frizz shooty. That would simply compound the error which has Sa teretofore in dealing with that agency.

and you very much.

CHAIRMAN. You think then this plan would simply place this under more direct influence, if we might use that term, influence ne Executive?

M. SOUBY. I do not think there is any question about that, Senator. Die CHAIRMAN. What are the aspects that definitely signify that? Mr. SOUBY. There are several. It sets up what I think is an imposble situation. While it gives lip service to independence on the part of the so-called Board, it creates a situation which would completely estroy all its independence. To have as Chairman of the Board a an who has absolute control over the appointment of all the key personel and can determine the assignment of their duties, is bound to give him influence over the personnnel of the Commission.

On the other hand, I think he has control, or certainly is in a position to exercise influence over the judgments and actions of the other two proposed members of the Commission, because the literature on the Subject cites as one of the desirable features of having a chairman who is to be selected by the President from the membership of the Board and who will hold his office at the will of the President, that it will give the President someone with whom to consult with respect to Commission appointments.

Now, if a Chairman of the Commission is there even with the thought that he has the say-so on whether one or the other man is going to be reappointed by the President or not, it is just not realistie I think to say that he could not in any way influence the judgment and actions of those Commissioners.

The CHAIRMAN. What about the policy-forming powers?

Mr. SOUBY. I did not carry it on through. This Chairman, as I say, is quite a hybrid sort of a fellow. He sits at one moment as a member of an independent board in exercising certain types of functions, those relating to regulation of rates and things of that sort.

Again, when he sits on the Board in the exercise of its functions in determining ship subsidies, he must conform, and the other two members of the Commission must conform, to the policies determined for them by the executive department, instead of policies determined for them by the statute which they are suppose to be administering.

I say it is fundamentally inconsistent with the whole theory of an independent commission. I tried to describe it somewhat in the language that was used by Justice Sullivan in that Humphrey case that Mr. Lea referred to. It is described there as a body of experts appointed by law and informed by experience, looking only to the law for the policy to be administered by them, free to exercise their own judgment without hinderance from the executive department or any other official of the Government.

The CHAIRMAN. Do you think this plan in a measure circumvents the objections that were expressed in the Humphrey case to that sort of executive power that was attempted to be used there?

Mr. SOUBY. That is right. You see the Humphrey case turned on two points. First, the Court had to construe the act to see whether Congress intended to give the President authority to discharge a member of the Commission. The President had appointed him, but he appointed h the advice and consent of the Senate.

The act provided that he could be discharged for certain cause, but the President elected to discharge him because he refused to resign at the request of the President, based on the ground that he was not in harmony with the policies of the administration.

Now the Court first held that the act did prohibit the President from discharging the man except for causes mentioned in the act, and then the next point was whether Congress had the authority to so limit the powers of the President.

That brought it to the point that Mr. Lea emphasized. They answered that in the affirmative by pointing to the absolute necessity of that sort of a situation if one of these independent commissions was to function as it was intended to function.

The CHAIRMAN. Now under this plan of course the Board would have to be confirmed by the Senate, so whoever the Chairman is, he would have to be confirmed by the Senate.

Mr. SOUBY. Yes, sir, as a member of the Board.

The CHAIRMAN. Now this next subsection (b) reads:

The President shall from time to time designate one of such members to be the Chairman of the Board hereinafter refered to as the Chairman.

Would you say that by "from time to time" that would in your judgment permit him, if any time the first man he designated as Chairman did not carry out satisfactorily the policies of the Executive, to remove him and appoint another member who would be willing to do that?

Mr. SOUBY. That is absolutely understood, Mr. Chairman, that the man would hold his office as Chairman wholly at the will of the President. He would still remain a member of the Board for the unexpired term, but the President could change the Chairman at will.

That is definitely understood, and that is the reason I say that I think the Chairman would from every ordinary, practical consideration of the matter be responsive to the wishes of the President. I do not think you could expect anything else.

The CHAIRMAN. Thank you very much.
Mr. McCormick, you are next, I believe.

