Establish a Department of Housing and Urban Development

ment, in part, because Congress had acted on the question quite recently, but, I think, even more important, because of certain complications which arise about the functions of the Home Loan Bank Board. Some of its functions are regulatory in nature and are exercised through quasi-judicial machinery. It has some resemblance in its responsibilities and procedures to some of the independent regulatory agencies, and although some Cabinet departments do exercise regulatory functions, there has always been some question, I think a legitimate question, about the extent to which agencies exercising quasijudicial regulatory functions ought to be incorporated in executive departments.

Senator SIMPSON. Would you advocate the inclusion of this department under this new system if you set it up?

Mr. GORDON. I would not advocate the inclusion of the Federal Home Loan Bank Board in this new department.

Senator SIMPSON. Could you submit a copy of this study you say you made for the record here so that we could have the benefit of that, Mr. Gordon?

Mr. GORDON. We will be happy to submit a statement. We examined it internally.

(The statement referred to follows:)

EXHIBIT 11

FEDERAL HOME LOAN BANK BOARD

The Federal Home Loan Bank Board was created as an independent agency in 1932. At one time, it was a part of the former Federal Loan Agency. From 1942 until 1947, it was a constituent of the National Housing Agency and from 1947 until 1955 it was a constituent of the Housing and Home Finance Agency. The Board again became an independent agency under the Housing Amendments of 1955. In restoring the Federal Home Loan Bank Board to independent status, the Congress emphasized that in its view the Board's primary mission related to the supervision of private financial institutions, rather than to the encouragement of housing, and that its functions were analogous to those of other independent regulatory agencies such as the Securities and Exchange Commission and the Federal Communications Commission.

The Federal Home Loan Bank Board's activities obviously have a significant impact on the cost and availability of housing credit. The Board's policies need to be related to national housing policies and objectives. Necessary coordination can be provided, however, by means other than the transfer of the Federal Home Loan Bank Board to the Department of Housing and Urban Development. Integration of a regulatory agency within the structure of an executive department would present serious organizational problems. While regulatory functions may be vested directly in the head of an executive department, the establishment by law of a regulatory board within a department, except for housekeeping purposes, would be most unusual. The Secretary's authority with respect to such a board would have to be highly circumscribed, and he could not properly be held responsible for the performance of its regulatory functions. In this connection, it should be noted that the Home Loan Bank Board was a constituent within the Housing and Home Finance Agency and under the provisions of the Reorganization Plan No. 3 of 1947 the Housing Administrator's authority was limited to "general supervision and coordination." The functions of the Home Loan Bank Board were vested directly in the Board, not the Administrator.

DIFFERENCES BETWEEN S. 1599 AND PAST PROPOSALS

Senator SIMPSON. I have another question. What are the essential differences between this bill and the bill which the Kennedy administration submitted in 1961, to create a Department of Urban Affairs and Housing?

Mr. GORDON. The bills are very similar, Senator. I can run over some of the differences with the bill reported in 1961.

The first difference is a difference in the proposed name of the Department. The proposed name in the present bill is Department of Housing and Urban Development. In the 1961 bill it was Department of Urban Affairs and Housing. There is a difference with respect to the treatment of the Federal Housing Administration in the two bills. The committee amendment of the 1961 bill provided that the functions of the Federal Housing Administration would be in the Secretary of the Department and carried out under his direction by a Commissioner and would have transferred the FHA as an entity to the Department. Now, the present bill does not transfer FHA as an organizational entity to the Department but vests the statutory authority relating to FHA functions in the Secretary and allows him flexibility to organize the discharge of the functions of the FHA legislation in the most efficient manner, so there is a technical change in that respect.

The committee amendment to the 1961 bill would have provided for appointment of the Federal Housing Commissioner by the President with the advice and consent of the Senate. The present bill, as I just indicated, does not require the retention of the Office of Federal Housing Commissioner and so does not require that he be appointed by the President with the advice and consent of the Senate.

The appointments of the new Department which would require the advice and consent of the Senate are, of course, the Secretary, the Under Secretary, the four Assistant Secretaries and the General Counsel.

Finally, the 1961 bill provided for three Assistant Secretaries. The present bill provides for four Assistant Secretaries. I think you will find that most Cabinet departments today have four or more Assistant Secretaries.

