Letter to Congressional Committee Chairmen on Federal Compensation for Federal Reserve Board and Office of Management and Budget Officials

I AM writing to you about a matter of unfinished business which I believe deserves the early consideration of the Congress.

As you know, the Quadrennial Commission on Executive, Legislative and Judicial Salaries recently issued a comprehensive report which covered a wide range of problems in the present system of Federal compensation. In a discussion of existing, serious anomalies in the Federal pay structure, the Quadrennial Commission stated:

"By any standard, the Chairman of the Federal Reserve Board has responsibilities that one could argue are roughly equivalent to the Secretary of the Treasury. His position has many aspects of a career job--given the fourteen year tenure. Thus, it does not offer the prospect of a short government career. The internal relationships within the "government" banking institutions are more than anomalous. They are incomprehensible. The President of the New York Federal Reserve Bank is paid $97,500 versus the $44,600 Level II salary of the Chairman of the Federal Reserve Board.

An equally irrational classification result is the enormously important job of Director of the Office of Management and Budget who constantly negotiates with Cabinet members on critical budget matters on behalf of the President, yet is still classified as Level II; i.e., at the level of an Undersecretary." I would urge that immediate steps be taken to correct these two serious defects in the classification structure.

With regard to the Federal Reserve Board:

--Those who control our monetary policy have a more pervasive impact on the economy and society as a whole on a day-to-day basis than any other comparable group in any department or agency.

--The Federal Reserve Board has an extraordinary set of conflict of interest rules. Unlike other members of the government, its members are even barred from investing in government bonds. There are also existing, severe constraints on the jobs that can be accepted upon departure from the Board.

--Historically, the Chairman of the Board and the members of the Board were paid at the Cabinet level. In 1949, however, the Congress reduced the Board's pay levels.

Action should be taken to restore the position of Chairman of the Federal Reserve Board to a Level I and the members of the Board should be raised to Level II.

With regard to the Director of OMB, the issue is simply whether all Cabinet officers subject to Senate confirmation should receive the same pay. I believe the answer to this question is unequivocally and categorically in the affirmative. The Congressional hearings on PL 93-250 of 1974 indicate that the Congress, when it required Senate confirmation for the Director and Deputy Director of OMB, considered the position of Director to be comparable in importance to other members of the Cabinet whose appointments are subject to Senate confirmation.

I would urge that immediate action be taken on making the Director of OMB Level I and the Deputy Director Level II.

I trust you will accept these recommendations in the spirit in which they are made.

With warm regards.

Sincerely,

GERALD R. FORD