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DEFENSE PRODUCTION ACT

HOARDING AND STRATEGIC MATERIALS

WEDNESDAY, DECEMBER 20, 1950

CONGRESS OF THE UNITED STATES,

JOINT COMMITTEE ON DEFENSE PRODUCTION,

Washington, D. C. The committee met, pursuant to call, at 10:40 a. m., in room F-82, the Capitol, Senator Burnet R. Maybank, chairman, presiding. Present: Senators Maybank, Fulbright, and Capehart; Representatives Brown and Hays.

Also present: Hon. Charles A. Sawyer, Secretary of Commerce, accompanied by Matthew Hale, Acting Solicitor, Department of Commerce; and William H. Harrison, Administrator, National Production Authority, accompanied by Manley Fleischmann, general counsel.

The CHAIRMAN. The committee will come to order.

I called this meeting on behalf of the joint committee, after conferring with the vice chairman. We postponed a previously scheduled meeting from Monday until today. Since then, Mr. Wilson has been appointed Director of Defense Mobilization and his name is now before the Senate, having been approved by the Banking and Currency Committee. He will probably be confirmed today. His nomination is on the Senate Calendar. Therefore, in view of the fact that Mr. Wilson is going to be in over-all charge of everything, I asked him if he could appear before this committee on this coming Friday because I felt certain that Congressman Brown would agree. Mr. Wilson said he would be pleased to appear before the joint committee on Friday at 10:30.

In view of this fact, I took the liberty of suggesting to Mr. Symington that he not come since the pertinent duties on control have been removed from his office.

Does that meet with the committee's approval? After all, Mr. Wilson will be in my judgment confirmed today and he is going to be the man in charge.

Senator CAPEHART. What duty is Mr. Symington going to have from now on?

The CHAIRMAN. I would not be able to speak for Mr. Symington. But the connection he had with this hearing was that he testified before us in the committee previously, and he said to ask you, General Harrison, about information pertaining to hoarding.

Secretary Sawyer, we were going to discuss with you voluntary controls.

As I understood the question at that time, Mr. Valentine and Mr. Di Salle were to be sort of tied in together, if I may use that expres

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sion, under Mr. Symington. Now the President has appointed Mr. Wilson, and Mr. Wilson is to be here with Messrs. Valentine and Di Salle at 10:30 Friday morning.

The VICE CHAIRMAN. I have a reservation to go home. You will not have any other meetings during the holiday season?

The CHAIRMAN. Mr. Congressman, I am only asking if it is agreeable to you.

The VICE CHAIRMAN. It is agreeable.

The CHAIRMAN. I have just mentioned the fact because people have asked me about Mr. Symington, and in view of the fact that the new powers are vested in Mr. Wilson, and in view of the fact Mr. Wilson has not yet been confirmed but will be confirmed today, in my judgment, I thought we would invite him to appear Friday, if it is agreeable to you.

The VICE CHAIRMAN. Yes; but we will not have any other meetings? The CHAIRMAN. Not without conferring with you first.

Will it be agreeable to meet at 10:30 on Friday with Mr. Wilson and Mr. Valentine and Mr. Di Salle? Is that agreeable?

The VICE CHAIRMAN. That is all right.

The CHAIRMAN. 10:30 Friday. Will you send the notices out today, Mr. Parsons?

Mr. PARSONS. Yes, sir.

The CHAIRMAN. Sometime ago, Mr. Secretary-Are you in a hurry? Secretary SAWYER. I am completely at your service, Mr. Chairman. The CHAIRMAN. I appreciate that.

What happened to us was that sometime ago Senator Capehart was interested, as I am deeply interested, in the question of hoarding, and we questioned Mr. Symington upon this subject at the time, General, and he informed us that you would know more about that detail

than he would.

Mr. HARRISON. I would be very glad if there are any questions

The CHAIRMAN. This is an open meeting because when I found out neither Mr. Symington nor Mr. Wilson would be present I told Mr. Parsons this would be an open hearing. If you want to say something off the record we can have an executive session later.

Secretary SAWYER. This is all on the record?

