APPENDIX

STATEMENT OF HON. JOHN A. BLATNIK OF MINNESOTA

Mr. Chairman and members of the House Banking and Currency Committee, I appreciate having this opportunity to testify with respect to the Defense Production Act of 1950 (H. R. 9176) which provides for the allocation of scarce commodities under a priority system, defense loans, credit controls, and other policies relating to national defense.

I will not spend the short time at my disposal in discussing all aspects of this bill, since other witnesses have already covered most of the points. Instead, I will confine my remarks to title III of H. R. 9176, which covers the Government's loan guaranties. Title III embraces four major provisions:

(1) It guarantees essential defense loans against loss of either principal or interest, regardless of whether such loans are made to private or public financing institutions;

(2) It authorizes direct Government loans to private enterprise for production of essential materials, the expansion of facilities for such production, and the development of technological processes in connection with such production;

(3) Loans authorized under title III would be made by either existing Federal agencies, including the RFC, or new lending corporations created by the President. The proposed new corporations will not operate beyond June 1952, and their lending resources would amount to $2,000,000,000; and

(4) The President would be authorized to buy for Government use, storage, or resale, any minerals, metals, or raw materials needed to increase the supply of essential supplies.

IRON AND STEEL SUPPLIES MUST BE EXPANDED

The most important strategic mineral in the United States is iron ore-we live in an iron age, and steel is basic to all heavy industry, whether this industry is used in war or peace. Hence, the problem of guaranteeing an adequate supply of iron and steel is a matter of top priority.

Mr. Chairman, my congressional district includes the Mesabi Iron Range, which produces three-fourths of all the iron ore in America, and I am very familiar with the entire iron and steel picture. And I say with all the force at my command that the iron and steel situation is serious and a question of real concern. The following facts and figures will demonstrate the seriousness of the iron ore situation: (1) At the present time we are using our iron ore at the rate of 80 million tons a year. In 1948, for example, 84.7 million tons of iron ore was used in the United States. In times of national emergency we need at least 100 million tons a year; (2) The Great Lakes area has furnished over 85 percent of our iron-ore needs for the last 50 years, and the Mesabi Iron Range has provided about 75 percent of all iron ore. The Mesabi Range provided 62 million tons of iron ore in 1948 out

of total ore production of 84.7 million tons;

(3) The high-grade iron ore of the Mesabi Range is fast being depleted. According to official estimates made in 1946, there was only 1.2 billion tons of iron ore left in the Great Lakes area, and only 900 million tons of iron ore left on the Mesabi Range;

(4) According to the United States Bureau of Mines, Great Lakes iron ore reserves will be exhausted by 1960 if such ore is used at the present rate of consumption. Even if we figure a 33-percent overrun, existing reserves will last only until 1965. If America should become involved in a war and require an all-out production effort for a number of years, our iron ore reserves will naturally be exhausted at a faster rate.

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TACONITE DEVELOPMENT NECESSARY

The growing depletion of our high-grade ores of Mesabi creates a seriou situation, and it would be a gloomy picture indeed if it wasn't for the fact tha northern Minnesota is covered with a dense siliceous rock known as taconite. It i estimated by the Bureau of Mines that there is enough taconite in northerr Minnesota to supply our iron needs for a thousand years if its development can be made commercially feasible.

Taconite ore was first made into a commercial product back in 1922, but at that time it could not compete with high-grade ore taken by open-pit mining. Since that time refinements and changes have been made in the method of beneficiating taconite and experiments show that it can be produced today at a price approximating that of other types of iron ores.

Taconite is a hard rock composed of about 25 to 30 percent pure iron. Its processing involves blasting it loose, crushing it into a fine powder, washing out the silicate and pelletizing it. These pellets contain about 60 percent pure iron. These pellets can then be utilized by blast furnaces in the same way regular iron ore is processed.

The production of taconite differs from regular open-pit mining in that it is an industrial process rather than strictly mining. It involves six times as much manpower and a great deal more machinery for blasting, crushing, washing, and pelletizing. In terms of investment, taconite production requires a heavier capital expenditure. Open-pit mining requires a capital expenditure of $3 to $5 per ton of output, i. e., to produce a million tons of open-pit ore a year requires an investment of $3,000,000 to $5,000,000. But to produce a ton of taconite requires a capital investment of $20 per ton. To promote its production requires that the Federal Government provide liberal long-term loans to mining companies.

