Chairman NEAL. Does that mean 40 or 50 people full time all year?

Mr. SOCOLAR. That's right.

Mr. SWAIN. That would assume a presence at each of the 12 banks as well as looking at the way the system interacts.

Mr. SOCOLAR. That's right.

Chairman NEAL. That even sounds modest to me just having some sense of the magnitude of these institutions.

Mr. SOCOLAR. Well, if it sounds modest to you, I had better hasten to add that it might be a lot larger. [Laughter.]

Chairman NEAL. Right. I don't now anything about it of course. Mr. SWAIN. Relative to the effort I just might put that in some perspective. In the division that I work for, which is the General Government Division, which has most of the work in the financial area, although by no means all, I believe our entire staff year allocation for work at the Federal Reserve and the other banking agencies, the Bank Board, the Credit Union Administration, the SEC and the CFTC is in order of around 80 or 85 staff years. So that from our perspective is a rather large undertaking.

Chairman NEAL. I don't have any other questions right now, but I have a feeling that questions will emerge as we continue the hearings and so on. So if we may call on you in the future that would be a big help.

You're nodding in the affirmative I think so that the record can show here.

Mr. SOCOLAR. Oh, sure, we'll be happy to work with the committee and to respond to any further questions that you might have. Chairman NEAL. Thank you, sir, very much, and thank you for coming this morning and we will see you again.

Mr. SOCOLAR. Thanks very much.

Mr. SWAIN. Thank you.

Chairman NEAL. Ŏur next witness will be Mr. Clinton Ray Miller, legislative advocate for Liberty Lobby.

Mr. Miller, welcome. We will put your entire statement in the record, and it would be a big help if you could sort of summarize so we would have a little time for questions and answers.

STATEMENT OF CLINTON RAY MILLER, LEGISLATIVE
ADVOCATE, LIBERTY LOBBY

Mr. MILLER. Thank you, Mr. Chairman.

I respectfully request to have our entire statement and the five exhibits entered into the permanent record.

Chairman NEAL. Yes, sir.

Mr. MILLER. Just by way of introduction, this is the first time that we have appeared before your subcommittee on the question of auditing the Fed.

My name is Clinton Ray Miller. Mrs. Bonnie K. Miller and I are legislative advocates for Liberty Lobby, with our specific assignment to lobby for any and all legislation which will lift a part of the veil of secrecy which has enveloped some of the more important aspects of the Federal Reserve System for the past 75 years. We therefore are in complete support of H.R. 3512, H.R. 3066, and of course H.R. 844, which is not a part of this hearing.

I attended your hearings a couple of weeks ago and was completely amazed at the proposal you made in House Resolution 409. I agree with you completely that zero inflation should be a proper goal for the United States.

The thing that I do not quite understand is why we have to make a choice between these three bills and House Resolution 409.

Chairman NEAL. If I may interrupt, we don't. They have been thrown together sort of I think by the press I mean just as a convenience. They are totally unrelated. One deals with overall policy and the others deal with a procedure and they are in no way related. It's just now that we've started talking about them together that we've continued it, and some of the witnesses have chosen to deal with them at the same time, but they are unrelated, and if they were all good ideas, we could try to pass them all. There is no tradeoff between them.

Mr. MILLER. It seemed to me that Chairman Greenspan took the position that he was totally opposed to every aspect of H.R. 3512 and completely in favor of House Resolution 409, and I didn't quite understand why we have to take that position.

In fact, as I see it, the fastest way to attain the objectives of H.J. Res. 409 and focus on the objective of a zero inflation rate is to open up the system.

I was glad to see a member of this committee raise the question earlier to clarify the consultations required in section 2 of H.R. 3512. We raised that issue as one of the major questions in my testimony on page 3. "Should these consultations required in section 2 be open to the media and full public scrutiny or should they be closed and kept secret?"

Well, Mr. Chairman, we believe that if they are going to hold these consultations that they absolutely at the very minimum must be wide open to the full public scrutiny the same way as this committee hearing is. My statement on pages 3 and 4 goes into depth on that.

