LETTER TO MR. LARRY A. HAMMOND FROM(Sanitized)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81M00980R001400100026-8
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 16, 2016
• Document Release Date: December 3, 2004
• Sequence Number: 26
• Publication Date: October 5, 1978
• Content Type: LETTER

THE DIRECTOR OF CENTRAL INTELLIGENCE - _
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Office of Legislative Counsel
Mr. Larry A. Hammond
Deputy Assistant Attorney General
Office of Legal Counsel
Department of Justice
Washington, D.C. 20530
OLC 78-1736/1
'OCT 1978
Dear Larry:
The House passed H.R. 12171, the "Federal Accounting
and Auditing Act of 1978" (the so-called "Brooks bill")
on Tuesday, 3 October, under suspension of the rules. The
bill as passed included the amendment proposed by the
Permanent Select Committee on Intelligence (HPSC1).
During his remarks on the floor, Representative Brooks
submitted for the Record a letter from HPSCI Chairman
Boland, dated 3 October 1978, providing the views of the
Committee on H.R. 12171 and the amendment thereto. The
following two points in Chairman Boland's letter are
particularly relevant:
1. Although the-Specified categories of
financial transactions are, or may be, exempted
from Comptroller General review, they are "not exempt...
from any review." Chairman Boland goes on to note
that, under the amendment, such transactions are
"reviewable" by the two oversight committees, and
that ,Representative Burlison's subcommittee "will
conduct" an appropriate review.
2. Chairman Boland states that this amendment
"fully satisfies the security concerns of the.
...Intelligence Community."
As we have discussed previously, the extent of the
authority of the committees of Congress, particularly the
oversight committees, to review sensitive intelligence
financial transactions is a live issue. As you know, our
concern all along with H.R. 12171 has been that it should
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not alter the status quo as regards unvouchered funds
expenditures and authorities. To the extent that the final
sentence of the "Boland amendment" may be construed to
alter that status quo with respect to review by the oversight
committees, then we do not endorse that sentence; in that
case, the amendment--in the words of Chairman Boland's letter--
does not fully "satisf[y] the security concerns of the
..intelligence community." This is a matter we will want to
explore further.
Of course, nothing in Chairman Boland's letter goes to
the other, primarily constitutional, problems the Department
of Justice raised with H.R. 12171. This is understandable,
since the appropriate focus of HPSCI's jurisdiction runs to
intelligence "security concerns" rather than general,
constitutional issues. Still, these remain very real concerns.
I have been informed by Mr. Vic Reinemer, on the Senate
Governmental Affairs Committee, that they hope to take action
on the bill next week. He said further that he had been in
touch with the intelligence committee and was under the
impression that the Boland amendment took careof all of our
"intelligence concerns" with the bill. I told him this was
essentially true although we were somewhat uncomfortable with
the provisions therein relating to review by the intelligence
committees; I also stated that it was our understanding the
Department of Justice had other serious concerns with the
bill.
I think we should get together on this as soon as possible.
Please give us a call.
Distribution:
Original - Addressee
STAT 1 - IG/Audit
1 - OGC (Wm.
1 - 0/Compt.
1 - D/Financ
1 - OLC Subjec
1 - OLC Chrono
OLC:RLB mao (4-Oct 78)
Ass is a ive ounsel
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H11358
CONGRESSIONAL RECORD?HOUSE
Why do wehave such a wide disparity-
in the estimate of the cost of this leg-
isindon 'between the. USDA figures and
the CBO figures? One is talking in terms
of nearly $a million, the other is talking
about e300,000 or $400,000 over the
same _period. It seems to 'me that if
we are going to pass a bill to create-
another task force to_do another study;
we ought. to. know what it is going to
cost. r? ? _ ?
? .