With this in view, I introduced on May 15 a bill (H. R. 8512) which calls for granting 30-year loans to private firms to develop taconite and other strategic minerals in the interests of national security and the strengthening of the national economy. This bill fits into the over-all pattern of national defense and it should be included as an amendment to the National Defense Act of 1950.

I recommend the acceptance of the language of H. R. 8512 as an amendment to H. R. 9176 because I find the latter deficient in the following respects:

(1) H. R. 9176 is a temporary and emergency proposal while taconite development is a long-range proposition, and regardless of the outcome of current international developments, it will be necessary to proceed with the development of taconite on a long-term basis;

(2) H. R. 9176 does not specifically define what minerals are considered "strategic," and I maintain that the various strategic minerals, including taconite, must be specifically set forth as minerals requiring development and increased production;

(3) In view of the long-term nature of taconite development, loans of 30 years maturity are required. H. R. 9176 does not spell out the terms of loans, and there is no guaranty that the terms of loans granted under its provisions will be for 30 years; and

(4) New transportation facilities are required for the full utilization of taconite in Minnesota, and it is important that H. R. 9176 be amended to permit loans to be granted for construction of new transportation facilities required in the production of taconite.

In conclusion, Mr. Chairman, the passage of H. R. 9176 in its present form will not guarantee the development of taconite as a source of additional iron and steel. Yet the development of taconite to supplement our iron and steel reserves is today a matter of first magnitude. Our industrial strength, our national security, require that taconite production begin without further delay. For this reason I urge the committee to write the language of H. R. 8512 into the Defense Pro-· duction Act of 1950. Provisions which define taconite as a strategic mineral of first importance, and authorization of loans of 30 years maturity for taconite development must be included in H. R. 9176, to guarantee that this measure will do the job for which it is intended to provide new sources of iron and steel for this Nation.

EXTENSION OF REMARKS OF HON. JOHN B. BENNETT, REPRESENTATIVE, Twelfth DISTRICT, MICHIGAN

Mr. Chairman, I represent the Twelfth Michigan District which comprises the western half of the northern Peninsula of Michigan, and which contains the iron-ore mines of the so-called Lake Superior district.

For many years our district has produced a very important part of the total steel production of the United States. That area played a very vital part in steel production during World War II.

In addition to the so-called high-grade iron ores in northern Michigan there are milions of tons of low-grade taconite ores which so far have never been touched. It is estimated by the Bureau of Mines that there are approximately 2,000,000,000 tons of such ores in northern Michigan, out of which approximately 800,000,000 tons of iron concentrates could be obtained.

Most of the steel companies have spent considerable sums of money in research connection with the development of these low-grade ores, but thus far actual production has never been undertaken. It involves large capital outlays which Fould take many years to liquidate.

I have introduced H. R. 9202 to provide long term RFC loans for the development, production, and utilization of these ores. In view of the world situation today it is desperately important that we utilize the large sources of supply of these very critical ores.

I hope the committee will favorably consider my bill as an amendment to the emergency legislation which is now before it.

STATEMENT OF H. S. TAYLOR, PRESIDENT, OGLEBAY, NORTON & Co., CLEVELAND,

OHIO

My name is Harrie S. Taylor, president of Oglebay, Norton & Co. of Cleveland, Ohio, which company has been engaged for over 96 years in the iron-ore industry. About 1 year ago I had the privilege of appearing before Senator Fulbright's subcommittee of the Senate Banking and Currency Committee on Senate bill 2344. At that time, when our country was in a theoretical peacetime economy, I endeavored to show the need for the development of the low-grade iron ores of the Lake Superior district commonly referred to as taconites in Minnesota and as iron-ore formation or jaspers in Wisconsin and Michigan.

In that statement I pointed out:

(a) The great strength of this country was made possible through the use of the wonderful iron-ore deposits in the Lake Superior district and that the expanding economy of this country, together with the impact of two world wars, had brought about a rapid depletion of these iron-ore deposits;

(b) The necessity of developing the taconites to replace the high-grade direct shipping ores, especially the open pit ores from the Lake Superior district;

(c) To make the taconite ore suitable for blast furnace and other furnace use, it is necessary to beneficiate about 3 tons of crude taconite to make 1 ton of high-grade iron ore analyzing approximately 641⁄2 percent iron, dried; (d) To beneficiate the taconites requires a large capital investment for plant facilities, namely, from $15 to $20 of capital for each annual ton of output or $15,000,000 to $20,000,000 for each million tons of annual output; whereas, the capital requirement for an open-pit mine for direct shipping ore is only about $3 to $5 per annual ton of output or $3,000,000 to $5,000,000 for 1,000,000 tons of ore.

