bill, that it was then reported to the Senate, and that the Senate passed the authorization bill for this new mint in Philadelphia, and that it became Public Law 88-102 on August 20, 1963, authorizing this new mint in Philadelphia. We just called a few minutes ago the mint to find out what progress had been made and they tell us that they are clearing the land up in Philadelphia at the present time, that they still don't have the appropriation which is in the supplemental appropriations bill which was not acted on last year, but that they are testifying before the Subcommittee on Appropriations of Monday of next week on that particular thing and are going ahead regardless of it. So I think that you can tell the bankers who communicate with you as I will and as I know Mr. Reuss will also, that steps are being taken. Although certainly in his message of a year ago Mr. Dillon made very clear that the problem was then very acute and that the mint was then working around the clock, three, 8-hour shifts, 24 hours a day, that this was a real danger and hazard, because of the fact that equipment could break down, that you could run into long delays which would produce even more acute shortages than we have at the present time. Mr. SCANLON. I understand that Mr. Dillon is seeking an appropriation to work overtime on a full round-the-clock basis now, and in addition to that, is still seeking approval of the appropriation to proceed with drawing the plans for this new mint. Mr. HARVEY. I think that is correct. The CHAIRMAN. I think they are working 24 hours a day and they have been for some time. That has been my information. Mr. HARVEY. Last but not least The CHAIRMAN. I don't know of anybody objecting to this. Mr. HARVEY. I don't think so either. Mr. SCANLON. I think we are all in agreement on this. Mr. HARVEY. Mr. Chairman, since it has been brought up, Mr. Reuss has requested this of Mr. Scanlon. The CHAIRMAN. That is right, and I am glad to have the information. I am sure the Appropriations Committee hasn't been negligent in it. Mr. HARVEY. I would like to thank both of these gentlemen for their very fine and forthright statements on this matter and particularly Mr. Scanlon who also serves as president of the Federal Reserve Bank of Chicago which covers the area that I represent. I would say that your very fine representation has preceded you here today. Several persons in my district have spoken to me very favorably about your activity as president. They haven't all been bankers either incidentally. We certainly welcome you here today and I know on both sides of the aisle we thank you very much for your statement. The CHAIRMAN. Yes, sir; I share the view of Mr. Harvey. The CHAIRMAN. We certainly appreciate your testimony. Mr. HARVEY. I have nothing further. The CHAIRMAN. We will certainly carefully consider everything you have said. Whether we agree with you or not we will give careful consideration to it. We have as our witness Friday-this is something 28-680-64-vol. 1-54 you gentlemen might be interested in-we are going into the question of how the expenditures that you are making compare with the expenditures that other Government agencies can make and be legal, and we will have Mr. Ramsey, who is Associate General Counsel of the General Accounting Office to testify here Friday morning at 10 o'clock on that point. Tomorrow we will finish the Federal Reserve bank presidents by having Mr. Irons, who is president of the Federal Reserve Bank of Dallas, Tex. Again I want to thank you for the entire committee and for myself for your appearance here and thank you for your cooperation not only today but in the past. I am highly pleased with the cooperation which the Federal Reserve System has given our committee, the Federal Reserve Board, the Chairman of the Board, the members and also the presidents of the banks. You have been very cooperative. Thank you very much. Mr. SCANLON. Mr. Chairman, we appreciate the fine treatment we have been accorded here. The CHAIRMAN. Thank you, sir. Mr. CLAY. Mr. Chairman, I would like to say one thing because the question was never addressed to me, and since I am probably going to be called on to vote on the matter very soon, I think I should tell you what I think about it at this time. Mr. CHAIRMAN. That is the Open Market Committee minutes. Mr. CLAY. This is the question of the Open Market Committee minutes. The CHAIRMAN. I wish you would. Mr. CLAY. My feeling is that you should have the Open Market Committee minutes. The ones you referred to I have a great deal of doubt about. I have a great deal of doubt about letting you have those because I think the nearer you come to the time of a particular action, and if you have ability to go in and study and interpret those recent minutes, the nearer you can come to predicting exactly what the Federal Reserve is going to do in the next move, which may make the