aside the full amount for the program, and we are very much afraid that the $1 billion will be dissipated very quickly. Mr. REGAN. You are going to be out of snuff, before morning. Well, you get that language up here right away, Mr. Medley. Don't send it through the regular course. Mr. MEDLEY. Yes, sir. (The information is as follows:) (Presented below are two suggested amendments to the Defense Production Act, as submitted by the General Services Administration at the request of the subcommittee, both of which were designed to permit the financing of minerals and materials programs through a prudent reserve method rather than the present restrictive maximum contingent liability method. Also presented below is the language of the amendment subsequently adopted by the House Banking and Currency Committee at the instigation of members of this subcommittee. This amendment became an important provision of the Defense Production Act of 1950, as amended, when signed by the President on July 31, 1951.) SUGGESTED AMENDMENT TO THE DEFENSE PRODUCTION ACT OF 1950 SUBMITTED BY GENERAL SERVICES ADMINISTRATION AT THE REQUEST OF THE SUBCOMMITTEE ON MINES AND MINING Amend section 304 (b) of the Defense Production Act by inserting after the comma following the word "Provided": "That the amount necessary to be borrowed in connection with a proposed or existing underwriting contract or other instrument creating a contingent liability on the part of the United States shall be such amount as the borrowing official or the head of the borrowing agency or corporation shall from time to time determine to be sufficient to constitute a prudent business reserve against such contingent liability in the light of then known and foreseeable conditions and circumstances, but each borrowing official. agency, and corporation shall report monthly to the joint committee established by section 712 of this Act and to the Appropriations Committees of the Senate and House of Representatives the gross contingent liabilities incurred under such underwriting contracts and other instruments, the amounts determined to constitute prudent business reserves against such liabilities and any changes in the amounts determined to constitute such reserves against existing contingent liabilities: And provided further,". ALTERNATE AMENDMENT TO THE DEFENSE PRODUCTION ACT OF 1950 AS SUBMITTED BY THE GENERAL SERVICES ADMINISTRATION AT THE REQUEST OF THE SUBCOMMITTEE ON MINES AND MINING Amend section 304 of the Defense Production Act by adding a new subsection (d) as follows: "(d) Guaranties, underwriting contracts, and other contracts and commitments creating a contingent liability on the part of the United States may be made under sections 301, 302, and 303 and subject to the limitations thereof without regard to the limitations of existing law with respect to the availability of funds in relation to the gross contingent liability so created, but such limitations shall be applicable in connection with each such contract and commitment to such amount as the President may from time to time determine in the light of then known and foreseeable conditions and circumstances to constitute a prudent business reserve against the contingent liability created thereby." DEFENSE PRODUCTION ACT AMENDMENT OF 1951, AS ADOPTED, TO ELIMINATE MAXIMUM CONTINGENT LIABILITY METHOD OF DETERMINING AMOUNT OF RESERVES REQUIRED FOR FINANCING EXPANSION PROGRAMS AND MATERIAL ACQUISITIONS Subsection (b) of section 304 of the Defense Production Act of 1950 is amended by striking out the proviso in the first sentence and inserting in lieu thereof the following: "Provided, That the amount borrowed under the provisions of this section by all such borrowers shall not exceed an aggregate of $2,100,000,000 outstanding at any one time: Provided, further, That when any contract, agreement, loan, or other transaction heretofore or hereafter entered into pursuant to section 302 or 303 imposes contingent liability upon the United States, such liability shall be considered for the purposes of sections 3679 and 3732 of the Revised Statutes, as amended, as an obligation only to the extent of the probable ultimate net cost to the United States under such transaction; and the President shall submit a report to the Congress not less often than once each quarter setting forth the gross amount of each such transaction entered into by any agency of the United States Government under this authority and the basis for determining the probable ultimate net cost to the United States hereunder." Mr. REGAN. In other words, it takes 8 days to get a letter from one department back here in the mails, so if you will send a carrier pigeon down here, we would like to have that language as quickly as possible. DPA FUNDS FOR FOREIGN PRODUCTION Mr. BENNETT of Michigan. May I ask a question on this foreign program? Mr. REGAN. Yes. Mr. BENNETT of Michigan. Are you people spending any money on foreign