Newspaper article The Christian Science Monitor

Fed's Policy Meetings Need Fuller, More-Timely Scrutiny

Newspaper article The Christian Science Monitor

Fed's Policy Meetings Need Fuller, More-Timely Scrutiny

Article excerpt

LAST March I asked my colleagues in Congress: Under the following circumstances, would you vote to give the Federal Reserve a $33 billion line of credit that will be used to lend money to foreign countries? You have nothing to say about who gets the money, you can put no conditions on the loans, and you have to abdicate your congressional oversight role. In addition, the General Accounting Office, the nonpartisan investigative arm of Congress, is prevented by law from any examination of these foreign transactions. The records of the expenditures are intentionally vague and, at times, purposely misleading.

This isn't fantasy, it is happening today. The Federal Reserve has for years been lending money to foreign countries without congressional input or consent, through its $33 billion swap fund. Despite the Fed's "keep your nose out of my business" attitude, Congress cannot relinquish its oversight responsibilities.

The nation's money supply is controlled by the Fed's seven governors and by five of the 12 regional Federal Reserve Bank presidents. As members of the Federal Open Market Committee (FOMC), they decide whether to increase or decrease the nation's money supply. Where do they get the money? They can order unlimited amounts from the US Treasury Department. The FOMC's actions affect everyone. Shifts in monetary policy affect inflation, employment, interest rates, and the value of our currency on foreign-exchange markets.

How much do the Congress and the American public know about FOMC members?

Congress examines the board of governors' credentials and their views on monetary policy because nominees to the board go through a Senate confirmation process. However, Congress knows less about the views, the credentials, or even possible conflicts of interest of the regional presidents who also serve on the FOMC. These officials are selected within the regional Fed banks. Congress, the public, and the press never get the opportunity to scrutinize their views or history. And yet these internally selected officials have immense power over our lives.

FOMC members recently joined the United States Treasury in extending to Mexico a $6 billion line of credit as part of a $9 billion package that included contributions from the Mexican and Canadian governments. FOMC members voted to increase the $700 million line of credit for Mexico they had previously approved to $3 billion. This $3 billion line of credit is a loan from the Fed - money that, unlike the Treasury's $3 billion contribution, never was approved by Congress.

Although the secretive Fed would want otherwise, Congress has a right - and a duty - to oversee the central bank's operations and the foreign-currency operations of the Treasury. Unfortunately, Congress is not privy to the full details of the agency's recent intervention in foreign-currency markets. …

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