[Federal Register Volume 70, Number 215 (Tuesday, November 8, 2005)]
[Rules and Regulations]
[Pages 67641-67644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-22223]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

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Federal Register / Vol. 70, No. 215 / Tuesday, November 8, 2005 / 
Rules and Regulations

[[Page 67641]]



FEDERAL RESERVE SYSTEM

12 CFR Part 268

[Docket No. OP-1239]


Rules Regarding Equal Opportunity

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Interim rule with request for comments.

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SUMMARY: The Board of Governors of the Federal Reserve System (the 
Board) is soliciting comments on an interim rule that would amend the 
section of its Rules Regarding Equal Opportunity (EEO Rules) which 
governs the employment of persons who are not United States citizens 
consistent with the Board's requirements for the security of its 
information. The amendments would clarify the limitations on access to 
sensitive information for non-citizen employees.
    The amendment, which concerns the internal management of the Board, 
is issued as an immediately effective interim rule, with opportunity 
for public comment, to ensure that hiring decisions facing the Board 
can be made as soon as possible.

DATES: This interim rule is effective November 8, 2005.
    Applicability Date: This interim rule is applicable to all 
decisions on access to Sensitive Information of the Board as of 
November 8, 2005.
    Comment Date: Submit comments on or before January 9, 2006.

ADDRESSES: You may submit comments, identified by Docket No. OP-1239, 
by any of the following methods:
    <bullet> Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> E-mail: <a href="/cdn-cgi/l/email-protection#d5a7b0b2a6fbb6bab8b8b0bba1a695b3b0b1b0a7b4b9a7b0a6b0a7a3b0fbb2baa3"><span class="__cf_email__" data-cfemail="ec9e898b9fc28f8381818982989fac8a8988899e8d809e899f899e9a89c28b839a">[email protected]</span></a>. Include docket 
number in the subject line of the message.
    <bullet> FAX: 202/452-3819 or 202/452-3102.
    <bullet> Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.

All public comments are available from the Board's web site at 
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, 
except as necessary for technical reasons. Accordingly, your comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper in Room 
MP-500 of the Board's Martin Building (20th and C Streets, NW.) between 
9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Alicia S. Foster, Senior Counsel (202-
452-5289), Legal Division, Board of Governors of the Federal Reserve 
System, 20th Street and Constitution Avenue N.W., Washington, D.C., 
20551. For users of Telecommunications Device for the Deaf (``TDD'') 
only, contact 202/263-4869.

SUPPLEMENTARY INFORMATION:
    The Board proposes to amend Sec.  268.205 of its Rules Regarding 
Equal Opportunity (12 CFR 268.205), governing the employment of persons 
who are not United States citizens in accordance with the Board's 
security requirements. The amendments are effective immediately, 
subject to revision based on public comment.
    Currently, Sec.  268.205 permits the employment of non-citizens in 
positions that do not require access to sensitive information, subject 
to a preference for citizens over equally qualified non-citizens. 
Positions that require access to sensitive information currently are 
reserved for United States citizens or ``intending citizens'' (that is, 
non-citizens seeking U.S. citizenship). Under the existing Sec.  
268.205, ``sensitive information'' is defined to mean--(1) Information 
of the Federal Open Market Committee (FOMC); (2) national security 
classified information; and (3) confidential supervisory information of 
the Board.
    The framers of the Federal Reserve Act made special provision for 
the Board to be free to hire staff independent of other provisions of 
law governing the federal government service in order to ensure that 
the Board is able to hire the highest possible quality of staff to 
obtain the ``special talent'' it needs to carry out its important 
responsibilities. See, comments of Senators Owen and Reed, 51 Cong. 
Rec. 1138, 1141 (1913). In recent years, the Board, like employers 
throughout the United States, has been having greater difficulty 
identifying qualified United States citizens, nationals, or ``intending 
citizens'' as candidates for positions in a number of important job 
families. In particular, the percentage of Ph.D economists graduating 
from U.S. universities who are citizens or permanent residents has 
declined steadily from 73 percent in 1980, to 54 percent in 1990, to 43 
percent in 2001. In order to perform its statutory duties to implement 
monetary policy and serve as the lender of last resort (as well as its 
other statutory responsibilities), the Board must hire a significant 
number of Ph.D economists. The shrinking pool of graduates with Ph.D.'s 
in economics and other needed skills who are U.S. citizens, nationals, 
or ``intending citizens'' has prompted the Board to reconsider its 
hiring policies.
    To address the diminishing number of available graduates with Ph.Ds 
in economics and other needed skills who are U.S. citizens, the Board 
proposes to revise its policy regarding hiring for positions that 
require access to sensitive information. This will allow the Board to 
hire qualified non-citizens in certain positions of importance to the 
Board's duties and for which a growing proportion of qualified 
candidates in the applicant pool are non-citizens. Currently, the Board 
does not hire individuals who are non-citizens into positions that 
require access to certain types of sensitive information unless the 
non-citizen intends to obtain and does, in fact, seek U.S. citizenship. 
The Board proposes to amend its rule to allow it to hire non-citizens 
without intention of becoming U.S. citizens into positions that require 
access to sensitive FOMC information in certain circumstances. The 
Board does not propose to change its policy governing access to 
national security information or confidential supervisory information. 
Moreover, while the Board's rule governs hiring,