production? Dr. MORGAN. Yes, sir, some of this money under the Defense Production Act is being spent on foreign production. Mr. BENNETT of Michigan. How much has been spent. Dr. MORGAN. I don't know any that has actually been spent that wouldn't be recovered. Take the rubber program, where by we have set up sufficient money in a revolving fund ($150 million) to permit them to operate for a period of 3 months. Mr. BENNETT of Michigaan. What about minerals. Dr. MORGAN. In minerals, we have a revolving fund set up for the purchase of foreign tungsten and its resale. There is about 14 million dollars involved in that. We also have a revolving fund for the purchase of foreign tin totaling 60 million dollars. Mr. BENNETT of Michigan. Then this report by Mr. Wilson, on April 1, he said that in some cases the United States Government is furnishing a substantial share of the capital needed to develop resources or for funds needed for research in new transportation facilities. That is on foreign projects. Does that money come from you people, or does that come from ECA? Dr. MORGAN. I imagine Mr. Wilson referred to all sources of United States money. Mr. BENNETT of Michigan. What? Dr. MORGAN. All sources of United States money, not just the DPA funds. He must mean the Economic Cooperation Administration, the Export-Import Bank, the International Bank-does he say Government or United States? Mr. BENNETT of Michigan. He says "United States Government." Dr. MORGAN. Then he must undoubtedly mean all those different authorities. Mr. BENNETT of Michigan. Do you keep yourself informed as to the amount ECA is spending on copper, lead, and zinc production in foreign countries, as well as some of these other? Dr. MORGAN. Yes, sir; we get monthly reports from the Economic Cooperation Administration as to development projects they are entering into, as well as specific purchase contracts for the United States stockpile, either with United States dollars, or with counterpart funds, and we keep a running check on their operations. Mr. BENNETT of Michigan. The thing that bothers me is this: Suppose we spend, say, $50,000,000 on a program for copper, lead, and zinc, in French Equatorial Africa and in Morocco. To that extent, we have made less money available for the expansion of the domestic production of those particular metals, have we not? Dr. MORGAN. Only if the total supply of money is limited. I mean that if the ECA didn't spend this, I wouldn't know that that same money would be available to us to spend. Mr. BENNETT of Michigan. You assume all this money for foreign production is going to be spent by ECA? Dr. MORGAN. Not all of it. We in DPA will certify some money for foreign mineral production, there is no doubt about that. Mr. BENNETT of Michigan. It all comes out of the same pocket? Dr. MORGAN. The taxpayer ultimately pays it. Mr. BENNETT of Michigan. If you increase the sources of production upon which we may rely, which we are financing in foreign countries, to that extent you reduce the necessities for expanding production domestically, isn't that true? Dr. MORGAN. That may be true, but may I quote from the Defense Production Act that says when you go into the higher than current market prices you have to certify that the supply of the material could not be effectively increased at lower prices or on terms more favorable to the Government, or that such purchases are necessary to assure the availability to the United States of overseas supplies. Now, if we can get foreign metals and minerals at a lower price, and Dr. Boyd and the DMA knows about that, he can't very well come to us and certify a domestic program for those materials at twice the market price when it can be shown that they can, in fact, be obtained abroad at the market price. He couldn't execute the necessary certification under this act, under those conditions. Mr. ENGLE. Just one point there, how do you integrate into that proposition the availability during an emergency. For instance, on tungsten, where you have a factor of zero, and availability from India Dr. MORGAN. The national stockpile under Public Law 520 is supposed to cover the possible loss of those overseas sources of supply during an actual war when the objectives are on hand for a particular material. Mr. ENGLE. I know, but they may not do it. I am quite familiar with that language. The Department of the Interior was trying to *sneak that in several bills I had, and I kept it out, because I knew what they were up to. It was a plain deal made to the State Department to support foreign production, and let our own stuff remain here in the ground. Some people down there think that is conservation, but it is not conservation, if you put all your eggs in foreign baskets, and then can't get the baskets over here. Dr. MORGAN. That is recognized, sir. BILLION DOLLARS SUPPLEMENTAL APPROPRIATION REQUESTED FOR FISCAL YEAR 1951; 1952 REQUEST NOT YET FORMULATED Mr. REGAN. Dr. Morgan, on this