5. Business. - Started a real-estate management business June 1, 1933, which is now the largest independent real-estate management business in Hartford having approximately $5,000,000 worth of property in charge. The business has a real-estate brokerage department, acts as mortgage-loan representative, and controls Jones Bros., Inc., a successful insurance agency. 6. Graduate studies. --Made graduate studies in real-estate economics and appraising in short summer courses at Chicago University and Wharton School of Finance in Philadelphia. 7. Professional recognition. Is a Hartford real-estate management representative for the Equitable Life, two of the four local savings banks, one other Connecticut savings bank, and many private individuals and corporations. 8. Articles and addresses.--Author of several published articles on real-estate matters and invited by clubs or service organizations to give addresses on realestate subjects. Will address the New Haven Bankers Association on the subject "Decentralization" at their March meeting. 9. Rent-control qualifications.-Member of executive committee, Hartford Real Estate Board; chairman of fair-rent committee of the board; member of the committee on the rental emergency of the National Association of Real Estate Boards; chairman of the Hartford fair rental committee panel appointed by the Connecticut State Defense Council. 9A. Author of a plan for rent control originally submitted to Leon Henderson by Senator Maloney which was highly praised by Leon Henderson. Consulted on several occasions by the chief and staff of the rent section of the Office of Price Administration and Civilian Supply both in Hartford and by request of the Office of Price Administration and Civilian Supply in Washington. 10. Other activities. Director and one of the organizers and officers of Governmental Research Institute (budget, $20,000 per year) a privately financed research organization specifically interested in the fiscal affairs of Hartford; president of the Hartford Get-Together-Club; member of Hartford Rotary Club; member of Hartford University Club; member of Hartford Golf Club; treasurer of and director of various real-estate corporations. Senator BROWN (Presiding). You may resume, Mr. Henderson. STATEMENT OF LEON HENDERSON, ADMINISTRATOR OF THE OFFICE OF PRICE ADMINISTRATION, WASHINGTON, D. C.Resumed Mr. HENDERSON. Mr. Chairman and gentlemen: I discussed this morning the very sensitive relations between the cost of living and the courses of prices from here out. I had just begun to point with a great deal of pride to the extremely good record of production which the American productive machine has made since the defense effort began. I think this record surpasses any other industrial production in so short a period. I think it argues, also, that if we had not had that expansion, if we had not been able to take advantage of idle capacity, idle men, and excess inventories, we would probably have had a greater strain on the price structure than has taken place to date. I will put it another way; the price structure today is probably as sensitive as it has been in the last 12 years. It has been below the average of the twenties for a considerable period. We began, as I said, with a low level of prices. That was particularly true of our agricultural commodities, which have had special attention from the national legislature. But since about June or July of this year the strong forward thrust of production has ceased. That means that we have reached or have begun to reach the limit of our productive mechanism; that we have touched several bottlenecks. Of course, those bottlenecks reflect themselves in priorities and restraints on the use of materials. At the present time the Federal Reserve Board index stands at 166 (chart 20). It is a necessity of my office to indulge in "guesstimating." because so many of the current decisions relate to events which will transpire in the future. We have had an ordinary amount of luck with our "guesstimating." Our feeling is that in 1942 we may reach at some month a level of 180 in the Federal Reserve Board index, but that the average will be somewhere between 173 and 175-that is, for the whole year. This estimating was done before war broke out. It was done in terms of what the expansion of new capacity already laid down for armament production will be and does not take into account anything which might be stimulated by reason of special efforts to meet the war demands. But withal, the possibilities of getting into another forward impetus of production are relatively slight. It takes time to build new plants; it takes time to open up marginal mines. We are, of course, threatened with a shutting-off of some of our important raw materials. Senator MALONEY. Mr. Henderson, what is the situation as of today on copper as related to your office? Mr. HENDERSON. Do you mean on the price of copper? Mr. HENDERSON. The price of copper for standard production is 12 cents. Senator MALONEY. That is the price you fix? Mr. HENDERSON. That is right. Then, we have made special prices for marginal production on contracts to be negotiated by the R. F. C. Senator Maloney. In each individual mine? Mr. HENDERSON. Yes. Senator MALONEY. Are those prices fixed? Mr. HENDERSON. Those prices are the result of negotiations between the R. F. C. and, for example, the Northern Michigan marginal mines, and every week some additional contracts are being negotiated. We have also suggested that we would approve a price up to 14 or 15 cents a pound for the R. F. C. if they would negotiate for, say, additional production over some