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Now, we had to consider where we were cut. Two of the places we could cut on the civilian are in lead foil and also in the lead content in the high-test gas. A lot of automobiles have been built to take this high-rated gas. So, we have on those two items a question of what to do.

Lead production has been sufficient at 57/8 cents to take care of that. Now, we need, say, 40,000 tons more of lead, or we may need even more, for defense. We are confronted with this problem. We can't buy up that marginal production at, say, 711⁄2 or 8 cents, because we have no way of selling; there is no way of pooling it.

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Senator BALL. How is Jesse Jones going to get rid of this copper, buying it for 15 cents under this contract that you told us about? Mr. HENDERSON. Well, as I said, he sold it to the Lend-Lease. We hunted around for some means by which we could prevent when we negotiate price he usually wants little commission, and we had to find a special arrangement. Everybody agreed-Will Clayton and Jesse, Hopkins, the O. P. M., ourselves, the Governor of Michigan-that this was the thing to do. If we had had this power we could have handled it. Now, every one of these metals is going to be subject to a review, and we are going to need the marginal production in this country.

Senator MALONEY. Mr. Henderson, might I ask you at that point whether or not you feel and I assume you have given careful thought to it that an increase of a cent or 2 cents per pound in the ceiling or the price of copper would give you much additional production in the standard mines, the regular mines.

Mr. HENDERSON. We have, but it would not give us an amountwhat we would rather see done is to pay a higher price for, say, anything above 110 percent of the first 6 months' production, pay up to 15 cents if necessary, and absorb that loss. You see, every cent the price is raised-we have 135,000 tons. You raise it a cent; that is what? It runs three, four million dollars a month for every cent copper is raised. Now, you can do a lot and you can save the community a lot by buying the high-cost production at the higher rate for the additional.

Senator MALONEY. Yes; but there is a limit to the high-cost production, about 135,000 tons per year?

Mr. HENDERSON. That is right.

Senator MALONEY. I wondered if you could more than pick up that 135,000 tons or add to it by allowing the standard producers an additional cent, let us say. Could that increase

Mr. HENDERSON. I think you could pick up some of it; yes, sir. Senator MALONEY. Have you given any study to how much you could pick up?

Mr. HENDERSON. Yes; but I know this: That it would cost us about-let me see. We figured that the additional would cost us 37 cents a pound.

Senator MALONEY. Well, that is too much for me.

Mr. HENDERSON. Well, you have to pay it. You are getting now, say, a million tons of copper a year at our 12-cent rate.

Senator MALONEY. Yes.

Mr. HENDERSON. If you raise it 2 cents, say, to get 50,000 or 75,000 more tons

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Senator MALONEY. Well, but I did not ask you that. I did not say seventy-five or eighty thousand more tons. I asked you if you knew how many additional tons you could get.

Mr. HENDERSON. Yes.

Senator MALONEY. Because you are not just dealing with the copper alone at that point. You are dealing with thousands of industries who may be compelled to close because they cannot get the copper. But every ton of copper that has been heretofore selling at 12 cents would have to be paid for at the 1 or 2 cents more; that is right.

Senator BROWN. Therefore it would mean an average cost on the extra copper would be four or five times the amount per pound that you are now paying.

Mr. HENDERSON. That is right. And I say I am greatly in favor, and always have been, of getting this extra production. We have said to the R. F. C., several months ago, that we would authorize a price for this additional production, and they are negotiating now with the three standard major companies for increased copper production at a higher rate, but to pay for that smaller amount, and the copper companies are going to deliver some copper on that. They have made their own estimates on it. What I have said is that it is not necessary, and in addition you compound your inflationary status. It is much better to take the bookkeeping loss than allow that much of an inflated value to get into your price structure particularly at the beginning end of the process.

Senator DANAHER. Mr. Henderson, I assume it would not be feasible to have two prices for a standard company, to pay the higher price only for excess; that would not be workable, would it?

-Mr. HENDERSON. To pay a company, yes; it would pay us, for example, to pay Kennecott 12 cents for their standard production and 14 cents for what they would get by an extra effort.

Senator TAFT. May I ask a question, Mr. Chairman?

