Mr. BINGHAM. This underlies the fact that the draft does requiredoes permit the President to require the production of all documents. Mr. MAJAK. And presumably access to them. However, we have removed the specific procedure to seizure. I would point out one more significant thing about the basic authorities. We had a discussion in the first markup concerning whether the authorities in national emergencies ought to extend to both foreign and domestic remedies. It was the position of the staff in the earlier draft that we ought to place some restrictions on domestic remedies.

We have since softened our views on that, and on page 6 (ii), you will see that we provide authority here for the transfer of credit or payments between, by or through any banking institutions. We have removed our earlier limiting phrase which limited that authority to asssets involving foreign interests.

We have, however, retained—and I should have pointed this out, I guess, on page 4-we have retained what is probably the more important provision which limits the use of this act to foreign situations, namely, the phrase "extraordinary threat which has its source in whole or in part outside the United States.".

So, a national emergency can only be declared for essentially foreign problems, but we have retained what the administration has requested, namely some flexibility with respect to the remedies that can be used both domestic and foreign.

Mr. WHALEN. Could you give us an example of where this remedy would be applied?

Mr. MAJAK. Yes, we were looking for-do you mean the use of the domestic remedy?

Mr. WHALEN. What situation, No. 1, might arise in which this would be used; second, how it could be used?

Mr. MAJAK. In, for example, the national emergency declared in 1941 by President Roosevelt, the term "banking institution" was interpreted to include individuals or parties that contracted for consumer durables, which would mean washing machines, or something.

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The President, therefore, was able to control that kind of domestic credit so that it would be essentially a domestic remedy, even though obviously it was, in the President's mind, related to a certain foreign problem.

Mr. WHALEN. Carry this a little bit further, and relate it to the approach the bill takes. Suppose we have a very serious imbalance in trade, serious enough that the President would want to declare an emergency. Would he be able to declare an emergency under this act; and if so, I would imagine, he would be able to impose limitations on consumer credit?

Mr. MAJAK. I would presume that the answer to both of those would be, yes.

Mr. BINGHAM. Does the question come up as to whether the Congress should have veto authority over the definition of what the President might issue under section 206?

Mr. MAJAK. The other document that we provided separately is the provision for congressional veto of the regulations pursuant to this act. This would be one way of giving the Congress a rather specific check over the uses of the act, including cases where the President

might choose to use domestic remedies, or where the Congress might think that such remedies are appropriate.

Mr. BINGHAM. I think the case you cite of President Roosevelt's extension of the term "banking institution," would cover something that would normally not be thought of in the banking institution as an example of where perhaps the Congress should have authority over a definition issued by the President in regulation. Bearing in mind that in all cases the declaration of emergency under the National Emergencies Act is subject to congressional veto, this would be a more limited exercise of that power?

Mr. MAJAK. Yes. While we are stopping, this is jumping ahead in the bill, but I would point out that on page 10, section 206, on the bottom, there is the authority to issue the rules and regulations.

The original Trading With the Enemy Act contained a broad authority to issue rules and regulations, including definitions and definition of terms. Section 206, as we have it, is still quite broad, and it still includes, as the administration has urged, specific reference to describing of definitions, although it is slightly less broad than the definition in the existing Trading With the Enemy Act.

I suppose that here, again, it could be an argument for inclusion of a provision which would allow Congress to veto certain regulations. Mr. WHALEN. Thank you.

Mr. MAJAK. I think that is all.

Mr. CAVANAUGH. I would like you to readdress yourself to 204 (a) and (b). (b) is simply applicable to interests of foreign countries. Mr. MAJAK. That is correct.

Mr. CAVANAUGH. I would draw your attention to (ii).

Mr. MAJAK. I may be incorrect on that point.

Mr. Santos, would you like to address this?

STATEMENT OF LEONARD E. SANTOS, ATTORNEY ADVISER, OFFICE OF THE GENERAL COUNSEL, DEPARTMENT OF THE TREASURY

Mr. SANTOS. If you would allow me, Mr. Cavanaugh, I think the question that you have in mind is whether 204 (a) may be used in a situation where there is a threat, an extraordinary threat from a source which is substantially outside of the United States. Is that the question?

