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EXTENSION OF STABILIZATION FUND AND POWERS, ETC.

MONDAY, APRIL 19, 1943

HOUSE OF REPRESENTATIVES,

COMMITTEE ON COINAGE, WEIGHTS, AND MEASURES,

Washington, D. C.

The Committee on Coinage, Weights, and Measures met in the rooms of the Committee on Insular Affairs at 10:30 a. m., Hon.. Andrew L. Somers, chairman, presiding.

Other members present were: Hon. Compton I. White, Hon. Dan R. McGehee, Mr. Worley, Hon. William L. Dawson, Hon. Harry Sauthoff, Hon. Chauncey W. Reed, Hon. August H. Andresen, Hon. Richard P. Gale, and Hon. Ranulf Compton.

The CHAIRMAN. Gentlemen, I believe a quorum might be present and if you will be kind enough to take your places we can open this meeting.

The meeting will come to order.

This being the first meeting of the committee, I want to extend to the new members the welcome that we older men feel in knowing they will be associated with you during the year, and to assure the new members that any problems they may have in connection with the committee work will be gladly and sympathetically considered by the committee.

This morning, gentlemen, we have for consideration S. 991, an act to extend the time within which the powers relating to the stabilization fund may be exercised.

The act is very simple.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (c) of section 10 of the Gold Reserve Act of 1934, approved January 30, 1934, as amended, is further amended to read as follows:

"(c) All the powers conferred by this act shall expire June 30, 1945, unless the President shall sooner declare the existing emergency ended and the operation of the stabilization fund terminated."

This act passed the Senate April 15, 1943, without a dissenting vote. This morning the Secretary of the Treasury was kind enough to come and tell us why, in his opinion, this is a necessary measure. If the Secretary is ready we will be glad to hear his statement at this time.

Mr. ANDRESEN. Is it the understanding, Mr. Chairman, that we are to consider only S. 991 today, which is solely to extend the time within which the powers relating to the stabilization fund may be exercised? And that we will not take action or discuss H. R. 2489, the bill introduced by yourself

to extend the time within which the powers relating to the stabilization fund and alteration of the weight of the dollar may be exercised.

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The CHAIRMAN. I think that is a fact, in view of the passage by the Senate of S. 991. I feel that it is advisable now just to take that act in considering it, without muddying the water with any other issues. Mr. WHITE. Mr. Chairman, as a matter of fact, haven't we two bills under consideration, S.991 and H. R. 2489?

The CHAIRMAN. I have only called up the one bill, S. 991.

Mr. WHITE. And it is your purpose not to consider H. R. 2489 at this time.

The CHAIRMAN. That is right.

Now, Mr. Secretary.

STATEMENT OF HON. HENRY MORGENTHAU, JR., SECRETARY OF THE TREASURY

Mr. MORGENTHAU. Mr. Chairman, and members of the committee, the beginning of my statement is a little bit different in view of the action taken by the Senate. The rest of my statement, however, is the same. I would be more than pleased to read it if it would not bother you. My statement today, I want to say, is practically identical with the exception of the first two paragraphs with what I read before the Senate, but I would be more than pleased to go through with it.

The CHAIRMAN. I suggest that you read the main part of your statement which relates to the act we are considering.

Mr. WHITE. Mr. Secretary, don't you think the issue before the committee this morning is one of the most important Government functions we have to deal with?

Mr. MORGENTHAU. Do I think it is important?

Mr. WHITE. Don't you think the committee should be fully informed?

The CHAIRMAN. The only thought I have in mind, Mr. White, is that if the Secretary were to confine himself for the moment to the essentials, while later it could be developed under questioning.

Mr. MORGENTHAU. It will only take about 10 minutes to go through the whole thing.

Mr. WHITE. Mr. Chairman, I think this issue is fraught with so much importance to the American people that this committee should give it very mature and full consideration.

The CHAIRMAN. As far as the chairman is concerned, he has found claims of Mr. White's in the past to have been very accurate in their appraisal, and with the consent of the Secretary we will proceed in that way and hear his complete statement.

Mr. MORGENTHAU. Mr. Chairman and members of the committee: On April 13, 1943, Congressman Somers introduced a bill, H. R. 2489, extending to June 30, 1945, the powers relating to the stabilization fund and the power to alter the gold content of the dollar, both of which under the present law will otherwise expire on June 30, 1943.

I believe that a 2-year extension of the power to devalue the dollar would be helpful, but in view of the action taken by the Senate last Friday, I am here before your committee only to ask for the extension of the stabilization fund.

The spread of the war to this hemisphere and the presence of American forces in many countries abroad have heightened the importance of our currency relations with these countries. The gold, currency,

and stabilization operations of the stabilization fund in the past 2 years have reflected these changes in the world situation.

While during most of the period since 1934 there was a heavy inflow of gold into the United States so that the fund's purchases exceeded its sale of gold, during the last 2 fiscal years the fund has sold more gold to foreign countries than it has purchased. In the fiscal year 1942 the fund sold $644,000,000 of gold to foreign countries and purchased $162,000,000 of gold from foreign countries. So far in the fiscal year 1943 the fund has sold $401,000,000 of gold to foreign countries and purchased only $27,000,000 from foreign countries. The fund's sales of gold have been made to 21 different countries.

As I have said to this committee before, I know of no better means of settling international balances than with gold. For this reason it has been, and is, the policy of the Treasury to facilitate the continued use of gold for the settlement of international balances. Our stabilization fund has definitely contributed to the implementing of this policy. Since I last appeared before this committee the stabilization fund has entered into three gold-purchase agreements with Russia and a goldsale agreement with Cuba.

Under the gold-sale agreement with Cuba, which was signed on July 6, 1942, the stabilization fund has undertaken to sell gold to Cuba, payment to be made in United States dollars within 120 days from the date of such sale. Under this agreement Cuba has already acquired $25,000,000 in gold, all of which has been paid for. The agreement with Cuba was designed to facilitate the accumulation and the maintenance of a gold reserve against Cuban currency as provided by Cuban law.

During the past 2 years we have made and completed three gold purchase agreements with Russia. The agreements called for future delivery of gold purchased by the stabilization fund, with an advance on such gold prior to its delivery. The obligations of Russia under these agreements have been fully met. The dollars made available by these gold transactions were used by Russia to pay for purchases of goods and services in the United States in addition to the materials obtained under the terms of the lend-lease arrangement.

The series of stabilization agreements under which the stablization fund cooperates with other countries to facilitate the maintenance of stability in the exchange rate of currencies of other countries with the dollar have been extended since July 1, 1941.

On November 19, 1941, a stabilization agreement was entered into with the Government of the Republic of Mexico and the Bank of Mexico for the purpose of stabilizing the United States dollar-Mexican peso rate of exchange. It is still necessary under this agreement for the Mexican Government to confirm its authority to guarantee the performance of all obligations undertaken by it and the Bank of Mexico.

On February 27, 1942, a stabilization agreement was signed with the Government of the Republic of Ecuador for the purpose of stabilizing the United States dollar-Ecuadoran sucre rate of exchange. The agreement is now in force, although no stabilization operations have as yet been necessary under this agreement.

As a further link in the closer relations between the Governments of the United States and Iceland, a stabilization agreement was signed with the Government of Iceland and the National Bank of Iceland

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