In section 3 (a), where it says "7 directors", I would suggest 5, nd then where it says "One director shall be a director-at-large", I vould suggest two.

Then later it says 2 directors shall represent agriculture, 2 indusry, and 2 the bankers, I would make it 1 for each.

Mr. CROSS. I believe you discussed that a while ago.

Mr. FISHER. Yes; and I would like to leave them all out, but if you are going to have them represented, I would reduce the representation to I each instead of 2, and increase the representation of hose at large from 1 to 2, with a total all together of 5.

But if you can get it through Congress without any limitation I think it is very much better.

Mr. GOLDSBOROUGH. My opinion is that the House has passed the point where they would want to fasten the Authority with any limitation. I think the House visualizes what you say very clearly.

Mr. FISHER. I certainly would strike it all out, and that would, of course, affect the wording of the next sentence with reference to the director representing banking.

Then there ought to be something at the end of that paragraph (a) in regard to the term. There is nothing in regard to how long these people should be appointed for, whether for life, a year, or subject to removal by the President, and it would be better to make the term definite. I would suggest, if there are five, that it be a 5-year-limit term.

Mr. GOLDSBOROUGH. That would make it a 25-year term.

Mr. FISHER. No; the first term should be 1 year, then 2, 3, 4, and 5 years, the one sitting for only 1 year.

I have already discussed paragraph (b) in answer to your question, and I have suggested that you leave out the phrase "removal by the President or by concurrent resolution of Congress ", and substitute what was said by Mr. Walcott in regard to impeachment. Then you should put in a clause that they are all automatically removed if at any time for 3 months in succession the value of the dollar is constantly 10 percent or more out of line with the norm established by law.

In regard to the chairman, I would not have the chairman elected by the members. It sounds well, but I am afraid it would make for logrolling rather than efficiency, and I would suggest that the chairman be appointed by the President just as the Chief Justice of the Supreme Court.

I would have that sentence read:

The chairman of the Board shall be appointed by the President.

Then a little lower down there is a provision, "There shall be a governor and one or more deputy governors of the Authority." I wonder whether you mean that the governor and deputy governors should be members of the Board or not. If so, that is all right, but it should be definitely in there.

Mr. CROSS. I believe the governor and deputy governors ought to come out of the Board. They are all going to be here all of the time and give all of their time and attention to it.

Mr. WOLCOTT. I wonder if they have not used the word " governor" possibly as you and I would say executive secretary?

Mr. BUSBY. Would it be worth while to have this Board of five separated somewhat from the administrative end of it, they to bę

the driving portion, in other words, and the governor and the other officials the machine serving and carrying out their determinations Mr. GOLDSBOROUGH. My own opinion is that five of them is enough without having a governor and deputy governors. It is my opinion the chairman should be the governor.

Mr. CROSS. I believe the smaller the Board is the quicker they will act.

Mr. WOLCOTT. In fact these are executive officers and have nothing to do with the board policies, which is brought out later on, down in lines 22 and 23, where it is provided that the Board shall fix the compensation and prescribe the duties of the governor and deputy

governors.

Mr. CROSS. I think the Board should be the whole thing.

Mr. FISHER. It seems to me the governor ought to be the main man, and he ought to be the chairman.

Mr. CROSS. I should think that would be proper.

Mr. FISHER. They are all going to be there; they are not a board of directors meeting once a month to O.K. the act of the president of the corporation. If you would have a board that meets once a month, it would be another thing, like the directors of a corporation but all of these five people are going to be putting all of their time on it. It seems to me they are like the executive committee. So I would leave out everything in that regard.

Now, I don't like the provision that "directors shall receive the same compensation as the heads of the executive departments." I regard this Board, when constituted, the most important department we will have in this country, excepting the Supreme Court. Unlike the Supreme Court, it will consist of people, some of whom, at any rate, have facility for making money, while the people on the Supreme Court are not supposed to be primarily men like Mr. Mellon people who have money. But a person who is going to be on this Board, at least a banker or industrialist, would be a person who could get a very large earning power elsewhere.

I think Governor Strong, of the Federal Reserve Bank of New York, got $50,000 per year, while probably he could have gotten elsewhere a hundred thousand, and very likely more. But he had public spirit and was willing to sacrifice getting what is a large salary for most people to be of public service.

