The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
STRICTLY CONFIDENTIAL Gov. Szymcza Gov. Draper Gov. Evans ( P l e a s e r e t u r n t o Chairman's k A Office Fc,-a fe R. 680 ftwisect March 1946 CHAIRMAN ECCLES1 OFFICE TO: OV. DRAPER 6 0 V . RANSOM 60V. EVANS 6 0 V . SZYMCZAK 6 0 V . VARDAMAN MR. MR. BETHEA CARPENTER MR. HAMMOND MR. KENNEDY MR. LEC WE MR. DRfPARRY MR. PAULGER MR. PISER MR. SMEAD MR. THOMAS MR. TOWNSEND MR. VEST MR. WILLIAMS MR. WOOD REMARKS: f fh: • August 12, The President, the White House# ?fy dear Mr. President: Your budget statement and the action you hare already taken to deal with the Inflation problem are so forthright and construct ire that 1 are taking the liberty of writing you this note to suggest two additional steps which you sight wish to consider la following up your program, which has been cowaendod by the press and public generally. It is of great importance at this tine, Z think, to focus public attention on the paramount necessity for increasing productivity in Industry, You hare done all that you can do so far as the Governaont is concerned to keep effective price controls, to reduce Government expenditures and to Maintain ?ederal revenue by opposing further tax reductions while inflationary pressures exist. At best, however, price controls are only a stopgap. Fiscal policy deals only with the aoney supply side of the Inflation problem. The overwhelmingly vital need of the hour is for acre work and more goods* It should be forcibly i»pressed upon the public that it is now up to labor and Management to overeene the major oause of the inflationary danger. For that reason, X would like to suggest that you consider Making a statement, possibly at a prm— conference, along the following general "I have noted with great interest and satisfaction the discussions aaong sons of the leaders of labor and industry who are considering ways and Moans of increasing the output of Industry In the critical period while inflationary danger still confronts the country, This is by far the nest effective means of overcoming the danger, there is no further step that the President has authority to take in dealing with tho problem that compares in importance with what oaa bo done on tho industrial front "by labor and isanagensnt through increasing output by increasing efficiency, by eliminating bottlenecks and restrictive rules ana practices, including those is tho building industry* and by avoiding strikes and shutdowns* More work and More goods are tho fundamental cures for inflation* That is tho only way for labor to keep tho gains from pay Increases it has received. It is tho only way to safeguard the purchasing power of all wages and savings• It would bo of tho greatest benefit to tho entire country if during tho months ahead labor and Management agreed to work longer hours particularly in those linos whore shortage* are tho greatest. This would serve to increase production and help to stabilise prices. The restating increase in tokohoaae pay would thus bo accompanied by increased output* That would benefit all concerned whereas further wage Increases for tho same amount of time and output would serve only to intensify tho upward pressure on prices* Increased wages that result in increased prices are self-defeating* It is as muoh in the public interest now as during tho war to increase production and hence to avoid strikes. We all know that in our interdependent eoonoray a strike in one key industry can paralyse others* Likewise, strikes by conparatlvely few workers in plants that supply others can throw naay thousand a out of work* The way to keep prices down and to maintain tho buy* ing power of wages and savings is to achieve an uninterrupted high rate of output* This is tho only way to bring about an increase in tho standard of living* This is tho only way in which national income can bo increased* thereby inoroasing tax revenues without increasing tax rates* Increased tax revenues resulting from increased national inooms and decreased Federal expenditures will result in a balanced budget and then in a budgetary surplus which will make possible tax reductions later on* Budgetary surpluses and tax reductions can bo brought about in no other / In view of the excellent example to the Nation whloh have already set in your budgetary statenent, X would suggest that you consider tending to the Oovernort of the States an open letter enlisting their full cooperation wherever possible by reducing; state expenditure*, lay deferring public works and by maintaining taxation while inflationary dangers exist« Both a statement from the President of the United States highlighting and encouraging the morenent lor increasing produotirity and «uch a letter to the Governors would, la ay opinion, also hare a favorable reception generally and farther increase public confidenoe in your leadership* Respectfully, M. 8 # Sooles, Chairaan. ETPtnnm Memorandum on H»R« 14J28, Reducing Federal Savings and Loan Insurance Corporation Premium Charged for Insurance from I/k of 1 por cent to l/l2. of I per cent The major provision of this Bill is tho reduction of the insurance premium* On a logical basis If any change were to be made in the premium It should bo increased, not reduced. The Bill should not bo permitted to become law for those reasons: The Federal Savings and Loan Insurance Corporation's reserve against its insured risk is still grossly deficient. Congress originally contemplated that the reserve should someday reach 5 per cent of the insured risk, but after 10 years of operation the vm^rrm had reached only 0*57 por cent of the insured risk, as of June 30, 19Uu The risk exposure of the FSLIC is far greater than that of FDIC. It has boon contended that the risks are about the same and that therefor* the FSLIC premium should bo the same as that of FDIC — l/l2 of 1 per cent. However, based on the latest available figures, Insured banks (taking into account their capital, surplus and undivided profits and the amount of their deposits not covered by their holdings of Government securities and cash) have a cushion of approximately $1 for every |297 of risk. FSLIC insured institutions, on the same basis, have a cushion of only $1 to $8 of risk* In a word, tho FDIC cushion is three times as big* In fact, on any basis of comparison, tho FSLIC exposure is far greater than FDIC, so that the logio of any argument based on comparability would lead to increasing not reducing the FSLIC rate0 It would be inconsistent for the Administration to approve this Bill which is diametrically the opposite of S # 2h9h, recently introduced by Senator Wagner and endorsed by the Treasury, contemplating that the FDIC premium shall bo maintained with a view to repaying the Government funds which are, in offoot, a subsidy to the FDIC, As a matter of principle, neither FDIC nor FSLIC should reduce their premiums until this Government money has been paid off* It is particularly important, from the budgetary standpoint, that the money be returned to the Government as rapidly as possible. The FSLIC has #100,000,000 of Government-furnished money. It amounts to a subsidy for the benefit of private institutions just as the Governmentfurnished money in the FDIC is a subsidy to private banks. These private institutions constantly complain against subsidies for agricultural or other Government institutions and logically they should apply the same rule to themselves. At present, isles the national debt is so great and such vigorous efforts are being made by the Administration to increase Government reoeipts and reduce expenditures, prudent policy requires that tho premium of the FSLIC bo maintained or oven increased with the ultimate view of repaying the #100,000,000 of subsidy to the Treasury, August 13,
@FedFRASER