Mr. HENDERSON. No; and I think that the Nye committee's volume on wartime excess profits, taxation, and prices would warrant my statement. You may or may not be familiar with it, but the conclusion of the Nye committee was that excess-profits taxes cannot be relied upon to take care of the excessive profits.

Mr. WILLIAMS. I think I can see where it would fall short in many cases; but the question still is, Under this plan what is to be done with the high-cost producer if you fix a price at a figure below the price at which he can produce at a profit? What will he do?

Mr. HENDERSON. I think then that we would do as we have been doing, that is, give a differential price. Take the case of copper. The three leading producers have agreed to a price of 12 cents. There has been some copper sold at 122, and the custom smelters sometimes have gone above that, and that is based upon a recognition of a difference in cost, and it has worked out very satisfactorily as far as that situation is concerned. There is a provision in this bill, as you know, for just that kind of a producer.

Mr. WILLIAMS. A provision for buying. That means that the Government should buy from the high-cost producer, and pay the subsidy between that and the price fixed?

Mr. HENDERSON. That is correct.

Mr. WILLIAMS. Would that apply to agriculture as well as industry? Mr. HENDERSON. It could. You are way beyond me, Mr. Williams, on that.

Mr. WILLIAMS. Have you or your committee, or your administration, made a study of the difference in the cost of production within certain industries?

Mr. HENDERSON. Yes.

Mr. WILLIAMS. Do you have those figures available? Take copper; what is the spread between the high-cost and the low-cost producer? Mr. HENDERSON. In the matter of cost?

Mr. WILLIAMS. Yes.

Mr. HENDERSON. Seven cents.

Mr. WILLIAMS. Do you mean that the low-cost producer can produce at 5 cents, and the high-cost producer at 12?

Mr. HENDERSON. The low-cost at 6 and 7 cents, and the high-cost producer at about 14 cents.

Mr. WILLIAMS. Do you have that information as applied to the basic commodities, pretty generally?

Mr. HENDERSON. On the manufactured commodities; yes. You may recall that we got the copper figure in the Monopoly Committee.

Here is what we have relied upon where there has been a great number of sellers-we have relied upon the best available information, on the profits records, on Tariff Commission studies, and Federal Trade Commission studies, and on the market prices, and then we have invited hardship cases, high-cost producer cases, to come in and to make their special presentations.

In the case of steel, we had one within the first week. We put a large force at work and it was determined that the contention of the company was correct, and we made the change. That has taken place in at least three other instances that I know of. In connection with the operation of some of the textile schedules, that has been

exactly the course. We have recognized that the community, or Government, buys that production, and that, therefore, a special rate ought to be authorized. It is where the needs of Government supervene that we ought to permit a higher price.

Mr. WILLIAMS. As a matter of fact, there is a very considerable spread between the low-cost and high-cost producer in all lines of activity, is there not?

Mr. HENDERSON. Yes; and there is in many lines also, Mr. Williams, a considerable spread in the prices that are charged when all the discounts and everything else are taken into consideration; that is, the ordinary system of pricing that we rely on in a competitive society is a system of differential prices.

We have had very little complaint from the low-cost producers as to the special allowances that we have permitted the high-cost producers.

Mr. WILLIAMS. Your purpose is to try to strike a generally fair, equitable balance, and to adjust the price at that level?

Mr. HENDERSON. That is correct, and, in addition, to keep on with a study of the costs and profits in that industry, and also to see whether or not material is flowing, because to me, price has an essential function of being the river along which raw material flows until it gets to the ultimate consumer, and it ought not be dammed up by any arbitrary price scheme. We undertake to see whether or not the goods continue to move to market, and if they do not, we think that there is something wrong with the price schedule and undertake to change it.

Mr. WILLIAMS. I think that now we will come to the question of rents. That is in this bill in a limited way. Why has it been limited?