You may not agree with me, but I would be inclined to make the salary of these people a fixed sum, and make it large, larger than any other salaries in Washington; make it large, make it $50,000.

Mr. GOLDSBOROUGH. You are right, and I agree with you; but that is one thing you cannot get through.

Mr. FISHER. You can make it at least $12,000 and that is what the Secretary of the Treasury gets, I believe.

Mr. SCRUGHAM. His salary is $15,000.

Mr. FISHER. You can make it $15,000; and the incumbents will be either people who cannot earn $15,000 elsewhere-I mean not in the first instance, but 10 or 20 years from now-or they will be people who have an income from property of two or three hundred thousand dollars per year and don't care anything about money but would like to get into public service. Neither of those is the best type.

Now, going to the next point, I don't like this in line 12, page 6: No director shall hold, directly or indirectly, or have any financial interest 1 any financial, manufacturing, or importing or exporting institution or stablishment.

I think that will hamstring it. You could never get a Mellon-not hat I am especially devoted to him, but he is the type, anyway, of nan you would want, and you could scarcely get a man representing anking or industry who could qualify under that kind of clause.

I would omit that provision, or leave it there subject to disclosure ›y sworn statements as to any interest they may have.

Mr. GOLDSBOROUGH. I don't think there ought to be any restriction. here myself. If a man is straight he is straight, and if he is a crook he is a crook, and that is all there is to it.

Mr. FISHER. Now, at the end of this paragraph (b), at the top of page 7, there is a provision which reads:

Expenditures of the authority for other than for administrative expenses shall not be subject to review by any officer of the Government.

I would like to ask why not? Is there any reason?

Mr. CROSS. I assume the reason that was put there was that they would have charge of the fund to be used in manipulating the foreign exchange.

Mr. GOLDSBOROUGH. That is the reason it was put there.

Mr. WOLCOTT. I think that is in order to enable them to carry out the policy of the act, when it says, "expenditures other than expenditures for administrative expenses."

Mr. FISHER. Then subparagraph (d) providing for net profits, I think it is better to say "all or any ", rather than assuming there will be net profits.

Then at the end of subparagraph (d) I would put in something about losses, to the effect about like this:

Losses incurred from reductions in price of gold or other activities incident to the performance of the duties of the Authority are to be assumed by the Treasury.

That is for the purpose of safeguarding the Authority so that they are not personally liable for losses.

Mr. WOLCOTT. Before you get off of that subject, may I inject this? If we ever go before the House of Representatives without some limitation, and do not take into consideration that the Treasury is protected sufficiently by power of removal and so forth, some of them are even demagogues on the fact, that this Authority has power to open the Treasury and run out all of the funds, so that, could you suggest any limitation there?

Mr. FISHER. I don't see how you can and have them responsible for keeping the price level, because they have, under certain circumstances, to incur big losses. The Government just now has a big gain, two billion and some million dollars, and that is one effect from the sudden deflation, so that if they deflate any more they will get more, and if they do the opposite they will get a loss.

I do not believe that we ought to have these people hamstrung. Mr. BUSBY. Of the hundred million dollars or so of gold purchased by the R.F.C., I notice the Treasury has taken it over at the old gold price, which will show a book loss to the R.F.C. of the difference between 27 and around 34, still as you say, there is an increased

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value to the country, yet there is a question of somebody being re lieved of liability because of a loss in this instance.

Mr. FISHER. As long as you are going to have a gold standar you have got to have, as Warren said, a dollar that is rubber in weight in order to avoid its being rubber in value, and you have go to have this possibility of loss.

Mr. STOKES. What would bring about that loss?

Mr. FISHER. A decrease in the price of gold.

Mr. STOKES. What could be the reason for a decrease in the pric of gold?

Mr. FISHER. Now we have got to fight inflation, and one of th most effective means would be to decrease the price of gold. Mr. STOKES. And that may be a possibility?

Mr. FISHER. Yes.

Mr. STOKES. Within a short time, do you think?

Mr. FISHER. No; not in a short time.

Mr. WOLCOTT. I have this in mind. We are told the Governmen will buy, if it keeps up its rate, more gold than is produced in th year-in any one year. I think we are told the new gold produced in terms of dollars, amounts to about 400,000,000. If we are buyin more than that, we can foresee a situation which might develo whereby we might control 70 or 80 percent or more of the gold o the world, to the extent that France, England, and all of the othe countries that look with favor on gold will just throw up their hand and say we will have nothing to do with gold, because the Unite States owns all of the gold, and they might develop some othe metallic base, or go to silver.

