the Office of Small Business. What do they need an Office of Small Business today for, with the SBA doing the job?

Mr. BARNES. Well, a number of agencies have such an officer, and he is usually just a liaison type officer and handles coordination of small business programs within that particular department.

In this particular case they have, I think, 1 man or 2 men in that particular office, and they-well, rather than deal with their functions, I understand that Commerce itself is going to testify before you tomorrow. I think they should answer that question, as to what his functions are.

Mr. MULTER. You made no mention of the Budget Bureau in your statement. Has your statement been cleared with the Budget Bureau! Mr. BARNES. Yes, sir, my basic statement has been cleared, and the Budget Bureau has no objetcion to the comments I made on H. R. 7474, with the exception of the fact that they understood that it had been prepared rather hurriedly, and that it might be subject to correction in case there were any lapses on the part of the person delivering it.

Mr. MULTER. What are you referring to as being prepared hurriedly?

Mr. BARNES. The comments I gave the other day on it.

Mr. MULTER. Oh, yes, we all understand that you had comparatively little time in which to do it, between the time you got it and the time you had to come up here. As I said to you privately, I will repeat for the record, particularly having in mind the little time you had, it was an excellent analysis of the bill, and you were very fair in your comments about it.

Thank you, Mr. Chairman.

Mr. BROWN. Mr. Barnes, we want to congratulate you on your splendid statement. We appreciate your views. You may be excused. Mr. BARNES. Thank you, sir.

Mr. BROWN. The committee will adjourn to meet tomorrow morning at 10 o'clock.

(Whereupon, at 4:30 p. m., the committee adjourned to Friday, May 17, 1957, at 10 a. m.)

SMALL BUSINESS ACT

FRIDAY, MAY 17, 1957

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met at 10 a. m., Hon. Brent Spence, chairman, presiding.

Present Chairman Spence, Messrs. Brown, Patman, Multer, Reuss, Breeding, Talle, Kilburn, Betts, Mumma, and Bass.

The CHAIRMAN. The committee will be in order.

Mr. Mueller, the Assistant Secretary for Domestic Affairs, Department of Commerce, is the witness this morning.

Mr. Mueller, if you have a prepared statement, you may read it without interruption and subject yourself to interrogation after you are finished.

Mr. MULLER. Thank you, sir.

STATEMENT OF HON. FREDERICK H. MUELLER, ASSISTANT SECRETARY FOR DOMESTIC AFFAIRS, DEPARTMENT OF COMMERCE

Mr. MUELLER. Mr. Chairman and gentlemen of the committee, at the outset I wish to tell you how deeply we appreciate the opportunity to appear before this committee to discuss with you the legislation you are now considering dealing with the problems of small business and how the Federal Government can best assist in the solution of these problems.

As you know, the basic charter of the Department of Commerce is to foster, promote, and develop both the foreign and the domestic commerce of the United States. Our mission concerns itself with business of every kind and character-big, medium sized, and small, and certainly in the discharge of this historic responsibility we are keenly interested in giving every posible assistance to any segment of the commercial community of this country which may have a prob

lem.

As you further know, for some time the executive branch has been engaged in the study of the problems of the small-business men and has reached some conclusions concerning steps which we feel should be taken to assist him in the solution of his problems. The development of this program requires legislation to extend the Small Business Act and to empower the Small Business Administration to do certain things.

In examining the legislation before you, we find that the provisions in H. R. 6645 by Mr. Hill of Colorado faithfully implement the ideas which the executive branch has developed on this subject, and is con

sistent with the program of the President. Therefore, we appear before you this morning to ask your serious consideration of Congressman Hill's bill and to convey to you our deep feeling that the interests of the small-business man would be best served by the prompt enactment of H. R. 6645. Secretary Weeks has written a letter to you, Mr. Chairman, in support of this measure.

We should also point out we have made a very careful examination of H. R. 7474, by an important member of your committee, Congressman Multer. This measure also contains many of the provisions which we believe would be helpful to the small-business man. But we do want to point out that it contains some provisions which give us very serious concern. For this reason, we feel we must oppose certain provisions of this piece of legislation.

In particular, Congressman Multer's bill has two provisions which, upon detailed examination, we believe would in the long run prove to be disadvantageous to the small-business man-the very person that all of us are trying to help. If I may, I would like to discuss these provisions with you gentlemen briefly in order to make clear the basis for our concern. I shall take these matters up in what we believe to be their order of importance.

First, section 103 (d) of Mr. Multer's bill (H. R. 7474), in effect, abolishes the Loan Policy Board as it functions pursuant to the legislation under which the Small Business Administration currently conducts its affairs.

The current Loan Policy Board is composed of the Administrator of the Small Business Administration, the Secretary of the Treasury, and the Secretary of Commerce. As you know from the abundance of testimony heretofore adduced concerning the functions of the Loan Policy Board as presently constituted, it functions on the broadest possible policy basis.

It does not pass upon the individual loans to the small business people but establishes loan policy from time to time as national conditions dictate within which the lending function is conducted. The function which the Loan Policy Board presently performs for the Small Business Administration is closely analogous, if not identical, to the role such boards play in lending institutions generally.

Here, they have historically demonstrated their effectiveness throughout the country. For such a board to be effective in providing such broad policy guidance, it is necessary for it to be comprehensively informed of the financial conditions of areas served and to be similarly aware of industrial conditions and commercial opportunities in these

areas.