[[Page 67642]]

access to FOMC information is ultimately limited by the rules of the 
FOMC.
    The interim rule would retain the Board's preference for U.S. 
citizens and U.S. nationals over equally qualified non-citizens. Under 
both the current and interim rule, U.S. citizens, U.S. nationals, and 
intending citizens \1\ (all of whom are now referred to as ``Protected 
Individuals'') may be hired into a position requiring access to 
sensitive information. The interim rule focuses only on non-citizens 
who do not intend to obtain U.S. citizenship and, in particular, on the 
hiring of these non-citizens into positions requiring access to FOMC 
information.
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    \1\ An intending citizen is an individual who is a lawfully 
admitted permanent resident alien, refugee, or asylum grantee and 
who has evidenced an intention to become a U.S. citizen.
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    For purposes of hiring individuals into positions that require 
access to FOMC information, the interim rule would distinguish between 
non-citizens from a country on the Country List contained in the annual 
federal appropriations laws specifying countries, including a general 
category of ``countries allied with the United States in a current 
defense effort,'' whose citizens are eligible to be hired as federal 
employees using appropriated funds and non-citizens from a country that 
is not on the Country List.\2\ Because the Board's funds are not 
appropriated, the Board is not subject to this limitation on hiring. 
However, Congress periodically affirms that other government agencies 
may use appropriated funds to hire non-citizens from countries on the 
Country List. The rule uses the term ``Country List'' as a common point 
of reference.
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    \2\ The appropriations ban that contains the Country List is 
codified at 5 U.S.C. 3101 note. Which countries are considered to be 
``allied with the U.S. in a current defense effort,'' is a decision 
made by the Department of State, Office of the Assistant Legal 
Adviser for Treaty Affairs.
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    Under the interim rule, the Board may hire into a position that 
requires access to Class III or Class II FOMC information a non-citizen 
who does not intend to obtain U.S. citizenship and who is from a 
country that is on the Country List.\3\ In addition, if he or she meets 
three conditions set forth in the rule, that person may be granted 
access to Class I FOMC information. Those conditions are: (1) The 
employee's Division Director recommends the employee be given access to 
Class I FOMC information; (2) the employee has resided in the United 
States for at least six years and has been employed for at least two 
years with the Board and/or with one or more of the Reserve Banks; and 
(3) the employee has passed a background investigation acceptable to 
the Board. If the Country List changes so that the employee's country 
is no longer on the Country List, the employee's access to Class II 
FOMC information would not be affected by the change in the Country 
List. Similarly, the employee would continue to be eligible for access 
to Class I information and may be granted such access if he or she 
meets the remaining conditions outlined above for employees from a 
country on the Country List.
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    \3\ FOMC information is classified as Class III, II, and I 
information, in increasing order of sensitivity.
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    Under the interim rule, the Board may hire into a position that 
requires access to Class III FOMC information a person who is a non-
citizen without intention of becoming a U.S. citizen and who is from a 
country that is not on the Country List. Upon meeting the three 
conditions discussed above, a non-citizen from such a country may also 
be granted access to Class II information. However, the Board would not 
provide access to Class I information to a non-citizen from a country 
that is not on the Country List.
    The interim rule does not change access by a non-citizen to 
confidential supervisory information or classified information. As 
result, the existing limitations on who may have access to this 
information would be continued.
    Beyond the changes discussed above, the interim rule includes a 