This language under 204 is no longer modified by the term "to the extent to which there is a foreign country or national interest."

Mr. CAVANAUGH. The power would arise under the definition of 202? Mr. MAJAK. That is right.

Mr. CAVANAUGH. The source outside the United States, I understand that. Once the application has been made, it gives rise to these powers in 204.

Mr. SANTOS. Which powers are not restricted to foreign nationals. Mr. CAVANAUGH. In particular, (a) (2) would confer upon the President absolute, unlimited, and unrestricted power to place any restrictions, regulations, or investigations on the entire domestic banking system of the country.

Mr. MAJAK. Yes, but you were referring to (B).

Mr. CAVANAUGH. No.

Mr. MAJAK. It would apply whether or not there was a foreign interest or not. (B), however, would apply only to those properties which involve a foreign interest.

Mr. CAVANAUGH. Right, and again the reason for that is

Mr. SANTOS. May I interrupt for just a moment. I want to point out that my understanding is that whatever is done pursuant to section 204, it must be to carry out the purposes that are specified in 202. So it is not anything he wishes to do with banking institutions. Presumably, it would have to be consistent with 202.

The other thing I would point out, (A) is not restricted to powers involving the interest of a foreign country or national. It is (B) that is modified by that term. So with respect to banking transactions, transactions of foreign exchange, and the importing or exporting of currency or securities, those powers can be exercised whether or not there were foreign national interest in those.

It is (B), the power to investigate, and so forth, that is modified by the phrase "to the extent that there is a foreign country or national interest therein."

Mr. MAJAK. Is your question, why do we divide them that way? Mr. CAVANAUGH. Why we confer those powers in (a) without reference to foreign countries or nationals?

Mr. MAJAK. That is basically something that the administration wants to do.

Mr. SANTOS. This was an issue that you raised and asked us to look into.

Mr. CAVANAUGH. I don't think that it was specifically, but in general. Mr. SANTOS. We had pointed out in the previous draft that the power to regulate banking transactions is one of the things that are now listed under (i), (ii), and (iii) in the previous drafts. Those powers were modified, at least (i) and (ii) were modified by the phrase "to the extent that there is a foreign country or foreign national interest involved."

We have pointed out that it would be limiting power that is now conferred by 5(b). I don't say or purport to say that the administration opposes or is in favor of deletion. I simply wanted to note that this was what was occurring.

You asked me to consult with the administration, and find out how it felt about that deletion.

Mr. CAVANAUGH. I thought that I was speaking in reference to 202.

Mr. MAJAK. We have retained 202 essentially as it was in the earlier draft, namely, focusing

Mr. CAVANAUGH. You have changed it from "exclusively," to "substantially."

Mr. SANTOS. The net effect of both of those is somewhat similar in both cases. In one case you are restricting the transaction in which there is a foreign country involved, and in the other case you are saying that there must be a foreign source for the national

emergency.

We have gone back and done some research. We do not have a final bill from Congress. The administration is somewhat reluctant to give

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a position on the subject, but we did consult, we did do research, and I can state that nobody with whom we have talked felt that the deletion of the domestic aspect now contained in 5(b) would be troublesome.

The Federal Reserve Bank and others pointed out that many of the powers that are now conferred under 5 (b) with respect to domestic transactions are now conferred by other sections which have been enacted.

It was pointed out to me that section 12 U.S.C. 95 contains powers, very broad powers during times of national emergencies to regulate the member banks of the Federal Reserve System. That is a power given to the President which has nothing to do with the Trading With the Enemy Act.

With respect to banking transactions involving Federal Reserve banks, there are existing powers apart from 5(b) to regulate. There are other sections which do not or which are not quite as broad as the ones I just cited for you, but do supplement the powers that are now given by 5(b).

So, quite honestly, I am not sure, once the administration is presented with the deletion, the one contemplated in the previous draft of the domestic angle of 5(b) that they would veto it, but we have not gotten a clear administration position on that.

