EMERGENCY PRICE CONTROL ACT : THURSDAY, DECEMBER 11, 1941 UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met at 2 p. m., in room 301, Senate Office Building, Senator Prentiss M. Brown, presiding. Present: Senator Brown (presiding), Bankhead, Herring, Spencer, Tobey, Danaher, Taft, Thomas of Idaho, Ball, and Butler. Senator BROWN (presiding). The committee will be in order. You may proceed, Mr. Henderson. STATEMENT OF LEON HENDERSON, ADMINISTRATOR OF THE OFFICE OF PRICE ADMINISTRATION, WASHINGTON, D. C.Resumed Senator BROWN. Where were we, Mr. Henderson? Mr. HENDERSON. We were discussing the licensing provision. I think we had almost completed it. I expect to call Senator Taft's attention to this personally, but I think the record should show what was done under the Food Administration in the World War. Senator BANKHEAD. Senator Taft, Mr. Henderson has something that he wants to call to your attention. Mr. HENDERSON. I said I expected to call it to your attention personally today. Senator BROWN. We are in formal session now. Mr. Henderson has reference to page 26 of the bill. Mr. HENDERSON. I expected to call your attention to it personally, Senator Taft, but I thought the record ought to show what was done under the Food Administration in the last war in the way of suspending the issuance of stock orders on licenses. There were 3,868 cases. We have gone back through the archives and made a study of what happened there, not merely for a dry record, but naturally as a basis of any administration we might seek. Mr. Ginsburg, you might want to comment on that. Mr. GINSBURG. In the first place, I would like to offer for the record a memorandum which we prepared which summarizes most of these data. I think it should be in the record. Senator BROWN. It will go in at the conclusion of Mr. Henderson's statement, Mr. GINSBURG. I wanted to indicate that we made a break-down of what had happened under the Lever Act in connection with the licensing provision. You will find in the Annual Report of the Food Ad ministration for the year 1918 on pages 42 to 45 statistical material which summarizes their enforcement work. Among other things there were unlimited revocations in the number of 249; limited revocations, 187; refunds or contributions, 4,123; temporary suspensions and minor penalties, 3,658. Senator BROWN. I would understand that better if you told me how many were licensed. There Mr. GINSBURG. A total of about 260,000 licenses were issued. were relatively few revocations. There were only 450 cases of actual revocation over a period of a year and a half. But there was every type of enforcement. Contributions were required to the Red Cross; the violators were required to buy bonds. There were all kinds of informal enforcement, as well as permanent or temporary suspensions of licenses. One interesting fact is that because of the control through licenses Mr. Hoover was able to avoid many criminal penalties. As a matter of fact, in the whole period of a year and a half there were only 72 criminal prosecutions, which is very good considering the number of people who were subject to the provisions of the act. All of our findings and all of the information we have with reference to enforcement under the Lever Act are contained in this memorandum which we would like to have inserted in the record. Senator BROWN. It may be inserted at the conclusion of Mr. Henderson's statement. (The brief referred to and submitted by Mr. Ginsburg will be found at the conclusion of Mr. Henderson's statement, pp. 181-200, infra.) Senator TAFT. My recollection is that most of the licenses were taken away by State administrators, from retail stores. Mr. HENDERSON. They were signed by the National Administrator and sent to the food administrator in the State, such as Mr. Heinz in Pennsylvania. Senator TAFT. There were a number of fly-by-night operators who were not really in the business. Mr. GINSBURG. In the Lever Act there was a straight, broad license provision. As a matter of fact, there were several licensing provisions. Senator BANKHEAD. And the Food and Fuel Act? Mr. GINSBURG. Yes, sir. Senator BROWN. What control did they exercise over the sellers who were engaged in the business? Mr. GINSBURG. It was essentially price control through control over the mark-ups above cost. But the Administrator also promulgated regulations which covered a great many other things in addition to prices. Senator BROWN. And that was based on statutory authority? Mr. GINSBURG. Yes. For example, the general licensing regulations prescribed under the Lever Act, applicable to all licensees, required the making of reports, permitting the inspection, and the keeping of records. Regulations prohibited resales within the same trade in order to keep the movement of goods as simple as possible. Regulations prohibited speculation as well as sales to speculators or violators. They prohibited unfair practices and secret rebates. Market quotations were required not to be misleading. Senator BROWN. Was there any legal attack on that act? Mr. GINSBURG. There were several, but the constitutional validity of price fixing under the Lever Act was sustained in United States v. Macintosh, 283 U. S. 605. Senator TAFT. Oh, no. It was finally held to be unconstitutional as far as the criminal provisions were concerned. Senator BROWN. That was my recollection. Senator TAFT. It is held unconstitutional solely because the criminal section was held to be so vague that it was perfectly indefinite. Senator BROWN. The attack was not aimed at the essential legality of the act itself; the power to control? Senator TAFT. No. Senator BROWN. It was merely the indefiniteness of it? Senator TAFT. Yes. Mr. GINSBURG. The act merely prohibited unreasonable prices. The court held that the standard "unjust or unreasonable rate or charge" was too uncertain and indefinite. Senator BANKHEAD. That was held in the Coal case, was it not? Mr. HENDERSON. I think it was sustained in the matter of a coal license. Senator BROWN. We will go to section 206. Senator TAFT. The act was always uncertain, and the legal department doubted somewhat its legal authority to prescribe the regulations that we did prescribe. Senator BANKHEAD. What part of that Administration were you in? Senator TAFT. In the legal department of the Food Administration, in charge of drafting price regulations, mostly-these things that Mr. Ginsburg has been referring to. Senator BANKHEAD. Where was Mr. Garfield? Senator BROWN. Let us pass to section 206. Mr. GINSBURG. Briefly, section 206 provides that you cannot enter into a contract at a price higher than the ceiling in effect at that time, or at the time of delivery. Senator BROWN. How about the word "heretofore" in line 6? Mr. GINSBURG. That is designed to cut across contracts which presently involve sales at prices in excess of ceilings. Senator BROWN. What do you think about the legality of that provision? Mr. GINSBURG. We are not especially troubled by that provision, because, as you know, the contract provision of the Constitution does not apply to the Federal Government. It is a perfectly reasonable thing, and indeed necessary, in circumstances of this kind, to cut across. I do not think there is any question about it. And I think Senator Taft will bear me out. Senator TAFT. I do not think it will work without it. There may be some constitutional questions about depriving of property, and so forth; but I do not see any alternative except to try it. I left it in my bill, or something like it. 1 255 U. S. 81. 