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Calendar No. 27
79TH CONGRESS )

1st Session

SENATE

j

(
1

EEPORT

No. 30

ADMINISTRATION OF GOVERNMENT LENDING
AGENCIES

JANUARY 31, 1945.—Ordered to'be printed

Mr. BAILEY, from the Committee on Commerce, submitted the
following

REPORT
[To accompany S. 375]
The Committee on Commerce, to whom was referred the bill (S. 375)
to provide for the effective administration of cerfcaiji lending agencies
of the Federal Government, having considered the same, report favorably thereon with an amendment in the nature of a substitute and
recommends that the bill as amended do pass.
The amendment in the nature of a substitute reported by your committee is as follows:
That the Federal Loan Agency, created by section 402 of the President's Reorganization Plan Numbered I under authority of the Reorganization Act of 1939, shall
continue as an independent establishment of the Federal Government and shall
continue to be administered under the direction and supervision of the Federal
Loan Administrator in the same manner and to the same extent as if Executive
Order 9071, dated February 24, 1942, transferring the functions of the Federal
Loan Agency to the Department of Commerce, had not been issued.
SEC. 2. All powers, functions, and duties of the Department of Commerce and
of the Secretary of Commerce which relate to the Federal Loan Agency are
hereby transferred to the Federal Loan Agency to be administered under the
direction and supervision of the Federal Loan Administrator.
SEC. 3. The unexpended balance of the funds made available to the Secretary
of Commerce by Public Law 365, Seventy-eighth Congress, approved June 28/
1944, for administrative expenses of supervising loan agencies, shall be transferred to the Federal Loan Agency to be used for the administrative expenses of
that Agency.
SEC. 4. No functions, powers or duties shall be transferred from the Federal
Loan Agency under the provisions of title I of the First War Powers Act, 1941^
or any other law unless the Congress shall otherwise by law provide.
PURPOSE OF THE BILL

Briefly, the purpose of this bill is to restore to the Federal Loan
Agency, an independent agency in the executive branch of the Government, the powers, functions, and duties which were temporarily
transferred from that Agency to the Department of Commerce by




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ADMINISTRATION OF GOVERNMENT LENDING AGENCIES

Executive order of the President under the First War Powers Act,
1941. If enacted it will group under an existing agency lending
agencies established from time to time for the purpose of rendering
assistance to and stabilizing the financial, commercial, and industrial
enterprises of the country.
The language of the bill as introduced suggests, by the use of the
word "reestablish," that a new office is being created. Such a construction would not be in harmony with the existing legal status of the
Federal Loan Agency and your committee has therefore reported the
substitute which makes clear that the purpose of the bill is merely to
revive (or perhaps it might better be expressed as "acceleration of the
revival of") an existing agency and to retransfer to it functions, powers,
and duties which had been temporarily taken from it by the Executive
order referred to above.
STATEMENT

The Federal Loan Agency was created by section 402 of the President's Reorganization Plan No. I, submitted to the Congress on April
25, 1939, pursuant to the Reorganization Act of 1939, approved April
3, 1939. Section 402 of that plan reads as follows:
SEC. 402. (a) Federal Loan Agency.—There shall be at the seat of the Government a Federal Loan Agency, with a Federal Loan Administrator at the head
thereof. The Federal Loan Administrator shall be appointed by the President
by and with the advice and consent of the Senate and shall receive a salary at the
rate of $12,000 per annum.
(b) Assistant Federal Loan Administrator.—The Federal Loan Administrator
shall appoint an Assistant Federal Loan Administrator, who shall receive a salary
at the rate of $9,000 per annum. The Assistant Administrator shall act as
Administrator during the absence or disability of the Administrator, or in the
event of a vacancy in that office, and shall perform such other duties as the Administrator shall direct.
(c) Powers and duties of Administrator.—The Administrator shall supervise the
administration, and shall be responsible for the coordination of the functions and
activities, of the following agencies: Reconstruction Finance Corporation, Electric Home and Farm Authority, RFC Mortgage Company, Disaster Loan Corporation, Federal National Mortgage Association, Federal Home Loan Bank
Board, Home Owners' Loan Corporation, Federal Savings and Loan Insurance
Corporation, Federal Housing Administration, and Export-Import Bank of
Washington. The Administrator may appoint such officers and employees and
make such expenditures as may be necessary.
(d) Administrative funds.—The Director of the Bureau of the Budget shall
allocate to the Federal Loan Agency, from appropriations, allocations, or other
funds available (including those available for the fiscal year ending June 30, 1940)
for the administrative expenses of the agencies named in this section, such sums,
and in such proportion, as he may find necessary for the administrative expenses
of the Federal Loan Agency.

