The CHAIRMAN. Who would make the final decision whether they needed money and should borrow money, the Secretary or the Board? Senator FULBRIGHT. As I interpret it, the Board would go through the motions of carrying out the directions of the Secretary. If the Secretary says you should make certain loans which require $100,000,000, of course he would not go to the Treasury. He would tell the Board and the Board, if they follow his policy guidance, then would borrow the $100,000,000 from the Treasury and disburse it.

The CHAIRMAN. Today the RFC borrows it.

Senator FULBRIGHT. It borrows it.

The CHAIRMAN. The Board borrows it.

Senator FULBRIGHT. That is correct. The Corporation borrows it now directly from the Treasury.

The CHAIRMAN. If this reorganization goes into effect then who would borrow it?

Senator FULBRIGHT. They still have to borrow it, but what they do with it is subject to the policy guidance of the Secretary.

The CHAIRMAN. Whether they borrow it or not is subject to his guidance too.

Senator FULBRIGHT. Let us assume he said regarding RFC, "Let us cut down on our loans and make no more loans and restrict it," they would do that. If he said, "Let's expand it, let's go out and help everybody who needs it," they would do that, I assume.

The CHAIRMAN. That would come within the policy guidance.

Senator FULBRIGHT. I would assume that is what that means. That particular interpretation is mine. There has been no judicial determination of the meaning of that language that I know of, but it seems common sense that that is what it would mean.

The CHAIRMAN. In view of the resolution of disaproval having been introduced, in consideration of it each member of the Senate will have to undertake to make an interpretation of the plan and whether it is a wise plan to have go into effect.

Senator FULBRIGHT. I think that is a very important point. Whatever activities the present Department of Commerce carries on, they submit to you a budget, and you are on the Appropriations Committee and you know how detailed those are. If the Congress says that a certain activity should be cut out, you have an opportunity every year, do you not, to cut it out if you like or to expand it. You have a check on it. When you authorize a bureau in Commerce to expend funds for a certain purpose on that particular activity, the Comptroller General has a check. We will say the bureau head draws a check in payment of some activity, say $10,000, and it comes over to the Comptroller General and he says, "No; you are not authorized to do that," and he turns down that check. It has to be in accordance with the law and the appropriation as it exists. There is that check on the regular departmental expenditures, but that is not so with the RFC. He has no check. The only thing he can do is review it under the Corporation Audits Division and come up and advise the Congress usually 2 or 3 years later, that this particular loan in his opinion may go beyond the authority of law. But that is all he can do. There is no way to recover the money or to prevent its expenditure, in contrast to what happens in the normal course of Commerce Department expenditures. If he thinks an expenditure is illegal in the regular departmental funds, he stops it then and the man is respon

sible. In other words, Government funds are not expended in that case, and whoever did it is responsible for that. Those claims are settled in the normal course.

You can see there is a tremendous difference in the power of this Board to deal with public funds from any normal activity of a regular department. In effect, under this provision of supervision and policy guidance, you would be giving that power to an executive department. To the extent that he could tell the Board what to do, you would be giving to the Secretary of Commerce a power which would vastly enhance his power over the expenditure of funds. I think in time, if it was done, since it is such a convenient and easy way to get money as opposed to coming up and submitting oneself to the grueling examination of two Committees on Appropriations, that he would tend to try to carry on every activity that he could through this corporate device. It is too easy and too convenient to get money that way. I think that would be the tendency if this came about.

Senator SCHOEPPEL. I should like to ask a question at this point, Senator Fulbright. Let us assume that this reorganization plan should go through and there should be a conflict between the Board of Directors, the members of the RFC Board, and the Secretary, who would be in charge. Suppose the Board of Directors would go one way and the Secretary would want to go another way. Do you think there is sufficient authorization or power or authority under this reorganization so that the Secretary would have the final say and could move on out, or would we find ourselves at an impasse here?

Senator FULBRIGHT. I think technically, if they were willing to bow their necks and tell him they would not do it, they could resist him, but the normal procedure, and I think what would actually happen, if they had a difference, they would go to the President and he would resolve the difference and say the Board is right or the Secretary is right, and under this plan you are supposed to follow his guidance. I think 99 times out of 100 they would follow his guidance. If such a division of opinion arose, I think it would be the President who resolved it.

