Mr. KRUG. I think you will have to ask Mr. Matthiessen that question. Right now the Copper Branch advises us that there is just no copper for civilian needs. Such requirements will have to be met by whatever copper comes out of the effort to get increased copper production, and better control of the copper believed to be on hand in stocks and in warehouses throughout the country. FORMER CONNECTIONS OF O. P. M. ASSISTANTS Mr. TARVER. Mr. Krug, did you hear Mr. Slattery's statement with regard to your three assistants? Mr. KRUG. Yes, indeed; I heard it. Mr. TARVER. Each of whom he said was connected with power interests. Mr. KRUG. Yes. I would like to say this, and I would like to make it completely clear and completely frank. I want to answer your question as directly as I can. We have the job of defense production. In that job, I think power is probably one of the most important single elements. It underlies every line of defense production. It is an operating and production job. It must be done by men who know operating problems. The staff we have on power I have assembled personally. I have selected every one of them. They have not been inherited by me from anybody. I am responsible for what they are. They do include men from the private power companies. They also include men from the regulatory agencies, and they include men from some of the leading publicly owned utility systems. Moreover, they are technicians and experts. They are not policy men. To the extent that policy is involved in the Power Branch I make it. But most of the policy in O. P. M. comes down from S. P. A. B., and not from branch chiefs. NOTE. See Mr. Nelson's testimony for comment on Mr. Krug's authority, p. 217. Now, the three men who were mentioned here are not my direct assistants. They are men on the staff. Mr. Scott is one of the men in the Priorities Division. Mr. Falck is one of the men on Power Supply Allocation. Mr. Moore is one of the men on production. At the present time, collaborating with Mr. Moore on his work is Mr. W. S. Peterson, of the Los Angeles municipal system. They work as a pair on every important production problem. The power priority section has been headed up by Dr. E. W. Morehouse, who, for 10 years, directed the Wisconsin Public Service Commission, and who was for most of that period a consultant for T. V. A., and at times a consultant for Bonneville. During the past year he has been economic adviser to the trustees in the liquidation of the estate of Associated Gas & Electric Corporation. I am proud of the staff that we have down there. I do not believe there is a better group of men in the Government. They have been selected just for this job. SCOPE OF AUTHORITY OF ASSISTANTS TO DECIDE PRIORITY APPLICATIONS Mr. TARVER. Do these men who come from power companies have anything to do with the making of decisions as to priority rights? Mr. KRUG. They make recommendations on priority applications that flow in now at the rate of 600 to 900 a day, but the policy on how those applications are rated is controlled by S. P. A. B., as to general policy, and by me as to the detailed policy. I make clear to them what kind of a project is entitled to a certain rating. Their job is to find out whether the project is the kind of a job that is entitled to that rating. Mr. TARVER. Suppose somebody is dissatisfied with a decision made on his application, and wants to have that reviewed by somebody; are you the authority that reviews it? Mr. KRUG. Yes, sir; I review those personally, and I might say every important project, such as an R. E. A. project, I review personally. No one does that for me. Every one of those crosses my desk and has a memorandum prepared on it, and I sign it. So, whatever decision is made, I know of it. POLICY RESPECTING R. E. A. APPLICATIONS Mr. TARVER. Can you give us anything in the way of hope as to when it may be possible for these R. E. A. cooperatives to have copper allocated to them for project which are not regarded as being strictly connected with national defense? Mr. KRUG. I think Mr. Matthiessen can answer that better than I can. Needless to say, I favor the R. E. A. I have spent 5 years on rural electrification. I think it should rank very high on the list of priorities. As soon as copper can be made available, I think R. E. A. should get it, but somebody has to tell me copper is available. If the Copper Branch of O. P. M. says no copper is available, I carry out orders and try to scale everybody down alike. Mr. TARVER. What do you say with reference to the suggestion or the statement made by Mr. Slattery to the effect that a great many of these