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For Use at 10:00 a.m. EDT Tuesday, October 19, 1993 Testimony by Robert T. Parry President and Chief Executive Officer Federal Reserve Bank of San Francisco before the Committee on Banking, Finance and Urban Affairs U.S. House of Representatives October 19, 1993 As President of the Federal Reserve Bank of San Francisco, one of my jobs is to contribute to Federal Reserve policy deliberations with information and ideas from my District. Twelfth Federal Reserve District is highly diverse: The it is made up of the nine western states, which at present include three of the more robust state economies in the country (Utah, Idaho and Nevada), and one of the weakest— California. In fact, California has seen employment fall by 592 thousand jobs (4.7 percent) since mid-1990. With that introduction, I would like to express my appreciation for this opportunity to discuss my views on the disclosure of information about Federal Open Market Committee (FOMC) meetings. I believe that there should be a presumption that Federal Reserve deliberations should be fully disclosed, unless there is a compelling reason not to do so. (I expressed this view in my letter to you dated January 13, 1993.) However, in the case of FOMC deliberations, such a compelling reason exists. Given the importance of the decisions being made, it is essential to ensure the effectiveness of the decision-making process. In order to reach the best possible policy decisions, it is important that there be a free flow of information and ideas at each meeting. Some of the information discussed at FOMC meetings is inherently confidential — for example, because it pertains to individual firms and was obtained under a promise of confidentiality, or in some instances, because it pertains to 1 confidential matters in other countries. Video tapes or verbatim records of our meetings would severely limit the information that would be brought into the decision-making process. It also is important that members of the FOMC feel free to advance their ideas in the context of a freely flowing discussion. By the very nature of any productive discussion, some ideas are discarded or modified in the process of reaching a consensus. Yet such comments could be seriously misinterpreted if taken out of the full context, which may include discussions at previous meetings or collective institutional memories. I am concerned that verbatim records or video tapes would inhibit the free flow of comments at our meetings, and in the process, limit the effectiveness of our policy discussions. I have considered the merits of returning to detailed non verbatim minutes with attribution revealed after a long delay, as was done until the mid-1970s. If it were possible to ensure that such minutes would not be made public for an extended period of time— say, five years— after a meeting were held, many of my objections would be assuaged. Such records might have value to researchers studying U.S. monetary policy. However, I am skeptical that such a delay in the release of information could be guaranteed. Even the possibility of an early release of a transcript could hamper the deliberative process at FOMC meetings. I might also add that the preparation of such detailed minutes would be very burdensome, and I am not convinced that the social benefits would justify the costs. 2 Also, I believe that the Minutes of FOMC meetings that currently are made available provide an accurate and thorough distillation of all the comments made by me and my FOMC colleagues, while avoiding the problems associated with direct attribution or a verbatim record. The current document accurately reflects the issues and discussions leading to policy decisions by clearly describing the views of the majority, as well as contrary points raised in the discussion. Moreover, members who dissent from the final decision of the Committee explain their reasoning, and are identified by name in the Minutes. The document covers expectations of policy over the period until the subsequent meeting, and normally is released a few days after that subsequent meeting. In your letter requesting me to attend this session, you asked for information concerning notes or records that I have made in connection with FOMC meetings I have attended, and any knowledge I have of notes that others have made. I do not take notes of what is said at FOMC meetings. However, I do take into the meetings notes concerning the comments I plan to make about the national and Twelfth Federal Reserve District economies, about monetary policy, and occasionally about special topics that are on the agenda for a particular meeting. These "talking points" are stored in locked files at the Federal Reserve Bank of San Francisco in accordance with FOMC security procedures. My actual statements often diverge somewhat from my notes, and I also make impromptu 3 comments at each meeting, for which I have no notes. I also take into FOMC meetings a briefing book prepared by the Research Department at the Bank. This book contains analysis and forecasts of developments in the U.S. economy, analysis of developments in the Twelfth Federal Reserve District, occasionally discussions of special topics related to FOMC issues, and analysis of monetary policy issues and recommendations by my staff. The Director of Research at the San Francisco Reserve Bank, and occasionally his alternate, take hand-written notes of comments made at FOMC meetings when they attend as my advisor. These notes are for their own use in directing FOMC policy analysis within the Research Department. They are stored in their locked files at the Federal Reserve Bank of San Francisco in accordance with FOMC security procedures. Finally, with respect to your question about "leaks" of confidential FOMC information, I have never divulged any FOMC information to unauthorized persons prior to the official release date, and I have no information concerning anyone else doing so. 4
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