power of the Federal Reserve in really carrying out its function much less. Now where that time is, whether it is 3 or 5 years, I just don't know but I would want to hold it back as far as 3 years, and I am afraid, Mr. Patman, that when the subject comes up that is the way I am going to vote and I just thought I should tell you. The CHAIRMAN. Certainly. Thank you, sir. I was hoping you would say 3 to 6 months instead of 3 to 6 years. Mr. CLAY. I think that there can be damage to carrying out our function if we make it that short. The CHAIRMAN. The same argument you are making could be used in wartime against having any printed testimony about what is going on concerning appropriations to carry on the war. They would say our enemy is likely to get a hold of it. Mr. CLAY. I don't think this is related to the appropriations question. The CHAIRMAN. Thank you very much, gentlemen. We will stand in recess until 9:30 in the morning. (Whereupon, at 11:50 a.m., the hearing was recessed, to reconvene at 9:30 a.m., Thursday, February 6, 1964.) THE FEDERAL RESERVE SYSTEM AFTER 50 YEARS THURSDAY, FEBRUARY 6, 1964 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON DOMESTIC FINANCE OF THE COMMITTEE ON BANKING AND CURRENCY, The subcommittee met, pursuant to recess, at 9:30 a.m., in room 1301, Longworth House Office Building, Hon. Wright Patman (chairman) presiding. Present: Representatives Patman, Reuss, Vanik, Pepper, Minish, Weltner, Hanna, Kilburn, Widnall, Harvey, and Brock. The CHAIRMAN. The committee will please come to order. Mr. Irons, we will insert your statement in the record at this point and ask you to summarize briefly for us, if you please, and then we will ask you questions. After your statement we will insert in the record the information we received from the Federal Reserve Bank of Dallas concerning the banks earnings. We are doing this in the interest of getting through. We have another witness if we will be able to get to him, the General Accounting Office witness, and the House meets at 12 so we want to make it possible to get through with both of you if we can. We don't want to deny you any opportunity to present anything that you desire to present. So, you may proceed in your own way and summarize your statement, if you please, bringing out the major points. (The statement and other information records referred to follow :) STATEMENT OF WATROUS H. IRONS, PRESIDENT, FEDERAL RESERVE BANK OF DALLAS Mr. Chairman and members of the subcommittee, for your information, I have been an employee and officer of the Federal Reserve Bank of Dallas since July 1, 1945, and president of the bank since February 15, 1954. Prior to that time I had been employed in the field of education and in Government service. I appreciate very much the invitation of the subcommittee permitting me to submit this statement and to discuss with the subcommittee matters of mutual interest relating to the Federal Reserve System. Although as persons of independent judgment we may differ in our approach to the achievement of some of the objectives which we seek from our Federal Reserve System, I believe that the ultimate objectives of those of us involved in the operations of the System and those of you sitting as members of this subcommittee are the same. In a broad sense, I think the Federal Reserve System should be so constituted and structured, and should have such authorities and powers as are necessary to enable it to operate in such a manner as to make the optimum contribution to the economic well-being of the American people that can be made by monetary and credit means. This is, in effect, consistent with the objectives of the Employment Act of 1946, as I understand them. This statement also points out, as I believe it should, that monetary and credit policy alone cannot assure the objectives sought; they can only contribute in some degree toward that end. Moving from this broad, general responsibility to more specific objectives, it is the responsibility of the System (a) To conceive and administer credit policy, which in relation to the prevailing economic conditions at any given time, will provide reserves to the banking system consistent with requirements for optimum sustainable economic growth; (b) To maintain highly qualified and experienced economic research groups within the staffs of the Board of Governors and the Federal Reserve banks; (c) To provide an elastic currency system, including currency, coin, and checks, to meet the seasonal and cyclical money and credit requirements of our economy; (d) To serve as fiscal agent of the Treasury in helping it to carry out its debt management program and other fiscal responsibilities; (e) To maintain an effective member bank examination and supervisory program; (f) To serve as a center of financial leadership and a source of economic information in the several Reserve districts; and (g) To consolidate