65913-41-11 Senator BROWN. I think we understand the effect of section 206. Unless there is some other question you may proceed. Mr. GINSBURG. The House committee had it that you could not enter into a contract above the ceiling which was in effect at the time of the contract, but I think that was probably too rigid. We took the matter up with Mr. Neff at the War Department, and as a result of his suggestions we have broadened it. Senator BROWN. It seems to me that practically there would be very few contracts of that kind. Mr. GINSBURG. I just do not know, sir, about that. Senator BROWN. Does section 206 differ substantially from the House bill? Mr. GINSBURG. No, sir. The changes are indicated in the committee print. Senator BROWN. You have stricken out some language on pages 29 and 30? Mr. GINSBURG. That is not a substantial change. The only substantial change is the change from the ceiling in effect at the date of the contract to the ceiling in effect on the date of delivery. Senator BROWN. And section 207 is a mere technical provision? Mr. GINSBURG. It is a little bit more than that. I will indicate why it was put in there. It is a provision regarding schedules which are presently issued. We have got out, I think, 52 schedules. If we had to put out statements of considerations as to all of these at the time that the act was passed, the burden on the office would be enormous. What we propose here is that they should be subject to the protest and judicial review sections of the act, but that we should not be required to reexamine every schedule and throw uncertainty into what the price is. Business is presently working under those schedules. Section 207 merely says that we do not have to go through with the statements of considerations. Senator BROWN. The legality of it is unquestionably from the effective date of the act or from the date that the Administrator takes office. Why do you say the date he takes office instead of the effective date of the act? Mr. GINSBURG. This act is not self-operative. It only takes effect after the Administrator has done certain things. So the draftsmen felt it was preferable to have section 207 operate from the date the Administrator takes office. Senator BROWN. Does anybody have any question about these definitions that you want to present to the Administrator? Senator TAFT. I think the term "commodity" is very broad. I have no questions at this time, however. Senator BROWN. I think that pretty well completes the reading of the bill. Mr. Ginsburg will have a brief on the legal aspects. Mr. GINSBURG. Yes, sir. Senator BROWN. Is that included in the statement that you have already filed? Mr. GINSBURG. No, sir. I would like to offer that for the record later. Senator TAFT. I want to get back to some of these sections as to which there is no amendment offered. I do not like section 1 (a) with reference to all the different reasons why the act may be constitutional. I would very much rather put the whole thing on the basis of war power. I have no question that under the war power it can be done, that it can extend beyond interstate commerce, and then when the war is over we have not in the meantime raised all these other questions. I would particularly object to No. 1 [reading]: to preserve the value of the national currency against the consequences of price and credit inflation. That, it seems to me, is trying to pass on the power to coin money and regulate the value thereof. Senator BANKHEAD. They had to do that in order to give this committee jurisdiction. Mr. GINSBURG. That was one of the considerations. Senator TAFT. I do not want to raise a lot of constitutional questions. I would like, when the war is over, to have the thing stop-at least, when the war emergency is over-and not try to set up a lot of claims that we can fix prices on that basis, because I think that is stretching the value of currency away beyond where I would like to see it stretched. Mr. GINSBURG. All we had in mind, Senator, was this. Whether we put this in the preamble or whether we do not, the fact is that when the act gets to the Supreme Court, or if it gets to the Supreme Court, the Court will be under an obligation to consider whatever constitutional authority there may be in order to sustain the act. Senator TAFT. You can make any argument you want to over there. Mr. GINSBURG. They are under obligation to consider whatever constitutional powers in their judgment would sustain the constitutional validity of the act. Senator TAFT. The amendment which I have offered simply says [reading]: It is hereby declared that it is in the interest of national defense and security and the purposes of this act are, to prevent or retard a general rise in the price level of commodities, and to prevent unreasonable increases in prices, which would cause hardship to individual consumers and wage earners, to persons engaged in business, to investors, to endowed schools, universities, and other institutions, and to Federal, State, and local governments, and which would increase the cost of the defense and lend-lease programs to the United States Government; and it is further declared that this action is made necessary by the tremendous increase in purchasing power resulting from Government borrowing in connection with the defense and lend-lease programs growing out of the war in Europe and the possibility that the United States may become involved therein. That may be too long, but I tried to boil it all down to the war. Mr. GINSBURG. There is one function that section 1 serves, and we intended it to serve that function. I do not think there is any substantial question involved in connection with standards. But one of the functions of section 1, which we worked over with Mr. Wood last summer, was to provide standards for the guidance of the Administrator; for example, to obtain the maximum possible production without undue profits to low-cost producers. Senator TAFT. That is your buying and selling proposition again. You suggest that the low-cost producer ought to get less profit than a high-cost producer. I do not see why we have to discuss theoretical questions at all. I would take out all of section 1 and have one clause simply basing it on the war. |