Under the Reorganization Act of 1939, plans submitted pursuant
thereto were to take effect upon the expiration of 60 calendar days
after the date on which the plan was transmitted to the Congress but
only if during such 60-day period the two Houses had not passed a
concurrent* resolution stating in substance that the Congress did not
favor the plan. Thus the Federal Loan Agency would have been a
statutory agency had the plan taken effect in due course under the
procedure set forth in the Reorganization Act of 1939. However, on
June 7, 1939, the President approved Public Resolution No. 20,
Seventy-sixth Congress, which provided that Plan No. I should take
effect on July 1, 1939 (along with Reorganization Plan No. II, submitted to the Congress on May 9, 1939), notwithstanding the pro


ADMINISTRATION OF GOVERNMENT LENDING AGENCIES

3

visions of the Keorganization Act of 1939. The Agency can therefore be said to be in all respects a statutory agency.
On February 24, 1942, pursuant to the provisions of the First War
Powers Act, 1941, which authorized the President to redistribute functions among executive agencies in matters relating to the conduct of
the war, the President issued two Executive orders affecting the Federal Loan Agency. Executive Order No. 9070 transferred to the National Housing Agency certain functions, powers, and duties of the
Federal Loan Administrator with respect to agencies, functions,
powers, and duties transferred under the order to the National Housing Agency. These had to do particularly with matters affecting
housing and home financing. Executive Order No. 9071, which concerns particularly the subject matter of this bill, transferred certain
functions of the Federal Loan Agency to the Department of Commerce. The pertinent part of that Executive order is the first section,
which reads as follows:
SEC. 1. Transfer of functions.—All functions, powers, and duties of the Federal
Loan Agency and of the Federal Loan Administrator which relate to the Reconstruction Finance Corporation, Electric Home and Farm Authority, RFC Mortgage Company, Federal National Mortgage Association, Disaster Loan Corporation, Export-Import Bank of Washington, Defense Plant Corporation, Rubber
Reserve Company, Metals Reserve Company, Defense Supplies Corporation,
and War Insurance Corporation, together with all other functions, powers, and
duties not transferred by the Executive order establishing the National Housing
Agency, are transferred to the Department of Commerce and shall be administered under the direction and supervision of the Secretary of Commerce.

It will be noted that any action taken by the President pursuant to
the First War Powers Act, 1941, is of a temporary character. Section
5 of that act provides as follows:
Upon the termination of this title all executive or administrative agencies,
governmental corporations, departments, commissions, bureaus, offices, or officers
shall exercise the same functions, duties, and powers as heretofore or as hereafter
by law may be provided, any authorization of the President under this title to
the contrary notwithstanding.

Section 401 of the act provides:
Titles I and II of this Act shall remain in force during the continuance of the
present war and for six months after the termination of the war, or until such
earlier time as the Congress by concurrent resolution or the President may
designate.

Accordingly, even in the absence of further legislation by the
Congress the functions, powers, and duties transferred to the Department of Commerce under Executive Order No. 9071 would, upon the
termination of title I of the First War Powers Act, 1941, be restored
to the Federal Loan Agency. The effect of the bill, therefore, is
only to hasten that restoration. The reasons for such action appear
to the committee to be substantial and convincing.
In his message transmitting Reorganization Plan No. I to the
Congress the President stated:
I find it necessary and desirable to group under a Federal loan agency those independent lending agencies of the Government which have been established from
time to time for the purpose of stimulating and stabilizing the financial, commercial, and industrial enterprises of the Nation.