Mr. GRASSLEY- Mr.. Speaker, if- the
gentlereen will allow me to. answer the
question, that was before the bill- was
amended; and now, with the amendment,
it will be in the lower figure- -
Mr. BAUMAN._ It will bee the lower--
figure? ? - _
? - GRASSLEY. Mr. Speaker, I will ask
the gentheeerefrom Indiana:. Am I right
on that?-, eneee .
Mr' FITHIAN. Mr. Speaker,.
gentlemanswill yield. I want to assure my
friend. the, gentleman- from Maryland
(Mr. BeirAte) ? -that, the. original- USDA
estimate-. wase made- at the time when
they interpreted the original language.
of the bill to reOuireltearings and studies
into every single possible obstruction to
the movement of agricultural goods: Two
&mese& in: the- bill have- ensued:. One,,
which InT- friend; the gentleman from
Iowa, alludes-to,- was an amendment to
title VI; and the other was stressing that
it-was to study .and to-review only those -
that would bring sen US Impact to agri-
culture:Therefore; the lower figure is the
correctflgure. Lee. re. a, - . .? -.5 .
BAUMAN. ? Mr: Speaker, / thank
the gentleman for his explanation, and 11
the- gentleman- will yield further,--I have
another question, ,and it- pertains to the
duplication that this -task force may
cause. I clearly remember, after the pas-
sage of the. Northeast Emergency Rail-
way' legislation in 1973, that those a us
who represent rural areas spent hundreds
of manhours at hearings and meetings,
and so ? on, which included agricultural
commodities shipment studies under
that act. The whole Northeast quadrant
of the United States, from Chicago to
/Viaine to the-South, was studied in great
depth, because the IISRA had to deter-
mine vrhich - rails woulciebe taken out of
the eventual ConRail system and which
were to be inchided. -
I hope we are not going to replow- all
of that very expensive study by the Fed-
eral Government once again as a part of
this task force study; and it raises the
question as to whether this is necessary..
Mn, GRASSLEY. Mr. Speaker, I would
expect that the task force would not
break new ground again. Part of the job
ought to be to first review what studies
have already been made and build. on
those, as opposed to starting out fresh,
anew. Perhaps the ? committee report
should have made that point clear.
Since it did not, let me assure you where
this Member stands. I feel it should not
repeat any earlier studies. We have not
been quite that direct in our telling the
Commission' what they should do, but
that would be my intent -
Mr. Speaker, I would ask the gentle-
man from Indiana (Mr. Erre-Tax) if he
would like to speak to that point.
Mr-Ffl'IA.N. If the gentleman will
Yield.' there is no intention, I can assure
my friend, the gentleman from Mary-
land (Mr. BAUMAN), to start over and
restudy?rail abandonment: and all of
three problems. It is primarily looking
at those real impediments to the agri-
cultural sector and the movement of
goods there. - ? --
Speakeie I would like to read 'a
letter, dated 'August 31, 1978, that.-I
received from the acting chairman of the
Interstate Commerce Commission: ? --
Taerrasreeit Commexece COMIOSSION,
- Washington, D.C.,'August 31, 1978.
Eoe.PrnvnFrrawr, ? v?-: ? ? ?
House orRepresentatives,..1. .
Washington, D.C; ? -
Dees CONGS.12182dAN PrzeineneThank you for
your. letter of July 10, 1978, requesting the
views of the Interstate Commerce Commis-
sion -on MR. 12917. This bill would require
the Secretary -of Agriculture to conduct- a
study of -rail. lines in the-United States-and
maks. recommendations for:a railroad-trans-
portation system adequate to meet the need-s
of Vaal:hilted States' agricultural industry.,
As you know, this legislation is identical.
to? &, 1833 which was passed with minor
modifications by the Senate on June 8, 1978.
Prior to its passage, the Commission testified
in favor of 8.-1835 before-two separate Sen..
-ate Subcommittees.. _ P _
The Commission continues to support this
legislation because it establishes a mecha-
nises for identifying the rail service needa
of the agricultural industry. This informa-
tion could be quite beneficial in aiding the
Commission in its attempts. to solve grain
car shortage problems.- ? '.
