a report to me from the Postmaster General on ocean-mail contracts prepared pursuant to an Executive order of July 11, 1934.

Reports which have been made to me by appropriate authorities in the executive branch of the Government have shown that some American shipping companies have engaged in practices and abuses which should and must be ended. Some of these have to do with the improper operating of subsidiary companies, the payment of excessive salaries, the engaging in businesses not directly a part of shipping, and other abuses which have made for poor management, improper use of profits, and scattered efforts.

Legislation providing for adequate aid to the American merchant marine should include not only adequate appropriation for such purposes and appropriate safeguards for its expenditure, but a reorganization of the machinery for its administration. The quasi-judicial and quasi-legislative duties of the present Shipping Board Bureau of the Department of Commerce should be transferred for the present to the Interstate Commerce Commission. Purely administrative functions, however, such as information and planning, ship inspection, and the maintenance of aids to navigation should, of course, remain in the Department of Commerce.

An American merchant marine is one of our most firmly established traditions. It was, during the first half of our national existence, a great and growing asset. Since then it has declined in value and importance. The time has come to square this traditional ideal with effective performance.

Free competition among the nations in the building of modern shipping facilities is a manifestation of wholly desirable and wholesome national ambition. In such free competition the American people want us to be properly represented. The American people want to use American ships. Their Government owes it to them to make certain that such ships are in keeping with our national pride and national needs.

THE WHITE HOUSE,

March 4, 1935.

FRANKLIN D. ROOSEVELT.

The CHAIRMAN. We would like to hear from the Post Office Department. General Howes, will you make a statement?

STATEMENT OF WILLIAM W. HOWES, FIRST ASSISTANT
POSTMASTER GENERAL

Mr. HowES. Mr. Chairman and members of the committee: The Post Office Department does not claim to be expert in matters of shipping and we do not presume we would have been called upon for an opinion as to this bill except that we have the mail contracts, the ocean-mail contracts, in our Department.

This proposed bill, no. 3500, having come up, we presumed it was naturally referred to us like any other bills that come up in committee pertaining to our Department, and we have met, a committee of officials of the Post Office Department and a like committee from the Commerce Department, and have numerous discussions on this bill, with the thought that the bill, having been up in the previous session and having been introduced early in this session, that there was a necessity for some kind of a bill, and we did not want to have the thing held up in our conference in our Department, so we joined in a report as to the bill itself, which is now before you.

The CHAIRMAN. General Howes, as First Assistant Postmaster General, you have been familiar with all the conferences between the Post Office Department and the Commerce Department, and the Post Office Department has participated in the formulation of all these amendment, is that true?

Mr. HOWES. Yes, sir.

The CHAIRMAN. I take it from the statement that General Farley made, that the Post Office Department is in favor of a merchant marine and intends to assist, so far as it can properly assist?

Mr. HOWES. Yes.

The CHAIRMAN. Is it your feeling that this bill, as formulated with the amendments suggested by joint conference, is a fairly satisfactory bill?

Mr. Howes. Speaking for the Post Office Department I think, and we think, that the question of a United States merchant marine is a question that is way beyond the province of the Post Office Department. Our interest is primarily in the handling and the carriage of mails. We would not undertake to say that this is the best bill that could be arrived it. We do not think we are competent to say that. We think that this is something that brings the matter before a legislative body and that you gentlemen, and the President, are much more able to arrive at a satisfactory merchant-marine bill than we would be from our knowledge on the subject.

The CHAIRMAN. On the part of my committee I am much obliged to you. Of course, the President will speak for himself. Have you any suggestions to make about amendments or changes from the bill as printed? I assume that the suggestion made by Senator Guffey about the failure of a definite repeal should be given some consideration.

Mr. Howes. We understood that it was being repealed.

The CHAIRMAN. There is no difference of opinion then on your part on the idea which I presented here a moment ago regarding that?

Mr. Howes. No. We considered that it was an oversight.

The CHAIRMAN. Well now, will somebody from your department help us in going over these amendments to make clear to the committee exactly what they are intended to do?

Mr. Howes. Yes, sir. Mr. Crowley, our solicitor, is here for that purpose.

The CHAIRMAN. Have you anything to add then?

Mr. Howes. I have not.

The CHAIRMAN. Do you have any questions to ask?
Senator GUFFEY. No.

The CHAIRMAN. We will proceed with Mr. Crowley then.

