I am not a lawyer, but it does seem to me that an interpretation of that would permit the use of this silver for things other than for war purposes. Senator MALONEY. That is entirely right, and that is the intent and purpose of the bill, but under the direction of the Commander in Chief of the Navy, of course. Rear Admiral KELEHER. But I rather think that this silver, particularly the free or unpledged silver which we have, most certainly should be reserved on the basis of these estimates for the use of the armed services. Now, there has been some discussion about the domestic production and more particularly about imports. That is, of course, beyond my field, but I do think that we must protect by a reserve, a substantial reserve, the stocks of silver that we have. We cannot predict too accurately. These figures I have given you, I think, are very sound figures. On the other hand, we go from one thing to another. We shifted, for example, from copper cartridge cases to steel, and we find that steel is scarce, and so it goes. Each thing becomes scarce in turn, so that I can say almost with certainty that everything now is scarce; everything is critical, including silver. Senator CLARK of Idaho. Then, after all, if I understand you, on the basis of the figures you have worked out, you believe that all the free silver in the Treasury should, as a wise and prudent policy, be held for the armed services and the war effort? Rear Admiral KELEHER. That is correct, sir, including in the war effort the Allies. You included them, I believe, but I think I should make that clear. Senator MALONEY. Thank you very much, Admiral. Rear Admiral KELEHER. Yes, sir. Senator MALONEY. Now, we are prepared to hear Mr. Richard J. Lund of the War Production Board. You may proceed, Mr. Lund, and identify yourself completely for the record, please. STATEMENT OF RICHARD J. LUND, CHIEF, MISCELLANEOUS MINERALS BRANCH, WAR PRODUCTION BOARD Mr. LUND. Mr. Chairman, in view of the rather sweeping changes that have occurred in the silver situation in a relatively short time, it was felt that it might be advisable to go into a little more detail than might customarily be the case, for the help, perhaps, of the committee, in its deliberations, so I have prepared a statement that I should like to read. My name is Richard J. Lund, Chief of the Miscellaneous Minerals Branch of the War Production Board. One of the minerals under the jurisdiction of the branch is silver, and I have been asked by Mr. Donald Nelson to appear before your committee and outline in some detail the silver situation in connection with the war effort, and to state the views of the War Production Board relative to S. 2768, a bill to authorize the use for war purposes of silver held or owned by the United States. I will first present a brief review of recent developments in silver, then present a concise picture of the current situation, followed by a presentation of our best estimates on the long-term picture regarding silver in the war effort. All of this relates rather closely to our views on this proposed legislation. I shall confine my discussion pretty much to problems relating to industrial use of silver, and will not touch upon the broad and complex field involving monetary aspects of silver, which is handled by the Treasury Department. Up until about April 1942, supplies of foreign silver were adequate to satisfy both essential and nonessential demands. At about that time the restrictions on use of other nonferrous metals such as tin, copper, nickel, chromium, and so forth, began seriously to affect production of nonessential items, with the concurrent rise in demand for silver to substitute for these metals. Coupled with this came a rise in demand for silver for war uses and for essential civilian needs, both as a substitute for other more scarce metals and for use in the manufacture of items in which silver stands out as the most desirable metal for those purposes. As a result, demand materially exceeded the supply of cheap foreign silver, and suppliers were thus forced to distribute foreign silver in accordance with provisions of Priority Regulation No. 1, whereby rated orders must be accepted and filled in the order of their priority ratings. From then on, manufacturers of nonessential articles found it more and more difficult to obtain silver. Some of them found that silver could be bought directly in nearby countries, notably Mexico, and there soon developed a fairly sizable demand with consequent sharp rise in price in connection with these transactions. This practice, in effect, circumvented the efficient functioning of distribution under Priorities Regulation No. 1, and threatened so to curtail supplies that essential needs might not be met. In order to correct this situation the War Production Board during July formulated orders to place imports of silver under its control and to restrict the sale, purchase, and use of foreign silver for the manufacture of certain