-Last year, the Department of -Defense pro-
-sided: us- with this sort of. information, by
Identifying the- major main line- corridors
which-are essential to the national defense
and the lines that provide direct- access to
military Installations. This information baa
been valuable to the Commission in consid-
ering national defense needs in our decisions..
A similar identification of the agricultural
Industry's needs could aid the Commission In-
its deliberations and could assist the Depart-
ment of Transportation in meeting its plan'.
ring responsibtlities. This "would, ultimately
benefit the farmer, the processor, and the
consumer, as well as the rail industry.
- Accordingly, the Commission supports the
speedy enactment of H.R. 12917. If I can be
of any further assistance to you on this mat-
ter, pleaecontact me. - _-
Very truly yours,
_ e (Mrs.) Berm Jo Cultisrsere'
Actilsg Chairman-
. I thiniethat carries the thrust of where
we are going with this study. -
Mr. GRASSLEY. I would just add at
this point, for the sake of the concern of
the gentleman from Maryland, that leg-
islative history now supports what was
originally intended by the authors and
supporters of this
Mr. Speaker, I reserve the balance of
(Mr. PITMAN asked and was- given
permission to revise and extend his re-
-marks and to include extraneous mat.
Mr. ETTEMAN. Mr. Speaker, I yield
back the balance of my time.
Mr. GRASSLEY. Mr. Speaker, I yield
back the balance of my time.
The SPEAKER pro tempore. The ques-
tion is on the motion offered by the
gentleman from Indiana (Mr. Fri.-Rue)
that the House suspend the rules and
pass the bill HR. 12917, as amended.
October 3,-1973
The question was taken.
Mr. WALKER. -Mr. Speaker, on that I
demand the yeas and nays. ?
The yeas and nays were ordered. ?
The SPEAKER pro tempore. Pursuant
to-clause 3, rule 20e-VII, and the Chair's
prior announcement, further proceed-
ings on this motion will be postponed. ?
GENERAL LEAVE
Mr.Y FITHIAN.- Mr. Speaker, I ask
unanimous consent - that all Members
may have 5 legislative days within which
to revise -and. extend their remarks on
the-bill: HR. 12917. e ? i
-The SPEAKER pro tempore. Is- there -
objection to the- request of the gentle-
man from Indiana? - ee-- -
There was no objection: -
? _
).11)ERAL ACCOUNTING AND
AUDTITNG.,ACT OF-1978 -
? -
Mr. BROOKS. Mr. Speaker-,I move to
suspend the rules and pass the bill (HR.
12171) to strengthen the right of access
of. the Comptroller General to public-
and certain private records,, to allow for'
limited auditing of unvouchered expende
itures,- and for other. purposes, as
amended. ? - --see'e-ese
The Clerk read as follows:
?
Be it enacted by t e Senate, and House
of Representatives of the United States Ot
Anievica in Congrese assembled, That this Act
may be cited as the "Federal Accounting and-
Auditing Act of 1978":
, urrvoncereamirexerisorrestra
Sec. 2. Section 117 of the Accounting and
Auditing Act of 1950 Is amended by adding
at the end thereof the following new sub-
section: . ? . .
. "(e) (1) Notwithstanding any provision of
law heretofore enacted permitting an ex-
penditure to be accounted for solely on the
approval, authorization, Or certificate of the
President of tile United States or an official
of a department or establishment, the Comp-
troller General shall be- furnished such in-
formation as he may request and shall have
access to such books, documents, papers,-
records, and other information relating to
such expenditure as-' may be ? necessary to
enable him, to determine whether the, ex-
penditure was, in fact, actually Made and
whether such expenditure was authorized by
law. The provisions of this paragraph shall
not, be superse led-except by a provision of
law enacted after. the date of enactment of
this paragraph and specifically repealing or
modifying the provisions of this paragraph.
