At this moment the personal savings of the people of this Nation are at their alltime peak. Consumer-credit control will place no restraining hand upon those who have ready stores of cash or its equivalent. To imagine that the fixing of credit terms in the form of “larger down payments and shorter maturities" for consumer durable goods will serve as any kind of brake on inflated prices, even to an insignificant fractional degree, is to resort to innocent wishful thinking or to a deliberate avoidance of the grim realities of price, wage, and rationing controls. Government concentration upon individual and family credit, whether such credit is for the meeting of everyday personal emergencies or for the acquisition of manufactured articles, is a flight from these realities. Behind the presumably plausible excuses for consumer-credit control as reflected in charts, graphs, and tables of so-called economic studies, there still stands the antiquated but whispered moralizings about "debt"-without distinction between constructive credit constructively employed and the debilitating effects of useless debt uselessly incurred. As so often when legislation adopts the scattergun principles instead of bull's-eye markmanship, we would have here unwarranted control of constructive credit in all of its wholesome forms and none of the preventives that its exponents deplore. If we reduce the matter to its mathematical equations, using statistics originated by the Government itself (statistics not wholly reliable) we will find still less justification for rushing into these controls either in the name of patriotism or inflation. Government statistics place national consumer credit at approximately 18.6 billion dollars as of April 30, 1950. This is the figure tossed to the public as evidence of its own reckless squandermania. It is the figure newspapers, periodicals, and even some economists use to describe the staggering number of automobiles, television sets, and other "luxury" articles being bought for "a dollar down and a dollar when they catch you.' Seldom or never is it made clear that this 18.6 billion dollars of credit includes approximately 7.3 billion dollars of non-installment credit such as single-payment loans, charge accounts and "service credits," the latter presumed to be bills for professional services and other similar noninstallment credit. Seldom or never is it made clear that this 18.6 billion dollars of consumer credit also includes 4.8 billion dollars of installment credits arising out of personal or family loans for meeting domestic emergencies, sickness, hospitalization, funeral bills, and for tuition, home repairs, and a multitude of purposes altogether unrelated to installment purchases. Thus we have the residue of the 18.6 billion dollars of consumer credit which is identified as "sale credit," or the purchase of manufactured articles and this amounts to 6.5 billion dollars as of April 30, 1950, of which 3.4 billion dollars represented automobile financing and 3 billion dollars the acquisition of electrical appliances, including washing machines, refrigerators, ironers, and other household articles. If related to the total gross national product of 263.9 billion dollars on January 31, 1950, this 6.5 billion dollars of installment sale credit amounts to 2.5 percent. This unimpressive percentage is derived from the Federal Reserve Board's own findings as reported in its Bulletin for June 1950. In 1929 this percentage of installment-sale credit to the gross national product income amounted to 2.4 percent. In 1939 it was 3 percent. When related to disposable personal income, installment-sale credit amounted to 3 percent in 1929, 3.8 percent in 1939, and 3.2 percent in January 31, 1950. Personal savings in 1929 totaled 3.7 billion dollars, decreased to 2.7 billion dollars in 1939, and jumped to 18.6 billion dollars in January 1, 1950. In summation it has become increasingly evident that consumer credit is leading the sweepstakes in the political contest for "Public Whipping Boy No. 1." It provides a forum for the "reformers," an escape hatch for the avoider of realities, and another haven for the faithful bureaucratic retainers. The national economy, racing in high gear, may be compared with a fourcylinder engine. These cylinders are material, production, distribution, and credit. To tinker with any one of the four, without coordinating the timing and firing of the other three, simply results in misfiring. The fuel that feeds this engine is a composite of wages, salaries, dividends, and other products of the national income. If the purpose is to slow down the engine in terms of inflation, then adjustment of the fuel supply is called for through wage and price control. If the purpose is to divert the power of the engine to other than peacetime energy, the basic engineering principles still adhere. Statement of ROBERT P. GERHOLZ, PRESIDENT OF THE NATIONAL ASSOCIATION OF REAL ESTATE BOARDS*** Mr. Chairman and gentlemen, our association has by resolution of its executive committee offered its services to our Government in every way in which our special knowledge and skill in the field of real property can be helpful. This offer has been sent to the President and Mr. Symington. We believe that our national security requires that our Nation be well prepared and we are in accord with an adequate military preparedness program. Title IV of Senate bill 3936, however, gives the President of the United States unprecedented powers over sections of our national economic life. These powers are given almost without restraint in the bill as drawn. They are more farreaching than were found desirable or necessary in World War II. Title IV con cerns itself with real estate credit in which our group is vitally interested. In our opinion the Government already possesses; or under other pending measures will possess for the predictable future, adequate control over critical materials and over real estate credit through 1. The existing Federal agencies, including the Federal Reserve Board, the Housing and Home Finance Agency, the Home Loan Bank System, and the RFC. These agencies set the pattern for real-estate credit throughout the Nation and to a large extent control it. Housing credit has already been curtailed by the President through these agencies. 