tion of S. 3497 can be brought into line with what I believe to be the will of this body. Mr. JOHNSON of Pennsylvania. Mr. Speaker, I want to express my agreement with the remarks made by my distinguished colleague from Ohio, and to assure him that I agree with his insistence that this matter be fully reviewed as soon as possible in the next Congress. As a matter of fact, I voted against S. 2397, the Housing and Urban Development Act of 1968 and I did so for what were to me good and sufficient reasons even without being aware of the amendment to which my colleague, Mr. Ashley refers. In my opinion, S. 3497 created too heavy a burden in new financial commitments for the country to undertake at this time. I believe it will unquestionably have a serious inflationary effect, and I voted against the bill for this and other reasons. However, had I been aware of the situation created by the language in section 1705 (h) of S. 3497, that would have been reason enough in itself for me to have voted against this measure. To my knowledge the House certainly had no intent to change the basic general rules applying to what banks may underwrite except as to college housing, which we all know has long been an interest of my distinguished colleague, Mr. Widnall from New Jersey. I, therefore, want to go on record as saying I was shocked to learn that the Comptroller of the Currency has given his broad interpretation to a minor amendment and that I think it calls for a full review as soon as possible in the next Congress. Mr. GONZALEZ. Mr. Speaker, I am very glad that my distinguished colleague from the State of Ohio (Mr. Ashley) has brought this matter to the attention of this body. I was on the floor when this amendment was presented and I recall very well that it was my understanding that the amendment was simply to relate to the very specific field of college housing. It was my further understanding that we were adopting in section 1705 (h) of S. 3597 language that would cover college housing in line with the specific and long-held interest of my distinguished colleague from the State of New Jersey (Mr. Widnall). No objection was raised to acceptance of this amendment because we were fully convinced that Mr. Widnall's interest in helping fund college housing was meritorious and deserved our full support. It may be that the language as written was the result of a misunderstanding, but it is not my purpose to examine the steps that led up to the confusing language that finally was adopted by the House. Certainly we intended to make no major change in the Glass-Steagall Act. It was not our purpose to open up new areas for bank underwriting by adopting section 1705 (h). The amendment was brought up during the last stage of the legislative process, and its adoption was without the benefit from any of the Government agencies who would normally be asked to submit their opinions on any major change in this area. It would have been proper to have asked the Comptroller of the Currency for his opinion, rather than to have him seize upon the amendment once passed and give it his own interpretation. That is why I want to express my sincere thanks to my colleague (Mr. Ashley) for bringing this matter to the attention of the House and to assure him of my full support for his proposal to bring this up for full review as soon as possible in the 91st Congress. Mr. BROWN of Michigan. Mr. Speaker, the remarks of my distinguished colleagues from Ohio, Pennsylvania, and Texas regarding the interpretation given by the Comptroller of the Currency to section 1705 (h) of the Housing and Urban Development Act of 1968 prompts me to comment thereon. I can substantially concur with the remarks of my colleagues insofar as these remarks relate to the understanding and intent of the House of Representatives at the time the referenced language was adopted. Inasmuch as the question has been raised by members of the Banking and Currency Committee, the committee having jurisdiction over this legislation, as to whether or not the Comptroller's regulation is consistent with the intent of the Congress, it would seem to me that the reexamination they have called for is dictated. Since becoming a Member of the Congress, I have felt that too little attention has been paid by the Congress to the implementation of legislation by administrative agencies through the latters' rule and regulation-making authority. Conceivably, a majority, or most, of the Members of the House of Representatives were aware of the broad interpretation which could be given the subject language of the Housing and Urban Development Act of 1968. Nevertheless, the significance of the question which has been raised causes me to agree that the matter is deserving of the attention of the Congress. Senator RANDOLPH. That was shortly before we resolved in conference the final bill, I believe, in March. You say you have not reviewed the matter in recent months. Mr. WALKER. We have not reviewed it within the administration. I reviewed it yesterday with Secretary Connally. Senator RANDOLPH. I think, Mr. Chairman, that the Treasury's position, as indicated, is, of course, important. I think we would want to have something beyond the Treasury viewpoint-the administration's statement or an agreement with the Treasury Department's opinion as expressed today by the Under Secretary. Would that be provided within a reasonable time? Mr. WALKER. I think it could, sir, yes; I can get that process going and, of course, a letter from the chairman asking for comments on that particular amendment would also go through the regular OMB process of review in the administration. Senator RANDOLPH. Mr. Under Secretary, we can facilitate the dispatch of the request properly through Senator Muskie. Senator MUSKIE. I assume the request has gone forward already, but we will check it out and see that it does, if it has not. Senator RANDOLPH. Senator Bentsen? Senator BENTSEN. Thank you, Mr. Chairman. I think most of my questions have been asked by the members but I would like to pursue one of the questions that was asked by Senator Buckley, that is, concerning what constitutes a reasonable interest rate for the local taxing authority in the issuance of municipal bonds. As I understood you, Secretary Walker, it would be a judgment of the Secretary of the Treasury. It would seem to me it would be of assistance if we could have some comments on guidelines, if there are going to be any, as to what would constitute a reasonable price for the money. Mr. WALKER. First of all, let's look at the statute itself, to get the ground rules straight. This is on page 4, line 12, section 5. Any purchase by the Authority shall be upon such terms and conditions as to yield a return at a rate determined by the Secretary of the Treasury