ON SOME FEDERAL RESERVE TESTIMONY

A few days ago Chairman Martin of the Federal Reserve Board testified to the Joint Committee on the Economic Report. He was asked by the chairman of the Subcommittee on General Credit Control and Debt Management, now holding hearings, "I get complaints that they (the investigators) are going to people's homes and calling people out, interrogating them, about buying something on the instalment plan.'

Mr. Martin replied: "We have had lots of complaints of that. We have tried to minimize that type of enforcement. I think they are exaggerated, but it is not a happy lot to be the policeman at anything these days."

The subcommittee chairman continued, "I know, but it is rather ironical that you should chase somebody down to their own home and call them out to ask them about a wheelbarrow that they borrowed or bought on instalment plan. You let the bankers have a credit of millions of dollars a year without restraint." Mr. Martin replied: "I know of only one case where someone has been followed to his home. I just do not know-we have been tightening up on the regulations. I do not like any better than you do having Federal Reserve people going to people's homes."

The interrogation then took an interesting course. The chairman asked, "Do you not think we could well afford to do without regulation W for next year and on a trial-run basis?"

Mr. Martin: "Unless we get more flexibility than we have in it now; I question how much serviceability there is in it."

Meanwhile, public opinion outside of Washington, among the people generally, is mounting rapidly.

A. F. of L

THE RISE OF PUBLIC OPINION

Labor's monthly survey, February-March 1952, official publication of the A. F. of L., already has been introduced in these hearings. We believe it is one of the strongest statements yet made for the elimination of unnecessary controls. James B. Carey, CIO

James B. Carey, secretary and treasurer, Congress of Industrial Organization, said before this committee last May 30:

"In no field has the concept of equality of treatment and sacrifice been more violated than in the area of credit controls.

"Those who have sought to engage in speculation on the necessities of life and on the national defense have been left free to use the Nation's credit; but the small man who wanted only to participate in the decencies of life by the purchase of a refrigerator, a radio, an automobile or a home, found the full weight of the Government turned against him.

"This double standard of conduct in the field of credit should be ended. In fact, we propose a complete reversal of the present situation.

"For example, the regulation W is an instrument which declares that any person who has enough cash to purchase an auto, refrigerator, or washing machine can do so. But if you are not rich enough to have the 25 percent down payment, you must do without.

"The large margin of spendable income and of liquid assets is at the top of the income structure. The wealthy have the means to continue large expenditures for consumer goods. Regulation W can have but little, if any, effect on them. It is the low-and middle-income groups who are seriously affected by such inequitable regulation."

Journal of The United Mine Workers

The Journal of the United Mine Workers on February 15, 1952, said editorially: "Now that legislation to renew the defense production act is again before Congress, members of the Federal Legislature have an inescapable obligation to reexamine in the light of current economic facts the plea for continuing the controls over prices, wages and credit.

credit regulations which interfere with the normal flow of consumer goods into buying channels would seem to have lost whatever justification, if any, they ever had. The original basis for these restrictions on consumer credit was the assumption that goods would become scarce and that buyers would bid up prices unless their ability to buy was checkreined.

"There always was an element of discrimination in the Government-imposed restraints on installment credit because obviously the wealthy could buy all they wished and pay cash, while the middle- and lower-income groups were unable to do so. The 15 percent to one-third down payment and the curtailed period to pay off installments acted only to restrain hard-pressed householders. This group has traditionally bought furniture, household appliances, automobiles, and such commodities on the installment plan, thus creating a mass market for the output of our mass economy.

"An invasion of the right of the individual to make contracts to purchase necessary household goods, automobiles, and such is not only discriminatory against workers with modest incomes but lacking in economic sense at a time when goods are abundant and unemployment is again a problem, at least on a regional basis. This is one phase of the control bill that especially requires reconsideration as Congress tackles its annual task of renewing and revising the legislation."

Fulton Lewis, Jr.

Fulton Lewis, Jr., in his column February 22, 1952, condemned the effect of regulation W. In part he said:

"President Truman has once again asked Congress for continued controls over installment buying.

"Last year Mr. Truman said the credit curbs-a 15-percent down payment on an 18-month basis-would curb inflation. It is not necessary to comment on the silliness of that reason.

"The argument for further controls this year is equally silly.

"The combination of ceiling prices and production controls make unnecessary installment buying controls. Here is why.

"If you can't meet the restrictive credit terms or lack the cash, the odds are 1,000 to 1 that you'll spend your money elsewhere, for something else on the store counter, or for a vacation or maybe a few nights out on the town. "So where is the anti-inflation virtue in the credit installment controls. Ninety percent of the laboring man's money goes into the market whether it is for fun or furniture. And if he can't get furniture he usually finds some fun. Thus, instead of having anything tangible when his cash is gone, he still needs a television set, a washing machine, or a new chair for the living room.