articles of low essentiality. The Silver Producers Industry Advisory Committee and the Silver Distributors Industry Advisory Committee were formed to discuss the proposed orders, and monthly meetings have been held with these groups since July 14, 1942, the date of the first meeting. The order placing silver imports under control of the War Produc-` tion Board was issued July 21, as amendment 5 to Order M-63, and the order restricting purchases and use of foreign silver was issued July 29, as Order M-199. These orders were effective in channelizing limited supplies of foreign silver into essential uses. Up to late August virtually no newly mined domestic silver was finding its way into industrial use. This arose from the fact that the price of 71.11 cents per troy ounce was far above the general ceiling set by the Office of Price Administration at March 1942 levels. During August a severe shortage in supplies of foreign silver began to develop. This resulted in part from (1) Delays in arrival of silver-bearing ores and concentrates from such distant sources as Peru and Australia; (2) Curtailment in shipments from Mexico as a result of rumors that the 35-cent price would be raised in the near future; and (3) Purchase by the Treasury Department of over 3,000,000 ounces of silver from a Canadian company to meet a pressing demand for foreign coinage. In this critical situation steps were taken at once to make available to industry for war use, needed amounts up to 4,900,000 troy ounces of "silver ordinary" held by the Treasury Department, which is the amount that Department could legally release for this purpose. Considerable time was necessary to work out all details in connection with this release, and it was not until the middle of September that authorizations went out to industry allocating needed amounts to fill war orders. Early in September the situation was so tight that considerable delays were met in filling orders carrying a rating of A-1-j or higher. Following the announcement by the Office of Price Administration, late in August, that the ceiling would be raised from 35 cents to 45 cents for silver imported after September 1, together with their announcement on September 22 that the ceiling price on all silver other than newly mined domestic would be raised to the same price level, supplies of silver again became plentiful. Also, the announcement by the Office of Price Administration effective September 3 of the price ceilings for newly mined domestic silver, together with the conclusion of final arrangements with the Treasury Department regarding provisions of the transfer tax and methods of handling certificates instruments of transfer-proving the origin of the silver, made it possible for manufacturers of nonessential articles to purchase and use this higher-priced silver in their plants. We do not have figures showing amounts of newly mined domestic silver that are going directly into industrial use, but large producers have indicated to us recently that they have sold sizable amounts to industry, and have delivered only relatively small quantities to the Treasury on earlier contracts made for future delivery. Senator CLARK of Idaho. Do you mind being interrupted, Mr. Lund? Mr. LUND. No, indeed. Senator CLARK of Idaho. Do I understand from that statement there that industry is apparently now buying considerable quantities of silver at 71 cents an ounce? Mr. LUND. That is our understanding, Senator; yes, sir. Senator CLARK of Idaho. There has been testimony here to the ́effect that they could not use it at that price because of the retail ceiling on the finished product. Do you have any knowledge on that score? Mr. LUND. I don't know the details of that, Senator, but it is our definite understanding that sizable sales have been made for industrial use, and I think it is pretty much in the nonessential uses rather than in the essential uses. Mr. INGLEBY. We bought that silver at 71 cents on the assumption-perhaps we were wrong that we were to obtain an increase in price; in other words, the O. P. A. had granted the bullion people the privilege to sell it to us at 71 cents, and we assumed in our talks with them that we would be granted an increase, too. Senator CLARK of Idaho. Have they denied that? Mr. INGLEBY. Well, they have denied the increase in price, so we have some domestic silver now which we cannot use. Senator CLARK of Idaho. They definitely refused to raise your ceiling after your talks with them? Mr. INGLEBY. That is right. Senator CLARK of Idaho. With your permission, Mr. Chairman, I would like to ask just one question here at this point. If W. P. B. had access, through proper legislation, to the free silver in the Treasury for war purposes, then do you think it would be possible to relax your orders so that the commercial users could obtain foreign silver again? Mr. LUND. By that you mean the nonessential luxury trade? Senator CLARK of Idaho. Yes; if you have, for war purposes, access