in the Constitution-to go home on the 4th of March. We have been sitting here continually for the last three months.

Mr. SEIBERLING. We would like to have the bill passed so that the Secretary will have that authority before May 16, if we can.

Mr. LINEBERGER. Has the bill passed the Senate?

Mr. SEIBERLING. I do not think so.

The CHAIRMAN. Let us have the view of the Secretary of the Navy about this matter, because that is really the view which will influence the committee in its action.

STATEMENT OF HON. CURTIS D. WILBUR, SECRETARY OF THE NAVY

Secretary WILBUR. Mr. Chairman, there are several outstanding obligations due the Government which are noninterest bearing. I have here a statement in connection with this bill showing the total amount of those obligations to be $2,712,965.44.

I might say that this is not a unique instance. There are other notes not yet due, one of the General Electric Co., which owes us $1,200,000. They have approached us several times expressing the desire to pay that off and get rid of it, because it runs as an obligation against them, and it shows in their statement of obligations, although, of course, they have ample property to pay it at any time.

It seemed to me to be a perfectly sane business transaction to settle these obligations whenever the debtors are able to do it, and thus to close the transaction.

I want to say, however, that I believe it would be better, in this bill, to fix the interest, because that practically fixes the amount to be paid, rather than leave it in the form in which it is now, that is, "the highest amount being paid by the Government."

Mr. VINSON. What interest would you suggest? That would be inserted in page 2 lines 4 and 5, where it says, "such interest to be computed at the highest rate being paid at the time of settlement on any bonds of the United States." What interest would you suggest?

Secretary WILBUR. We had the exactly opposite question to determine in connection with an obligation which was owed to the Government by the Erie Forge & Steel Co. In that obligation they were to pay us the same rate of interest that the Government was paying, but the amount was not specified,

We corresponded with the Treasurer of the United States to find out what would be a fair rate of interest to put in a new contract specifying the interest, and the rate we finally adopted was 44 per cent. I would suggest that you put a provision in this bill for 44 per cent, which makes it definite and certain.

Mr. VINSON. If you made your calculation based on a 44 per cent settlement, how much of a discount would that give the corporation?

Secretary WILBUR. We have it on the basis of 42 per cent, and that would give them a discount of $98,366.19 at the time this was drawn up.

Mr. ANDREW. Is that discount at compound interest?

Mr. SEIBERLING. I think that is the way present worth is figured. Mr. ANDREW. Ought not that to be stated?

Secretary WILBUR. That would avoid any doubt about it.

Mr. MAGEE. If you put in the bill the amount of interest, that fixes a precedent for the other debtors, does it not?

Secretary WILBUR. It applies to all of them.

The CHAIRMAN. You have reported here the different concerns that owe the Government money under the same conditions? Secretary WILBUR. Yes, sir.

The CHAIRMAN. It is your idea that we should amend this bill so as to put in the amount that each one owes?

Secretary WILBUR. No.

Mr. VINSON. You are basing your calculation on 44 per cent at the present time?

Secretary WILBUR. Yes.

Mr. VINSON. Would it not be wise to deal with these debtors as separate debtors, instead of combining them? Take Cramp's, for instance. They may not be willing to settle right now, and next year or the year after next your rate of interest might be 434 per cent, 42 per cent, or even 5 per cent. Therefore, why would it not be in the interest of the Government to give each one of these debtors the right to settle on the discount rate at the present value of 42 per cent, instead of saying that has got to extend over previous years, when in previous years your rate of interest might be higher? Secretary WILBUR. Of course, there are two answers I would like to give to that. In the first place, this bill makes it optional with the debtor whether or not he will pay now. He will pay when it is to his best advantage to pay.

If we were fixing this on the basis of what was the best interest of the Government and we assume that these obligations are about to be paid-if we accept that as a certainty, then the Government can borrow money at a much less rate of interest than 44 per cent. We are doing that right along.

We could borrow the total amount of the indebtedness due us and pay a lower rate of interest, use the money during the period that the company is owing us the money, and then at the conclusion of that period accept the full value. In other words, unless the Government makes the discount rate of interest the minimum amount it is required to pay to get money at this time, we are, in a sense, loosing money. But it seems to me it would be fair to put the rate at 414 per cent, which is about the business rate.

Mr. VINSON. Is the appraised value put upon these buildings the total amount that the Navy allocated to spend in this company's premises, or on their premises?

Secretary WILBUR. I do not think so.

Mr. VINSON. What was the total amount that the Navy spent? I want to see how much the Navy put in there, what the appraised value was, and how much the Navy will lose by a settlement with them.

