(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "Extension of the Defense production act of 1950. Hearing, Eighty-ninth Congress, second session, on H.R. 14025. March 29, 1966"

Google 



This is a digital copy of a book that was preserved for generations on library shelves before it was carefully scanned by Google as part of a project 

to make the world's books discoverable online. 

It has survived long enough for the copyright to expire and the book to enter the public domain. A public domain book is one that was never subject 

to copyright or whose legal copyright term has expired. Whether a book is in the public domain may vary country to country. Public domain books 

are our gateways to the past, representing a wealth of history, culture and knowledge that's often difficult to discover. 

Marks, notations and other maiginalia present in the original volume will appear in this file - a reminder of this book's long journey from the 

publisher to a library and finally to you. 

Usage guidelines 

Google is proud to partner with libraries to digitize public domain materials and make them widely accessible. Public domain books belong to the 
public and we are merely their custodians. Nevertheless, this work is expensive, so in order to keep providing tliis resource, we liave taken steps to 
prevent abuse by commercial parties, including placing technical restrictions on automated querying. 
We also ask that you: 

+ Make non-commercial use of the files We designed Google Book Search for use by individuals, and we request that you use these files for 
personal, non-commercial purposes. 

+ Refrain fivm automated querying Do not send automated queries of any sort to Google's system: If you are conducting research on machine 
translation, optical character recognition or other areas where access to a large amount of text is helpful, please contact us. We encourage the 
use of public domain materials for these purposes and may be able to help. 

+ Maintain attributionTht GoogXt "watermark" you see on each file is essential for in forming people about this project and helping them find 
additional materials through Google Book Search. Please do not remove it. 

+ Keep it legal Whatever your use, remember that you are responsible for ensuring that what you are doing is legal. Do not assume that just 
because we believe a book is in the public domain for users in the United States, that the work is also in the public domain for users in other 
countries. Whether a book is still in copyright varies from country to country, and we can't offer guidance on whether any specific use of 
any specific book is allowed. Please do not assume that a book's appearance in Google Book Search means it can be used in any manner 
anywhere in the world. Copyright infringement liabili^ can be quite severe. 

About Google Book Search 

Google's mission is to organize the world's information and to make it universally accessible and useful. Google Book Search helps readers 
discover the world's books while helping authors and publishers reach new audiences. You can search through the full text of this book on the web 

at |http: //books .google .com/I 



/EXTENSION OF THE DEFENSE PRODUCTION 
ACT OF 1950 



89-2 



HEARING 



BEFORE THE 



COMMITTEE ON BANKTNft ANP OUMKNCY 
HOUSE OF MFBFfflNTATTYBS 

EIGHTY-NINTH CONGRESS 
SECOND SESSION 

H.R. 14025 

A BILL TO EXTEND THE DEFENSE PRODUCTION 
ACT OF 1950, AND FOR OTHER PURPOSES 



MARCH 29, 1966 



Printed for the use of the CMnmittee on Bankmgr and Currency 




abvpoogle 



o OJ 



98 



COMMITTEE ON BANKING AND CDHRBNCY 

WRIGHT PATMAN, Tmas, C^jrnum 



ABBAHAM J. MULTBR, NcwYcrk 
WILLIAM A. BABKETT, PennsylTUilB 
LEONOR E. SULLIVAN, Mlwoitri 
HENRY S. REUSS, WlsccmaiD 
THOMAS L. ASHLEY, Ohio 
WILLIAM S. MOORHEAl), Penusf IVBQla 
ROBERT O. STEPHENS, JR., Oeorgla 
FERNAND I. ST QERMAIN, Rhode Iiland 
HENRY B. OONZALEZ, Teies 
JOSEPH a. MINI3H, Naw Jersey 
CHARLES L. WELTNER, OeocEln 
KICHABD T. HANNA. CBlltornla 
BERNARD F. QRABOWSKI, Connecticut 
COMPTON I. WHITE, Ja.. Idaho 
TOM B. QETTYS. South CaroUna 
PADL H. TODD, Jr., MlchlBSn 
RICHARD L. OTTINOEB. New York 
THOMAS C. McQRATH, Jr., New Jersey 
JOHN R. HANSEN. lora 
FRANK ANNUNZIO, lUlnoiB 
THOMAS M. REES, CsUfomb 

PiUL Nelson. Citric tni Staff Dlitrttr 

Alvin Lee Mobsk, Countel 

Curtis a. PbjNs, Cfti<//BMt(VB(nr 

NOBUAN L. HOLUES, Coututl 

BuiBt D. Oellhan, InctitieBlliie Cmnntl 
Orvan 8. F:nk, Mlmraa Staff Mtmhtr 



WILLIAM B. WIDNALL. New Jersey 
PAUL A. FINO, New York 
FLORENCE P. DWYER, New Jersey 
SEYMOUR HALFBRN, New York 
JAMES HARVEY, Mlehl^aD 
W. £, (BILL) BROCK, Tennessee 
BURT L. TALCOTT, CoUtolib 
DEL CLAWSON, CaUlofOia 
ALBERT W. JOHNSON, Peansylvanla 
J. WILLIAM STANTON, Ohio 
CHESTER L. MIZE, Kansas 



it 



•■■■(/ \_ 






db,Googlc 



fiJ^ir^3(»/% /?(>■(' 



XTENSION OF THE DEFENSE PRODUCTION 
ACT OF 1950 



39-2 



P87-30 



HEARING 



]OMMITTEE ON BANKIN G AM) CTIKRENCY 
HOT ISK OF RRPRRSRNTATTVm 




■i .^'' 



-98 



COMMITTEE ON BANKING AND CURRENCY 

WRIOHT PATMA.V, Texas, ChiirmsB 

WILLIAM B. WIDNALL, Negr Jersey 
PAUL A. yiNO, New York 
FLORENCE P. DWYER, New lerecjr 
BEYMOUB HALFEHN, New York 
JAMES HARVEY. MliAlgan 
W. E. (BILL) BROCE, 1 
BWBT L. TALCOTT, Calilorn 
DEL CLAWSON, CBlltomla 
ALBERT W. JOHNSON, I 
J. WILLIAM STANTON, Ohio 
CHESTER L. MIZE, Kansas 



ABRAHAM J. MDLTBB, New York 
WILLIAM A. BARRETT, Pennsylvsnls 
LEO NOR K. SULLIVAN, Missouri 
HENRY S. REUSS, WISCODSiD 
THOMAS L. ASHLEY, Ohio 
WILLIAM a. MOORHEAD, Feucsylranls 
ROBERT a. STEPHENS, JR„ Georgia 
FSBNAND J. BT QERMAIN, RbDde Island 
HXNRY B. GONZALEZ, Teiss 
JOSEPH G. MINISH, Now Jersey 
CHARLES L. WELTNER, Oeogla 
RICEARD T. HANNA. Calltornia 
BERNARD F. ORABOWSKI, Connecticut 
OOMPTON L WHITE, Ja., Idaho 
TOM 8. GETTYB, South Caroltaa 
PAUL H. TODD. Jr., Michigan 
RICHARD L. OTTINOER, New York 
THOMAS C. McQRATH. la., NewJeravy 

FRANK ANNUNZIO, lUlnols 
THOMAS M. REBS, Calltornia 

Paul Nelson. Clerk and Staf Bin 

Alvin Lee Mokbr. Camutl 

OUBTIS A. Prins. CIttrf Innalieal 

NorkaN L. Holues, Courutl 

Bekbt D. Qilliun, IncitUtalliii Cc 

OruaH S. Fine, MiaerUt Slaff Mi. 



ns^lvanlB 



/^- 



■'.5'^V/| 






DiolizodbyGoOglc 



CONTENTS 



H.R. 14025. A biU to extend the Defense Production Act of 1950, and 
for other purposes 

Statement of — 

Bryant, Hon. Farris, Director, Office of Emergency Planning; accom- 

Knied by G. Lyle Belaley, Director, Economic Affairs Office; M. M. 
erker, legal adviser, and Ernest Crooks, industrial Bpecialist, 
Office of Emergency Planning; and A. A. Bertfich, Aasistant Admin- 
istrator, Industrial Mobilization, Business and Defense Services 

Administration, Department of Commerce 

Additional information submitted to the committee: 

Bryant, Hon. Farris, Director, Office of Emergency Planning: 

Response to questions submitted by Hon. Leonor K. Sullivan 

Responses to written questions submitted to the Otfice of Emer- 
gency Planning by Hon. Wright Patman 

Statements and attaichments in a report to the Office of Emergency 
Planning from the Secretary of Commerce, dated February 18, 

1966 

Application forms BDSAF-711A available for stockpile 

copper, release dated November 26, 1965 

Rans for distributing stockpile copper announced, release 

dated November 2i, 1965 _ - 

Stockpile copper allocations completed, release dated January 

17, 1966 

Summary of applications for authority to purcliase refined 
copper from national stockpile inventories and allotments 

for first quarter, 1966, as of December 31, 1966 

Patman, Hon. Wright: 

Questions submitted to the Office of Emergency Planning, with 



Statement of Reuben D. Siverson for the Chamber of Commerce 

of the United States 

Sullivan Hon. Leonor K. : Questions on standby authority to regulate 
installment credit, vrith response 



dbyGoogle 



db,Googlc 



EXTENSION OF THE DEFENSE PRODUCTION ACT 
OF 1950 



TtTEBDAY, UABCH 29, 1966 

House of Representatives, 
Committee on Banking and Currency, 

Washington, D.C. 

The committee met, pursuant to notice, at 10 a.m., in room 2128, 
Raybum House Office Building, Hon. Wright Patman (chairman) 
presiding. 

Present: Representatives Patman, Multer, Barrett, Mrs. SulHvan, 
Reuss, Moorhead, Gonzalez, Minish, Weltner, Grabowski, White, 
Ottinger, McGrath, Hansen, Annunzio, Rees, Widnall, Fino, Mrs. 
Dwyer, Halpern, Brock, Talcott, Clawson, Johnson, Stanton, and 
Mize. 

The Chairman. The committee will please come to order. 

The committee is meeting today for the purpose of considering 
H.R. 14025, to extend existmg authorities under the Defense Pro- 
duction Act of 1960 from June 30, 1966, to June 30, 1970. 

(H.R. 14025 follows:) 

IH.B. 14D21I, Sttb Cottg., 2d sen.] 
A BILL To sitend tlu Delease Prodnotlon Att ol IflM), and lor othet purposes 

Be it enacted by the Senafe and House of RepTesentatives of the United States of 
America in Congress assembled, That section 717(a) of the Defense Production 
Act of 19S0 is amended by striking out "June 30, 1966" in ttie first sentence and 
inserting in lieu thereof "June 30, 1970". 

Sec. 2. Section 712(e) of the Defense Production Act of 1950 is amended to 
read as follows: 

"(e) The expenses of the committee under this section shall be paid from the 
contingent fund of the House of Representatives upon vouchers signed by the 
chairman or vice chairman." 

The Chairman. First of all I want to welcome Gov. Farris Bryant, 
who has just been sworn in as the new Director of the Office of Emer- 
gency Planning. 

The Defense Production Act was first enacted into law by the 
Congress in 1950, during the Korean conflict. The act originally 
provided for an extensive system of economic controls intended (1) to 
promote adequate supplies and facUities for defense production and, 
(2) to prevent inflation of the economy under the pressures of the 
greatly expanded mihtary procurement effort. 

Several of the major authorities under the original Defense Produc- 
tion Act of 1950 were allowed to expire around the time the Korean 
conflict was coming to an end. These included Title II: Authority 
To Requisition and Condemn; Title TV; Price and Wage Stabihza- 
tion: Title V, Settlement of Labor Disputes; Title VI; Control of 
Consumer and Real Estate Credit. 



__ ._ , jtizflHflrGoOgt 



2 EXTENSION OF THE DEFENSE PRODDCTION ACT OF 1850 

The authorities under the act as it now exists provide for the 
operation of a system of priorities and allocations which enables the 
Defense Department, the Atomic Enei^ Commission, and the 
National Aeronautics and Space Administration to secure the timely 
manufacture and production of items necessary to the security of the 
United States, 

Another provision of the existing act provides for the expansion of 
production capacity and supply through Government loans, loan 
guarantees and other financial assistance to industries active in the 
field of defense production. 

A third major authority provided for in this act is the operation and 
continuance of the defense production inventory, a stocltpile of ma- 
terials and resources for use in possible national emei^encies. 

A fourth program authorized under this act is the executive reserve 
program. This program recruits and trains for possible use in a 
national emergency men expert in various parts of industry, labor, 
economics, and other important fields. 

These are all programs now operating under the Defense Produc- 
tion Act. I think they are important programs, essential to the 
national security. For this reason alone, especially \vith the present 
situation existing in Vietnam, I feel that the renewal of this aci 
should be carried out with some dispatch. 

At the same time, I think the Congress owes it to the American 
people to look carefully at the existing program to see if there are any 
weaknesses in it, to point out what they are, and to entertain recom- 
mendations for the program's modification. 

This act has been in existence over 16 years, and, as we all know, 
many changes have occurred during that time. These include signifi- 
cant changes in the strategic position of the United States and that 
of its potential enemies, changes in the sources of supply of natural 
resources vital to our national security, the development of substitute 
materials for scarce natural resources, changes m the demand for 
certain materials as new weapons systems and products have been 
developed, tremendous ^owth in the productive capacity of our 
economy — -our gross national product has more than doubled since 
1950 — cnanges m the geographic distribution of productive facilities 
in the Nation with the movement of plants and the development of 
new indtistries in different sections of the country; and other major 
economic, military, and technological developments. 

The Nation has also recently been made \ividly aware of its \'ul- 
nerability, both in economic and personal terms, to the failure of 
essential systems such as electric power, communications, and trans- 
portation. 

Of course, I refer to the great Northeast power failure of lust 
November, when millions of people and thousands of businesses were 
left helpless and idle because of a relatively small breakdown in the 
electric power system. And, of course, the New York subway strike 
in January of this year illustrated how heavily our complex modern 
society relies on mass transportation in order to function properly. 
What we may have learned from these and other incidents I think 
is that, perhaps, we have in the past concentrated too much and too 
long in this area of defense production on the tangible resources and 
materials which we must have in order to produce the items neces- 
sary for our national security. We should now look at the need for 



dbyGoOgle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OP 1950 3 

insuriDg that power, transportation and communications systems are 
adequate to m-oduce and deliver the items needed in a national 
emergency. The stockpiles are virtually useless without the capacity 
to make finished products out of material at hand and an adequate 
means of transporting the finished items to where they are required. 

We should also not overlook the fact that there have even been 
significant changes in the oi^anization of government which affected 
programs dealing -with defense production. 

In summary, I personally feel that we should renew the authorities 
existing under the Defense Production Act, but at the same time the 
Joint Committee on Defense Production, the Office of Emergency 
Planning, and other interested executive agencies should carefully 
review the act and submit to the appropriate committees of Congress 
proposals for revising and updating this and other related legislation 
in tne area of defense production. This woUld allow us to deal more 
effectively with the problems of today and tomorrow, whidi are ag- 
nificantly different from the problems of yesterday. 

Governor Bryant, we are glad to have you, sir, and you may pro- 
ceed in your own way. 

I understand you have a prepared statement. 

Mr. Bryant. Thank you, Mr. Chainnan. 

The Chairman. For the record, wiD you please identify the gentle- 
men accompanying you? 

STATEHEHT OF FASBIS BRTANT, DIRECTOR, OFTICE OF EHER- 
GENCr PLAHiriHO; ACCOMPANIED BY G. L7LE BELSIET, DI- 
RECTOR, ECONOMIC AFFAIRS OFFICE; M. M. MEREER, LEGAL 
ADVISER, AND ERNEST CROOKS, INDUSTRIAL SPECIALIST, 
OFFICE OF EMERGENCT PLANNING; AND A. A. BERTSCH, 
ASSISTANT ADMINISTRATOR, INDUSTRIAL MOBILIZATION, 
BUSINESS AND DEFENSE SERVICES ADMINISTRATION, DEPART- 
MENT OF COMMERCE 

Mr. Bryant. Mr. Chairman and members of the committee, I 
am happy to have this opportunity to discuss with you H.R. 14025, 
a bill which would extend the termination date of the Defense Pro- 
duction Act of 1950, as amended, for 4 years to June 30, 1970. I have 
with me Mr, G. Lyle Belsley, Director of our ikiononiic Affairs Office, 
Mr. M. M. Merker, our legal adviser, and Mr. Ernest Crooks, in- 
dustrial specialist. I also have asked Mr. Louis Brooks of the 
General Services Administration, who b familiar with the details of 
the financial aspects of the act, and Mr, A. A. Bertsch, Assistant 
Administrator, Industrial Mobilization, Business and Defense Serv- 
ices Administration, Department of Commerce, who is thoroughly 
familiar with the priorities and allocations aspects of the act, to be 
present. 

These gentlemen will assist in responding to any questions you may 
have regarding my statement. You have very succinctly and com- 
prehensively reviewed much of the history of the act. But, for 
completeness, some of it I will repeat. 

The Defense Production Act has supported and facilitated the 
defense program in many ways since it became law on September 8, 



dbyGoogle 



4 EXTENSION OF THE DBiFENSB PRODUCTION ACT OF 1950 

1950. As originall;y enacted it was the authority for virtually all 
economic mobilization measures taken during the Korean hostihties. 
Provisions for price and wage controls and related credit controls, 
among others, were allowed to lapse in 1953 when inflationaiy pres- 
sures subsided. The authority to require that production for ttie 
national defense be given preference over other business, as well as the 
authority to guarantee loans and enter into voluntary agreements, has 
continued to be used during the subsequent years of cold war and 
extraordinary military expenditures. It is now being used to an 
increasing extent to meet problems arising as a result of hostilities in 
southeast Asia, and will be used to an even greater extent if the impact 
of those hostilities becomes greater. 

