(FOMC) are selected by the Board of Governors of the Fed and five are selected by the Directors at each local Federal Reserve Board. Instead, all appointments to the FOMC should be selected by the president and subject to the advise and consent of the Senate. The members of the FOMC should, at the very least, be made officers of the United States. F. H.J. Res 409, sponsored by Representative Stephen Neal, directing the Federal Open Market Committee to adopt and pursue monetary policies leading to, and then maintaining, zero inflation. Public Citizen opposes H.J. Res. 409. This resolution, would result in Draconian monetary policy. Eliminating inflation over the next five years would necessarily bring increased unemployment. It is far better to have a percentage increase in inflation than it is to have a percentage increase in unemployment. However, while we disagree with the substance of this resolution we applaud and encourage Congressional involvement in the direction of the FOMC. IV. Conclusion During his testimony before this subcommittee, Chairman Greenspan used the word "accountable" many times in referring to the Federal Reserve. He certainly can say it as often as he wants, but that will not make it come true. The present structure of the Fed does not include an ounce of public accountability. Instead, it looks like the fourth branch of government with few checks and balance requirements. The Fed needs to be more open with its policy decisions and procedures, and the public needs to be better informed about the financial industry. Public Citizen is very supportive of proposals to make the Fed more open and accountable. But proposed bills are only half of the solution. Financial Consumers Associations, as a means to better inform and represent consumers, are essential to any effort to making the financial industry more accountable. The solution for the imperfections of democracy is not less democracy but more. Our democratic system should not allow for only partial democracy. As requested during the Subcommittee's hearing of November 9 The enclosed amendments to the Federal Banking Agency Audit We hope that the enclosed amendments are useful to the these amendments, please contact Ms. Lynn Gibson, Assistant AMENDMENTS EXTENDING GAO'S AUDIT AUTHORITY OF THE FEDERAL RESERVE SYSTEM The attached amendments would make several substantive and technical changes to the Federal Banking Agency Audit Act, 31 U.S.C. SS 714 and 718. The principal substantive amendments, discussed in more detail below, would give GAO authority to audit monetary policy and credit operations of, and international transactions conducted by the Federal Reserve System. The amendments would protect the independence of the Federal Reserve's decisionmaking in these areas by providing that GAO may not have access to confidential information relating to sensitive transactions until 100 days after the transaction. Also, GAO would be prohibited from disclosing certain documents and items of information obtained during the course of Federal Reserve System audits. Substantive Amendments to 31 U.S.C. § 714 The principal amendment to section 714 would enable GAO to audit monetary policy operations and international transactions of the Federal Reserve System by deleting provisions in subsection 714(b) which currently prohibit GAO from conducting audits of these operations and transactions. Specifically, the amendment deletes the provisions in subsection 714(b) which bar GAO from auditing monetary policy decisions of the Federal Reserve Board and Federal Reserve Banks, transactions made under the direction of the Federal Open Market Committee, and transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization. Amendments to subsections 714(b) and (c) impose restrictions on GAO's access to and disclosure of confidential information relating to the Federal Reserve's monetary policy operations and international transactions. Specifically, a new provision is added to subsection 714(b) which bars GAO from obtaining access to confidential information relating to the Federal Reserve's monetary policy operations and international transactions for 100 days after the date of a particular transaction, decision, or action. An amendment to subsection 714(c) bars GAO from disclosing to any person any document maintained as confidential by the Federal Reserve System which relates to its monetary policy operations and international transactions, and the names of foreign entities involved in international transactions. These restrictions on disclosure may be waived by the agency which provided the documentation or information to GAO. A conforming change to subsection 714(d) requires GAO at all times to maintain monetary policy and international 2 B-203576.2 |