Mr. Henderson, the R. F. C. power is this: "To produce, acquire, carry, sell, or otherwise deal in strategic and critical materials as defined by the President." Now, the President can include any strategic materials in that power. So they have the power to buy and sell anything relating to the defense program, as I see it, at all.

Mr. GINSBURG. Senator Taft, may I reply?

Senator TAFT. Yes.

Senator HUGHES. You mean that is the purpose of the present law? Senator TAFT. That is the present law of the R. F. C.

Senator HUGHES. I mean the present law.

Senator TAFT. That is the present R. F. C. law.

Senator HUGHES. Oh, it is, yes.

Mr. GINSBURG. We took this up with the R. F. C., and they raised with us two considerations. The first was that in the definition of strategic or critical materials they must consider only those things which were related to the defense program. So that copper would be included, Senator Brown pointed out, in the proviso and could not be purchased. That is, it could not be purchased under the other provisions of this bill.

Senator TAFT. Copper is really not in issue here. He is always talking about copper, but that is really not in issue.

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Mr. GINSBURG. That is right. Only the R. F. C. could buy copper as strategic or critical material.

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Now, there is a further consideration. Whatever r you may say the provisions of the law as presently administered by the R. F. C., Secretary Jones takes the position that he has no authority to sell that copper at a loss, and it was for that reason

Senator TAFT. I mean, he cannot take that position.

Mr. GINSBURG. Well, that is

Senator TAFT. Of course, maybe he had to sell it at a loss. How is he going to help himself from selling it at a loss?

Mr. GINSBURG. Well, this is Michigan copper we are talking about. He bought that copper only after an arrangement had been made with the Lend-Lease Administration to purchase copper at the higher price so as to cover his cost.

Senator TAFT. Well, but this section that you are striking out is intended, I think, if the wording is not broad enough, to authorize the President to tell him to sell at a loss to carry out the purposes of this

act.

Mr. HENDERSON. Well, the next time we have one of these conferences I may ask you to go as my counsel. I mean no criticism of Jesse Jones in this, but I think you ought to know that we have, as a price office, been in favor of expansion of raw materials ever since the defense effort started. We have tried by many methods to increase the standard production and to get the marginal production, and we have never hesitated on the matter of price, and we have spent quite a bit of time trying to induce that attitude of mind which the Senator says could be present.

Senator TAFT. Well, now, how does your bill, how does your amendment, in any way reduce Jesse Jones' authority?

Mr. HENDERSON. It does not reduce that.

Senator TAFT. That is, to sell at a loss.

Mr. HENDERSON. What it gives him is the authority to buy and sell in order to carry out the purpose of this act. It gives him the authority. It expands and makes clear that he does have the right. Mr. GINSBURG. To take a loss.

Mr. HENDERSON. He would buy the copper, and he would be able to sell it.

Senator DANAHER. Page 8.

Mr. HENDERSON. No. Begin at the bottom of page 7. Senator TAFT. But that is in the House bill. We did not need that. This is just on your amendment. That is in the House bill already. Mr. GINSBURG. Well, may I explain, too? There were in general two changes that we had in mind. The first was the House bill authorized only the exercise of those powers which heretofore had been conferred or hereafter would be conferred and in itself conferred no powers. So this bill-this revision-was intended to confer the power to buy where needed from marginal producers and otherwise to prevent price increases. But if it involves strategic or critical materials, then the R. F. C. has the exclusive power to do that purchasing.

Now, it did one other thing: It authorized the purchase of commodities to prevent price increases inconsistent with the act; this authority includes power with reference to imports. As the House

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bill was originally written it was limited to the purchase of domestic production. This went step beyond that and authorized the import of certain materials that we need for the purpose of maintaining prices.

Those were the two primary changes we had in mind. It was not in any way a derogation of power from the R. F. C. It was in substance an enlargement of that power so far as strategic and critical materials were concerned.

Senator TAFT. I do not quite see, still, why your amendment in any way changes the authority given by this bill to the R. F. C.

Mr. GINSBURG. Well, just let us look at the bottom of page 6. You will see that the buying and selling authority was given with reference to the exercise of authority heretofore or hereafter conferred on them by law to buy, sell, store, use. Well, this did not give it, since the power had not heretofore

Senator TAFT (interposing). What power?

