gressional declaration of policy in the Em-. ployment Act of 1946.

Testimony of Jacob Viner, professor of economics, Princeton University, hear

Joint answer of the Federal Reserve ings, page 794: banks, compendium, page 651:

While the Employment Act of 1946 contains no explicit directive to the Federal Reserve banks, the stated objectives of that act guide the consideration of Federal Reserve policy.

The text of the mandate they have now has just been handed to me [Employment Act of 1946], and I want to read what that mandate is, for the special benefit of those who think that the Federal Reserve has a sufficient mandate now.

In the declaration of policy in the EmStatement of Secretary Snyder, hear- ployment Act, the last words are "to promote ings, page 9:

It is a primary goal of both Treasury and Federal Reserve policy, and an important part of public economic policy in general, as expressed in the Employment Act of 1946.

Statement of Chairman Martin, hearings, page 78:

The Federal Reserve Board is subject to the Employment Act of 1946.

Statement of Chairman Martin, hearings, page 81:

And I am accepting the Employment Act of 1946 as national policy and being applicable to the Federal Reserve System.

Testimony of W. L. Hemingway, American Bankers Associations, hearings, page 336:

Representative PATMAN. Of course, they would always have over them this threat that if there should develop a poor economic situation in our country with lots of unemployed and lots of distress, and there was need to do something to bring the country back, and the Employment Act of 1946 was not carried out as the President and the Congress thought it should be carried out, in cooperation with the Federal Reserve Board, the Congress by a majority vote could change that. If we happened to have an obstinate, contrary board, that just would not do what was necessary to help the country come back, why then something could be done about the Board.

Mr. HEMINGWAY. That is right.

Testimony of Malcolm Bryan, president, Federal Reserve Bank of Atlanta, hearings, page 430:

There may be an implication of built-in inflationary bias, as we have interpreted the act or tended to interpret the act up to now, but I want to make very clear that I approve of it as a statement of policy of our Government of all branches.

Testimony of Allan Sproul, president, Federal Reserve Bank of New York, hearings, page 537:

maximum employment, production, and purchasing power."

Statement of the United States Chamber of Commerce, hearings, page 804:

As an instrumentality of Congress, the Federal Reserve is presumably bound by this declaration of policy. Moreover, since monetary policy is an important means of achieving and maintaining a maximum level of business activity and employment, the Federal Reserve cannot evade or ignore this congressional declaration of policy.

Statement of Murray D. Lincoln, president, Farm Bureau Insurance Companies, Columbus, Ohio, hearings, page

816:

The only policy directive cited to you by the Board as giving it responsibility with respect to stabilizing the economy is the Employment Act of 1946. But that act contemplates no independent action by any part of the Government. On the contrary, it calls for coordination of all the relevant powers of Government under the direction and responsibility of the President. How can the Federal Reserve Board pretend to draw authority from that act while proclaiming its

independence of the Executive?

NO DEBTS, NO MONEY

A lot has been said here about the payment of the national debt. I believe in paying debts, and I believe in individuals and other people paying their debts; but in connection with our national debt, the Board of Governors must keep in mind under the Employment Act of 1946 that they must have sufficient money and credit to buy the goods and services that are available. Keeping that in mind there must be debts. There is one thing I want in particular to invite your attention to. Do not be afraid anybody will dispute it, they will not, it cannot be disputed; these people who Representative PATMAN. And you recognize tirely and other debts entirely, pay off talk about paying the national debt enit as a congressional policy? Mr. SPROUL. Yes.

Mr. SPROUL. In the answer of the presidents

of the Federal Reserve banks, I think we expressed that opinion, and certainly it is my opinion that principles and policies set forth in the Employment Act of 1946 are a guide to us in our actions with respect to credit policy.

Representative PATMAN. And I believe you stated that you recognize, too, that the Federal Reserve System is an agency of the Government?

Mr. SPROUL. Yes.

