to continue this on a temporary basis-I don't say the day will come, but it will come if we continue to go down the road we are on, and not fasten on ourselves a permanent agency which as a small-business operation shall be too small to do the job that ought to be done. Don't you think that the job that is to be done could be greater than even contemplated in this particular bill?

Mr. MULTER. If you are right, and none of us can prognosticate that far ahead, that tight money will continue for 2 years, even if we set this up as a permanent agency, you can be sure this agency will be back before this Banking and Currency Committee 2 years from now or sooner and ask for an additional authorization at which time you can review their activities and decide what they are doing and what they should do.

When we set it up as a permanent agency that does not mean it will continue forever and a day. Subsequent Congresses can always abolish it or put a time limit on its existence.

Mr. RAINS. I feel it takes it out from under the Congress, though, and my feeling is this is merely an experiment. It is not a deal big enough to meet the need. Everybody agrees with that. I feel if we establish it in a degree of permanency we have put the stamp of approval on an agency much too small to do the job that Congress says has to be done.

Mr. MULTER. This has been an experimental program. I think it has proved itself. The time has come now when we must decide what to do with this agency. We believe we should take the position to continue this agency as a permanent one. Whether or not it is going to be big enough only time can tell.

If money eases, and I can foresee that it may ease, if not this year, next year, there won't be as great a demand on the agency for money as there is today. If the tight money policy is going to continue and the demand continues to increase as it has in the past 6 months, certainly in the next 2 years they will be back asking for an additional appropriation, and in a substantially larger sum.

Mr. SEELY-BROWN. Will Mr. Rains yield?

Mr. RAINS. Yes.

Mr. SEELY-BROWN. As I understand your comments a moment ago, you indicated a very proper concern, one which I share, that the banks were not participating in the small-business loans to the degree we would like to see. I think one of the reasons they have not participated was because of the fact the agency was not a permanent agency. In other words, they recognize any participating contract they sign would obviously be good because it was backed by the United States Government, but the testimony certainly indicated to our committee, that by making this agency permanent, giving it a permanent status, even though we may change the rules under which it operates in each Congress, as we always can do, that permanency might encourage the banks to participate to an even greater degree and I believe Mr. Multer will agree that was the testimony presented before our committee, and was another reason it would be helpful to make it a permanent agency. Mr. MULTER. I do agree. I expressed during the course of the public hearings a suggestion that one day this agency will attain Cabinet status. I think it should. I think if the economists of the country are right that the backbone of our economy, of our free enterprise

system, is the small-business man, we must have a permanent agency of this kind to watch out for them. Big business is taken care of by Commerce. Labor is taken care of by the Labor Department. At least that was the theory in setting up those Departments. There was a time when we thought the Commerce Department would take care of small business. It has never done so. It had a small-business office, but it was merely an office with a man in charge. I do not know of anything it ever did for small business.

I think this agency has proved itself. I think we can say this agency is the spokesman in Government for small business.

The CHAIRMAN. Do you think Congress would have less day-byday control over it as a permanent agency, than it has if it is solely a temporary agency?

Mr. MULTER. I think there would be more control over this agency by Congress, than most agencies. Most agencies find themselves under the jurisdiction of one committee. The Reorganization Act of 1946 charges the Banking and Currency Committee to examine and continually review the activities of all the agencies about which it may legislate. The Small Business Administration is one such agency. In addition, we have the House Select Committee on Small Business. I think that committee has proved itself and one of these days will be made a permanent committee. But whether as a select committee or a permanent committee, it will continue to do the job during the year, in the field and in Washington, of making sure the agency does the work and the job that Congress intends it should do.

The CHAIRMAN. Do you have any statistics on the proportion of the national income that comes from small business-and what percentage is that compared to the contracts?

Mr. MULTER. I don't think there are any complete statistics on small business. The Commerce Department through its Census Bureau did gather statistics on the manufacturing corporations. I stress the word "corporations." I think Commerce found there were some 245,000 manufacturing corporations which accounted for between 40 and 50 percent of the gross national product.