With that statement the committee is wholly in accord. It was
necessary and desirable then; it is necessary and desirable now. The
committee is not advised of any sound policy of administration which




4

ADMINISTRATION OF GOVERNMENT LENDING AGENCIES

would have justified the transfer of these agencies to the Department
of Commerce, or in fact to any executive department.
Senators need only refer to the powers and authority of the Reconstruction Finance Corporation, the principal lending agency, and its
subsidiaries, with respect to loans and investments, read into the
record by Senator George, the author of this bill, to be convinced of
the unwisdom of reposing in any Cabinet officer, in addition to the
responsibilities which are imposed upon him as such, the vast powers
and authority recited in this statement. The powers are manifestly
enormous; the amounts involved are staggering. It was stated at the
hearings that the Reconstruction Finance Corporation, and its subsidiaries, conduct the most gigantic business enterprise, or series of
business enterprises, that this country, if not the world, has ever
known, and has engaged in literally hundreds of separate businesses.
With a borrowing authority for upward of $14,000,000,000 and, on a
revolving-fund plan, with almost unlimited lending power, the organization has the capacity to exert a profound influence upon our economy. For example, the Reconstruction Finance Corporation and its
subsidiaries have made direct authorizations and commitments for
war purposes amounting to $32,300,000,000 and of this sum disbursements have been in excess of $18,000,000,000. In activities not
directly related to the war, the Reconstruction Finance Corporation
has authorized loans and investments amounting to $13,160,000,000,
and disbursements have been nearly $10,000,000,000. Of course, substantial amounts of these sums have been returned in one form or
another, but these figures indicate the extent of the operations of these
agencies. The activities of this organization cover practically the
whole of our business, financial, and economic life. Frankly, the consequences of the vast political control that conceivably could be exerted by a Cabinet officer in whose hands was placed the administration of these lending agencies cannot be measured. The man who
has charge of these agencies could so administer those powers as to
determine the economic direction of the country, and with that, its
social and political character.
Your committee is not unmindful of the fact that Congress passed
special legislation to permit Mr. Jesse Jones to be appointed Secretary
of Commerce while at the same time holding the office of Federal
Loan Administrator. Without at this time questioning the wisdom
of that particular legislation your committee regards it as an extraordinary precedent, and feels free to suggest that it should not be
repeated under any circumstances without most,searching consideration, to say the least. Your committee also frankly recognizes that
the exercise of the powers reposed in these lending agencies has in
many respects not been circumscribed by restrictions and limitations
which would normally be expected in legislating such vast authority
over the business, financial, and economic life of the Nation. Whatever may have been the considerations which impelled the Congress
in the instances just cited to depart from more or less well-recognized
principles of legislative practice, it is respectfully submitted that, as
stated by Senator George in the hearings on this bill—
the vast powers and vast authority given is the strongest possible argument that
anyone can make for the return, or for the hastening of the return, of these powers
to an independent agency of the Government created by the Congress and responsible to the Congress.




