Statement by Gary H. Stern, President, Federal Reserve Bank of Minneapolis, 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

I appreciate this opportunity to discuss issues related to maintaining a record of Federal Open Market Committee (FOMC) meetings and procedures followed at the Federal Reserve Bank of Minneapolis to handle confidential monetary policy material. These matters are indeed significant.

As I indicated in my January correspondence, I am convinced that there is considerable value in our current report of FOMC proceedings. As you know, we release extensive minutes of each FOMC meeting shortly after the subsequent meeting. The minutes describe the discussion and the votes of individual members. More specifically, they include an assessment of business conditions here and abroad, price developments, and the performance of financial markets and monetary aggregates. They report the Committee's views of prospects for the economy and frequently include information gleaned from personal contacts in individual Federal Reserve Districts. The minutes also report discussion of monetary policy options as well as the decision ultimately reached by the Committee, including dissents, if any, and the logic underpinning the dissents.

In light of these minutes, I believe that the views of the Committee members are known. In addition, FOMC members reveal their policy positions in other ways. Certainly, I take full responsibility for my positions at FOMC meetings, and I have presented my policy views in Federal Reserve Bank of Minneapolis publications, among other places. (Two examples, one from 1990 and one from 1993, are appended to this document).(1) I In addition, the Congress can at any time ask us about our views, as the Senate Banking Committee did last March.

Thus, a good deal of information is available, in my view, and I do not find merit in suggestions to prepare and release, at any time, a literal record of FOMC deliberations - through videotaping or other vehicles. Three issues, in particular, concern me. First, given the gravity of our responsibilities, I believe it imperative that the quality of our deliberations be maintained. Open discussion of ideas, of policy alternatives, and of significant potential risks to the economy are critical to sound policymaking. Second, some of the information we discuss is voluntarily provided on a confidential basis. Much of this information would be lost if we have an obligation to respect anonymity and confidentiality. Third, I believe that our procedures carefully balance the need to provide information to the pubic with the necessities of effective monetary policy. Even small changes carry the considerable risk that they will disturb, perhaps unknowingly and unintentionally, this balance, with adverse consequences for financial markets and economic performance.

As I indicated in my earlier correspondence, I believe that there could be some merit in reintroducing something like the "memorandum of discussion," a very detailed, although edited, accounting of FOMC discussions, provided that the confidentiality of such material is assured for several years. As I see it, such a document could be useful to historians and students of monetary policy when they investigate the broad context of policy decisions and the evolution of the policymaking process.

Finally, in response to your specific inquiries about confidentiality, I am unaware of any unauthorized release of monetary policy information ever having emanated from the Federal Reserve Bank of Minneapolis. My economic adviser and I leave highly confidential material at the Board of Governors and do not return with it to Minneapolis. I take limited notes during the meeting, as does my adviser. All notes and other materials are handled according to strict guidelines, the essence of which is to limit their distribution and access and assure proper disposal. A copy of our Bank's procedure is appended to this testimony.

(1) The attachments to this statement are available from the Federal Reserve Bank of Minneapolis, Minneapolis, MN 5540).