Testimony of E. A. Goldenweiser, member, Institute for Advanced Study, Princeton, University, hearings, page 765:

I think the general mandate in the Employment Act and in phrases in the Federal Reserve Act, together with the public understanding and the legislative and congressional history of the Federal Reserve, has now made its mandate reasonably clear.

all debts, do not, I am afraid, take everything into consideration.

Under our capitalistic system if they have thought this thing through-we have a capitalistic system; that is the finest and best system in the world; it is the private-enterprise system. I would not change it at all, I would not change

our banking system; I would leave it all just like it is. There are certain changes I would make, such as the Board of Governors and certain changes in the Federal Reserve banks, but that does not go to the changing of the commercial banking system. I would leave it just as it is under our capitalistic system. If

any changes should seem expedient they should be made gradually and in a helpful way without endangering our privately owned, profitably operated commercial banking system consisting of about 15,000 establishments.

Keep this in mind that where there are no debts there is no money. You know you cannot have money without debts. If it were possible for us to levy income taxes and pay off our national debt in 10 years or 20 years it would cause the most devastating and destructive panic we have ever had on earth; you could not stand it; it would be canceling too much money.

So in our country with 161 million people, every year in order to have prosperity we must have the economy going up about 4 percent, that is our gross national product, for the purpose of taking care of the new workers that come in every year, and to take care of those who have been displaced during the year by labor-saving devices and machinery.

There are about a million new workers every year. There are almost a million people who are replaced by new laborsaving machinery every year. So there are 2 million people that have to be taken care of every year in our economy.

If we keep on an even keel that is not enough. We would soon have a backlog of these new workers and these displaced of unemployment. In order to take care workers, we must have our economy increasing at the rate of about 4 percent a year. That means in our gross national production. In order for the gross national production to increase we have to increase our money supply. The only way we can increase our money supply is through debts. That is the only way in the world in our present capitalistic, private enterprise money system. Today we have debts, public and private, of about $640 billion. That includes our national debt of $275 billion, our States, counties and cities, installment debts and all other debts-about $640 billion in all.

REASON FOR PROSPERITY

Of course, people talk about having to pay these debts off. If you paid them all off you would not have any money. We would be reduced to barter. For a time in one section of the United States the people were absolutely dependent upon barter, using axe handles, hickory nuts, skunk hides, and things like that for legal tender. The reason our people are prosperous is because we have money and credit available to purchase the goods and services that are available for sale. We must continue to have it available.

DR. BURGESS' VIEWS

I am going to insert in the RECORD statements from people who will corroborate, at least they have said what I am saying here, and I refer to witness No. 1, Dr. Randolph Burgess, who is the architect of the present administration's monetary policy, of National City Bank fame, one of the greatest experts in our country. I do not agree with him all the time, but I recognize him as a great man and as a great expert in his line.

He appeared before our Committee on Banking and Currency recently. They talk about paying off the national debt

rapidly. Naturally, I favor paying off the national debt when we can without disrupting our economy. But do you not agree it is something that should not be done quickly and suddenly over a period of 10 or 20 years? I am going to put his testimony in the RECORD. At that time I asked him a question along this line.

Dr. Burgess, if we were to pay all of our debts, is it not a fact we would have no money to do business with?

He finally said that that is the fact. He hedged on it at first. He said: "We would find a way." Then he had to admit that it would be a different way Under our from what we have now. capitalistic system as it exists today, there is no way to have adequate money and credit without debt. If all debts were paid there would be no money.

Statement of W. Randolph Burgess, Deputy to the Secretary of the Treasury, before Committee on Banking and Currency of the House of Representatives, May 27, 1954:

Mr. PATMAN. Alexander Hamilton is credited with saying that a national debt is a national blessing, and Andrew Jackson is credited with saying that a national debt is a curse to the Republic.

Do you agree with either one of those statements and, if so, which one?

