The bill would amend section 1104(a)(2) of the Merchant Mari Act, 1936, so as to increase from 75 to 87% percent of the applicab vessel actual cost, the maximum mortgage that could be insure under title XI for the construction of any tug of more than 2,50 gross tons.

Under section 1104(a)(2), the Secretary is authorized to insu mortgages on newly constructed vessels in the amount of 87%1⁄2 perce of the actual cost of the vessels only if they meet the requirements f a 122-percent downpayment under section 509.

Section 509 authorizes the Secretary of Commerce, upon applica tion, to construct vessels for an applicant for use in the foreign domestic commerce of the United States, except vessels to be engage solely in the transportation of property on inland rivers and canal Construction-differential subsidy is not authorized under this section The section provides that if the vessel is of at least 3,500 gross ton and is capable of a sustained speed of 14 knots, the downpaymen shall be 122 percent of the construction cost. If the vessel does no meet these requirements, however, the required downpayment is 2 percent of the construction cost.

Ongoing consideration of the possibility of Government aid t modern bulk carriers could seriously reduce what might appear t be the economic advantage of tugs and barges entering the ocean going trades. For this reason we are unable to recommend enactmen at this time.

We have been advised by the Bureau of the Budget that ther would be no objection to the submission of this statement to th Congress from the standpoint of the administration's program.

Senator BARTLETT. Mr. Davis, will you be kind enough to elaborat on the two different approaches in these bills to accomplish essentiall the same result for qualifying for 872-percent mortgage guarantee, an indicate from a legal viewpoint which is the more effective?

Mr. DAVIS. Yes, I would be happy to, Mr. Chairman. From a lega point of view I think the proper way to draft the bill is to amend se tion 509 of the Merchant Marine Act, which now provides, as I state in my testimony, that any citizen of the United States may apply t the Secretary to have the Secretary construct a vessel without con structional subsidy, for use in domestic commerce, except a vessel to b used exclusively in the transportation of property on inland rivers an canals, and if the vessel is capable of sustained speed of 14 knots, th required downpayment is 12% percent of the construction costs, and you know the mortgage covers the balance of the construction price Now, 509, Mr. Chairman, is, by reference, a part of title II, and t make the necessary determinations the Secretary has to go back to 509 You accomplish the same purpose which you seek to accomplish, bu you do not give the Secretary the flexibility unless your amendment i resolved in 509 or not.

Senator BARTLETT. Is it true that the agency you represent i opposed to enactment of these bills?

Mr. DAVIS. It is true that the administration's position is opposed to the enactment of these bills.

Senator BARTLETT. When you said "administration" are you re ferring to the broad, general outline of executive branches of the Government, or do you refer to the Maritime Administration?

Mr. DAVIS. No, I refer to the broad, general outline of the execu tive branch of the Government where positions must be cleared

Senator BARTLETT. Has the Department of State entered any e vigorous objections to these bills?

Mr. DAVIS. I have not heard any objections at all from the DepartDment of State, for or against.

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Senator BARTLETT. ÑASA?

Mr. DAVIS. No; nothing from NASA.
Senator BARTLETT. AEČ?

Mr. DAVIS. Nothing from AEC.
Senator BARTLETT. Treasury?

Mr. DAVIS. No word from Treasury.

Senator BARTLETT. Transportation?

Mr. DAVIS. Transportation has sent a report to the committee which is somewhat along the lines of the position which I have testified.

Senator BARTLETT. Budget?

Mr. DAVIS. Budget is opposed to the enactment of these bills. Senator BARTLETT. We might call Mr. Schultze up if it weren't for 5 the fact that he is busy testifying before the Senate Committee on Appropriations at this moment.

0 Did the Maritime Administration ever favor bills of this character? 0 Mr. DAVIS. Mr. Chairman, with respect to the what I will characterize as the tug and barge bill, the Maritime Administration has ta legislative proposal of almost identical character which cleared the Maritime Administration, cleared the Department of Commerce, went to the Bureau of the Budget. However, it was never sent to Commerce.

Senator BARTLETT. It was favorable in nature?

Mr. DAVIS. Yes; it was favorable in nature.

Senator BARTLETT. Do you have any notion why the Bureau of the Budget would be in oppostion? Has this program cost the Government money, generally speaking?

Mr. DAVIS. This program does not cost the Government any direct moneys; no. Of course, on a default or a breach, why it would; d but that is the same chance you take with respect to any title 11 loan. No, thi does not cost the Government any direct appropriations. Senator BARTLETT. Do you know how much the Government's obligation is, at the moment, in respect to the guaranteed mortgages? 11 Mr. DAVIS. Well, we have got a build authorization and our current e commitments are in excess of $500 million.

