CONTENTS Press release dated February 8, 1973, announcing hearing on administra- Executive Communication No. 395: Letter from the Secretary of the Treas- ury transmitting a draft proposal to establish a Federal Financing PUBLIC WITNESSES American Institute of Merchant Shipping: Mark Schlefer, counsel, Barbara D. Burke, director of legislation, presenting statement of Albert E. May, 59 Clark, Earl W., codirector, Labor-Management Maritime Committee- Coles, Marvin J., counsel, Committee of American Tanker Owners_. Committee of American Tanker Owners, Marvin J. Coles, counsel.. Klausner, Joseph A., counsel, American Maritime Association__ Labor-Management Maritime Committee: Earl W. Clark, Talmage E. Maritime Trades Department, AFL-CIO, O. William Moody, admin- Martin, George C., president, National Association of Home Builders Maskin, Alfred, executive director, American Maritime Association May, Albert E., vice president, American Institute of Merchant Shipping, (statement presented by Mark Schlefer, counsel, and Barbara D. Burke, Moody, O. William, administrator, Maritime Trades Department, AFL- National Association of Home Builders, Burton C. Wood, deputy legisla- Petersen, John E., director, public finance, Securities Industry Association_ Schlefer, Mark, counsel, American Institute of Merchant Shipping----- Securities Industry Association: Robert H. Bethke, vice chairman, U.S. Government and Federal agencies committee, John E. Petersen, director, Simpkins, Talmage E., codirector, Labor-Management Maritime Wood, Burton C., deputy legislative counsel, National Association of MATERIAL SUBMITTED FOR THE RECORD GOVERNMENT WITNESSES Department of the Treasury: Effect of Federal Financing Bank Act on Federal and federally assist- Federal direct and guaranteed loans. Letter from Hon. Earl L. Butz, Secretary of Agriculture. Letter from Hon. Elliot Richardson, Secretary of Health, Education, Letter from R. C. Van Dusen (for Hon. George Romney, Secretary of Amendment to proposed Federal Financing Bank Act of 1973....... PUBLIC WITNESSES 15 27 23 24 26 36 Adams, Eugene H., president, American Bankers Association, letter to 64 American Bankers Association, Eugene H. Adams, president, letter to 64 Hood, Edwin M., president, Shipbuilders Council of America, letter to 69 Maffin, Robert W., executive director, National Association of Housing Slipher, Stephen, legislative director, United States Savings and Loan United States Savings and Loan League, Stephen Slipher, legislative 65 66 65 66 69 70 70 FEDERAL FINANCING BANK ACT THURSDAY, MARCH 1, 1973 HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, D.C. The committee met at 10 a.m., pursuant to notice, in the committee room, Longworth House Office Building, Hon. Al Ullman presiding. Mr. ULLMAN. The committee will be in order. The purpose of the hearing today is to receive testimony from the Treasury Department and the interested public on the Administration's proposal to establish a Federal Financing Bank. If there is no objection, there will be included in the record of the hearing at this point a copy of the press release issued by the committee announcing this hearing. Also, there will be included in the record at this point a copy of the Executive communication to the Speaker from the Secretary of the Treasury which has been referred to the Committee on Ways and Means concerning this subject. (The documents referred to follows:) [Press release, Thursday, Feb. 8, 1973] CHAIRMAN WILBUR D. MILLS (D., ARK.), COMMITTEE ON WAYS AND MEANS, U.S. HOUSE OF REPRESENTATIVES, ANNOUNCES * **ONE-DAY HEARING ON THE TREASURY PROPOSAL TO ESTABLISH A "FEDERAL FINANCING BANKS," ETC. The Honorable Wilbur D. Mills (D., Ark.), Chairman, Committee on Ways and Means, U.S. House of Representatives, today announced * * * a one-day hearing on the Administration proposal to establish a Federal Financing Bank, etc., will be held on Thursday, March 1 * * *. HEARING ON THE ADMINISTRATION PROPOSAL TO ESTABLISH A FEDERAL FINANCING BANK As indicated, a one-day hearing on the Administration proposal to establish a Federal Financing Bank will be conducted by the Committee on Ways and Means on Thursday, March 1. Requests to be heard on this proposal must be submitted by not later than the close of business Friday, February 16, 1973, and should be diretced to John M. Martin, Jr., Chief Counsel, Committee on Ways and Means, Room 1102 Longworth House Office Building, Washington, D.C. 20515 (telephone: (202) 225-3625). Notification as to scheduled appearances will be made at the earliest opportunity. It is expected that a representative from the Department of the Treasury will be the first witness, followed by any other individuals or organizations who request to be heard on the subject. This hearing must be completed within the one day scheduled for it, and it is necessary that all interested persons and organizations designate one spokesman to represent them where they have the same general interest. Any interested person or organization desiring to do so may file a written statement for inclusion in the printed record of the hearing in lieu of a personal appearance. Persons submitting a written statement in lieu of a personal appearance should submit at least three copies for that purpose by the close of business Thursday, March 1. (1) If it is desired that copies of written statements submitted in lieu of a personal appearance be distributed to the press and the interested public during the course of the hearing, an additional 50 copies should be submitted for this purpose. This public hearing will be conducted in the Main Committee Hearing Room, Longworth House Office Building, starting at 10:00 a.m. on March 1. It is requested that witnesses scheduled to appear at the hearing submit 75 copies of their prepared statements to the Committee office, Room 1102 Longworth House Office Building, by no later than Tuesday, February 27. A copy of the letter from the Secretary of the Treasury to the Speaker and a copy of the proposed bill are available for examination in the Main Office of the Committee on Ways and Means. [Executive Communication No. 395] THE SECRETARY OF THE TREASURY, Hon. CARL B. ALBERT, Speaker of the House of Representatives, DEAR MR. SPEAKER: There is transmitted herewith a proposed bill "To establish a Federal Financing Bank, to provide for coordinated and more efficient financing of Federal and Federally assisted borrowings from the public, and for other purposes." Such legislation is urgently needed because the tremendous increase in