(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
on the proposed "Federal Reserve Reform Act of 1989,"
H.R. 3512, we are enclosing draft amendments relating to
section 5 of H.R. 3512. Section 5 would expand the General
Accounting Office's authority to audit the Federal Reserve
System by deleting provisions in the Federal Banking Agency
Audit Act, codified at 31 U.S.C. § 714, which preclude GAO
from auditing monetary policy and credit operations of the
System.

The enclosed amendments to the Federal Banking Agency Audit
Act would replace those proposed in section 5 of H.R. 3512
and would accomplish the changes we recommended in our
testimony of November 9. Specifically, the amendments would
enable GAO to audit the Federal Reserve System's inter-
national transactions as well as its monetary policy and
credit operations. The amendments also would place
restrictions on GAO's access to and disclosure of documents
and certain items of information associated with trans-
actions made subject to GAO audit. Finally, the amendments
include several technical and conforming changes to
31 U.S.C. S$ 714 and 718.

We hope that the enclosed amendments are useful to the
Subcommittee. Should you have any questions concerning

these amendments, please contact Ms. Lynn Gibson, Assistant
General Counsel, on 275-5422.

AMENDMENTS EXTENDING GAO'S AUDIT AUTHORITY
UNDER 31 U.S.C. § 714 TO MONETARY POLICY
OPERATIONS AND INTERNATIONAL TRANSACTIONS

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

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