therefore, become an important element of sovereignty and, in the case of the Federal Government, rests ultimately with Congress. Congress, however, is not organized in such a manner that it can effectively manage monetary policy from day to day or even from year to year. If it were, then, by the same token, it would not be well organized to perform its fundamental deliberative tasks under the Constitution. Congress must, therefore, rely heavily upon agents to carry out its underlying wishes. The general agent named in the Constitution to enforce the laws and carry out the wishes of Congress is the President and, under him, the executive branch of the Government. The Federal Reserve System--the most important executor of monetary policy-is a mixed organization. The members of its Board of Governors are appointed by the President with the advice and consent of the Senate, and the Chairman of the Board is designated by the President. However, the members of the Board during their terms of office have, in general, recognized no responsibility except to Congress in the performance of the majority of their functions. Two-thirds of the membership of the board of directors of each Federal Reserve bank is elected by its member banks and one-third is appointed by the Board of Governors. The president of each Federal Reserve bank is elected by its board of directors, but his election must be approved by the Board of Governors. The regional organization of the Federal Reserve System, reaching as it does deep into the business community, provides an invaluable liaison between business and Government. The System has performed an indispensable service in helping business to understand the point of view of Government, and helping Government to understand the point of view of business. It is, in my opinion, of the utmost importance to insure the continuation of the participation of business and agriculture (and possibly labor) in the formulation of monetary policy, while at the same time insuring that the fundamental decisions which affect the welfare of every person in the country and so are of the essence of sovereignty should be made by Federal officials and, ultimately, by Congress. THE APPROPRIATE CONTENT OF MONETARY POLICY The controversy which preceded the announcement of a "full accord" between the Treasury and the Federal Reserve System centered around the efficacy of credit policies resulting in small increases in interest rates as means of combating inflation. Both short- and longterm interest rates had increased during the year preceding the full accord; since that time (March 4, 1951) the increase in long-term rates has been given wider amplitude as a result of the abandonment of the policy of supporting long-term Government obligations at par. The effects on inflationary pressures of the policies resulting in these increases have been the subject of intensive discussion, much of which is reflected in this compendium. As is so often the case in the real world, the results of this discussion have so far been inconclusive. It will be one of the major tasks of the subcommittee to sift this matter further and come to such conclusions as it believes appropriate with respect to the extent to which a general tightening of credit can and should be used as an instrument in combating inflation under present and other conditions. Furthermore, inasmuch as the effective appli cation of general credit controls may depend, at least in part, on the adoption of measures to cushion some areas of the economy-and particularly the public credit-from its full impact, this sifting must inevitably include some consideration of measures (such as the various special reserve devices) which have been proposed for this purpose. Finally, the role of general credit control can scarcely be evaluated except in relation to that of its equally general partner, fiscal policy. And the role of both general credit control and fiscal policy must, in turn, be evaluated in the light of their more partial alternatives and supplements principally selective credit controls and so-called direct controls, such as those over prices and wages. The advantages and disadvantages of each of these, under present conditions and under the conditions with which we may be faced in the future, must be assessed if the subcomittee is to reach a useful conclusion concerning the role, if any, which each of them ought to play in combating inflation and maintaining a high level of employment under present and other conditions. The subject matter before the subcommittee is, therefore, immense. The subcomittee's approach must be selective, examining most closely such areas of the field as, in its opinion, require immediate attention. Only one result of its deliberations can be confidently predicted: that is, that the fundamental issues involved will be found vastly too complex to permit of facile generalization. WRIGHT PATMAN, Chairman, Subcommittee on General Credit 92245-52-pt. 1- -2 Chairman, Subcommittee on General Credit Control and Debt Management, Joint Committee on the Economic Report, Congress of the United States, Washington, D. C. MY DEAR MR. CHAIRMAN: The work has now been completed on the answers to the questions which you, as Chairman of the Subcommittee on General Credit Control and Debt Management, submitted to me on October 12, 1951. It seems to me that the inquiry which your Subcommittee is conducting will make an important contribution in the field to which it is addressed. I have given a great deal of time and thought