A Look Inside the Federal Reserve

Even by the high standards of Washington's official gathering places, these quarters are impressive.

Inside the Federal Reserve's classical marble edifice, a short distance from the Capitol city's centers of power, this board room's ceilings loom 23 feet high. A 1,000-pound chandelier dangles above a massive, 27-foot mahogany table, a marble fireplace gracing one wall.

The trappings clearly befit the man who preside at that table — he's been called the world's second-most-powerful official. And in this room, he and his associates make decisions that can roil or soothe financial markets and global economies.

That man is chairman of the Federal Reserve, Alan Greenspan. And eight times each year, he convenes his so-called Federal Open Market Committee to set the key short-term interest rates that reach across the economy and ultimately all the way into American's pockets and purses.

Inside the Federal Open Market Committee

A Green Light Goes On

The Fed meeting is a gathering of some of the financial world's most powerful figures. Besides Greenspan, the committee comprises the seven members of the Federal Reserve Board, the president of the Federal Reserve Bank of New York and a rotating selection of four of the other 11 reserve bank presidents.

But it is Greenspan who sets the agenda. On days when the committee meets, Fed officials and staff members take their respective chairs just before Greenspan takes his place at one end of the table.

A perk of Greenspan's chairmanship, notes one Fed governor, is that while all must walk a long corridor in order to enter the room's main entrance, Greenspan enters from a separate door connected directly to his office.

At 9 a.m. precisely, Greenspan calls the meeting to order, with a green light blinking on to signal that the meeting is being recorded.

Yet despite the power and influence collected in the room, the meeting is short on pomp and long on serious deliberation about the nation's economic condition.

There's no fancy spread of pastries and coffee. In fact, only water is served throughout the gathering, at least until an early afternoon buffet of cold cuts, rolls and drinks finally is wheeled into the room.

Greenspan’s View Is One That Prevails

The first substantive agenda item is a staff presentation on developments in the domestic financial and foreign exchange markets, aided by colorful charts which identify market moves in response to key events of recent weeks.

Next comes the economic forecast, a report put together by a group of about two dozen staffers and circulated to committee members the previous week in a document known as the green book.

After each Fed member is afforded time to present his or her views on the economy, and a staff presentation on monetary policy options, it's the chairman's turn to speak. Greenspan expresses his preference for what the committee should do, followed by suggestions from the others.

By early afternoon the committee is ready to vote. And while there is an occasional dissenting vote, Greenspan's position is the one that always prevails.

Interactive Guide to the Federal Reserve

Getting the Word Out

But the rest of the world is still holding its breath, awaiting word of the decision. That role falls to the financial press and wire services, whose reporters gather in a room within the Treasury Department some six blocks away.

Shortly before 2:15 p.m. ET, news services are called to say the Fed's statement will be faxed shortly. And in a system that's been in place since 1994, copies of the statement are quickly made and distributed around the room. There's a countdown and then a bell (sometimes a whistle) will be sounded to signal the news embargo is lifted. Reporters rush to phone their editors with the news.

In a vast ripple effect, Wall Street will react, as will banks and other financial institutions around the world. But, for the day, at least, Greenspan and his colleagues have spoken.