billion dollars you are asking for, is that to complete the present program, that is not for the fiscal year, 1952? Dr. MORGAN. Well, you see, under the terms of these arrangements as Mr. Gumbel explained Mr. REGAN. Yes. Dr. MORGAN. If we want to sign an aluminum contract today, but perhaps no aluminum will come in for the next 2 years, we have to set aside the full funds today. Mr. REGAN. We have to have that handled by the committee. Dr. MORGAN. That money for fiscal 1951 will have to cover some long-range projects. Mr. REGAN. Have you worked out your budget for 1952? Dr. MORGAN. We are working on that at the present time. Mr. REGAN. That has not come to the Bureau of Budget and to Congress as yet? Dr. MORGAN. No, sir. The Defense Minerals Administration and other agencies that recommend these programs are working with us. to develop that budget. Mr. REGAN. When that is in order, would it be in order to let this committee have a copy of that? Dr. MORGAN. Yes, sir. Mr. REGAN. We would very much like to have that. Dr. MORGAN. I will see that you get that. (The information is as follows:) (It subsequently developed that the Defense Production Administration was not required to submit a budget to the Congress for the fiscal year 1952; an increase in borrowing authority under the Defense Production Act of 1950 was granted without such requirement. The information presented below shows the amount of funds set aside by the Defense Production Administration for various materials expansion or acquisition programs as of July 27, 1951:) INFORMATION ON CERTIFICATES ISSUED AND STATUS OF BORROWING AUTHORITY, AS OF JULY 27, 1951-SUBMITTED BY THE DEFENSE PRODUCTION ADMINISTRATION The attached table details certificates issued under section 303 of the Defense Production Act on the basis of the maximum possible liability. Public Law 96, Eighty-second Congress, approved July 31, 1951, amends the Defense Production Act as follows: * That the amount borrowed under the provisions of this section by all such borrowers shall not exceed an aggregate of $2,100,000,000 outstanding at at any one time: Provided further, That when any contract, agreement, loan, or other transaction heretofore or hereafter entered into pursuant to setion 302 or 303 imposes contingent liability upon the United States, such liability shall be considered for the purposes of sections 3679 and 3732 of the Revised Statutes, as amended, as an obligation only to the extent of the probable ultimate net cost to the United States under such transaction; and the President shall submit a report to the Congress not less often than once each quarter setting forth the gross amount of each such transaction entered into by any agency of the United States Government under this authority and the basis for determining the probable ultimate net cost to the United States thereunder." Consequently, the certifications presently outstanding as detailed in the attached table will have to be amended after recomputation on the new basis provided by the amended act, and the funding of all new projects will also have to be provided for on the new basis. Defense Production Administration, Office of Resources Expansion-status of borrowing authority, sec. 304 of Defense Production Act, maximum possible liability basis, as of July 27, 1951 Borrowing authority authorized in basic act. Total borrowing authority available. Less total of certificates issued to date-- Balance available___. SCHEDULE OF CERTIFICATES ISSUED Projects under sec. 303: Aluminum expansion. Aluminum sheet_. In thousands $600,000 1, 000, 000 400, 000 2, 000, 000 1,859, 066 140, 934 427, 400 7,300 Castor beans___. Cobalt_ Copper: Domestic___. OFHC (domestic). Graphite. Gum turpentine and rosin. Kenaf__ Korean steel scrap Linseed oil.. Machine tools_ Manganese Magnesium___. Minerals exploration_ Molybdenum_. Nickel. Platinum__ Rubber, natural_ Tin: Contract-U. S. Tin Corp_. World purchase_ Titanium__ Tung oil (certified by Agriculture) –. Tungsten: Contract, Tungsten Mining Corp--- Zinc--- Subtotal, sec. 303 projects--. Projects under sec. 302: Allocation to RFC for loans. Total of certificates issued to date_- 13, 100 13, 641 93, 919 1,300 55, 000 1,245 10,000 6,000 4,000 58,000 340, 000 71, 055 20,000 10,000 103, 530 1,680 11,900 200,000 1,550 33,500 15,000 666 400 130, 500 38, 950 14, 430 1,684, 066 175,000 1,859, 066 Mr. REGAN. Right there now, Mr. Controller, if we get this language that we have discusssed here into the new bill, if you could give us some estimate either now or later as to about how much, instead of asking for the several billions, how much you actually require to be safe, to be reasonably safe MODIFICATION OF CONTINGENT LIABILITY ORDER WOULD REQUIRE REANALYSIS OF BUDGET Mr. MEDLEY. I might say in answer to that question, Mr. Chairman, that if this current policy and decision is modified, it will require a complete reanalysis of the budget, and a new submission on that basis. |