4. Interest rates In general-and I know the chairman is very much concerned about this interest rates should be kept as low as possible. I agree with section 202 of the President's H.R. 11309, which gives the President the authority to stabilize interest rates. Of course, interest rates are also strongly affected by Federal Reserve policy, as well as the actions of individual lenders and borrowers in capital markets. 5. Suspension of the Administrative Procedure Act Section 207 of the President's bill, H.R. 11309, requests exemption of the economic stablization program from the Administrative Procedure Act except for public information matters. Basically, this provision would eliminate the entire panoply of procedure which protects the rights of interested parties in administrative proceedings, including provisions for rule-making procedures for adjudication, rules for hearings, burden of proof, evidence, record as a basis of decision, conclusiveness of decisions, review of decisions h the agency, and other provisions. The Administrative Procedure Act is a complex and carefully drawn set of procedures to protect the rights of persons and corporations in administrative dealings with the Government. These procedures should not be lightly discarded. It may be appropriate to make some changes in these procedures to fit them to the particular tasks of the new agencies charged with carrying out the economic stabilization program. But tossing out most of the Administrative Procedure Act should not be done without serious study of the long-term consequences. These procedural rights are not the less valid because they may be exercised in times of some stress. In summary, I urge that: (1) the wages of the working poor and the near poor be freely allowed to rise to the point where they are no longer substandard; (2) the freeze on rents be continued; (3) corporate profits and dividends be limited; (4) interest rates be controlled; and (5) the President's request to suspend the Administrative Procedure Act with respect to the Price Commission and the Pay Board be considered carefully. The CHAIRMAN. Mr. Ryan, we have given you all the time we can. Mr. RYAN. If I may simply summarize, Mr. Chairman? I urge that the wages of the working poor or near poor be allowed to rise to the point where they are no longer substandard; that the freeze on rents be continued; that corporate profits and dividends be limited; that interest rates be controlled, and that the chairman and members of the committee study the proposed suspension of the Administrative Procedures Act with respect to the Price Commission and the Pay Board. The CHAIRMAN. Thank you very much, and you may extend your remarks to include anything you desire that is relevant to this subject, and we appreciate your testimony. It will be considered, but we are working under a limited length of time given to us to get this bill out, and we have a lot of work to do on it. We meet Monday; we have Dr. Burns Monday, and we have witnesses Tuesday, and then we expect to write up the bill or mark it up if we can, and we are deeply appreciative of your coming before our committee and presenting your views. And they will be given thorough consideration. Mr. RYAN. Thank you very much, Mr. Chairman. The CHAIRMAN. And thank you very much for the whole committee. And since we have some work to do in getting this ready for the markup session, without objection, we will stand in recess until Monday morning at 10 o'clock, at which time Dr. Arthur Burns will be our witness here. Mr. WIDNALL. Mr. Chairman? The CHAIRMAN. Yes, sir, Mr. Widnall. Mr. WIDNALL. I would just like to comment as to our colleague's testimony, because he has, for years, interested himself in the plight of the low-income section of our economy, and he has consistently tried, by the introduction of bills and through his own testimony, to narrow the housing gap and improve conditions for that particular group within the economy. I think that his testimony is constructive and helpful, and I appreciate his appearing before the committee. Mr. RYAN. Thank you, Mr. Widnall, and I know you have throughout your career, been concerned with the same problems. The CHAIRMAN. Thank you, sir. Thank you, again. And the committee will stand in recess. Monday, November 1, 1971.) was taken until 10 a.m., ECONOMIC STABILIZATION-PART II MONDAY, NOVEMBER 1, 1971 HOUSE OF REPRESENTATIVES, COMMITTEE ON BANKING AND CURRENCY, Washington, D.C. The committee met pursuant to recess, at 10:05 a.m. in room 2128, Rayburn House Office Building, Hon. Wright Patman (chairman) presiding. Present: Representatives Patman, Sullivan, Reuss, Stephens, Gonzalez, Gettys, Griffin, Brasco, Chappell, Mitchell, Widnall, Johnson, Blackburn, Brown, Heckler, McKinney, Archer, and Frenzel. The CHAIRMAN. The committee will please come to order. This morning we open the fourth session on the administration's phase II legislation, H.R. 11309. The success of phase II is dependent on