Federal Reserve Board chairman Arthur F. Burns, in unusually strong and often emotional language, yesterday denounced an effort by some congressmen to require the central bank to made public forecasts of interest rates.
"You'll never get a forecast on interest rates out of me," he told Rep. Henry S. Reuss (D. Wisc.), chairman of the House Banking Committee, and principal author of a bill to make the Fed more accountable to Congress.
"If I am forced to do it (forecast interest rates) that would pose a very difficult moral circumstances for me," Burns said. A Fed spokesman later denied that Burns had intended a veiled threat of resignation.
Burns did not deal with substantive issues relating to the economy or to current Federal Reserve money policy. He will do that in a separate session Friday, when he presents the Fed's regular quarterly updating of money targets.
But in response to questions, he said there were "serious implications" to the depreciation of the dollar. "We have a great deal of responsibility to protect the integrity of our money domestically and internationally," Burns said.
The dollar has depreciated only fractionally against an average of other currencies, but has declined against a stronger German mark. Swiss franc and Japanese yen. In a Washington Post interview last week, Treasury Secretary W. Michael Blumenthal said that the dollar might edge down further against the strong currencies.
Burns said that "Blumenthal's thinking has been misinterpreted by the press." A Treasury spokesman later said that Burn's comment was not correct, if his reference was to The Post story.
"The capacity for mischief inherent in the interest-rate provision is so apparent that I find its inclusion in the bill inexplicable," Burns declared. He had much the same criticism of a provision calling for quarterly reports on the portfolio of securities held by the Fed.
Reuss' bill (H.R. 8094) would make basic changes in the operation and management of the central bank and especially its relationship with Congress. The requirement for public revelation of the Board's thinking on interest rates was only one of several major provisions to which Burns objected.
On the other hand, he endorsed several parts of the bill, including a statement that monetary policy "shall be governed by the national policy to promote maximum employment, production, and price stability." In effect, this would substitute the more precise "price stability" goal for the "purchasing power" language in the Employment Act of 1946, which now is the guiding underpinning of Fed policy.
He also backed a provision that would provide Senate confirmation of the chairman of the Board and in a colloquoy with Reuss, agreed that the chairman should testify quarterly on prospects for the "velocity" of money.
Money velocity - the actual rate at which many changes hands - has a great effect on the amount of new monetary growth that may be needed. The Reuss bill had demanded that the Fed specify anticipated velocity along with its quarterly money growth target, but Burns balked at this. Reuss then said he was satisfied with Burns' offer to testify on his own views during his quarterly appearances before the House and Senate.
That testimony is now being given under terms of a congressional resolution that expired at the end of 1976. The Reuss bill is an effort to extend and expand that congressional overview by statute requiring the Fed to offer testimony on matters beyond the monetary aggregates.
"Some of the proposed revisions, if enacted," Burns intoned in his best sermon-like style, "would be inimical to the orderly functioning of financial markets." What's more, he said any "clues" to what the Fed might do could result in "violent" changes in interest rates.
Reminded by Reuss that both Treasury Secretary W. Michael Blumenthal and OMB Director Bert Lance had talked about interest rate prospects earlier this year without "rocking" the markets, Burns shot back:
"I hope you won't ask me to do it. It would force the Fed into misleading the public at times. I think it's immoral. As for the Secretary or the Budget Director - well, it's a free country."