The foregoing amendments to the Budget for the fiscal year 1947 are required to meet contingencies which have arisen since transmission of the Budget for said fiscal year. I recommend that they be transmitted to the Congress. Very respectfully yours,

HAROLD D. SMITH, Director of the Bureau of the Budget.

Mr. CHURCH. There is one question that I asked that you did not answer. We are unable in the Congress to amend these three plans, I believe. They must be accepted as prepared, or rejected.

Mr. WASHINGTON. You could of course offer legislation which would cover the subject matter.

Mr. CHURCH. We can always offer legislation. We also understand the President can always, irrespective of Public Law 263, send us up suggestions for legislation. I also understand any Member can suggest legislation. We are discussing now the Law 263 and these three plans. Is it your opinion that the Congress can amend the three plans that have been submitted?

Mr. WASHINGTON. No, I believe not.

Mr. CHURCH. Then there is no need of our looking to anybody in the office of the Attorney General. Should we find one person over there who was intending throughout these conferences that section 2c should be lived up to, look to him for advice in the consideration of these plans before us now, if we are to adopt them or reject them, because that man's advice should go to the President in submitting another plan later, is that not right?

Mr. WASHINGTON. I think that the President should have before him that statement in the legislation.

Mr. CHURCH. Then our hope then seems to be to pass these three resolutions in order to bring about, if we do insist on section 2c being lived up to; that is all Mr. Chairman.

The CHAIRMAN. Are there any further questions?

Mr. JUDD. In section 507, the following agencies are abolished: Three and four are the Board of Trustees of the Federal Savings and Loan Insurance Corporation, and the Board of Directors of the Home Owners' Loan Corporation. Now when the Board of Trustees or the Board of Directors of those two agencies respectively are abolished, that does not mean that the corporation is abolished in either case, does it?

Mr. WASHINGTON. I would have to consider that further. I should imagine that the corporate form would continue as long as the Congress had established its term.

Mr. JUDD. In section 505 it says:

the following functions shall be administered by the Federal Home Loan Bank Administration,

and down there in two and three it mentions those functions, you see, which are abolished: the functions presently possessed by the agencies abolished in section 507. That is right, is it not?

Mr. WASHINGTON. Of course, section 505 speaks in terms of functions and duties. My understanding is that since the adoption of Executive Order 9070, the functions of the Board of Trustees in the one case and the Board of Directors in the other have gone to officers designated in the Executive Order. In other words, this would not change that arrangement.

Mr. JUDD. What functions does the Home Owners' Loan Corporation have as a separate corporation if its Board of Directors is gone?

When you say the functions of the Board of Directors are transferred to this Federal Home Loan Bank Administration, are not the functions of the Corporation transferred to that Administration, also?

Mr. WASHINGTON. That is a form which is frequently used. Very often it is employed for statutory reasons. In other words, the statute itself may speak of the functions of the Board of Directors. When it does that, those functions are the ones which should be transferred.

Mr. JUDD. What it means in effect then you have transferred those two corporations to the Home Loan Administration, is that not right? Mr. WASHINGTON. That is the effect, I believe

Mr. JUDD. Is the purpose of that to evade section 304 of the act which was passed last year, the Government Corporation Control Act which says: "No corporation shall be created, organized, or acquired, hereafter, by any officer of agent of the Federal Government or by any Government corporation for the purpose of acting as an agency or instrumentality of the United States except by act of Congress or pursuant to an act of Congress specifically authorizing such action"? That is the Federal Home Loan Bank Administration is acquiring, under this reorganization plan-actually it is acquiring a Government corporation and in that case two Government corporations when it acquires the functions of the Board of Directors or the Board of Trustees. It acquires not only the functions but its assets as well, does it not?

Mr. WASHINGTON. I would read the Government Corporations Act as being aimed, in the section you have read, at the possibility of a Government agency acquiring a corporation for the purpose of using that corporation to evade or conceal. It seems to me that the provision you have read forbids conduct which is in a way the opposite of what is being done here. What is being done here is to transfer the functions of the Board of Birectors to an executive officer who operates in full view of Congress, and under direct control of superior officers, including the President. It seems to me that what the reorganization plan contemplates is conduct fully compatible with the spirit of the Corporation Act to which you refer.