I won't take your time to read my entire statement. Many of the points I've made have been covered. We do agree very much with Chairman Gonzalez' statement made last month to this subcommittee that Congress should have the authority to audit all aspects of the Fed's operation.

However, we do not believe that any of these three bills would in any major way audit all aspects of the Federal Reserve, as has been explained here today. We believe that these are very mild audit changes. They are very modest, almost a microsteps in the right direction. They will go a long way to stop a great deal of the suspicion that is created because the Fed has a policy of secrecy where there should be no secrecy.

We ask that attention be given to two bills that seem to be gaining a great deal of momentum. They are the Crane-Reid bills, H.R. 844 and S. 734. There has been increasing congressional support in the Senate for S. 734. It just gained its fifth cosponsor, Symms of Idaho. There are now five cosponsors on that bill.

Chairman NEAL. Which bill is that?

Mr. MILLER. That is S. 734, which is an identical bill to Crane's bill, H.R. 844 in the House.

Chairman NEAL. Oh, that's the audit bill.

Mr. MILLER. Yes. Strictly the audit. There are now over 50 cosponsors on H.R. 3512 in the House. It's getting increasing bipartisan support.

I want the record to make it clear that for some reason we seem to be totally opposed to Greenspan's position on H.R. 3512. It's not quite clear to us why he is so uneasy with lifting the secrecy of the Fed.

I want to draw attention to my exhibit no. 2, from the Washington Post, October 3, 1989. The Federal Reserve announced a massive increase in their salaries. This is a wonderful way to get zero inflation.

The thing that was quite disappointing to me was to find that the salary increases only took place at the top level where people were already receiving the highest salaries in Government circles. The article points out that there were no, absolutely no wage increases for certain lower grades. Now I can predict, although I'm not a political scientist, that if the Fed tries to get a zero inflation rate by giving those already receiving the highest salaries increases that are 20 to 30 times as great as those receiving the lowest salaries, this will bring so much resistance in this enlightened age that it could bring down the provisions of House Resolution 409 instantly.

Here you have the Federal Reserve give employees who were already making nearly $100,000, raises of $10,000, $20,000, and $30,000. The salaries of those who were receiving $11,000 were not given even a penny increase. It doesn't take much imagination to see the resentment that will come if this were openly debated.

If this policy at the time these salary levels were put in by the Federal Reserve had been debated before this subcommittee, I'm sure that there would not have been a hearing room in the Rayburn Building large enough to hold the people that would be here to object to it. Yet they get away with this because they have absolutely no control by Congress and no control by the President over the salaries they pay their staff.

They could have at least doubled the salaries of people that were making $11,000 to show how they intend to bring about their marvelous utopia by controlling monetary policy.

Now we urge you and all members of this committee to support this bill H.R. 3512 and to work vigorously for its speedy enactment by this Congress. I was delighted to hear that you're going to hold additional hearings, and I hope that you'll hold field hearings on this issue around the country.

We do thank you for this opportunity to testify and for every courtesy extended by your capable staff to Liberty Lobby at this time.

Thank you.

[The prepared statement of Bonnie K. and Clinton Ray Miller can be found in the appendix.]

Chairman NEAL. Thank you, sir, very much, and I certainly do appreciate your being with us today.

I'm troubled also. As I see it, every aspect of our Government should be accountable. It's at the heart of this idea that we have here, and the secrecy frankly bothers me, and I hope that we can

find some proper balance here where there is, and I guess the simplest way to say is no more secrecy than is necessary.

Here has been my worry in the past with this idea of revealing the Open Market deliberations immediately. I've thought for years and said many times in hearings and so on on this subject that the only people who would be able to put that knowledge to good use would be very sophisticated investors.

Mr. MILLER. Or insiders.

Chairman NEAL. Well, I'm just saying now we make it public, and I'm talking about that point of the bill that would do away with the secrecy and make the Open Market deliberations public say the day that a decision is made instead of waiting this 6 weeks. Well, I had thought that the only people who would really be able to use that information would be the sophisticated investors and so on and that in fact they would get a leg up on the average guy because they would know what this means for interest rates, for example, or oh say prices down the road and so on. So for years I had argued against revealing that data immediately on those grounds, that that would give an undue advantage to speculators.