Mr. BURGESS. Well, I think it is rather academic. We will have a national debt for a long time to come. I wouldn't worry about our situation, if we didn't have any; I think we would get along pretty well.

Mr. PMAN. Suppose we were to issue a capital levy and pay off the national debt over a period of 10 years. What would be the effect on our economy?

Mr. BURGESS. I think that would be very destructive of people's initiative and incentive, to feel that we felt it was right to take away people's capital. That is going pretty far.

Mr. PATMAN. Of course, I was just using that that is a rather brutal way of doing It-but suppose we raised income taxes and paid it off over a period of 10 years, or 15 years. Don't you think it would be in the direction of a severe deflation?

Mr. BURGESS. I agree with you, yes. Notice what Dr. Burgess says about paying off national debt too rapidly.

Mr. PATMAN. And isn't it a fact, Dr. Burgess, that our capitalistic system being as it is, that we might as well be realistic and recognize that without debt we cannot have prosperity?

Mr. BURGESS. Well, I wouldn't make as broad a statement as that, but I think I would say, from where we are now, we cannot undertake to pay off this debt in 10 years or any such period, because it would be too much of a shock.

Mr. PATMAN. In fact, if we didn't have debts we wouldn't have any money.

Mr. BURGESS. No, I wouldn't-you mean if there weren't any debts, public or private? Mr. PATMAN. That is right.

Mr. BURGESS. Well, we would find some other way to do it.

Mr. PATMAN. We would be reduced to barter?

Mr. BURGESS. I think we could still have a money system.

Mr. PATMAN. We would have to change our system. What I am talking about is our present capitalistic system, which we are all in favor of-I am in favor of it, you are in favor of it-yet under that system, without debts, we could not expand our economy.

Mr. BURGESS. Well, without getting into great flights of imagination, I quite agree, that under our system as it works if we

are going to have progress and move along, people have to borrow to go ahead and do things.

Mr. PATMAN. And then if the people don't borrow money, and the banks do not lend money, and the local governments do not borrow money, it might be that the Federal Government would have to have deficit financing for the purpose of creating debts to expand our economy; is that right? Mr. BURGESs. That is possible.

Mr. PATMAN. In other words, somebody has got to create debts, either public or private.

Dr. Burgess knows we cannot have sufficient money and credit without debt and therefore has admitted the time might come when the Federal Government may be compelled to create debts in order to provide our economy with money.

In addition to that I am going to insert statements from the Chairman of the Board of Governors along the same line.

Before the Banking and Currency Committee of the House of Representatives, May 26, 1954, the following testimony was recorded:

Mr. PATMAN. About the reserves: If you reduce the reserve requirements-the banks have no excess reserves now-and you reduce the reserve requirements, say, one point, how much excess reserve would that make available?

Mr. MARTIN. I would have to check one point. I would say it is about 7 or 8 hundred million dollars. Perhaps about a billion dollars.

Mr. PATMAN. About a billion dollars?
Mr. MARTIN. Yes.

Mr. PATMAN. What is the difference in you saying that all the banks of the country, without putting up an extra dime of capital, without putting up anything in the way of security at all, you can just create a billion dollars more money, and on that you can create about $6 billion-what is the difference between that and printing press money?

Mr. MARTIN. The forces of the market are at play.

Mr. PATMAN. I know, but it is the creation of money, is it not?

Mr. MARTIN. We have the power to create money. That is the strength of the Federal Reserve System.

Mr. PATMAN. Well, the private banks have it, too, don't they?

Mr. MARTIN. Not in that sense.

Mr. PATMAN. On their reserves don't they create it on an average of 6 to 1 now? Mr. MARTIN. If they lend the money, or create the loans or investments, they can do that.

Mr. PATMAN. That is right. But under your capitalistic system, which I believe in, and which we all believe in, we think it is the finest and best system on earth, you cannot do business in this country unless people go into debt, can you?

Mr. MARTIN. I think it is possible to do business without going into debt.