the several thousand independent banking units in our country into a balanced, coordinated commercial banking system, capable of carrying out effectively the policies and services initiated by the Federal Reserve System. Obviously, an institution such as the Federal Reserve System, endowed deliberatly by the Congress with quasi-public, quasi-private characteristics, should be studied carefully from time to time to determine whether it is discharging its responsibilities efficiently and to the satisfaction of its creator-the Congress of the United States. Fortunately, this has been the case with respect to the Federal Reserve System. On numerous occasions, congressional bodies have appropriately investigated the Federal Reserve System-its structure, its policies, its administration, its operations, and its expenditures. Also, on occasions, legislative proposals have been advanced by Members of the Congress to modify in one respect or another the characteristics of the Federal Reserve System-structurally, operationally, and in its policymaking authority. The present hearings, in which we are participating today, advance several legislative proposals which are very fundamental and which reach to the roots of our central banking system. In my judgment. these legislative proposals, if enacted, would represent significant moves in the direction of breaking down the quasi-public, quasi-private character of the System, lessening the independence of the Fed eral Reserve System within Government, and weakening the regional strength and contributions of the System. My reaction to the provisions of H.R. 9631, which is a bill to increase to 12 the number of members of the Federal Reserve Board and for other purposes, is unfavorable for the following reasons: (a) The most desirable number of members of the Federal Reserve Board undoubtedly can be subject to reasonable differences of opinion. How many members is the "best" number may be difficult to prove. The Board should be large enough to permit an effective discharge of its assignments and responsibilities. Also, it should be large enough to avoid an undue concentration of power and authority in a relatively few members. Moreover, it should be large enough not to be hampered it its operations by the inevitable absentees that will occur from time to time. On the other hand, it should not be so large as to become unwieldy in its operations or to lessen the prestige and challenge of membership. Dilution of responsibility by expansion of membership is a real danger. In my judgment, the present membership of seven Governors is a desirable compromise between a larger and a smaller Board. Furthermore, experience has proved that the Board of seven members has operated effectively. (b) It would be a serious mistake to include the Secretary of the Treasury on the Board as a member and as Chairman of the Board. In the first place, it is probably beyond the capabilities of one man to serve effectively as Secretary of the Treasury and Chairman of the Federal Reserve Board; the responsibilities and requirements of each position are simply too great, with the consequence that one or the other would almost inevitably be neglected. Secondly, placing the Secretary of the Treasury in the position of the Chairman of the Federal Reserve Board would be a step in the direction of lessening the 'independence" of the Federal Reserve Board. Thirdly, the conflictof-interest possibilities that might arise as a result of the debt management responsibilities of the Secretary of the Treasury, and the credit policy responsibilities of the Chairman of the Federal Reserve Board, is a strong reason for not consolidating the two functions in the hands of one person. The world's largest borrower should not at the same time exercise control over the power to create money and credit. Fourthly, the proposal would place the central bank too directly under the influence and power of the executive branch of Government, a danger that history has proved too often; moreover, it would appear to be, at least in some degree, a step in the direction of an abdication of congressional authority in this field. (c) The term of office of members of the Board, which under the proopsed legislation is limited to 4 years, is too short. Moreover, the restriction as to reappointments is so severe as vortually preclude service beyond the original 4-year term. Under this proposal, there would be little continuity of service on the Board, but instead a high rate of turnover. The problem of obtaining highly competent men as members of the Board for such a short term of office would be much more difficult. Geographic and vocational qualifications of membership on the Board should be eliminated and members should be appointed to represent the public interest. Finally, making tenure of appointive members subject to removal by the President might tend |