STATEMENT OF KARL A. CROWLEY, SOLICITOR, POST OFFICE DEPARTMENT

The CHAIRMAN. Will you state your name?

Mr. CROWLEY. Karl A. Crowley.

The CHAIRMAN. Solicitor of the Post Office Department?
Mr. CROWLEY. Yes, sir.

The CHAIRMAN. Well now, suppose we start with the bill. On the first page is the change from "At least one-half" to "A substantial portion of the water-borne export and import foreign commerce." What was the reason for using that language?

Mr. CROWLEY. That was a suggestion, Senator, made by the State Department, as being a little more appropriate. The CHAIRMAN. A little more diplomatic?

Mr. CROWLEY. A little more diplomatic, you might say, without changing, in effect, the meaning of it.

The CHAIRMAN. Very well. On page 2, line 18, why was the language put in that is found here in italics, "the original members may be appointed at any time prior to July 1, 1936"?

Mr. CROWLEY. That is to enable the President, in case Congress is not in session, or this bill passes before he should make up his mind about whom to appoint on the Authority, to make certain that he had the power to appoint these members up to July 1, 1936.

The CHAIRMAN. Is there any particular reason why that date was fixed?

Mr. CROWLEY. I think he wanted some additional time for that. The CHAIRMAN. Very well. Page 3, beginning on line 18, "No person shall be eligible for appointment as a member who has or has had, within a period of 3 years prior to appointment, any financial interest in any carrier", why was that put in? Was there any distrust in the President as to the type of men he would put in? Mr. CROWLEY. That follows the custom that prevails, as I understand, in the Interstate Commerce Commission appointments, to prevent any of the present holders of any contract, or any person in any way connected with them, from serving as a member of this board which is to adjust these contracts and deal with the concerns. The CHAIRMAN. Do you understand that language to be so broad that it would bar from the appointment anyone who within 3 years owned a share of stock in an oil company, in an electric company, or a foodstuffs dealer having contracts or making sales to shipping interests?

Mr. CROWLEY. No, sir; I do not think so.

The CHAIRMAN. Is there any reason that developed in the past to justify the inclusion of this amendment?

Mr. CROWLEY. Only this: Most of the shipping companies in the country are being subsidized with these mail contracts and it was agreed in our conference that it would be much better that there be a direct prohibition against the appointment of any person from any of the shipping companies to serve on the Authority.

The CHAIRMAN. You are an able lawyer and familiar with our statutes. Do you have any such restriction placed on the President with reference to the appointment of any members on any other board?

Mr. CROWLEY. I am not familiar with any restrictions placed on them.

The CHAIRMAN. Tell us in a word why, in your opinion, this language should be included in the bill. I am not resisting it at all, but I would like, for the purpose of the record, to have it clear as to why it was included.

Mr. CROWLEY. Of course, these contracts have been the subject of controversy here for many years, and it seemed to be obvious that they should be settled and determined, and the new system, if we have one, should be set up by persons who have no financial interest, directly or indirectly, in any of these present contracts, so that they could not deal with themselves, that the President should go out. and get business men entirely unconnected with any of the present ocean-mail contracts who could study these problems and reach unbiased decisions as to what to do with them.

The CHAIRMAN. The sole purpose was then to make certain that in the set-up of the maritime authority there should not be included any person who might have a selfish interest in the settlement of those contracts?

Mr. CROWLEY. That is it exactly.

The CHAIRMAN. What do you understand to be the meaning of line 21, "or concern subject to this act or the shipping laws"? What would that mean in your opinion?

Mr. CROWLEY. That would mean those would be the beneficiaries who are the beneficiaries of the present subsidy or who would be the beneficiaries of a new subsidy would be forbidden from receiving this appointment.

The CHAIRMAN. I want to make that clear for the record. You have already said that would not include necessarily persons who have sold materials to shipping lines.

Mr. CROWLEY. It possibly would prevent the appointment of a shipyard owner or person having a substantial interest in a shipyard or similar business.

The CHAIRMAN. He might have had an interest in the past in building ships or might in the future.

Mr. CROWLEY. This would prevent anybody having any interest in shipping or shipbuilding from being a member of the Authority. The CHAIRMAN. Would there be any objection, under this law, to my being a member of the Authority? I have been here fighting on this thing and for a merchant marine.

Mr. CROWLEY. I mean a financial interest, where he has money invested in it.

