Senator MALONE. The act specifically covered these three things? Mr. WALSH. No, sir; the act covered the entire field, but those three commodities are the only three commodities on which the Emergency Procurement Service as such was authorized to buy and resell.

Senator MALONE. You are the head of the Emergency Procurement Service?

Mr. WALSH. That is correct.

Senator MALONE. Who authorizes you to do this?

Mr. WALSH. That was authorized by the Defense Production Administration.

Senator MALONE. Who is the head of the Defense Production Administration?

Mr. WALSH. At the present time that is the Office of Defense Mobilization, headed by Mr. Flemming.

Senator MALONE. Let me ask you, Mr. Walsh, right here, and then we will ask Mr. Medley to explain it in detail: Under this setup that you are now describing you do incur losses by purchasing from different sources and then selling to selected purchasers?

Mr. WALSH. On the rubber program there was no loss incurred.
Senator MALONE. What rubber did you buy, the natural rubber?
Mr. WALSH. Natural rubber.

Senator MALONE. From where?

Mr. WALSH. From all producing countries of the world. That was during the period of time when the Government was the exclusive buyer and seller of rubber.

Senator MALONE. What dates did that include?

Mr. WALSH. That began in January of 1951 and was discontinued in March of 1952. The sale, however, went on until the end of June 1952. The purchases were discontinued in March 1952.

Senator MALONE. The rubber purchases covered only that period of time?

Mr. WALSH. Yes, sir.

Senator MALONE. There was no loss?

Mr. WALSH. No loss.

Senator MALONE. What about lead?

Mr. WALSH. In lead there was no loss sustained either.

Senator MALONE. What period did that cover?

Mr. WALSH. It covered the period from June 1952 to September 1952. It was an authorization to buy 30,000 tons of lead for resale to industries, and in the event there was no need in industry for that lead by the end of December 1952, it was to be transferred to the stockpile.

Senator MALONE. What happened to this?

Mr. WALSH. There were 26,104 tons purchased. Industry did not take any. It was transferred to the stockpile.

Senator MALONE. What was the price paid for this lead?

Mr. WALSH. 16.1 cents per pound.

Senator MALONE. From whom did you purchase it?

Mr. WALSH. I think all except one lot was purchased from domestic producers.

Senator MALONE. What was the amount of that one lot?
Mr. WALSH. I believe it was 2,000 tons.

Senator MALONE. Where did it come from?

Mr. WALSH. Yugoslavia.

Senator MALONE. Is that the same Yugoslavia that is talking about moving in on Trieste and Italy at this time?

Mr. WALSH. Yes, sir.

Senator MALONE. What did we pay them for this lead?

Mr. WALSH. We paid them the same as the others, 16.1 cents.
Senator MALONE. Now how about the tungsten?

RESALE OF MATERIALS AT A LOSS TO THE UNITED STATES

Mr. WALSH. The program on tungsten authorized the Government to sell at a loss.

Senator MALONE. It authorized you to sell any of these materials at a loss, did it not?

Mr. WALSH. Rubber, yes, sir, it did.

Senator MALONE. And lead?

Mr. WALSH. I do not recall whether the language was specific.
Senator MALONE. This is the act itself you are talking about?

Mr. WALSH. The authorization under the act. The act itself does permit loss.

Senator MALONE. Does it mention that particular item in the act itself, that it permits a loss?

Mr. WALSH. It does not mention items to my memory, but I think Max could clarify that.

Mr. ADLERMAN. This is the letter of authority [indicating].
Senator MALONE. Do you have a copy of the act with you?

Mr. WALSH. I do not have. Mr. Elliott has.

Mr. ADLERMAN. Public Law 774. Do you have the two executive orders on this?

Senator MALONE. Mr. Elliott, will you identify yourself for the record and state the number of the law and the date of its passage, and read that part of it that authorizes the executive order to sell at a loss?

Mr. ELLIOTT. Yes, sir. I am Maxwell Elliott, General Counsel for the General Services Administration. This is under section 303 (a) of the Defense Production Act of 1950, as amended. Subsection (a):

To assist in carrying out the objectives of this Act, the President may make provision (1) for purchases of or commitments to purchase metals, minerals, and other materials, for Government use or resale; and (2) for the encouragement of exploration, development, and mining of critical and strategic minerals and metals: Provided, however, That purchases for resale under this subsection shall not include that part of the supply of an agricultural commodity which is domestically produced except insofar as such domestically produced supply may be purchased for resale for industrial uses or stockpiling, and no commodity purchased under this subsection shall be sold at less than the established ceiling price for such commodity (except that minerals and metals shall not be sold at less than the established ceiling price, or the current domestic market price, whichever is lower), or, if no ceiling price has been established, the higher of the following: (i) the current domestic market price for such commodity, or (ii) the minimum sale price established for agricultural commodities owned or controlled by the Commodity Credit Corporation as provided in section 407 of Public Law 439, Eighty-first Congress: Provided further, however, That no purchase or commitment to purchase any imported argricultural commodity shall be made calling for delivery more than one year after the expiration of this Act.

Senator, it is rather long, but (b) and (c) of this section are also pertinent to your inquiry, if I might read them.

(b) Subject to the limitations in subsection (a), purchases and commitments to purchase and sales under such subsection may be made without regard to the limitations of existing law, for such quantities, and on such terms and conditions, including advance payments, and for such periods, but not extending beyond June 30, 1963, as the President deems necessary, except that purchases or commitments to purchase involving higher than established ceiling prices (or if there be no established ceiling prices, currently prevailing market prices) or anticipated loss on resale shall not be made unless it is determined that supply of the materials could not be effectively increased at lower prices or on terms more favorable to the Government, or that such purchases are necessary to assure the availability to the United States of overseas supplies. Then subsection (c), because we had some operations under (c), reads as follows:

If the President finds-(1) that under generally fair and equitable ceiling prices for any raw or nonprocessed material there will result a decrease in such supplies from high-cost sources of such material and that the continuation of such supplies is necessary to carry out the objectives of the Act or (2) that an increase in cost of transportation is temporary in character and threatens to impair maximum production or supply in any area at stable prices of any materials, he may make provision for subsidy payments on any such domestically produced material other than an agricultural commodity in such amounts and in such manner (including purchases of such material and its resale at a loss without regard to the limitations of existing law), and on such terms and conditions as he determines to be necessary to insure that supplies from such high-cost sources are continued, or that maximum production or supply in such area at stable prices of such materials is maintained, as the case may be. I read the last section, sir, because Mr. Walsh may want to tell you about the copper purchases which were made.

Senator MALONE. I have a copy of a letter here with which you are no doubt familiar, Mr. Walsh, from Edmund T. Gibson, Deputy Administrator of the Defense Production Administration, to Mr. Larson, the Administrator of General Services.

Do I understand that the duties of the Defense Production Administrator are moved over now to Mr. Flemming?

Mr. WALSH. Yes, sir.

Senator MALONE. In the Office of Defense Mobilization?

Mr. WALSH. Yes, sir.

Senator MALONE. There really is no Defense Production Administration now?

Mr. WALSH. That is correct, sir.

Senator MALONE. It might be well, if you are familiar with the intricate setting up of all these administrations and with the transfer of authority and in certain instances the abolishing of titles, to take all these various initial organizations and bring them down to where the authority now rests. Would you do that for the record?

LEGISLATIVE HISTORY AND ADMINISTRATIVE RESPONSIBILITY FOR THE

STOCKPILING PROGRAM

Mr. WALSH. To the best of my ability, I will try.

Senator MALONE. Do you not have advisers who can look that up for us?

Mr. WALSH. Yes, sir, I have. I think I can give it to you right

now.

Senator MALONE. Then start from the beginning.

Mr. WALSH. Going back to Public Law 520 at its inception?
Senator MALONE. Yes.

Mr. WALSH. Public Law 520 established the authority in the Secretaries of Army, Navy, and Interior, who in turn designated to the Munitions Board the authority of the stockpiling program.

Senator MALONE. They set up the Munitions Board under the authority of Public Law 520 ?

Mr. WALSH. I believe it was set up before that, but they assigned under 520 the responsibility to the Munitions Board. I believe it was brought into being prior to 520.

There was delegated to the Secretary of the Treasury the authority to make purchases, to transport, inspect, and store the materials in the stockpiling program as directed by the Munitions Board. That authority was delegated by the Secretary of the Treasury to the Procurement Division of the Treasury Department.

Senator MALONE. All under 520?

Mr. WALSH. Yes, sir.

Later on the Procurement Division title was changed to Bureau of Federal Supply, and under Public Law 152 is was transferred to the General Services Administration, and the name changed to Federal Supply Service. Then in August of 1950, I believe it was, the strategic and critical materials or the 520 functions were broken away from the Federal Supply Service and set up in the Emergency Procurement Service.

The Defense Production Act brought into being the Defense Production Administration. The Defense Production Administration was absorbed by a newly created organization known as Office of Defense Mobilization, which also took over from the Munitions Board the authority for operation under Public Law 520.

It also took over the functions formerly performed by the National Security Resources Board.

Senator MALONE. What was the National Security Resources Board? When was that created?

Mr. WALSH. I really do not know, sir.

Senator MALONE. When was the end of it, then?

Mr. WALSH. I think the complete end of it was when the Office of Defense Mobilization came into being; was it not, Max?

Mr. ELLIOTT. That is correct.

There had been an Office of Defense Mobilization created by Executive order under the Defense Production Act, but by the reorganization plan of President Eisenhower which became effective June 12, there was created a new Office of Defense Mobilization which took over the functions of the old Office of Defense Mobilization, the old Defense Production Administration, and the National Security Resources Board.

Senator MALONE. And also the National-what was this organization?

Mr. ELLIOTT. And the functions, also, yes, sir, of the Munitions Board and the Secretaries of Army, Navy, Air Force, and Interior

under Public Law 520.

Senator MALONE. Had you finished?

Mr. WALSH. Except that I would like to add this: As of today, or as of the effective date of this order of June 12, the responsibility for the stockpiling program and for the expansion and development of natural resources is vested in the Office of Defense Mobilization.

Senator MALONE. Headed by Mr. Flemming?

Mr. WALSH. Yes, sir.

Mr. ADLERMAN. Dr. Arthur Flemming.

Mr. WALSH. That is all I would like to say about that.

Senator MALONE. In other words, if I understand you correctly, Mr. Walsh, you have only one organization now, the Office of Defense Mobilization, headed by Dr. Flemming, who has the responsibility for all these various boards and commissions that functioned from, we will say, 1945

Mr. WALSH. 1946, I think.

Senator MALONE. From 1946 until June 11 of this year? You are answerable now to Mr. Flemming?

Mr. WALSH. No, sir, to Mr. Mansure, the Administrator of General Services Administration.

Senator MALONE. Is Mansure's organization, then, under Defense Mobilization?

Mr. WALSH. No, sir.

Senator MALONE. It is independent?

Mr. WALSH. It is independent; yes, sir.
Mr. ELLIOTT. If I could explain that, sir.
Senator MALONE. Yes.

Mr. ELLIOTT. Dr. Flemming and the Office of Defense Mobilization establish the policies for expansion and for stockpile. The General Services Administration is a ministerial operating agency which carries out those policies.

Mr. WALSH. Those policies and programs, Max.

Mr. ELLIOTT. Policies and programs.

Senator MALONE. The General Services Administration carries

out

Mr. ELLIOTT. The policies and programs established by the Office of Defense Mobilization.

Senator MALONE. Then the head of the General Services Administration does only what he is directed to do by the Office of Defense Mobilization, Mr. Flemming heading it?

Mr. ELLIOTT. That is correct; yes, sir.

Senator MALONE. Not technically under it, but can make no move without his sanction?

Mr. ELLIOTT. That is correct. The programs are usually couched in broad terms as to quantities, qualities, and rate of acquisition. Senator MALONE. That is set by the Office of Defense Mobilization, Mr. Flemming?

Mr. ELLIOTT. Yes, sir.

Senator MALONE. Then it is carried out in detail by the General Services Administration, headed by Mr. Mansure?

Mr. ELLIOTT. That is correct. Our authority to operate is limited by these policies, directives, and programs that are established by the Office of Defense Mobilization.

Senator MALONE. At any moment Mr. Flemming could change the order?

Mr. ELLIOTT. Yes, sir.

Senator MALONE. So you really are under the direction of Mr. Flemming?

Mr. ELLIOTT. That is correct, for these purposes.