The CHAIRMAN. Yes.

Secretary SAWYER. It is all right with us.

Mr. HARRISON. Mr. Chairman, does Senator Capehart have some questions?

The CHAIRMAN. Senator Capehart.

Senator CAPEHART. Since we are going to discuss hoarding, I would like to know what action you have taken under section 102 of the bill, if any.

Mr. HARRISON. Why, yes. One of the initial acts was to establish a general inventory order, and then as the additional orders have come forth covering specific materials, that original inventory order has been pinpointed with respect to individual materials, and that has been a progressive matter.

Senator CAPEHART. General, I am afraid we are talking about two different subjects.

Mr. HARRISON. I do not know.

Senator CAPEHART. Section 102 has to do with hoarding.

Mr. HARRISON. I am sorry, Senator, I do not know what section 102 is.

Senator CAPEHART. Who in the Government is handling section 102 of the act? Are you?

Mr. HARRISON. I am sorry; I will have to find out.

Senator CAPEHART. Will someone hand the general the bill?

Secretary SAWYER. Mr. Fleischmann is here. He is counsel for NPA and perhaps he can answer your question.

Mr. FLEISCHMANN. Let me just say this

The CHAIRMAN. Come to the table, Mr. Fleischmann.

Mr. FLEISCHMANN. Yes, sir.

The NPA has that authority under section 102. Our actions have been taken under the other section up to the present time.

Senator CAPEHART. Then your answer is that nothing has been done under section 102?

Mr. FLEISCHMANN. No action has been taken under section 102. Senator CAPEHART. With respect to hoarding? Has the President designated these strategic materials, spelled them out, or have you gotten any orders as to what they are?

Mr. FLEISCHMANN. Let me say this: We have taken very definite steps in the inventory field. We have not designated scarce materials under section 102. For certain reasons, which we thought were adequate, we have started off under section 101 at the present time. I think that is the question you are asking, Senator.

The CHAIRMAN. Yes.

Senator CAPEHART. When do you propose to put into effect section 102?

Mr. FLEISCHMANN. I find that difficult to answer for this reason: The reasons that we have used section 101 up to the present time are that we considered in the first place, with a very small organization, the problem of compliance under section 102 would be an enormously difficult one until we got better staffed up.

Secondly, we considered that under section 101 we had a more selective approach, which in the early stages would be a better one. We have, as you know, put out an inventory regulation order, and, as General Harrison says, we have also proceeded from the general to the specific by regulating certain materials much more strictly; for example, a 45-day inventory in some materials and a 60-day inventory in others.

Senator CAPEHART. You published that then in the Federal Register?

Mr. FLEISCHMANN. Yes, sir.

Senator CAPEHART. Section 102 has to do with hoarding?

Mr. FLEISCHMANN. Yes.

Senator CAPEHART. Is it not a fact there is a tremendous amount of hoarding going on?

Mr. FLEISCHMANN. I assume that is true. I do not have that information officially, but I think everyone would agree there is some going on.

Secretary SAWYER. I think you should make a distinction, Mr. Chairman, between a tremendous amount and some, in Mr. Fleischmann's answer.

I happened to participate in a meeting at Chicago about a month and a half ago of businessmen and others, and there was one organ

ization there that has been making detailed reports. They were dealing mostly with the housewives and the retailers, including a survey made in your State, Senator. Their report was there was not much hoarding on the part of the housewives, contrary to popular belief. I think it would be a mistake to assume that there is a tremendous amount of hoarding, although, as Mr. Fleischmann says, there is undoubtedly some hoarding in individual cases.

Senator ČAPEHART. I doubt if there is much hoarding on the part of the housewife, but I question the statement there is not much or tremendous hoarding on the part of certain organizations and institutions.

Secretary SAWYER. I did not mean to say that. There may be. Senator CAPEHART. And on the part of manufacturers.

Secretary SAWYER. There may be, but I do not think that is general. There are many cases undoubtedly, but I think it would be a mistake to assume that everybody in the country, for instance, is hoarding. Mr. HARRISON. Could I add, please, sir, something to that?

