Regional President Speech

,$// 7 It is a real pleasure for me to join you here in Wichita for the annual convention of the Kansas Bankers Assoc iation. I am especially delighted because this is my first state association convention since becoming president of the Federal ~~erve Bank of Kansas City 1fCoJ'­ just two months ago. This meeting is just the first of manyJI plan to attend here in Kansas and throughout the Tenth Federal Reserve District in coming years. I'll be meeting this way with bankers as often as possible because I firmly believe that we at the Federal Reserve should strive to improve our communication with all segments of the banking and business , ~ community-not only to convey our ideas on various policy issues, but(to seek your opinions and advice on matters we may be considering at the moment. A A ( i -2­ Your convention theme-"Caucus '76"-seems particularly appropriate this year. Getting together to discuss and clarify the critical issues affecting banking is an important tradition for Kansas bankers. And this year, your concerns appear to be even more significant. On the one hand you are facing rapid development of electronic payments technology, with the associated impacts in your markets and operations. On the other hand, the industry is under attack through so-called "reform legislation" in Congress. I know that many of you ~c...-:( a.-~ bd~eAthat the Financial Reform Act now under consideration proposes to alter many of the fundamental economic and financial relationships in our nation which have developed over a long span of years. While many of you would support the concept of comprehensive financial ~ I JB8;:l» restructuring, would also agree that the Financial Reform Act, in its current e res' n, is an erratic package which would be detrimental to/ the public interest. f'~~~~ -3­ Af rtf ~ ,I' 1\ Recent developments appear to confirm that you have communicated well your concern about this financ ial legislation. Among the industry's ablest spokesmen this year has been your fellow Kansan and ABA president, Rex Duwe. It is in the best tradition of our representative political processes that many of you have spoken up about your beliefs that the financial reform legislation, if passed, would have an adverse impact upon the whole economy, with particular Md ,,~ i;;; f' I effects on housing and cbargtEil5 to consumers fO ( bank services. Many of you are concerned hat the so-called "reform': legislation could lead to political allocation of credit, and you have J L , your rep~esentatives in Washington your concern. -4­ As you all know, the Federal Reserve also has been under attack this year. These attacks have been incorporated recently into the proposed legislation known as the "Federal Reserve Reform Act, " a measure which I believe strikes at the very heart of the traditionally independent Federal Reserve System. Supporters of this legislation claim that it would "democratize" the System. On the contrary, ) believe that the eg-islation would "politicize" I ~ ~ , the System and {"it<' II df'S create a dangerous situation ~economy. As one example, this legislation would provide for the appointment of Reserve Bank presidents by the President of the United States, subject to Senate confirmation. The proposal also would remove the current '" Reserve Bank presidents as voting members of the Open Market Committee until Presidential reappointment, which would not occur until 1981. Such action would seriously undermine the representative and independent nature of the monetary policy process. If this legislation 1 CJ­ becomes reality, and Reserve Bank presidents become directly responsible to members of r " Congress, the exclusive franchise to create mone~ested in the independent Federal Reserve System would be effectively passed into the hands of those who also have the authority to i spend money") ~ ~ x. ,/' ASJyot~re al'il:S::£e, economic history contains many clear lessons of what happens when the money creating process in a nation is taken over by political forces. The creation of money to finance politically desirable projects leads to inflation, the printing of more money, and then rampant inflation. Inevitably the financial structure%ecl mes sC: weak that the economy !l :t:V " collapses, and often the political structure as well. For this reason, I am not in favor of the current legislative proposals as they now stand. This is not to say, however, that changes in the System should not be explored and adopted. The Federal~eservfmust always be receptive to changes that would improve its organizational structure, widen its perspective, and allow it to continue to be responsive to the broad wishes of the American people. However, I believe that any changes that would jeopardize the independence of the System in its conduct of monetary policy, or would weaken the regional and decentralized nature of the System, would be economically unsound and accordingly not in the best interests of the American people. -6­ In closing, I want to say that as inevitable change occurs in banking-whether spurred a ;.....--.""'" /Nk../ by technology,(market developments, or legislation-we at the Federal Reserve Bank of Kansas City intend to work with you to accommodate this change, to manage it for the preservation of the finest financial system in the world. As we consider these matters, and as we deliberate about monetary policy and other policies affecting banking, business, and the public, I hope ~..J that I-like my predecessor George Clay-will be able to call upon @Y friends in Kansas for advice, assistance, and support. I ###

J. Roger Guffey (1976, May 6). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19760507_j_roger_guffey

@misc{wtfs_regional_speeche_19760507_j_roger_guffey,
  author = {J. Roger Guffey},
  title = {Regional President Speech},
  year = {1976},
  month = {May},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19760507_j_roger_guffey},
  note = {Retrieved via When the Fed Speaks corpus}
}