It is for these reasons that membership on the Board of the Secretary of the Treasury and the Secretary of Commerce is valuable in helping small business in solving their particular problems. They bring to bear their intimate day-to-day knowledge of the money markets of the country, including such matters of availability of money, interest rates, and many other factors which must be considered from time to time in the establishment of sound loan policy. Likewise, the Secretary of Commerce contributes from his current detailed knowledge of industrial conditions and commercial opportunities provided to him by the commercial fact-gathering agencies in the Department of Commerce which report to him daily.

Experience has proved the wisdom of this present type of organization of the Loan Policy Board. The Administrator of the Small Business Administration has spoken often of the important role which the representatives of the two departments with major responsibilities in the closely related fields of finance and industry play in assisting in development and decision on policy in the lending field.

The legislative history of the existing law, particularly comments on the floor at the time of passage, makes clear that subject to very broad standards, lending policies so developed provide for proper use of the taxpayers' money by the lending agency.

This board performs an important responsibility which should be performed by Government officials, and which we do not believe could be carried out if the council table for making loan policy is deprived of the unique information which can only be brought to bear on the problem by the Secretary of the Treasury and the Secretary of Com

merce.

Congressman Hill's bill, H. R. 6645, preserves this important Loan Policy Board function.

In this connection, we should point out that adequate safeguards for the receipt of the views of the small-business community are provided by present statutes (sec. 212 (i)) and by H. R. 6645, Mr. Hill's bill, and by H. R. 7474, Mr. Multer's bill, all of which authorize the establishment of small-business advisory boards to the Administrator. By use of these boards, the Administrator is always in a position to know the views of small-business men and small bankers with respect to all phases of the small business problem.

Section 103 (d) of H. R. 7474 causes us concern not only because it does not provide for a Loan Policy Board of the nature of which we have been discussing, but also because it would, in our opinion, introduce additional real and difficult problems. This bill would provide for a Policy Board of three members-the Administrator, a representative of a small business and a representative of small banking.

The small-business man and the small banker would be part-time Government employees actively engaged in their respective businesses. This Board would be responsible for establishing and modifying, as conditions indicate, the general policy under which the Administrator of the Small Business Administration would be required to operate. This seems to us to be embarking on the questionable practice of placing important governing powers in the hands of non-Government people. The problems arising in the conflicts-of-interest field with people who perform part-time Government services, while engaged in private enterprise, has been the subject of frequent congressional discussion and does not need elaboration here.

Experience has shown that even with advisory committees, composed of private citizens, the best interests of the Government require that these groups be strictly limited to giving advice, never performing operations or establishing policy. The advice must be directed to fulltime, salaried Government officials who then must have the power, without limitation, for either accepting or rejecting this advice as in their opinion the best interests of the country require.

Second, section 115 (b), which reads as follows:

All small business functions not heretofore transferred to the Small Business Administration by the Department of Commerce are hereby transferred upon the effective date of this Act.

If this provision is interpreted to provide for transfer of functions which are directly and immediately related only to small business, these functions were transferred originally to Small Defense Plants Administration and thence, upon its creation, to the SBA. We understand that the Administrator has also testified to this effect earlier this week. There is, therefore, nothing relating exclusively to small business left to be transferred.

The provision is also subject to the interpretation that any function which has as indirect or peripheral effect on small business should be transferred. The results of such an interpretation are subject to such obvious and valid objections that it is clear the framers of the provision did not desire or intend such a result.

The Bureau of Census with its inquiries of all businesses and dissemination of data of value to all businesses; the Coast and Geodetic Survey with the small business uses of its charts and inland benchmarks; the Patent Office and its relations with small inventors, and descriptions of commercial devices now in the public domain or available for licensing: the business and defense services administration attuned to needs of all businesses and reflecting those needs and the public viewpoint in preparing plans for industry mobilization in the event of an emergency and for priorities in use of scarce commodities in such an event, preparation of studies of materials used in industry, and of studies of legislative proposals affecting businesses as a step in the formulation of the departmental view in such matters; our Office of Business Economics which continually studies and reports on all aspects of our economic climate; our Weather Bureau with its enormous impact on numberless businesses; the Bureau of Foreign Commerce assisting as it does all businesses in the effort to obtain new markets mostly for small business; our field offices with their more than 70,000 inquiries each month principally from the area of small and medium sized businesses; and even the transportation bureaus and the very Office of the Secretary with its responsibility for leadership in the fostering, promoting, and developing of all businesses, large and small. would all be included in such a class under such an interpretation.

It is clear, therefore, that the provision would result in no transfers under the first interpretation and that results of the second interpretation were not desired or intended. We urge against inclusion of any such provision, therefore, in the proposed legislation.

In conclusion, therefore, the Department of Commerce recommends your favorable action on Mr. Hill's bill, H. R. 6645, as now written. and for reasons set forth above, urges that the provisions of H. R. 7474 which we have discussed, be not included in any legislation.

I hope I have been able to convey to you the considerable area of common agreement we have with you in our joint efforts to be of assistance to the small-business man in helping him to solve his problems.

That concludes my statement.

The CHAIRMAN. Are any specific applications for loans submitted to the Policy Board?

Mr. MUELLER. No, they are not, sir.

The CHAIRMAN. Your functions are entirely to make general rules, general policies?

Mr. MUELLER. That is right, sir.