more comprehensive definition of ``FOMC information'' that contains a 
description of the three internal security designations that apply to 
this information. The interim rule also replaces the citation to 
Executive Order 11356 with the citation to Executive Order 12958 
entitled, ``Classified National Security Information,'' as this 
executive order, and its amendments, control what information is 
considered classified. The definition of ``confidential supervisory 
information'' remains unchanged.
    The interim rule also separately addresses what access is 
applicable to each of the three types of sensitive information, i.e., 
FOMC information, classified information, and confidential supervisory 
information. For example, as discussed above, the interim rule provides 
new parameters for access that are applicable only to FOMC information. 
The rule would also change the present language on access to classified 
information to provide that access is determined by the applicable 
executive orders and amendments. This more general reference 
incorporates the current rule's exception for hiring a non-citizen for 
a position requiring access to classified information if he or she is 
able to obtain a security clearance. Further, with respect to 
confidential supervisory information, the interim rule would specify 
that access to this information is limited to Protected Individuals 
(formerly citizens, nationals and intending citizens) with a need to 
know employed by the Board or by a Federal Reserve Bank.
    The interim rule would also update some of the terminology used in 
the current rule. In this respect, the interim rule would substitute 
the term ``Protected Individual'' for ``U.S. citizens and intending 
citizens.'' The term ``Protected Individual'' covers U.S. citizens, 
U.S. nationals, and aliens meeting the requirements of 8 U.S.C. 
1324(a)(3)(B) who have filed a declaration of intention to become a 
citizen of the United States. This more inclusive term is consistent 
with existing immigration law, which no longer uses the term 
``intending citizen'' but uses instead the term ``Protected 
Individual.''
    Further, where the current rule refers only to ``U.S. citizens,'' 
the interim rule would add the term ``national'' to make clear that 
both U.S. citizens and U.S. nationals are, in fact, similarly treated. 
The term ``national'' refers to certain individuals who are not 
citizens of the U.S. and typically are born in or are descendants of 
individuals in the outlying possessions of the U.S. Thus, the interim 
rule provides that the hiring preference is a preference for U.S. 
citizens and U.S. nationals over equally qualified non-citizens.
    The Board also proposes to add a definition of ``employee'' to 
clarify the coverage of the rule and a definition of ``national.'' The 
interim rule includes a revised definition of ``non-citizen'' that more 
accurately reflects its meaning.
    This rule relates solely to matters of agency management or 
personnel, and, therefore, is not subject to the public notice and 
comment provisions of the Administrative Procedures Act, 5 U.S.C. 
553(a)(2). However, the Board has in the past found public comment on 
this matter to be helpful and invites comment on this rule. While 
allowing comment, the Board has determined that it is unnecessary, and 
would be impracticable, to defer the effective date of this action 
until after notice and after public comments have been received and 
considered (5 U.S.C. 553(d)(3)). Issuance of this rule as an interim 
rule is appropriate, in any event, because the rule concerns only the 
internal management and personnel of the Board and is not subject to 
statutory delay. In addition, the Board is facing immediate hiring 
decisions that would be subject to this rule. The Board believes that

[[Page 67643]]

issuance of the regulation as an interim rule is necessary for the 
Board to conduct its internal management in an expeditious and 
efficient manner. The Board will consider all public comments received 
and make changes in its procedures based on those comments where 
appropriate. On these bases, the Board has determined that good cause 
exists to make this action effective immediately. As this rule concerns 
only agency management or personnel, it is not a rule subject to the 
Congressional Review Act (CRA), 5 U.S.C. 804(3)(B), and therefore an 
analysis under the CRA is not required.

