(3) provide for suspension of any such registration or license for violation of any provision thereof or of any regulation, rule, or order prescribed under this Act. (4) prescribe appropriate requirements as to the keeping of records and as to the form, contents, or substantive provisions of contracts, liens, or any relevant documents. (5) prohibit solicitations by creditors which would encourage evasion or avoidance of the requirements of any regulation, license, or registration under this Act. (6) prescribe the maximum amount of credit which may be extended on, or in connection with, any loan, purchase, or other extension of credit. (7) prescribe the maximum rate of interest, maximum maturity, minimum periodic payment, maximum period between payments, and any other specification or limitation of the terms and conditions of any extension of credit. (8) prescribe the methods of determining purchase prices or market values or other bases for computing permissible extensions of credit or required downpayment. (9) prescribe special or different terms, conditions, or exemptions with respect to new or used goods, minimum original cash payments, temporary credits which are merely incidental to cash purchases, payment or deposits usable to liquidate credits, and other adjustments or special situations. (10) prescribe maximum ratios, applicable to any class of either creditors or borrowers or both, of loan of one or more types or of all types (A) to deposits of one or more types or of all types. (B) to assets of one or more types or of all types. (11) prohibit or limit any extensions of credit under any circumstances the Board deems appropriate. Sec. 207. Reports Reports concerning the kinds, amounts, and characteristics of any extensions of credit subject to this title, or concerning circumstances related to such extensions of credit, shall be filed on such forms, under oath or otherwise, at such times and from time to time, and by such persons, as the Board may prescribe by regulation or order as necessary or appropriate for enabling the Board to perform its functions under this title. The Board may require any person to furnish, under oath or otherwise, complete information relative to any transaction within the scope of this title including the production of any books of account, contracts, letters, or other papers, in connection therewith in the custody or control of such person. Sec. 208. Injunctions Whenever it appears to the Board that any person has engaged, is engaged, or is about to engage in any acts or practices constituting a violation of any regulation under this title, it may in its discretion bring an action, in the proper district court of the United States or the proper United States court of any territory or other place subject to the jurisdiction of the United States, to enjoin such acts or practices, and upon a proper showing a permanent or temporary injunction of the Board, any such court may also issue mandatory injunctions commanding any person to comply with any regulation of the Board under this title. Sec. 209. Civil penalties (a) For each willful violation of any regulation under this title, the Board may assess upon any person to which the regulation applies, and upon any partner, director, officer, or employee thereof who willfully participates in the violation, a civil penalty not exceeding $1,000. (b) In the event of the failure of any person to pay any penalty assessed under this section, a civil action for the recovery thereof may, in the discretion of the Board, be brought in the name of the United States. Sec. 210. Criminal penalty Whoever willfully violates any regulation under this title shall be fined not more than $1,000 or imprisoned not more than one year, or both. TITLE III-SMALL BUSINESS ADMINISTRATION ACTIVITY SEC. 301. The Small Business Administration shall promptly increase the level of its financing functions utilizing the business loan and investment fund established under section 4(c) (1) (B) of the Small Business Act (15 U.S.C. 633 (c) (1) (B)) by $70,000,000 above the level prevailing at the time of enactment of this Act. This Small Business Administration shall submit to Congress a monthly report of its implementation of this section. Approved December 23, 1969. Mr. ST GERMAIN. Yes, Mr. Chairman. The past weeks have been very confusing also in that last week when the President made the statement that he was going to allow highway construction; in other words, federally supported construction to proceed; he also stated that he hoped that the banks would cooperate and that the prime interest rates would be lowered, and this was rather an unusual statement that he said, "he hoped this would happen," when we consider that he has the power to lower these interest rates. Chairman PATMAN. That's right. He was very mild in his statement I thought. Mr. ST GERMAIN. Once again, I do hope that the statement by my colleague, Mr. Brown, is accurate and that we are going to find the interest rates coming down. We have heard some people in the administration come out with a similar statement. By the same token, in reading the financial papers and listening to Dr. Burns of the Fed, he feels that it is not so that only when the fight against inflation has been won we can begin to ease up with lower rates and what have you. So that, I am still confused and I think this stockmarket results in the past weeks indicate this clearly also; all the investors throughout the country are just sitting back and, as one financial writer put it: "They are yawning when they hear these statements," because no one is placing any confidence in them. I do hope, as I say, once again, that Mr. Brown's statement is accurate and we will-I am sincere about this, that we will see a lowering of these interest rates. I believe I have exceeded my time already, Mr. Chairman, but I once again want to commend my colleagues. Mr. BROWN. Will the gentleman yield for a moment? Mr. ST GERMAIN. Yes. Mr. BROWN. Just one thing: we referred to the bill we passed last year. We said this gives the President power to roll back interest rates. It gives the President the power to invoke credit controls, which would have the impact, probably-would have some impact upon interest rates, but he doesn't have any power to roll back interest rates any more than he can set wages that are paid to a carpenter. Mr. ST GERMAIN. Oh, excuse me, sir. The power was given to the President in that legislation to invoke price and wage controls and credit controls. Mr. BROWN. I don't know how you want to define it, but Chairman PATMAN. I must answer you, Mr. Brown, if you please. Under that law he is allowed to set rates on any class of loans; it is specific. There is no doubt about it. The President acknowledged it when he hesitated and was reluctant to sign the bill. He criticized Congress for putting the power in there, a power that he did not want. He was, of course, compelled to sign it because of the other provisions that he wanted and needed. But, it is in there, Mr. Brown; I can assure you of that. Mr. BROWN. Mr. Chairman, supposing he sets the rate at 4 percent on something and the banks can buy Treasury notes and everything else, say at 8 percent; are they going to make 4-percent loans? Of course not. So, in effect, you have said you can dry up the money market by those controls; yes-but, Mr. Chairman, just a second, if I may Chairman PATMAN. You are presenting an "iffy" unrealistic situa tion. Mr. BROWN. It is not an unrealistic one Mr. ST GERMAIN. Mr. Chairman, I for one, know that President Nixon would never take such a drastic step and I am surprised to hear my colleague come up with a hypothetical that is so drastic. We know full well that he has much finer and more delicate appreciation of the financial picture of this Nation and that is why we were willing to give him this power. Mr. BROWN. I am pleased to see my colleague have the tremendous confidence in the President, which he heretofore has not expressed. But, if I might just go back Chairman PATMAN. Some of us have not had an opportunity. I have not had an opportunity myself Mr. BROWN. Just a minute, sir. Mr. Wright, I think that when you were talking about World War II and so on, I don't think you want to leave the impression with the committee as though there were no controls imposed at that time and therefore, in effect, it was a free economy then. Mr. WRIGHT. Quite to the contrary, if I might respond, Mr. Chair man. I'm not saying in any sense that there were no controls imposed. I am saying, rather that there are other means which are much more effective in halting inflation than high interest rates. In fact, high interest rates are not effective at all. They are counterproductive. I am saying that selected credit controls of the nature described by Mr. Reuss, the wage-price guidelines which did hold the price level very stable during the early 1960's in a period of economic growth, something in the nature of regulation W that we had during the Korean War, which required a minimum downpayment on the part of individuals purchasing things on installments they are infinitely more effective in curbing the growth of prices than an increase in interest rates, and are not so recessionary as increasing interest rates. This is what I am saying. Mr. BROWN. I don't think the resolution goes to wage or price controls Chairman PATMAN. Without objection, I would like to use my time and then, of course, yield to the other members and then either use it to ask questions or to comment themselves. Now, Mr. Wright, if you will consider that list of 85 cosponsors on these resolutions a sort of a steering committee, I would like to be placed on it as a member of the steering committee, because I am wholeheartedly in favor of it. You gentlemen have rendered a great service. You are to be commended. Now, I shall make just a few comments, I hope, and then yield to these other gentlemen. The credit, of course, is a wonderful thing in our country. And installment