Statement by Robert D. McTeer, Jr., President, Federal Reserve Bank of Dallas, before the Committee on Banking, Finance and Urban Affairs, U.S. House of Representatives, October 19, 1993.

Thank you for your invitation to testify on H.R.28. As requested, I will limit my testimony to the issue of Federal Open Market Committee (FOMC) records, although I do have opinions on other parts of H.R.28, especially the part that puts me out of work.

I became president of the Federal Reserve Bank of Dallas in February 1991, so I am a relative newcomer both to the FOMC and to your great state of Texas. As the bumper sticker says, "I wasn't born in Texas, but I got there as soon as I could."

Before moving to Texas two and a half years ago, I was with the Federal Reserve Bank of Richmond for twenty-three years, the last eleven of which I served as manager of its Baltimore Branch. I have participated in FOMC meetings since 1991 but did not vote until this year.

You asked us to respond to three specific questions regarding notetaking in FOMC meetings. Regarding my own practice, I do not take notes of the type I assume you mean. I do a lot of reading and homework before the meeting, and I go into the meeting with some tentative ideas in mind. I doodle during our discussion and occasionally write down a word or phrase for reference when I speak. I do not write down decisions because they are simple and easy to remember and come at the end of the meeting. My doodles and notes would be of no use to traders or journalists. I destroy them after the meeting and rely only on official documents for future reference.

Regarding your second question, notes kept by others, my impression is that most other FOMC members and staff members probably follow a pattern similar to my own because all who are present presumably have access to the official records and documents. At least. I have no knowledge to the contrary.

In answer to your third question, I have no information about the premature release of FOMC information by anyone at the Federal Reserve. Let me add that, in my opinion, if someone wanted to leak valuable information about the Committee's decisions, such notes would not be necessary nor even very helpful. Although the decision process may be difficult, the decisions themselves are simple and easy to remember. Let me comment briefly on other aspects of meeting records. As a former economist, I have some sympathy for the idea of immediate release of the directive. Immediate releases of the decision would eliminate any question of leaks or the appearance of leaks.

The practical problem with immediate release of the directive is that not all decisions are clear-cut decisions to ease, tighten, or remain unchanged. On occasion, the Committee votes to hold steady, pending further information or developments, and wishes to give the Chairman extra leeway to act on his own before the next scheduled meeting. More often than not, I believe, these "asymmetric directives" are not acted on, but occasionally they are. To announce a decision of "no change" without the proviso would be misleading, and to announce it with the proviso would likely cause the markets to react in a way not necessarily warranted by subsequent information.

Given this dilemma, I believe that the current arrangement is best. Markets are able to discern the immediate decision by watching the federal funds rate the following morning, and we retain maximum flexibility to react to incoming data and changing circumstances without misleading anyone. Then as soon as another meeting is behind us, we release the directive that includes the prevailing circumstances, the rationale for the decision, and the identity of any dissenters and their reasons for dissenting.

I, personally, have a greater problem with videotaping and verbatim transcripts of discussions than with prompt release of decisions. I believe that videotaping or verbatim transcripts, no matter when they are released to the public, would diminish the quality of our deliberations. My colleagues and I are willing to listen to each other and adjust our initial leanings in the interest of consensus building. We currently do not posture for the record or for the camera. There is no winning or losing the debate. There is no playing to the gallery or to the folks back home. This, I am afraid, would all change with videotaping or its equivalent.

I would much prefer present arrangements even with more detail added, so long as the detail involves the substance of the discussions and decisions rather than the language used. I would also have no objection to detailed minutes (not a verbatim transcript) being released after a lengthy period, so long as the legal obstacles to a decent delay could be overcome.