cooperatives feel that they should be allowed to expand to the extent that they think would be necessary in order for them to be going concerns? Mr. KRUG. My personal view is that the Government should be lenient with all of these cooperatives. If they cannot pay back their loans, I think the Government ought to forget it. I do not think priority restrictions will be serious enough to cause rural electrification cooperatives to fail for that reason alone. I cannot think of a better investment that the country has made than the investment in rural electrification. If we lose those dollars I do not think the country has lost very much. The lines are there, the transformers are there, and they will continue to do the job of rural-electric service. The Government ought to help them if they cannot pay off. Mr. LEAVY. You do admit, Mr. Krug, that there may be instances, and probably quite numerous instances, where R. E. A.'s were perhaps set up on a basis of 1,000 customers, and they now have reached only 200 or 300, and with that heavy overhead, if they are unable to proceed to the full extent that they had expected, they might become financial liabilities on the R. E. A.? Mr. KRUG. Yes; if they are denied copper for any considerable length of time I think that situation might prevail. Of course, I do not think this is a long-range affair, and I do not think a year or so is going to make or break any of them. Mr. LEAVY. But, in giving consideration to priority applications, would that be one of the factors that would be taken into consideration? Mr. KRUG. Yes; I think it will be taken into consideration when we have copper available for civilian purposes, but I do not think it is a factor that we can take into account as long as all of the copper is needed for defense. Mr. LEAVY. Now, during the last 3 or 4 years particularly, the great expansion of the transmission and the distribution of electric energy has been by public agencies and through cooperatives; has it not? Mr. KRUG. Yes, sir. Mr. LEAVY. And practically all of them have gone ahead without any reserve on hand of copper, and a great many of the larger ones used aluminum for transmission wires? Mr. KRUG. Yes. Mr. LEAVY. Of course, aluminum is out of the picture entirely now, as I understand it? Mr. KRUG. Yes; it is temporarily. Mr. LEAVY. And they have had no reserves; the T. V. A. had no great copper reserve or aluminum reserve, nor did Bonneville. Mr. KRUG. That is right; they are using it as fast as they get it. Mr. LEAVY. But some of these private concerns have reserves. Mr. KRUG. I believe that some of the private concerns and some of the big municipal concerns, for that matter, knowing this was coming on, did stock up, and we are trying to adjust that under this order that will control the materials they can get in the future. Mr. LEAVY. But they were not stocking up in anticipation of a development in progress, as much as they were stocking up for the purpose of meeting a situation that they might take advantage of, to the prejudice of such agencies as R. E. A., and some of the rest of these agencies? Mr. KRUG. I do not think that was primarily the motive, although I do not know. I happen to know that some of the towns in the Tennessee Valley are stocked up, and they were not trying to ruin cooperatives. Mr. LEAVY. They are not interfering with R. E. A. in any way, are they? Mr. KRUG. No. Mr. LEAVY. But do you doubt the fact that some of the private concerns are now building lines out into the same territory that they have had an opportunity for years and years to build into, where lines were projected and planned by the R. E. A.? Mr. KRUG. It would not surprise me at all, but I do not know personally of such cases. DOLLAR-A-YEAR MEN ON STAFF Mr. LEAVY. Now, you talked about your staff and that you are proud of them, and no doubt you have a right to be; I am sure that none of the committee do, and I know that I do not, question the patriotism of any of your people. But, I do question the ability of an individual to render fair and impartial judgment when he is required to sit in judgment upon a matter in which he is interested either directly or indirectly, either immediately or remotely. How many of your men are dollar-a-year men? Mr. KRUG. I would like to give you an accurate figure later, but there are less than 20. Mr. LEAVY. How many are there on your staff, that is, that occupy executive positions? Mr. KRUG. I think of our technical staff less than 20 are dollar-ayear men. Mr. LEAVY. And you have a staff of how many? Mr. KRUG. About 60. Mr. LEAVY. About one-third of them? Mr. KRUG. Yes. Mr. LEAVY. And how many of those 20 come from the private utility field? Mr. KRUG. I would say most of them come from the private utility field. Some of them come from manufacturers of equipment. Mr. LEAVY. Do you know whether or not those that come from the private utility field are now drawing compensation from their former employers? Mr. KRUG. Most of them are. Mr. LEAVY. Do you have the facts and figures down there, when they come into your service that would disclose that situation? Mr. KRUG. Yes. Mr. LEAVY. Is there any reason why you would not want to give it to us for the purpose of the record? Mr. KRUG. No; I can think of no reason. Mr. LEAVY. I am going to ask that the names of those dollar-a-year men be put into the record, together with the utility from which they came, and the compensation that they now receive from such utility. Mr. TARVER. Without objection that will be done. Mr. KRUG. If you do not mind, Mr. Chairman, I would like to submit a list of the complete staff. I think it would be more informative. (The list referred to may be found on p. 113.) Mr. TARVER. Let me ask you this, Mr. Krug, Would one of those men pass on an application of his own company? Mr. KRUG. No. There are written instructions on that. No man may pass on an application for his own company, or for any company that his own company is affiliated with. That is an iron-clad rule, and there are no exceptions to that rule. Mr. TERRY. If an application for priority comes to you from a cooperative, and it does not show on its face that it is for the purpose of a national-defense project, do you turn it down as a matter of course? Mr. KRUG. No; it gets a B rating, which means, in effect, that it does not get copper because we do not have enough copper to take care of the A ratings. That is, pending the completion of the copper study I told you about, by which we will determine if there is not some way to find enough copper so that we can make it available for such a worth-while requirement as rural electrification. Mr. TERRY. Then, until you have finished this study, all of the cooperatives' applications for priorities which do not deal with national-defense projects, are put in class B, and are refused priority? Mr. KRUG. They are given priority, but it is a B rating. Mr. KRUG. Yes, sir. DESIRABILITY OF DETERMINATION BY R. E. A. WHAT COOPERATIVES ARE ENTITLED TO PREFERENTIAL PRIORITY Mr. TARVER. Would you deem it desirable, when and if you have copper that may be allocated to cooperatives, that the Ř. E. A. undertake to select those who are entitled, in their judgment to preference, out of the very considerable number they have? Mr. KRUG. That is, civilian projects? Mr. TARVER. Yes. Mr. KRUG. Yes. I am giving you that as my personal view. Mr. TARVER. Do you think that is a function that they could discharge better than the O. P. M.? Mr. KRUG. I would think so, but I have tried time and time again to get information on particular projects, and as Dr. Craig pointed out, apparently they do not have the required information. I as sume that R. E. A. can get it from the projects more completely than we can and they have built up an organization which would help in making certain that we have all of the facts: I would say if an allocation is made which is less than the total requirement that their advice as to how that allocated should be distributed by projects would be very valuable. STATUS OF FOOD PRODUCTION IN LIST OF DEFENSE NEEDS Mr. TERRY. I suppose you know that the Department of Agriculture is encouraging the farmers to produce more food, feed, and so forth. They say that food will win the war and dictate the peace. Now, the farmers who are in the cooperatives and who are responding to the call of the Secretary of Agriculture to assist in the production of food, do you not think that they should be considered as part of the defense program? Mr. KRUG. That decision comes away above my level of responsibility. S. P. A. B. would have to decide how all of these things relate together. Obviously, almost everything we do has some relation to the defense picture. Food production is one of the important. things. Mr. TERRY. That is a matter, then, that does not come within your jurisdiction? Mr. KRUG. No, sir; except for those projects that would be classified as defense. It would have to come from S. P. A. B. Mr. TERRY. So far, these projects where the farmers are responding to the call to produce food, and where they belong to these cooperatives, they have not been given the green light, in your opinion, by the people above you who make this policy? Mr. KRUG. They have not. Mr. TERRY. They have not? |