Fed's Secretive Decisions Need `Sunshine'
Now that Fed chairman concedes that detailed records of key policy meetings exist, they should be made public
ON Oct. 19 Federal Reserve Board Chairman Alan Greenspan and several Federal Reserve Bank presidents appeared before the House Banking Committee. The hearing focused both on proposals to make available verbatim written transcripts of Federal Open Market Committee meetings and dealt with changing the appointment process for the regional Federal Reserve Bank presidents. Through its decisions influencing interest rates, the FOMC is a critical player in determining United States economic policy.Skip to next paragraph
Subscribe Today to the Monitor
Rep. Toby Roth (R) of Wisconsin directly questioned Mr. Greenspan on the existence of tapes and transcripts following the chairman's opening remarks. Greenspan replied that the tapes that existed were routinely erased. Written queries prior to the hearing from Mr. Gonzalez to FOMC members also asked about tapes, transcripts, or formal notes. In response to one of Mr. Roth's two successive questions, Greenspan replied only that ``no mechanical transcriptions'' were preserved.
By focusing on the question of mechanical transcriptions, Greenspan seemed to imply that no transcripts existed beyond the summary minutes of monetary-policy sessions. Officially, the Fed says it re-records over the tape used to prepare summary minutes of the FOMC's monetary-policy sessions and that no other electronic records are maintained.
But Mr. Gonzalez and his staff have been hearing from inside sources that, contrary to the line from the Fed bureaucracy in Washington, verbatim written transcripts of the FOMC's secret deliberations do exist. These documents are said to stretch back to the era of Fed Chairman Arthur Burns (1970-78), who in 1976 discontinued the original practice of releasing after a five-year delay detailed minutes.
Fed officials in Washington say Greenspan initiated a conference call on Friday, Oct. 15, to reveal to regional Federal Reserve Bank presidents for the first time the existence of full FOMC transcripts dating to 1976. Several presidents on the call reportedly were angry upon hearing Greenspan's confession. Others counseled ``stonewalling'': Having already delivered written statements to the Banking Committee that denied the existence of transcripts or tapes, they would have been in an awkward position come hearing day.
Greenspan met with some Fed bank presidents the following Monday evening and at breakfast Tuesday, Oct. 19 to finalize ``what to do about the transcripts.'' Greenspan reportedly agreed to inform Gonzalez's panel about the transcripts during his opening testimony that morning. This morally correct position apparently was supported by Fed public affairs chief Joe Coyne, a senior staffer of the FOMC whose tenure began in the Burns era.
Mr. Coyne staunchly defends the Fed's veil of secrecy (as opposed to its independence from political meddling). In this case, though, he recognized that the chairman was obliged to Congress, other members of the FOMC, and the public to come clean. Yet when Greenspan appeared before the House Banking Committee on Oct. 19, all he said about the existence of the until-then secret Fed transcripts was that each meeting is taped, a transcript is prepared, summary minutes are distilled from the transcript, and the tapes are erased. Several presidents and governors noted Greenspan's failure to call attention to the transcripts (separate from his description of the regular minutes), yet none took the opportunity to raise the issue with the committee.
Anna Schwartz, a respected economist and a leading authority on the FOMC who also testified before Gonzalez, concedes that she was ``confused'' by Greenspan's statements. ``He did not address the issue directly,'' Schwartz notes. ``The Fed has been lying about the transcripts for years. I could not discern whether he was talking about old transcripts or the regular meeting `notes' prepared after the FOMC meets. As far as I could tell sitting in the room, Greenspan did not clearly and explicitly disclose the existence of written verbatim transcripts so that members of the committee understood what he said.''
In an interview after the hearing, Mr. Coyne conceded that the ``rough, unedited transcriptions'' of FOMC meetings dating back to 1976 era are kept ``under lock and key.'' Several days later, in a press release, Greenspan did likewise, finally admitting that transcripts do exist.
Ultimately, this was the right thing to do. But it catches the central bank in a legal and political trap of its own design. Public release of FOMC transcripts has been the subject of a series of lawsuits between 1975 and 1987, but the central bank consistently denied that any transcripts or tapes exist.