I think they found that 92 percent of those manufacturing corporations employed less than 100 people. I am relying on my memory, my statistics may be slightly wrong, but I believe they are approximately correct.

We are told that there are 4 million small-business concerns of every type throughout the country. I think that our economists are right when they say that small busines is the backbone of our free enterprise

economy.

Mr. KILBURN. Of course, there are an awful lot of those that would not have anything to do with procurement, like the grocery store.

Mr. MULTER. You are quite right. 4 million includes the retail merchant who does not deal with the Government. It includes the small manufacturing company which does not deal with Government and does not want to deal with Government. You know, you must have a pretty strong financial position in order to deal with Government, the way they take their time inspecting and approving and then in paying when they get ready. That was one of the problems we had to sit on in these agencies, to see that they paid promptly, so the small-business man could operate.

Mr. KILBURN. They would have to have the line of goods they want. Mr. MULTER. That is right.

Mr. KILBURN. A gas station would not become part of procurement or a grocery store.

Mr. MULTER. There you get into the question of whether you are going to let the local Government offices buy gasoline locally in small quantities or in tank car lots at wholesale. There is always that problem, whether the Government should buy in large quantities at wholesale and warehouse and distribute, or buy from the small-business man at retail. You can't have it both ways.

Mr. KILBURN. I imagine the taxpayer would want us to buy as cheaply as possible.

The CHAIRMAN. You would give us the Policy Board which consists of the Administrator, a typical small-business man and a typical small-business banker, and it provides no qualifications, with no experience for either one of them.

The only qualification they seem to have is that they are typically small, but I don't know just what a typically small banker is, or a typically small-business man is. Does it mean a small-business man without ambition, who always wants to remain typically small? If that is so, I don't think you have a very good Board. I don't see any argument for that. What is the argument for that?

Mr. RAINS. Could I add one word to what the chairman said, so you will have a full one before you. I can't see how you can get away from the argument we should not have WOC's in Goverment, instead of Government employees.

The CHAIRMAN. They are day-to-day employees. They have no permanent association with the Government and no responsibility, and I would like to have some argument in favor of it.

Mr. MULTER. Let me answer you, Mr. Chairman, and the other gentlemen who have some doubts about this, by saying: first, for a long time, the Small Business Committee has felt that the Loan Policy Board, as set up by the statute, has no place in this law. As a matter of fact, we reported out from this Banking and Currency Committee, in accordance with the recommendation of the Small Business Committee, one bill which eliminated the Loan Policy Board. None of us have any objection; and, as a matter of fact, there is a specific requirement in the statute and this bill that here must be consultation between the Small Business Administrator and other Government agencies, having in mind particularly the Secretary of Commerce and the Secretary of the Treasury.

But consultation is one thing and giving them control of making policy is another, and we feel that this agency cannot be a truly independent agency and cannot truly do the job for small business if the Secretary of the Treasury or the Secretary of Commerce or their designees are going to be in control of the Loan Policy Board.

So what we are mainly concerned with is eliminating the Secretary of the Treasury and the Secretary of Commerce as the two controlling members of the Loan Policy Board.

Now, if the Administrator feels he should have a board, he does have one now, a review board, which reviews loan applications. The Loan Policy Board is not charged with that and does not do that. It makes the overall policy. But if the Loan Policy Board is controlled by two Cabinet officers, then obviously the Administrator is

subservient to them. The best proof the Loan Policy Board does not serve a good purpose in my opinion is demonstrated by the fact that at every meeting of the Loan Policy Board the resolution has always been presented as to policy, and those are the only resolutions they consider, by the Administrator, and in every instance it has been unanimously adopted.

If there is such unanimity of thinking on the Board, and if the Administrator's view always prevails, then he does not need the Secretary of the Treasury or the Secretary of Commerce to do more than advise with him.

On the other hand, if there is unaninity because he bows to their will, then the will of the committee and the Congress is not being fulfilled.

The CHAIRMAN. That is not a very strong argument for the reason you want to dispose of the present Board, for which you substitute a small-business man and a small banker.

Mr. MULTER. I am coming to that.

