Fed power shifts from Greenspan

April 08, 1994|By New York Times News Service

Without a vote or even a formal discussion, the Federal Reserve's top policy-makers are taking over the process of raising and lowering rates, rather than allowing their chairman, Alan Greenspan, to act on his own between meetings, as he often has in the past.

Several Federal Reserve officials, speaking on the condition of anonymity, described the new approach not as implying criticism of Mr. Greenspan, but as a sign of a growing reluctance to delegate authority to any single person.

In fact, both of the Fed's recent moves to raise rates, in February and March -- the first increases in five years -- were made by the policy-makers as a group in the face of faster economic growth and growing concerns about inflation.

The new approach to decision-making has evolved through consensus, and while it has not been made formal, neither has Mr. Greenspan challenged it.

It comes partly in response to pressures from Congress for the Fed's policy-makers to be more open and accountable for their actions.

"We are under enormous pressure from some quarters to stand up and be counted," a senior Federal Reserve official said, referring to congressional demands for more public disclosure of Fed deliberations. "This change we are making may be a halfway house for taking on that accountability as a committee rather than individually."

The Fed has said that its job has become more difficult because the economy is behaving in ways that traditional statistics are failing to measure adequately.

"If our national indicators were more reliable, there would not be as great a need for a collective decision, and we would be delegating more authority to the chairman," said Harvey Rosenblum, director of research at the Federal Reserve Bank in Dallas.

In the past, the policy-makers, collectively known as the Federal Open Market Committee, adopted directives that gave the chairman guidance.

Actual changes were almost always made by Mr. Greenspan in the six to eight weeks between meetings.

He either acted on his own, or after consulting with his colleagues in a telephone conference call, a practice that Wayne D. Angell, a Fed governor who resigned in February, described as less than satisfactory.

"It is difficult for the members to politely disagree in a conference call the way they can at the meetings," said Mr. Angell, whose views sometimes clashed with Mr. Greenspan's.

The directives adopted at each meeting are called, in Fed jargon, "symmetric" or "asymmetric."

An asymmetric directive toward higher rates, or toward lower rates,would give Mr. Greenspan the green light to move in the indicated direction, if he wished to do so between meetings, while a symmetric directive is effectively an instruction to leave interest rates alone.

Before the Fed's two recent moves, rate changes typically occurred in this fashion between meetings.

But significantly, the policy-makers voted at their Feb. 4 meeting to raise rates that day.

And instead of adopting an asymmetric directive to reflect their view that rates should be going up, they took the unusual step of adopting a symmetric one -- in effect, telling Mr. Greenspan not to act betweenmeetings. The March 22 meeting produced another vote to push up rates that day. The minutes of that closed-door meeting will not be published until May 20.

The new insistence on changing rates at meetings, and not between them, has inevitably raised speculation that some members of the Open Market Committee were losing faith in Mr. Greenspan.

That policy-making group is composed of Mr. Greenspan and the six other Fed governors based in Washington, as well as the presidents of the Fed's 12 regional banks.

Despite denials by many policy-makers, Mr. Angell said Mr. Greenspan had not always responded as all the policy-makers thought he should.

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