figure is about one-sixth of the total production, it can be roughly stated that the additional car availability will assist the movement of coking coal to approximately that extent.

However, there are some special situations which make it impossible to apply such figures with any certainty. Coal districts 7 and 8 produce about 50 percent of the coking coal and except for minor instances there are now no stortages of railroad cars on roads which deliver coking coal from these districts to the steel companies. On the other hand, districts 1 and 2 which deliver about 37 percent of the coking coal have had a heavy shortage of cars. The 15,000 cars which are soon to be released from the Great Lakes trade will be of particular benefit to the B. & O. and the Pennsylvania and conditions on these roads will improve. However, in the districts handled by the New York Central conditions will probably remain tight because of bad weather.

There are presently no orders regulating the assignment of cars by the ODT to any particular movement of coal except for coal used by railroads. The ODT however, keeps a continuous watch on the car-supply situation and endeavors by arrangements through the American Association of Railroads to give additional assistance where it is most needed, especially to avoid a surplus of cars in any particular district or trade.

It is of particular interest to note that the steel companies in the Pittsburgh district received from 25 to 30 million tons per year by means of river-barge transportation and only a portion of this coal is finally loaded on cars for shipment to Youngstown, Ohio.

One additional specific help for the steel companies will be the reopening of the Carter Coal Mines, the product of which goes to the steel companies and which expects to load about 215 cars a day, carrying about 12,000 tons of coal and equal to approximately 300,000 tons per month.

As the general coal-production situation has improved considerably in the last few months, it can be expected that the increased shipments will proportionately benefit the steel companies and coke ovens. During the past 7 weeks the bituminous coal production averaged 12,740,000 tons per week as against 12,000,000 tons for the previous 12 weeks. During the week ending November 22 the production reached 12,900,000 tons. The ODT believes that the car supply will within the next few weeks be sufficient to support a movement of 12,500,000 tons per week and make possible a total production of coal for the calendar year of 610,000,000 tons, the second highest production in history. The previous high was 620,000,000 tons in 1944.

IRON AND STEEL SCRAP

Since 1930 the iron and steel industry has been fed approximately 50 percent pig iron and 50 percent scrap. Scrap was obtained from two major sources, namely, (1) home scrap, (2) purchased scrap, each of which normally provided half of the domestic scrap requirements.

(1) Home scrap is derived from three different sources, namely:

(a) Scrap produced in making ingots.

(b) Scrap produced in cropping ingots.

(c) Scrap produced in rolling-mill operations.

The usual yield of home scrap (b) and (c) was 30 percent, but has recently been reduced to 26 percent because in a sellers' market the conversion ratio of ingots to finished steel products has been advanced from 70 percent to 74 percent.

(2) Purchased scrap originates from three different sources, namely:

(a) Prompt (industrial) scrap: About 40 percent of purchased scrap becomes available from the stamping, shearing, boring and turning operations of the steel consuming industries. This scrap is made available to either the steel mills directly or through scrap dealers.

(b) Railroad scrap accounts for 15 percent of purchased scrap and is also sold to the steel mills by either the railroads or by dealers.

(c) Obsolescent scrap is 45 percent of purchased scrap and is all supplied by scrap dealers to the steel mills.

The shortage of scrap is due to the following causes:

(1) Home scrap is a function of the rate of steel output, with the qualifications, however, that today the conversion rate is about 74 percent instead of 70 percent and that, therefore, home scrap is reduced from 30 percent to 26 percent, which amounts to a deficit of 31⁄2 million tons as long as steel output is at a ratio of 85 million tons annually and a sellers' market continues.

This is further demonstrated by the fact that with steel ingot production in September of this year 14 percent above output in December 1939 and foundry

oduction even higher relatively, total stocks of home scrap at the end of Septem= were 28 percent less than at the end of 1939.

While the correspondingly greater quantity of finished steel resulting from the her conversion rate eventually becomes available as scrap, its return may be stponed from a few months to many years.

(2) Purchased scrap presents the major problem, particularly with respect to solescent scrap.' The flow of prompt industrial scrap is directly related to the te of metal working and so long as industrial production remains high scrap will ntinue to be forthcoming at high rates from this source.

The over-all stock position in purchased scrap at consumers' plants has been proving somewhat in recent months, although it is still below the normal ewar position and far below the level prevailing during much of the war, in terms days' supply. While average stocks at consumers' plants during September, quivalent to 38 days' operation, are a distinct improvement over the situation Erlier this year, they do not compare favorably with stocks which ran as high as days' supply in 1943. In the face of the high rate of present steel production, ocks at the end of September were 11 percent lower than at the end of 1939. Despite the improvement in this phase of the stock situation, the total shortage greatly aggravated by the change in stocks at dealers' plants and at automobile reckers' plants. These stocks have shown a gradual deterioration over recent ears and at the end of September were only 10 percent as high as they were at e end of 1939.