Federal credit program activity in recent years has greatly expanded the total Federal impact on the credit markets. The widespread support for this legislation was evident from its prompt passage last year by the Senate and by its approval by the Ways and Means Committee of the House. I hope that the Congress will act promptly on this measure so that we can begin to realize the savings in interest costs and other benefits that the Federal Financing Bank would assure. Many existing Federal agencies are now required to finance their programs directly in the securities markets. Similar financing arrangements have also been proposed for a number of new agencies. These agencies must develop their own financing staffs, and their abilities to cope with their principal program functions are lessened by the need also to deal with the complex debt management operations essential to minimizing their borrowing costs and avoiding cash flow problems which could disrupt their basic lending programs. Interest costs of the various Federal agency financing methods normally exceed Treasury borrowing costs by substantial amounts, despite the fact that these issues are backed by the Federal Government. Borrowing costs are increased because of the sheer proliferation of competing issues crowding each other in the financing calendar, the cumbersome nature of many of the securities, and the limited markets in which they are sold. Underwriting costs are often a significant additional cost factor due to the method of marketing. Under the proposed legislation these essentially debt management problems could be shifted from the program agencies to the Federal Financing Bank. Many of the obligations which are now placed directly in the private market under numerous Federal programs would instead be financed by the Bank. The Bank in turn would issue its own securities. The Bank would have the necessary expertise, flexibility, volume, and marketing power to minimize financing costs and to assure an effective flow of credit for programs established by the Congress. While many of the market financing activities of Federal agencies are subject to coordination with Treasury's financial management advisers, a large and growing number of these are not. Some of the coordination requirements are vague or incomplete, and none require advance submission of financing plans as would be required in the proposed legislation. The Federal Financing Bank bill will not solve all of the problems in the financing of Federal and Federally assisted borrowings, but it will go a long way toward relieving them within a rational framework. The discipline of improved management of Federal financial operations is urgent now but will become even more critical for the years ahead. It would be appreciated if you would lay the proposed bill before the House of Representatives. An identical bill has been transmitted to the President of the Senate. The Department has been advised by the Office of Management and Budget that there is no objection to the submission of this legislation to the Congress and that its enactment would be in accord with the program of the President. Sincerely yours, Enclosure. GEORGE P. SHULTZ. A BILL To establish a Federal Financing Bank, to provide for coordinated and more efficient financing of Federal and federally assisted borrowings from the public, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Federal Financing Bank Act of 1973". FINDINGS AND DECLARATION OF PURPOSE SEC. 2. The Congress finds that demands for funds through Federal and federally assisted borrowing programs are increasing faster than the total supply of credit and that such borrowings are not adequately coordinated with overall Federal fiscal and debt management policies. The purpose of this Act is to assure coordination of these programs with the overall economic and fiscal policies of the Government, to reduce the costs of Federal and federally assisted borrowing from the public, and to assure that such borrowings are financed in a manner least disruptive of private financial markets and institutions. DEFINITIONS SEC. 3. For the purposes of this Act (1) The term "Federal agency” means an executive department, an independent Federal establishment, or a corporation or other entity established by the Congress which is owned in whole or in part by the United States. (2) The term "obligation" means any note, bond, debenture, or other evidence of indebtedness, but does not include Federal Reserve notes or stock evidencing an ownership interest in the issuing Federal agency. (3) The term "guarantee" means any guarantee, insurance, or other pledge with respect to the payment of all or part of the principal or interest on any obligation, but does not include the insurance of deposits, shares, or other withdrawable accounts in financial institutions, or any guarantee or pledge arising out of a statutory obligation to insure such deposits, shares or other withdrawable accounts. (4) The term "Bank" means the Federal Financing Bank established by section 4 of this Act. CREATION OF BANK SEC. 4. There is hereby created a body corporate to be known as the Federal Financing Bank, which shall have succession until dissolved by an Act of Congress. The Bank shall be subject to the general supervision and direction of the Secretary of the Treasury. The Bank shall be an instrumentality of the United States Government and shall maintain such offices as may be necessary or appropriate in the conduct of its business. BOARD OF DIRECTORS SEC. 5. (a) The Bank shall have a Board of Directors consisting of five persons, one of whom shall be the Secretary of the Treasury as Chairman of the Board, and four of whom shall be appointed by the President from among the officers or employees of the Bank or of any Federal agency. The Chairman and each other member of the Board may designate some other officer or employee of the Government to serve in his place. (b) The Board of Directors shall meet at the call of its Chairman. The Board shall determine the general policies which shall govern the operations of the Bank. The Chairman of the Board shall select and effect the appointment of qualified persons to fill such offices as may be provided for in the bylaws, and such persons shall be the executive officers of the Bank and shall discharge such executive functions, powers, and duties as may be provided for in the bylaws or by the Board of Directors. The members of the Board and their designees shall not receive compensation for their services on the Board. |