"(2) With respect to any expenditure ac-
counted for solely, on-the approval, authori-
zation, or certificate of the President of the
United States or an official of a department
or establishment' and 'notwithstanding- any
previously enacted provision of law, no officer
or employes of the General Accounting Office
may release the findings of ita audit" of such
expenditure or disclose any books, docu-
ments, papers, records, or other information
concerning such expenditure to anyone not
an officer or employee of the General Ac-
counting Office, except to the duly estab-
lished committees of the Congress having
legislative or oversight responsibilities, un-
der the rules of the House of Representa-
tives or of the Senate, over. the subject mat-
ter of the expeneiture.
" 3 A N In in this s all
be_ co ns teneetesee.anle uthadtasenie
tah__Ied - inn a(h) thA reptr11,1n-
1147-ence-Agency Act of 1949, aS amended:
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? . .
dent ma exempt fm" ? e
; pzovisions of paragraph (1) o ? subsec-
tion entancial transacfrellreeeleich relate ti
sensitee_faseleteeeetellieeekeeor roreign
counterintelligence activtoes; such an ex-
etiretion may be given for a chee. or category
treeseeeeone_ Financial tran.sac-
tionan to subsection e b of
e.eretral Intelligence Agency Act of 1949,
as ani a and enan
rerer tett from the provisions of paragraph (1)
thai Oe revfewnere ev Lee Peerseeset ereect
"ommittee on. Intelligence of the Mouse Pr
letepresentatilettee
on Intern neesenate.e.
"InerOtenesteNT A:me-access TO ar,C04118_..:
CONGRESSIONAL RECORD .==- HOUSE
W ?
2x.c.--3-Section 313 set- the -Budget and Ac-
counting Act. 1.921.els amended by detsignat-
Mg. the existing paragraph as subsection (a)
by deleting the last sentence thereof and b
- adding at the end "the 'following new sub
sections: zee:- ' -
Ztany infoimaelon;:hooke:retocurnents
? papers, or.records requested underzebeection
(a) or any other provision of lam or agree-
_ ? ment -granting the Comptroller General
right of wows trom any department or :stab
'? lislunentehavenotbeenematie available to th
- -General Aocotmting Office within_a period o
: twenty -calendar -days -after -the -request has
? beendelivered te the .ofnce of the head of th
department or 'establishment ' involved, 'the
-Comptroller 'Generals through 'any attorney
_ designated by him; is authorized to bring an
- action in -the -United .States District Court ofthe District of Columbia against the head of
e- the department or establishment concerned
to compel-the -furnishing of such material
'The Attorney General is -authorized to Tem,-
rent 'the "defendant -official in such 'actions.
?-7( c) (1)- To -aesiet.in- carrying out his tune-
tions, the Comptroller 'General may signand
Issue subpoenas requiring the production ot
contractor and subcontractor records per-
taining to megotlated_.contracts--anci records
of other, non-Pederal _persons or organize-
tions to which he base right of. encess by any
e law or agreement. 'Service of a embpoena Is-
sued under this subsection may be made 'by
?? mailing a "copy thereof by ?oertilled or .reg-
- eletered eratel; return -.receipt _requestecle ade
- dressed to ssuctterontractor? eubcoiatractor.
other non-pederal parson, -or organization At
-hisor eitseeesidence or ;principal place of
, burliness. '
"(2) 7.11 meent-tailure to obey alsitbpoena
. issued' under paragraph 1). the Comptroller
General. through any attorney designated by
-"him; may Invoke the aid of any district -court
-of the -United ?Statea in requiring the produc-
tion. of the 'records 'involved. Any district
court,of thel7rdted -States within whoeseue
riedietion ? the-oontraoter, subcontractor, or
other sionePatiersepeeson or organization Is
found or. resider _or. lie 'which the contractor
subcontractor; 'or nther -non-Pederal person 'Or
organization %mamas 'business, 'may, in 'case
of 'refusal' to 'Obey's 'subpoena -lamed under
this --section; %ante Jtn.-order requiring -corn- .
