Congress, Hoping to Influence Future Policy, Pushes Measures to Curb Fed's Independence
WASHINGTON -- As it marks its 75th birthday in its usual understated style, the Federal Reserve will soon find itself the focus of unwanted attention: Congress is gearing up for unusually close scrutiny of the powerful institution.</br></br>Hearings will be held on two bills that would crimp the Fed's fierce independence in quite different ways, with both measures sponsored by congressmen who insist the Fed's recent record is superb. Although these bills aren't given much chance of passing, they are bound to leave an imprint. Their sponsors intend to use the hearings to beam a spotlight on a corner of the government that generally hides from public view and, in the process, to influence future Fed policy.</br></br>One bill would require the Fed to eliminate inflation, now in the 4 1/2%-5% range, by 1994. The other would add the Treasury secretary to the autonomous 12-member Fed committee that manipulates short-term interest rates.</br></br>Criticism of the Fed always appeals to the populist streak in the U.S. Rep. Lee Hamilton (D., Ind.), sponsor of the second bill, insists he isn't out to hurt the Fed, only to help it better coordinate policy with the administration. But he traces his interest in reforming the Fed to complaints from constituents during the deep recession of the early 1980s. "They say, 'I don't like what the Fed does.' I say, 'The Congress doesn't really control the Fed.' They say, 'Who does?' I say, 'Well, nobody does.'"</br></br>One of the Fed's best friends in Congress, Rep. Stephen Neal (D., N.C.), will oversee the hearings and prevent them from turning into unrestrained Fed-bashing. Rep. Neal, chairman of the House monetary-policy subcommittee, acknowledges that his no-inflation bill serves as a useful counterweight to proposals less friendly to the Fed.