Senator SCHOEPPEL. In other words, assuming the Congress of the United States would approve this plan, it would be shifting the operation of the Department into the executive branch rather than having some checks and balances which we heretofore have had vested in the legislative branch.

Senator FULBRIGHT. I think that is true. Of course, it is my feeling as a general proposition that in recent years all over the world and in our country, too, the power of the executive has grown tremendously. The war was greatly responsible. One of my present feelings is that even this independent board tends to look to the executive more than it possibly should. I think the activities we are now carrying on in the committee are making the Board a little more conscious that we have an interest in it, and they are beginning to realize that, after all, they are independent and should pay more attention to the congressional committees in discussing their policy. I think the Board is responding. I may say I criticize the Congress because we have not followed it as closely as we should have. We should have these meetings every year and keep in close contact. As we have tended to neglect that, the people from the executive branch have

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tended to step into that sort of vacuum. If this goes through, I think the case you make illustrates very well, and in my own mind I have no doubt that if there came a conflict they would take that conflict to the President and he would resolve it and then the Board would feel that as a practical matter they must go along with it. I think undoubtedly they would go along with it.

Senator SCHOEPPEL. Senator Fulbright, your committee is investigating the activities of the RFC. You may not want to answer this. I do not mean by asking the question to imply that you had any particular idea or motive in mind by legislation other than to be helpful, constructive, and corrective. But your committee has been holding this series of hearings with an effort to determine, first, to what extent weaknesses have developed in RFC policies and to suggest by your reports and maybe by proposed legislation the corrective features of these measures or policies that you find are being practiced now. Is that a fair question?

Senator FULBRIGHT. That is correct. That is the very purpose. We have approached it in a little different way from the former study made in 1948. We are taking specific examples of the application of these general principles. It is very easy to talk in generalities about how you help small business and how you relieve unemployment and so on. When you come to applying those vague concepts to actual loans, you get a very different feeling about it. We have already expressed some criticism of their activities; and, as I said, I think the Congress takes part of the blame, and on the other hand I think the Board has been very loose in its interpretation of the language. We are trying to resolve that. I hope we can come out with more specific standards in our legislation for the guidance of the Board. I feel, if we are able to do that, the Board will respond and follow it. I feel the present law is definitely defective in being entirely too general in the guidance that it gives to the RFC.

Senator SCHOEPPEL. Pursuing this a little further, Senator, assuming that you make your findings, which you will, and submit them to the Congress, to the committee and to the Senate and thereby to the Congress, I think you said awhile ago that to put this reorganization plan into effect would to a degree nullify and probably hold for naught some of the corrective features that your committee might feel should be made. Do you feel that those recommendations and those suggestions or proposed statutory changes could be submitted within a reasonable time, probably not at this session but certainly at the beginning of the next session? What would be your judgment on that? Senator FULBRIGHT. Oh, certainly. I hope we will be able to make the report and present a bill before this session is over, fully realizing it won't be passed. I think it is a good practice to submit the bill, and in the meantime between now and January all the business people, the legislators, and the public will have an opportunity to examine it and consider it, and then it ought to be ready either for passage or amendment, or consideration at least, at the beginning of the next Congress.

Senator SCHOEPPEL. That to me is very important.

Senator FULBRIGHT. That is what I think.

Senator SCHOEPPEL. You, of course, will have the opportunity and the benefit of having the President's plan before you and your com

mittee and those of us in the Congress, to see to what extent from your findings you may fit in to those suggestions or reject them as you see fit. I did want to know if there would be an opportunity given for the Members of Congress to know something about that before the deadline on this reorganization plan, which is 60 days from now.

Senator FULBRIGHT. No; this deadline is less than 30 days from now. I did not mean to leave the impression that I was going to have that bill ready before July 9. I mean before we recess. I am assuming that we will recess somewhere around the 1st of August. That is the sort of general view. It is the optimistic view. I do not think we can possibly get the report in by the 9th of July. I may say I have already requested the legislative counsel to draw up some of the proposals that have been clarified to this point for the consideration of the committee. As some point comes up, we try to develop that in legislative language for a bill, but that is not complete.