Mr. GINSBURG. The power to sell at a loss.

Senator TAFT. Why, of course, they had power to sell at a loss.

They may say they have not, but they have.

Mr. GINSBURG. Well

Senator TAFT. How can they help selling at a loss? The Commodity Credit Corporation sells at a loss whenever it wants to sell at a loss.

Mr. GINSBURG. There is really nothing more you can say except that we have dealt with the R. F. C., we have talked with them, and we have tried to convince them that you are right.

Senator TAFT. Well, I do not think on the passage of your amendment you are going to exercise any pressure on them.

Senator BARKLEY. Well, this is not supposed to exercise pressure on the R. F. C. This is supposed to give authority to the President according to what the R. F. C. wants.

Senator TAFT. Well, it does not show at the bottom. Mr. GINSBURG. If a material is critical or strategic as already defined by law, then the Price Administrator is not given any additional authority.

Senator BARKLEY. I know, but I am speaking of articles generally. Mr. GINSBurg. As to other articles which are not critical or strategic. Now, that brings up the next point.

Senator TAFT. That is the other point I want to raise.

Senator HUGHES. Before you leave that point, Senator, in reading over (e) it seems to me that practically the only change as made by the proposed new provision for (e) is this part down here, then: "any authority heretofore or hereafter conferred." That is what you object to?

Mr. HENDERSON. I say that no additional power is conferred. Senator HUGHES. That is, the same power is either given to the President to direct it to be done-in your case it is given to you to do it-or to have it done. It is the same thing. And that is what you want out, those words?

Mr. HENDERSON. Well, that is the main thing, but we want also the authority to deal with imported commodities.

Senator TAFT. Well, Mr. Henderson, the main effect of your amendment is to authorize you to buy and sell any kind of products, whether they are strategic or critical or anything, for the general purpose of affecting prices, and I wonder-I thought that process might be all right up to, say, 10, 15, or 20 percent of the crop, so to speak, or of the total, and that is implied in your words, "in order to obtain the maximum necessary production of marginal or high-cost producers," but then you go on and just nullify those words, make them mean nothing, by saying, "or to prevent price increases," which opens it up again wide open. Now, if that were confined to buying the maximum necessary production of marginal or high-cost producers not to exceed 20 percent of the annual production of the country, or something of that kind, I would not have much objection to it any more. I would perhaps rather not, but I can see some point in that. But I do not like this idea that you can work on toward the Government just buying out a whole industry and taking it over because we do not like the way the prices are acting in the industry.

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Mr. HENDERSON. The only objection on the import

Senator TAFT. I have not much objection to an import provision;

Mr. HENDERSON. That is the one we run into most, and we are going to run into.

Senator TAFT. I can see much more reason for the import.

Mr. GINSBURG. Well, that would be left out, you see, if you did not go beyond that.

Senator TAFT. Yes.

Mr. GINSBURG. I think it is conceivable you could limit somehow the amount which could be bought of the output of any industry.

Senator BALL. You are speaking that price increases are consistent with the purposes of this act?

Mr. GINSBURG. Well, they could not prohibit them from purchasing things. There are primarily two things we have in mind. First, there is marginal production, and, second, imports. Now, if we could spell it out more specifically in some other way I think that would certainly be better.

Senator TAFT. Well, we could work it out practically.

Mr. HENDERSON. I should like the record to show, Mr. Chairman, that the provision was drafted in the light of acute and persistent difficulties with specific commodities, and that there has never been any plan or any purpose to try to use this as a means of buying up the entire production of a standard American industry for the purpose of producing a price control. I agree with the Senator that if you got the uniform objection of an industry to a price you should not have the complete resources arbitrarily to put compulsion on that. Furthermore, the price control would not work in that commodity.

Senator TAFT. I think so, too; yes.

Mr. HENDERSON. It takes what I call at least the reluctant acquiesence of an industry in a price, in the sense that it is fair, before you can really make it go. It is not just the setting of a price which really controls the price; it is the acceptance of that in an industry and in its use, and a general feeling that it is not to be evaded, which make the price control work.

Senator BROWN (presiding). I think we sufficiently understand the issue. Let us go on.

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