to free silver in the Treasury. Mr. LUND. That refers to a statement I will give you a little later in connection with our contemplated demand. It is awfully hard to say how far this demand is going, but we see the possibility and probability, even, of possibly requiring not only all of the Treasury, but the newly mined silver as well. The answer on that would really have to be made at the time-reviewing the current situation at that time, and bearing importantly in mind the reserves that must be maintained to meet any possible war and essential civilian demand that might arise over a period of as long as 5 years. Senator CLARK of Idaho. Just one more question. The bill, as it came to your attention, is different than the bill as proposed this morning. You were here, were you, when Senator Green proposed an amendment to substitute the words "not inconsistent" for the words "in connection." In other words, the effect of the amendment is going to release or might release, under your supervision, Treasury silver for consumptive purposes to commercial users, nonessential commercial users. Mr. LUND. Still under our control? Senator MALONEY. That is right. Senator CLARK of Idaho. I assume it would be under your control, but the bill as originally introduced would, in effect, as I interpret it, only release Treasury free silver for purposes in connection directly with the war effort. Mr. LUND. That is right. Senator GREEN. It simply broadens the discretionary power given the agency. Senator CLARK of Idaho. That is correct. Senator MALONEY. I would like to say, first, if I may, that it does not restrict your powers at all. Senator CLARK of Idaho. I think that is true. Mr. LUND. The views of the War Production Board as presented in this statement refer to the legislation as we saw it, or the proposed legislation, and any changes that might be major changes, I would not be able to pass upon this morning. Senator MALONEY. But, you would not consider it a major change if it did not affect your power in connection with the bill, would you; I mean the War Production Board? Mr. LUND. One of the comments we have concerning the original bill relates specifically to the power of the War Production Board. That is one of our suggestions. Senator MALONEY. Yes; that suggestion was made by Senator Green in an amendment. Mr. LUND. Yes. Senator MALONEY. In keeping with your desire. Mr. LUND. Oh, yes. Senator Jarover But Senator Mark s concerned about the Jiffaranpo jetween 'n connection" and hot inconsistent. It does Senator CLARE of duho 13 I matter of act. t roadens their *1:|:2 Senator Jatexty "Lat s oht. It rendens your cowers. „wingem Diegener alver for purposes in connection with he 'war Senator Chark of „daho That is rne. Senator alstorey But the new language heins to clear the languand althonoh 00 probably have the same power inder he original (anotage this makes it a little more clear: Mr. Deyo 14 3 a ather basic change, hough, and I won't think L I'M POTAPert to pass 1ght now on that. Senator CLARK of Idaho. The only reason I interrupted you was. I 20 2002, Dave to learn. ont i will rad your statement ater: Senator DANAHER. Before Senator Clark goes, in order that the whole ntendment of Senator Green's amendment shall be before his witness, don's forget that he also suggested in line t alter the word hat we add the words 'unon the recommendation of fie Chairman of the War 2nduction Boarti. Senator CLARx of idaho. That is right. There is 10 muestion about that 1 Mr. Lond. That was one of the suggestions that I was going to enter Semetor MiLowwy. I would like to ask a question. Are you "akt¡ng into account and zeening `n mind the fact that the silver ndustry here indicates that it would be completely satisfied with 30.300.300 onneas of silver per year. The Navy is anxious to give ful protection to the var program, as you are. Thirty million ounces a year geams to be a small amount compared to what we have and what we anticipate getring. if Note, I want to mention this while. Senator Clark is here because.. your fears are great, the life of the bill might be restricted to not later than the frst day of 1944. Senator Green has suggested mat wa change it, but if there is any feeling that we might not want togive so much protection to the smail industry, we could come backc again to the definite 30,000,000 ounces.. Mr. Lox. I understand. Senator MALONEY. For a definite period of I year.. Mr. Lond. Yes, I see. I cannot pass upon these suggested changes, however, at this time. Senator ManoNEY. Please proceed. Mr. Land. Mr. Lond. Owing to the rather sudden release of stocks during September which had become immoble in August through price considerations, together with the release of sizable amounts of "silver ordinary" from the Treasury, we are currently in a period of surplus supplies, which we feel is only temporary. Late in Sptember an amendment to Conservation Order M-199 permitted manufacturers of items on the restricted |