I may say this is a much more complicated business the RFC is in than a lot of people realize; for example, the number of loans. The Corporation has 31 agencies. In a sense there are 31 small RFC's over this country, each one of which has a great degree of autonomy. They can make loans up to $100,000 without coming to Washington, and they do make thousands of loans on the authority of the 31 agencies. We have tried to examine some of these agencies. We have had people from Dallas going over their loans, and in Boston, as samples. One member went out to Denver and Salt Lake City, a member of the committee, and made a report on their activities, trying to draw this together.

I think the credit structure of this Government is one of the most important aspects of what we call free enterprise. Just to use a broad generalization, if you should socialize the credit structure, it seems to me you have made the biggest possible step toward socializing your whole business structure. I don't say they are doing it or intend to do it. I think it is an avenue by which it could be done without the Congress ever knowing what is going on. That is why I was trying to emphasize the peculiar nature of the powers of the RFC, because they do not come to Congress for their appropriations. We do not have the normal annual check on their activities that you have on every other Department in the Government. I think we should. I think it is like every other thing, it is something that the Members of the Senate are too busy to pay attention to until something occurs which sort of shocks you into making an investigation.

The CHAIRMAN. Let me ask you, in that connection, would this plan, if it goes into effect, tend to bring RFC under the supervision of Congress more so than it has been in the past?

Senator FULBRIGHT. No; I think it has the directly opposite effect. It would tend to insulate the RFC more from our supervision than it is now. I think that is inevitable. It certainly places between us and the RFC a member of the President's Cabinet who is given supervision and policy guidance over that Board. I think the tendency would be to look upon it as not our responsibility any more. Let the Secretary take care of it. He is a good man. Everybody admits the present Secretary is an excellent man; in fact several people have said, "Oh, I think Secretary Sawyer is a fine man. Why not let it go there?" But that is not a proper basis for making a fundamental change in a

governmental agency and the distribution of power. However fine he may be, in the first place he may not be there forever. Of course, he will not be. The next one may be some other kind. That is not the proper basis to judge it on at all. It should not be judged because we happen to like a present incumbent in that office.

Senator HOEY. As when Henry Wallace was Secretary.

The CHAIRMAN. In that instance, because he was there, we did not permit the RFC to go there; is that not correct?

Senator FULBRIGHT. That was one of the contributing factors [laughter]; but, as I said a moment ago, I do not think it was ever put there because the Congress considered that a proper place for it as a governmental organization. It was put in solely because Jesse Jones had been the symbol of the RFC and everyone had great confidence in his independence, his power to resist political influence, and they wanted him to be the loan director even though he was made Secretary of Commerce. It followed Jesse Jones rather than by reason of any desire to put it under an agency as such. It was independent, certainly, as long as he was there.

Senator SCHOEPPEL. I would like to ask the Senator this: I don't know who the President of the United States might be. In our wisdom as a Nation we have a right to pass on that every 4 years; but, if this reorganization plan should go through to make this change in this great lending agency, it would shift, as you have pointed out here, in your judgment, to a degree the determination to the Secretary, who is a member of the President's Cabinet. As the Senator has said, when they come up for confirmation, unless there is something glaringly and apparently wrong in the individual, if the President desires him, we must go along with the President. Do you think it is a good thing in this country, progressing as we are, to give one man or maybe two men political influence over the great financial structure of this country?

Senator FULBRIGHT. I most certainly do not. basis of my objection.

That is really the

Senator SCHOEPPEL. If this plan goes through, Senator Fulbright, do you feel that there is a tendancy or certainly a great opportunity, if sought to be used that way, that that could be used?

Senator FULBRIGHT. I most certainly think it could be used. I think that this plan gives him the authority to use it for the promotion of programs which he may think desirable in fields other than strictly business lending.

The CHAIRMAN. May I suggest at this point that, if this plan went into effect with the authority and power that it vests to determine policy and so forth in the Secretary, would it not be unnecessary to have any legislation to carry out any sort of small-business program subsidizing small business at all? Are we not delegating power now in this plan to the Secretary of Commerce or to the President as the case may be actually I think it would extend to the President where they could formulate any policy they wanted to with reference to such a program, and legislation to authorize it and to regulate it would not be necessary at all? Would they not have the power under this plan to do it?

Senator FULBRIGHT. They would not have the power, for example, under this to set up these new independent capital banks that they require.