The supply of obsolescent scrap will remain a problem for some time. This crap is becoming available at a lower rate than in the past, for three reasons, two ermanent and one temporary.

(a) Until 1905 most of the steel made in this country was by the Bessemer rather han by the open-hearth method. Because the Bessemer converter uses only 5 ercent scrap it stands to reason that iron and steel accumulated in this country ntil 1905, and that since 1905 we have lived on the scrap accumulation of the re-open-hearth period.

(b) Between 1934 and 1940 we exported more than 20 million tons of scrap. Then during the war we shipped abroad some 124 million tons of steel, and of steel n manufacturer's products, practically none of which has been returned as scrap. (c) While our steel-consuming industries are running at a high rate of capacity, emand for automobiles and other durable goods remains unsatisfied and, thereore, people hang on to obsolete models, which otherwise would come on the market as obsolescent scrap. Only the last condition promises an improvement. The CHAIRMAN. Thank you very much, Mr. Secretary. Secretary HARRIMAN. Thank you, Mr. Chairman. The CHAIRMAN. Mr. Secretary Snyder.

Mr. Secretary and members of the committee, we will plan to run. here at least until half-past twelve or a quarter of one. I am very sorry. I did not think the additional questioning of Secretary Harriman would take over an hour.

I think probably there will be another roll call of the Senate, and if the House Members stay a while, we will be glad to hear your state

ment.

You may proceed.

STATEMENTS OF HON. JOHN W. SNYDER, SECRETARY; A. LEE M. WIGGINS, UNDER SECRETARY; AND VERNON CLARK, ASSISTANT TO THE SECRETARY OF THE TREASURY, AND NATIONAL DIRECTOR OF THE SAVINGS BOND DIVISION, TREASURY DEPARTMENT, WASHINGTON, D. C.

Secretary SNYDER. Mr. Chairman, I appeared before the House Banking and Currency Committee on this same matter a day or two ago, and the statement which I have here is substantially the same as the one I gave before that committee.

With your permission, I will read it into the record. Is that satisfactory?

The CHAIRMAN. Yes, indeed. Go right ahead. We will not q tion you until you finish this statement.

Secretary SNYDER. Mr. Chairman and members of the commit I appreciate your invitation to appear before this committee to cuss certain phases of the program for controlling inflation outl in the President's message of November 17.

As you know, I appeared before the House Banking and Curr Committee and discussed this subject with them for several hour Tuesday. Only one business day has intervened since my appear. before that committee, and the statement that I wish to make be you today, therefore, consists mainly of a restatement of the po that I made before the House committee.

It is of the utmost importance that we extend early aid to Western European countries in order to assure that people will go hungry and cold this winter and to assure their continued partic tion as free nations in the world economy. It is equally necessary this aid be extended without subjecting our economy to the strai further inflation.

Both of these things are essential if we wish to maintain a nati environment and a world environment in which peace and free can continue to develop. If we fall short of our goal in foreign our own freedom could be threatened by external forces; and, if fall short of our goal in controlling inflation, we will be threatened the danger of economic collapse at home. We must avoid both dang

I am directing my remarks this morning to one phase of the 2 inflation program. Testimony in support of the emergency prog for European assistance has been presented by representatives of Departments of State, Commerce, and Agriculture.

The President outlined three types of measures for the contro inflation: One, measures to relieve monetary pressures; two, meas to channel scarce goods into the most essential uses; and, th measures to deal directly with specific high prices.

It is to the first of these measures that I will give attention, as o representatives of the administration have been invited to dis items 2 and 3.

Anti-inflationary measures which may be taken in the monetary are, of course, but a segment of the whole program, and could not any means, solve the problem alone. But such steps as can be ta when related to those in other fields, will of course be helpful in over-all solution.

The President is greatly disturbed in regard to price inflation, w threatens our whole economic structure, and he is convinced that Congress is equally concerned.

The President has laid special emphasis on voluntary actions the part of businessmen, labor leaders, farmers, and consumer hold prices down. Intensified efforts will be continued to obtain untary restraint. Certain powers are necessary, however, to for the voluntary efforts.

The President has suggested that consideration be given to the lowing monetary measures: One, that consumer credit controls she be restored and some restraint should be placed on inflationary bi credit; two, legislation should be provided to prevent excessive s ulation on the commodity exchanges; three, intensified activity in sale of savings bonds.

The last item is the only one of those suggested which comes comtely under the jurisdiction of the Treasury Department, and I all devote my time principally to a discussion of that particular m. I shall touch but briefly upon the first two, as they are pririly the concern of other Government departments and are being cussed by representatives of those departments as they appear and tify.

As to item 1, Restoration of consumer credit controls and restraint inflationary bank credit, these matters have been discussed by deral Reserve officials. As to consumer credit controls, I am in vor of their restoration.

The most effective types of credit control are those which strike at e individual forms of credit extension which are contributing to Hationary pressures. The most important single form of such credit tension at the present time is in consumer credit.

Total consumer credit outstanding at the end of September reached all-time peak of $11,400,000,000. At the end of 1945, it amounted only $6,600,000,000. Prior to December 1946, total consumer loans tstanding at any one time had never reached the $10,000,000,000 vel.

This increased use of consumer credit in the present period of inflaonary pressures can only add to those pressures. As we all know, e curtailment of the production of consumer goods during the war eriod gave rise to a tremendous deferred demand for such goods. s we all know, despite the fact that industrial production during 1947 as reached the highest level ever attained during peacetime, we have ot yet been able to produce enough goods to satisfy this deferred deand. There still exist many important shortages of goods. But with production near capacity levels, purchasing power made availale by consumer loans can be used only to bid up prices of consumers' oods, not to purchase more goods. It is imperative, therefore, that fforts be made to restrain the demand for scarce goods until supply pproaches demand.

Money market interest rates form a small part of the total cost of onsumer credit, and changes in such rates are almost powerless to imit its extension. It is necessary to cover specifically by regulation uch matters as minimum down payments and the maximum periods ver which payments may be spread on installment purchases of consumers' goods in order to restrain this type of inflationary credit.

In reference to the second part of item 1, "Some restriction should be placed on inflationary bank credit," this is a matter under the jurisdiction of the Board of Governors of the Federal Reserve System which has the responsibility for over-all bank credit control. Mr. Eccles has discussed this matter with you in considerable detail. and I have discussed it together on a number of occasions and we are entirely in agreement that the objective is fundamental to the inflation control program. I do not believe, however, that one or two specific proposals that he has made will accomplish the objective in question.

I would like to point out that I have a positive feeling that the major objective at this time is to maintain the fiscal soundness of the Government and the continued confidence of the public in Government obligations. I feel that the attack on the problem can best be handled by the application of a substantial budget surplus to the

reduction of the public debt in the manner which will extinguish a equivalent amount of bank-held Government securities. Since th end of the war, the Treasury has conducted its program of del management in such a way as to reduce inflationary pressures wher ever possible by paying off bank-held securities.

The public debt reached its peak of $280,000,000,000 on Februar 28, 1946. During the following 10 months, it was reduced ov $20,000,000,000 reflecting the reduction in the cash balance in th Treasury from a wartime to a peacetime level. Almost all of th reduction in the debt during this period took place in the holdings Government securities by commercial and Federal Reserve bank Since the end of 1946, the debt has remained substantially constan reflecting the approximate balance of the budget during this perio Holdings of Federal debt by commercial and Federal Reserve bank have nevertheless continued to be reduced and fell by over $6,000,000 000 in the first 10 months of the year, with holdings by nonbank inve tors increasing correspondingly.

The concentration of debt reduction during 1946 on securities hel by banks and the transfer of over $6,000,000,000 of debt thus far i 1947 from bank to nonbank hands have been, in large part, the conse quence of the public debt policies of the Treasury and of the restrictiv credit policies of the Federal Reserve System. These policies hav contributed substantially to the fight against inflation, and will b continued as long as they are appropriate. I should like to note in th connection that a sizable reduction in the public debt will be possibl during the early months of 1948, during which months will occur mos of the excess of government receipts over government expenditure predicted for the entire fiscal year.

To minimize bank credit expansion, restrictive measures have bee applied to the money market by the Federal Reserve System and th Treasury. This has been reflected by a rise in interest rates and better balance between short and long term rates.

The average rate on 90-day. Treasury bills has increased from three eighths of 1 percent in early July to nearly 1 percent at the presen time; while the rate on 1-year Treasury certificates of indebtedness ha risen from seven-eighths of 1 percent to 1% percent in the same period During this time the yield on the longest-term Treasury bonds, thos issued in the victory loan, has risen from a little over 2.30 percent to about 2.43 percent.

The entire debt management policies of the Treasury since February 1946 have been of an anti-inflationary character. First, there was the paying off of bank-held Government debt out of excess cash balances second, there has been a payment on bank-held debt out of funds derived from (a) budget surplus, (b) trust funds, and (c) the sale of savings and investment bonds to the public; third, pressure on the money market with slightly higher interest rates. Through the pay ment and calling of maturing bonds and refunding them into shortterm issues, it has been possible to create an interest pressure on the money market without an increase in the net cost of the market debt to the Government.

In making our decisions with respect to public debt management we must constantly weigh the restrictive effect of any proposed debt management action against its cost in added interest burden on the taxpayer. An increase of one-half of 1 percent in the average cost of