Mr. HENDERSON. That is limited to defense areas. It is intended. as drawn, to apply to the increases in rents that come about from an increase in the housing needs brought about by the Government's own activities. It is pretty clearly defined on page 20 of the bill, and is limited to a $15-per-month-per-room basis. The intention was to take note of what we all have been hearing about, of the market increase in rents due to congestion in the defense areas, and to make some provision for handling that.

Mr. WILLIAMS. Why was that particular period, of August of last year, taken? Is there any particular reason for that?

Mr. HENDERSON. That was about the time that the first money for the defense activities began to go out, and that was the first time we began to find an acuteness in some of the New England areas.

Mr. WILLIAMS. It is not quite clear in my mind why it should be confined to defense activities or to defense areas, for there might be a situation where rents were unreasonable in areas which were not designated as defense areas. That situation can exist, and I am not so sure that it does not exist now.

Mr. HENDERSON. If you look at rent as one of the prices or one of the standards of living, that is correct, but there was an attempt to limit this to the places where the Government was responsible for the acuteness of the situation. It is more of a local problem, of course, than the basic commodity prices.

Mr. WILLIAMS. To my mind, it does not make any difference who is responsible for it. The man who pays the rent is the one who is affected, and if that situation exists in areas outside of the defense areas, it seems to me that we ought to control the rents, as well, in those areas, and I say again that I think that that condition perhaps does exist, not generally, but I think that there are communities where that is true.

Mr. HENDERSON. I would expect that in those communities they would try to do something about it themselves. A number of communities, independently of defense activities, are doing that mainly on a voluntary basis. There is no State legislation on rents that I

know of.

Mr. WILLIAMS. What is this provision in the bill with respect to invoking the Federal authority if the local authorities do not act?

Mr. HENDERSON. It means that when there is a runaway rent situation in terms of the standards set out in the bill, the first opportunity would be given to the local State authorities to handle the situation, and if they did not, then the Federal authority would be invoked. Mr. WILLIAMS. Do you mean by that that you would wait for the State legislature to pass some kind of an act?

Mr. HENDERSON. No, sir. There is a limitation of 60 days in which the State legislature might conceivably act.

Mr. WILLIAMS. Could the State authorities act without legislation? Mr. HENDERSON. Yes. I think that in some of the States and in some of the communities they are bringing pressure on the landlords to hold them down.

Miss Elliott and I did draw up a model statute for the various States, but it was not adopted by any of the States. The situation, evidently, did not warrant it in any State.

Mr. WILLIAMS. Do you think that this price limit, this rent limit. of $15 a room per month, will cover the situation?

Mr. HENDERSON. I do not believe that it would cover all situations, but I think that it would cover the most acute situations.

Mr. WILLIAMS. Of course, the question with me is this: If we have a rent problem, which I think we have, why should we not cover the situation generally, rather than to single out a particular community or a particular price?

Mr. HENDERSON. I would say that we had in mind that this was more of a local than a national matter, such as the price of copper, so that we would suggest a limitation of the authority of the Federal Government to go into a local community in order to administer

rents.

I might say that in Canada they did not have such a limitation. The rent controller there moved into the situation pretty quickly and made an example, the Canadian authorities tell me, of some flagrant offenders, and the rent situation subsided.

Mr. WILLIAMS. Now, there is a provision, or a section in this bill which, as I understand it, is designed to control or prohibit speculative or manipulative marketing practices of buying and selling, hoarding, and so on.

Does that cover the question of installment buying and selling? Mr. HENDERSON. No, sir.

Mr. WILLIAMS. Why doesn't it?

Mr. HENDERSON. Authority already exists in the Emergency Banking Act of 1933 for the control of installment credit.

I suggest, Mr. Williams, that perhaps the chairman will be inviting Chairman Éccles of the Federal Reserve Board, and you might want to interrogate him about that, since it falls in his jurisdiction.