'A look at the newspaper advertisements today discloses that there is now no shortage of television sets, automobiles, radios, refrigerators, or furniture. Manufacturers and retailers are more adequately supplied with these articles already produced but unsold. Whether they rot in the warehouse or are utilized in homes that need them no more money will go into the open market to kick up prices and create new inflation. If prices are forced up by the mere selling of goods now in storage or authorized to be produced under NPA regulatins, then the entire Office of Price Stabilization is a corrupt fraud.

"When we have to take orders from the Government concerning almost every household purchase made-plus having to get permission to borrow from our hometown banker to send junior to college or pay a hospital bill-then we open the gates to totalitarian control that goes down the road to only one ending. In Russia they tighten the screws every day."

Mr. Lewis' remarks assert themselves with terrific impact, to report the effect of regulation W on the American family-and its basic right to enter into normal contracts.

Many other columnists in recent weeks have taken up the cudgel for the consumer who uses installment buying-and have to increasing degree found regulation W wrong in principle and unsound in economics. These include Earl Godwin, John O'Donnell, and others. Countless newspaper editorials now are on file contributing to the rise of opinion against this type of regulation. Earl Godwin says (February 23, 1952), "Regulation W is a stranglehold on the individual's precious right to spend his money the way he chooses and that is certainly one of the freedoms."

The CHAIRMAN. Mr. Nepil of the National Association of Retail Meat and Food Dealers, Inc.

STATEMENT OF GEORGE T. NEPIL, SECRETARY-TREASURER, NATIONAL ASSOCIATION OF RETAIL MEAT AND FOOD DEALERS, INC., ACCOMPANIED BY CHARLES BAUER, PRESIDENT

Mr. NEPIL. My name is George T. Nepil. I live in Berwyn, Ill., a suburb of Chicago. I am executive secretary-treasurer of the National Association of Retail Meat and Food Dealers, Inc. We represent thousands of retailers dealing in food products, primarily in meats. Our members are located throughout the United States.

I might add that many of these retailers operate small and mediumsized businesses.

I have had 29 years of experience in the food business. At the present time I own and operate a super market in Berwyn, Ill. With my experience, I feel that I am qualified to talk for our membership. After the Korean situation started, and the Defense Production Act and wage and price controls were in the thinking stage, the National Association of Retail Meat and Food Dealers, Inc., assembled at its sixty-fifth annual convention at Omaha, Nebr., August 7, 1950, adopted a resolution offering to those Government bodies in Washington, charged with formulating any proposed legislation or regulations pertaining to our industry, our suggestions borne out of the actual working experience gained during the operation of the meatcontrol program of World War II for making any meat-control program fair and workable.

Gentlemen, I bring out this point to point out the fact that when the emergency arose, we were willing to cooperate with any Government agency, and if we saw the necessity was great, we were not opposed to any controls program if the conditions so warranted it.

Senator SCHOEPPEL. Then do you not think the Congress, in its wisdom, did a pretty good thing in not giving them the long-time over-all, first initial enactment that they asked for?

Mr. NEPIL. Yes.

Senator SCHOEPPEL. And we should take a review of this situation? Mr. NEPIL. Yes, sir.

The recommendations embodied in this resolution were ignored, and as a result the regulations were loosely drawn and were not tested and tried in the crucible of experience and failed in many respects to accomplish the stated objectives of the meat-control program. After controls were imposed in January 1951 the National Association of Retail Meat and Food Dealers, Inc., was cooperative with OPS officials. We repeatedly offered evidence and figures to the agency and suggested remedies for the inequitable provisions embodied in the act. Most of the suggestions and advice were not heeded.

In many instances the Retail Meat Advisory Committee, of which Mr. Bauer happens to be a member, presented evidence showing that the regulations were imposing a severe squeeze on retailers' gross profit margins.

On April 30, 1951, OPS began to put its profit-control policy into being. It took beef out from under the GCPR and set up dollars-andcents ceilings. The Retail Meat Advisory Committee again presented evidence that the new regulation was imposing a terrific squeeze on beef margins. Relief was promised, but instead the squeeze was increased.

Senator SCHOEPPEL. Then they also, in their regulations, required you to go completely out of your customary way of handling your merchandising-of cutting of meat and everything else, did they not?

Mr. NEPIL. I am glad you asked me that question. The fact that you state is absolutely true. We tried in various way to prove it to the OPS. In fact, last June we conducted a cutting test in the Senate cafeteria in this building. I do not know if you were present. Senator SCHOEPPEL. I was not up there.

