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The Government Corporation Control Act of 1945

Published online by Cambridge University Press:  02 September 2013

C. Herman Pritchett
C. Herman Pritchett
Affiliation:
University of Chicago
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Extract

The government corporation, by reason of its use as an instrument for administering commercial and emergency programs in two world wars and one depression, has become a familiar device in American government. A recent census turned up some 115 federal corporate agencies, with over 20 billion dollars in assets. Admittedly, not all of these were government corporations “in the strictest sense of the term,” and some have since been liquidated with the ending of the war. More than half of the total of 115, moreover, are attributable to the fact that the federal land banks, intermediate credit banks, banks for coöperatives, production-credit corporations, and home loan banks are organized on a regional basis, with twelve individual corporations in each category. Nevertheless, the list is an impressive one, including such permanent major federal agencies as the Reconstruction Finance Corporation, the Tennessee Valley Authority, the Panama Railroad Company, the Inland Waterways Corporation, the Export-Import Bank, the Federal Deposit Insurance Corporation, the Federal Public Housing Authority, and the Farm Credit Administration system.

Type
American Government and Politics
Information
American Political Science Review , Volume 40 , Issue 3 , June 1946 , pp. 495 - 509
Copyright
Copyright © American Political Science Association 1946

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References

1 General Accounting Office, Reference Manual of Government Corporations, as of June 30, 1945, Senate Doc. 86, 79th Cong., 1st Sess. (1945).Google Scholar

2 See Appleby, Paul H., Big Democracy (1945), pp. 95–96.Google Scholar

3 No. 7916, June 24, 1938.

4 Public 248, 79th Cong.

5 55 Stat. 726 (sec. 601).

6 Senate Doc. 227, 78th Cong., 2d Sess.

7 Ibid., p. 30.

8 The principal purpose of the George Act was to transfer the R.F.C, and its associated lending agencies out of the Department of Commerce, in order to meet the objections raised by President Roosevelt's appointment of Henry Wallace as Secretary of Commerce.

9 The original Byrd-Butler bill was S. 469, the companion House bill was H.R. 2177, and the amended House bill was H.R. 3660 (79th Cong., 1st Sess.).

10 See Pritchett, C. H., The Tennessee Valley Authority (1943), pp. 232–234.Google Scholar

11 Hearings before House Committee on Expenditures in the Executive Departments on H.R. 2177, 79th Cong., 1st sess., pp. 193–194, 254.

12 Executive Order 7126, 7150.

13 49 Stat. 1648.

14 Executive Order No. 9159. It might be added that during the early days of the New Deal the Treasury Department conducted a campaign to extend corporate budget control far beyond the realm of administrative expenses. In 1935, the Treasury proposed that the R.F.C., and the H.O.L.C. be prohibited from incurring any obligations whatever “unless within estimates … approved by the Director of the Budget.” Congress failed to act. See McDiarmid, John, Government Corporations and Federal Funds (1938), pp. 160, 181.Google Scholar

15 Reference Manual of Government Corporations, pp. xi–xii.

16 Statement of Harold D. Smith, Hearings on H.R. 2177, p. 135.

17 Hearings on S. 469, p. 72.

18 Ibid., p. 122.

19 Sec. 102.

20 The Management of Your Government (1945), p. 92.

21 Hearings on H.R. 2177, pp. 136–137. Following this lead, the Budget Bureau's instructions to the corporations for submission of their first budget programs under the new act gave full recognition to the special problems of corporate budgeting. The Bureau interpreted a “business-type” budget as involving “a concise presentation of a corporation's plan for the conduct of its present and proposed activities, setting forth the manner in which they will be financed and their effect on the earnings and financial condition of the corporation.” The Budget Bureau supplied an illustrative budget program of a hypothetical corporation for the guidance of corporate officials, though recognizing that “the form and content of financial statements will vary among the corporations depending upon the type of operations.” The Bureau frankly admitted that in the initial budgets it would hardly be possible to resolve all the conflicts between “two desirable objectives: (1) sufficient uniformity for purposes of consolidation and interpretation; and (2) adequate flexibility to meet the vast range of business activities carried on in the government corporations.” President Truman's message submitting to Congress on May 2, 1946, the Corporation Supplement to the 1947 Budget, was in the same spirit, stating: “In developing budgetary controls applicable to the corporations, the wisest course appears to be to progress carefully, through experiment and evolution. I recommend that the Congress approve the types of programs set forth in the budgets transmitted herewith, and, in addition, provide general authority for actions necessary to meet unforeseen emergencies or contingencies arising subsequent to approval of the budget.” Cong. Rec., Vol. 92, p. 4431 (daily ed.).