Mr. FISHER. What they are likely to do is what we have done because you know others can do it.

Mr. WOLCOTT. I am just giving that as an illustration as to a con dition which might force the price of gold down, then there migh be a tremendous loss, which might happen by circumstances ove which this board might not have control, although, of course, it almost an unlimited control. Unfortunately, however, there migh be conditions over which they might not have any control, and th losses run into millions and millions. That is why I suggested ther might be some limitation.

Mr. FISHER. You cannot have a limitation and at the same tim hold those people responsible for the price level.

Mr. BUSBY. When you need to stiffen up and use your authority you would take out, because you are running into losses.

Mr. WOLCOTT. Of course, we realize that the loss by reason of th activities of the authority having to act or, being unable to act, i that instance, would be no greater than the loss if this fund wa administered by the Treasury, the President, or anyone else.

Mr. FISHER. It seems to me you are safe against any loss for long time. First, you will have the use of the 234 billions that hav been referred to, and when that time comes you will have plent of discussion in Congress as to what to do; and if it should happe that gold becomes as cheap as yellow dirt, or some mountain of gol is discovered somewhere, and you try to make the dollar bigger an bigger until it weighs a ton, in order to keep it from rising, the the burden on the Treasury will be so large that the people will say "Let's give up this ", and that would be the time to do it, you ar ready for it.

Mr. GOLDSBOROUGH. Have you completed your suggestions, Professor Fisher?

Mr. FISHER. I think that is all, but I would like to say in reference to the end of section 4 (a) the standard set-up is the commodity standard of 1926. I do not object to that, but in fact I think that is pretty nearly right, and there has been so much said about it, probably it is easier to get it through Congress that way than if you made it 95 percent or 105 percent of 1926, or put it in the hands of a commission to determine what it should be.

I want to call attention to the fact, if I had the say of it, I would like to get a statistical organization to find out whether it was exactly the 1926 level or whether it was a little more, or as I suspect, a little less.

Mr. CROSS. I think we can state that the purchasing power of a dollar from 1917 to 1929, during that 13-year period, when practically all of the debts accumulated, in comparison with the pre-war period of 1910 to 1914, would be 682 cents; then the purchasing power of the dollar during 1926 in relation to that same pre-war 5-year period would be 62 cents.

In other words, it would still leave the debtor at a little disadvantage, but I think the country is pretty well sold on the 1926 average because of the President's talk and other things we have heard and

seen.

Mr. FISHER. I don't think he has ever mentioned it.

Mr. CROSS. Oh, yes; he has mentioned it.

Mr. BUSBY. He said the other night he thought the 1926 price level was the right level because it was about the average at which the majority of the debts of the country were contracted.

Mr. FISHER. If either of you gentlemen can give me the chapter and verse of that, I would like to have it, because I have been looking for it a long time. I have made my own calculations, and know of several economists who have also done so. Nineteen hundred and twenty-six is not bad. I don't believe it is quite the ideal, but it might be better if we set it at that and let it go.

I would like to ask what is title III of the act of May 12, 1933, which is repealed in section 5-what is that?

Mr. GOLDSBOROUGH. It is the Thomas amendment.

Is there anything further you have to say, Professor Fisher?
Mr. FISHER. No; I believe not.

Mr. GOLDSBOROUGH. Gentlemen of the committee-and the secretary will please notify those who were not present-tomorrow morning at half past 10 we will have Dr. Bernhard Ostrolenk, economist of the publication Business Week, address the committee.

Professor Fisher, on behalf of the full committee and the subcommittee, I want to thank you for coming here this morning and contributing so splendidly to our understanding of what this measure can be made ultimately to do; and also, on behalf of the committee, to express our thanks for the development of this whole subject which you have given the committee and Congress the benefit of for a period from 1922 up to the present time.

Mr. FISHER. I thank you.

Mr. GOLDSBOROUGH. The hearing will adjourn until 10:30 a.m.

tomorrow.

(Adjournment taken at 1 p.m. until 10:30 a.m. Feb. 2, 1934.)