2. An increase in taxes, which is pending and which, as stated by President Truman in his message to Congress on July 19, is "our basic weapon in offsetting the inflationary pressures" and "will make general controls less necessary." 3. Controls which may be imposed by other sections of this bill, which cover such matters as priorities and allocations of materials and facilities. We believe that the existing and pending controls are adequate to achieve the objectives sought and that, so far as real estate is concerned, title IV should not be enacted. In order to supplement our opinion as to the adequacy of present legislation, we cite the recent opinion expressed by Mr. Marriner Eccles, member of the Federal Reserve Board, issued July 18, in which he makes the following suggestions, which are herewith briefed: 1. Request every bank to unite in a nationwide voluntary agreement to stop bank credit expansion by limiting new loans to the amounts of the loans paid. 2. Request insurance companies and mutual savings banks not to sell Government securities for the purpose of getting money to increase loans on other investments. 3. Require RFC to stop making loans except when they are for military purposes and cannot be gotten elsewhere. 4. Require FHA to rescind its recent reduction in interest rates and to reduce its insurance coverage. 5. Give the Federal Reserve Board control over consumer credit terms. 6. Require the Treasury to permit short-term interest rates to rise moderately and thereby take off the pressure for long-term interest rates to go down, which will expedite the sale of Government bonds. We are particularly apprehensive over the power given the President by section 401 (d) of title IV to impose a license system on all transactions, persons and classes thereof in connection with real estate credit. No such measure was authorized in World War II, and we know of no justification for it now. I need not dwell on the dangers inherent in giving the Government such powers. It may be pertinent to remind you that over 90 percent of the real-estate brokers are already licensed by State law, and that there is no need for Federal licensing for them. Such a system involves building up tremendous additional machinery, duplicating what is already in existence, thus consuming manpower more needed elsewhere. I doubt that the public realizes the nature and breadth of the powers which title IV of the bill confers on the President. Some may say that these powers will not be exercised to their full extent, but we cannot safely assume this. Time does not permit a detailed discussion but it is worth while to note the high lights of section 401, beginning on page 11 of the bill. Subsection (a) gives the President power to prescribe regulations over all aspects of real estate credit, including regulations forbidding any credit at all under such circumstances as he may specify. Subsection (b) provides that "no person shall extend or maintain any credit or renew * * * refinance * or lend or borrow on, any obligation arising out of any credit" in violation of any regulation. What does the word "maintain" mean? Does it mean that 70331-50- -9 * * people may be forbidden to continue holding or making payments on mortgages which are already in existence? Under subsection (c) any person violating any regulation is subject to heavy penalties by way of fine and imprisonment. Subsection (d) authorizes the President to subject transactions, or persons or classes thereof to licensing. Violation of any regulation could lead to suspension of the license. In the light of these powers, the definitions contained in subsection (e) are startling. Take the definition of "credit" in subparagraph (3), page 15. It embraces not merely credit in the usual meaning of the word but many situations to which the word is not normally applied. For example, if A signs a contract to purchase a house from B for $10,000, paying $1,000 down and agreeing to pay the balance in cash when title passes, the transaction involves real estate "credit" and is subject to regulation by the President, including licensing and registration. Under this definition every real estate transaction involves credit. No one can buy or sell a home except as permitted by the President's régulations, or, if the license system is imposed, without the approval of some Federal official. The, same is true of every loan on a home, every renewal of refinancing of such a loan, exchanges of property, options, leases containing options to buy, and all other transactions in real estate. The powers could be used to freeze the entire real estate economy of the country. They could prove disastrous for the defense program itself, which is likely to require the movement of workers and others from one community to another. There is one more feature under the definition of "credit" to which I should like to invite your attention, even though it may not apply generally to us. The term "credit" applies not only to contracts involving property but also specifically to sales and contracts for "services." What does this mean? We take this opportunity to suggest that, as it did in World War II, the Con gress set up one or more appropriate committees to review regulations, to hear suggestions and grievances from the public, industry, and labor, and to report thereon to Congress from time to time. In closing, I quote again from President Truman's message to Congress of July 19. He stated: "We are determined to maintain our democratic institutions so that Americans now and in the future can enjoy personal liberty, economic opportunity, and political equality." THE NATIONAL GRANGE, Washington 6, D. C., July 27, 1950. DEAR MR. CONGRESSMAN: In a time of great national crisis, such as we face today, the Congress must grant to the President the necessary war powers to assure quick action, but it must not abdicate its responsibility as the repre- : senatives of the people. We believe that the Congress can delegate to the administrative branch all the powers needed for the maximum war effort and still retain the responsibilities provided in the Constitution. We call your attention to the enclosed statement in which we outline methods by which we believe this can be accomplished. Sincerely, A. S. Goss, Master, The National Grange. TESTIMONY OF ALBERT S. Goss, Master, the National GranGE 1. The brief time allotted to discuss so far reaching a bill precludes doing more than present two or three recommendations which we consider most important. 2. In time of emergency it is often necessary for democracies to increase the power of their executive officers in order to make quick decisions and quick action possible. Thus the Government becomes further removed from the control of the people. The control of the Federal Government by the people is not exercised by the election of a President once in 4 years, but rather by the election of their representatives in Congress. Usually the President is elected on a very few major issues, sometimes a single issue. Many of these are of transient importance. On the other hand, the Members of the Congress are elected for the purpose of representing the people of their districts on every issue which arises, and the very life of a true democracy depends on keeping the control of governmental policy in the hands of the people's constitutional representatives. 3. In time of emergency speed and ability to make quick decisions are needed, but the counsel of the people's representatives is also needed. Congress can provide adequately for speed and quick decisions without surrendering its responsibilities and without placing in the judgment of one man absolute powers over the economic life of the Nation. He might be the ablest man in the Nation, but the problems confronting the President in a defense emergency are so extremely complex that Congress has no right to assume that any one man can meet them without adequate aid. The people have every right to expect that Congress will provide sufficient aid and at the same time maintain adequate control of those powers upon which their freedom depends. 77 KOTZ PIŠT 4. The bill under consideration gives the President almost complete powers over our economic life for a period of 2 years. No matter how many mistakes might be made, or how serious they might be, only by a procedure almost equivalent to impeachment could those powers be retrieved, and then possibly too late to prevent irreparable damage. The powers might be wisely administered in some respect and poorly administered in others, in which case Congress would be practically helpless to correct the weakness, no matter how glaring it might be. 5. On the other hand, quick decisions and quick action, where action is needed, must not be subjected to the slow processes of congressional deliberation. We deem the present situation so serious that all practical steps should be taken without delay to mobilize our full economic strength to meet any emergency / which may occur. Events may soon develop which justify the immediate exer cise of any one or most of the powers conferred in the bill. Even more power to ration supplies at the consumer level and to control prices and wages may be needed. With two or three exceptions, which we will point out, we think it probably wise to grant the President most of the powers contained in the bill, if and only if, adequate safeguards are provided so that the Congress is kept in touch with the situation at all times; so that mistakes may be promptly corrected; and so that limitations may be provided where powers are not wisely used. 6. Many costly mistakes made during and since World War II could have been avoided if the representatives of the people had been consulted. These are still fresh in our minds, and should serve as a warning not to depend almost entirely on the judgment of one man, but rather to provide for adequate consultation and the sharing of the responsibility by the Congress... 7. We believe this can be accomplished without sacrificing in any respect the power for quick decisions and quick action by providing two amendments to the bill. À 8. First, we would recommend that there be established a bipartisan Joint Security Committee of eight members, four to be selected from each House. It should be the purpose in the selection of the members of this Joint Security Committee to give major consideration to the experience, the capacity, and the trustworthiness of those selected, without regard to their seniority or committee position. To accomplish this it is suggested that, by caucus, the majority and minority parties in each House each select two members, and that the eight members so selected be confirmed by two-thirds vote of each House, thus putting a firm stamp of approval upon them. Any member should be removable by a two-thirds vote of the House of which he is a member. 