buying, if used wisely and prudently, is a wonderful thing, too. But, credit is necessary; otherwise we would not have any money. Our monetary system is so set up that if everybody paid their debts we would not have any money with which to do business. This does not mean you should have to be paying an extortionate or usurious rate of interest for that credit-that is what people are objecting to. Whenever you raise the interest rate, that immediately causes an increase in prices. It causes an increase of prices of goods on the shelves that are offered for sale. It upsets every budget in America immediately, every increase in interest rates. It is a fallacious notion that certain people have, that raising interest rates could prevent inflation. The opposite is true. Fighting inflation by raising rates is just as illogical as fighting fire with gasoline instead of water. Don't fall for this fallacious slogan "Fight inflation with interest rate increases.” Another fallacy is that people who want to buy homes or other worthy things, should pay the interest that is fixed in a so-called "marketplace." Let's evaluate and examine that natural force in the market mentioned by Mr. Brown. Who is setting these rates in the market place? It is the big banks that have plenty of money; the big corporations that are willing to borrow money for 12, 15, 18, and 20 percent. That is the reason there has been no money available for housing. The corporations can still pay these high rates, but housing cannot compete with them. The same thing is true concerning speculators and the gamblers. They all can outcompete the house buyer. Why, there is one bank, one of the biggest banks in the world, just recently took the trust accounts of 159 of their customers and used that money to buy nearly a million shares of stock in Resorts International in the Bahamas, a corporation which operates a large gambling casino. Now is anyone going to protect that poor homeowner who is in competition with the people who are not restricted as to interest rates, and don't care, like the corporations, the gamblers, the speculators, the extortionists, usurious loan sharks? They are there in the marketplace, they are bidding high; the gamblers are there; they are bidding high for money. The speculators are there and they are bidding high. Do you think the little homeowner has a chance in competition with them? Of course not and they should not be forced to compete in this kind of market. The Federal Reserve should be forced to let people have money for an interest rate not exceeding 5 or 6 percent for the purchase of homes. It is the best security on earth-a mortgage on the homes of the people of the Nation, 55 million families. What we do to help those 55 million families, I think, helps all America. We are letting these high interest rates destroy our country. Now, back during the time that Mr. Wright mentioned, in 1939 the war clouds were over Europe. We knew that we were going to get into a war and we started here like other countries to prepare for the worst. In 1939 we began to get ready, and as we began to get ready, we were still in a bad depression. We had very bad economic situations all over the United States, but Mr. Roosevelt got the Federal Reserve Board together, and other leaders, and said, "Now, we can't have high interest rates in this war; we will be ruined." And they agreed to fix interest rates. And, from 1939 during that World War II, after World War II, and the Korean war, we had stable interest rates. At times we were shooting away a hundred million dollars a day on the battlefields. Other times we had the worst type of inflation. Despite this, during those 14 years, from 1939 to 1953, the interest rates were kept at 212 percent and below on long-term Government bonds. So, it can be done; it has been done. Interest rates can be kept down. Mr. Eisenhower came in in 1953, along with Mr. George Humphrey, of Cleveland, his Secretary of the Treasury, who had never believed in low interest. They wanted to immediately raise the interest rates. Mr. GIBBONS. Mr. Chairman Chairman PATMAN. Just a moment. During the early days of the Eisenhower administration, the Secretary of the Treasury sold two large bond issues-one for 23% percent and another for 212 percent. This proves that the Democrats delivered low interest rates to the incoming Republican administration. But shortly after this, they commenced raising those rates and they have been going up ever since. I will put in the record of this hearing a table about those rates from 1939 up to the present, to show you if those rates had been maintained, we would have saved billions of dollars. (The table referred to follows:) YIELDS ON LONG-TERM GOVERNMENT BONDS, PUBLIC AND PRIVATE DEBT, AND TOTAL INTEREST PAID Average annual interest cost for the 14-year period (total col. 3 divided by 14), $11,900,000,000. Sources: Col. 1: Treasury Bulletin, Feb. 1970, table AY-1. Col. 2: Survey of Current Business, U.S. Dept. of Commerce, |