The CHAIRMAN. What does this mean on page 5, line 15, beginning with line 12, "trained and satisfactory present employees of the United States Shipping Board Bureau or United States Shipping Board Merchant Fleet Corporation", and then in italics, "or other Government employment"? Would that mean that a man who is in one of these alphabetical organizations, or emergency organizations, for only a few days, that he could be transferred?

Mr. CROWLEY. It would mean that any person in the employ of the Government in any capacity could be transferred. It might mean the clerk of your committee here, if the Authority saw fit to appoint him.

The CHAIRMAN. We will include in the record at this point this letter from the Civil Service Commission making some objection to that language.

Hon. ROYAL S. COPELAND,

Chairman, Committee on Commerce,

United States Senate.

MARCH 7, 1936.

DEAR SENATOR COPELAND: Thank you for your letter of the 4th with its enclosure of the latest print of S. 3500.

The personnel provision appearing as amendment paragraph (e) of section 201, pages 4 and 5, I am convinced is not in accord with your views as expressed in our correspondence last summer and fall. The whole paragraph as it reads in this latest print, provides, in brief, not only for a large number of non-civilservice appointments, but also for the transfer to the United States Maritime Authority of non-civil-service personnel of the Merchant Fleet Corporation which in itself would not be objectionable, and also provides for transfer of any person "from other Government employment." This would include all the non-civil-service employees in the various emergency agencies.

A still further objection lies in the final paragraph on page 5 because under ordinary construction of such phraseology it seems to mean that every non

civil-service employees, whether secured by the Maritime Authority through original appointment or by transfer, could be accorded a classified status at the end of 6 months after noncompetitive examination by this Commission. Thereupon the non-civil-service position that such employee vacated could again be filled and the "round and 'round" procedure again followed of giving him a classified status at the end of 6 months.

From the standpoint of the Classification Act, which fixes comparable salaries for comparable work, there would be no necessity for including the limitations as to rates of pay appearing in lines 5, 6, and 7 on page 5. The highest grade to which any position may be allocated under the Classification Act of 1923, as amended, carries an initial compensation of $8,000 with two promotion steps provided by Congress, namely, $8,500 and $9,000. Therefore, under the Classification Act, without express authority by Congress no higher compensation may be paid than $9,000. If the directors of divisions occupied such highly important positions that their responsibilities would compare with the responsibilities of the directors of bureaus of the Interstate Commerce Commission, then their positions could also be allocated to the $8,000 grade; but in almost all instances such positions are allocated to the grade of position carrying entrance compensation of $6,500, with two steps of promotion authorized by Congress, namely, $7,000 and $7,500.

The entire personnel situation could be simplified and every proper authority accorded if the paragraph (e) of section 201 were changed to read: "With such exceptions as the President may direct, all appointments shall be made in accordance with the provisions of the Civil Service Act and rules, and compensation shall be fixed in accordance with the provisions of the Classification Act of 1923, as amended."

Similar phraseology was used by the Congress in the establishment of the Veterans' Bureau (now Veterans' Administration); and the Commission and the head of the Veterans' Bureau conferred and made joint recommendation to the President concerning the specific positions to be exempted from competition. The President approved this recommendation. With this sort of a provision in the law it is possible for the President to make amendments from time to time as conditions require; and it is believed that this form of personnel provision is the most satisfactory that could be adopted in the interest of good business administration.

Very sincerely yours,

HARRY B. MITCHELL President.

The CHAIRMAN. The point that you have in mind is that if there should be found somebody in Government with particular training it should be possible for him to be transferred?

Mr. CROWLEY. Yes; that he might be transferred. There are so many employees, of course, of the Government that are capable and experienced, people of ability, and yet they do not have a civil-service standing, and this would enable the transfer from one Government department or agency to this branch of the Government department. The CHAIRMAN. That is to say the Authority could reach out anywhere?

Mr. CROWLEY. It could reach out anywhere at all, if they found a capable person that they wanted to appoint to a job with this Authority they would not have to take civil-service examinations. It gives the Authority a little more latitude in selecting its people. The CHAIRMAN. Thank you for the answer. We will see what the Civil Service Commission has to say at a later time. Let us turn to page 12, line 16. I notice that in the conference there has been stricken out this proviso, beginning with "provided further" on line 16, page 12:

That the provisions of paragraph (c) of section 405, Merchant Marine Act, 1928, shall apply to all vessels receiving a construction differential or operating differential subsidy under title V of this act in the same manner as said paragraph applies to vessels employed in ocean-mail service.