22 49 Stat. 1648. Under this statute, Congress fixed annually a total which administrative expenses of the affected corporations were not to exceed. The corporations remained free to determine how their administrative expenditures would be allocated within this limit. See McDiarmid, op. cit., pp. 161–162. An act of July 5, 1945 (Public 132, 79th Cong.) provided funds for the administrative expenses of a number of World War II corporations.

23 Hearings on S. 469, p. 57.

24 An excellent brief statement of the differences between governmental and commercial types of audit is found in Reference Manual of Government Corporations, pp. xv–xvi.

25 See Mansfield, Harvey, The Comptroller-General (1939).Google Scholar

26 Executive Order No. 6549, Jan. 3, 1934.

27 Senate Doc. 227, 78th Cong., 2d Sess., p. 28.

28 House Doc. 111, 71st Cong., 1st Sess., p. 49.

29 House Rep. 1215, 72d Cong., 1st Sess., p. 25.

30 H.R. 12180, 70th Cong.

31 See Pritchett, op. cit., pp. 249–263. The most recent statute giving exemption from G.A.O. audit is the National War Agencies Appropriation Act, 1944 (57 Stat. 529) affecting corporations created by the Coördinator of Inter-American Affairs.

32 Senate Doc. 227, 78th Cong., 2d sess., p. 30. For a similar proposal relating to the R.F.C., see McDiarmid, op. cit., pp. 158–159. The Secretary of the Treasury and the Budget Director dissented from the Byrd proposal.

33 58 Stat. 105.

34 59 Stat. 5.

35 Sec. 106.

36 Sec. 301(d). This section reënacts a similar prohibition in the First Deficiency Appropriation Act, 1945 (59 Stat. 81). The Control Act also authorizes the G.A.O. to employ the services of auditing firms and organizations for temporary periods or special purposes.

37 See the views of the president of the Panama Railroad Company, Hearings on S. 469, pp. 133–134.

38 Leo T. Crowley, chairman of the F.D.I.C., made the following case against these controls. “It is necessary that the Corporation have working accounts in various communities in order to have funds available for payment of expenses incurred in these communities in connection with the liquidation of bank assets, the payment of insured depositors' claims, and the collection of funds realized from liquidations. … To impose upon the Directors of the Corporation the necessity of obtaining the approval of the Secretary of the Treasury for maintenance of these accounts would merely divide the administrative responsibility and thereby impair the efficiency of the Corporation.” Hearings on H.R. 2177, p. 17.

39 Sec. 303 (a).

40 As Chairman Jones of the R.F.C, stated in 1935: “Of course, we can only lend the money that the Secretary of the Treasury permits us to lend, because if he does not buy our notes, lend us money, or permit us to sell our notes, we have no funds.” McDiarmid, op. cit., p. 162.

41 Hearings on H.R. 2177, p. 19.

42 As Budget Director Smith said before the House committee: “We have had a great increase in the number of corporations and in the volume of corporate activities, sometimes, I think, without very careful consideration of the corporate instrument as against the appropriation process. Some of the corporations might very well have been established under the regular appropriation process….” Hearings on H.R. 2177, p. 138.

43 See the comments of Thurston, John, Government Proprietary Corporations (1937), pp. 37–41.Google Scholar

44 Sec. 304(a).

45 Fainsod, and Gordon, , Government and the American Economy (1941), pp. 679, 684.Google Scholar

46 Sen. Rep. 936, 79th Cong., 2d Sess. (1946).

47 “Government Corporations: A Proposal,” Harvard Law Review, Vol. 48, pp. 775, 781 (1935).

48 For example, the Walter-Logan bill, the effect of whose Procrustean formula, James M. Landis said, would have been “to cut off here a foot and there a head, leaving broken and bleeding the processes of administrative law.” “Crucial Issues in Administrative Law,” Harvard Law Review, Vol. 53, pp. 1077, 1102 (1940).

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