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eliminating this and that segment of control. This will create confidence in our great free enterprise system. I hope you agree with me in general on that.

Mr. MARTIN. I agree with you in general on that.

Senator MOODY. Mr. Martin, I would like to point out that the Director of Defense Mobilization, Mr. Wilson, has anticipated that when production of civilian as well as military goods has been raised, in a couple of years from now, there is every anticipation that controls will be lifted. This is merely a temporary device to keep things from running away while there is a gap between the consumer goods available and the amount of purchasing power available on the market. Would you not agree with that, sir?

Senator SCHOEPPEL. I agree with that, but I also agree, Senator Moody, that personalities and characters change and are removed. and somebody else moves in, and we do not know the pattern of those individuals. Therefore I say it becomes an agency matter, and I would rather put it on the fundamentally sound basis of responsibility to the people of the country who want to know and to feel and to sense that those agencies are looking toward the day when they will unshackle rather than to shackle.

Senator MOODY. I just wanted to point out, Senator, that there is every impulse on the part of the people who are conducting this thing to get rid of controls as soon as it is safe to do so from the national standpoint.

Senator BRICKER. Let me say for the benefit of the Senator from Michigan that I came to this Congress with all the prophecies made for peace in the world. We had the United Nations, we had the International Bank. We were promised peace through the Atlantic Pact, and during those early years when I was down here I did try desperately to get rid of some of the controls that had been in effect during the war. I say to you very sincerely that, when we put these controls on, they will not be taken off in 2 years, or they will not be taken off in the lifetime of any man here in the Senate now. That is my personal feeling, because of the opposition which we faced in the early days after the war in trying to get rid of some of the controls I felt were out of place and ineffective and not needed. I say I was wrong in my judgment about anticipating peace. I took the promises and assurances too literally as being real when they were not. That is not ascribing any wrong motives or representations to the Congress, but I do know once these controls go in it is an almost impossible job to get them off.

The CHAIRMAN. I might say this, that I feel certain, when we put on controls for any length of time, they are not going to automatically expire. In the last war from 1941 on we had a question of the President's war powers, and all those things. But I do not think we will do that this time. I think we might have this law for 2 years, or 1 year, or have it so Congress can take it off when we want to.

Senator BRICKER. I think the best way this time, Mr. Chairman, is to put a limit on the time of this bill so the Congress will have a continuing control over it.

The CHAIRMAN. That is right.

Senator MOODY. I would like to point out one thing to the Senator from Ohio. It is true peace has not yet been brought about in the

old bm I might point out we have a relentless and rathless enemy after us and is na entirely the fault of the people who would be caite get rid of the controls sooner, because we are not operating in a Tam We have to stand up against the Russians.

Senator BECKER. I did not mean to get into any debate as to why Russia is what she is today. I just want to say that I cannot take the assurances of Mr. Wilson or anybody else that these controls will or an be taken cf. We all hope they can be taken off. I know that is

tape.

Senator Mooor. We certainly concur in that.

The CHARMAN. I think I can concur with the Senator. Mr. Stern, will you go ahead and ask the questions Senator Douglas wanted to ask!

Mr. STERN. I am not sure that he had specific questions. He mainly wanted to express his satisfaction with the trend in bank credit and Federal Reserve holdings of Government securities since April 4. which is roughly since you came into the Federal Reserve. This trend is shown in the fact that the Federal Reserve holdings of securities have gone down about $370.000.000 since then. The memberbank reserves have gone down $308.000.000 since April 4.

I think Senator Douglas wanted to point out for the record as well, though, as against the favorable trend of the past month the things that happened since a year ago, that is from March 1950 to the end of March 1951. These figures show how the very roots of the inflation took hold during that year when the open-market purchases were unlimited. They show that loans and discounts on the part of all commercial banks went up between the end of March 1950 and the end of March 1951 by about 10.7 billion, while their holdings of Government obligations went down by $7.000.000.

I think Senator Douglas wanted to point out the urgency of continuing the trend that has shown itself, particularly since the Federal Reserve has stopped supporting the Treasury conversion, the urgency of holding that line in the future, and of not returning to unlimited open-market purchases.

The only other thing he might have wanted to bring up. I think, was the statement made by Secretary Tobin with relation to commodity speculation. Secretary Tobin said:

Speculation on a large scale was also a factor in the advance during the last half of 1950. Not only were the professionals playing the futures market, but also industries and individuals were building their inventories of goods as fast as possible.

As I understand it. the level of the commodity trading went up quite considerably in the last half of 1950; is that true?

Mr. MARTIN. That is correct.

Mr. STERN. Would that indicate that some individuals who were ordinarily not professional commodity traders were entering into the market who had not been trading before!

Mr. MARTIN. I would be inclined to think so.

Mr. STERN. And some specific commodity prices had very sharp price rises during the last half of the year, did they not? I believe soybeans went up some 50 percent in a few months.

Mr. MARTIN. There were many rises.

Mr. STERN. Would not such rises have a tendency to press against price ceilings, even though price ceilings were imposed at the consumer level?

Mr. MARTIN. I do not think there is any question about that.

Mr. STERN. But still you feel that commodity speculation in the last half of 1950, or since Korea, has not had a marked inflationary effect?

Mr. MARTIN. I do not think it has been controlling, of course.