Mr. PATMAN. Under our system? Mr. MARTIN. Yes, sir; I think it is possible. Mr. PATMAN. How would you do it? Suppose everybody paid their debts, what would you do for money?

Mr. MARTIN. Well, now, debt is an important part, I don't want to debate that. Debt is an important part of our business.

Mr. PATMAN. Of our economy. Could we do business without debt?

Mr. MARTIN. Well, theoretically, I think you could. You would have to change the system.

Mr. Martin thereby admits that we cannot have sufficient money under our

present capitalistic system without debts and the only way we can provide ourselves with money without debt would be by changing the present system.

Mr. PATMAN. Well, you would have to pay out money into circulation, instead of borrowing it into circulation?

Mr. MARTIN. You would have to change your system.

Mr. PATMAN. You would have to change from your capitalistic system entirely. But under a system as we have now, if everybody paid their debts, all the money you would have left would be the $346 million Lincoln greenbacks, and the silver certificates, and the silver, and the copper coins; is that right?

Mr. MARTIN. Well, I don't know your figures, but

Mr. PATMAN. Well, I am just giving them from memory. But your memory on that is better than mine.

Mr. MARTIN. You would have gold.

Mr. PATMAN. But it is not in circulation. If everybody paid their debts, we would not have money to do business on, and we would be reduced to barter, wouldn't we?

Mr. MARTIN. Well, we could certainly go back to the stone age and engage in barter. BANKS LARGE HOLDING OF GOVERNMENTS

I am inserting herewith a report of the condition of a bank in a western State, as of June 30, 1954. The statement discloses loans and discounts of less than $15 million and holdings of United States Government securities of more than $58 million.

I hope the banks will pursue a policy of making all local loans possible and invest less and less in United States Government securities. I am apprehensive that if the trend continues as is indicated by many bank statements, the banks will rely more and more upon riskless Government securities and become less anxious to take the time and trouble of dealing with applications for local small loans.

LOANS OFF BILLION PAST YEAR

A recent statement of the condition of all the banks discloses that loans and discounts are off over a billion dollars the past year, but the investment in United States Government securities is up considerably. After all, accommodations and services to local people come first. I am sure that bankers generally recognize this as bankers are among our finest citizens and are always anxious to be helpful to the communities and cities they serve.

What I am afraid of is that our governmental policies are making it too attractive for banks to invest in riskless securities. Bankers are expected to look at the situation from a standpoint of the bank's interest, and I believe it is possible under present circumstances for many banks to be persuaded that it is in their interest to get away from local loans in order to enjoy absolute security and reasonable earnings from investments in riskless securities.

The statement that I am inserting is not typical of all banks; I think it is an exceptional case, but since it is a statement of a bank that is principally owned and operated by a former President of the American Bankers Association, I thought it would be of interest to show

Suppose all banks adopted the policy of having such a large percentage of their investments in Government securities and such a small percentage in loans. Who would create the debts necessary to sustain an expanding economy? Would the banks be in the position where they would not only object to Government securities being paid off but also in the position of demanding that more Government securities be made available for them to purchase? It will not be long until the trust funds that support the different old-age and retirement systems will probably be able to buy all the Government securities available. I hope the banks never get into the position where it is in their interest to oppose the continuance and establishment of such funds.

Mr. CUNNINGHAM. Mr. Speaker, will the gentleman yield?

capitalistic system. Certainly we should not expect any debt to be permanent but the aggregate amount of debt must increase in order to expand our economy.

Mr. ROGERS of Florida. Mr. Speaker, will the gentleman yield?

have between four and one-half to five billion dollars in the banks, and I want the Government to use that idle money before we increase the debt limit. But, whenever it is necessary to increase it, I am for increasing it. I think it is intellectually dishonest for a Member of Con

Mr. ROGERS of Florida. Did the gentleman oppose increasing the limit of our national debt?