Mr. JUDD. You do not believe it meant what it said when it said:

No corporation shall be created, organized, or acquired hereafter by any officer or agent of the Federal Government or by any Government corporation for the purpose of acting as an agency or instrumentality of the United States except by act of Congress.

Do you think it really did not mean that?

Mr. WASHINGTON. I think that is aimed at a Government agency going out to acquire a charter, let us say, under the law of Delaware, so as to create a new arm for activities which Congress has not directly authorized. I think that is the purpose of that act.

Mr. JUDD. You do not think, for example, that this section 304 is violated by this act?

Mr. WASHINGTON. No. This plan refers to a governmental corporation which Congress itself created long ago, which Congress knows all about, and the functions of the Board of Directors of which are now being transferred to an executive officer who will be fully and directly responsible.

Mr. JUDD. Would there be any objection to just saying outright that the Home Owners' Loan Corporation is abolished, and the Federal Savings and Loan Insurance Corporation is abolished and their func

tions are transferred to the Federal Home Loan Bank Administration, instead of this subterfuge of saying that their Board of Directors or Trustees are abolished and of maintaining the picture that the Corporation is still there?

Mr. WASHINGTON. As I understand it, these Corporations have heavy obligations in the form of contracts.

Mr. JUDD.. They have legal commitments under that name?

Mr. WASHINGTON. It would create great confusion, I think, if the name were abolished.

Mr. JUDD. You keep the building, you move out all the present occupants and move in other occupants, but the name is the same over the door.

Mr. WASHINGTON. The obligation of the United States remains. In many instances, there is a pledge on bonds and other obligations, and no one intends to disturb those obligations. I think that that purpose is well served here by indicating that the functions of those corporations, or rather the functions of their Boards of Directors, shall now be performed by the proposed National Housing Agency. But the corporate entity is there for the protection of the public.

Mr. JUDD. However, in effect, it does abolish as far as these operations are concerned, those two corporations and transfers their functions to this Federal Home Loan Bank Administration; you will agree with that?

Mr. WASHINGTON. I think there may be further information on that, in the Bureau of the Budget.

I understand from the Bureau of the Budget that this plan would transfer the control of the Corporation, and that it may be in the future that the corporate form would continue to be used.

Mr. JUDD. That is my point. In effect the transfer has been made of the control, and that means it abolishes the Corporation as is today and transfers the functions operated by the Corporation to this Home Loan Bank Administration, is that not right?

Mr. WASHINGTON. Congress has established those corporations with certain powers and functions, and those functions are to be continued so as to carry out the intent of Congress.

Mr. JUDD. Congress determined the way in which the Board of Directors or Board of Trustees is to be chosen and of what men or types of men it is to be constituted. By this act, we put those functions in the hands of men chosen in quite a different way.

Mr. WASHINGTON. That is, of course, a characteristic of any reorganization of the Government. It is essential in a reorganization that there be shifts of authority, and the plan must explain those shifts for the consideration of the Congress.

Mr. JUDD. I will yield.

The CHAIRMAN. Do you have any questions, Mr. Latham?

Mr. LATHAM. As to the particular section, in your discussion with respect to drafting this message, I assume you had something to do with it. Who was it that suggested the changes that are affected by section 505? Who was the individual?

Mr. WASHINGTON. I would not be able to answer that. When I first saw this particular plan it was practically in final form.

Mr. LATHAM. You have no knowledge of who proposed or pushed these particular transfers of authority?

Mr. WASHINGTON. No, sir.

Mr. LATHAM. Do you know the reasons advanced for these changes of authority?

Mr. WASHINGTON. The main reason for the plan, as I understand it, is to enable the organization of housing work in the Government to continue on a consolidated basis. I believe it was felt desirable to have these constituent units placed under one executive head and one superior agency.

Mr. LATHAM. Has the Federal Housing Authority in times past been controlled by a Federal Home Loan Bank Administration completely; is that in effect now?

Mr. WASHINGTON. I do not know.

Mr. LATHAM. If this proposes to transfer the functions of the Board of Directors to the Federal Home Loan Bank Administration, that has not been done yet, has it?

Mr. WASHINGTON. I would have to refresh my recollection as to the provisions of Executive Order 9070.

The CHAIRMAN..Are there any further questions?