In that statement, I was thinking of the need of developing the taconites primarily for a peacetime economy and based my calculations as to the tonnage of taconites that should be developed on an average production of iron ore of 78,000,000 gross tons a year, but I pointed out that the development of the taconites would be necessary to aid the iron-ore supply in times of an emergency.

Little did I realize that within the short span of 1 year this country would be confronted with that emergency and, so, instead of an average annual production of 78,000,000 gross tons of ore, the requirements of iron ore from the Lake Superior district to meet the military and domestic needs for steel could easily be in excess of 85,000,000 gross tons.

This increase in the production of iron ore will more rapidly deplete the open-pit direct shipping ores and, so, instead of the present need to build plants for the production of 5,000,000 tons of iron ore annually from the taconites, it is very possible that plans should be made for facilities to produce from 10,000,000 to 15,000,000 tons annually.

In order to produce 15,000,000 tons of taconite, plant facilities costing not less than $300,000,000 would have to be constructed. This is a very large amount of money for the producers of iron ore to obtain in a short period of time.

The beneficiation of taconites has been studied for many years and already millions of dollars have been expended by companies interested in taconites in experimentation, pilot plants, and the acquisition of lands, water rights, and

other essential rights necessary in this work. Tests indicate that the use of iron ore produced from taconites by reason of the high iron content, increases the capacity of a blast furnace; thus the use of beneficiated iron ore would enable the blast furnaces to produce more pig iron without expansion in blast furnace facilities. Furthermore, the richer beneficiated iron ore produced from taconite would be very helpful for mixing with or sweetening, so to speak, those direct shipping ores which have an iron content of less than 50 percent of iron natural. Consequently, it appears essential that Congress should encourage the construction of plants to beneficiate taconites in order not only to replace the shortage, but also to improve the quality of the direct shipping iron ores.

The Congress of the United States could be very helpful in encouraging the construction of plants to beneficiate taconite by adding to section 302 of House bill 9176, now under consideration, the wording of either House bill 8512 or House bill 9202 so there would be specific authority to make loans for the construction of facilities to beneficiate taconites or iron formation. If Congress, on the other hand, in its good judgment, does not consider it advisable to amend section 302 as above proposed, I then urge that at least the report of this committee should contain a directive with respect to section 302. Such directive could indicate that one of the purposes of the enactment of section 302 was to make loans for the development and production of iron ore from taconites or iron formation. Such loans should cover a very large percentage of the cost of the facilities and be for a long term with a provision for repayment on a unit of production basis, that is, on each ton of iron ore produced from the beneficiating plants, a fixed amount would be paid to apply on interest and amortization of the loan. I do not know whether any producer of ore will be required to take advantage of a right so granted, but it would be unfortunate, indeed, if in times of emergency such as this when it is urgent that we go forward with the building of plants to beneficiate the taconites that a producer of ore would be unable to do so by reason of being unable to obtain the necessary money from either private sources or the Federal Government.

STATEMENT BY SYD J. HUGHES, VICE PRESIDENT, INDUSTRIAL BANK OF COMMERCE, NEW YORK CITY

Recommendation on the part of the administration for the restoration of consumer-credit controls is not essentially a product of the war emergency.

Since the cessation of hostilities of World War II, the President has consistently sought from the Congress the authority for such intimate and far-reaching domination over the purely personal customs and habits of every individual and of every family in the Nation.

Consumer credit regulation, conceived in the early stages of World War II and imposed upon the public by Executive decree under a concededly dubious interpretation of the Trading With the Enemy Act of 1917, has since been described by its peacetime proponents as antideflationary or antiinflationary in character, whichever objective was in currency.

In war it is supposed to contribute toward the conservation of essential materials and to remove obstacles from the channels of production and distribution. In peace it is supposed to have some profound influence upon the leveling of the peaks and valleys of the Nation's economic cycles, as well as constituting a blend of moral and economic discipline as concocted by the philosophy or whims of its administrators.