Mr. PATMAN. I did. A year ago I voted against it because they had plenty of money in the banks to take care of the Government's needs for the next year. They had $9 billion in the banks on the day I spoke, which is a large amount. Normally they have from four to six billion dollars in the banks all the time, which gives opportunity for great favoritism, in addition to destroying the use of it for the Government's purposes.

Mr. ROGERS of Florida. How does the gentleman explain the fact that it takes debt to create prosperity although it would not be a good thing to increase the national debt?

Mr. PATMAN. Well, I want the private-enterprise system to work by local people going into debt through the local

banks and other financial institutions. The Government should stay out of debt as much as possible. Like local and State governments, they should stay out of it, and only to be used at a time of emergency. But, Dr. Burgess admitted, in questioning him, that the time could come and I am putting his testimony in the RECORD-that we would have to increase our national debt in order to have enough money and credit to do business on.

Now, if it got to that point, I would increase it just for that purpose, but I am not going to increase it if it is not needed for that purpose. I would rather use this idle and unused money in the banks that the Government is not receiving any interest on at all; nothing; idle; four to five billion dollars. It is serving no useful purpose for the Government. It is just helpful to the banks.

Mr. PATMAN. Yes. You have got to do that. There is no way else to do it under our capitalistic system. Does the gentleman know of any other way to do it? I do not. Dr. Burgess does not, Chairman Martin, of the Board of Governors, Federal Reserve System, does not, Mr. Eccles does not. I asked Leon Henderson a question along that line years ago. Leon Henderson said all debts ought to be paid. I asked what we would do for money then? He said that we would have to go right back into debt again. That is the fact. With no debts we have no money. As foolish as that

I do not want to help them that way. Why should the Government borrow money and pay interest when it has billions of dollars in private banks idle and unused? The banks have a side to the question. I am impressed with the arguments they made. I want them treated right. It can be adjusted and the banks treated fairly without the Government giving up the use of these deposits.

INCREASING NATIONAL DEBT

The only reason I voted against increasing the national debt a year ago was because they had $9 billion idle and unused in the banks which, if they used, they would not have to increase the debt limit. And, the debt limit was not increased during this past year and it did not exceed the limit because they had to dip in and use some of these idle and unused funds. On yesterday I did not vote to increase it because they still

when paid, will exceed the debt limit and then fail to vote to raise the debt limit to take care of them. I think it is just as wrong and dishonest as a Member of Congress voting for all appropriation bills and against all tax bills. It is the same thing. So, the time might come in this country when we will have to increase the national debt just for the purpose of creating sufficient money and credit. I hope that time never comes, but it is possible.

So, again, in conclusion, I invite your attention to the fact that we should all remain on the alert, to persuade the authorities against permitting the Government bonds to go below par. It should never be permitted again. If such a policy is started again, Congress should do something about it without delay.

Report to the People of the Second Congressional District of Wisconsin

EXTENSION OF REMARKS

OF

HON. GLENN R. DAVIS

OF WISCONSIN

IN THE HOUSE OF REPRESENTATIVES

Friday, August 20, 1954

Mr. DAVIS of Wisconsin. Mr. Speaker, I include herewith my sixth annual report to the people of the Second Congressional District of Wisconsin. In the 5 immediately preceding years I prepared reports on my voting and attendance records for the sessions of Congress. This is a similar compilation for the 2d session of the 83d Congress complete to the date of sine die adjournment on August 20.

By means of newsletters and conferences throughout the district during congressional recesses, I have attempted to inform my constitutents and report to them on my stewardship as their Representative in Washington. This voting report is in keeping with my purpose of keeping the people of my district as fully informed as possible on congressional issues.

It is a complete record. It is not a hand-picked list of a few so-called key votes compiled by some lobbyist, pressure group, or political campaign committee. The whole record is here in concise form for the people to examine and evaluate for themselves.

If more complete information on any measure considered, or an explanation of any particular vote is desired, I shall be glad to respond to such requests, as I always have in the past.

The report follows: