he is required to do anyway, but it was found necessary to put that thing in because they didn't pay attention to it during World War II. Now, the Secretary of Commerce says Senator MAGNUSON. Do you know whether or not the rider has been put on the House appropriation bill again, or they haven't finished, I don't think. Mr. CASEY. They haven't finished, but I would know if they didn't put it on, let us put it that way. Mr. MORGAN. It is on. Senator MAGNUSON. It is on, so we will get it over here shortly. Mr. CASEY. The Secretary of Commerce says there are two standards of valuation in the present law, the fair and reasonable value and the section 902 (a) value. Well, as a matter of fact, the legislative history clearly indicates that when President Truman signed the War Risk Insurance Act of 1950, he issued a message at the same time, a statement, in which he said: I sign this bill with the understanding that the term "fair and reasonable value" means the unenhanced value reckoned under section 902 (a). In the face of that kind of mandate from the President it is inconceivable to me that they wouldn't follow that anyway in fixing the fair and reasonable value, and I understand from the staff of Maritime that there is no disposition not to follow it. He says that there are three agencies created in the present law and bills for reckoning just compensation, the Secretary of Commerce, the Maritime Administration, and the General Accounting Office. He said it would facilitate administration of the law to cut it down to one, and of course he says the Secretary of Commerce. Actually, the General Accounting Office, as I pointed out, is in the picture under the Budget and Accounting Act to the extent that their decisions are required to be followed to the extent that when they audit the accounts, if they determine a payment is illegal or excessive, it is binding on the executive branch of the Government. Senator MAGNUSON. Do you think that the rider is necessary, that there is necessity for the rider at all if they would carry out the provisions of the act? The rider is merely a directive. Mr. CASEY. A directive, that is all it is. Senator MAGNUSON. In other words, they say, "You had better do what you should have been doing." Mr. CASEY. Exactly, and the only reason I would say it is necessary is because experience has demonstrated that you have to put it down in black and white. Senator MAGNUSON. Well, after your laudatory remarks of Mr. Rothschild, maybe we wouldn't have to do it. Mr. CASEY. Well, that is true, but personalities in Government change from time to time. Senator MAGNUSON. Yes. Mr. CASEY. We have to look to the future and to the possible change in the particular personality that is occupying an office from time to time. I think that as a basic proposition the rider would have been unnecessary if the experience of World War II had never taken place, but with that behind us, we think that now the rider is necessary, and I might say, Mr. Chairman, that the General Accounting Office, so far as I have been able to determine, did not propose this rider. When Mr. CASEY. It is true, the fellow whose vessel is requisitioned is in worse shape than the fellow whose vessel is not requisitioned and is free to make money with it, no matter what he gets for it. He doesn't want the money. He wants a chance to carry cargoes where he suffered through the bad times and hasn't been able to get cargoes. That is why, as a matter of fact, Mr. Chairman, I have always disagreed with the rule that the Advisory Board on Just Compensation laid down so far as how you reckon this enhancement. They said there were three principles, the Government's need of vessels that is the one that causes the thing to go up, the Government's need of vessels-but then they said, the previous taking of vessels of a similar type. Now, applied to vessels that doesn't cause enhancement. It does in the case of land. If you have a railroad that comes to one town and it can only go one place, then the land in the next town is going to enhance in value. But in the case of a vessel, as soon as the shipowners know that that vessel might be requisitioned, the value is going to drop. Nobody wants to have the vessel taken away from them. They want the chance to make money with it. The third principle that they stated was the prospect of a taking reasonably probable. That is about the same as No. 2, and as I say, in the case of vessels it doesn't work. We have been fair in this thing, Mr. Chairman, in permitting the shipowner to go to court if he doesn't agree with the Maritime and General Accounting Office construction of the statute and the value that has been placed on it. Now, there is some merit to the position which the Secretary of Commerce has taken in this thing. I have read his reports. He said that during World War II we were plagued with all kinds of litigation. Of course that was of their own making, between you and me. Instead of stipulating the value in the policy which they had a right to do, they put in "In case the vessel is lost, we will pay you the value reckoned under section 902 (a)." Of course if the fellow didn't accept it, he had a right to take 75 percent and sue in the courts. So they could have stipulated a value which was it. I mean, the fellow had no appeal under the law, as I read it, and under the law as it now reads. In fact, the Secretary of Commerce has, in my opinion, an indefensible position in this situation today. He comes up and says, "I disagree with the bills because they don't give the Secretary of Commerce the right to set this valuation free and unencumbered." The fact of the matter is that he has that right under the present law, but he hasn't exercised it. They haven't gone ahead and set valuations, and that is really the box that the shipowners find themselves in. Senator