l a n at e n a c w t a e t g d n i m d r i i e r o u i r e y o h g e k m r c o h s e i t d n r . k . c r n e m t t c a t y e w a o e F d n 8 a h i f o e n f s r e n r o i h p t a e . . 0 B o t D , M( s ( m C i r B D A . ) F S P , n Vn C o t m u s o a S 1 A . r t o h 0 2 U T . 3 C S B M , 0 P : 60 l as t 8 n t o 3 e s n t i 1 r d c e n s 7 o i i m g e e – s i e t n e d m c 6 e d vi n 7 g s i u o 2 r 1 i e n t r k s n e 6 ( 7 V . ) S , P Ds a i a d r e o v n h f u o r n c a c i o . Q t P E a I b p t n s a i h m c f r d i o e t k i r d n i a n e o n a f a o u h c a t c t M C , o t B q g E g i i t i o o r k s h r e r n d u n c t m t w n r a i e o e B a T n ( D ) M , D C y t i n s e a r g c s e i n c s . k t v h a i s e D n i r d s c m u m .s e e n u a o f o e i h n s W b t U o M w p Pi i F k t e p n i o m b s d o r a i t o u n c o l a A . w , p t c j : B E v n o l t a e i g l v c n a r n i f d e h a r . s t n d a i C e i o a . h F R B W , D P K C n e o dt l n v g a e e t d r n a h i e y kd e i c t c i g o r e s d i d a n s r i n e as f e r h n e o t s t e w 3 a c Br o F R T C a s t i e u h o 5 w i n o r i e t h g s a l c n s s a r i e r o a n n f o p g e i i f t t n r w n e s a n o h 3 s i o u e t a c G M 2 C s c t . nr , B R S t t g r o 1 i s l i s i a 3 s t m a o i h t e c y e o f r r c s i k 6 e l 3 k n f t i e s u a 1 5 o a d o n r D M 3 ( , 5 ) R A Q . t f e i n c t a o G D o A a E , M F S e t 0 h n a 4 c d i 4 r n g e c 5 a i v o e r l h i l 5 s o 6 c r o 3 e s h i 1 S . s D H M , 6 ( 3 ) R A D B R . S V , i C n ( r 7 ) P t s l s g n i a t n o m t e i o i k t o n p r i t n c o o n a e u c C , M S q t g i . E b g n i g h t n c e l i r g u h e a n s c e a n r s d f h o n e i a m c o t a , r . t e n c t a s h n t ' a e s n d r i e l n o s m l c w a b e s n o a R A i W H , B n ( D n o i t a g d t d n e r e i t e r n k r t s e l i b e r f k m a s t l h e o a i t n u r L . ) t j w s o d f d e v r c l e n h e o t a b s t d e r v a n a o n e h i b j a o t m i w f . r o 3 g s e 2 n w s c 3 i o e a n 2 h l m c a f s l o a n e 4 r 3 e r h i 6 n o 1 i F f P T G 3 ( 7 ) , . e t a l u o . t d o D i a h r . u r h c o f Q g P t G S h t l a e w n o m m o . C t n e m y d o ' l t p n m o ) c ( E y r a m m u S : . t p 6 e 7 ' S y 4l u 7 'J y l 4 u 7 ' J . b 6 e 7 F ' . b 7 e 6 F ' . t p 4 e 6 ' S . t 4p e 6 ' S . t p 9 e 5 'S . b 7 e 5 F ' . t 9p e 5 'S . b 7 e 5 F ' b 5 e 5 F ' , 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