Statement by Silas Keehn, President, Federal Reserve Bank of Chicago, before the Committee on Banking, Finance and Urban Affairs, U.S. House of Representatives, October 19, 1993 - Statements to the Congress - Transcript

Federal Reserve Bulletin, Dec, 1993

As requested, let me briefly summarize my views on the question of the appropriate recordkeeping and public release of the deliberations of the Federal Open Market Committee (FOMC).

As I stated in my letter of January 13 of this year to the chairman of this committee, I fully support Chairman Greenspan's previously stated position on the various proposals for maintaining and releasing a more detailed record of the FOMC's deliberations. In my view, the minutes of the FOMC, as they are currently written, provide the right level of reporting and detail necessary to communicate the current policy concerns and actions of the Committee. The minutes explicitly document the full range of policy arguments made during the discussion, and when a member of the Committee disagrees with the resulting consensus that member's dissent becomes an integral part of the public policy record.

Based on my participation in FOMC deliberations, I believe that releasing more detailed minutes, most especially a verbatim transcript of the meeting, without a significant delay would be counterproductive and would impede the development of sound monetary policy - first, by limiting the free flow of necessary information into the policy process and second, by hindering the consensus process go essential if policy is to adequately reflect economic conditions in all regions of the country.

As president of the Federal Reserve Bank of Chicago, I have an important responsibility to convey to the FOMC the economic conditions of the Seventh Federal Reserve District. To meet this responsibility, I and other senior members of our staff maintain extensive contacts with District businesses (large and small), community groups, and state and local government officials. From these individuals we are able to gather a wide array of highly significant information about the District that cannot be derived from the public data sources - information not only about current economic conditions but also about changes in business practices, future production, labor negotiations, investment and hiring plans, and a host of other issues that have important value to the policy process.

This type of information is particularly important at the present time. The economy is going through a very different phase than any that we have experienced in the past. Many of the economic indicators that have been useful guideposts in developing policy in the past are now proving unreliable. In such an environment, I find the regional information derived from local contacts, both about the Seventh District and elsewhere in the country, essential to the policy process. In the context of these hearings, it is important to understand that much of the information that these contacts provide is highly proprietary and very confidential in nature. I have absolutely assured these contacts that the source and nature of the data win not be divulged in a way that they would find compromising. I have never had anyone decline to speak with me about their activities. If I could not provide such assurances, then much of this significant information would not be forthcoming and the development of monetary policy would be impeded.

It is precisely this type of information about local businesses, communities, and financial institutions that demonstrates the value of the regional structure of the Federal Reserve System and District representation on the FOMC. The impact of releasing such information as part of the written record of the FOMC without a significant delay would only result in the exclusion of this vital information from the FOMC policy discussion. In my view, this would not be in the public interest, especially when the current system of disclosure is able to convey an accurate description of the key issues and arguments underlying the FOMC decisions as well as record individual votes and dissenting positions. If it became necessary to prepare more detailed minutes, then they should only be released after a period of five years and with all confidential information about individual corporations excised, as well as confidential information about foreign countries, foreign central banks, and international institutions.

As to the specific questions you asked us to address:

I prepare an outline of economic conditions in the District, which forms the basis for my remarks at each meeting of the FOMC. After the meeting, these notes are kept secured in my office until the next meeting, at which time I destroy them. I do not maintain notes on the discussion that takes place at the meeting itself, and Chairman Greenspan is in a better position to describe the records that are kept by the FOMC secretariat.

As to the premature release of information from the FOMC meetings, I have not talked to the press or other outside contacts nor to other Federal Reserve officials who do not have authorized access to FOMC information, and my only direct knowledge of such premature releases arises from articles that I have seen in various newspapers. I completely concur with Chairman Greenspan that premature releases of this type are highly inappropriate and totally unacceptable.