Gonzalez Seeks Congressional Control on Fed : Legislation: House Banking Committee chairman’s bill would extend Senate confirmation to all 12 members of the powerful panel that governs the U.S. money supply.

House Banking Committee Chairman Henry B. Gonzalez (D-Tex.) on Thursday proposed major legislation to impose congressional controls over the Federal Reserve Board, including Senate confirmation of the five local Federal Reserve Bank presidents who belong to the powerful committee that votes on whether to raise or lower interest rates.

Gonzalez also called on federal financial regulators to impose strict standards for requiring banks to disclose “the fair-market value” of their troubled real estate loans. The new rules, which take effect next month, could require some banks to take major write-downs in the value of their large real estate portfolios.

Gonzalez, a veteran populist who has long criticized the Fed for being aloof from the democratic process, said he will hold an extensive set of hearings on his proposal.

During the campaign debates, President-elect Bill Clinton said he was generally satisfied with the Fed’s conduct of monetary affairs and didn’t indicate any interest in limiting the independent board’s powers.

However, Gonzalez hopes that the substantial Democratic majority in Congress will be willing to accept his arguments that the Fed should be more accountable to the elected legislators.

The Fed, which has fought off previous efforts in Congress to limit its power, had no comment Thursday on the Gonzalez plan.

But as Banking Committee chairman, with a reputation for dogged determination, Gonzalez is in a position to lead the most serious effort in many years to restrict the Fed’s independence.

The agency influences the economy through its Federal Open Market Committee, which uses the agency’s massive holdings of government securities to help shift interest rates.

The FOMC includes the seven Federal Reserve Board governors, who are chosen by the President and confirmed by the Senate. The other five members are the presidents of regional banks, chosen by the boards of their banks without congressional approval, Gonzalez noted.

“The members’ actions have such a profound influence on employment, the price level and exchange rates--in short, on the economic well-being of our country--that it is essential that we know just who we are placing in such a position of power,” he said.

His bill would require the local bank directors to give a list of potential nominees to the President, who would choose “no more than a simply majority from the Administration’s own party” to be nominated as heads of the banks.

Gonzalez believes that the directors too often represent a narrow, banking industry viewpoint, focusing on controlling inflation without enough concern for stimulating the economy.

He contends that the Fed “has made a sham out of the ‘public’ participation and director ‘diversity’ concepts for boards of directors of reserve banks despite the Federal Reserve Reform Act of 1977 that clearly delineates that women, minorities and people with a consumer and labor orientation should be represented in decision-making roles.”