Date: 1981-12-07
Speaker: ROBERT C. BYRD (democrat)
Chamber: S

Mr. President. I am proposing an amendment to assure that a small business representative Is named as a member of the Federal Reserve Board of Governors when that position opens on January 31. 1982. By appointing a small business representative. to the Board. the President will take a giant step toward assuring that a voice from Main Street will be heard amid the chorus from Wall Street. Under my amendment. a farner or a rancher would be eligible for the position. A Small business representative will temper the Boards monetary Policy with an understanding of this creditsensitive sectors concerns. This appointment will bring the Board of Governors closer to realizing the Intent of the 1913 Federal Reserve Act that envisioned a Board representing the full spectrum of American financial. business. and geographic Interests. The act specifically said thatInA selecting the members of the Board. not more than one of whom shoal be selected from any one Federal Reserve district. the President shall have due regard to a fair representation of the financial. agricultural. Industrial. and commercial Interests. and geographical divisions of the colustry. The current Board of Governors to a far cry from ther pluralistic group the Federal Reserve Act envisioned. The long. 14year terms of the Governors TB S814619 require that a fair sampling of the Nation& Interests be Included on the Board to prevent it from drifting away from the concerns of the Nation. A look at the current Board would lead us Ineluctably to one conclusion: We are a nation of Federal Reserve employees and private bankers. Of the seven Governors. five are former employees of the Federal Reserve System. and the other two were private bankers before their appointment. The Federal Reserve Board has a special place In our Government. Although there are other nominally Independent agencies. none of them have the Federal Reserves power to affect the wellbeing of all Americans. Despite Its power. Independence was assured. so that the conduct of monetary policy would not be affected by partisan Politics. and the swiftly shifting tides of public opinion. But structured thus to be an island of stability. It was not to be an island cut off from the effects of Its policies on the mainland of the body politic. We must all realize the danger that arises from filling the Board witn people of -the same limited range of experience and understanding. No one person can represent the needs and views of the entire American economy. Our Nation was founded on a notion of pluralistic representation that is as important for the Federal Reserve Board as it is for both Houses of Congress. By naming a Small business representative to the Board of Governors. we help to bring this Important body back within the framework that originally shaped our Government. Nearly 200 years ago. during the great debate about our Constitution. three of our Founding FatherR conducted a publbc campaign for ratification that has since commanded the attention of thoughtful citizens from many lands. Writing under the Joint nom de plume of Publis. these three men. Alexander Mlanilton. John Jay. and James Madison. produced 85 newspaper articles that became know collectively as the Federalist Papers. Within this mother lode of political theory and practical wisdomn. stands James Madisons Federalist PaperlNo. 10. in this paper. Madison makes the most concise and convincing argument for pluralistic representation ever put forth. While attempting to convince his readers that a United Republic provided more readily for internal and external peace than did the loose confederation of States. Madison recognizes the number of varied Interests which spring up from the system of Private enterprise. in discussing them he writes: The most common and durable source of factions has been the various and unequal *distribution of property. Those who hold and those who are without property have ever formed distinct Interests in society. Those who are creditors. and those who are debtors. fall under a like discrimination. A landed interest. a manufacturing interest. a mercantile interest. a money Interest. with many lesser Intferests grow up of necessity in civilized nations. and divide them Into different classes. activated by different sentiments and views. The clash of Interests that surrounds *money. its availability. and its cost is the realm over which the Federal Reserve must watch. The nexus where the lenders face the borrowers Is the focus of most Board activity. yet all of the current Governors represent private experience they acquired as central bankers. That is. they are lerders. Perhaps it is thought that. because of their expertise in financial markets and monetarist theory. these Governors are able--to assure hitat the countrys broad interest is Considered when making policy decisions. Thus. some might say. we do not need a person whose expertise lies In small business operations. although he may be acquainted with financial markets. Madison foresaw a similar argument coming from his contemporaries. and responded clearly: It is In vain to say that enlightened statesmen will be able to adjust these clashing Interests and render them all subservient to the public good. Enlightened statesmen will not always be at the helm. Nor. In many cases. can such an adjustment be made at all without taking Into view Indirect and remote considerations. which will rarely prevail over the Immediate Interest which one party may find In disregarding the rights of another. or the good of the whole. This is not to say that any member of the Board of Governors has ever. or would ever. taken an action he or she thought to be against the best interests of the country. What is important in Madisons argument is that a person who represents one interest or one set of experiences. may not be the best judge of how his decision affects those In differing situations. That is what concerns me here. The wisdom of James Madison Is. perhaps. even more valuable in this age of Increasing specialization. The ability of an experienced central banker to truly understand the needs of creditsensitive sectors of the economy cannot be taken for granted. For that central banker. a small business Is not much more than one Piece of datum among many millions. The 15.449 businesses that have collapsed this year are simply 15.449 faceless. nameless entries onto a data sheet which are coolly discussed along with the 9 million jobless citizens now among us. For the small businessman. however. the 15.449 failures are made up of people like himself. and the 9 million unemployed have a great deal in common with his own employees. whose livelihoods depend on the decisions made by the Board of Governors. I do not believe this country should go another year without a small business representative on the Board of Governors. All indications are thht 1982 will be a rough year for our economy. All the mall. Public meetings. congressional hearings. and newspaper editorials are less Important to the Board than a member who can understand and sympathize With the needs of borrowers. and who can Penetrate those Oakpaneled walls with the message of People struggling to stay In business. and to hang onto their Jobs. James Madison knew nearly 200 years ago that danger stems from limited representation In Policysetting bodies. 1981 has taught us that lesson anew. Let us vote to return to the spirit of our Founding Fathers. and to the legislative intent of the Federal Reserve Act. by assuring small business representation on the Board of Governors next I ask for the yeas and~ nays on the amendment.