Mr. WILLIAMS. My question is why this bill does not cover it? Mr. HENDERSON. Would you mind consulting with the chairman a minute? The chairman has some special knowledge on that.

Mr. WILLIAMS. I do not believe that I made myself clear. What I mean is, doesn't the provision in this bill which covers that subject when it prohibits or regulates selling practices on the market, also cover installment buying itself?

Mr. HENDERSON. That could cover the actual trade in a commodity at a price, but in my opinion it would not authorize credit. control or the expansion of credit.

Mr. WILLIAMS. The language is "selling practices."

Mr. HENDERSON. That is correct. You could, by going directly to the regulation of the vendor through a licensing system or other systems, actually control, but there is a far easier method, which is related to all other types of credit, and that is through the Emergency Banking Act of 1933.

I think that the power of the Federal Reserve Board to control the extension of credit is the one to be relied on, and if after discussion with Chairman Eccles when he appears it is not clear, I would certainly want to suggest it for the committee's consideration.

Mr. WILLIAMS. Well, your idea is that it should be in the law, if it is not?

Mr. HENDERSON. That is correct.

Mr. WILLIAMS. Your idea is that we should have the power to control installment buying?

Mr. HENDERSON. That is correct.

Mr. WILLIAMS. Do you have in mind what those controls are in the Federal Reserve System, briefly? I do not seem to have them in my mind.

Mr. HENDERSON. I think that Chairman Eccles would make a better witness than I would on that.

Mr. WILLIAMS. Of course, I think I understand the general powers of the Federal Reserve Bank System.

Mr. HENDERSON. I want to suggest that we have that arrangement which the newsboy had who refused someone a loan when he was peddling papers in front of a bank. He said that he had an arrangement with the bank that he would make no loans, if the bank would not sell newspapers. [Laughter.]

The CHAIRMAN. I would say that when the Emergency Banking Act was passed, the matter of great concern to the framers of that act and, I suppose, to everybody in the United States-was to induce or persuade the banks of the country, if possible, to engage in any kind of financing that would tend to get business moving.

Mr. WILLIAMS. There seems to be a difference of opinion as to whether that ought to be in the legislation or not; but we will pass that for the moment. We will go to the agricultural provisions in this bill. Have you a record of the agricultural commodity prices during the last World War, to what limit they rose?

Mr. HENDERSON. Yes, sir.

Mr. WILLIAMS. Then, as a preliminary to that, what field is covered by the expression "agricultural commodities"?

Mr. HENDERSON. I presume that it would be the same commodities which are covered by other congressional legislation on agricultural commodities.

Mr. WILLIAMS. Well, we have special legislation that is applied to what we call or what has been called the basic agricultural commodities, and then others, different kinds. I was just wondering how many agricultural commodities are in this general commodity price level, which is supposed to include some 900 commodities, is it notMr. HENDERSON. Yes, sir.

Mr. WILLIAMS. How many of those are agricultural commodities? Does anyone know that?

Mr. HENDERSON. Sixty-seven out of the 900 are agricultural commodities.

Mr. WILLIAMS. Do you have in your records there what they are? Mr. HENDERSON. I can supply that for the record.

Mr. WILLIAMS. I think that that should go in this record, because it is confusing, and it has been a question in the minds of many as to what field that covers.

Now, as I understand it, the figures that you have are based upon those 67 agricultural commodities?

Mr. HENDERSON. That is correct.

Mr. WILLIAMS. We will be glad to have that.

Mr. HENDERSON. I have here a list of those 67 commodities.

Mr. WILLIAMS. Include it in the record.

(The list of farm products referred to is as follows:)

FARM PRODUCTS INCLUDED IN NEW INDEX OF PRICES RECEIVED BY FARMERS, 1935-39 [*Asterisk represents farm product included in both old and new indexes. + Dagger represents new item included in index but not carried back to 1910-14. No mark after a commodity indicates new item included in index and carried back to 1910-14 period]