pliance therewith; and any failure to -obey
such order of 'the court shall be treated by
-the -court as contempt hereof,"
...erpoarrerner . Or erne COmerTROLLZR - GEMOLIL
?AIM Denrrr__seeseerstneast ezeramai,?e,
? ^?Einc.,t ea) Section::302 of the Budget and
Accounting deetieleeeeis -emended to weed as
ff911",: eeerreesee-4-ei5ore. ; e'es;
eSsc. -802.-444 (l)erheree-Shall be in the
-General -Arceneting -Office s _Comptroller
_General of the-United States. who aball. /ram
a list of ,personentitunitted .by the Commis-
' elan 'described , -subsection-lb). 'be ap-
pointed by the -Presidenteby. Land- with the
, advice- and. "consent err -tbe-Peeete.e, - - ? -
lee^(2) The DeputyComptr011er "General shall
Jperfortztesuch duties asensay beeseigned -to
eernatylthe Cornett:oilier 'General. During the
-absence -for eincapacity-oe -the -Coraptroller
General, or during a vacancy in that office. -
H 11'359
the Deputy Comptroller General- Mali act as ,General to -audit ''uneenichered" ?expecid-
"(b) Whenever, after the date of enact-- soieiy on approval pr reettier.ate,
Comptroller -General.
'tures which today are _acregintW?tor
ment of ;this subsection, a vacancy occurs in
the Office -of -Comptroller General, there is ..thcce President or 11.
established a eommission to recommend in- ee-?C purpose of the aucin.s -are
clividusoR to :the President for _appointment Lre determine -whether, expenditures are
to the Office of 'Comptroller General and made for the purposes-authorized by leA
Whenever, after such-date a vacancy -OCCUrs Disclosure.-of such information will only :
In the -Office of Deputy Comptroller Gen- be to congressional -committees having .
real, there is established a creenessiou to rec- appropriate leg,isiative-and oversight se- ,
0 '
11111 ' ? I
ornmend individuals to the President for ap-
S-o? nsibilties. - . - -
Potntment to the Office of .Deputy Comp- - .
'troller -General. Such commission shall en ? kt_p_2,-_t_sent excluding funds e.xPended
either case consist of? ? e '! ef,? , by the CIA, overspent an- e
- , ? , eee.. itures by
the_ President Pro tensierro -of ;this _,Parttneht National Science Foundation.
Senate. -? ? ??? a'--r -- - ? H.M., aiad many other agencies. While
? "(3) the majority and minority leaders of
Ilecesser:y confidentiality must be pre-_
ee1(1) -tee speaker of -.the femme of irtepre. 11,etLaInvelyslarrasLfeseaenel-
I
y _ the Mouse of Representatives and-the-Senate.
- e( 4 ) -the . Chairman _and ranking minority
- member of the Committee on :Government
? Operations of the Moniii-Olestipeesentatives
and of the ? Committee on Governmental Af-
fairs -of -the Senate. and.. e. 1
a ,-"(C) ihe .r.ase.of a. -vacancy in the:office
. of -Deputy Comptroller General, the Comp-
e 'troller General of the 'United .States. .
H 11360
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CONGRESSIONAL RECORD?HOUSE 'October 3, 1978
con uct what rev' of these transactions Ls .
a thorough and res o bie-rtsi
fashion. Thus, there wil be review bn ii wTff'
occLir ur_ych procedures an rotect o
as- call enThntial -?..Lre secrecy of ths.
raaci?'? 0, ? z aentitTles rn question
113. C Oh ? - ? :4111
amend, ? ? ? ? . v?-? ? ? ..en 7011 Will Carer,
fully satisfies chke security cora-erns of- the
Permanent Select Conunittee on Intelligence
and of t? intell-ence community as t ex-
penditures w ? ? go.l'a?ri.e?-?or ?rour most
sensitive-Intelligence efforts.
With every good wish,' am-- =
Sincerely yours, ??