Now I ran this idea by, and this subject came up not long ago when I was talking to Paul Volker, and I said to him, I asked his opinion. He had a long career there at the Fed and certainly ought to know something about it, and he said, well, I'm not sure whether that argument will hold up or not. And because of that, I must question my own argument.

He said though that the release, the problem with it would be more in terms of the ability of the various participants in the Open Market Committee deliberations to be honest about their decisions. Let me give an example of what I think he's talking about. Let's say you had the President of the Reserve Bank from wherever, Cleveland say or say a heavy farm area, the St. Louis Bank, for example, and in terms of discussing what money policy ought to be over the next little while he might say, well, the economy in my part of the country is really softening, farm prices are weak and so

on.

If that information was released that day, and I can't all that through, you know, all the economic gyrations, but I can see that that information could be put to use by some folks and put to use in a way, I mean not in any secretive way or any speculative way, but just the normal way, and that might have an adverse impact, a further adverse impact on that section of the country.

In other words, let's just take this as an example. Let's say that his suggestion was that farm prices were softening, and then let's say that that was believed and then the commodities folks started betting that the farm prices would go down further and in fact forcing them down.

It's that kind of worry that I would have, and that would be the tradeoff it seems to me. In other words, for me to try to understand whether it would be a good idea to support a provision like this you would have to ask the question is the benefit, and I guess here would be the efficiency argument, would the benefit to the full working of the economy of letting this information be public at the earliest possible moment outweigh any possible limit on how people would talk in the Open Market meeting for fear that their com

ments would be made public and thereby running the risk that the policy option chosen wouldn't be the optimal one because you have people in there pulling their punches, and they would be afraid to say what they really thought, and then a decision might be based on inadequate information. See, that would be the tradeoff it seems to me, and maybe there is more to it than that.

Mr. MILLER. I'm glad your opinions on this are evolving, and mine are, too. The thing that I'm concerned about is that the small investor have an equal shot at any advantage there would be at the time it's announced.

Chairman NEAL. Well, that would be the desirable goal I think. Mr. MILLER. And this is where I think Mr. Gonzalez focused. He felt that if we're going to announce the Feds open market deliberations we want to make sure they are announced at once so we have an even playing field for the little person and the big person.

As it is now, I don't think anyone is naive enough to think that for 6 weeks this information is not leaking. It's a sieve over there, but it's not leaking to the little man. By the time it gets out to the little man, the big man, the man that is really able to manipulate the market without SEC regulations to see who has insider information, he has received inside information. As I point out in my testimony, this insider information is not worth a few dollars or a few million dollars, but it's worth billions of dollars.

It is our uneasiness that these decisions are given to the insiders 6 weeks before it gets to the little investor that has concerned Gonzalez and it has concerned us. I think that the little blurp we would have, and it might be an exciting thing every 6 weeks when they make their announcement on the marketplace, but I don't think it's going to be disastrous.

I frankly have been over to the Federal Reserve enough to see the tough-mindedness of those people, and I don't think they are going to hold back many punches. These people recognize that the American people are sophisticated. They are tough and they can take the full truth.

Chairman NEAL. Well, it may be that I'm overly worried about that restriction on full debate. That was the point that Volker made.

Mr. MILLER. Well, why don't we try it for 75 years and then we can go back and try it again. [Laughter.]

Chairman NEAL. And try the other way for a while. [Laughter.] As I take it, that's the part that you feel the strongest about.

Mr. MILLER. No. I feel equally strong about all six provisions of H.R. 3512. I can find no fault with any of the six sections. I even love the title of the bill. I like it when we talk about reform in this country because I think we should constantly be willing to reform those institutions that we've set up. I think the need for reform takes place almost the next day after we've set up some of these institutions.

I can find no fault in H.R. 3512 except, of course, it doesn't go as far as I would have it go. I think it was Mr. Hamilton that talked about the slippery slope. I hope that slippery slope is going towards zero inflation and towards 6 percent interest, which you mentioned for your resolution.

Chairman NEAL. Right.