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.
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. …