Full text of Statements and Speeches of Wayne D. Angell : Statement before the Committee on Banking, Finance and Urban Affairs, U.S. House of Representatives

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FOR RELEASE ON DELIVERY
10:00 A.M. EDT
OCTOBER 19, 1993

Statement by

Wayne D. Angell
Member, Board of Governors of the Federal Reserve System

before the
Committee on Banking, Finance and Urban Affairs
U.S. House of Representatives

October 19, 1993

Mr. Chairman and members of the Committee, I appreciate this
opportunity to give you my views on the accountability of monetary
policy.

As I have indicated previously in correspondence with you, my

perspective is of one who throughout his career as an elected and
appointed official has been in favor of opening government proceedings
to the public and the press.

Our democracy demands that the actions

of its government be conducted "in the sunshine" to the greatest
extent possible to ensure that the process of public policy
formulation is appropriate and equitable; it also demands that
government agencies adopt the very best policies.
there is a trade-off between these two objectives.

In some cases,
As my statement

will explain, I believe the current legislative requirements for
monetary policy accountability and the Federal Reserve's current
policies regarding the provision of monetary policy information strike
a reasonable balance between these objectives.
Monetary policy is best formulated within a framework that
provides an appropriate degree of insulation from day-to-day political
pressures while requiring full accountability.

The Congress gave the

Federal Reserve some insulation, for example, by establishing long
terms for members of the Board of Governors and by exempting the
budget of the Federal Reserve System from Congressional appropriations
of funds.
But at the same time, the Congress has provided for full
accountability of monetary policy.

As you know, the Board of

Governors is required to report to the Congress on its monetary policy
plans and objectives twice each year.

In hearings before this

Committee and the corresponding body in the Senate, the Chairman of
the Board presents testimony on the monetary policy report and
responds fully to your questions on monetary policy.

Federal Reserve

- 2 -

policymakers also testify as requested before this and other
Congressional Committees about monetary policy and other matters of
interest, including a detailed accounting of our expenditures.
Beyond the statutory requirements, the Federal Reserve
provides significant additional information to the public about the
conduct of monetary policy.

In particular, the Federal Open Market

Committee publishes minutes of each of its meetings.

These minutes

summarize fully the discussion and indicate the attendance at the
meetings.

They show the results of all recorded votes, including

statements that explain dissenting votes.

Significant decisions taken

by the FOMC should always be made on the basis of recorded votes--in
accord with an important principle of accountability.

Each member of

the Committee is afforded an opportunity to participate in the
preparation of the minutes so that no individual or shared views are
omitted.

In my view, the minutes present an accurate account of each

FOMC meeting.
With regard to the timeliness of the release of such minutes,
as you know they are published shortly after the following Committee
meeting.

It seems to me that such a lag is appropriate.

The

immediate release of information on the Committee's plans for
contingencies could increase market volatility, particularly in
circumstances when the contingencies do not eventuate.

Such

volatility is unnecessary, and could be especially counterproductive
if concerns about possible volatility deterred some members of the
Federal Open Market Committee from discussing such contingencies or
drove them to relying on implicit or behind-the-scenes understandings.
On balance, the market and the public are better served by more detail
and more openness with delayed publication as compared with the

-3-

realistic
earlier

alternative

of less

s p e c i f i c i t y that w o u l d

likely accompany

publication.
Similarly,

I b e l i e v e that p r o v i s i o n s in t h e F e d e r a l R e s e r v e

S y s t e m A c c o u n t a b i l i t y Act

(H.R. 28) that would

videotapes

of C o m m i t t e e m e e t i n g s w o u l d h a v e d e l e t e r i o u s

or t r a n s c r i p t s

consequences.