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Senator BARTLETT. Over the lifetime of this guaranteed mortgage authority, what has been the experience of the Government? Has it lost money?

Mr. DAVIS. No, it has not. We are now in a position where we have about a $12 million earned surplus.

Senator BARTLETT. I should think, without knowing the reasons that dictated the Budget Bureau's attitude, that they would be strongly for a program that gave a possibility of returning money to the Treasury, rather than subtracting from it. At the moment, Mr. Schultze is in agony because they are taking away. If you have had a good experience in respect to money poured into the Treasury from the mortgage guarantee program in the past, it would be implied that the same might be true in the future, and although it wouldn't compensate for this year's deficit, it would make a tiny contribution toward doing so, but I know you can't speak for the Bureau of the Budget. That is my personal comment.

Now, the Treasury Department, in commenting on S. 2247, said that the Department has no independent knowledge of any need for the proposed legislation, and no comment to make with regard to the general merits of the bill, which we must infer means a hands-off policy as far as the Treasury Department is concerned, but the interesting part of this letter directed to Chairman Magnuson by Fred D. Smith, General Counsel of the Treasury, to my way of thinking, is the concluding paragraph, which reads in these words:

The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of administration's program to the submission of this report to your Committee.

And, of course, if I read the language correctly, this isn't a clear turn down by Budget. It just casts a dark shadow over the proceeding Mr. Davis, on April 12 of this year, the Secretary of Commerce and officials of the Maritime Administration accompanying him, testified in response to an inquiry by Senator Hartke, before this very subcommittee, that legislation such as that proposed here was under consideration in a favorable light and might very well be requested by the Department of Commerce.

Now, I think you have explained that this was the case and all went well until you arrived at a certain building not too far removed from the White House. Do you have any idea of why the Budget Bureau turned this down?

Mr. DAVIS. I do not have any idea as to precisely why they turned it down. I knew, of course, the reasons given to me were that they were not absolutely contrary to the idea. They said there was no demonstrated need for moving from the 25-percent downpayment requirement to the 121⁄2-percent downpayment requirement on the one hand, and then on the other hand they said that there was the ongoing new modern bulk carrier program which could have a very adverse effect on oceangoing tug and barge operations.

Senator BARTLETT. Let me read to you from a letter directed to Chairman Magnuson, dated October 19 of this year, by John L Sweeney, Assistant Secretary for Public Affairs of the Department of Transportation, referring specifically to S. 2247:

Economics of ocean freight movements are in the process of radical alterations as a result of technological innovations which are changing the capabilities of ocean going bulk carriers. The Department, therefore, believes that any difficulties which operators of ocean going tugs and barges may encounter in obtaining finances would not be attributable to the present 75 percent ceiling on the maximum insurable obligation. More significant would be the financial community's recognition of the uncertain role of the ocean going tub and barge in the movement of bulk ocean freight. In these circumstances, the Department of Transportation believes that any radical modification of present maritime programs cannot be undertaken in a piecemeal manner, but rather should be evaluated and considered in the broader context of comprehensive federal maritime policy reform Therefore, the Department would not favor enactment of S. 2247.

I want to say that that is the most amazing statement I ever came across in recent months in respect to the maritime policy of the United States. Here, we in Congress have been waiting years, literally for the administration to submit a maritime program, which it hasn done, despite repeated promises, and there seems to be some doubt a this time as to whether it will even now, and here is the Assistan Secretary of the Department of Transportation telling us that w shouldn't do things piecemeal.

Well, how else are we to do them, without administration guidance, if I may call it that, or administration policy enunciated to the Congress? I would say that statement made in that paragarph might well do more than anything else could to cause the Senate to act favorably upon the independent Maritime Administration bill which passed the House earlier this week than anything else could.

For the Department of Transportation, of all departments, to inform this committee now that we have to wait for broad, comprehensive programs, and we must not tackle these needs piecemeal, is simply incredible to me, and, of course, we're going to tackle them piecemeal. We have no option. We have no other option at this time; and I discredit every word of that paragraph. It is amazing that the Department would send it to this committee. That is not for you to comment on, but it is for me to talk about.

Mr. Davis, with a particular reference to S. 2211, would not that effectively limit the benefit of the bill to ships on inland waterways that carry passengers as well as cargo?

Mr. DAVIS. I don't believe that you could say that would effectively eliminate them. What we are talking about here is a vessel to carry passengers. That is what this bill is really addressing itself to, Mr. Chairman. This was a point of considerable amount of discussion in the House yesterday, so as a result I have prepared a little one-page paper entitled, "Difference Between the Section 509, and Amending Title II." If the chairman would like, I would be happy to submit it. Senator BARTLETT. Please read it.

Mr. DAVIS. Difference between amending section 509 and title 11. Section 509 of the Merchant Marine Act, 1936, 47 U.S.C. 1159, now provides that any citizen of the United States may apply to the Secretary of Commerce to have the Secretary construct a vessel for him without construction subsidy for use in the foreign and domestic commerce, except a vessel to be exclusively for the transportation of property on the inland rivers and canals. If the vessel is to be of not less than 2,500 gross tons, and is to be capable of sustained speed of 14 knots, the required downpayment is 12% percent of the construction costs, and in the case of any other vessel, the required downpayment is 25 percent of the construction cost. The balance of the price is secured by a mortgage which is payable over a 25-year period with interest on the unpaid balance of 3%1⁄2 percent a year. Title 11 of the Merchant Marine Act of 1936 provides that to qualify a vessel for mortgage insurance the downpayment required is 25 percent of the actual costs. Except that if the vessel would have been eligible for mortgage aid under section 509, with a downpayment of 121⁄2 percent, the required downpayment is 121⁄2 percent. If section 509 is amended as S. 2211 proposes, to permit mortgage aid for vessels of 1,000 gross. tons, and 8 knots speed, which are to operate solely on inland rivers and waterways, with a 121⁄2 percent downpayment, the provisions would not apply to vessels to be used solely for the transportation of property on inland rivers and canals, because the section as a whole does not apply to such vessel, and the amendment does not change this. If title 11 is amended, the amendment would apply to such vessels unless the amendment specifically provides that it does not.

Senator BARTLETT. Would you favor an amendment that would insure any change of the law along the lines we are considering that would be effectively limited to inland waters?

Mr. DAVIS. Would I personally do so?
Senator BARTLETT. Yes.

Mr. DAVIS. Yes.

Senator BARTLETT. Of course, this is an iffy question, but I'll direct it to you anyway. Personally, again, do you have any idea at all of how many vessels might be constructed if S. 2211, amended or otherwise, became law?

Mr. DAVIS. Well, I think there were three in this category at the time we passed the vessel safety legislation, but the Delta Queen is the only one I am aware of that is seeking to be a replacement vessel. Senator BARTLETT. Have you ever seen the Delta Queen?

Mr. DAVIS. Yes, I have.

Senator BARTLETT. Have you ever been aboard the Delta Queen? Mr. DAVIS. I have not. But I have seen it.

Senator BARTLETT. Over a period of I don't know how many years, I have seen the ads. I have had two great ambitions in life. One is to get on the Trans-Siberian Railroad and ride across Siberia, and that is somewhat dim now by reason of circumstances in Siberia, and the other was to get on the Delta Queen and go clear down to New Orleans and back. So I'm a little bit prejudiced here.

Mr. DAVIS. Well, the Delta Queen reminds me of the old movies that I love so much. They don't make those movies any more. The old river boats any more. I even like the gambling aspects of them. I hate to see those relics go.

Senator BARTLETT. I agree with you. Now, referring to S. 2247, Mr. Barer has a question to propound to you in respect to the definition of eligibility which might be applicable under the present wording of the bill, and I think we ought to bring this up.

Mr. BARER. Mr. Davis, by use of section 509, in S. 2211, and its possible use with reference to the problems sought to be resolved under S. 2247, 509 would limit the 872-percent benefit to inland vessels or vessels on inland waterways, which carry passengers as well as property. Is that correct?

Mr. DAVIS. Passengers as well as property, yes.

Mr. BARER. In other words, if S. 2247 were to follow the same legislative route chosen in S. 2211, in other words came in to title 11 in 509, the inland waterway tugs and barges would not have the benefit of the bill, would they?

Mr. DAVIS. No, that's right.

Mr. BARER. It would then be limited to oceangoing tugs and barges and

Mr. DAVIS. That would be the effect, although I would not recommend using the term "oceangoing tugs and barges" because you get into a very difficult problem of oceangoing, and you also bring into play some other laws which by putting oceangoing into the legislation, I wouldn't recommend that.

Mr. BARER. By that statement, I gather you prefer that nothing be said descriptively about tugs and barges and let the section go through as 509, is that right?

Mr. DAVIS. Yes, sir; that's right.

Mr. BARER. Now, in response to a question by Chairman Bartlett, you stated a personal opinion, or preference, to a limitation. Could you expand on that? I'm not clear whether you prefer the limitation we have just discussed, using section 509 with S. 2247 to accomplish a limitation against inland tugs and barges, or not.