MAGNUSON. Your general contention then would be that if the Secretary of Commerce had been administering the present law as it should have been administered, we wouldn't have the necessity of having this legislation or this problem in front of us? Mr. CASEY. That is my opinion, Mr. Chairman. Now, so far as the shipowners' bill is concerned, the only reason there is disagreement between us is that they want to repeal the appropriation rider, and under no circumstances do I think that the rider should be repealed, merely because it is in there. It has been in there for 4 years. It has been a directive to the Secretary of Commerce to pay attention to the Comptroller General's decision which under basic law he is required to do anyway, but it was found necessary to put that thing in because they didn't pay attention to it during World War II. Now, the Secretary of Commerce says Senator MAGNUSON. Do you know whether or not the rider has been put on the House appropriation bill again, or they haven't finished, I don't think. Mr. CASEY. They haven't finished, but I would know if they didn't put it on, let us put it that way. Mr. MORGAN. It is on. Senator MAGNUSON. It is on, so we will get it over here shortly. Mr. CASEY. The Secretary of Commerce says there are two standards of valuation in the present law, the fair and reasonable value and the section 902 (a) value. Well, as a matter of fact, the legislative history clearly indicates that when President Truman signed the War Risk Insurance Act of 1950, he issued a message at the same time, a statement, in which he said: I sign this bill with the understanding that the term "fair and reasonable value” means the unenhanced value reckoned under section 902 (a). In the face of that kind of mandate from the President it is inconceivable to me that they wouldn't follow that anyway in fixing the fair and reasonable value, and I understand from the staff of Maritime that there is no disposition not to follow it. He says that there are three agencies created in the present law and bills for reckoning just compensation, the Secretary of Commerce, the Maritime Administration, and the General Accounting Office. He said it would facilitate administration of the law to cut it down to one, and of course he says the Secretary of Commerce. Actually, the General Accounting Office, as I pointed out, is in the picture under the Budget and Accounting Act to the extent that their decisions are required to be followed to the extent that when they audit the accounts, if they determine a payment is illegal or excessive, it is binding on the executive branch of the Government. Senator MAGNUSON. Do you think that the rider is necessary, that there is necessity for the rider at all if they would carry out the provisions of the act? The rider is merely a directive. Mr. CASEY. A directive, that is all it is. Senator MAGNUSON. In other words, they say, "You had better do what you should have been doing." Mr. CASEY. Exactly, and the only reason I would say it is necessary is because experience has demonstrated that you have to put it down in black and white. Senator MAGNUSON. Well, after your laudatory remarks of Mr. Rothschild, maybe we wouldn't have to do it. Mr. CASEY. Well, that is true, but personalities in Government change from time to time. Senator MAGNUSON. Yes. Mr. CASEY. We have to look to the future and to the possible change in the particular personality that is occupying an office from time to time. I think that as a basic proposition the rider would have been unnecessary if the experience of World War II had never taken place, but with that behind us, we think that now the rider is necessary, and I might say, Mr. Chairman, that the General Accounting Office, so far as I have been able to determine, did not propose this rider. When this rider was originally proposed, it was even more restrictive than it is today. They would have provided in one of the bills that was introduced to restrict the owner to the book value of the vessel computed under section 802 of the Merchant Marine Act, and in fact, the General Accounting Office was asked to comment on that bill, and we said we thought that that might bring up some doubts about the constitutionality, that you take a vessel from a fellow and only pay him the book value of the vessel no matter what the market value might be, and we suggested as a substitute, just hold them down to the market value under 902 (a); that is all we contend for. Senator MAGNUSON. Under the present law do you think a shipowner can reject the amount determined and sue for just compensa tion? Mr. CASEY. I do not believe he can if the Maritime Administration should give him a policy and say, "Your vessel is worth $400. We are insuring for $400.” Senator MAGNUSON. In other words, if they arbitrarily set a figure, you think under the present law they would have no right to accept the 75 percent under 902 and then sue for the rest? Mr. CASEY. That is my construction. However, I will say this, that under the present law, in the administration of the law, the Maritime Administration could take this position: They could say, "We have determined the value of your vessel to be $400. What do you sav?" He would say, "I don't think that is fair. I think I am entitled to more than that." If after the discussions they couldn't come to some agreement on it, the Maritime Administration could, "All right, we will put in your policy 902 (a) value, and after it is lost we will determine what it is worth, and if you don't like it, you can go to court." Senator MAGNUSON. In other words, they could do either. Senator MAGNUSON. Under the present statute, without the rider. Senator MAGNUSON. I think at this point, Mr. Casey, we ought to put in the record the Comptroller General's letter to Senator Tobey on this matter, dated April 17, 