In any

r e q u i r e r e l e a s e of

s e t t i n g , t h e r e c o g n i t i o n that

one's

remarks will

be r e p o r t e d v e r b a t i m w i l l d a m p e n p a r t i c i p a t i o n of m o s t m e m b e r s in the
discussion.
would

In the

context

of m o n e t a r y p o l i c y ,

such p r o v i s i o n s

likely

cause m a n y p o l i c y m a k e r s to be m u c h less w i l l i n g to c o n j e c t u r e

about f u t u r e e c o n o m i c

and f i n a n c i a l d e v e l o p m e n t s , to e x p l o r e

alternative policies,

or to c h a l l e n g e o t h e r s ' v i e w s .

Under those

c o n d i t i o n s , d i s c u s s i o n s d u r i n g F O M C m e e t i n g s are l e s s l i k e l y to lead
to a p p r o p r i a t e
m e m b e r s to

policy decisions.

The w i l l i n g n e s s

explore verbally what may

seem to be low p r o b a b i l i t y

m a y be the b e g i n n i n g of a n e w p e r s p e c t i v e that
w a t c h i n g and

continued

debate.

For t h e s e
H.R.

events

elicits more careful

The p r o c e s s of d e v e l o p i n g a c o n s e n s u s

v i e w t h r o u g h an open c o n t r a r i a n f o r u m is e s s e n t i a l
is to lead toward m o n e t a r y

of i n d i v i d u a l

if m o n e t a r y p o l i c y

stability.

reasons,

I b e l i e v e that t h e

relevant

provisions

of

28 w o u l d do l i t t l e to m a k e the m o n e t a r y p o l i c y p r o c e s s m o r e

transparent

and, u n f o r t u n a t e l y , w o u l d

monetary policy

less e f f e c t i v e .

do m u c h to m a k e the c o n d u c t

In m y v i e w ,

r e g a r d i n g d i s c l o s u r e are on the right
r e v i e w of a l t e r n a t i v e p o l i c i e s w h i l e

our c u r r e n t

t r a c k : T h e y permit

of

procedures
a careful

a l l o w i n g the C o n g r e s s

and the

public to a n a l y z e both the p r o c e s s by w h i c h our d e c i s i o n s are

reached

and t h e i r r e s u l t s .
In a d d i t i o n to s o l i c i t i n g m y c o m m e n t s on t h e a c c o u n t a b i l i t y
of m o n e t a r y p o l i c y , y o u also
FOMC m e e t i n g s and

asked about n o t e s or r e c o r d s r e g a r d i n g

about p r e m a t u r e r e l e a s e of i n f o r m a t i o n p e r t a i n i n g to

- 4 -

the d i s c u s s i o n at

such m e e t i n g s .

It has b e e n m y p r a c t i c e to t a k e

s k e t c h y n o t e s d u r i n g t h e c o u r s e of F O M C m e e t i n g s ; the n o t e s are kept,
solely for m y own use,
Federal Reserve.

in a locked file

Others may

cabinet

in m y o f f i c e at the

also t a k e n o t e s , but

I h a v e no

information

r e g a r d i n g the l o c a t i o n and d i s p o s i t i o n ,

others will

answer your question themselves.

a w a r e of t h e e x i s t e n c e of rough t r a n s c r i p t s
writing

a dissenting statement.

a v a i l a b l e to m e a t r a n s c r i p t
from the p r e v i o u s m e e t i n g .

The

I became

of t h e m e e t i n g s w h e n

and

only m y

statements,

regard to p r e m a t u r e d i s c l o s u r e of
I have b e e n t r o u b l e d

a p p e a r a n c e in the p r e s s of i n f o r m a t i o n that

serves to

give

c r e d e n c e to c o n j e c t u r e and t h e r e b y d a m a g e s F e d e r a l R e s e r v e
credibility.

I have no k n o w l e d g e as to the

source of such

information.
T h a n k y o u a g a i n for the o p p o r t u n i t y to t e s t i f y on t h i s
important subject.

I was

s e c r e t a r y of the F O M C m a d e

c o n f i d e n t i a l F O M C i n f o r m a t i o n , over the y e a r s
the

I a s s u m e the

Some y e a r s ago

of m y s t a t e m e n t s ,
With

and

by