The House Banking Committee chairman said he will begin an effort to reform the Federal Reserve Board, saying the "splendid isolation" of the central bank "won't continue forever."
"I recognize the need to give the Federal Reserve room to operate and make objective judgments," said Rep. Henry B. Gonzalez, D-Texas, a longtime critic of the Fed."But, this doesn't have to mean . . . (it) operates as some separate government, free to veto economic policy spelled out by the administration, the Congress - and the American people at the voting booths."
Gonzalez offered few specifics on how he would restructure the Fed, but mentioned expanding the board to include representatives of interests other than banking. Consumers, builders, manufacturers and other groups hurt by high interest rates have long sought more influence over Fed policy.
The seven Fed board members in Washington are appointed to 14-year terms by the president and once in office cannot be removed. The boards of the 12 regional banks that comprise the Federal Reserve System are dominated by members chosen by bankers.
Gonzalez, through most of his 28-year career in Congress, has been frequently critical of the central bank for fighting inflation at the expense of economic growth. When interest rates soared in the early 1980s, he introduced legislation to impeach Paul Volcker, then Fed chairman.
A bill introduced this year by Reps. Lee Hamilton, D-Ind., and Byron Dorgan, D-N.D., would force the Fed to announce the results of closed-door sessions immediately rather than with the current six-week lag. It also would require it to meet regularly with administration officials.
However, Gonzalez said the approach was "fragmentary" and that he would launch a long-term effort to comprehensively restructure the Fed, starting with hearings and studies next year and legislation after that.