Secretary WILBUR. I think that would show on these different contracts, and probably they are here.

Mr. SEIBERLING. The Navy put more money in than the appraised value.

Secretary WILBUR. We are really carrying out a contract which has been made and is in force, which we could not go back on, even though they might be getting an advantage out of it. The question is one of settling an obligation to the Government.

Mr. VINSON. But the contract provides that that company shall have the right to purchase the buildings and the machinery that the Navy built in their yards?

Secretary WILBUR. Yes.

Mr. VINSON. And that an appraised value shall be put upon those buildings. The department comes along after the war and puts this appraised value on them. Of course, we would like to know how much you built there, and how much of a reduction there is on account of depreciation which was allowed on each one of these contracts, because we have a rule for depreciation of machinery and for depreciation of property fixed by the income tax law, and it should have been in accordance with the principle laid down for depreciation, I presume. In this particular case, suppose there was invested $1,000,000 there. Then somebody settles for $500,000. There is $500,000 for depreciation and deterioration. I am inclined to think when you get this bill up there will be a great many questions asked as to how much we invested in each one of these yards, what the appraised settlement was, and how much each company would have paid with a 44 per cent discount.

Secretary WILBUR. That would mean, in effect, a reopening of the entire transaction. These settlements were all made by a previous administration.

Mr. VINSON. That is true.

Mr. ANDREW. That is an accomplished fact. The settlement has been made, and the obligations have been received, and we can not go back on that now.

Mr. VINSON. I understand we have accepted their notes, and we have adjudicated the appraised value at the same figure. The very question I asked will be a question which will arise in the House, how much, in the original instance, did the Government invest in this plant, and for how much the settlement was made.

Secretary WILBUR. Mr. Nagel has just handed me a memorandum. He was one of those who negotiated the contract, and his memorandum states that probably the amount fixed did not exceed 50 per cent of the cost.

The CHAIRMAN. Let me see if I have this right. It is proposed by the bill to cover all these cases so that in the future you may settle them as you see fit.

Secretary WILBUR. That is in the bill now.

The CHAIRMAN. But it is proposed to amend it, is it not?

Secretary WILBUR. No; not in that regard. The only question is as to the rate of interest.

The CHAIRMAN. You would insert that in the second section, making it 44 per cent?

Mr. VINSON. It is not the rate of interest; it is the rate of discount. It seems to me it should be specified that the rate of interest or the rate of discount shall not exceed 42 per cent, or shall be 42 per cent Secretary WILBUR. You can strike out, after the word "and" in line 5 on page 2, the words "the highest rate being paid at the time of settlement on any bonds of the United States," and insert "44 per cent per annum.'

Mr. VINSON. That is your recommendation?
Secretary WILBUR. Yes, sir.

Mr. MCCLINTIC. Are you going to specify whether it is simple or compound interest? That question will arise.

Secretary WILBUR. I think you are right about that. The method of computing. the present value is thoroughly established. My impression was that it was simple interest.

Mr. MCCLINTIC. Then you had better put that in there.

Mr. VINSON. Why not express it in this way: "Such interest to be computed at an interest discount of 44 per cent." You will have to put somewhere here interest discount.

Mr. ANDREW. It is not necessary, because it says "reduced by the interest thereon"; that is in line 3.

The CHAIRMAN. If you make it read "from the date of settlement to the date of maturity, with such interest to be computed at 44 per cent per annum, simple interest," is not that about as plain as is necessary?

Mr. ANDREW. You have a computation here. Is that computation which reduces the payment by about $98,000 computed at simple interest?

Secretary WILBUR. I do not know. That was computed in the Bureau of Supplies and Accounts. I supposed it was simple interest. I am relying on my schoolboy knowledge as to the computation of present value.

Mr. ANDREW. What you want is to have the rate computed in the way in which it is customary to compute it?

Secretary WILBUR. Yes.

Mr. ANDREW. Could we not agree to this statement, leaving it open to decide afterwards whether we would use the words "simple interest" or "compound interest," and if it is compound interest, whether it is to be computed annually or semiannually.

Mr. MCCLINTIC. Why not put in the words "simple interest," and then you are through with it?

Mr. MAGEE. Do you know how it was computed, Mr. Seiberling? Mr. SEIBERLING. No; I do not.

Mr. UPDIKE. It seems to me it would be better to say "to be computed at simple interest at the rate of 414 per cent per annum. Mr. VINSON. I'move that the bill as amended be favorably reported. The motion was agreed to.

(Thereupon the committee proceeded to the consideration of other business.)