Regulatory Flexibility Act Analysis

    Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub. 
L. 96-354, 5 U.S.C. 601 et seq.), the Board believes that this rule 
will not have a significant economic impact on a substantial number of 
small entities. This rule governs the Board's dealings with its 
employees and applicants for employment, and would not affect small 
entities as defined for purposes of the Regulatory Flexibility Act. 
Accordingly, a regulatory flexibility analysis is not required.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
ch. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the proposal 
under the authority delegated to the Board by the Office of Management 
and Budget. No collections of information pursuant to the Paperwork 
Reduction Act are contained in this proposal.

Plain Language

    Section 722 of the Gramm-Leach-Bliley Act requires each federal 
banking agency to use plain language in all rules published after 
January 1, 2000. In light of this requirement, the Board has sought to 
present the interim rule in a simple and straightforward manner. The 
Board invites comment on whether the Board could take additional steps 
to make the rule easier to understand.

List of Subjects in 12 CFR Part 268

    Administrative practice and procedure, Aged, Civil rights, Equal 
employment opportunity, Federal buildings and facilities, Federal 
Reserve System, Government employees, Individuals with disabilities, 
Religious discrimination, Sex discrimination, Wages.

Authority and Issuance

0
For the reasons set out in the preamble, the Board amends 12 CFR part 
268 as follows:

PART 268--RULES REGARDING EQUAL OPPORTUNITY

0
1. The authority citation for part 268 continues to read as follows:

    Authority: 12 U.S.C. 244 and 248 (i), (k), and (l).


0
2. Revise 268.205 to read as follows


Sec.  268.205  Employment of aliens; Access to sensitive information

    (a) Definitions. The definitions contained in this paragraph (a) 
apply only to this section:
    (1) Classified Information means information that is classified for 
national security purposes under Executive Order No. 12958, entitled 
``Classified National Security Information,'' including any amendments 
or superseding orders that the President of the United States may issue 
from time to time.
    (2) Confidential Supervisory Information means confidential 
supervisory information of the Board, as defined in 12 CFR 261.2(c).
    (3) Country List refers to the list contained in the annual federal 
appropriations laws of specific countries, including a general category 
of ``countries allied with the United States in a current defense 
effort,'' and the particular Non-Citizens from those countries who are 
eligible to be hired as Federal employees in the excepted service or in 
the senior executive service and be paid by appropriated funds. The 
appropriation ban is codified at 5 U.S.C. 3101 note. The list of 
eligible countries and Non-Citizens is subject to legislative and other 
change.
    (4) Employee means an individual who works full-time or part-time 
and is appointed into Board service for a period of more than 90 days. 
The term ``employee'' does not include members of the Board.
    (5) FOMC Information means confidential information of the Federal 
Open Market Committee (FOMC) regardless of the form or format in which 
it is created, conveyed, or maintained. FOMC information includes 
information derived from confidential FOMC materials. Three internal 
security designations, which are subject to change by the FOMC, apply 
to FOMC Information as follows:
    (i) Class I FOMC generally applies to materials containing 
policymaker input, such as that related to monetary policy decisions at 
meetings, views expressed by policy makers on future policy, and 
identification of meeting participants who express particular views. 
Examples of Class I FOMC Information include, but are not limited to, 
the ``Bluebook,'' drafts of meeting minutes, unreleased meeting 
transcripts, documents reflecting the preparation of semi-annual 
forecasts and related testimony, and certain sensitive internal 
memorandums and reports.
    (ii) Class II FOMC covers information that is less sensitive than 
Class I FOMC. This designation generally applies to staff forecasts 
prepared for the FOMC and to information about open market operations. 
Examples of Class II FOMC Information include, but are not limited to, 
Part I of the ``Greenbook,'' reports of the Manager on domestic and 
foreign open market operations, and other materials on economic and 
financial developments.
    (iii) Class III FOMC covers information that is less sensitive than 
either Class II or Class I. This designation generally applies to 
background information supporting policy discussions and includes, but 
is not limited to, Part II of the Greenbook.
    (6) National refers to any individual who meets the requirements 
described in 8 U.S.C. 1408.
    (7) Non-Citizen refers to any individual who is not a citizen (by 
birth or naturalization) of the United States.
    (8) Protected Individual means--
    (i) A citizen or National of the United States, or
    (ii) An alien who:
    (A) Meets the conditions set forth in 8 U.S.C. 1324b(a)(3)(B), as 
amended, and
    (B) Has filed with the Board or the appropriate Federal Reserve 
Bank a declaration of intention to become a citizen of the United 
States.
    (9) Sensitive Information means FOMC Information; Classified 
Information; and Confidential Supervisory Information.
    (b) Hiring.
    (1) Prohibition against hiring unauthorized aliens. An individual 
is eligible for employment with the Board only if he or she satisfies 
the requirements of Section 101 of the Immigration Reform and Control 
Act of 1986, 8 U.S.C. 1324a.
    (2) Preference. Consistent with applicable law, where two 
applicants for employment at the Board are equally qualified for a 
position, the Board shall prefer the citizen or National of the United 
States over the equally qualified Non-Citizen.
    (3) Protected Individuals access to Sensitive Information. The 
Board may hire a person to a position that requires access to Sensitive 
Information if the person is a Protected Individual.
    (4) Non-Citizens access to Sensitive Information. The Board shall 
not hire a Non-Citizen, other than a Protected