to the answers which I have submitted to the questions and have tried to make them as responsive as possible. I trust, therefore, that you will find that they meet the requirements which you had in mind in developing them. If there are any omissions in the answers or any points which you feel are not covered adequately, I am, of course, willing to send you such additional material as is required. Sincerely, JOHN W. SNYDER, Secretary of the Treasury. A. CONGRESSIONAL POLICY DIRECTIVES 1. State, citing the appropriate statutes, all of the policy directives bearing upon economic objectives which have been given by Congress to the Treasury Department as a guide to the use of the powers entrusted to it. Nearly all of the legislation which has been passed by the Congress relating to Treasury responsibilities has had definite economic objectives; and the fact that the Congress directed the Secretary of the Treasury to carry out the legislation has constituted in itself, in most cases, a policy directive. Generally, also, the circumstances leading to the passage of the various statutes have made clear the economic objectives which the Congress had in mind in enacting the legislation. Some of the laws which have been passed have had detailed provisions defining the purposes of the acts and objectives which are to be achieved in carrying them out. In other cases, the objectives have been implicit in the very nature of the legislation. Accordingly, the answer to this question, it seems to me, requires more than just a current list of major statutes under which the Treasury endeavors to carry out its economic objectives. (See Exhibit A, p. 8.) Such a list does not tell the whole story. It does not indicate how Treasury responsibilities, like those of the rest of the Government, have developed over a period of years in a flexible way and not merely by statute. 1 Neither does it indicate how Treasury policies on economic matters have developed within the general framework established by the Congress. It is with this in mind that a discussion of the historical development of Treasury activities in the economic area is presented in addition to the citations listed in Exhibit A. A survey of the Finance Reports of the Secretaries of the Treasury makes it clear that historically the Treasury has attempted to carry out the responsibilities with which it is charged by law with a continuous recognition of their significance in the economic life of the Nation. The Employment Act of 1946 now represents the basic policy directive bearing upon economic objectives for the Treasury, as well as for other Government departments and agencies. Long before the Employment Act of 1946 was passed, however, the Treasury was endeavoring to manage its responsibilities with a view, on the one hand, to the immediate problems of fluctuations in business and an awareness, on the other hand, of the importance of facilitating the long-term economic growth of the country. The basic directive in this respect is the directive contained in the statute establishing the Department in 1789, which set forth the duties of the Secretary of the Treasury as follows: That it shall be the duty of the Secretary of the Treasury to digest and prepare plans for the improvement and management of the revenue, and for the support of public credit; to prepare and report estimates of the public revenue, and the public expenditures; to superintend the collection of the revenue; to decide on the forms of keeping and stating accounts and making returns, and to grant under the limitations herein established, or to be hereafter provided, all warrants for monies to be issued from the Treasury, in pursuance of appropriations by law; to execute such services relative to the sale of the lands belonging to the United States, as may be by law required of him; to make report, and give information to either branch of the legislature, in person or in writing (as he may be required), respecting all matters referred to him by the Senate or House of Representatives, or which shall appertain to his office; and generally to perform all such services relative to the finances, as he shall be directed to perform (1 Stat. 65). The provisions of this basic statute gave the Treasury Department, from the beginning of the Nation, responsibilities which were at the very heart of the economic problems of the country. The Treasury Department was, in fact, in the early days of our country, the sole "economic department" of the Government. And, as the country developed, the Congress gave the Treasury new and extended responsibilities bearing on economic objectives. Over the years, the duties which the Congress has instructed the Treasury to carry out have reflected a great many of the important economic problems which have engaged the attention of the country during the more than 160 years of its existence as a Republic. The Reports of the Secretary of the Treasury, beginning with the first Report prepared by Alexander Hamilton, as well as the numerous other papers relating to Treasury matters, indicate that successive Secretaries of the Treasury have been acutely conscious of the economic responsibilities which have been placed upon them. The material which follows, largely from Treasury Reports, is illustrative of this economic awareness in a selected number of areas. 1. Support of the Public Credit and the Revenue System The first and basic policy directives laid upon the Secretary of the Treasury, as already noted, were in the original Act of 1789. Of the |