ADMINISTRATION OF GOVERNMENT LENDING AGENCIES

5

Admittedly, the Reconstruction Finance Corporation was originally
established as an emergency agency at a time of great economic stress,
with resulting business instability and unemployment. Additional
broad powers have been given to the Corporation since the countrywas put in a state of general emergency growing out of the war in
Europe or since we have actually been at war. We must recognize
that in times of public emergency the Executive is disposed to seek
and the Congress to grant powers, that in ordinary times would be
subject to the most careful scrutiny, and as time goes on the exercise
of these powers is perhaps enlarged far beyond those the Congress
might have anticipated even in time of emergency. Doubtless, this
is particularly true in the case of activities carried on by agencies in
corporate form.
Your committee is firmly convinced that it is time for the Congress
to take stock. Mr. Jesse Jones frankly stated to your committee that
the Reconstruction Finanpe Corporation needed no more money and
had enough borrowing power to carry it through the war. Sometime
in the future, we hope it will be soon, this country will enter into and
follow through a reconversion period, and presumably the Congress
may see fit to utilize these experienced lending agencies in carrying
out the responsibilities of the Congress in that period. Any such
powers should be exercised independently of an executive department
by an agency directly accountable for the administration of tjie
functions committed to it. The greater the necessity for the exercise
of extraordinary powers the greater becomes the responsibility of
Congress for bringing the exerciae of those powers more immediately
under its scrutiny, and only by such action can the Congress discharge
its direct responsibility for the Nation's welfare.
As one step in this direction your committee recommends the enactment of this legislation, taking advantage of an agency already created
pursuant to act of Congress and approved by the Congress for the
very purpose for which this legislation is designed.
In this connection, and in conclusion, your committee desires to
call attention to the fact that some question has been raised, or rather
inquiry has been made, as to the sufficiency of this legislation in that
only a part of the so-called lending agencies of the Government are
dealt with in the bill. As to the desirability of grouping in the
Federal Loan Agency all of the activities which were formerly under
its jurisdiction, and perhaps others that have been provided for since
the Executive orders redistributing the functions of the Agency,
this* committee, as a committee, is not in position to advise. Perhaps
further study will disclose that other lending agencies, whose activities
fall within the jurisdiction of other committees of the Senate, should
be transferred to the Federal Loan Agency. This committee has
dealt only with those activities now centered in the Department of
Commerce. For example, the Export-Import Bank of Washington,
now under the Foreign Economic Administration, and the agencies
under the National Housing Agency, will be unaffected by the enactment of this legislation. However, it is pointed out that having
revivified the Federal Loan Agency and retransferred to it the activities now in the Department of Commerce the bill specifically provides
that there shall be no transfers from the Federal Loan Agency under




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ADMINISTRATION OF GOVERNMENT LENDING AGENCIES

the First War Powers Act, 1941, or any other law unless the Congress
shall otherwise provide. The Executive is thus denied the power to
again redistribute its functions, now or in the future.
For the committee:
JOSIAH W. BAILEY, Chairman.




MINORITY REPORT ON S. 375
As Mr. Wallace said in his testimony before this committee, it is
obvious that the occasion for the introduction of S. 375 was the
nomination of Mr. Wallace to be Secretary of Commerce by President
Roosevelt. Further, as Mr. Wallace said in his testimony:
There are some who have suggested—perhaps in an effort to save my feelings
or face—that this separation of the lending functions from the Commerce Department is desirable because of my alleged "lack of experience," in such field. Let
me say that this talk does not fool me or the American public. You know and
I know that it is not a question of my "lack of experience." Rather it is a case
of not liking the experience I have.

Further in his testimony Secretary Wallace spoke of his own
experience as follows:
For 8 years I was Secretary of Agriculture. During that period the Commodity Credit Corporation, the Farm Security Administration, the Farm Credit
Administration, and the Rural Electrification Administration were under my
supervision. During that period these agencies loaned over $6,000,000,000.
We made 11,500,000 separate commodity credit loans and 1,208,000 rural rehabilitation loans. We arranged the financing to permit 20,184 tenant farmers to buy
their own farms.

In addition to this experience as Secretary of Agriculture for 8
years, Mr. Wallace was Chairman of the Supplies, Priorities, and
Allocations Board in the most critical period of the defense effort.
Later Mr. Wallace did pioneer work in setting up the Board of Economic Warfare. Mr. Wallace has traveled extensively through the
United States, South America, Europe, and the Orient on behalf of
the United States Government as Vice President of the United
States. Mr. Wallace is admittedly one of the foremost students of
economics and political science in this country.
As Vice President during the last 4 years he sat in the meetings of
the President's Cabinet; by virtue of his several positions he has been
in intimate contact with the mobilization of the Nation's economy
for the war effort.
No question has been raised as to Mr. Wallace's integrity, his
intelligence, his industry, or his general competency. No single case
of either bad administration, lack of foresight or competence in the
performance of any of the very responsible duties which have been
under his charge, has been pointed out by the opposition. Indeed,
the opposition has referred to no subject, no book, no statement, nor
act of omission or commission on the part of Mr. Wallace which gives
rise to the bitter fight which is being made in the Senate to keep him
from being Secretary of Commerce and having general supervision of
the lending agencies of the Government in the same way that Mr.
Jesse Jones has occupied the office of Secretary of Commerce and
exercised those supervisory functions for the past 4 years.
One cannot escape the conclusion, therefore, that as Mr. Wallace
further said in his testimony:
The real motive underlying these suggestions for stripping the Department of
Commerce of its vast financial power has, of course, nothing to do with my competence to administer these powers. The real issue is whether or not the powers



