Powers of the President during crises

by J. Malcolm Smith; Cornelius P. Cotter

Control of Credit, Exchange, Prices

Credit: The major purpose of the Defense Production Act of 1950 was to place the national economy on a war production footing with minimal possible effect upon civilian production and consumption. An effort was made to expand the total productive facilities of the nation beyond the levels needed to meet the civilian demand, thus reducing the need to curtail civilian consumption. To some extent, however, it was anticipated that normal civilian production and purchases would have to be curtailed and redirected.[381] In this connection the Federal Reserve Board by law was empowered to impose consumer credit controls pursuant to an Executive Order[382] until such time as the President determined that the exercise of such controls were no longer necessary. The controls, of course, were to be directed at carrying out the objectives of the Defense Production Act.[383] In addition, the President was authorized from time to time to prescribe regulations for regulating real estate construction credit as he believed necessary to prevent or reduce excessive fluctuations in such credit. He was empowered to prescribe maximum loan or credit values, minimum down payments, trade-in or exchange values, maximum maturities and maximum amounts of credit.[384] These, of course, were direct controls, as distinguished from inducements or incentives designed to reduce civilian demand for materials and productive facilities needed by the military establishment.

Opposite to the use of credit controls as a means of reducing effective consumer demand is direct intervention to insure that adequate credit is available to finance business activities declared by the Government to be essential to national defense. Conceivably the government could require that lending institutions, under certain conditions, make such grants. In lieu thereof it sought to provide incentives to lending institutions to make loans to defense producers, and avoided compelling extension of such credit. In fact, credit was made available through the Reconstruction Finance Corporation, the Smaller War Industries Administration and most recently the Small Business Administration. As a quid pro quo the government compels the recipient of such aid to submit to supervision.[385] Equally effective as loans in financing needed defense construction or production are advances to contractors. In providing for the construction of pipe-lines for the transportation of petroleum products, Congress in 1941 permitted the President to make such advances as he deemed advisable, through such departments as he might designate to the contractors.[386] It also authorized the Secretary of Navy to advance to private salvage companies such funds as the Secretary thought necessary to provide for the immediate financing of salvage operations.[387]

Exchange: The May 1937 amendment to the Neutrality Act made it unlawful, when the President had issued a proclamation that a state of war between two or more states or a state of civil war in a foreign state existed for any person in the United States to purchase, sell, or exchange bonds, securities or other obligations of the governments of any belligerent states or to loan, or to collect contributions.[388] The First War Powers Act of 1941 echoed this provision, providing in Title III, Trading with the Enemy, that the President in time of national emergency declared by him might investigate, regulate, or prohibit any transactions in foreign exchange, transfers of credit or payments.[389] The Export Control Act of 1949 permitted the President to stipulate the rules which should apply to the financing, transporting, and other servicing of exports.[390]

Price Control: In time of war the capitalist economy is transformed into a closely administered economy regulated in an effort to maximize war production and minimize dislocation of the civilian economy. To prevent speculation and dissipation of tax and consumer dollars through continuous and unchecked price increases, it becomes necessary that prices be subjected to government control. This was the aim of the Emergency Price Control Act of 1942. Whenever in the judgment of the Price Administrator the price or prices of a commodity or commodities threatened to rise to an extent inconsistent with the purposes of the Act, the Price Administrator could establish whatever maximum price or prices he thought equitable and fair. The only guide lines for “fair and equitable” in establishing a maximum price were the prices prevailing between October 1 and October 15, 1941.[391] He was further empowered to recommend stabilization or reduction of rents in defense-rental areas. Where state or local boards failed to heed the recommendation the Administrator could by regulation or order establish maximum rents for such accomodations as in his judgment would be generally fair and equitable and would effectuate the purposes of the Act. Rent levels were established on the basis of those prevailing on April 1, 1941. The Act was amended in October 1942 when Congress authorized and directed the President on or before November 1, 1942, to issue a general order stabilizing prices, wages, and salaries affecting the cost of living. Stabilization was so far as practicable, to be on the basis of the levels which existed on September 15, 1942.[392] The President was also given power by regulation to limit or prohibit the payment of double time except when, because of emergency conditions, an employee is required to work for seven consecutive days in any regularly scheduled work week.[393]

In an effort to adapt the price control program to postwar reconversion and prepare for its eventual termination Congress in July 1946 extended the life of the Price Control Act of 1942 to June 30, 1947, admonishing the Office of Price Administration and other agencies to use their price powers to promote the earliest practicable balance between production and demand: Congress wanted the control of prices and the use of subsidy powers to be terminated as rapidly as possible.[394] The President was directed to recommend to the Congress legislation needed to establish monetary, fiscal, and other policies adequate to supplement the control of prices and wages during the balance of the fiscal year 1947. A Joint Resolution of March 1947 continued the price control program with regard to sugar until October 31, 1947.[395] Rent control as well as other war production controls continued in effect by the Defense Production Act of 1950 which authorized the President to establish a ceiling or ceilings on the price, rental, commission, rate, fee, charge or allowance paid or received on the sale or delivery, or the purchase or receipt, by or to any person, of any material or service. And the same Act required that the President issue regulations and orders stabilizing wages, salaries, and other compensation.[396] Once the Korean War ended, all controls, price, rent and credit were swept off the statute books.

Control of Common Carriers

Congressional enactments under this head generally fall into three major categories: control of domestic transportation, control of carriage by American ships, and control of foreign vessels in American ports. Our interest is confined exclusively to emergency controls exercisable by the Interstate Commerce Commission and similar federal regulatory agencies.

Control of Domestic Common Carriers: The Emergency Railroad Transportation Act of 1933 was designed to facilitate rehabilitation of the depression ridden American railroads. An Act addressed to economic rather than military emergency, it had nonetheless military overtones. The maintenance of an efficiently functioning railroad system capable of meeting potential American defense needs was an objective that could not be overlooked in the formulation of a successful railroad policy. The Act set up a Coordinator of Transportation who was to divide the railroad lines into three groups: eastern, southern, and western.[397] A number of railroad coordinating committees were created to carry out the purposes of the Act—i.e., elimination of unnecessary duplication of services and facilities, control of allowances, etc., and avoidance of undue impairment of net earnings, and other wastes and preventable expense, and promotion of financial reorganization.[398] Whenever unable to carry out these reforms the committees were to recommend action to the Coordinator who might, at his discretion, issue an order embodying their recommendations. When the committees failed to act on matters brought to their attention by the Coordinator he was authorized and directed to issue and enforce such order, giving appropriate directions to the carriers and subsidiaries subject to the Interstate Commerce Act as he found to be consistent with the public interest.[399]

Like the N.I.R.A. the Act contained a provision dealing with labor relations. The Railroads were prohibited from reducing the number of their employees below the number as shown by the pay rolls of employees in service during the month of May, 1933, after deducting the number who had been removed from the payrolls after the effective date of the Act by reason of death, normal retirement, or resignation.[400] A regional committee system was established for the representation of employees, and provision made for regional boards of adjustment to settle controversies between carriers and employees. Carriers and employees were to be equally represented on such boards.[401] The Railway Labor Act of 1926, as amended in 1934, attempted to establish a pattern of free union-management negotiation of disputes with ultimate recourse to a National Mediation Board.[402]