1953, and another letter from the Comptroller General to Senator Tobey, dated June 3, 1953, and a copy of your proposed legislation so it will be in the record. Mr. CASEY. Yes, Mr. Chairman. (The letters to Senator Tobey dated April 17, 1953, and June 3, 1953, and copy of proposed bill to amend the Merchant Marine Act of 1936, as amended, are as follows:) Hon. CHARLES W. TOBEY, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Committee on Interstate and Foreign Commerce, United States Senate. MY DEAR MR. CHAIRMAN: Reference is made to your letter of March 4, 1953, acknowledged by phone on March 6, 1953, forwarding a copy of S. 1148, 83d Congress, 1st session, entitled "A Bill To Amend the Merchant Marine Act of 1936, as Amended," and requesting any comments I may care to offer concerning this proposed legislation. I should state at the outset that I am unequivocally and unalterably opposed to this bill. 45698-54- 3 The part of the Merchant Marine Act proposed to be amended is a new title, "War Risk Insurance," added on September 7, 1950. The general purpose of this title was to give standby authority to the Secretary of Commerce to provide warrisk insurance against loss or damage to vessels whenever adequate insurance cannot be obtained on reasonable terms and conditions in the commercial market. Section 1209 (a) in its present form authorizes the Secretary to issue such policies of insurance as he deems proper and to pay claims thereunder, provided the amount of the claim does not "exceed the vessel's fair and reasonable value as determined by the Federal Maritime Board." This provision in the existing law must be read, however, in conjunction with a provision which has been included in the annual appropriation acts beginning with the fiscal year 1951, which as contained in the Independent Offices Appropriation Act, 1953, provides: "No money made available to the Department of Commerce for maritime activities, by this or any other act shall be used in payment for a vessel the title to which is acquired by the Government either by requisition or purchase, or the use of which is taken either by requisition or agreement, or which is insured by the Government and lost while so insured, unless the price or hire to be paid therefor (except in cases where sec. 802 of the Merchant Marine Act, 1936, as amended, is applicable) is computed in accordance with subsection 902 (a) of said act, as that subsection is interpreted by the General Accounting Office." Section 902 (a), referred to in the above appropriation provision, contains a limitation on the amount which may be paid for a vessel requisitioned by the Government during a national emergency. It provides that just compensation shall be paid for the property taken but that in no case shall the value of the property taken be deemed enhanced "by the causes necessitating the taking or use." This language was intended to prevent gouging of the Government in the form of war-inflated prices for vessels requisitioned during a national emergency. On November 28, 1942, this Office rendered a decision, at the request of the War Shipping Administrator, construing the so-called enhancement limitation in terms of practical conditions and circumstances existing at the outbreak of World War II. Considerable controversy developed over this decision, and strenuous efforts were made by both the War Shipping Administration and the maritime industry to nullify its force in every conceivable way. A hue and cry went up that the limitation was unconstitutional and that as such it should be disregarded. This Office took the position that laws duly enacted by the Congress are constitutional and remain so until declared otherwise by the Supreme Court of the United States. Eventually there was presented to the Supreme Court, in the case of United States v. Cors (337 U. S. 325), the question as to the proper meaning and application of the enhancement limitation in section 902 (a) of the 1936 act. The court used strong language in its decision holding, among other things, that as applied to the facts of the case before it the exclusion from just compensation of enhancement in value due to causes necessitating the taking or use of the property is "coterminous" with the just compensation requirements of the fifth amendment to the Constitution. Speaking through Mr. Justice Douglas, the Court pointed out that at the time of the requisition of the vessel in question there was "a rising market and a strong demand for tugs of all types" in and around the port of New York, due in part at least to the shortage of tugs resulting from the Government's requisitioning program. Then it said: "It is not fair that the Government be required to pay the enhanced price which its demand alone has created. That enhancement reflects elements of the value that was created by the urgency of its need for the article. It does not reflect what 'a willing buyer would pay in cash to a willing seller,' United States v. Miller, supra (374), in a fair market. It represents what can be exacted from the Government whose demands in the emergency have created a sellers' market. In this situation, as in the case of land included in a proposed project of the Government, the enhanced value reflects speculation as to what the Government can be compelled to pay. That is a holdup value, not a fair market value. That is a value which the Government itself created and hence in fairness should not be required to pay." During the World War II period the law contained no similar limitation with respect to the amount which could be paid under a war-risk insurance policy issued by the Government under the legislation then in effect. This Office attempted, purely by moral suasion, to keep the amounts payable under those insurance policies within reasonable bounds and bearing some reasonable rela |