These continuing essential national defense programs are provided 
for under three remaining operative titles of the act; namely, title I, 
title III, and title VII. Iwould like to describe briefly at this time the 
oorrent use of each of these authorities. 

The priorities and allocations authority of title I is used to assure 
that materials and equipment are available at the time and place 
where they are needed to meet military and other essential production 
requirements, and to assure that defense orders take priority over all 
other orders. It is used to assure that essential production orders 
including the intensive research and development activities of the 
Department of Defense, the Atomic Energy Commission, and the 
National Aeronautics and Space Administration are filled promptly. 

Priorities assistance for the Nation's defense program is carried out 
under the defense materials system regulations issued by the Depart- 
ment of Commerce. They operate by aiding in the placement of 
contracts and assuring prompt deliveries of military materials to 
defense contractors and their suppliers and subcontractors. They 
also require producers of basic forma of steel, copper, aluminum, and 
nickel alloys to "set aside" certain percentages of their production 
for defense-rated orders. These set-asides assure that no individual 
producer will be required to accept an excessive proportion of defense- 
rated orders for particular matenals at the expense of regular civilian 
business. 

The existence of the defense materials system is of immeasurable 
value to the national security because it provides, on a going-concern 
basis, the operational setup that would have to be in existence in the 
event there is an expansion of the present emei^ency. One of the 
more important things that is inherent in the system is the mechanism 
for collecting and evaluating defense requirements data in cooperation 
with the Department of Defense, the Atomic Energy Commission, and 
the Nation^ Aeronautics and Space Administration. This function 
is the backbone of the activity of controlling the flow of materials in 
an emei^ncy. The defense materials system can be progressively 
enlarged with minimum effort and time to provide for the control of 
materials needed to meet even greater war requirements than we are 
faced with today. During the Korean period it took more than a 
year to establish an operatmg OTstem. 

The authorities under title III of the act also serve both current 
defense needs and preparedness measures. 

Section 301 provides for loan guarantees to defense contractors who 
need working capital or equipment for new defense production. 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 5 

Section 302 and section 303 provide lending and procurement 
authorities which in the past were h^hly instrumental in bringing 
about laree-scale expansion of productive capacity required for 
defense. In the last several years no new defense expansions have 
been financed under these authorities, and they have been in a standby 
status. However, they continue to be essential to the security of the 
country to meet unanticipated defense demands that might arise. 
The authorities provide the President with a flexible tool whereby lie 
can take immediate action if the circumstances so require. 

It is contemplated that these authorities will be used to help meet 
expanding copper requirements which have been accentuated oy the 
pressures of the Vietnam situation. On March 21 , 1966, the President 
authorized the release of 200,000 tons of copper from the national 
stockpile. He has also concluded that a program for encouraging 
additional domestic copper production to meet these increasing 
requirements through new purchases or commitments to purchase 
under section 303 of the act should be undertaken on behalf of the 
national security. 

While some increased production capacity is now contemplated or 
already underway by some domestic copper producers, it is believed 
necessary to accelerate the development of new and additional copper 

f reduction. Accordingly, the Office of Emergency Planning, under the 
'resident's finding, intends to authorize the General Services Admin- 
istration, under provisions of title III, to enter into negotiations with 
domestic copper producers to purchase or make commitments to 
purchase copper in order to bring into being additional copper produc- 
tion as soon as possible. Contracts entered into under this autbority 
will be within the limitations on the use of the borrowing authority 
included in section 304(b) of the act. 

In view of the fact that national security interests require that the 
expansion of domestic copper production and supply be accomplished 
at the earliest possible time, priority attention will be given to those 
cases where additional copper production can be brought into being 
within a relatively short time. 

Title VII of the act includes a number of supplementary authorities 
necessary to the exercise of those authorities granted in tne preceding 
titles, but it also includes two specific authorizations of importance 
to the mobilization preparedness program. 

The voluntary agreements provisions of section 708 provide 
immunity from the antitrust laws to private parties voluntarily 
participating in actions found to be in the pubuc interest as con- 
tributing to the national defense. There are presently outstanding 
18 agreements of which 12 are in a standby status. These ^;reementa 
are sponsored by various agencies of Government, principally the 
Department of Defense. 

The greater number deal with "integration committees" which 
consist of current and prospective contractors of the Department of 
Defense who meet to exchange and pool information, techniques, and 
processes. Their objective is to speed the development and provision 
of systems whereby more efficient and uniform mihtary items can be 
produced in the shortest time. Tbey are of value both to current 
production and for rapid expansion of military production. 

The need for new committees by the Department of Defense arises 
as new military production problems develop. The voluntary 



dbyGoOgle 



6 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 

agreements powers under sectiou 708 are very valuable not only in 
expediting production, but in achieving the maximum results from 
the expenditures of defense dollars. 

Other agi-eements sponsored by Interior, the Maritime Commission, 
and the U.S. Information Agency also serve unportant defense 
purp<«es. 

Another avithority that would be continued by extension of the act 
is that of the Joint Committee on Defense Production. This com- 
mittee has served the valuable function of keeping the Congress iind 
the public informed of all activities carried out under the Defense 
Production Act and other related progFams. 

The other special authority in title VII is found in section 710(e). 
It authorizes the creation of a reserve of persons from private life or 
Government service capable of filling executive positions in the Fed- 
eral Government, in time of mobilization. Pursuant to the pro- 
cedure established by Executive Order 11179, dated September 22, 
1964, 9 departments and agencies having emergency mobilization 
responsibilities have 38 units of the Executive Reserve with an enroll- 
ment of approximately 3,600 members. It is anticipated that by the 
end of fiscal year 1966, 4,000 reservists will be enrolled in the programs 
and by the end of fiscal year 1967 the total strength of the Executive 
Reserve will be 5,000 members. Eighty percent of the membership 
of the Executive Reserve represents a cross section of industry. The 
other 20 percent of the reserve is made up of educators, lawyers, 
doctors, labor leaders, and permanent Government employees. 

Under this program each Federal department and agency having 
major mobilization assignments determines the number of executives 
it will need to fill ke^ positions and itprescribes training and orienta- 
tion programs for its members. OEP evaluates each unit of the 
program and coordinates the activities of the units. Candidates 
for membership in the Executive Reserve are submitted to the Director 
of OEP for approval; if approved, the candidate can be designated 
for a term not to exceed 3 years. 

The reservists participate in training programs on a national 
and regional basis and are given orientation and training on activities 
they would need to perform under emergency conditions. Since 
June 17, 1965, three national or regional conferences involving 1,500 
executive reservists have been held. Besides these joint training 
conferences of all agencies with imits of the reserve, numerous training 
conferences were conducted by the departments and agencies with 
components of the reserve. 

Initially the reserve was based on the assumption, that as in World 
War II and Korea, Federal direction in an emergency would be 
carried out lai^;ely by agencies in Washington. Since the early 
1960's greater emphasis in the program has neen given to training 
executives to imdertake regional and field assignments. Lately, 
both regional and national assignments in Washington have been 
stressed at training conferences. 

The Executive Reserve, as the chairman indicated, is one of the most 
important elements in our efforts to develop programs which would 
make us capable of functioning efficiently in the event of an emergency. 
It will assure us of a number of trained executives who can immediately 
go into action and perform the functions that would be required by 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 7 

the Federal GovemniMit in either a nuclear-attack type of emergency 
or a stepped-up limited war. 

Because of the continuing importance of all of these authorities to 
our current military effort and mobilization preparedness, we strongly 
urge approval of H.R. 14025 which will extend the effective date of 
the Defense Production Act, as amended, for 4 years to June 30, 1970. 
We hope it will be acted on fa\'orably by this committee and the 
Congress. 

The Chairman. Thank you, Governor Bryant. 

I have a number of questions that I shall not ask you but I will 
deliver them to you and ask you to put the answers in the transcript 
when you look over your transcript, it you please. 

Will that be satisfactory? 

Mr, Bryant. I will be glad to handle it that way, 

(The submitted questions and answers follow:) 



ESPON8ES TO Written Questions Submitted i 


:o THE Office c 


IF Emergency 


Planning by Hon. Wright Patman, Chairu 


AN, BaNXINQ a 


ND CUHRENCr 


Committee 







Do fou think (hat there is a need for reviewing the present authorities under the 

Defense Production Act of 1950 and other reJated acts in the light of new 

deTelopments, such as the ones 1 have outlined, with a thought that perhaps 

bf the time that the administration appears belore Congress again in 

the next session of Congress seeking renewal ol ihe Defense Production Act 

authorities, concrete proposals for extensive revisions in the law, or perhaps 

even a new act replacing the present act, may be in order? 

Answer. The Office of Emergency Planning does not believe there is a need 

for a major revision of the present Defense Production Act at this time. 

Section 303 of the Defense Production Act provides authority for the maintenance 

of the Defense Production Act inventory or stoekple. 
Are there any current purchases of stockpile materials under this provision of 
the act? 
Answer. There are no active contracts to purchase strategic and critical 
materials under the Defense Production Act. 
Under section 303(b) of the Defense Production Act, the President may make 

commitments to purchase materials for delivery up to June 30, I97fi. 
Are there any commitments under section 303(b) still in effect to purchase 
materials in the future? 
Answer. All purchase contrsjita made under section 303(b) during the Korean 
war period have t>een completed or t«rminated. There are no commitments for 
future deliveries on these contracts. 

Under present arrangements who manages the stockpile operation, the General 
Services AdminlBtration (GSA)? 
Answer. The Director of the Office of Emergency Planning determines stock- 
pile policies and programs and is responsible for performing those stockpile 
lunctions that have been delegated to him by the President in Executive Order 
10480 and in sections 401, 402, and 403 of Executive Order 11051. You may be 
particularly interested in section 402(b) of Executive Order 11051 which provides 
that: 

"(b) The Director, under the provisions of the said Strategic and Critical 
Materials Stockpiling Act, shall determine which niat«rials are strategic and 
critical and the quality and Quantity of such materials which shall be stockpiled, 
and shall direct the Generaf Services Administration in the purchase, storage, 
refinement, rotation, and disposal of materials." 

This section also describes the general administrative and ministerial functions 
performed by the General Services Administration. 

What is the function of the Office of Emergency Planning as far as the Defense 
Pr«dacti«n atockpile Is concerned? 



dbyGoogle 



8 EXTENSION OF THE DEPENSE PRODUCTION ACT OF 1950 

Answer. The reaponaibilities of the Office of Emergency Planning with respect 
to the Defense Production Act inventory are similar to those responsibilities 
included in the answer to the previous question. 

Have (here been any cases since the passage of the Defense Production Act in 
I960 wherebr a particular mineral or material was eliminated from the 
Defense Production Stockpile completely, either by transfer to the national 
stockpile or by sale or by otherwise disposing of the material? 
Answer. Seven items have been eliminated from the DPA inventories by sales 
to the national stockpile or under the "Government use or resale" provisions of 
the Defense Production Act. They are: asbestos, crocidolite; bismuth; lead; 
mercury; platinum grade palladium; tin; and graphite, lubricating. 
How many different items are there in the Defense Production stockpile at the 
present time? 
Answer. There were 22 materials in the DPA inventory on December 31, 
1966. They were: 

1. Aluminum. 

2. Asbestos, chrysotilc 

3. Bauxite, metallurgieaJ grade, Jamaica. 

4. Beryl. 

5. Chromitc, metallurgical grade. 

6. Cobalt. 

7. Columbium. 

8. Copper, other. 

9. Cryolite. 

10. Fluorspar, acid grade. 

11. Manganese, battery grade, synthetic dioxide. 

12. Manganese ore, metallurgical grade. 

13. Manganese metal, electrolytic. 

14. Mica, muscovite biocli, stained and better. 

15. Mica, muscovite film, first and second qualities, 

16. Nickel. 

17. R^% earths residue. 

18. Butile. 

19. Tantalum. 

20. Thorium residue. 

21. Titaiiium sponge. 

22. Tungsten. 

At present there are four different stockpiles now in existence. Do you think 

that serious consideration should be given to consolidating these BtochpUee 

for more efficient operation? 

Answer. At the last session of Congress the administration supported most 

provisions of S. 28, a bill which would have consolidated all stockpiles into a 

nationaJ stockpile to meet stockpile objectives and a materials reserve inventwy 

which would have contained all materials surplus to stockpile objectives. 

The bill was passed by the Senate, and bearings were held on it by the House 
Armed Services Committee. It has not been reported. 
Why do we need four different stockpiles? 

Answer. There seems to be no need tor four different stockpiles. There is need, 
however, for the continuance of titles I, III, and VII authorities included in the 
Defense Production Act of I9S0, as amended, and of the flexible sales provisions of 
section 303. 

There is now little or no procurement of stockpile materials. In fact, there Is 
considerable disposal of surplus materials being carried oat and will be con- 
tinued to be carried ont. 
Does the OEP or any other agency have an overall plan with dates and quantities 
for disposal which will give us some idea of when the phasing out of surplus 
materials in the stockpile will be completed? 
Answer. The present policy is to dispose of excess stockpile materials, a,nd sub- 
stantial disposals have been made in accordance with it. There is no overall plan 
to complete disposals within a fixed period because the terminal dates of the dis- 
posal of many materials are dependent on market conditions. Section 3n of 
Defense Moblization Order 8600.1 {issued March 30, 1964) on "General Policies 
for Strategic and Critical Materials Stockpiling" provides in part that disposals 
shall be made whenever possible under the following conditions: 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1960 9 

"{a) Avoidance of serious disruption of the usual markets of producers, procee- 
gors and consumers, (6) avoidance of adverse eHE^cts on the international interests 
of the United States, (c) due regard to the protection of the United States against 
avoidable loss, (rf) avoidance of adverse effects upon domestic employment and 
labor disputes. • * • " 

Recent reports have indicated that s serious shortage of copper is developing in 
this country. Jast last week the President ordered 200,000 tons of copper re- 
leased from (be national stockpile (o provide adequate supplies to domestic 
users. Some of this will be used tor production of essential items needed by 
the military for our soldiers in Vietnam. 
There are also reports that, although the quoted price of copper is 36 cents per 

pound, some parties are paying as much as 70 to 75 cents a pound? 
A year ago, on March 31, 1965, the national stockpile contained approximalely 
I million tons of copper. Is that correct? 
Answer. On March 31, 1965, there were 1,074/JOO short tons of copper in the 
national and supplemental stockpiles and the Defense Production Act inventory. 
Since that time, copper has been released, or announcements made for (he re- 
lease, in the amount of 610,000 tons, well over half of (be national stockpile 
supply at the end of March 1965. 
After this most recent release, it is my understanding that the national stockpile 
will contain only about 396,000 tons of copper, is that corrects 
Answer. After the most recent (March 21, 1966) release of 200,000 short tone 
of copper from the national stockpile, there will remain approximately 409,000 
short tons of copper in Government inventories. Nearly all of this is in tbe 
national stockpile with a negligible amount in the DPA inventory, and a very 
small quantity in the supplemental stockpile. 
Now, OEP has established a stockpile objective, which is a determination of the 

needs of raw materials for carrying on a 3-year war. 
As I understand it, the stockpile objective for copper is approximately 775,000 
tons, is that correctT 
Answer. The current conventional war stockpile objective for copper is 775,000 
short tons. 

Therefore, sTler this recent release, there will be a sborlage under the stockpile 
objective of approximately 379,000 tons, is that correct? 
Answer. The copper inventory will be aijout 366,000 below the present con- 
ventional war stockpile objective. 

How does the administration propose to make up for (his very large deficit of 
copper in (he s(ockpileT 
Answer. The President directed, in connection with the copper disposals under 
the recent release, that sales provisions should give the Government an option to 
repurchase coiq>er at the current market price of 36 cents, or at the domestic 
market price if it is less than 36 cents, at the time the Government option ia 
exercised. 'In addition, the option agreement was to give the Government the 
right to call for immediate delivery in the event of an emergency. 
What alternatives are you considering to moke up this dangerous deficit? 

Ansvrer. In addition to tbe option provisions planned as a part of copper 
disposals (as described in the answer to the previous question), an effort will be 
made to encourage additional production of copper in the United States, its terri- 
tories, possessions, and the Commonwealtli of Puerto Rico. In recognition of 
the current high level of industrial consumption of copper, accentuated by the 
pressures of the Vietnam situation, and of the need for additional copper produc- 
tion, the President (on March 29, 1966) issued a finding — pursuant to section 
304(b) of the Defense Production Act of 1950, as amended — that a program for 
encouraging such additional production tlirough new purchases or conmiitments 
to purchase under section 303 of that act is essential to the national security. 
Unaer that finding, and tlie authorization accompanying it, plans are now being 
developed to carry out such a program. 

Are you considering requesting Congress to increase the Defense Production 
Act borrowing authority to provide funds to pay premium prices for copper 
in order to increase the production of copper in this country? 
Answer. There is no present intention of making such a request. If experi- 
ence indicates that present statutory limitations are unduly restrictive, further 
consideration will be given to this matter. 



dbyGoogle 



10 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 

Under section 30J(b) of the Defense Production Act, as amended, in 1964 "* * * 
the total of * * "* new purchases and commitments, including contingent 
liabilities made or incurred under section 303 after June 30, 1964, shall not 
exceed SlOO million." 

Do you think that this authority to purchase up to SlOO million is adequate to 
replenish the stockpile of copperT 
Answer. It is estimated that the $100 million of borrowing authority will be 

adequate to encourage the additional production of from 110,000 to 130,000 short 

tons of copper, depending on the conditions of purchase. 

In order to be efTecUve in stimulating the production of copjKr you would hare 

to psy a premium above the 36 cents a pound market price, is that correct? 

Answer. We cannot answer this question until we have discussed the program 

with copper producers. It is assunied that some of the contracts may have to be 

made at prices higher than 36 cents a pound. 

If you paid 50 cents a pound that would mean that you would be paying $1,000 

So for (100 million jou can only buy 100,000 tons of copper, is that correct? 

Answer. At 50 cents per pound, we would be able to contract for delivery to 
the Government of only 100,000 short tons of copper. 
You would then still be about 279,000 tons short, is that correct? 

Answer. Assuming the delivery of 100,000 short tons to the national stock- 
pile, the inventory would be 266,000 short tons below the present stockpile ob- 
jective. 

Therefore, there is a possibility that you will need additional borrowing authority 
in order to make up for (he heavy deficit in copper? 
Answer. It is premature to conclude at this time that additional borrowing 
authority will be needed. 

As I understand it, the OIGce of Emergency Planning determined that the stock- 
pile objective for copper is approximately 775,000 tons. And yet, the Gov- 
ernment has released, or has announced a release, over the last year of 
610,000 tons. This raises (he question in my mind as to the soundness of 
the methods used in determining (hat 775,000 tons of copper was the amount 
needed for a 3-year emergency. In other words, if we have had to use 
610,000 tons in a period of s year, how can 775,000 tons be sufficient for a 
3-year emergency period? 
Answer. The objective is soundly based. It should be emphasized, however, 
that the estimates of mobilization requirements assume the imposition of priorty 
and allocation controls, and the strict use of conservation and limitation orders 
which would restrict the use of copper in the production of many nonessential 
items. The releases of 610,000 tons were considered necessary for the conunon 
defense, to provide copper to the mint for the new coinage program, and to meet 
hardship cases. The high level of industrial consumption of copper accentuated 
by the Vietnam situation and the loss of copper production because of domestic 
and foreign strikes have contributed to the present situation in the copper market. 
Tide I of the Defense Production Act provides means by which priorities of 
materials which are essential to the national defense can, where necessary, 
through a system of priorities and allocations be channeled to that use ahead 
of nondefense uses. 
Section 101(b) allows the President to control the distribution of a material if he 
finds that such material is a scarce or critical material essential to the na- 
tional defense and that the requirements of (he national defense for such 
material cannot otherwise be met. 
Has the authority under this section of the Defense Production Act been used in 
connection with (he war in Vietnam? 
Answer. The authority of section 101(b) has not been used in connection with 
the war in Vietnam. The priority authority contained in section 101 (a) , however, 
has been in effect since the Korean war in order to meet defense-rated orders. In 
addition, the authority of section 101 has been used to establish set-asides by 
materials suppliers to provide an equitable distribution of defenae~rated orders, 
and to issue directives in support of defense procurement. 



dbyGoogle 



EXTENSION OF THE DEFENSE PHODTJCTION ACT OF 1950 11 

Is there any thonekt that it might beeoitie necessar; to vae this anthwitf In con- 
nection with (he Vietnam conOictr 

Answer. The administration has no plans to use the authority of section 101 (b) 
unless the war in Vietnam requires a significant increciae in defense production. 
Are any sJKnifieant scarcitiea of materials showing up that might require the use of 
this anthoritf in the present Vietnam crisis? 
Answer. In the past year there have been, in addition to copper, some short- 
ages of lead, zinc, aluminum ingot, cadmium, colutnbiura, mercury, molybdenum, 
platinum, and tungsten. Alt of these shortages were alleviated, or are in process 
of alleviation, by sales of surplus DPA inventories and surplus materials from the 
national and supplemental stockpiles. No action was required under section 
101(b) of the Defense Production Act. 

Htle in of the Defense Production Act provides for financial assistance by the 
Federal GorernmeRt in obtaining the expansion of prodnctive capacity and 
supply in order (o support the production of needed defense and defense- 
related items. 
Section 301 provides for Government loan guarantees in the production of ma- 
terials and in the performance of services for the national defense. 
Hare there been any loan guarantees entered into under this section in the last 
few years? 
Answer. The loan guarantee program is a continuing activity. It is being 
used principally by the Department of Defense. The annual reports of the Joint 
Committee on Defense Production list the value of loans guaranteed each year. 
When was this section last used? 

Answer. As indicated in the answer to the previous question loan guarantees 
are being used currently by DOD. 

Is this section Included in the act at present largely as a standby for use in an 
emerge ncyT 
Answer. As indicated above, section 301 of the Defense Production Act is 
currently active. 

Section 701 of the Defense Production Act provides that special consideration 
be given lo the allocation of defense contracts entered into under the pro- 
grams established by this act to small business concerns. 
Has (he purpose of this section been carried out in praellce? 

Answer. Yes. In fiscal year 1964, the smaU business share of DOD contracts 
was $5 billion within the total of $26 billion of prime contracts. The AEC 
awarded $312 million out of S677 million in subcontracts to small business in 
fiscal year 1965. 

Section 701(d) provided for a report lo be submitted to the President and (he 
Congress 6 months after the enactment of tbe Defense Production Act 
Amendments of 1955. The report was (o contain a statement of the steps 
taken by the Ol&ce of Defense Mobilization in securing (he distribution of 
contracts to small business; a statement of the actions taken by the Office of 
Defense Mobilization and other agencies lo increase the share of con(rac(s 
given to small business and specific recommendations by the Office of 
Defense Mobilization for further action that could be taken to increase the 
share of procurement going to small business. 
Now, this report would be over 10 years old by now and, I don*t know why this 
subsection bas remained in the act, but I do think that a similar report 
covering (he same ground might be made by tbe Office of Emergency 
Planning again to see where small business stands as of 1966 in connection 
with the prc^ams under this act. 
Do yon think that would be a good idea? 

Answer. The attention of the major Federal contracting agencies to the princi- 
ples set forth in the Defense Production Act, indicate that the amount of smalt 
business contracts placed do not appear to require extensive review at this time. 
Would you please provide (bis committee with a report on the effectlreness of 
the program under section 701 of the Defense Production Act lo give special 
consideration to small business concerns in letting contracts? 
Answer. Judging from the agency reports to the Joint Committee on Defense 
Production, the progress to aid small business has been very effective. 



___ D.-jtizc^ttil^OOglt^ 



12 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1960 

In effect, a lar^e part of the Defense Production Act as now in force serres as 
standby legislation that may be needed In soine future emergency. This 
is true in part of tlie guarantee program, of the priorities program, and of 
stoclcpile procurement. 
Now, I would like to know if the Congress should give consideration to providing 
the President vrith broader standby authorities snch as the ones in the 
original Defense Production Act of 1960T 
Answer. The reestablisliineiit of titles II, IV, V, and VI authorities is not 
judged necessary at this time These authorities may be required if mobiliza- 
tion of resources tor war should become necessary The Congress would un- 
doubtedly respond quickly to any reasonable request for legislation under an 
extreme emergency 

In further response to this question, I am inserting at this point a copy of my 
March 30, 1966, letter to the chairman of the House Banking and Currency Com- 
mittee in connection with questions raised by Mrs. Sullivan and Mr, Beuss 
regarding the advisability of amending the Defense Production Act to provide 
standby authority for regulating consumer credit. 

Executive Office of the Prbsidbht, 

Oftice of Embkqbkcy Planning, 

Washington, B.C., March SO, 198S. 
Hon. Wright Patman, 

Chairman, Banking and Currency Committee, 
Route of Bepreieniativei, Washington, D.C. 

Dear Mr. Chaihuah: During yesterday's hearings regarding the extension of 
the termination date of the Defense Production Act of 1950, as amended, Mrs. 
Sullivan and Mr. Reuss raised questions regarding the advisability of amending 
the act to provide standby authority for regulating consumer credit. 

I have some questions whether selective controls over consumer credit are 
appropriate to the current economic situation. They could have significant 
advantages, however, under two types of conditions: when military priorities 
clearly require a sizable diversion of resources away from consumer uses, or when 
inflationary pressures are stongly concentrated in consumer durable goods indus- 
tries. I am not certain that we are at the point where either of these conditions 
is present. 

These comments do not necessarily imply that it would be undersirable for 
the President to have standby authority, if Congress wished to place it in his 
hands, which would enable him to institute such controls if and when they became 
appropriate. The President has not requested such authority, and I am not 
proposing it here. Indeed, such a request might have undesirable effects if it 
was misinterpreted as an indication of some intention to impose consumer credit 
controls. 

I greatly appreciated having the opportunity of discussing H.E. 14025 with 
your committee yesterday. 
Sincerely, 

Farrib Bryant, Director. 

Acting Director of OEP, Mr. Dryden, mentioned in his letter to Speaker Mc- 
Cormach submitting a draft of the proposed legislation to extend the Defense 
Production Act that — 

"* * * We are not proposing any amendments to this title [title III] 
although, as we have pointed out in the past, the financial condition of 
the borrowing authority under section 304 of the act causes us con- 

Could you tell as in a little tnore detail what the problem is in this connection? 

Answer. The financial problems briefly are that (1) funds being generated by 
disposal of DPA inventories must be applied in large part to the payment of interest 
on the notes representing borrowings from the Treasury, and (2) the limitation 
of SlOO million for new contracting under the 1964 amendment may restrict 
capabilities of expanding production and procuring materials to meet now short- 
ages in supply. The diminishing availability of funds under the original $2.1 
billion borrowing authority was identified in the March IS, 1964, hearing before 
the House Committee on Banking and Currency and in prior hearings. It 
was also reviewed in considerable detail in House of Representatives Report 
No. 1456 (88th Cong., 2d sess.), dated June 3, 1964, Concern in respect to the 
SIOO million limitation on new contracting arises from an evaluation of capabilities 
to expand domestic copper production pursuant to the President's determination 
of need on March 21, 1966. 



dbyGoogle 



E3OTENSI0N OF THE DEFENSE PBOD0CTION ACT OF 1061) 13 

Under section 303(f) of the Defense Production Act the President may transfer 

msterials in (he defense production stockpile which are judged to be in 

excess of the needs of the program under this act to the national stockpile. 

Has there heen a substantial transfer of materials to the national stockpile under 

this provision (a) since 1960, and (b) since 1964? 

Answer. There have been no transfere of materials from the DPA inventory 

to the national stockpile under the provision of 303(f) of the Defense Production 

Act. 

How many different items were there in the defense production stockpile as of the 
end of 1961T 
Answer. There were 25 items in the Defense Production Act inventories as of 
December 31, 1961. They were: 

Aluminum Manganese, metallurgical 

Asbestos, chrysotile Manganese, metal, electrolytic 

Bauxite, Jamaica Mica, muscovite block, S/B 

Beryl Mica, muscovite film, first and second 

Bismuth quality 

Chromite, metallurgical Nickel 

Cobalt PaUadi im 

Columbium Rare earths residue 

Copper Rutile 

Cryolite Tantalum 

Fluorspar, acid grade ThoriUm 

Lead Titanium 

Manganese, battery, synthesized dioxide Tungsten 

And how many different Items are there fn the defense production stockpile as of 
the present timeT 
Answer. There were 22 diSerent items in the DPA inventory on December 31, 
1965. 
Under the executive reserve program various agencies have recruited eiecutire 

reservists from all over the country in various flelds. 
Is there an operating concept on which you (rain these executive reservistsT 

Answer. Members of the national defense executive reserve are trained by 
each Federal department and agency r^erve unit. Their training depends on 
their specific emergency assignment. For example, reservists assigned to the 
Office of Emergency Planning s stabilization unit are trained in specific fields of 
wage, price, and rent controls. Executive reservists assigned to the Office of 
Emergency Transportation, Department of Commerce, are informed on the Gov- 
ernment's emergency transportation networks. Overall training and orientation 
is coordinated by the Office of Emergency Planning. In its capacity as a coordi- 
nator, it sponsors joint training sessions between all units of the executive reserve. 
In 1965, for example, a national conference of all members of the executive reserve 
was held in Washington, D.C., on October 25 and 26. More than 1,200 reservists 
participated in this conference. Reservists were briefed on general Government 
policies pertaining to mobilization and on their specific emergency roles. 
Are most of these executive reservists to work in the field or In Washington in 
case of an emergency T 
Answer. Some executive reservists are assigned to headquarters positions and 
Others to field positions in case of an emergency. The field assignments are based 
on the concept that in the event of a nuclear attack, many of the Federal Gov- 
ernment's activities will be decentralized and emergency staffing will be required 
in the regional relocation centers. 

Has it been determined In advance for whom they would work In emergency and 
where they would workT 
Answer. Executive reservists have preassigned emergency responsibilities 
and reporting locations. 

Has It been determined in detail whether some or all would be assigned (o State 
and local authorities or would Ifaey all be working for the Federal Govern- 
ment in case of emergency? 
Answer. Ail reservists would be working for the Federal Government in case 
of an emergency. Some States are developing their own reserve programs. 

61 -«2 — 6B 3 



__ I jtizeattti^OOgle 



14 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1850 

From whom wonid the§e execatfve reserviBts take orders under emergency cir- 
cumstances in carry inK out their assign me nts? 

Answer. In an emergency involving a nuclear attack on the United States, 
each member of the executive reserve would take orders from the reeponaible 
head of the agency or agency unit to which he is assigned. In some instancea, 
agencies have provided that their executive reservists in the field Ehould work 
with, and often subject to the direction of, the regional director of the Office of 
Defense Resourcca if the reservist is unable to get in direct contact with the 
agency to which he is assigned. 

Has anything been done in developing an executive reserve program to 
jirovide for an adequate continuing base of operating personnel? In other 
words, have yon guarded against the problem of recrniting persons who 
either are or become high executives after a period of lime, and who might, 
therefore, be of little use In actually operating these programs in an emer- 
gency? 
Answer. Executive reservists are enrolled from business, labor, agriculturei 
and the academic professions. They are expected to serve as top level Govern- 
ment officials or as specialists during periods of an emergency. Members of the 
executive reserve sign a statement of understanding with the U.S. Government 
commiting themselves to be available in times of emergency to perform their 
preassigncd duties or other emergency functions. The large number of operating 
personnel that might be required in an emergency will be provided by the Civil 
Service Commission from its pool of less essential employees, and retired em- 
ployees, and by emergency recruitment from the outside. 

Roughly, what percentage of the active members of the executive reserve would 
you classify as operating personnel as opposed to high-level management 
personnel? 
Answer. Nearly all members of the reserve are high-level management person- 
nel. The program is designed for this purpose. The functions which reservists 
will carry out in a national emergency generally require high-level management 
or professional personnel. 

Under section 301(c) of the Defense Production Act, the Federal Reserve Board 
is given the power to determine interest rates on loans, guarantees, etc., 
made to industry under the Defense Production Act. 
Please describe the actions of the Federal Reserve in establishing these interest 
rates, including the basis on which they have been established and the 
changes that have been made by the Federal Reserve Board since the act 
was originally passed. 
Answer. Pursuant to Executive Order 10480 the Federal Reserve Board pre- 
scribes the regulations governing the actions and operations of fiscal agents under 
section 301 of the Defense Production Act and prescribes the rates of interest, 
fees, and other charges made in connection with loans, discounts, advances, or 
guaranteed commitments. We are obtaining the information you have requested 
and will forward it to you promptly upon receipt. 

ExBCOTivB Okficb ok the Pkebident, 

Office of Emekoency Planning, 

Washington, D.C., April I4, 1966. 
Hon. Wkight Patman, 

Chairman, Banking and Currency Committee, 
House of Representatives, Washington, D.C. 

Dear Mr. Chairman: At the conclusion of the March 29 hearings regarding 
the extension of the termination date of the Defense Production Act of 1950, as 
amended, you presented a list of 44 questions and asked that I rejriy later. 

On April 7, 1 forwarded a detailed statement responding to all questions except 
Mo. 43 which requested an outline of the actions of the Federal Reserve Board 
in establishing interest rates on loans made pursuant to section 301 of the act. 
The General Counsel of the Federal Reserve Board, in response to my request, 
has examined its procedures implementing the authorities d^egated in Executive 
Orders 10161 o( September 9, 1950, and 10480 of August 14, 1953. A copy of his 
letter to me of April 8, 1966, is enclosed for your consideration. 
Sincerely, 

Fabris Bbtant, Director. 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1B50 15 

Bo A AD OP GOVBRNOHB, 

Federal RsgERVE System, 
Washington, D.C., AprU 8, 1966. 
Mr. Farms Bryant, 
DirectOT, Office of Emergency Planning, 
Waahinglon, D.C. 

Dear Mr. Bbtant: This is in reply to your letter of April 6, 1966, in which 
you requested information which will enable you to respond to a question from 
the House Banking and Currency Committee concerning the Defense Production 
Act of 1950. 

You have asked us to describe the actions of the Federal Reserve Board in 
establishing interest rates on loans made pursuant to authority of the Drfense 
Production Act, including the basis on which they have been established, and the 
changes that have been made by the Board since the act was originally passed. 

As you know, the President by Executive Order No. 10161, dated September 9, 
1950, delegated to the Board his authority under the act to prescribe regulations, 
interest rates, guarantee fees, and forms and procedures, subject to a requirement 
that the Board should first consult with the guaranteeing agencies. At the same 
time, the President expressly designated the Federal Reserve banks as fisc^ 
agents of the United States in carrying out guarantees under the act in respect 
of private financing institutions. 

Pursuant to this authority, the Board on September 27, 1950, issued its Regula- 
tion V (32A CFR ch. XV) entitled "Loan Guarantees for Defense Production." 
Executive Order 10161 was subsequently superseded by Executive Order 10480, 
dated August 14, 1953, which, however, made no changes affecting the Board's 
authority under the program. 

The first action taken by the Board in establishing interest rates was on Sep- 
tember 27, 1950, at which time the maximum rate of interest authorized to be 
charged with respect to a guaranteed loan was set at 5 percent. The rate waa 
increased to 6 percent on May 15. 1957, and this rate is in effect at the present 
time. The Board's Regulation V has not been amended since its initial pub- 
Ucation in 1950. 

In accordance with the provisions of the above-mentioned Executive Orders, 
Regulation V states that the rates of interest which nmy be charged with respect 
to these guaranteed loans will be prescribed by the Board after consultation with 
the guaranteeing agencies. These rates of interest are set at a level which will 
make them attractive to commercial banks throughout the country, and yet not so 
high as to interfere with the overall effectiveness of the proeram. This means, in 
effect, that the banks extending these loans do not realize a return equivalent 
to that which they might obtain through other types of lending operations. 

I trust that this information will be helpful to you in respondmg to the House 
Banking and Currency Committee. If I can furnish you with any further infor- 
niation, please do not hesitate to be in touch with me. 
Very truly yours, 

Howard H. Hacklht, General Cownsei. 
What has CEP done to see that our vulnerability to such incidents as the North- 
east power failure do not occur? 

Answer. In preparation for possible future blackouts or emergencies, OEP, in 
cooperation with other agencies, has taken the following actions: 

The OEP is working with the Federal Power Commission and the Defense 
Electric Power Administration in developing an information gathering system in 
cooperation with the electric utiUty industry for reports to the President through 
OEP and to various levels of Government in the very early stages of disasters or 
such occurrences as the Northeast power failure. The reports will cover the 
causes of the trouble, extent of the disaster, restoration schedules and problems, 
and possible Government actions. These reports should provide essential facts 
and conclusions of valuable assistance to us in refining and improving our emer- 
gency planning with the electric power industry. 



^^ I Gtiz^abvGoOgle 



16 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 

The DeMrtment of the Interior hae e., 

1. Review its emergency procedui 
electric failures; 

2. Examine its wiring and transmission systems; 

3. Have manual rather tlian automatic turn-on of emergency power when 
such is determined to be more desirable; and 

4. Keep constant surveillance over its instaliations. 

Under FPC/s rulemalting authority, extensive studies are underway to prevent 
a recurrence of the Northeast power failure. It is understood that FPC is pre- 
paring a report to the Senate Commerce Committee on this subject. 

The Chairman. Mr. Fino? 

Mr. FiNO. Thank you, Mr. Chairman. 

Governor, just quickly, in view of the rapidly change world con- 
ditions, would you not think that 1 or 2 years should be the licait 
of the extension on this act? 

Mr. Bryant. This act has had a history of some 16 years now, 
and one of the things that interested me about the act, as I stated, 
in these few days that I have been involved, is where the authorities 
have not been necessary in whatever the current situation is from 
time to time, they have not been used. Apparently, this has not 
been one of the acts where either those in the executive branch or 
those in Congress have attempted to assert all the authority that 
they could. I think that this act, while we would have no objec- 
tion to reviewing it at any time, does unnecessarily come before the 
Congress for review, inasmuch as your joint committee constantly 
reviews our work and can call us up at any time. 

Mr. Fino. Governor, it is common knowledge that the Korean 
troops fightmg in Vietnam are paid for by the United States. We 
pay their expenses. 

It is not common knowledge that we are paying Koreans far more 
than just expenses. It seems we are giving them, the Koreans, s 
cut of Vietnamese war production. 

The London Economist and the St. Louis Post-Dispatch both 
stated that priority for Korea in war production is part of the deal. 
Senator Bayn, of Indiana, has described some large-scale profiteering 
that is going on. As I understand it, it seems simple enough, an 
American agency which uses U.S. AID funds in South Vietnam is 
using U.S. AID funds to buy iron which is galvanized in Korea at en 
outrageous cost. The Koreans pay $140 a ton for the iron; they 
galvanize it at a cost of $30 or $40 per ton, and then they sell it for 
$260 a ton. According to information Senator Bayh put in the 
Congressional Record on March 10, of this year, the galvanization of 
this iron is substandard. The Korean galvanization process uses 
less than half of the zinc specified by the U.S. Bureau of Standards. 
Galvanized iron of the same or better quality could be bought on the 
free market for $160 per ton. 

What is happening seems very clear. The Koreans are being 
given a setup where they may use profit from galvanizing iron ajid 

gart of their profits come from the substandard job they are doing. 
'o you know the terms of our deals with the Koreans, and do you 
support this type of war production needs? 

Mr. Bryant. No. In fact. Congressman, this is the first I have 
heard of it. I have not been exposed to it. I do not know the terms 
of any deal with the Koreans. 



dbyGoOgle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 17 

Mr. Pino. This matter has heen brought to the attention of the 
chairman of the Joint Committee on Defense Production, by a letter 
from me to Senator Robertson, and he has turned this letter over to 
Secretaiy McNamara. He asked for his comments on this situation. 

On March 18, I asked Senator Robertson to investigate reports 
that we are letting South Korean suppliers sell these materials as 
part of the price of other South Korean war participation. 

Do you feel that it is proper to hold out cuts of Vietnamese war 
production needs to interest Asian governments in furnisliing hired 
troops to Vietnam? 

Mr. Bbyant, Congressman, I do not wish to evade you, but what 
I would have to do is respond to you on the basis of completely inade- 
quate information. I would not feel in my judgment 

Mr, FiNO. When you s^ "inadequate mformation," you mean in- 
sofar as you are concerned? 

Mr. Bhyant. Yes. 

Mr. Fmo. Is there anyone on your staff that is familiar with this 
situation? 

Mr. Bryant, They advise my that this really does not come within 
the purview of the Office of Emergency Planning, and that there is no 
one on our staff which does have the competence in this particular area. 

Mr. FiNO, Are you surprised at using U.S. AID funds to buy war 
materials from our so-called allies, at inflated prices instead of requir- 
ing that such materials be bought in the United States? 

Mr. Bryant. Well, sir, I would have to give you a hypothetic^ 
answer to a hypothetical question as this, because it is hypothetical 
to me, lacking that knowledge. 

With your permission, I would rather not do so. 

Mr. FiNO. I would like to ask you with regard to two stockpiled 
commodities, tungsten and opium. 

I understand that we have 159 million surplus pounds of tungsten, 
and it will take us 157 years to get rid of it at the current disposalrate. 

I also understand we have 40,000 surplus pounds of opium. All 
this is extremely valuable stuff, as you can well appreciate. I beUeve 
it comes from the Far East. Some of it comes irom Korea. These 
materials were purchased many years ago. Why were they stocked 
in such excess? 

Were these purchases made as disguised foreign aid to the nations 
in question? 

Mr. Bryant, While I cannot give you the specific answer, actually 
the acquisition of these materials from time to time has been in varying 
circumstances. Sometimes it has been for cash and sometimes a 
result product of barter where we were trying to dispose of surplus 
agricultural of one kind and in return took commodities for our pur- 
poses, and it might be in excess supply. 

Also, there has been a continuing evaluation of our stockpile needs 
and of the basis for determining them so that which was at one time 
not in excess supply may at another time with new stockpile objectives 
be determined to be in excess supply. 

Mr, FiNO. Recently, it was announced that part of our copper 
stockpile would have to be disposed of to help meet growing copper 
needs. 

Now WB are faced with a copper shortage. The President is 
considerii^ various programs to encourage copper production. 



dbyGoOgle 



18 EXTENSION OF THE DEFENSE PHODTJCTION ACT OF 1950 

My question relates to copper consumption, specifically in our 
coinage. In the light of our national shortages of both copper and 
silver, do you think we ought to take steps to change our couis? 

Mr. Bryant. If this can be done without reducing the usability 
and utUity of coins of that category, I would see no reason why not. 
However, it is not a field within my purview, and I would think it 
would be up to the Treasury Department to express views on this. 

It has also been pointed out to me that it is the function of Congress 
to make that determination, and I assume that what has been done 
has been consistent with the law. 

Mr. FiNO. It is the function of Congress to do a lot of things. 
Governor, but many times we seek advice of gentlemen like yours^f. 

Mr. Bryant. Certainly. 

Mr. FiNO. Let me see if we can get a quick answer. A recent man- 
power report indicates a shortage of skilled manpower. This is not 
surprising. We have drafted 300,000 men and put in an additional 
half million persons in munitions industries. Presently we have 
300,000 troops in Europe. We can ease the draft and we can ease 
our manpower problems if we withdraw troops from Europe. 

Do you a^ee that U.S. boys should have to face the draft to pro- 
tect European industry and manpower needs? 

Mr. Bryant. I am sorry. I did not hear the last question, 

Mr. FiNO. Do you agree that the U.S. boys should have to face 
the draft to protect Europe's industry and manpower needs? 

Mr. Bryant. No, I do not, except as we have obligations to NATO, 
for they should be met. 

Mr, Bareett. Mr. Chairman, will the gentleman yield to me? 

Mr. FiNo. I am just about finished. 

Just another question, Governor. 

Mr. Bryant. I do not understand that that has been done either, 
or is being done, or is contemplated, except to meet NATO obligations. 

Mr. FiNo. I recently read that the Renegotiation Board, which is 
the vehicle through which profits on defense contracts are limited if 
they are found to be excessive, had ordy one-quarter of the persons 
that it had at the end of the Korean war despite the fact that there is a 
hi^er dollar value of defense contracts now than at that time. 

Do you think that the Renegotiation Board ought to be given more 
persoimel and a bigger budget so that we can absolutely assure that 
war profiteering is firmly under proper control? 

Mr. Bryant. Of course, I would agree with the Congressman that 
every eflfort ought to be taken to assure that war profiteering is kept 
under proper control. 

As to particular measures required to do it, I am not competent 
to respond. 

Mr. FiNO. You do feel, as I do, I am sure, that the American 
taxpayers deserve these safeguards? 

Mr. Bryant. Certainly they do, and, as far as 1 know, they are 
receivii^ it. 

Mr. FiNO. Thank you. 

The Chairman. Mr. Barrett? 

Mr, Barrett. No questions. 

The Chairman. Mrs. Sullivan? 
- Mrs. Sdllivaj^. Thank yo,u, Mr, Chairman. 

I have several questions.,', ...-,". 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 19 

According to the radio reports this morning, the new Consumer 
Price Index will be announced today, and it will show a substantia 
increase for February, just as the wholesale index did, and I am sure 
we will begin to get requests and suggestions now that we impose 
some sort of controls on prices and wages. 

Let me say now that I do not think such an idea at this time would 
get a single vote in the House. But that is not my point. 

The Office of Emergency Planning is supposed to have been busy, 
among other things, these past 13 years, in drafting plans and legisla- 
tion for economic controls if they should ever become necessary. 

Have you been doing that work, and, if so, could you tell us some- 
thing about the way you have gone about this assignment? 

Mr. Bryant. I am advised Uiat we have been— this has been done, 
and I would like to ask Mr. Belsley to respond in particular for your 
information. 

Mrs. Sullivan. I would be happy to have lum do so. 

Mr. Belsley. It has been, as you point out, the responsibility of 
the Office of Emergency Planning and its predecessor agencies to 
develop plans with respect to price, wage, and rent controls. This 
has been done. It is a continuing job. The plans have been made 
not only for conventional or limited war situations but also for nuclear 
war situations. I hasten to add, however, that nobody at the present 
time contemplates, or plans, the imposition of such controls under 
present conditions. 

These direct controls generallv are considered to be a last resort 
action with other steps being taken first, so that while the plans for 
them have been a regular part of the activities of the Office of Emer- 
gency Planning, nobody is waving them aloft or ready to impose them 
on the American people at the present time. 

Mrs. Sullivan. One other question: In your opinion, do you or 
Governor Bryant think that we need any additional authority under 
the Defense Production Act at this particular time — and I stress "at 
this particular time — to give the President additional powers in 
the area of price and wage and rent stabilization or rationing or 
anything of that sort? 

Mr. Bryant, We do not have at the present time legislative author- 
ity in that field, and there is no thinking in the administration of 
which I know that we need such authority at this time. 

Mrs. SuLLiVA\. You would need additional authority from Con- 
gress, of course, in order for the President to have standby powers 
to impose wage or price controls, so 1 was wondering if tiiere was 
any thinking in that direction. 

Mr. Bryant. That is right. We do not have the authority to do 
that, and we would have to have it, but there is no present thinking 
that I know of to ask for it. 

Mrs. Sullivan. Thank you. 

Mr. Chairman, I have two additional questions, also on the issue 
of standby authority, and these relate to authority to regulate in- 
stallment credit. In order to conserve time, I would like to present 
these questions in writing to Governor Bryant and have him supply 
us with the answers, if he would, for the record. 

Mr, Bryant, I would be glad to. 

Mrs. SuLUVAN, Thank you. 



~i — — 



a»iG00glc 



20 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 

The Chaihman, Without objection, so ordered. 

(The questions referred to and Mr. Bryant's reply follow:) 



Question. During World War II, we had & program of credit regulation in 
operation under the Federal Reserve Board, under a regulation known as regula- 
tion W. This required a one-third downpayment on installment purchases, with 
the term of the contract limited to 18 months, I believe, on some items, and 24 on 
others. It eudal in the late 1940'8, and I believe was not used during the Korean 
war — in fact, I believe the Congress prohibited its use. 

Do we need Federal regulation in this field today — I'm not talking about truth 
in lending, but regulation of installment terms and conditions so that credit is not 
used excessively to cause inflation? 

Question. Should we write into the Defense Production Act any standby 
authority for a new typ^ "f regulation W if something like that should become 
necessary to clamp a lid on excessive use of installment credit in an inflationary 
eituation? I am just asking for an opinion, because I know the President has not 
recommended any such thing and it is not pending before us. But I think we 
always want to analyze these things in a calm atmosphere — and not wait for some 
emergency in order to begin talking about it. So, on that basis, could you give 
us your opinion on the advisability of standby authority to regulate installment 
terms as an anti-inflation weapou. 

Executive Office of the President, 

OrpicB or BMEHGBNCr Planning, 

Washington, B.C., March SO, 1966. 
Hon. Wrioht Patman 
Chairman, Banking and Currency Committee, 
House of Itepresentalives, Washington, D. C. 

Dear Mr. Chairman. During yesterday's bearings regarding the extension of 
the termination date of the Defense Production Act of 1950, as amended, Mrs. 
Sullivan and Mr. Heuss raised questions regarding the advisability of amending 
the act to provide standby authority for regulating consumer credit. 

I have some questions whether selective controls over consumer credit are 
appropriate to the current economic situation. They could have significant 
advantages, however, under two types of conditions: when military priorities 
clearly require a sizable diversion of resources away from consumer uses, or 
when inflationary pressures are strongly concentrated in consumer durable goods 
industries. I am not certain that we are at the point where either of these condi- 
tions is present. 

These commen 
President to havt . . . ^ 

which would enable him to institute such controls if and when they became ap- 
propriate. The President has not requested such authority, and I am not pro- 
posing it here. Indeed, such a request might have undesirable effects if it was 
misinterpreted as an indication of some intention to impose consumer credit 
controls. 

I greatly appreciated having the opportunity of discussing H.R. 14025 with 
your committee yesterday. 
Sincerely, 

Farris Bryant, DireeU/r. 

The Chairman. Mrs. Dwyer? 

Mrs. Dwyer. No questions. 

The Chairman. Mr, Keuss? 

Mr. Rbtjss. Governor Bryant, I noticed you testified that we do 
not need price or wage controls, and I thoroughly agree. However, 

Jou also point out that controls over consumer credit were allowed to 
Ipse in 1953 — they had been contained in the act for some years — 
when inflationary pressures suicided. 

The fact of the matter is that today in the United States consumer 
credit is at an alltime high, somewhere in the area of $80 billion — ■ 
perhaps you can check that — -and the Federal Reserve System is 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 21 

eDgaged coDstaotly id raising interest rate costs across the board 
ostensibly to cut down, among other things, on consumer credit. 
And, of course, this has the eflfect of chilling and dampening expansion 
by small business, expansion by industry, which could be making 
valuable capital additions to the economy, expansion of necessary 
activities of State and local governments. Therefore, the Joint 
Economic Committee believes that we are in a very vulnerable situa- 
tion without having on the statute books power for the Federal Reserve 
to impose consumer credit controls, by which one controls the length 
of the installment credit term and the amount of the downpayment. 

When Chairman Martin of the Federal Reserve was before Congress 
recently, he wrung his hands about this, b»it said, "Well, we do not 
have the power." 

1 propose today to introduce an amendment to our proposal for 
Krtension of the act giving the Government precisely the same standby 
powers that it had the last time we had inflationary pressures in the 
economy back in the early 1950's, to conti'ol consumer credit. My 
amendment would have the warne very simple authorisation that is 
contained in the law back in 1950 and 1953; namely, that the Federal 
Reserve has that standby power and cannot refrain from doing its 
duty on the ground that Congress has forbidden it to do its duty. 

1 hope you and the administration will support that simple little 
amendment. 

Mr. Bryant. Thank you, Congressman. I can't respond positively 
to that at this time. 

Of course, the President's proposal for the truth-in-lending bill, 
itself, contributes a somewhat restraining influence. 

Mr. Rbuss. This will do some good, because if the consumer 
knows what the interest cost on his installtnent credit is, some of 
the mai^nal sales might not take place. But the truth-in-lending 
bill, in and of itself, cannot come to giips with the problems of an 
inflationary extension of consumer credit. ThLs seems to me a very 
important gap in our armament, and I can't imagine that this admin- 
istration or any administration would oppose Congress empowering 
it, if it sees the need in the next 4 years, to exercise tne same 
controls which worked very well back when they were last needed. 

I am under the impression that this committee will shortly move 
to the markup of your bill, and, since, of course, consumer credit 
controls are part of the Defense Production Act, I would appreciate 
it if you would inform us, on an expedited ba-^is, whether the admin- 
istration has any objection to the Congress giving the executive 
branch this power which the committee feels is essential. You 
would not have any difficulty in flnding that out? 

Mr. Bryant. I think not, and I certainly will attempt to do so 
expeditiously, 

(The information may be found on p. 20.) 

Mr. Reuss. The only other question I have relates to the old 
question of whether we renew this authority for 4 yeai's or 2. I think 
tne pattern of the past has been that the administration. Republican 
or Democrat, comes up and ask for 4 years and Congress gives 2 years. 
Is that correct? 

Mr. Bryant. It is my understanding that we have always asked for 
two under all administrations, but at the last hearings, two members 
of the committee, the chairman and one who is not now a member of 



___ I .:ti7nrih,C0(wle 



22 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 

the comniittee, both raised the questioii: Why do you not come up 
for 4 years? And the other said, Why do you not make it a permanent 
authority? And so, in the liglit ot those expressions, we have sug- 
gested that it be for 4 years. 

Now, it is a matter for the Congress. We carry no great brief for 
the 4-year extension. 

Mr. Reuss. The only point in not making it permanent and 
possibly liaving it for 2 years rather than 4 years is that it compels 
us on the committee to tEuce a look at the state of the Nation when you 
and your associates come back. 

Mr. Bryant. I appreciate that. 

Mr. Reuss. Particularly, on the consumer credit thing, it focuses 
our attention on the fact that the administration is currently without 
a very important power which many of us think it ought to have. 

The Chairman. May I find out from the committee, if it wishes 
to pi"oceed, how fast siiould we go? Should we try to get this bill 
out this moming. We feel that it would be in the pubhc interest to 
do so, hut if the committee wants to go into examination of the 
witnesses furthei, it will be peifectly all right with me, 

Mr. Brock, Governor Bryant, I congiatulate you on your new 
I'esponsibility. 

Mr. Bhyamt. Thank you, sir. 

Mr. Brock. I would like to ask you just a couple of questions on 
your geneial pliilosophy in relation to the agency and the act which 
mvolves it. 

The Senate report on the Defense Pi-oduction Act said the act's 
authority was not to be used as an economic weapon to control 
profits. This piinciple is reiterated in subsequent recommendations 
and Imports of the Joint Committee on Defense Production. Do you 
agree m principle with this statement? 

Mr, Bryant, Yes; I do. I think in our capitalistic structure, the 
goal is to operate with the minimum restriction on free enterprise, 
consistent with the objectives set forth in the statutes and in the 
Executive orders undei- which we operate. 

Mr. Brock, What would be your interpretation of the primary 
purpose of your agency in its relationship to the Defense Prcxiuction 
Act? 

Mr. Bryant. In relation to the Defense Production Act alone? 

Mr. Brock. Yes, sir. 

Mr, Bryant. I am sure it can be better stated, but principally it is 
to insui-e that we have the right materials in the right amounts at 
the right places at the right tmie to serve the defense needs of the 
Nation. 

Mr, Brock, Thank you. Do you believe that the authority of this 
act should be used for such puiposes as enforcing an economic policy 
of price and wage restiaint through sales, or puichases, of commodities 
needed for civilian consumption? 

Mr. Bryant. I believe in the chauman's opening statement, as he 
commented— and I am very new — that one of the purposes of the act 
was to limit the inflationary process, and I think that is a part of the 
act, I think his statement was acciu'ate, and it should, be used in 
that fashion and for that pui-pose in the inteiest of the national defense 
and national security. 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 23 

Mr. Brock. You just expanded, then, your definition of the purpose 
of the Defense Production Act? 

Mr, Bryant. Yes; I have. You are correct; it is a dual role. 
But, of course, when you control inflation, you do this, among other 
things with the objective of insuring that you do have the capacity to 
produce the war materials, and you must do it within the limits of the 
act, 

Mr. Brock. As far as your commodities are concerned, what effect 
does inflation have on having the right material at the right place at 
the right time? You have got them on hand. 

Mr. Bryant. Whenever you have an upset in the price structure, 
you are going to have questions on delivery systems and delivery 
potentials. Obviously, if, for instance, at any time one of the overall 
products or essential products gets out of line with the othprs, you are 
going to upset the whole price relationship, 

Mr, Brock, I thought the law of supply and demand. Governor 
Bryant, would imply that if you had an increase in price that there 
would be an obviously greater tendency for more supply. 

Mr. Bryant. Of course, it is; but when you inject defense produc- 
tion requirements into a normal economy, you upset that economy. 
When you have a Chilean strike with a particular product, you upset 
the economy. When you have a Zambian crisis, you upset the econ- 
omy, and wnere the situation becomes such that it is essential to be 
able to deliver the product at the time and place needed, these upsets 
in the economy must be to the extent pos,yible, and in the national 
interest, taken into account. 

Mr. Brock. When you have an aluminum price increase of 3 
percent which did not raise the new price levels to the level which was 
in existence in 1958, does that create a serious imbalance in the econ- 
omy and in the action of the Defense Production Act? 

Mr. Bryant. Congressman, I have tried, in some degree, to 
acquaint myself with the copper situation, betrause while this order 
came into being before I arrived, I realised that it was of very current 
interest. 

As far as aluminum is concerned, all I know of it is that it is light 
and strong, I am really not competent to respond to you on that. 

Mr. Brock. Governor, to put it on a different plane, would an 
amendment of the Defense I^oduction Act to prohibit sales or pur- 
chases of stocks for purposes other than those directly related to 
national defense needs be unwise, given that the legislative history 
of the act provides solid ground for stating that such sales and pur- 
chases were definitely not envbaged in the act as passed? 

Mr, Bryant. I have to make a study of the existing language of 
the act before I could suggest to you the beneficial or harmful effects 
of the proposed amendment. Congressman. I am simply not able to 
respond to you on that, 

Air. Brock. Ijct me suggest something to yon. If we accept the 
act as writ.ten today and simply add a very s)iort sentence to the 
effect that the powei-s granted in section 101 shall not be used to ex- 
pand or wmtract supplies and materials in the civihan market for pur- 
poses of controlling prices fixed by Bucli industries or controlling 
profit of such industries. Would that he a simple amendment? 



dbyGoogle 



24 EXTENSION OF THE DEFENSE FBODOCTION ACT OF I960 

Mr. Bbyant. It would be a simple amendment, but it seems to me 
it wotil J change sumewlmt the spirit and effect of the act we now have. 

The Chairman. Would yuu be willing for him to submit his answer 
for the record in view of the fact that he states that he is not prepared 
to answer it now? 

Mr. Brock. If the committee is going to act before we receive the 
answer I would be dcliglited f(ir him to submit it later. But if we 
are going to act today I think we need the answer today because I 
suggest we might offer this amendment. 

The Chair-man. We would like to expedite it. So do the best you 
can, Governor Bryant, iu answering it. 

Mr. Bbyant. I have, sir. 

Mr. Brock. Well, let me elaborate, then, Governor Bryaot. 
Maybe I misinterpret your position, but I felt that you placea pri- 
mary emphasis on having the right material at tlie right place at the 
right time. 

The question asked somewhat earlier about allowing the Federal 
Ueservo to propose credit restrauits and about having the possibility 
of price and wage controls under a different act of Congress relates 
to my question. Do you envision your responsibility as being 
primarily one of inllutionary restraint? 

Mr. Bryant. Indeed, not. 

Mr. BjtocK. In any respect does it include that responsibility? 

Mr. Bryant. To the extent that it affects the ability of the econ- 
omy to serve the niitiontd interest as directed in the act, yes. 

Mr. BiiocK. I think my time has expired. 

The Chairman. Is there anyoue on this side desiring to ask ques- 
tions? Mr. Moorlicad? 

Mr. MooRHKAW. Do you or some other agency of Government have 
the authority to limit or prohibit export of materials deemed to be 
in short supply? 

Mr. Bryant. The Department of Commerce has that authority. 

Mr. Moorhead. Is it under Uiis act or imder a different act? 

Mr, Bryant. Under a different act. 

Mr. Moorhead. Thank you, Mr. Oiairman. 

The Chairman. Someone on this aide? Mr. Clawson? 

Mr. Clawson. Thtmk you, Mr. Chairman, 

In a hearing before the Committee on Appropriations of the House 
of Representatives on the budget for 1 967 — I want to lay a foundation 
for the (luostion^l he following appears in connection with conmienlB 
on receipts from stockpile sales. I quote: 

Mr. Mahon. I watil yoii to make clear for the record information in regard 
to the salcp! of stockpiled ttiaterial!<. What impact do these increaeing sales have 
on this budget? 

The following statement was supplied for the record: Disposals of 
approximately $1 billion of excess stockpile material are projected 
in 1966 and 1967. 

The following estimates for 1965 sales— and I have the record here— 
the Defense Pi-oduction Act revolving fund sales credited to ex- 
pendiUn-es, 1965, actual, $75 million; 1966, estimate, $139 million; 
and 1967, estimate, $185 million. 

Strategic and critical materials stockpile sales included in Treasury 
receipts, 1905, acluul. $280 million; 1966, estimate, $804 million; 
and 1967, estimnlp. .$826 nnllion. 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF I960 25 

The table that I have shows stockpile sales in the 1967 budget 
are scheduled to total slightly over $1 billion. Of such s&les, $826 
million will be from the strategic and critical materials stockpile and 
the proceeds from resales will be covered into the Treasury as mis- 
cellaneous recei|)t9. In other words, $826 million will be a one-shot 
item of revenue in next year's budget. 

It is interesting to compare this with the treatment of the $158 
million of receipts from the Defense Production Act stockpile. These 
receipts are to be credited to expenditures. In other words, the 
receipts will cover $185 million of expenditures that will not be in- 
cluded in the administrative budget as expenditures. This is another 
instance of the administration doctoring the budget to show a lower 
total of expenditures than is actually the case. 

Governor Bryant, can yuu enlighten us as to these projected sales 
from the Defense Production Act stockpile inventory, and- please 
identify the materials that are to be sold and the amounts, the mven- 
to^ cost price, and the proceeds to be received for each item? 

Mr. Brvant. I will ask Mr, Belsley to respond to that, if I may. 

Mr. Belsley. Congressman, it was estimated in the budget that 
a billion dollars wortn of excess strategic and critical materials will 
be disposed of in fiscal 1966 and another roughly $1 billion in 1967. 
I don't liave before me the exact items that would be involved, but 
we can furnish this for the record. We would be delighted to do so, 
if you wish. 

During the past 2 years, an extra effort has been made to dispose of 
excess materials. As I think the figures will show, this has resulted 
in increasing quantities being disposed of. There are now pending 
before the Congress some 20 bills providing for the disposal of excess 
materials from the strategic and critical materials stockpile and in 
some instances the supplementary stockpile. I will be very glad to 
furnish for the record that list if you wish. 

Mr. Clawson. Can we address ourselves to copper? Perhaps you 
will know from your own memory. The DFA inventory as of June 30, 
1965, listed 43,284 short tons of copper held at a cost of $24,462,000. 
Has that copper been sold since June 30 of last year and, if so, what 
was the proceeds from the sale? 

Mr. Belsley. It has been sold or committed. I would have to 
furnish for the record the exact dollar amount that was received. 
But all, except in a very negligible amount, copper from the DPA 
inventory has been committed for sale. 

Mr. Clawson. Has been sold or committed? 

Mr. Belsley. That's correct. 

Mr. Clawson. Mr. Chairman, could we have the proceeds for the 
record? 

The Chairman. Can you insert that in the record? 

Mr. Belsley. We would be delighted to do so. 

The Chairman. It will be inserted at this point. 

(The information requested follows:) 

Aa of .(line 30, 1965, there were 43,284 short toug of copper in tlie Defense 
Production Act iiiveiitor.v. Since July 1, 1965, through March 18, 1966, 41,369 
short tons have been aold or cominitted at a market value of $29,702,900 leaving 
A total of 1,915 short toiiH in the Defense Production Act inventory, which in 
presently being luld for payment for upgrading oxygcu-frce copper. 



dbyGoogle 



26 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 19 50 

Mr. Clawson. Apparently this copper is not included in tli 
initial 200,000 tons. 

Mr. Bblsley. No, sir. The 200,000 tona that I think you reft 
to, the recent action by the President, is from the national stockpiL 

Mr. Clawson. Then we are holding copper below the stockpii 
requirements, these 200,000 tons? 

Mr. Belsley. If you take all the copper that has been committ« 
for sale, including the recent 200,000 tons that has been releasee 
although not yet sold, assuming it is committed for sale, there woul' 
remain primarily in the national stockpile, approximately 409,00 
tons of copper. As I say, a very negligible amonnt — so small 
probably shouldn't even refer to it— is in the Defense Productioi 
Act inventory and a little bit in the supplemental stockpile. Tb 
total is 409,000 tons. The stockpile ohjective for copper is 775,001 
tons. 

Mr. Clawson. This would make the stockpile short? 

Mr. Belsley. The release brings the total mventory do^vn to aboul 
409,000 tons. 

Mr. Clawson. On another metal. In the paper yesterday I 
noticed a story that Bolivia was protesting an announced pendioE 
sale by our Government of 28,000 tons of tin. Is that tin in eiCKs 
of the stockpile? 

Mr. Belsley. Yes sir; it is excess to the objective. 

Mr. Clawson. As I understand it there is no tin in the Defense 
Production Act inventory. 

Mr. Belsley. I think that is correct. T woiijtl Imve to doubit 
check, but I think that is correct. I am told that is correct. 

Mr. Clawson. There is none. Is any needed? 

Mr. Belsley. No, sir, we have enough tin in the national stockpilt 
and in the supplemental stockpile to meet the stockpile objedin 
for tin. 

Mr. Clawsox. You feel that even though this was a criliolj 
material in the Korean conflict, you slill fee! we have enoiigfaal 
inventory? 

Mr. Belsley. We have enough in inventory to meet that stoc^ 
objective. 

Mr. Clawsox. Mr. Chairman, ! wonder if we should not be talriK 
a much more carefnl look at these DPA inventories and perhapsen 
amend the law to require that congressional approval must berectinJ 
before any additional sales are made. 

The Chairman. Most of this information, Mr. Clawson, canli 
obtained through staff or through your staff and I just wonderil" 
should go into that before the whole committee. It vpill delay tit 
proceedings considerably. 

If it is necessary, of course we should do it. But after all, thkd* 
not relate to the administration of the act. 

NIr. Clawson. It seems to me if we are selling from the stodrf 
and we have indicated herein the copper situation we are gieltin^M 
the needed requirement. I believe Congie;^s should look — coos' 
sional action may be necessary. 

The Chairman. Of course. T am on that Johit Coiuniittco wtB 
fense Production as vice chairman. We had a very fidl and comii 
report on all of the items that you mention in the annual reporliB 
on January 17. 1966. I offer it to you if you would like to see it. 



dbyGoogle 



I 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 27 

Mr. Clawson. I think I have a copy here. 

The Chairman. I think you will find the information that you de- 
Mii-e in this 15th annual report. It is very comprehensive. 

Mr, Clawson. We are making some cnanges right now. We are 
selling off from the stockpiles. 

The Chairman, We could not keep up with the activities fram day 
to day. 

Mr. Ci-AWfiON. I would like to yield to Mr. Brock. 

Mr. Brock. I believe you expected sales of about a billion dollars 
this year, is that correct? 

Mr. Belsley. That was the estimate that was included in the 
Pi-esident's budget. 

The Chairman. Last year you sold considerably less than that, did 
you not? 

Mr. Belsley. In fiscal 1965 there was a total of about $423 million 
disposed of from all inventories. So fai in the first half of tlie present 
fiscal year that amounted to about $44R million. 

Mr, Brock. Was that considerably less than you had estimated in 
the budget of 1966? 

Mr. Belsley. Wasn't what less? 

Mr. Brock. Actual sales for fiscal 1966? 

Mr. Belsley. We are in fiscal 1966. 

Mr. Brock. R^ht 

Mr. Belsley. The sales are not over yet. 

Mr. Brock. You estimated substantially higher amounts of sales 
than you inciirred to date? 

Mr. Belsley. For fiscal 1966? The billion dollars tliat were esti- 
mated in the President's budget have not yet been reached in fiscal 
196G. 

Mr. Brock. Do you anticipate reaching it? 

Mr. Belsley, I can't answer that. Only the General Services 
Administration could answer that. I think an effort is being made to 
reach the figure. I don't know what it will be and I couldn't answer 
you, sir. 

Mr. Brock. All right. 

The Chairman. Mr. White? 

Mr. White. Thank you Mr. Chairman, I think that really, for 
the purpose of this record that we should think a little bit — take a 
look at the stockpile objectives. 

Mr. Bryant, you and some of your people have testified before the 
Mines and Mining Subcommittee of the House of Representatives 
with reference to stockpile objectives in the past and as recently as 
about 2 weeks ago. At that time it was brought out in those hearings 
that stockpile objectives for conventional war are undergoing this 
continual study and you had been asked to try to detennine some 
nuclear war objectives. I understand from the testimony developed 
in those hearings that instead of nuclear war objectives you came up 
with residual amounts that miglit be anticipated after a nuclear attack. 
Is that correct? 

Mr. Belsley. If I understand you, Congressman, no, 

Mr. White. I understand that the committee adjourned at the 
point <tf testimony of the Defense Department that followed testimony 
by tlie Office of Emergency Planning where the actual information 
brought forth at Uiose liearings indicated there was no nuclear war 



dbyGoogle 



28 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1S60 

objectives and the only objectives were a residual amount that might 
be left after nuclear attack. Is that correct? 

Mr, Bblsley. I understand. I wasn't present when that testi- 
mony was made. I haven't read that record and it is hard to respond. 
But, we have tried to get from the Department of Defense their esti- 
mates of their requirements for nuclear war. We have gotten enough 
for us to proceed in making the studies for stockpiling purposes, but 
we need more. I think it is correct that they took the attitude at the 
beginning that they might be in a position where they would want to 
know what is available to them before stating what their requirements 
would be. 

Mr. White. There have been no objectives propounded as yet for a 
postnuclear war attack, is that not correct? 

Mr. Bblsley. We have not developed nuclear war stockpiling 
objectives. 

Mr. White. Have you any plans as to the date when this might 
be developed? 

Mr. Bblslkv. We have plans for the developmentof them, butitia 
very difHcult to give a precise date on this. Shortly, pr*)bably within 
the next 2 weeks, we will be forwarding U> the vanous agencies some 
results of supply requirements studies which we have made, and asking 
the agencies to convert that information into their estimates of stock- 
pile requirements. 

The Chairman. Will you yield and then you can resume? 

Mr. White. I yield. 

The Chairman. The Rules Committee will have a hearing in about 
8 minutes on a bill that we are interested in and I will have to leave. 
I wonder if we could have an understanding that we would have a 
vote on this bill at a certain time. Do you want to have further dis- 
cussion? Suppose we agree to have a vote at 11:45? 

Mr. Bbock. I am delisted that we can g<i ahead and have a vote. 
But I have two amendments and it may take some discussion 
time. I think we can begin consideration of this. 

The Chairman. Perhaps we could fix the time at 11:40 to start 
consideration of the amendment and try to vote before 12 o'clock. 

Mr. Brock. We will try to vote. 

The Chairman. We wdl have an executive session at 11:40, is 
that correct? All right, without objection, we will do that. You 
may proceed. 

{riie chairman left the bearing and Mr. Multer assumed the Chair.) 

Mr. White. I may say, Mr. Chairman, it is important we bring 
forth in these hearings any references to nuclear war objectives 
because I believe this is most important and it is my impression at 
the present time that no one in the Office of Emergency Planning has 
any figures in this area or do they have any idea when these figures 
may be available. I would admonish OEP to get on with it as fast 
as you can. 

I would like to ask Mr, Bryant a question. Do you believe that 
stockpiles should be sold to reduce the debt just for the conversion of 
stockpiles into money for covering into the Treasury's miscellaneous 
receipts? Do ytm think that is the main purpose of stockpiles? 



dbyGoogle 



EXTENWON OF THE DEFENSE PHODUCTION ACT OF 1050 29 

Mr. Bryant. No; it is not the m&in purpose of stockpiles. 

Mr, White. What is the main purpose of stockpiles? 

Mr. Bryant. To provide us the materials necessary for the sinews 
to meet the emergencies that we must be prepared for. 

Mr. White. Do you not think that we should have the objectives 
clearly defined before we go ahead with disposals for the conversion to 
money? 

Mr, Bhtant. Well, Mr. Congressman 

Mr. White. In other words, before we convert any stockpiles into 
cash, we should have clearly defined objectives for both conveational 
and nuclear war; should we not? 

Mr. Bryant. Well, we can't stop. 

Mr. White. What can you not stop? 

Mr. Bryant. You can't stop operating. We can't stop function- 
ing, waiting tor objectives to be set. 

Mr. White. You can provide for the national defense iu both these 
instances and it is not you who should be doing it? 

Mr. Bryant. We should be providing for the national defense. 

Mr, White, All right. Now, I would like to further follow the 
copper disposals. The objective is 775,000 tons of copper for con- 
ventional war. Now, in this area are you nob includmg the possi- 
bility of acc|uiring these metals from other areas than the domestic 
production in the United States? 

Mr. Bryant. Other areas other than domestic production? Only 
from normal sources of Chilean production. 

Mr. White. What guarantee do we have m a conventional war or 
nuclear war attack that these supplies will be available to us? 

Mr. Belsley. The preaent conventional war stockpile objectives 
have been established on an assumption that, in an emergency, sup- 
plies will not be available to us from countries other than those 
contiguous to the United States and in the Caribbean area. 

Mr. White. Is Chile adjacent to the United States? 

Mr. Belsley. No; it is not. 

Mr. White. Is Peru adjacent to the United States? 

Mr. Belsley. It is not, 

Mr. White. What assurance do you hare that the production will 
be made available to the United States? 

Mr. Belsley. There is an assumption in the present conventional 
war stockpiling objectives that it will not be made available and the 
objectives were made on that basis. 

Mr. White. That it will not be made available? 

Mr. Belsley. In other words, the domestic production plus pror 
duction in adjacent countries would be sufficient, together with the 
stockpile objectives, for the national needs under a conventioUEil war. 
Adjacent countries including Canada, Mexico. 

Mr. White. Which are adjacent and contiguous to the United 
States? 

Mr. Belsley. And the Caribbean area. 

Mr. Bryant, Caribbean generally is included. 

Mr. White. I would like to go further. Why have you felt we 
could go 365,000 tons below the national objective, and I would also 



dbyGoOgle 



30 EXTENSION OF THE DBFBNSJE PRODUCTION ACT OF 1950 

like to know where the residual amount of the November release of 
200,000 tons of copper went beyond the 40 percent that w^ent into the 
Department of Defense uses? Does anyone know where that other 
60 percent went? I would make a request, Mr. Chairman, and (or 
the record, with r^ard to the additional 60 percent of the release in 
November of 200,000 tons of copper, where that copper idtiiaately 
was disposed of. 

Mr. Belslet. Mr. Bertsch of the Department of Conamerce caa 
respond. 

Mr. Behtsch. The 60 percent that was distributed out of the 
200,000 tons was distributed, as you know, on a hardship basis and 
information concerning that distribution was transmitted to the 
Office of Emergency Planning some time ago. 

Mr. White. I still would ask that that information be made a 
part of this record. 

Mr, MuLTER. It will be made a part of the record. 

(The information requested follows:) 

On February 18, 1966, the Secretary of Commerce included the following State- 
ments and attachments in a report to the Office of Emergency Planning: 

The Department announced on November 24, 1965, that in order to expedite 
defense orders on which deliveries are delayed due to the nonavailability of coppa, 
contractors with such orders should file Form BDSAF-138: Request for Priontics 
Aaeistance, with the Copper Division, On November 26, this Departmrat 
announced the avaiiability of Form BDSAF-71IA: Application for Authority To 
Purchase Refined Copper From National Stockpile Inventories. The prtm 
releases pertaining to these announcements are enclosed. The Copper Divisint 
sent the initial authorizations to GSA on December 13, 1965- 

The applicants certified their first quarter 1966 requiremonta for both defense 
and nondefense business. BDSA then screened the applicants' requirements and 
determined the appropriate company allotmente by giving full recognition to 
defense-rated orders and due consideration to hardship needs and to sinaU businas. 

As of December 31, 1965, 362 applications had been received. Of these, 3^ 
were classified as ehgible and were granted allotments. The remaining 34 appli- 
cants were determined not to be consumers of copper raw materials and therefa* 
inehgible for allotmente. The GSA was authorized to sell 95.7 percent of tin 
available supply in the first quarter 1966. In addition, 1.2 percent of the sumlr 
was allotted to cover December 1965 defense requirements. Appronotate^ 3 
percent of the sujqily was held in reserve to meet contingencies. 

Of the material allotted for the first quarter 1966, 39.8 percent ysaa restricted 
to use on defense-rated orders only. The remaining 60.2 percent ytas allotted ta 
help alleviate hardship. Of the total amount aUocated (387,620,000 pounda) 
Including the December 1965 allotments, 157,149,000 pounds or 40.5 percent not 
designated for use on authorized controlled material (defense) orders only. 

Enclosed is a table, Summary of AppUcations for Authority To PuretM 
Refined Copper From National Stockpile Inventories and Allotments fw Fint 
Quarter 1966, as of December 31, 1965. This table shows the request, screeael 
requirements, and allotments for military and hardship purposes, by type it 
refined copper and by type and size of applicant. 



Plans fob DisTBrsuxiNG STocKPrLE Copper Ankottncbd 

[For Immediate release. Wednesday, November M, 19M) 

Plans to begin distribution of 200,000 short tons of national stockpile rrfirf I 

copper to producers of copper-base-controlled materials were announced tdip I 

by the U.S. Department of Commerce. One hundred fourteen thousand Itf I 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 31 

of fire-refined copper, 80,000 tons of electrolytic cathodes, and 6,000 tons of 
I*ke ingot are being released from the national stockpile for purposes of the com- 
mon defense. 

To expedite defense orders on which deliveries are delayed due to the nonavaila- 
bility of copper, contractors with such defense orders are instructed to complet« 
form BDSAF-138: Request for Priorities Assistance, and file with api>ropriate 
office of the Department of Defense in accordance with existing instructions and 

Ccedures. In completing section 11 on the form, the applicant should limit 
request to copper-controlled materials scheduled to be delivered during 
the balance of calendar year 1065 and the first quarter, 1966. 

XJpou approval by the Commerce Department's Business and Defense Services 
Administration, refined copper will be released immediately from the national 
■tockpiie toproducers of copper-controlled materials who are identified on the 
form BDSAF-138 as suppliers. 

Within a tew days BD8A will announce details for distributing the balance 
of the 200,000 short tons of stockpile copper remaining after requests for priorities 
B have been met. 



Appucation Poems BDSAF-711A Available for Stockpile Copper 

[Far Immedlau release, Friday, November 20, IM5] 

Applications to purchase refined C(y5per released from Government stockpiles, 
must be filed by December 7, the U.S. Department of Commerce said today. 
The Department announced that aijplication form BDSAF-71IA. for use by 

groducers of copper-controlled materials, is now available from Department 
eld olficea or from the Copper Division, Business and Defense|8er vices Adminis- 
tration (BDSA), Washington, D.C., 20230. 

About 200,000 short tons of refined copper (electrolytic cathodes, fire refined, 
and Lake ingot) are being released to assist defense production and to alleviate 
hardship due to the shortage of copper in domestic consuming industries arising 
from defense activities. 

Today's announcement supplements one made Wednesday, November 24, 
concerning requests for priority assistance by defense contractors for whom 
deliveries of copper controlled materials are delayed due to the shortage of copper. 
Refined copper released from the national stockpile inventories to expedite 
deliveries on defense orders, in response to applications on form BDSAF-138, 
will be deducted from defense requirements of applicants who file on form 
BDSAF-711A. 

Sales will be made by General Services Administration (GSA) according to 
instructions from BDSA. BDSA will approve apphcations on the basis of defense 
and hardship needs as demonstrated by brass mills, wire mills, foundries, and other 
consumers of copper raw materials, which file formal applications for authority 
to purchase refined copper released from national stockpile inventories. 

The copper will be sold for domestic consumption only, with due consideration 
for small businesses. Sales will be made at current domestic market prices on 
the day of sale, as determined by GSA. The refined copper will be sold in mini- 
mum quantities of 20,000 pounds. 

The sales were authorized by President Johnson on November 17forthepurposes 
of the common defense. 

Stockpile Copper Allocations Coufletep 

(For Immediate release, Hosday, January IT, IMS) 

The U.S. Department of Commerce announced today that 97 percent of the 
200,000 short tons of copper released from the Government stockpile last Novem- 
ber had been allocated to consumers of copper raw materials by the end of 
December. 

The undistributed amount is beingheld for necessary adjuBtments and urgent 
defense priority assistance cases, the Department's Business and Defense Services 
Administration reported. 



dbyGoogle 



32 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1960 

BDSA said 328 companies v 
nventories. Of the total ami 
pounds, or 40.5 percent, were desigDated for uBe on authorized controlled material 
(defense) orders only. 

The type and number of apTdicant companiea, and the poundages authorized 
for the three types <ii refined copper are listed below: 





Niiinb«r 


Typaso 


raflne'l ooppa 




Type 


Etocttolytio 
eatbodBB 


Fire 
raflnnd 


Lska 


Tola] 




i 


78 


193,983 


'■la 

18t 






137,152 








« 














328 


B,M2 


322.828 

^1J4 


IJ;™ 


387,610 








12,380 







/ 

db,Googlc 



Si ! Hi mi I» i SI i 83 S Si i 
1 S? S S8 ^ 3-- = s si ' -• --s a a i 


. ii i M i i i Ss 1 as J a : 8 13 1 


t , El 5 i ; S II i i i 1 11 S SS S Sg 1 


1 1 IS S 88 i 1 1 1 s 1 s S S gS g il 1 
1 'S a !(g S i ! si s SS j 


1 SS S =a t ••- ' II-'-- -■ ii i 


u, i§ s IS s se g 1 1 § 1 § IS s §i 1 

III ss s =s s -■-■ -■ ^ i - -- - < ^ sg s 

II i 


, Sa ill iii t%% SS ! SI 1 » g «3 8 

1 =s i\ n s «-■=■« s ' - 's « gj- g- 

-- 


SS S 1 1 1 Si 1 1 ; 1 II 1 ■ : ■ 11 1 
1 'S £ i i i - ' -• i -• j j 2= s 


1 ,, iS i 11 1 S§ S IS 1 l§ 1 §S S Si ! 


1 it % ti % tt % i\ t S i i% i ii i 




|ii'piii^pi'iiiS|ii^ii!^ 



„Googlt; 



■ ACT OP 1951 



I 





18 S 8 i § Si « |S i SS i 


i Si s : i : SI 1 1 1 1 ss 8 

= J s-s- i i i i ^ - s 1 « -- -- 


. 55 S §3 1 III '!» sje 


3 as S =¥ B- "■ ^ i i -- -■ 


18 i 8 i 8 S 1 i is g Si i 


1 § Hi I M is s 1 s sa s 

5 1 =s- =• i 1 1 -• -■ if « -■ -- 




!S S IE ! 11 a i 1 S i 
3 ss St =>■ t -■-■ •■ i i - 1 - 

s i 1 


8 g 1 : i E! S i ; 

1 ' HI M 


1 13 S 1 M gl Si I 1 S S 

^ ss s" Mi"'" ill"" 


, §S i 31 1 8 S i i 


ill i ■ i I i ! 



„Googlt; 



ACT OF IflSO 35 



— i 

II I i 



ei s SI 1 Si 1 


s 1 s SI 1 11 1 


SI S SI S SI § 
-■-- - s« s s' a 




ii 1 as 5 11 




S3 i S3 i i 


Si i mi : 


Si 1 ii S : 

-■ -■ ss g 


a j a |i ll 1 


58 1 IS s '■ 
as S : 







i 



„Googlt; 



36 EXTENSION OF THE DEFENSE PRODUCTION ACT OP 1950 

Mr. White. On or about the 3d day of March, the question was 
asked if any additional disposals of stockpiles of copper were con- 
templated. At that time the answer was "No." Yet, on March 21, 
an additional 200,000 tons of copper was authorized for disposal from 



the stockpile. I have had a htUe difHculty reconciling the s 
at that time and the actual action that was taken and why the Office 
of Emergency Planning, at that time, was not able to give an answer 
that would indicate a disposal was contemplated that was culminated 
2 weeks later. Can you explain that situation to me, please? 

Mr. Belslet. Congressman, I think it is fair to say nobody here 
at this table — I suppose nobody in this room — was involved in some 
of the discussions tnat apparently did take place. But let met try, 

Mr. White. It would seem theOfficeof Emergency Planning should 
be included in and know what is going on, that 2 weeks prior to the 
release the answer was given conclusively, we have no plans for further 
disposals of copper. 

I would also like to know what plans are made for the disposal of 
this copper, what area it is going into. 

Mr. Belslet. May I try to meet your point? 

First, let it be made clear, Governor Bryant was not on board at 
that time. The rest of us were not in position to be in the discussiona 
that were taking place. Let me tiy to clarify it, as far as I am aware. 

The statement to which you referred was made on March 3. The 
decisions were apparently made to dispose of copper in the period 
around March 16, at which time the Acting Chairman of the Cfouncil 
of Economic Advisers proposed that a disposal be made of stockpile 
copper because of the very tight and critical situation in the copper 
market. He was sjipported in this by the Secretaries of State, Treasury, 
and Commerce and by the Acting Secretary of Defense. The At- 
torney General was requested, apparently, for a decision on whether 
ft disposal by the President would meet the criteria of section 5 of the 
Strategic and Critical Materials Stock PiUng Act. 

The Attorney General's answer was in the affirmative, as it had 
been with respect to the previous November 1965 release. 

It was on March 21 that the decision was finally made by the Presi- 
dent, based upon a March 17 recommendation which was made by 
the Acting Director of the Office of Emergency Planning. The 
President acted on that recommendation which had been based on 
the recommendations of the others that I mentioned. So that as I 
look at the record, the decisions seem to have been made around the 
middle — around the Ides of March 

Mr. White. Well, I want to thank you for your answer. I still 
would like to have one other question answered. 

What justification do you have for disposals of copper below th© 
national stockpile objective? And I might say, putting it into areas- 
other than national defense? 

Mr. Belslet. Just so there is no misunderstanding — I made it 
clear, I thought, that the copper disposals you mentioned were made 
from the strategic and critical materials stockpile and not from the 
Defense Production Act inventory, which is provided for by the 
Defense Production Act under consideration today. Section 5 of the 
Strategic and Critical Materials Stock Piling Act, authorizes the 
President to make disposals when he considers this advisable for the 
common defense, and he made that finding. 



dbyGoOgle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 37 

Mr. White. I always feel a little sorry for the President when the 
President makes a decision, he makes it on the recommendations of 
people like yourself rather than on his own information. 

One last thing I would like to bring out in testimony here and with 
respect to these hearings. 

You allude to the fact that we are going to expand the domestic 
production by getting into— entering into contracts with domestic 
producers. Just where will this additional production come from; 
the domestic mining industry in the United States if you enter into 
these contracts? 

Mr. Belsley. We are not sure where this will come from. There 
has been no formal request to copper producers to come forward 
with proposals, but such requests \vill be made. Some have already 
come forward, however, on tneir own, and Congressman, one of them 
is in Idaho. 

Mr. White. This is a very small part of the total production and 
I jffould Uke to leave an idea with you people. You do not turn a 
mine on and oflf within 10 minutes of the time you need the material. 
We need domestic mining industries that can continue to supply our 
needs and it should he one of the purposes of this office to see that 
this happens. Sometimes from the past testimony before the Mines 
and Mmmg Subcommittee I think that you minimize this particular 
operation. Thank you. 

Mr, MuLTER. Mr. Gonzalez. 

Mr. Gonzalez. I was dehghted to hear Mr. Bryant state that he 
was very much in favor of doing something to prevent profiteering 
during this period and just less than a week ago I was pushing very 
hard for the refurbishing, so to speak, of the Contract Renegotiations 
Board which has been, for all intents and purposes, practically dis- 
mantled since Korea. Now, this Board, even with very inadequate 
resources the last year, in its report found that an excess of $16 milhon 
in profiteering had been ascertained and these excess profits had been 
refunded. With Congress overwhelmingly and preponderantly ap- 
propriating additional moneys almost, if notactually, at the level of 
the Korean conflict, it would seem to me that the least we could do 
would be to reconstitute the Contract Renegotiationa Board. I was 
glad to see that you favored such a move. Is there anything you can 
do from your position to further this? 

Mr. Bryant. Of course, it would Ue within the purview of this 
oi^anization if we were instructed to determine if it is needed to be 
planned for in an emergency. However, it is not currently within 
our responsibihty and we are, at this time, doing nothing in that 
direction of which I know. 

Mr. Gonzalez. Do you not feel it is time we do it? Do you per- 
sonally feel it is time we should be looking into this? 

Mr. Bryant. Congressman, I would nave to famiharize myself 
first of all with the existing operations before I could form a judgment 
as to whether additional activity would be required. I simply 
don't have that personal knowledge. 

Mr. Gonzalez. I have been very much perturbed and I am quite 
disturbed, and, as I said, less than 10 days ago, I came out strongly 
that we reconstitute this Board. This was a Board that during the 
Korean conflict arrived at several billion dollars worth of excess 
profiteering that was returned to the American pubhc. Even with a 



dbyGoogle 



38 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 

skeleton crew, they discovered all that $16 million last year and this 
seems to me a pi-oper time to look into this. 

I would appreciate a real intensive effort on your part. In fact, 
I am currently studying and drafting legislation to brmg this about, 
at least introduce a bill. 

Mr. Bryant. We will be glad to look at that. 

Mr. Gonzalez. I will really appreciate that, Director. I feel that 
it is time we did. 

The Defense Production Act of 1950 — ^I notice here in section 2 of 
the declaration of policy that in order to insure productive capacity 
in the event of such attack on the United States, it is the policy of the 
Congress to encourage the geographical dispersal of the industrial 
facilities of the United States. I do not know if anything has been 
done along that line. Apparently in 1950 this was a present and 
clear danger, and recently when we had the power failure— we had a 
sharp awakening that maybe here we have been talking about stock- 

Eile production, Dut maybe with the cessation of power, we would npt 
ave anything to produce in order to stockpile. Is there anything 
that is being done along that line? 

Mr. Bbtant. I think there is very little being done along that 
line. That is my information. 

Mr. Gonzalez. Is there anything that can be done to stimulate 
activity along this channel from your standpoint, from your agency's 
standpoint? I am not asking this other than in a friendly way. I 
know you are limited and I know you are doing the best you can and, 
in my opinion, admirably well, but these are questions that are of 
great concern to some of us in here ui the Congress, if not to every one 
of the Congressmen. 

Mr. Bryant. Congressman, certainly the mstructions of section 2 
are that this be done. It would have to be done through tax incentives, 
through subsidization, through procurement contracts, directed in 
particular areas. All these things might be done. However, this 
could be a very disruptive, as well as beneficial process, and we have 
not, up to this time, made thp studies necessary to pertuit a sensible 
proOTam of this kind. It would certainly not be something that you 
womd want to do without a thorough understanding of what you 
are about. 

Mr. Gonzalez. Would you be in the position to look into this and 
study it, if nothing else, under your present budgetan' allocation? 
Woiud Congress have to be a little more generous in this direction, 
or are you limited now, or able to do it now? 

Mr. Bryant. I think we would not have either the staff or the 
money. One of the things that I am trying to do is to analyze our 
own operation to determine whether we have what we ought to have 
to do what we are supposed to be doing, and my only conclusion is 
that we are not yet equipped, and are not yet doing all that might be 
done under the charges you have laid before us. 

Mr. Gonzalez. This is so very, very disturbing because if we are 
risking — and the risks, apparently, according to all estimates are ever- 
present — a conflagration tuat will spread beyond our ability to control, 
if we do not even nave the minimal framework within which to control 
excess profiteering, the avoidance of another emergency such as a 
power failure and constant interruption in production, then I think 



dbyGoogle 



EXTENSION OF THE DEFEASE PRODUCTION ACT OF 1950 39 

this is a large, more than just dbturbing, it is a very large thing, and 
it is very alanning. 

Thank you very much. 

Mr. MuLTEH. Mr. Weltner. 

Mr. Weltser. I would like to return to the discussion concerning 
the sale of copper stocks. Perhaps you or a member of the staff can 
clear up a few questions I have about that. Do I understand that the 
Defense Production Act itself is not the l^islation under which the 
recent copper sale was made? 

Mr. Bryant. That's correct. 

Mr. Weltner. What is the name of that act? ■ 

Mr. Bei-sley. Strategic and Critical Materials Stock Pihng Act. 

Mr. Weltner. As provided in that act, what are the legal stand- 
ards for disposition? 

Mr. Belslby. Section 5 of that act provides that the President may 
release material from that stockpile when in his judgment that such a 
release is required for purposes of the common defense. 

Mr. Weltner. "For the common defense." Is that the specific 



Mr. Belslet. That is correct. 

Mr. Weltner. On the finding that such release is "for the common 
defense"? 

Mr. Belsley. Tliat is correct. 

Mr. Weltner. Under those circumstances, and only under those 
circumstances, can material such as this be released? 

ilr. Belsley. That's correct, other than by congressional approval, 

Mr. Weltner. Now, what part does your agency have in making 
recommendations to the President with regard to such releases? 

Mr. Belsley. By the President? Using the recent release of 
200,000 tons as an example? 

Mr. Weltner. Yes, 

Mr, Belsley. WeU, as was pointed out to Congressman White, 
the recommendation for that was made initially by the Council of 
Economic Adi-isers. 

Mr. Weltner. They do not have the authority. 

Mr, Belsley. No, they do not. They had some arguments. 

Mr. Weltner. You have the authority, have you not? 

Mt. Belsley. OEP makes a recommendation to the President. 
Of course the President could act without a recommendation from 
OEP. He does not require a recommendation, 

Mr. Weltner. Was it not the recommendation from the Office 
of Emergency Planning that this copper be released? 

Mr. Belsley. Yes, the Acting Director, after receiving and 
considering the recommendations of the Council of Economic Advisers 
and the four Secretaries and the opinion of the Attorney General 
as to its legality recommended to the President that the release be 
made; he ct>ncurred in the recommendations of the others. 

Mr. Weltner. But the impetus for the whole matter came from 
the Council of Economic Advisers. It seems strange to me that the 
Coimcil of Economic Advisers would be the vehicle for setting in 
motion an action that is statutorily limited to the common defense. 
That is not their job. How is it that the Council of Economic 
Advisers is in a position to determine strategic materials and their 
necessity in relation to the common defense? 



dbyGoogle 



40 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 

Mr. Belsley. As you pointed out, they did not determine it. 
They made an initial recommendation, and presented ai^uments on 
behalf of it. I would assume these arguments were somewhat per- 
suasive with the four Secretaries. That is the only thing that I can 
say. 

Mr. Weltnbr. Is it not true that this does not have anything to 
do with common defense, except insofar as the common defense is 
based upon the soundest health of the economy and the shortage of 
important materials and that alone was the justification for this 



Mr. Belsley. I think this may have been somewhat persuasive 
with the Council. On the other hand, 1 wiD ask you, who am 1 to ques- 
tion the President of the United States' finding that this was for the 
common defense? 

Mr. Weltneb. I am not talking about the President's findings. 
I am talkii^ about the recommendation of your i^ncy. 

Mr. Belsley. The Acting Director concluded, based on recom- 
mendations of others I mentioned, that this was for purposes of the 
common defense. And he based this in large part upon the fijiding of 
the Attorney General that the situation as described by the CouncU of 
Economic Advisers and the four Secretaries supported it. 

Mr, Weltner, Do you consider that to be in the common defense, 
to reduce the stockpile below the level of need for defense production 
in order to meet an economic situation? 

Mr. Belsley. I think the President found this was needed. 

Mr. Weltner. I am not asking you about the President. I am 
asking about this agency. 

Mr. Belsley. I think the Acting Director of the agency found this 
to be so and — — 

Mr. Weltner. I am askmg your opinion. The Acting Director 
is not here, is that correct? 

Mr. Bryant. He is not here now in this room. 

Mr. Weltner. We do not have the benefit of his opinion. I am 
asking your opinion as the one who has been for some time in this 
agency. 

Mr. Belsley. I hesitate to speak for him; he acted on his own 
authority. I think he acted on the grounds of two things' — quite 
apart from what may go directly to defense rated orders, there were 
two other things. I think these influenced him. One, that in any 
plant that is producing defense rated orders, you may find that a 
relatively small percentage of the output goes to such defense rated 
orders. This may vary from a low percent to a high percent, but the 
plant remains in being and in operation as a strong facility because of 
its other activities and if it drau-s upon copper for its other activities 
as well as for its defense rated orders and must have the copper to 
keep those activities going, then it will need copper in order to keep 
the plant going. That means it will need copper for its general 
business, otherwise it ^'t in business and ^oducing for its defense 
rated orders. But there is another one. The argument that was 
advanced by the Council of Economic Advisers and concurred in by 
the four Secretaries was that the strength of the United States is in a 
viable, lively, strong economy, and to permit it to deteriorate or not 
to have that viability because of the lack of copper was a doubtful 
point; therefore it was ai^uable that the release should be made. 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 41 

I want to emphasize that I hesitate to speak for the Acting Director. 
But I have a hunch that these factors may have entered hia mind. In 
the recommendation he made to the President, I think he mentioned 
some of these points. 

Mr. Weltner. I am not concerned with the opinion of the Presi- 
dent of the United States— what is your opinion? Is it in the common 
defense to put copper on the market in such a manner as to reduce the 
stockpile below the critical material requirement level? I would like 
your opinion on that. 

Mr. Belslet. I think it is correct, the Attorney General did, 
after looking &i aU these points 

Mr. Weltner. I am not concerned with the Attorney General. 

\It. Bblsl&y. He considered it was in the common defense and 
I think that is the basis on which the Acting Director acted. 

Mr. Weltner. Let me repeat my question. I have been trying 
assiduously to develop your opinion on that matter. You told me 
what the Attorney General's opinion is and many other opinions, 
I would like to know what your opinion is. 

In your opinion, is it appropriate to reduce copper stockpiles below 
the level requu-ed for defense needs in order to meat an economic 
situation? 

Mr. Talcott. We cannot hear the answer. 

Mr. MoLTER. He has not given the answer. 

Mr. Bryant. Mr. Belsley of course was not the one to make a 
decision on this and I don't even know that he has reached a con- 
clusion on it himself. This was a question as to whether or not it 
was in the common defense. It has been decided that it is in the 
common defense and that is for this agency the conclusion of the 
matter. 

Mr. Weltner. Governor, bear in mind that I understand you have 
been here only a short time. I welcome the appearance on the scene 
of a southern man of tested abilities. It seems to me that you and 
your staff are extremely reluctant to express an opinion on a very 
important matter. I know Mr. Belsley did not make the decision. 
I know the President made the decision. But if we had an act of 
Congress that specifies those conditions under which materials can be 
released and there ia a responsibility to make reconmiendations from 
your agency, it seems to me hke somebody in your agency should be 
wUling to express an opinion of this one matter. 

Mr. Bryant. There is of course, and Mr. Dryden, who was the 
Acting Director at that time, and it was hia opinion that this was in the 
common defense and I believe it was for the reasons that had been 
cited by Mr. Belsley. 

Mr. Weltner. Nobody at your table there is willing to say that 
that opinion is concurred in. 

Mr. Bryant. I am sure as on many other matters there are opinions. 

Mr. Merker. The legal tjuestion involved was whether this could 
be supported as an action in the common defense. I concur com- 
pletely in that opinion. 

Mr. Weltner. That still is not my question. 

Mr. Multer. Mr. Brock? 

Mr. Brock. Can I ask a question? 

Did I understand one of you gentlemen to say when it is in the com- 
mon defense then the President can make a nnding that it is in the 



dbyGoOgle 



42 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 

common defense and you can release material from the critical stock- 
pile? Is that correct? 

Mr. Merkeh. Yes, sir, 

Mr. Brock. 1 thought the primary responsibility for allowing the 
stockpile, the critical stockpile, to fall below the minimum rests with 
the Congress of the United States. AVhat exemption does there exist 
to that authority? 

Mr. Bryant. The problem you are thinking about there — you are 
thinking about the Defense Production Act, I believe. 

Mr, Brock. I am talking about the Critical Stockpile Act. 

Mr. Belsley. Congressman, I pointed out, I think, that section 5 
of that act authorizes the President to make a release on his own if he 
finds that the release is in the common defense. 

Mr. Bbock, Is there any other criterion? 

Mr. Belsley. No, sir, I will have to yield to Mr. Merker. 

Mr. Merker. I don't have the statute in front of me, but it is my 
recollection that it has to be in the common defense. Those two words 
are in the statute. 

Mr. Brock. That is all. 

Mr. Merker. Yes, sir. 

Mr. White. Will the gentleman yield at that point? I would hke 
to ask Mr. Bryant a question. In the 60 percent that was released 
outside of the set-aside area that went to national defense, did any of 
this copper go to industry where they were not producing materials 
of a national defense nature? 

Mr. Bertsch. You are speaking of the 60 percent that went to 
hardship cases, I take it. 

Mr. White. Yes, I am. 

Mr. Bertsch. There were 172 distributions to people producing for 
defense purposes out of a total, I believe, of 312 or so companies that 
received copper out of the 200,000 tons. 

Mr. White. The copper fabricating companies were not producing 
items for. national defense, is that correct, strictly speaking? 

Mr, Bertsch. They could have been, Mr. White. 

Mr. White. Are they or are they not? 

Mr. Bertsch, Some were and some weren't. 

Mr. White. How many were not? 

Mr. Bertsch. As I say,, we distributed to 172 who were those 
who came in with statements that they had priority rated orders for 
defense. The remainder, and including some who received defense- 
rated copper were distributed copper on the basis of hardship. 

Mr. White. But they were not producii^ copper — they were not 
producing items that were solely classified as priority defense items, 
is that correct? 

Mr, Bertsch. For that portion of t!ie copper that was distributed 
for hardship companies it did not relate to defense line. 

Mr. White. Now, the 200,000 tons that were authorized for release 
on March 21, have you any idea what distribution will be made of 
that copper and what areas it will go into? 

Mr. Bertsch. We have no instructions concerning the distribution 
of that copper, but we are conferring with the Office of Emergency 
Planning and other Government departments to ascertain the method 
of distribution. 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 43 

Mr. White. This Office of Emergency Planning? 

Mr. MuLTER. Mr. White, we are not being fair to the other mem- 
bers of the committee. You took much more than your 5 minutes. 
There are at least eight other members who have not been recognized. 
We would like to give every member an opportunity to ask questions, 

Mr, White. Then, Mr. Chairman, I think we should go ahead with 
this hearing. 

Mr. MuLTEH. We will go through with it until 12 o'clock and later 
if no one objects. 

Mr, White. I would like to ask one last question if I may, Mr. 
Chairman. 

In the Office of Emergency Planning is there anyone who has any 
idea where this copper is going at the present time? 

Mr, Bryant, I think not at this time. 

Mr. Mui-TBB. Mr. Mize? 

Mr. MiZE. Mr. Chairman, I want to pursue a little bit Mr. Brock's 
point. 

I want to quote from the Joint Committee Annual Report, 1959, 
and I quote, "The Joint Committee on Defense Production continues 
to believe that purchases of materials for both the Defense Production 
Act inventory and the stockpile should be limited to defense need 
and that it is not the purpose of these programs to regulate prices 
or to solve economic problems," 

In the 1963 annual report, page 25, the Joint Committee stressed 
that the defense stockpiles should be used for national emergencies. 
I quote, "The purpose and intent of the act, and the stated policy of 
Congress, was to provide for the acquisition of stocks and of these 
essential defense materials and to encourage the development of 
mines and the deposits of these materials within the United States, 
and thereby increase and prevent wherever possible a dangerous and 
costly dependence of the United States upon foreign nations for 
supplies of these materials in times of national emergency." 

Some of us feel that the Defense Production Act should be amended 
to prevent the President from usin^ his authority under the act as an 
economic weapon — to enforce artificial price levels, or to control 
arbitrarily supplies used in civilian production. Some of us feel that 
this is the use to which aluminum stockpiles were put last November 
in forcing aluminum companies to rescind price increases. 

Now, this would appear contrary to the intent of Congress in 
passing and in overseeing the executive's activities under this act. 

Would you care to comment on that? 

Mr. Bryant. Only to this extent, sir. The utilization of these 
authorities for the common defense cannot be defined strictly in 
terms of release of a material to build a gun or a particular machine. 
The authority of the President has to be more flexible than that. 

I understand — it is my understanding that this authority was 
exercised for the common defense and therefore that it was appropriate 
to do so. Of course, there are many more things to the common 
defense than just the production of a gim that you are going to shoot 
or a bullet that is going to be exploded, and I would certainfy hesitate 
to see the Congress put a definitive and artificial limit on the exercise 
of that authority by the President, 

Mr, Mize, Do you think an amendment of the act to prohibit 
sales of purchases of stocks for purposes other than those directly 
related to national defense needs would be unwise or unnecessary? 



dbyGoogle 



44 EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1950 

Mr. Belsley. Congressman, the Defense Production Act provides 
that the material that is acquired under it is for Government use or 
resale. It is unlike the provisions of the national stockpile, which was 
established as a result of the Strategic and Critical Materials Stock 
PUing Act. It came into being at the time of Korea, at which time as 
you know, there were sizable acquisitions of strategic and critical 
materials. The Defense Production Act provisions were used ex- 
tensively for that purpose. Some of the materials that were brought 
into production as a result of the use of the act went into the Defense 
Production Act inventory for use or resale. Some of them went 
directly to the business community and were not brought into the 
inventory at all. And yet, the production of them was encouraged 
through the various incentives provided in the act. 

It would be very restrictive in any emergency, as it would have been 
in Korea, as it might be if we arc faced with a much greater situation in 
southeast Asia than we are at the moment, to add any other provision 
to this. The intent was that the materials would be for Government 
use or resale— I repeat those words because they are very important, 

Mr. MizE. That is all. 

Mr. Talcott. Mr. Chairman 

Mr. MuLTER, One moment. 

Mr. Ottinger. Mr. Chairman, I was called out for part of this. 
But for the record, I would like to object to these proceedings on 
the ground that there was inadequate notice. Two weeks ago we 
were given notice that we were going to consider S. 2499 to amend the 
Small Business Act. Only the end of la^st week did we hear about 
consideration of H.R. 14025. I would like to know, how much 
notice did you, Mr. Bryant, have that these bearings were going to 
take place today? 

Mr. Bryant. When I reported for duty last Thursday there was 
a note on my desk that I should be here today. I believe that was it, 

Mr. Ottinger. You have not had adequate time to prepare your- 
self for this? 

Mr. Bryant. Our notice related to the Defense Production Act, 
the notice that I had which was informal and internal, and not to 
the Small Business Administration. 

Mr. Ottinger. All ri^ht. 

Mr. Talcott. Will the gentleman yield? The bill was only in- 
troduced on March 28. I do not knowliow you could have had notice 
to testi^ on it last Thursday. 

Mr. Bryant. That is one of the m3reteries of Congress, perhaps. 

Mr. MuLTBR. I am sure the Governor can protect himself without 
any aid from the committee. I have not heard the Governor ask 
for any additional time nor has he suggested that we should not go 
on with the hearing. 

Mr. Talcott. We should go on with the hearing probably past 
12 o'clock and probably tomorrow, 

Mr. MuLTBB. Every member will have an opportunity to ask 
questions and if no one objects we wiU go beyond noon today. 

Mr. Talcott, Mr, Chairman, I have a minor question. I was 
trying to differentiate between the Defense Production Act and the 
Strategic and Critical Materials Stock Piling Act under which act I 
understood the copper was disposed. 



dbyGoOgle 



EXTENSION OF THE DEFENSE FBODUCTION ACT OF ISSO 45 

Mr. Belslet. The 200,000 tons that the discussion has heen about 
were released under provisions of the Strategic and Critical Materials 
Stock Piling Act. 

Mr. Talcott. Does that act require congressional approval before 
it can be done? 

Mr. Belslet. On an ordinary release the answer is "Yes." As I 
pointed out, section 5 of that act authorized the President to make 
the release on his own authority, if in his ^judgment such a release is 
for the common defense. It was under this provision of the act that 
he took the steps he did. 

Mr. Talcott, And did the President indicate in his statement 
exercising his right under section 5 

Mr, Belslet. Yes. 

Mr, Talcott. That it was done for the "common defense"? 

Mr. Bewlbt. Yes. 

Mr. Talcott. And was the copper actually disposed of to copper 
industries to be used in the common defense? 

Mr, Belslet. Were you present when Mr, Bertsch spoke on that? 
I am not clear whether you were. 

Mr. Talcott. I am not clear on some of the answers. 

Mr. Bebtsch. Congressman, insofar as the distribution of copper 
was concerned, it was dbtributed for the common defense. Some of 
the copper went for direct defense requirements and some of it went 
for hardship cases. I think Mr. Belsley pointed out before that if 
we are interested in a viable industry — a viable industrial machinery 
in the United States, industiy cannot exist solely on defense produc- 
tion. And since defense production only supports a certain portion 
of our industrial plant — the matter of common defense relates to the 
viability of our industrial pr()duction and plant and on this basis the 
distribution of 60 percent of the copper went for hardship cases and 
40 percent for direct defense cases. 

Mr. Talcott. Then, under your testimony, it would not be neces- 
sary to have a war, hot war or cold war or any other sort, to enable 
the President to exercke hb prerogative under section 5? 

Mr, Bertsch. Apparently it is not. 

Mr. Talcott. Tnen it is true that "common defense" could be 
a guise for any reason that he wanted. 

Mr. Bertsch. I didn't say any economic reason. 

Mr. Talcott. Would you think that we need some clarifying 
amendment in this act, to clearly define the common defense? 

Mr. Bertsch. I don't beheve so, Mr. Congressman. I think the 
President should have a reasonable amount of flexibility in meeting 
the needs of the Nation. 

Mr. Talcott. But you would give this to him in time of peace 
and in time of war and for economic reasons as well as national 
defense reasons, I take it? 

Mr. Bertsch. Mr. Congressman, at the present time I think we 
are at war in Vietnam and this action takes cognizance of it. 

Mr. Talcott. Was that the reason the President exercised his 
right, because of a war situation? 

Mr. Bertsch. I would probably think this is the dominant reason 
why he exercised bis right. He had the r^ht and he chose to exercise 
it. 



dbyGoOgle 



46 EXTENSION OP THE DEFENSE PRODUCTION ACT OF 19S0 

Mr. Talcott. You said there was a 60—40 percent utilization of 
the copper between defease industries and nondefense industries. 
I take it yoii would permit a 99-to-l percent disposal? 

Mr. Bertsch. The only reason the disposition was 60-40 is be- 
cause the total number of requests that we received from direct 
defense users was 40 percent. Had we received 88 percent direct 
defense requirements 

Mr. Talcott. What if only 1 percent of the defense users needed 
copper? 

Mr. Bertsch. This is a rather theoretical question, but the 
answer would have to be tbe same if I were going to be consistent in 
my logic. 

I can only raise a sort of corollary illustration by reminding the 
Congress and this committee that we have continued in effect over 
a period of some 16 years in the Defense Production Act which in 
the area of defense production required the set-aside of only, let us 
say, 2 or 3 percent of our total steel production but still we continued 
the mandatory terms of our priorities and allocation system in order 
to support that production. This is a fairly close corollary to the 
current action. 

>Ir. Talcott. Is there any further need for the Strategic and 
Critical Materials Stock Piling Act? 

Mr. MuLTEB. That is not before us. 

Mr. Talcott. I know. 

Mr. Behtsch. I don't think it is inconsistent to have it on the 
books — to have on the books the Strat^ic and Critical Materials 
Stock Pihng Act and Defense Production Act. I think they both 
serve a purpose — although methods of administration and different 
types of action is taken under each. 

Mr. Taloott. One was a circumvention of Congress and the other 
was not. 

Mr. Bertsch. I don't think the President's action was a cir- 
cumvention of the Congress. I think his action under the Stock 
Piling Act was consistent with the intent of Congress. 

Mr. Talcott. Should the President ever request Congress to 
release materials from the strategic stockpile? 

Mr. Bertsch. There are quite a number of bills before the Congress. 

Mr. Talcott. But he did not do it in this case? 

Mr. Bertsch. He did not do it in this case. 

Mr. Multer. Has any Member of the Congress introduced any 
bill to take away — ^to take this away from him — -to take away from 
him the power? 

Mr. Bertsch. None that I know of at this time. 

Mr. Talcott. I yield to Mr. Brock. 

Mr. Brock. I am somewhat interested in the arguments of Gover- 
nor Bryant and yourself concerning more flexibility of the President. 
The National Defense Act says, "to promote the national defense," 
and you, yourself, said the "common defense" is applicable in the 
critical materials bill. Both acts were passed, not by the President 
of the United States but by the Congress. The Congress said in 
1959, "it is not the purpose of these programs to regulate prices." 
You have tastiJied to the effect that a good 40 percent of this material 
went to nondefense users and frankly I am amazed that your use of 
the word "flexibility" includes a direct violation of the intent of this 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1990 47 

Congress. It seems to me that yoa can better answer the questions 
which I asked. 

Mr. Merkes. Mr. Brock, may I say respectfully to you that the 
common defense, wliere it is connected with the economy and the 
economy concerns the common defense, that it is legal to find that on 
that basis, the common defense requires certain actions be taken as a 
matter of law, 

Mr. Brock. It may be legal, but we set forth clearly in case after 
case of the conmiittee reports that we do not intend under this act, 
either of these acts, for this agency to regulate prices or to solve 
economic problems. Let us be honest about it. That is exactly 
what this action was taken for. 

Mr. Mebker. It was taken for the common defense. 

Mr. Brock. That is a very broad interpretation. 

Mr. Talcott. Any material that is under the Stock Piling Act 
would be related to the common defense. You could put any 
material there and say it related to the common defense, could you 
not? 

Mr. Bhyant. It would depend on the facts and circumstances and 
the President would have to make a determination. I think he 
would assume and I do assume that the President would not make 
such a determination unless he had, upon review of the evidence and 
the circumstances, concluded that this was so. So while it is open 
end in conception, nevertheless, it seems to me you have quite wisely 
given the President the authority to make a decision in this situation. 

Mr. Talcott. Even if it has an adverse economic effect? 

Mr. Bryant. It is almost invariably true, you might hurt somebody, 
building a road or whatever ynu do. 

(The chairman, Mr. Patnian, resumed his seat as chairman.) 

Mr. Talcott. Yes. 

Mr. Bryant. There might be some adverse effect. 

Mr. MuLTER. Mr. Chairman, I would hke to make a statement 
for the record at this point. 

Every Member of Congress has been charged with notice that this 
law expires on June 30, 1966, and that it must be extended. This 
bill, H.R. 14025, is exactly the same as H.R. 13014 introduced on 
February 13 by the chairman with the exception of the second section 
in H.R. 14025 which is merely a technical amendment so as to give 
the Congress the right to expend the moneys that are being expended 
now for the operation of the Committee on Joint Defense Production. 

The Chairman. It would take care of the increased salaries voted 
by Congress. 

Mr. MuLTBR. Precisely. 

The Chairman. Can we agree when to vote on the bill now? 
Suppose we agree to meet tomorrow morning at 10 o'clock in executive 
8e,ssion. Without objection, so ordered. 

Mrs. SuLUVAN. Before we adjourn, Mr. Chairman, may I ask 
that Governor Bryant respond to the two questions that I submitted 
to him so that I mw have an answer before tomorrow morning? 

The Chairman. Can you do that, Governor Bryant? 

Mr. Bryant. We will give you an answer, the best answer we can 
at the time. 



dbyGoogle 



"48 EXTENSION OF THE DEPEatSB PRODUCTION ACT OF 1950 

Mr. Reuss. Mr. Chairman, my questions U> Governor Bryant 
were very much along the same hnea as those of Mrs. SuUivan and I 
asked the staff to hand you a copy of the amendment that I prepared 
to reinstate the power in the executive area. 

Mr. Talcott. Will these answers be provided to all the members? 

The Chairman. Can you mimeograph the replies, Governor? 

Mr. Bryant. Congressman Reuss, your question is not susceptible 
to as quick an answer as hers— as Congresswoman Suhivan's. 

Mr. Reuss. If you wish to suggest better language than the 
language already in the Defense Production Act, I would welcome it. 
But if you answer Mrs. Sullivan's questions, you will also be answering 
mine. The question very briefly is, Does the administration oppose 
having Congress empower it, if it wishes to use that power, to control 
consumer credit should consumer credit present an inflationary threat? 

(This information maybe found on p. 20) 

The Chairman. Mr. Widnall? 

Mr. Widnall. Unfortunatdy, I was unable to be present during 
the hearings earlier today. I have no questions at this time. 

The Chairman. Mr. Stanton? 

Mr. Stanton. My question to you is in light of so many members 
asking questions — would it be possible to dday this meeting tomor- 
row in order to give the gentlemen more time and give us an oppor- 
tunity to possibly ask questions for the record? 

The Chairman. Well we have another bfll after this. You will be 
able to answer these by tomorrow morning, would you not, Mr. 
Bryant? 

Mr. Bryant. I will be able to give an answer. 

The Chairman. All right. 

Mr. Taicott. The bUl that we are taUdng of, the act we are 
talking about does not expire until June 30. 

The Chairman. But it must go through both Houses. There are 
a lot of things that have to be agreed to. 

Mr. Talcott. It just has one provision extending the bill— extend- 
ing it 4 years. 

The Chairman. It is more than that. The deadhne comes up 
before you know it and unless we make hay while the sun shines we 
will not get through in time. 

Mr. Talcott. I am just trying to act in the best interest. 

The Chairman. Anything else? 

We will meet tomorrow morning at 10 o'clock in executive session. 

(The following statement was submitted for the record:) 

Chambbe of Comuercb of thb United States, 

Washington, D.C., March 30, 1968. 
Hon. Wright Patman, 

Chairman, Commillee on Banking and Currency, 
Washington, D.C. 

Dear Mr. Patman: The enclosed statement expresses the views of the Cham- 
ber of Commerce of the United States on the proposed eEtensian of the Defense 
Production Act of 1950, &s amended. 

I respectfully request that your committee give its careful consideration to 
these recommendations and that the statement oe made a part of the record of 
the committee's hearings. 
Cordially, 

Don a. Goodall, 



dbyGoogle 



EXTENSION OF THE DEFENSE PRODUCTION ACT OF 1860 



The Chamber of Commerce of the United States recommends extension, to 
June 30, 1968, of the Defense Production Act of 1950, aa amended, which expires 
on June 30, 1966. 

The national chamber recommends that H.R. 13014, under consideration by 
your committee, be amended to provide that before implementation of any plan 
recommended by the President for the disposal of surplus stockpile materials under 
the act, and after consultation with the industries involved, there must be con- 
gressional approval of the plan in the form of specific legislation. This provision, 
which would amend section 303(b) of the act, is consistent with the policy eatab- 
liflhedin the Strategic and Critical Materials Stock Piling Act, Public Law 79-520. 
It is also in keeping with the position adopted by the menoberehip of the national 
chamber in support of that policy. 

A 2-year extension of the act is recommended, rather than a 4-year extension as 
proposed in H.R. 13014, in order to provide opportunity for more frequent review 
and evaluation of the act than would be possible under the longer period. 

Eittension of the Defense Production Act, which the national chamber has 
supported on six previous occasions, is essential because it provides the basic 
statutory authority to establish priorities for defense contracts; limited power to 
allocate materials for defense purposes; authority to guarantee certain loans made 
in connection with defense contracts; authority to make loans and purchases to 
build up our defense capacity and assure adequate supplies of defense materials; 
authority under which businessmen may cooperate voluntarily in meeting defense 
needs without violating antitrust laws; and provisions for establishment of a re- 
serve of trained e.\ecutives to fill Government positions in time of mobilization. 

(Whereupon, at 12:10 p.m., the committee adjourned to reconvene 

subject to the call of the Chair.) 



dbyGoogle 



db,Googlc 



db,Googlc 



Y4.BZ2/l:D36W9fi6 C.I 

EMenoon (rf ttia Dsfan 

Stanford UnlverettvUbrartm 



111 



3 6105 045 163 719 



OVIEDUE 1 



































































































STANFORD UNIVERSITY UBRARIES 
STANFORD, CALIFORNIA 94305-6004