The Administrator should be charged with making the policy and administering it. But there is division among our committee and we came up with this as the alternative of having two small-business men sitting on the Board with him to make policy.

Mr. BROWN. They would be appointed by the Administrator?

Mr. MULTER. They would be appointed by the President, by and with the advice and consent of the Senate.

Let me read to you the language as it appears at the top of page 4 of the proposed bill.

The Policy Board shall establish general policies in the financial assistance, procurement, disposal, and general assistance to small-business programs of the Administration.

In other words, we are calling for a Policy Board which will make all policy for the agency. It will have nothing to do with administration. It will have nothing to do with personnel. It will make all policy as to procurement and financial assistance. We believe with a Policy Board of that kind, we will not have this difficulty that we are now having with the definition.

Let me continue reading from the proposed bill:

The members of the Policy Board representative of small banks and smallbusiness concerns shall be appointed from civilian life by the President by and with the advice and consent of the Senate, and they shall be persons of outstanding qualifications in their respective fields of operation known to be familiar and sympathetic with the needs and problems of small business. The members of the Policy Board other than the Administrator shall be actively engaged as full-time operating officials of (1) a small bank and (2) a small-business concern which shall be small business as defined in section 102 of this act.

Now, with reference to the possibility there will be w. o. c.'s or others working without compensation, I think this committee knows I am opposed to the w. o. c.'s working in Government, except in times of war or emergency.

These men will not be w. o. c.'s. These men, as provided in the previous sentence on page 3, are paid as follows:

Members of the Policy Board other than the Administrator shall be paid a per diem allowance of $100 for each day spent away from their home or regular place of business for the purpose of attendance at meetings of the Policy Board and the necessary travel; and while so engaged, they may be paid actual travel expenses

and not to exceed $25 per diem in lieu of subsistence and other expenses. The maximum time spent for such attendance is not to exceed 50 days in any 1 calendar year.

There is also a provision:

The Policy Board shall meet at least monthly and at such other times as the Board may determine or on the call of the Administrator to determine administrative programs and policies realting to loans, procurement, disposal, and general assistance to small business.

It was the feeling of the committee you could not get a small banker or small-business man of the type you wanted who would give up his banking or business connection and come to Washington full time and the only way you could get him was to compensate him fairly for his time and get him to come down here on a part-time basis.

I appreciate the force of the argument that men who make policy should be full-time employees. If we could get, instead of these two small-business men working part time, if we could get two men, say, called Deputy Administrators, appointed to work full time, not as a loan policy board, but as a policy board, I think we could accomplish what we are looking for, and eliminate the Secretary of the Treasury and Secretary of Commerce, except for consultation. I am afraid we cannot do that. The next best thing, when it comes to the job of making the policy in accordance with the intent of the Congress, let us have 2 men who are part-time employees but who are on the payroll and who will not have any exemptions on account of conflict of interest. There is nothing in here to give them any exemption on account of conflict of interest. They will have to toe the mark and operate without that exemption.

The CHAIRMAN. The success or failure of the organization depends upon the policies.

Mr. MULTER. I think it does.

The CHAIRMAN. Favorable policies would be very essential for the succesful operation of it. And these men who are part-time employees have entire control over that.

Mr. MULTER. I realize the force of the argument that these two part-time employees can outvote the administrator. There is much to that argument. I can't

Mr. RAINS. Mr. Multer, let me ask you one other question. First, I want to compliment you for the hard work and good job you have done on this bill, and with 1 or 2 exceptions it seemed to me to be a real good bill. I know you gentlemen have worked very hard and the bill shows it. But it is always the setup in Government that the Congress must hold some administrator responsible for the work of the agency. That is true in housing and everything we have.

The appointment of the two men you are talking about would come about by the President, as I understand it.

Mr. MULTER. That is right.

Mr. RAINS. We all know, as a matter of course, the head of the Agency would recommend to the President whoever the head of the agency wanted appointed in this policy business, so the result would be these two men, however they came in, would be men whose thinking was along the lines of the thinking of the Administrator. He would not be that dumb, and pick out somebody at variance. So why don't we wipe out the Policy Board completely and totally and just leave it. up to the Administrator.