In fact, as an instrument of total war, regulation of consumer credit contributes absolutely nothing to the necessary regimentation of an economy already firmly gripped by allocations, priorities, and rationing.

It is a cumbersomely superfluous restriction or prohibition upon the acquisition by the public of manufactured articles that are not being manufactured, or are subject to the strict limitations of priorities and rationing.

In peacetime such regulation is an unwarranted and discriminatory invasion and abridgment of individual's rights. It is at most, only a spoke in the cycle of national economics and not a force of propulsion.

The course and volume of consumer credit is charted by the indices of the national product, the national income, and personal income. It may have some barometric significance in the gyrations of inflationary and deflationary factors, but it is not in itself an important pressure upon or a potent motivation of these gyrations.

To cochend in time of total war that credit restrictions upon a nonexistent produen is logical, or that in time of peace and prosperity such credit be conserved for the inevitable days of siverstiy, is an indulgence in pure fantasy.

Even if the pubor to time of peace, but in its hour of economie siversity were to seek out the channels of credit as a panacea, which by practical experience it does not do, what of the reador of credit who butbely acquiesces?

He is quickly out of business or, if a quasi-publje institution such as a bank, he is under DEW Asrement

Now, in tenter the buck of wotal war nor the white of total pesce but in the fuzzy area of military praness, we can have the subject shoved to the forefront as a specife for our national and intemational allments.

Thus i proponents defend the potency of consumer-credit control as an instrumentality of great consegneare in total war, in total peace, in deflation, in inflation, in partial war, and in partial peace.

In short, it is control for the sake of contro—and, whatever national or international condition or situation appears conducive to the attainment of this end, they are utilized with great declamatory vigor.

Those who point to the feehueness of sich control as a war-victory measure and its warranted intervention as a peacetime abomination of the police state expose themselves to the risk of being branded as enemies of the common good. It is not paradoreal that some large financial and banking organizations advocate such controls in or out of war. Such advocacy is another manifestation of that peeniiar hybrid evolution of some business and industrial leaders who proclaim for Government contry, when, it appears to be their competitive business advantage and conversely denounce "Government interference.

As this Nation eonfronts the awful possibility of total war and the ghastly ravages of inflation, it is fecing at the target with a tack hammer when it toys with such controls instead of wielding the sledge hammer blows of wage and price control, priorities and rationing and greater productivity.

By means of its specific and far-reaching powers to regulate bank-reserve requirements and marginal trading, the Government has an effective instrument for the curtailment of credit in a quantitative sense.

If by its own excesses in credit ventures, such as domestic construction, the Government Low finds it advisable to retreat to a more conservative policy, such a retreat was long overdue without the provocation of national emergency.

But such governmental excesses are no criteria by which to measure the credit responsibility of non-Government agencies.

H. R. 9176. the House bill for the reimposition of Government controls over consumer credit. following on the heels of the Government's overdue selfrestraints, would appear to be a handy device for further confusing public thinking on the whole subject of autocratic government controls.

At the State levels there have long been laws and regulations governing consumer credit both as it applies to the supervision of the vendor and the protection of the consumer.

Interjection of the Federal Government into what is essentially a State and local domain, only contributes to the expansion of an ever-expanding bureaueracy. And in this instance a dead hand of bureaucracy, without the redeeming justification of benevolence, protection, or incentive.

Through the Government's right of levy upon the individual income it already determines what proportion of an earned dollar the individual or the family head can retain for his own disposal.

Through further control of individual and family credits, Government drives the entering wedge of dictating how and for what the public's remaining dollars may be expended.

A high Government official has been known to take the position that, by "sopping up" through credit control any excess funds the individual or family may have available, such excess funds could then be diverted into Government bonds or additional taxes. This was a peacetime utterance. It is symptomatic of that type of power intoxication which assumes the people exist for the Government and not the Government for the people.

If this is the true purpose of such regulatory and restrictive authority, then let the public be so informed without obscuring the purpose in the name of "emergency.

As an inflationary deterrent, such controls only impose harsher conditions upon the individual or the family budgeting their disposable income to the distinct advantage of those in a strong cash or liquid position.

Are we again to enlarge upon the premise that he who has gets"?