STATEMENT OF ROBERT L. L. McCORMICK, RESEARCH DIRECTOR, CITIZENS COMMITTEE FOR THE HOOVER REPORT

Mr. MCCORMICK. My name is Robert L. L. McCormick. I am appearing here in response to an invitation extended by Chairman McClellan, in a letter of May 1, to Dr. Robert L. Johnson, chairman of the Citizens Committee for the Hoover Report. Dr. Johnson requested that I present the committee's views on Reorganization Plan No. 21, in my capacity as research director for that committee. A copy of Dr. Johnson's letter of authorization to me is attached hereto as exhibit A.

Reorganization plan No. 21, on the Maritime Commission, was analyzed, in advance of submission to Congress, by the staff of the citizens committee and it was felt to offer a workable solution to an extraordinarily complex administrative matter. It is the opinion of the citizens committee that this plan is a practical, generalized application of the Hoover Commission's recommendations for the reorganization of the Maritime Commission and for the reorientation

of the Department of Commerce. The committee strongly supports Reorganization Plan No. 21, and urges that it be approved by this Senate committee. In short, I am appearing in support of the plan.

The plan is in general conformance with the specific recommendations of the Hoover Commission (recommendation 2, report on Department of Commerce), although, in putting the regulatory as well as the nonregulatory functions in the Commerce Department, the plan diverges from the Commission's program for the following reason. In preparing a detailed plan for the functions of the Maritime Commission, it was found to be somewhat impracticable to make a definite cleavage between the regulatory and the nonregulatory functions of the Maritime Commission. Unlike the other regulatory commissions, the Maritime Commission regulates primarily through the subsidy mechanism; thus were its regulatory functions to be placed in an independent regulatory commission and its executive functions within the executive branch in the Department of Commerce, the extended interagency coordination required would probably nullify the advantages of the plan. Hence, in an effort to follow the Hoover report, and, at the same time, to present a more workable solution, the President submitted the Maritime Commission Reorganization

Plan No. 21.

Furthermore, in accordance with the recommendations of the Hoover Commission, the Maritime Board under plan No. 21 is given both the regulatory functions of the present Commission and the award of subsidies. Because, however, of the fact that subsidies provide the principal means for the development of the merchant marine and because this is the area within which the principal problems arise regarding coordination with other branches of transportation and with national defense, it was found preferable to place the Board in the Commerce Department.

In creating an Under Secretary of Commerce for Transportation, the plan goes further than the Commission's program. However, in placing responsibility for coordination of all transportation programs now centered in the Comerce Department, the President has applied fundamental principle of organization espoused by the Hoover Commission. In moving these activities to Commerce, transportation functions are being there accumulated as the Commission recommended.

The Hoover Commission's specific recommendation on the Maritime Commission is:

The Commission recommends that the business operations of the Maritime Comission be placed within the Department of Commerce. Although no new corporation need be set up to handle these operations, the agency in charge should be given the flexibility of business-type management in budgeting, accounting, and auditing, which are established for Government corporations by the Government Corporation Control Act of 1945, as amended.

This recommendation in the Hoover report, and the provisions in Reorganization Plan No. 21, establishing a Federal Maritime Board for regulatory functions and a Maritime Administration for operating functions, are mutually based on the long recognized need for providing separately for the treatment of the regulatory as against the nonregulatory functions of the Maritime Commission.

The operating deficiencies of the present Maritime Commission establishment are well known to this committee. The President's

Advisory Committee on the Merchant Marine in 1947 reported that the present Maritime set-up was structurally inadequate. The management survey of the Maritime Commission conducted by your own committee in 1948 disclosed that the basic weakness of the Commission lies in its prescribed organization.

It was also the conclusion of the Hoover Commission, based on the findings of two task forces, that a fundamental reorganization of the Maritime Commission was essential to permit satisfactory performance of its functions. The Commission report states:

Aside from the primary necessity to group the Government's activities in transportation for coordination of policies (and for economy) there is still further impelling reason for bringing merchant marine activities into the Department of Commerce.

The United States Maritime Commission, made up of full-time members, has a dual function. It exercises regulatory functions affecting the whole merchant marine and, at the same time, buys, sells, and subsidizes shipping and makes loans on ships on a huge scale.