base period, such as the first 6 months of this year. Senator MALONEY. SO, R. F. C. would make the price, and you would have the right of veto? Mr. HENDERSON. No; we make the price; they make the contract and ask us about the price. Senator MALONEY. Have you actually completed any negotiations? Mr. HENDERSON. Yes; several. Senator MALONEY. With mines in operation? Mr. HENDERSON. Yes; but most of them were mines that had some production up to now. We have canvassed over a period of time the possibility of marginal mine production, and I think I am safe in saying it is not nearly so large as is generally expected. Senator MALONEY. How much is it, offhand? Mr. HENDERSON. I would say that it would run from 60,000 to 120,000 tons, but that some of it could not be gotten into operation for from 18 to 24 months. Senator MALONEY. What is the regular production under the 12-cent price? Mr. HENDERSON. The regular production runs around a million tons. Senator MALONEY. Do you know offhand, Mr. Henderson, about what the consumption is? how much copper we are using as of now? I do not mean allocations; I mean actual use. Mr. HENDERSON. Do I know how much is actually being fabricated each month? Senator MALONEY. Yes; or that will be for the coming year, let us say. Mr. HENDERSON. Well, we have been getting from South America, from the total production here, and from that which is got by way of scrap, about 135,000 tons a month lately. That is the amount which is allocated. To take a base period, I imagine we use in the neighborhood of 65,000 tons of copper for normal civilian consumption. Senator MALONEY. We cannot use that very well now, because we are taking a lot of that away. Mr. HENDERSON. We are taking away, Senator Maloney, the increase above that. That is what has really been taking place. Senator MALONEY. I want to keep that simple, because I find it hard to get into big numbers. Can you tell offhand about how much we are actually using per month-how much we are fabricating? Mr. HENDERSON. Well, we are fabricating from 135,000 to 140,000 tons a month. Senator Maloney. That is actually being used now? Mr. HENDERSON. Yes; and when I say "fabricating" I mean that in the Naugatuck Valley some of the brass mills might be just stamping out the cuts for cartridge pieces and shipping them. But as far as the flow through the brass mills, the rod mills, and all the other fabricating plants is concerned-not into final use but at that fabricating stage-about 135,000 tons. Senator MALONEY. Would that be material that is principally used in actual defense material or articles? Mr. HENDERSON. I will put it this way: The priority ratings run from A-1 to A-10. Now, they covered last month at least 8,000 to 10,000 tons more than are available to be allocated, so that if we use 135,000 tons, all of that presumably has had a rating. I will not give you a guaranty on that, because I do not know, and it does not completely add up. I think that there has been a little carelessness about ratings, and the like, and some that may have slipped us. Senator MALONEY. It would be pretty hard to criticize, much more than it was a week ago, but don't you think that many allocations were made of copper, and probably of a great many other things, that would not be used for 10 months, 12 months, or a year and a half? Mr. HENDERSON. Yes; I do. I think I can show just what has been happening, not just to copper inventories. This line [indicating on chart 21] represents the percentage change in inventories from April to September. Senator BROWN. Is that based 0-20-40? Mr. HENDERSON. No; 25 and 50. Senator BROWN. In the particular group? Mr. HENDERSON. The black represents the percentage increase in raw-material inventories. This represents the goods in process [indicating]. This represents the finished goods inventoried. happened, because I have checked several concerns. You build a new plant-say a new cartridge plant and you have to accumulate an inventory for that plant to begin with when it is built. They immediately go out and order and get a priority for delivery. Say it takes 8 months to build that, and they expect to go into operation in 8 months. Suppose they are delayed 2 months. They have arranged at the eighth month for a heavier supply of copper than at Senator BROWN. Do those blocks represent 20 or 25 percent each? Mr. HENDERSON. Twenty-five percent. We have had a stupendous increase in inventories since April. Up to April we were increasing at the rate of about $200,000,000 a month. These are total inventories. Over a few months it ran at the rate of about $400,000,000 increase, and the last figure was $700,000,000 (chart 22). In answer to your question, I think that there has been a great accumulation of raw materials, some of which will not be processed for several months. But here is another thing which I am sure has These figures are estimated on the basis of reports from a representative sample of firms out now that we are down to serious business. Senator, are 10,000 or 15,000 tons that I think will be squeezed tremendously larger amounts of raw materials. Somewhere in there, 165 in the Federal Reserve Board index, the veins of industry require In the main, what has been happening? Running at the rate of and they have had to turn it off. JFMAMJJASONDJFMAMJJASONDJFMAMJJASOND 0 which has been too heavy; they did not have the storage facilities the ninth month, and there was an accumulation in a couple of cases -100 -1.2 1939 1940 These figures are estimated on the basis of reports from a large representative sample of firms. -2.4 -200 SOURCE: U. S. Department of Commerce -200 -2.4 |