taking into consideration (i) the current average yield on outstanding marketable obligations of the United States of comparable maturity or in its stead whenever the Authority has sufficient of its own long-term obligations outstanding, the current average yield on outstanding obligation of the Authority of comparable maturity; and (ii) the market yields on municipal bonds. Now, there is considerable experience in Federal programs with dealing with this question of being able to borrow on reasonable terms. It comes into small business loan and insurance programs, loans for small business investment companies, defense production, fisheries, trade adjustment assistance, cooperatives for rural lowincome families, District of Columbia medical facilities and soil and water conservation loans. And I won't guarantee that this is an exhaustive list. Nevertheless, that begs a fundamental question of just when and under what circumstances the Secretary of the Treasury would set a rate that would be an operative rate and not completely out of the picture. First; we want to feel our way in this area, and this is why we have asked for considerable flexibility on the part of the Secretary of the Treasury. Second; looking at it from the here and now, our estimate is that about 20 percent of the municipal securities issues, and probably about 20 percent of the water and sewer issues, have been of the "lower grades and lower qualities" and of the types which were priced out of the market during 1968 and 1969. Some of that was because of the too low interest rate ceiling set by municipalities or State governments. There is no doubt about that. But, going on the basis of that sort of initial judgment, the rate could be established so that we would get approximately 20 percent of the business and then adjust our policies as we went along. That is just about as far as I could go in this instance, although we are perfectly willing to listen to other guidelines and to have the record show other concerns that the Congress would have for the Secretary of Treasury to take into consideration. We think we have avoided the pitfalls here that have complicated some of the other programs and are criticized by IBA. Senator BENTSEN. I agree you have considerable flexibility here. I think it is important providing information for these local municipalities to have some published guidelines so they can know when they might qualify or not within the parameters of those guidelines. Mr. WALKER. That is the beauty of the posted rates. If they meet the requirements of EFA, which they have nothing to do with, all they have to do is, one, look at EFA's posted rate of, say, 512 percent, and, two, ask their financial advisors and the local bank, depending on the size of the community, if they will buy them at say, 514. If the bank says no, EFA will buy them at 51/2. And there you are. Senator MUSKIE. Senator Bentsen? Senator BENTSEN. No more questions. Senator MUSKIE. Senator Tunney? Senator TUNNEY. I have no questions, Mr. Chairman. Senator MUSKIE. I have one that I would like to put at this time. I have others that I may submit for the record, but we have two other witnesses, and I don't want to take too much time. On page 3 of the bill, subsection 5(b)-reads: No commitment shall be entered into and no purchase shall be made unless the Administrator of the EPA, (1) has certified that the public body is unable to obtain on reasonable terms sufficient credit to finance its actual needs. I wonder what the criteria for reasonableness ought to be? Mr. WALKER. The criteria are, in effect, the rates set by the Secretary of the Treasury, unless you mean what sort of evidence does EPA have to get that they can't borrow below that particular rate. Well, EPA would have to respond to that more effectively than I. I know that I would make certain that the community had really beat the bushes to find the best deal that it could find in the financial community for this purpose. At the same time, the community has no desire to pay a higher rate than it has to pay, and if the posted rate is 51⁄2 and they can get something at 514 then they have no real reason to go to EFA. You have a self-policing factor there. But where the rate is posted and set goes a long way to defining what reasonableness is. That is the problem Senator Bentsen is talking about-how do you set the rate-and we are going to do some learning as we go along. Senator MUSKIE. While there may be posted rates constantly on file? Mr. WALKER. No, but it will vary. I have some tables that you might want to put in the record. (The tables referred to follow :) DETERMINATION OF EFA'S LENDING RATE Section 5(d) of the proposed Environmental Financing Act of 1971 provides that: Any purchase by the Authority shall be upon such terms and conditions as to yield a return at a rate determined by the Secretary of the Treasury taking into consideration (i) the current average yield on outstanding marketable obligations of the United States of comparable maturity or in its stead whenever the Authority has sufficient of its own long-term obligations outstanding, the current average yield on outstanding obligations of the Authority of comparable maturity; and (ii) the market yield on municipal bonds. Section 5(b) of the bill prohibits purchases of obligations by EFA ". . . unless the Administrator of the Environmental Protection Agency has certified that the seller is unable to obtain on reasonable terms sufficient credit to finance its actual needs . . .” The attached tables demonstrate the erratic behavior of tax exempt rates relative to taxable rates and thus the need for administrative flexibility in determining EFA's lending rate. Table 1 shows Treasury and municipal bond yields which might be considered by the Secretary under section 5(d). Table 1 also shows the yields on Aaa corporate bonds, which may be a reasonable indication of the yields on seasoned bonds issued by EFA. Table 2 shows that the yields on medium quality municipals vary considerably relative to the yields on Treasuries and Aaa corporates. Table 3 shows that municipal yields vary considerably within each month and that new issue yields (Standard & Poor's) were significantly higher than yields on seasoned issues (Moody's) during the tight money year of 1969. Table 4. 4a, and 4b show that the percentage of municipal issues in each rating group varies significantly from year to year and that a large percentage of revenue bonds are unrated. TABLE 1.-AVERAGE MARKET YIELDS ON TREASURY CORPORATE AND MUNICIPAL BONDS 1 1 Represent yields on outstanding bonds; new issue rates would presumably be somewhat higher. * Estimated average yield on outstanding marketable obligations of the United States with 10 or more years remaining to maturity. |