It is an anomaly that a regulatory commission should also conduct the executive function of managing a huge business, that executive functions should be carried on by an agency that is not subject to Presidential direction; that executive functions should be carried on by a full-time board of which all mem'bers have equal responsibility and authority instead of by a single administrator.

The task force investigating the Maritime Commission made no discoveries as to inefficiencies and inadequacies that have not been known for some time to your committee. The men most closely responsible for the operation of the Maritime Commission have been among its most severe critics. The task force reported it was profoundly impressed with the keen dissatisfaction on the part of many present and former Commissioners and officials over the weaknesses of the present organization and procedures of the agency. This dissatisfaction has been in the nature of an intelligent awareness of the tremendous responsibilities and work load and of the need for a change in the agency's structure and work habits.

The difficulties encountered by the Maritime Commission in attempting to perform its nonregulatory or business functions has resulted in serious delays and backlogs in many of its services and duties. That the accounts of the United States Maritime Commission are presently, and for several years have been, in a deplorable condition is well known to this Committee on Expenditures.

This committee's management survey, and the Hoover Commission task force, reported in August 1948 that

1. No formal balance sheet of the Commission or statement of its income and expenses have been prepared since those of June 30, 1945.

2. At that time the accounts had not been completely poster and adjusted for fiscal years 1946 and 1947, which is a prerequisite to the preparation of adequate financial statements.

3. The present backlog of accounting books in arrears is estimated by the staff of the Maritime Commission to represent approximately 2,200 man-years of work.

Maritime Commission accounting has provoked severe criticism from the General Accounting Office. In 1947, Comptroller General Lindsay Warren testified:

We have tried to make every allowance for their administrative difficulties over there in the Maritime Commission. However, I must confess that 10 years

of frustration with the Commission in this and many other matters has just about exhausted our patience.1

The Maritime Commission has been subject to criticism for its performance of subsidy functions by Congress for some time. The special inquiry conducted by the Government Operations_Subcommittee of the House Committee on Expenditures in the Executive Departments, into the operation of the Maritime Commission with particular reference to allowances for national defense features and construction-differential subsidies is a case in point. This report was based on a special report of the Comptroller General which contained serious charges of maladministration and excessive expenditures of public funds, alleging "irregular procedures, inaccurate calculations, and unjustifiably literal interpretations of statutory language," on the part of the Maritime Commission.

In its report on the inquiry into GAO charges, the investigating committee reflected seriously and unfavorably on the fumbling administration of the Merchant Marine Act of 1936 as amended. The subcommittee questioned whether a Commission could properly administer that act. The subcommittee recommended that serious consideration might be given to eliminating the commission form of administration and substituting in its place an adminstrator. It further suggested, in view of the inefficient administration and the dissentious. attitude prevailing at the Maritime Commission, that the feasibility of placing the administration of the Merchant Marine Act within an established Government department, such as the Department of Commerce, merits careful study.

Significantly, the subcommittee suggested that the Hoover Commission recommendations be examined with respect to the Maritime Commission.

Reorganization Plan No. 21, in our judgment, presents a method for remedying the serious deficiencies in present administration of Federal Merchant Marine activities.

The plan strengthens adminstration of the Merchant Marine Act, in particular, and provides for the coordination of all Federal transportation policies, in three broad and general ways.

First, it establishes a separate Maritime Adminstration in the Commerce Department to carry out the operating and administrative activities relating to the merchant marine. This is in line with Federal experience that business operations can be better administered by an executive head than by a commission form of administration.

This provision is in direct conformance with the Hoover report recommendation that business operations of the Commission be placed in the Commerce Department. It is also in conformance with the findings of the House Subcommittee on Government Operations.

Second, it establishes a Maritime Board of three members in the Commerce Department to carry out the regulatory functions related to the Merchant Marine Act. It further guarantees the independence of this Board in performing these regulatory functions. It vests responsibility for determination and award of construction and operating differential subsidies directly in the Board, subject only to general policy guidance by the Secretary of Commerce.

1 Hearings, Supplemental Independent Office Appropriation bill, 80th Cong., 2d sess., May 1948, p. 5101.