7

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ADMINISTRATION OF GOVERNMENT LENDING AGENCIES

of the Reconstruction Finance Corporation and its giant subsidiaries are to be
used only to help big business or whether these powers are also to be used to help
little business and to help carry out the President's commitment of 60,000,000
jobs.
In other words the question is really one of whether this committee, the Congress, and the American public want these enormous financial powers utilized
and invested in a free America—in a prosperous America.

The bill then presents the issue which Mr. Wallace posed in the
question "Shall we approach the problems of peace with the same
boldness of conception, the same courage and determination, as we
have approached the problems of war?"
Mr. Wallace presents simply, courageously, and clearly the policies
which he would pursue in the performance of the duties of Secretary
of Commerce as they now exist.
He takes as his premise the preservation and stimulation of free
enterprise and the promotion of the well-being of all the people of
America. He tells this committee that if he is confirmed as Secretary
of Commerce with supervision over the lending agencies that he will
administer the agencies in the spirit of those policies. To use Mr.
Wallace's own words:
For I can tell you here and now that if the R. F. C. is left in the Commerce
Department, I will use its powers in the interest of all the American people.

And, Mr. Wallace says with equal candor:
If the Congress does not feel that the powers of the R. F. C. should be exercised
in such a way as to further the objectives which I have set forth here, then I
respectfully urge the Congress to take the R. F. C. out from under the control of
the Commerce Department.

In his statement of policies, Mr. Wallace specifically enumerates
the economic bill of rights embodied in the President's message to
Congress as follows:
The right to a useful and remunerative job in the industries or shops or farms or
mines of the Nation;
The right to earn enough to provide adequate food and clothing and recreation;
The right of every farmer to raise and sell his products at a return which will
give him and his family a decent living;
The right of every businessman, large and small, to trade in an atmosphere of
freedom from unfair competition and domination by monopolies at home or
abroad;
The right of every family to a decent home;
The right to adequate medical care and the opportunity to achieve and enjoy
good health;
The right to adequate protection from the economic fears of old age, sickness,
accident, and unemployment;
The right to a good education.

Mr. Wallace then in his address to the committee commented upon
and amplified the eight points in this bill of rights of the President,
and disclosed his general views and ideas with respect to the implementation of each of those points. Nowhere did Mr. Wallace intimate that he would exercise any authority w^iich was not within the
scope of the statutes governing the lending agencies now under the
jurisdiction of the Department of Commerce. Nowhere did he question the necessity of having the approval of Congress if he were to
attempt to exercise any authority not now conferred upon the Federal
lending agencies. In fact, unlike his predecessor, he stated that if he
were in charge of the lending agencies he would come to the Congress
and seek legislation from the Congress permitting him to carry out the