9. This Joint Security Committee should act as an advisory committee to the President, and the powers conferred upon the President in this bill should be exercisable only after he has consulted with the Joint Security Committee with reference to them. The Committee should be constantly available throughout the life of the emergency. The President's hands should not be tied by any requirement that the Committee assent to his action. However, the Committee should know what is going on except in one type of case, when in the judgment of the President, the military security of the Nation demands complete secrecy. It is thought, however, that with men thus selected for this position of trust, such cases would be rare. The Joint Security Committee should make to the Congress such reports and recommendations as it determines are justified. 10. Thus the Congress would continuously work with the President in carrying the heavy war responsibilities, while leaving to him the right to make decisions; after the benefit of conference with the representatives of the people. 11. The second amendment should be to provide that the Congress by joint resolution might withdraw or modify any one of the powers granted. 12. With such safeguards much broader powers could safely be granted to the President than if there were no such safeguards. Without some such amend ments we believe practically every title of the bill would need very careful study with many revisions, because of the possibility of the serious consequences which might easily arise from the unwise exercise of the extremely broad powers provided in it. 13. We wish to comment on two sections specifically. Section 412 would serve no useful purpose and should be deleted. Its sole purpose is to place in the President's hands power to prevent inflation in the price of a few commodities of which the Government holds a supply. It authorizes their sale at the support price instead of at 105 percent of the support price plus carrying charges as under existing law. There can be no danger of an inflated price as long as Government stocks can be sold at less than parity. That is already provided in existing law. The proposed provision abandons the whole parity concept and establishes an uncertain support level as a fair market for farmers. It is the opening wedge for possible roll backs which proved completely unworkable during the days of OPA. When the support price and the sales price are the same, no private dealer could enter the market, with the result that Government trading would soon be substituted for private operations. The very fact that such a futile and unworkable provision should be proposed demonstrates clearly the need the President has for consultation with representatives of the Congress. 14. Section 411 deals with a highly technical subject which has had extensive study by the Committees of Agriculture. We feel that this section should also be deleted and a new bill covering this section alone should be introduced and referred to the Committee on Agriculture, because we believe that limitations should be provided to avoid the possibility of costly errors. 15. Summing up, we recommend the deletion of sections 411 and 412. We believe the bill provides a dangerous delegation of powers unless a Joint Security Committee of the Congress to confer with the President is created, leaving him freedom of action, but providing advice and counsel so that our democratic processes may be preserved and put to practical use. Hon. BRENT SPENCE, HOUSE OF REPRESENTATIVES, Chairman, House Committee on Banking and Currency, Washington, D. C. DEAR MR. CHAIRMAN: The attached resolution from the Restaurant Beverage Association of Washington, D. C., is self-explanatory. I would appreciate your bringing this to the attention of the members of your committee for whatever action they deem necessary. Sincerely yours, EDWARD A. Garmatz, M. C. A RESOLUTION Whereas on the 19th day of July 1950 the President in his message to the Congress of the United States and the American people, stated that the American people are united in their belief in democratic freedom and united in their detest of communistic slavery; and Whereas the Armed Forces of the United States are presently engaged in combating an "act of raw communistic aggression" in Korea; and Whereas these series of events are of signal importance to every citizen who will be called upon to do his share in order that our inherent rights and the freedom of this Nation are preserved; and Whereas it will be necessary to increase our military strength with men, equipment, and supplies; and Whereas it will be necessary for our Government to bring about a considerable adjustment in our national economy by proper legislation; and Whereas the Restaurant Beverage Association of Washington, D. C., à trade association affiliated with the National Licensed Beverage Association, comprising retail restaurants serving food and drink to the general public, desires to fully cooperate with the President of the United States in order that the purpose of the United Nations to maintain peace among all nations may be fulfilled and our generations of young people throughout the world will not be compelled to take up arms again but may continue to pursue the paths of freedom, equality, opportunity, and happiness in a world truly at peace; and |