We have cleared this with various agencies that might be interested, and they have not indicated a great concern on this. We perceived from the Federal Reserve Board that they would not be particularly concerned if 5(b) were repealed in its entirety.

I think that it is fair to say that we would not be terribly concerned by the deletion of the domestic angle. However, it is not an administration position until it is presented to them in the form of a bill. I am sure that, then, there will be a firm administration position.

Mr. BINGHAM. In light of this discussion, it seems to me that we should put the limitation back in.

I think the question that Mr. Cavanaugh raises is a very good point. I think that unless there is good reason to do otherwise, it should be as it was before, restricted to banking transactions having some foreign implication. How would the administration react to that?

Mr. SANTOS. Many of the powers with respect to banking transactions that I noted for you are restricted to the powers of the Federal Reserve Board with respect to Federal Reserve banks, and do not extend to national banks. So with respect to national banks, there may be significant gaps left if these modifiers are put in.

Mr. BINGHAM. Under what circumstances does the President need that power? I think that this is a question that we do not resolve in the committee, and which I think can be raised on the floor, namely, providing this authority for purely domestic transactions. Unless we have pretty good reasons to do so, I don't know why we should.

Mr. MAJAK. One argument that the staff found somewhat persuasive on the point was the practical problem of distinguishing between those items which may have a foreign interest, and those which do not, in a bank account.

There are other statutes of which we are aware that make such a distinction, so presumably banks are capable of determining which of their accounts, for example, have foreign interest and which do not. We are not sure that this would be the case in every instance. It might

be difficult to administer this under the summary authorities, if one had to make the distinction between property that did or did not have a foreign interest. We were somewhat persuaded by that.

Mr. BINGHAM. I am going to have to leave in a couple of minutes. I would ask the gentleman to take over the Chair. However, first, I would like to raise a couple of questions.

On page 5, it seems to me that (ii) on the bottom of the page is overkill. I don't see any need for that "If the Congress is physically unable to see whether the emergency should be terminated." The same is true of the declaration of war.

I would suggest that it would simplify this page, which is very difficult to follow, by eliminating the reference to declared war. That is something that we could consider tomorrow.

Mr. SANTOS. Mr. Chairman, there is one comment that I would like to make to you before you leave. I believe there may be a misapprehension as to the grandfathering, so-called grandfathering clauses.

As I understand this bill, and I have had it before me for perhaps a half hour, it would require that once the 2-year period provided under National Emergencies Act expires, a new national emergency would have to be declared. That is not required by the National Emergencies Act. Section 5(b) is not now under the National Emergencies Act.

Mr. BINGHAM. All that we are doing here is to apply the National Emergencies Act.

Mr. SANTOS. Under the language of this bill, the President must declare a new national emergency. It is about five or six lines from the bottom on page 2, after the words "National Emergencies Act," it says: "If a national emergency is declared for purposes of this subsection."

Mr. WHALEN. If I understood Roger, I think that is correct.

Mr. MAJAK. The President could choose not to extend the authority. Mr. WHALEN. As it was explained, this is not subjected to any congressional action.

Mr. SANTOS. We understand that, Mr. Whalen. I want to point out, though, that the way it is written, it might be construed that the national emergency would be redeclared rather than merely be extended through congressional notification, and Federal Register notice. Mr. BINGHAM. Let us look at that again. It is one thing to simply state the declaration of emergency of 20 years ago is extended; it is another thing, and this is what I would propose, to require the President to say the emergency continues. That is what I understood was required, was provided for under the National Emergencies Act. Mr. SANTOS. I am not sure that it is the same as to say, you will declare a national emergency.

Mr. BINGHAM. All you would be required to say is that the emergency continues. There would not have to be a new emergency.

As a matter of fact, I had somewhat of a similar suggestion on the bottom of page 4, "unless the President declares that the national emergency continues." I would like to suggest the possibility of, at the top of page 4, that the words "unusual and," be included there.

Mr. Whalen asked what is the definition of extraordinary, and we don't attempt to define that. But I think if the words "unusual and" were added, it would stress that this is not intended to cover the case, and continue the problem, which is supposed to be an unusual problem.