ADMINISTRATION OF GOVERNMENT LENDING AGENCIES

9

specific policies and projects which he thought were in the public
interest and within the scope of the lending agencies generally.
Specifically, in contrast to the policy of his predecessor, he stated that
he thought the lending agencies should be subject to the audit of the
Comptroller General and under the general supervision of the Director
of the Bureau of the Budget. Mr. Wallace, therefore, far from manifesting any desire to ignore the statutes or the sentiments of Congress,
has shown every respect for the laws by which he would be governed
in the administration of this agency and for the opinion of the Congress
in the performance of his duties.
Not only did Mr. Wallace affirm his belief in private enterprise
but the burden of his whole address to the committee was to show that
the lending agencies properly employed could be a great bulwark to
private enterprise in the United States and in the world. He went
further and set out specific suggestions as to how he would help private
enterprise by making credit and capital available for foreign trade, for
small business, and for new enterprises, and for the stimulation of the
economy of those parts of the country which heretofore have not kept
pace with the more favored regions of the Nation.
The most severe critic of the former Vice President cannot find in
his address to the committee one objectionable word, in our opinioii.
On the other hand, he shows an understanding of our economy and
the world economy which is sorely needed in one who is to direct the
agencies under the control of the Federal Loan Administration. He
shows an understanding of the principles which must govern our
foreign trade, of the economic significance of full employment and of
the lack of full employment in this country. He shows an understanding of the necessity of the free flow of investment capital essential
to the progress of the Nation. He grasps the significance of education
and of health as the firm foundation upon which the Nation can be
strong.
Mr. Wallace made the statement to the committee that the first
problem facing him was the winning of the war; second, the winning
of the peace; and third, the providing of full employment for the
people and adequate markets for the business and agriculture of the
Nation.
Mr. Wallace proved himself to be a farseeing man by his efforts
to build up stock piles of rubber as early as 1939, by the research
program which the Department of Agriculture carried on in the field of
rubber production while he was Secretary, and by his activities in
developing sources in South America for strategic and critical war
material, even before the war.
Few men who have ever appeared under similar circumstances
ha^e more courageously and candidly opened their minds to a Senate
committee than did Mr. Wallace to this committee.
Why then the bitter opposition to Mr. Wallace? Why are Senators
determined, even before Mr. Wallace is to be confirmed, to strip the
office of Secretary of Cpmmerce of these lending agencies? What is
the alleged lack of experience and lack of confidence to which Senators
refer without giving any indication of what they have in mind? Why
are some Senators determined to prevent Mr. Wallace from being
confirmed as Secretary of Commerce with the lending agencies
stripped from it? The only rational conclusion which one can arrive




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ADMINISTRATION" OF GOVERNMENT LENDING AGENCIES

at, is that those who would strip the Secretary of Commerce of the
lending agencies which are now supervised by him, are opposed to
what Wallace stands for and believes in and are opposed to the objectives which he has stated will guide him in the performance of his
duties.
We agree with Mr. Wallace and not with his opposition. We believe not only in Mr. Wallace's integrity and his'competence and his
efficiency, but we believe also in the objectives which Henry Wallace
symbolizes. We believe in the America which Henry Wallace is
trying to help build. We believe that the things Henry Wallace believes in are essential to the maintenance and the growth of private
enterprise in America. We believe that only if the office of Secretary
of Commerce and all the Federal lending agencies are administered
in the spirit of what Henry A. Wallace believes in, and in the interest
of furthering those policies Henry A. Wallace laid down to the committee, can we have a fully employed and a prosperous America.
We believe that if Henry Wallace had 1 year of opportunity as
Secretary of Commerce to direct the policies of the lending agencies
now under that office, he would do it with such administrative competence and such wisdom of policy that it would meet with the overwhelming approval of the people of the Nation and of the Congress.
Accordingly, we cannot conscientiously refrain from saying that
stripping the office of Secretary of Commerce of supervision of the
lending agencies, if Henry Wallace is to be the incumbent of that
office, would be a tragedy not for Henry Wallace but for America
and to a considerable extent for the entire world. The Nation needs
Henry A. Wallace in this place. The farmers need him. All businessmen, large and small, need him. Both labor and capital need him.
The President needs him. The Congress needs him.
The undersigned, therefore, earnestly hope that in its wisdom the
Senate may not, either out of misunderstanding or out of any other
motive, hurl a boomerang which will, possibly missing its victim, come
back to do greater harm in the long run to the people's representatives
and the people themselves.
We oppose at this time, therefore, the enactment of S. 375.
CLAUDE PEPPER.
THEODORE G. BILBO.
JAMES M. MEAD.
WARREN G. MAGNUSON.
JANUARY 31,




1945.

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