The other changes, I think, were quite minor and technical between the two bills:

EXHIBIT 12

BILL TO ESTABLISH A DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

DIFFERENCES BETWEEN 1965 BILL AND BILL REPORTED IN 1961

The new bill to establish a Department of Housing and Urban Development is like the administration bill (S. 1633 and H.R. 8429, 87th Cong.) as amended and reported in 1961 by the Senate and House Committees on Government Operations, except that (1) the name of the Department is changed; (2) a committee amendment to the 1961 bill relating to the Federal Housing Administration is deleted, the related provision of the original administration bill is substituted for the committee amendment, and an additional Assistant Secretary is authorized and (3) other conforming changes are made. More specifically, these differences are as follows:

(1) Name of Department.-The name of the Department under the 1965 bill would be the Department of Housing and Urban Development rather than the Department of Urban Affairs and Housing. This name would reflect more accurately the functions of the Department. It would make it clear that the Department would be concerned with the development (but not other "affairs") of all urban areas-large and small. The statement of purpose of the bill and the functions of the Secretary as stated in the bill are also changed to accomplish this clarification and for consistency.

(2) (a) FHA structure and Commissioners' Office.-The committee amendment of the 1961 bill provided that the functions of the FHA would be in the Secretary of the Department and "carried out under his direction by a Commis

sioner," and would have transferred the FHA as an entity to the Department. The 1965 bill would transfer the functions of FHA to the Secretary, and the Secretary could provide for the administration of those functions through such organizational component and headed by such officer as he determines.

This is consistent with the longstanding policy of the executive branch and with the recommendations of the Hoover Commission. As a matter of good organization, functions should be lodged in the head of the department or agency. It is also consistent with the existing structure of most departments and major agencies. The 1965 bill contains clear provisions emphasizing the importance of the Secretary's functions with respect to housing. The committee amendment was prompted by concern that housing would not receive its share of attention. The provisions of the 1965 bill remove the need for the committee amendment.

(b) Appointment of Federal Housing Commissioner.-The committee amendment to the 1961 bill would have provided for appointment of the Federal Housing Commissioner by the President with the advice and consent of the Senate. Under the new bill the head of any office established by the Secretary to carry out his FHA functions would be filled through appointment by the Secretary.

This authority in the Secretary is necessary for a consistent organization of the Department, and to give him the basic authority needed to assure control over the functions for which he is responsible. It conforms to a specific recommendation of the Hoover Commission.

(c) Additional Assistant Secretary.-The 1961 bill provided for three Assistant Secretaries. The 1965 bill provides for an additional Assistant Secretary to provide maximum flexibility for the Secretary in organizing the Department.

(3) Conforming and other changes.-In order to make the statement of purpose of the 1965 bill and other provisions in the bill consistent with the name "Department of Housing and Urban Development," the term "community" is omitted. A provision is also omitted which was in the committee reported 1961 bill which would have required the Secretary to give consideration to the problems of small towns and communities. This provision is not needed now in view of the broadening effect of the change of the name of the Department and corresponding changes in the functions of the Secretary.

A provision is omitted from the 1965 bill which would have authorized the Secretary to place up to 35 positions in the Department in grades 16, 17, and 18 of the general schedule, in addition to those authorized for Federal agencies generally.

Under the 1965 bill the Secretary would be authorized to fix the compensation for not more than six positions in the Department at the rate provided in level V of the Federal Executive Salary Act of 1964. This is deemed equivalent to the pay currently received by those officials in other departments performing functions similar to these of the commissioners of the present constituent agencies and units of the Housing and Home Finance Agency. The 1961 bill would have permitted the Secretary to provide compensations for up to nine such positions.

EXHIBIT 13

BILL TO ESTABLISH A DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT DIFFERENCE BETWEEN 1965 BILL AND REORGANIZATION PLAN NO. 1 OF 1962 The 1965 bill to establish a Department of Housing and Urban Development is the same as Reorganization Plan No. 1 of 1962,1 except (1) the name of the Department is different; (2) inconsistent provisions in the plan are omitted which relate to the status of the Federal Housing Administration and the appointment of the Commissioners of the Federal Housing Administration and the Public Housing Administration, and (3) the bill contains legislative provisions and authorizations of new functions and powers in the Secretary which

1 Reorganization Plan No. 1 of 1962 was essentially the same as the departmental bill as amended and reported in 1961 by the Senate and House Committees on Government Operations, except for omission of provisions in the bill which could not legally be included in a reorganization plan, and the addition of a provision for presidential appointmment and Senate confirmation of the Public Housing Commissioner and the continuation of that office.

could not legally be included in a reorganization plan. The following explains more detail these differences:

(1) Name of Department.-The name of the Department under the 1965 bill would be the Department of Housing and Urban Development rather than Department of Urban Affairs and Housing. This name would reflect more accurately the functions of the Department. It would make it clear that the Department would be concerned with the development (but not other "affairs") of all urban areas-large and small.

(2) (a) Status of FHA and appointment of Commissioners of FHA and PHA. The plan would have transferred the FHA as an entity and with its present name to the Department, and provided that the functions of FHA would be transferred to the Secretary and carried out under his direction by the Federal Housing Commissioner. The 1965 bill would transfer the FHA functions to the Secretary and authorize the Secretary to provide for the administration of those functions through such organizational component and headed by such officer as he determines.

(b) The plan would have provided for the nomination by the President and confirmation by the Senate of the Commissioners of FHA and PHA. Under the bill, the principal operating officials of the Department at the bureau level would be appointed by the Secretary. The Assistant Secretaries and the Under Secretary would be appointed by the President with the advice and consent of the Senate.

(c) The plan would have provided for three Assistant Secretaries. The 1965 bill provides for an additional Assistant Secretary to provide maximum flexibility for the Secretary in organizing the Department.

(3) Legislative provisions and new functions and powers.-The 1965 bill contains legislative provisions and authorizations, which could not legally be included in the plan, as follows:

(a) a congressional statement of purpose would be set forth.

(8) a of

(i) Advise the President with respect to Federal programs and activities relating to housing and urban development;

(ii) Develop and recommend to the President policies, for fostering the orderly growth of the Nation's urban areas;

(iii) Exercise leadership in coordinating Federal activities affecting housing and urban development;

(iv) Provide technical assistance and information to aid State and local governments;

(v) Encourage coordinating of intergovernmental urban development activities;

(vi) Study the problems of housing and urban development and promulgate his findings; and

(vii) Make an annual report to the President for submission to Congress. (c) The denying of any benefits to any community on the basis of its population or corporate status, except as expressly provided by law, would be prohibited.

(d) The Secretary would be authorized to establish a working capital fund for operating various common services in the Department.

(e) The Secretary and the Secretary of HEW would be placed in the line of succession to the Office of the President of the United States.

(f) The Secretary would be authorized to appoint personnel, and fix compensation for heads of organizational components he establishes, and the provision in the Federal National Mortgage Association Charter Act that provides for the salary of the President of the Association would be repealed.

(g) Certain existing statutory administrative provisions would be made available tot he Secretary.

(h) Prohibition against delegation by the Secretary of certain functions would be repealed.

Senator SIMPSON. Mr. Gordon, according to our report, the June 22, 1964, report of the Advisory Commission on Intergovernmental Relations, under the Federal Government program there are 43 urban development programs scattered through 5 executive departments and 6 independent agencies, according to that report.

Do I understand that the statement that you will submit for the record will indicate which of those you think should come under this new department?

Mr. GORDON. We would be happy to have a new look at that report and comment on it.

Senator SIMPSON. Do you not think it is high time we look into this burgeoning growth of additional agencies all in the same business?

Mr. GORDON. I would not question that at all. I agree with you wholeheartedly, Senator.

PROBLEM OF EFFICIENT DEPARTMENTAL ASSIGNMENT AND FUNCTIONS IN

GOVERNMENT

The question of the most efficient organization and departmental assignment of particular bureaus and agencies and functions of the Federal Government is one of the most complex and one of the most important we face, and I am delighted at these indications of strong interest on the part of the chairman and members of the committee.

I would only suggest that it is usually misleading to provide lists of functions according to a particular method of classification and use that as a basis for suggesting that, therefore, all of these functions ought to go in a particular department.

You can also take exactly those same programs and assign them to other functions, and this is the problem. It is in every instance a case of close judgment as to where the best performance, the greatest benefit will accrue as between alternative assignments of particular programs; and I am not at all suggesting that we have all the answers. I am sure we do not. But I think I am able to warn you that this is not a simple question. In every case you will find some close alternative assignment of the function for which a very strong case can be made, and a judgment between the two or three or four possibilities has to be arrived at.

Senator SIMPSON. I think we recognize that, and I am sure that is the thing we want to hit the head on.

I notice that there have been discussions in the proposed department for some time; as you know and the President has given voice to his wishes in the matter. I understand that the Housing and Home Finance Agency has established a liaison committee with the Bureau of Public Roads, is that correct?

Mr. GORDON. There is a liaison relationship. I am not sure it takes the form of a committee, but the common problems that HHFA and the Bureau of Public Roads have are so important and so close that I know there is very close contact between the two agencies.

Senator SIMPSON. It is indicated that the Public Housing Administration is working closely with the Department of HEW. Now, will your information to us indicate to us what you think should be done with those agencies in that coordination?

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