[[Page 67644]]

Individual, into a position that requires access to Sensitive 
Information except in accordance with paragraph (c) below.
    (c) Access to Sensitive Information.
    (1) Generally. The Board will grant access to Sensitive Information 
only in accordance with the Board's rules and policies regarding access 
to Sensitive Information and, if applicable, the rules and policies of 
the FOMC.
    (2) FOMC Information.
    (i) Access by a Non-Citizen from a country on the Country List. An 
Employee, other than a Protected Individual, who is a Non-Citizen from 
a country that is on the Country List on the date the Employee begins 
employment with the Federal Reserve System shall be granted access to 
Class I FOMC Information only upon the recommendation of the Employee's 
Division Director after six years of residence in the United States, at 
least two of which include satisfactory employment by the Board and/or 
one or more of the Federal Reserve Banks, and a background 
investigation acceptable to the Board. If the Employee's country is 
deleted from the Country List after the date the Employee begins 
employment with the Federal Reserve System, the Employee's access to 
Class II FOMC information will not be affected by the change in the 
Country List. Similarly, the Employee would continue to be eligible for 
access to Class I information and may be granted such access if he or 
she meets the remaining conditions outlined above for employees from a 
country on the Country List.
    (ii) Access by a Non-Citizen from a country not on the Country 
List. An Employee, other than a Protected Individual, who, on the date 
the Employee begins employment with the Federal Reserve System, is a 
Non-Citizen from a country that is not on the Country List: (A) Shall 
not be granted access to Class I FOMC Information, and (B) shall be 
granted access to Class II FOMC Information only upon the 
recommendation of the Employee's Division Director after six years of 
residence in the United States, at least two of which include 
satisfactory employment by the Board and/or one or more of the Federal 
Reserve Banks, and a background investigation acceptable to the Board.
    (3) Classified Information. Access to Classified Information is 
limited to those persons who are permitted access to Classified 
Information pursuant to the applicable executive orders and any 
subsequent amendments or superseding orders that the President of the 
United States may issue from time to time.
    (4) Confidential Supervisory Information. Access to Confidential 
Supervisory Information is limited to Protected Individuals with a need 
to know employed by the Board or by a Federal Reserve Bank.

    By order of the Board of Governors of the Federal Reserve 
System.

    Dated: November 2, 2005.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 05-22223 Filed 11-7-05; 8:45 am]
BILLING CODE 6210-01-P


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