Mr. NEPIL. Many Senators and Congressmen were present at this cutting test in which we proved that the way the OPS made up the regulations was contrary to historical practices of the meat industry, the retail meat industry. It worked hardships on the retailer, for one thing, and not only that, that is not the main thing, but the consumer did not get the kind of meat she wanted and they bought meat in the manner in which they were unaccustomed to buying it.

In other words, there was an excessive amount of bone and fat left on cuts, whereby the historical practice of most legitimate meat dealers, and meat dealers who want to hold their customers, is to trim the meat so that it looks presentable and so that the consumer gets a minimum amount of waste in bone and fat when she takes that piece of meat home.

Senator SCHOEPPEL. I might say to you, sir, the other day in the old Supreme Court Chamber here before this very committee a gentleman came down here from the eastern Atlantic seaboard and demonstrated to, I am sure, the satisfaction of all the members of this committee who were present, the fallacy of those requirements. It was most enlightening, the way that was presented and he showed conclusively that it cost the consumer more in the end.

Mr. NEPIL. We proved that when we conducted our cutting demonstration here last June.

I would also like to add that it is the definite proven opinion of both our membership and their customers that price controls on foodstuffs have raised the cost of living and interfered with the normal economic marketing of foodstuffs because of unsound restrictive regulations of OPS that have prevented regular historical meat-cutting procedures, and normal adjustments of the prices of various cuts to cover the preferences in certain neighborhoods for differnt cuts and grades of meat.

Now, you will notice that we say "neighborhoods" and not "areas," as consumer preferences will differ in one city according to nationality and economic status of customers in each little community contained in a city.

Under regular conditions least-demanded cuts must be sold for less than cost and the loss adjusted on more popular cuts according to each neighborhood's dietary preferences.

OPS has ignored this fact and it makes many dealers violators or bankrupts if they want to stay in business.

Most customers of our retailers refuse to accept OPS cuts or OPS type of trimming meats. So it makes it a rather difficult job to try to convince the consumer that that is the way it has to be and that is the way they have to take it.

I might elaborate a little further on this particular point, to clarify the point that I specified. For instance, to take soup meat. They have a certain price on navels, which is for soup. They regulated

the over-all picture to make up a general margin of profit, but they did not take into consideration that a lot of these cuts on which they had this margin set up are not in demand and many times they have to be sold at perhaps 25 to 30 percent under the ceiling price that was set up in order to move the product.

Senator SCHOEPPEL. Because it is permissible?

Mr. NEPIL. That is right, and also the cuts in higher demand like steaks, for instance, and roasts, the ceilings were averaged up to conform with the ceilings on these least-demanded cuts, and therefore the ceilings on those are too low.

Now, in the meat business, just like you said, it is permissible. We have a saying that you either sell it or you smell it, and if you want to sell it you practically have to give some items away.

I hope I made myself clear on that point.

Labor costs have been steadily rising and ceilings prohibit the retailer from raising his prices in order to meet the increased cost of doing business. Wage controls, as far as the retail meat industry is concerned, have offered no protection. The cost of supplies and other operating factors have also risen and have not been taken into consideration when the regulations governing the retail meat and food business were drawn up. Thousands of small retailers are encountering losses in the operation of their businesses, and no business can continue to operate without a profit.

Our members are in direct contact with hundreds of thousands of consumers and find that the act is none too popular for various reasons with this group who supposedly are the greatest beneficiaries of the act.

Many of the consuming public do not even realize that there is a control program. This is what the people have to say about controls: (1) The Government is blamed for inflation-the blame is put right on Government policies and scare buying. Unions and big profits were also blamed in a minor way.

(2) The consensus of opinion is that price controls are not working. About 90 percent of the people who expressed their views were of this opinion.

(3) Opinion is equally divided on the fact that wage controls are partially effective.

(4) Most people think that curbs on installment credit and loans are working. Many say that violations of controls are widespread because businesses and the public do not understand the rules and consequently ignore them.

Immediately after the Korean situation developed and the possibilities of price controls became a fact, a wild scramble by producers, feeders, slaughterers, packers, and wholesalers took place in order to establish high ceilings on meat products. As a result, prices soared upward rapidly becaue of this unnatural and artificial condition.

Now that the situation has adjusted itself, prices are easing off and are gradually coming back to normal after the high spurt following the Korean action. This is especially so in foodstuffs.

Now, Mr. Bauer has a preparation here on the differential of the prices between a year ago and now and if possible I would like for him to read it.

The CHAIRMAN. The only point is this: We have had to deny other witnesses here today. We have had several who wanted to testify.