? EDWAin P.Bowe.
,
Mr. Speaker, the second provision of
this bill, strengthens the power of the
GAO to enforce its statutory and other
rights of access to Federal agency and
Federal contractor records. While the
law clearly gives the GAO the right to 0i3p
tabs all necessary records required to
determine if moneys are being effec-
tively expended, some agencies and con-,
tractors in the past have refused or re-
sisted supplying such data. This bill au-
to t ,e Com? s ? er
the a
production of records by Federal agen-
cies. and also authorizes him to b a
e eral contrm-
approp
tors- a.
- ? ea. I
? ? Ir3 ? 6 ?
a-ssistance.
--rEal.0", the bill establishes a commis-
sion composed of the congressional lead-
ership and the chairmen- and ranking.
minority members of the House Govern-
ment Operations and Senate Govern-
mental Affairs Committees. This com-
mission will submit -not less than three
potential nominees for Comptroller Gen-
eral to the President, from which he may
appoint one for submission to the Sen-
ate for confirmation. The President may
reject such list of names ancireques
others.
The Comptroller General is an office
of the Congress, yet, he is presently
nominated and appointed by the Presi-
dent. Congress should have a greater
input Into the appointment of future
Comptrollers General?thus the basis
for this provision..
As originally reported,'" H.R. 12171 al-
tered the present arrangement for nom-
inating and appointing the Deputy
Comptroller General, which is presently
the same as for the Comptroller Gen-
eral. The bill gave the Comptroller Gen-
eral the right to appoint his deputy.
However, certain members of the other
body objected to losing their confirma-
tion authority.
In order that. this important piece of
legislation can be signed into law this
Congress, an amendment is included 'in
the bill before us to require the appoint-
ment of future Deputy Comptrollers
General in essentially the same manner
as the Comptroller General,- which in-
cludes confirmation by the Senate.
In summary, Mr. Speaker, this bill will
greatly increase the ability of Congress
to carry out its oversight responsibilities
by substantially improving the effective-
ness of the General Accounting Office. I
urge the House membership to support
this bill by voting for suspension of the
(Mr: HORTON asked and wase given
permission to revise and extend his re-
marks.)
- Mr. HORTON. Mr. Speaker, I yield my-
self such time as I may consure.
Mr. Speaker, H.R. 12171 is a reasonable
bill which would provide the General Ac-
counting Office with the authority it
needs to audit certain =vouched ex-
penditures and with the increased
strength it must have to enforce its stat-
utory right of access to records of Fed-
eral departments and of non-Federal or-
ganizations such as contractors who re-
ceive Federal assistance. I should point
out that the President may` exempt the
Central intellTeence eigenneneentnancial
framsautions which relate to sensitive
? &I ? r? *a - ? - S I ? ? a
un r-
inteuagence activities.
-Those features or the bill are accepta-
ble in my view, but the provision I most
like in the bill is the one that establishes
a formal mechanism for consultation be-
tween the President and congressional
officials in- the appointment of future
comptrollers general. This is a very im-
portant step forward and I support it
without reservation.
Mr. Speaker, I belleve-H.R.. 12171 is an
excellent bill and I urge my colleagues
to support it.
Mr. Speaker, I yield back. the balance'
of my time. ? - _
Mr. BROOKS. Mr. Speaker, I have no
further requests for time. ? -
The SPEAKER pro tempore. The ques-
tion is on the motion offered by the
gentleman from Texas (Mr. BROOKS)
that the House suspend the rules and
pass the bill H.R. 12171, as amended.
The question was taken; and (two-
thirds havenervineriallenanvor ffferof) the
rules were suspended and the bill, as
amencied. was -ITATZI71:?
A motion to reconsider was laid on the
table. -
GENERAL LEAVE ,
Mr. BROOKS. Mr. Speaker, I ask
unanimous consent that all Members
may have 5 legislative days in which to
revise and extend their remarks on the
bill H.R. 12171, just passed.
The SPEAKER pro tempore. Is there
objection to the request of the gentle-
man from. Texas
There was no objection.
MERCHANT MARINE -ACT AMEND-
MENTS FOR GREAT LAZES VES-
SFr .53 ? -
Mr. MURPHY of New York. Mr.
Speaker, I move to suspend the rules
and pass the bill (H.R. 11658) to amend
title XI of the Merchant Marine Act,
1936, to permit the guarantee of obliga-
tions for financing Great Lakes vessels in
an amount- not exceeding 871/2 per
centum of the actual or depreciated
actual cost of each vessel, as amended.
? PLR. 11658- .,
Be it enacted by the Semite and House of
.Representatives of the -.United States- of.
America in Congress assembled, That sec-
tion 509 of the Merchant Marine Act 1938,
as amended (48 U.S.C. 1159), is amended by
striking the words "fourteen knots" in the
fourth sentence, and Inserting in lieu there-
of the. words ."ten knots".
The-- SPEAKER pro-tempore Is -
second demanded? ? - - -
Mr. McCLOSKEY. Mrs Speaker, I de-
mand a second. . -
The SPEAKER pro tempore. Without
objection, a second will be conSiciered as
ordered:- - - - ?
There was no objection. _ - ?
The SPEAKER pro tampon. The gen-
tleman from New-York-. (Mr. MURPHY)
will be recognized for 20 mtnutes, and the
gentleman from California (Mr. McCeos-
}rev) will be recognized. for 20 minutes.
The Chair recognizes the gentleman
from New York (Mr. Muripary).
(Mr. MURPHY . of New York asked
and was given permission, to revise and
extend his remarks.) -
Mr. MURPHY of New York.. Mr.
Speaker; I yield myself such time as.- I
may consume. . ?
Mr. Speaker, I rise in strong support
of H.R. 11858, a bill that would correct
a longstanding _inequity that has ad-
versely affected. our Great Lakes fleet.
Pursuant to title Xi of the Merchant
Marine Act, 1936, aa amended, the Mari-
time Administration of the Department
of Commerce is authorized to guarantee
commercial loans and mortgages to fi-
nance the cost of construction or recon-
struction of U.S.-flag vessels. Under the
title XI guarantee program, the vessel
owner is required to make a downpay-
ment of 25 or 121/2 percent, and the
Government guarantees private financ-
ing for-the balance. ?
One of the general conditions for a
121/2-percent downpayrnent is that the
vessel must meet the size and speed re-
quirements set forth in section 509 of the
act.
Public Law 76-116, approved. June 6,
1939, enacted the, 14-knot requirement
currently set forth in section 509. The
purpose of this 'requirement in 1939 was
to generally preclude barges, -fishing
boats, and other "small craft from the
benefits provided by section 509.
. It was not until the Merchant Marine
Act of 1970, that the Great Lakes res
ceived long overdue recognition as the
fourth seacoast of the United States.
That act also amended the title XC guar-
antee program downpayment require-
ment from 25 to 121/2 percent for vessels
meeting the requirements of section 509;
including 14 knots. Through an over-
sight, at that time no thought was given
to the characteristics of vessels operating
on the Great Lakes. - "
It-is clear that the-most economical
speed for a 1,000-foot bulk carrier in
typical, Great Lakes service-is 12.8 knots.
This vessel, moving at its most econom-
ical speed can transport 1 long ton of
cargo 607 miles for every gallon of fuel
burned. At 14 knots, however, it can
tarnsport the same ton only 503 miles.
Requiring this higher speed can only
lead to higher transportation costs that
must eventually reflect in higher prices
for the Arnerican,consumer. -
Because the distinctive characteristics
of vessel operations- on the Great Lakes
dictate an optimum speed of less than
14. knots, these-vessels have been inad-
vertently precluded from the more fay-
. .
Approved For Release 2004/12/22 : CIA-RDP81M00980R001400100026-8