the ability of the Congress and the administration to develop a law and a program which is clearly equitable for all segments of the economy. The administration is willing to apply the same general treatment to wages, salaries, rents, and prices. But it seeks a different standard for interest rates and credit transactions, dividends, and profits. For interest rates the administration wants only the vaguest standby language inserted in this bill and its spokesmen have made it very clear that they never intend to use the authority. To support this "do nothing" approach-and the obvious favoritism involved the administration has besieged the press with endless recitations of "money-market" figures on bond rates and Treasury bills. Many of these short-term swings have been encouraging, but they hardly answer the questions before this committee. The Nation has a wage and price program which is being applied at the consumer level. So the important interest rates are those actually being paid by the consumer, by the worker whose wages have been frozen since August 15. The wage-price program could well be over before the benefits of money-market rates ever trickle down to the workers. The administration has produced no data on the great mass of consumer credit which runs at a monthly volume of nearly $10 billion. The administration simply does not have the figures on this credit. But around the Nation, thousands and thousands of workers are paying 36 percent and more for small loans and 18 to 24 percent for revolving credit. The Federal Home Loan Bank Board finally was forced to release its mortgage figures Friday-the last possible day for the release during the month of October. This release showed that mortgage figures were up again-for the fourth straight month with the nationwide. average at 7.82 percent on new homes. These are mortgages being paid by people whose wages and salaries were frozen. Along with the announcement of the higher interest rate figures, the Home Loan Bank Board released its set of excuses-stating that many of the increases represented "forward commitments." Inadvertently, the administration was pointing up another bit of favoritism for lenders. Forward commitments on wage contracts are frozenruled out by the Cost of Living Council-but the lenders are free to enforce fully any commitments they have gained from consumers. Even if interest rates do go down-and we all hope that they willit would be poor policy to leave the banks and other lenders uncontrolled in a controlled economy. They do not deserve favored treatment any more than does the grocery store or the automobile dealer. There have been price reductions in some areas since the freeze, but no one has suggested these areas be dropped from wage-price enforcement. Yet we have many in this administration who say the banks should be let off the hook because some rates are going down. This morning we have Dr. Arthur Burns, Chairman of the Federal Reserve Board, as our first witness. He will be followed by Mr. Milton Carrow, chairman of the administrative law section of the American Bar Association. Dr. Burns is also chairman of the special in-house "Committee on Interest and Dividends" established by President Nixon as part of phase II. Dr. Burns knows that I have a high regard for his abilities, but I must say I feel that he has pretty well prejudged the interest rate question in this wage-price program. The ink was hardly dry on the President's August 15 freeze order when the Chairman of the Federal Reserve wrote 300 banks expressing his personal opposition to control over interest rates. With this counsel from Dr. Burns, I am sure the banks feel that they have little to fear in the way of recommendations for controls from the President's "Committee on Interest and Dividends." We do not say, Dr. Burns, we do not accuse you of any prejudging of issues or anything like that, but I have always heard that if you are going to be operated on by a doctor, a surgeon, that the surgeon who wields the knife should want the patient to live. And we have a great deal of confidence in you and we feel sure that you are fair. And I have known you 15 or 20 years, and I have always considered you a fair man. So, I certainly hope you do not prejudge these issues by the information you received from those 300 bankers that you interrogated. Unless this committee and the Congress take definite action-makes its position crystal clear-I don't think we are going to get much more than talk and studies about consumer interest rates. Dr. Burns, we are happy to hear from you this morning. We look forward to your testimony and it will certainly receive careful consideration, sir. You may proceed in your own way. STATEMENT OF HON. ARTHUR F. BURNS, CHAIRMAN, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Dr. BURNS. Thank you very much, Mr. Chairman. Let me say that I appreciate very much, indeed, the opportunity to participate in this committee's discussion of H.R. 11309. |