If we are talking about hoarding at the retail level and at the distribution level

Senator CAPEHART. Will the gentleman yield?

Mr. HARRISON. Yes.

Senator CAPEHART. I am not thinking in terms of the retail level. I am thinking in terms of the manufacturers and the wholesalers, and the scrap dealers and the junk dealers, and that type of industry. My opinion is there is a tremendous amount of hoarding going on in those categories.

Mr. HARRISON. Senator, if for the minute we can separate hoarding as between finished products and hoarding as between raw materials that go into finished products, we have taken steps with respect to the raw materials that go into the finished products. With respect to the finished products we have not taken any steps.

Senator CAPEHART. I can well understand why you might not take any steps with respect to the finished product, because once it is finished, it is finished and there is nothing you can do about it.

Mr. HARRISON. But we have taken specific and direct steps.

Senator CAPEHART. What steps have you taken with respect to hoarding steel and aluminum?

Mr. HARRISON. We have specific orders that limit inventories to specific time intervals.

Senator CAPEHART. Has that been published in the Federal Register?

Mr. HARRISON. Yes, sir. And those orders as a generalization now. I must generalize.

Senator CAPEHART. Yes.

Mr. HARRISON. They cover the field of steel, copper, zinc, which are several of the items that we have already gotten out orders on, and those orders specifically pinpoint time.

Now, they specifically suggest this and so indicate: That where any particular manufacturer or supplier has an excess of inventory, that he may not accumulate additional materials.

Senator CAPEHART. He may not?

Mr. HARRISON. He may work it out. He is not yet forced to transfer that to somebody, although we do have the requisitioning power and are prepared to use that if necessary.

But actually, I think, in the field of raw materials the point the Senator is making has been covered. It has not been covered in the field of the finished goods.

Senator CAPEHART. Will the General yield? Do you not think it might be wise to mail to each member of this committee a copy of all these orders?

Mr. HARRISON. We would be very glad to, Senator. We would be very glad to do so.

Senator CAPEHART. If we do not get them, we do not know.

Mr. HARRISON. And I would like to restate my original observation that one of the first steps was a general inventory which spelled outSecretary SAWYER. The first thing.

Mr. HARRISON. I do not recall whether the priorities order was the first or the second. But it was one of the first steps. Then as we have worked into each of the individual items we have pinpointed that in terms of specific time.

Senator CAPEHART. What have you done in respect to this fellow that is hoarding steel, for example and there are many other things involved who is reselling it at a very, very high price?

Mr. HARRISON. No, sir, in the field of price we have not involved ourselves, and

Senator CAPEHART. Section 102-let's read it.

In order to prevent hoarding, no person shall accumulate (1) in excess of the reasonable demands of business, personal, or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which have been designated by the President as scarce materials or materials the supply of which would be threatened by such accumulation.

Now, that is the thing I am interested in, No. 2.

I have reason to believe there is a lot of hoarded steel in the United States, and hoarding of aluminum and other basic materials. Mr. HARRISON. Senator

Senator CAPEHART. We might some day take you out and show you some of it.

Mr. HARRISON. I am ready to get a railroad ticket and ready to go at any time.

I would like to say this: With respect to the price, I will ask Mr. Fleischmann, I think, if I might, to talk to that, but we did take and send out to several steel distributors, warehouses, in the last 45 days a selected list of questions to cover their inventories as of a certain date, as I remember, June 30, and then as of September 30. I may not be quite exact. And we do have the data on that and, incidentally, that data shows a decrease in the inventories of those particular firms that we checked.

Senator CAPEHART. If the General will yield, let me say this to you: We placed section 102 in here in order to try to control the black market, because it is my personal opinion-you may not agree with it, but it is my personal opinion you can control the black market on steel and basic materials better under this section than you can under price control; because under price control they will pay the additional price under the table in cash, and they are paying a lot of it under the table right now and it is hard to prove it, it is hard to get to it. Mr. HARRISON. Yes.

Senator CAPEHART. But here it ought to be fairly easy to prove whether or not they are hoarding for the purpose of selling at prices above the prevailing market price.

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