Should the policymaking committee of the most powerful peacetime entity in the United States government be allowed to destroy their source records? The Federal Open Market Committee of the nation’s central bank, an intricate part of the United States government may be continuing to destroy its source records, a policy it began in 1995 with an unrecorded vote -no fingerprints – conducted by then Chairman Alan Greenspan.
The FOMC committee is, when at full strength, composed of 12 unelected members. Five of these members are regional Fed Bank presidents who are internally appointed without having to go through a confirmation process where their views and credentials can be publically examined. The case now before the Supreme Courts [Free Enterprise Fund v. Public Accounting Oversight Board] should have direct application to their internal appointment. There should be presidential nomination and confirmation hearings for these unelected officials.
The FOMC controls the nation’s money supply, targets short term interest rates and since 1962 took it upon themselves to bypass the Congressional appropriations process and loan money to foreign governments. I have described [in Deception and Abuse at the Fed] how the FOMC mislead the Congress in 1962 when they began this activity. In 1995 they voted a $5 billion loan to Mexico to keep the peso from falling when the Congress would not appropriate the money and the Treasury did not have sufficient funds. The then secret transcripts reveal that some Mexican Yucatan oil collateral was to be used. The full deliberations are not available because that is when the FOMC voted to start destroying the source transcripts. When the announcement of the loan was made public the peso stopped falling and the loan was never consummated.
I knew they had lied about their transcripts for 17 years after they were forced to show them to me around the corner from Chairman Greenspan’s office in an investigation in which I assisted House Financial Services Chairman Henry B. Gonzalez. The Fed had said in 1976 they would stop making transcripts to avoid the Government in Sunshine laws. Although Governor Paul Volcker voted to end the transcripts, reportedly when he became chairman he stopped the staff from destroying them.
I wrote to Chairman Greenspan in 2001 when I read in the edited FOMC transcripts, released with a five year lag, that they had voted to destroy the transcripts. Donald Kohn, then Secretary to the Federal Open Market Committee and advisor to the Board for Monetary Policy replied November 1, 2001. Donald Kohn is a friend, a former colleague at the Kansas City Fed Bank and a devoted Fed employee for over 30 years.
What he wrote was astounding. The twelve unelected Fed FOMC officials can pull the plug on their extensive recording equipment for their deliberations whenever they chose to do so and they feed their source transcripts to the shredders. “FOMC members were told in 1995 that even though they were ‘not permitted’ to discard ‘raw transcripts’ of meetings before 1994, future unedited transcripts would be ‘thrown out,’ and only transcripts edited by the Fed would be retained. FOMC members were also told to move some discussions to the lunch period, when ‘the tape is not on.'” [“The Seventeen Year Lie,” published in the Huffington Post 11/30/09]
Now the Huffington Post has reported: “The day after his Inauguration, Obama declared, “Information will not be withheld just because I say so. It will be withheld because a separate authority believes my request is well grounded in the Constitution. Let me say it as simply as I can, transparency and the rule of law will be the touchstones of this presidency.”
In carrying out President Obama’s policy the Fed should stop feeding their source transcripts to the shredders. It should stop pulling the plug on their extensive recording equipment for FOMC meetings as Vice Chairman Kohn describes in his letter to me. This practice is more than deceptive. It blocks the need for meaningful checks and balances on the unelected Fed officials who have immense power over our economy even to bypass the Congressional appropriation process. Their word is not enough as many years of deception and abuse have proven. Legislation is needed to bring the Fed into the democracy.
Here is the Federal Reserve letter of November 1, 2001 from Donald Kohn, then Sectary to the FOMC, to Professor Robert D. Auerbach: