EXTENSION OF STABILIZATION FUND AND POWERS, ETC. TUESDAY, MARCH 7, 1939 HOUSE OF REPRESENTATIVES, COMMITTEE ON COINAGE, WEIGHTS, AND MEASURES, Washington, D. C. The committee this day met at 10:30 a. m., Hon. Andrew L. Somers (chairman) presiding, for further consideration of H. R. 3325. STATEMENT OF HON. HENRY MORGENTHAU, JR., SECRETARY OF THE TREASURY—Continued The CHAIRMAN. The committee will please come to order and we will resume our hearings concerning H. R. 3325. As was understood at the close of the last meeting, it is going to be necessary to limit the time of questioning so that we may conclude the hearings at a reasonable date. I believe Mr. Luce wishes 15 minutes to question the Secretary. Mr. LUCE. No; 10 minutes will be long enough. The CHAIRMAN. And Mr. Andresen and Mr. Reed wish about 10 minutes each. Mr. ANDRESEN. Yes. Mr. REED. Yes. The CHAIRMAN. Mr. Smith, can you conclude within an hour? The CHAIRMAN. That will conclude the questioning on the minority side, as I understand. I have requests for 30 minutes, and Mr. WHITE. My questions will be directed to the experts who are accompanying the Secretary rather than to the Secretary himself. I do not think I shall require more than 30 minutes; but I may want more time. The CHAIRMAN. The Secretary may want to return to his office and it may not be necessary for him to return here. Mr. WHITE. I should like to begin my questioning before it is too late. The CHAIRMAN. We shall try to conclude as soon as practicable. After the other gentlemen shall have concluded, the chairman will want to ask a few humble questions that, probably, will not interest anybody else. Mr. SHEPPARD. I move that those who are questioning be not interrupted. The CHAIRMAN. I think that is a good idea. The House is to meet at 11 o'clock this morning, and there may be some members of the committee who desire to leave before we adjourn, about 11 55 o'clock, since the debate concerning the reorganization bill will be resumed this morning. Mr. WHITE. But the bill will not be read for amendments until late this afternoon. The CHAIRMAN. It will not be necessary for us to go to the floor immediately after the House meets. Mr. Reed is first to interrogate. Mr. REED. Mr. Secretary, the stabilization fund was created by the act of 1934 and that act expired or terminated in 2 years, except that by proclamation of the President it may be continued; that is correct, is it not? Secretary MORGENTHAU. That is true. Mr. REED. It has, by Presidential proclamation, been extended an additional year. Secretary MORGENTHAU. Yes. Mr. REED. Two years ago you appeared before this committee and advocated the passage of a similar piece of legislation extending the stabilization fund and the power to devalue the dollar during a period of 2 years. Secretary MORGENTHAU. Yes. Mr. REED. Was that proposed legislation introduced at that time at the request of the Treasury Department? Secretary MORGENTHAU. I think it was introduced at the request of the President. Mr. REED. Was the pending bill introduced at the request of the President? Secretary MORGENTHAU. It was introduced at the request of the President. Mr. REED. Do you know why the bill this year has a termination date of January 15 rather than June 30, as in the previous bill? Secretary MORGENTHAU. I think that the thought was to ask this extension during the present term of this administration, and that by fixing it as January 15 it would give the incoming Congress an opportunity to decide whether it wished to extend it again or let it expire. Mr. REED. In response to a question last week by Representative Cochran I understood you to say that you had no objection to having the time extended to June 30; is that right? Secretary MORGENTHAU. Yes; that is right. Mr. REED. Do you think it would be advisable to do that? Secretary MORGENTHAU. I think it is a matter that is entirely up to the Congress to determine as to what its convenience would be. Mr. REED. H. R. 3325 is divided into three parts. Section 2 of the bill refers to the power of the President to devalue. If this bill should be enacted with section 2 eliminated therefrom, the President would still possess the power to devalue under the Thomas amendment, would he not? Secretary MORGENTHAU. No. Mr. REED. He would not? Secretary MORGENTHAU. No. Mr. REED. I am going to ask a question, but I do not want you to answer an academic question or anything like that. Just as a sound businessman's idea, what is your own opinion or idea as to the definition of "sound money"? I mean for you to answer that question briefly as a good businessman. Secretary MORGENTHAU. I would not know just how to answer that question. I will, though, answer it the best way I can. I think that during the first year after we devalued there was some apprehension and misunderstanding among the businessmen as to the course of the dollar. I think that as each year passed the worries of businessmen in this regard became less and less until I believe today that the businessmen who are doing business inside of the United States have become used to our present dollar and to its soundness and its purchasing power and that in his day-to-day transactions he does not think of the dollar as devalued. Over a period of 5 years I think he has come to recognize that we have the soundest currency in the world today. Mr. REED. One factor in maintaining sound currency, and a very important factor, is the thought of a solvent government; is it not? Secretary MORGENTHAU. Absolutely. Mr. REED. Therefore the piling up of a continuing deficit cannot help but affect the soundness of our money; is that not correct? Secretary MORGENTHAU. You have given me the liberty or permission to answer in my own way? Mr. REED. Yes; certainly. Secretary MORGENTHAU. In this question of soundness of money, after all there are various ways of appraising it. In the Treasury the way I appraise it is by the Government-bond market, by our securities, by the desire of the public to invest in these securities. We have United States savings bonds which are limited for any purchaser in any one year to $7,500 cash value or $10,000 face value. The purchases of these bonds each month show an increase over the same month of the preceding year, and the public invested in these bonds in January of this year to the extent of $140,000,000. I do not know the number of persons who buy this particular type of security. This means to me that the people have not only confidence in the Government but an increasing confidence. The same is true of the Government-bond market. We are in the midst of refunding $1,300,000,000 of notes that come due in next June. We are for the first time since 1933 charging a premium, and in the face of that the bond market handles most of the issues at an all-time high. I realize that there are other ways of measuring confidence in the Government, but, as Secretary of the Treasury, there is no single thing more indicative to me than the attitude of the people toward Treasury obligations. That indicates confidence in fiscal soundness, in soundness of the dollar, and causes me to believe that the people have full confidence in the fiscal policy of this administration. Mr. REED. You would not say that the existing demand for Government bonds is occasioned or not affected by the existing deficit of the Government? Secretary MORGENTHAU. An increase in our public debt? Mr. REED. Yes. Secretary MORGENTHAU. The occasion I am speaking of is one having to do with refunding, not with new issues. We are asking to change a note into three different kinds of securities. We are offering notes and two bond issues, one of 1950-52 and one of 1960–65. The notes which they have are of short-time maturity, and from the first day's offering we have met an excellent reception. This is not, as I have said, a question of offering new securities; it is a question of refunding. Mr. REED. Mr. Secretary, last week when you were here, as I recall, you stated that in case of war, so far as the Administration's stabilization fund was concerned, you would feel it to be your duty to come to the Congress and ask advice and ideas as to how this fund should be administered. Secretary MORGENTHAU. That is right. Mr. REED. I think that every member of this committee has confidence in your integrity and your good faith. Secretary MORGENTHAU. I thank you for that statement. Mr. REED. If this bill should be enacted into law in its present form, while we know your views in connection with it, and we know how you as Secretary of the Treasury would administer it, yet you could not bind your successor to anything you might say. Secretary MORGENTHAU. That is true; but Congress will still be here. Mr. REED. But in the unfortunate event of your death, resignation, or removal, your successor would not be bound by anything you may have said, and the Congress could not expect your successor to do as you have said you would do. Secretary MORGENTHAU. That is quite correct. Mr. REED. I do not have any further questions to ask the Secretary. The CHAIRMAN. Mr. Andresen, have you any questions? Mr. ANDRESEN. Yes. Mr. Secretary, I am pleased to hear your statements in regard to the confidence you believe the people of the United States have in the fiscal policies of the administration. In fact I know that the majority of the Members of the Congress have been especially pleased by the expressions of the President and yourself and others that we shall not have any new taxes and that there is to be a cordial cooperation with business. I am wondering whether that is a temporary proposal or whether it will be a permanent policy of the administration to have a real, earnest, and permanent breathing spell. Secretary MORGENTHAU. I think the only answer to that question is, "Time will tell.” Mr. ANDRESEN. I am sure that everybody on the Hill and the people of the country generally would like to have your reaction as to that. Is this announced policy to be one lasting only, say, 18 months or until 1941? Secretary MORGENTHAU. The statement that I made and to which you have kindly referred, as I remember, was that I hoped most sincerely that the Congress would reexamine the tax bill in order to remove any deterrents to business. Further, I said, as I remember, that I was looking for a lasting recovery. That is my fervent, sincere prayer for a thorough and enduring recovery. Mr. ANDRESEN. It is your desire to effect a permanent recovery and a permanent cooperation with business so as to remove the fear |