Mr. STERN. Well, it may not have been controlling but do you think it was not even significant?

Mr. MARTIN. I do not think it was any more significant than all the other scare operations that were engaged in.

Mr. STERN. But that would indicate it was a contributing factor?
Mr. MARTIN. It was a contributing factor.

Mr. STERN. And if individuals who were nonprofessionals had been discouraged from entering the market, there would have been less of an inflationary effect since Korea?

Mr. MARTIN. It would have been better.

Senator BRICKER. I have just one more question, Mr. Martin. We talked about this a little bit at the beginning, and that was the letter of Mr. Wilson on May 7 to the governors and to the mayors of the municipalities asking them to cooperate with the voluntary credit control program.

I want to commend you upon this voluntary Credit Restraint Committee program. I think it will be effective, and as I looked over the list of men, you certainly couldn't have picked a much better group of men than you have gotten there, from the reputations I know they have.

It is a very difficult thing, though, to enforce, and you can't enforce, I suppose, under our constitutional system, any such restrictions on the States or municipalities except through the control of materials, the allocation of materials, and of course you have the power and authority to do it.

What more would you suggest? The only thing that has been called to our attention at the present time is the issue of the soldiers' bonus bonds in West Virginia, and I can understand immediately how the Government officials would react there, the people have voted them, and it was their duty under the law to put them out and to offer them, and to pay the bonuses. Is there anything you have got to suggest supplementing Mr. Wilson's letter as to how such measures could be carried out except through the voluntary cooperation of the States, and that would be through the legislature on a matter like the West Virginia bonus?

Mr. MARTIN. Well, I think to be effective, that type of thing has to be voluntary. If it does not have public support, I think it is not likely to be successful.

Senator BRICKER. You cannot force it. It is a matter of education, a matter of cooperation.

Mr. MARTIN. If we have all-out war, that is a different story. You would have public support then.

The CHAIRMAN. Well, that has been the great fault, the lack of public support in so many things.

Mr. MARTIN. That is right.

The CHAIRMAN. Are there any further questions, gentlemen? The meeting this afternoon will be held in this room at 2:30. The State Department officials who have charge of the material we have

asked for will be here. It will be an executive session with only Senators present.

Senator BRICKER. I know the chairman would not want me to overlook this. I do want to express a word of appreciation to Mr. Martin for the great help he has been to us this morning. I think it has been one of the most instructive sessions we have had.

The CHAIRMAN. I want to join my good friend, the Senator from Ohio, in expressing our deep appreciation, and I look forward with much interest to the amendments we might have to discuss in 10 days. (The following were received for insertion in the record:)

HOUSING AND HOME FINANCE AGENCY,
OFFICE OF THE ADMINISTRATOR,
Washington, D. C., May 15, 1951.

Re S. 1397, Eighty-second Congress.

Hon. BURNET R. MAYBANK,

Chairman, Committee on Banking and

Currency, United States Senate, Washington, D. C.

DEAR SENATOR MAYBANK: This letter is with reference to your announcement that the Committee on Banking and Currency is prepared to hear all the Government officials who will be charged with the administration of the Defense Production Act of 1950 as it would be amended by S. 1397, which you introduced at the request of the executive branch. As you know, there are a number of basic provisions of the bill (particularly those affecting rent stabilization and the production or use of building materials) which would have important effects on housing in general and on the operations of this Agency. We strongly recommend the enactment of those provisions. Adequate rent control must necessarily be an important part of an effective economic stabilization program for the country. It is of vital importance in all areas of housing shortage, especially where military personnel or civilian workers required for carrying out national defense activities must be brought in from other localities.

There is one section of the bill, section 106, relating to the control of credit, which would directly affect the day-to-day operations of this Agency and concerning which this Agency is in a position to assist your committee in its consideration of S. 1397. Paragraph (a) of that section would authorize the regulation of non-Government-aided real estate credit without the limitation to "new construction" now contained in the law. Under Executive Order 10161, regulation of non-Government-aided real estate credit is the responsibility of the Board of Governors of the Federal Reserve System. Accordingly detailed information concerning the need for the proposed additional authority in the light of the Board's recent experience in the control of conventional credit is no doubt being made available to you by the Board. However, in view of the importance of achieving a maximum degree of consistency in the control of all real-estate credit, and in view of the close working relationship between the Housing and Home Finance Agency and the Federal Reserve Board in the field of residential credit controls, we would like to comment on this provision of the bill very briefly, and to indicate why we fully concur in the recommendations which the Board has made to your committee.

The basic objective of residential credit controls is, of course, twofold. By cutting down the total volume of new construction and by channeling such construction so that it fills essential defense housing needs, the controls effect important savings in critical materials, labor, and facilities which are needed for defense purposes. The second and equally important purpose of these credit controls is the elimination of inflationary pressures in the housing market which threaten to force the prices of shelter beyond the reach of most consumers and also add a dangerous support to the general inflationary pressures which jeopardize the stability of the economy as a whole. It is in connection with this purpose that it is necessary to provide authority for the control of credit on existing homes. The absence of such authority leaves a serious gap in our defense against inflation. It is obvious that in a period when housing demand exceeds supply, our efforts to reduce demand in the "new housing" market through credit controls tend to shift the excessive demand into the uncontrolled existing house market. This can only lead to greater inflation in the prices of existing homes. This sit

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