Mr. BENDER. I would like to ask one question more: Does not section 3 in plan 2 violate subsection 6a of section 5 of the Reorganization Act of 1945? Section 3 of plan 2-does not that section violate subsection 6a of section 5 of the Reorganization Act insofar as the United States Employees' Compensation Commission is required by law to be a three-member, bipartisan board? It transfers its functions to a single administrator, to the head of the Federal Security Agency, and it constitutes a greater limitation on the exercise of independent judgment than is authorized under law, since it would not represent a bipartisan board.

Mr. WASHINGTON. In my opinion, that provision of Reorganization Plan No. 2 is entirely legal, and within the purposes of the Reorganization Act of 1945. It appeared to us that to the extent that the Compensation Commission exercised quasi-judicial functions, those functions would continue to be performed under the proposal with the same degree of independence as before.

The CHAIRMAN. How would they be bipartisan, if covered by one man?

Mr. WASHINGTON. In our view, the provisions of section 5 (a) 6 were intended to see to it that the same degree of independent judgment should continue to be exercised.

The CHAIRMAN. Independent judgment and bipartisan judgment could not be the same.

Mr. WASHINGTON. We concluded after study of the Reorganization Act and the statutes establishing the Compensation Commission, that the fact that it was bipartisan did not constitute such an essential element in its make-up as would require us to advise the Bureau of the Budget that a bipartisan board should be set up under section 3 of the plan. In our view it must be presumed that any Commission or Appeal Board of the United States will be conducted with integrity. We cannot presume the contrary. Here, it did not seem to us that the element of bipartisan appointment was a vital element in the application of section 5 (a) 6.

The Federal Security Agency, including the Appeal Board to be created therein, may exercise independent judgment and discretion in carrying out the quasi-judicial or quasi-legislative functions transferred from the United States Employees' Compensation Commission

with no greater limitations than apply with respect to the exercise of these functions by the United States Employees' Compensation Commission. Section 3 of the plan fully complies with the provisions of Section 5 (a) (6) of the Reorganization Act of 1945. The new Appeal Board to be created under section 3 will have in our view complete independence of decision. You will note that section 3 states that the Board shall have authority to hear, and subject to applicable law, make final decision on appeals.

The CHAIRMAN. What would you do, would you appeal from yourself to yourself? If you rendered the dicision, who would you appeal to?

Mr. WASHINGTON. I am advised that that is in effect the situation today in the Compensation Commission. The Commission itself renders an initial judgment which is also a final judgment, subject always to appeals to the courts. Here, by the provision, "subject to applicable law," we have indicated that there is the same right of judicial review as was found previously.

Mr. JUDD. If you belonged to a minority party and you came up for a decision by one of these agencies, would you not rather have one member of your party sitting on that board? You do not belong to a minority party, but if you did belong to a minority party would that not be the case? If there are irregularities, and should a member of the minority party there, he can expose them. If there are no such members, and it is under the party plan, if you did not belong to the party in power, you might not get compensation, and would there not be an indication that you should join the party in order to get compensation? I would not say there wouldn't be, but there could be. Mr. WASHINGTON. We have considered that the Appeal Board under section 3 would act with integrity.

Mr. JUDD. You cannot assume that anywhere in the Government, but it is possible that that could happen, is it not? I mean it is conceivable that somebody might sometime be appointed-say if we came in power-that would use his power to try and influence people to join the Republicans, or contribute to your campaign?

Mr. WASHINGTON. I should not like to

Mr. JUDD (interposing). But it is possible, is it not, that pressure could be used upon people to support a political program in order to get a just claim, or what they regard as a just claim?

Mr. BENDER. It has been done.

Mr. JUDD. I just wonder if it can be possible hereafter.

I want to ask you another question. If you will look on page 10, section 504, paragraph a3 of the Reorganization Plan No. 1, you will find the following language:

The Federal Public Housing Authority, which shall be succeed to the corporate status of the United States Housing Authority.

Does that make the Federal Public Housing Authority a corporation if it succeeds to the corporate status?

Mr. WASHINGTON. The term "authority" has no fixed meaning in our law. Many "authorities" are considered for most purposes as being corporate in their status. We simply intended here to transfer the existing corporate status.

Mr. JUDD. What I am asking is a flat question, Does that make the Federal Public Housing Authority a corporation? It says it shall