realized without the enlightened cooperation and assistance of many, many thousands of equally well-educated private citizens. A program is no better than its prosecution by the people.

The blueprints of the Great Society will be more quickly transformed into reality as more and more of our people gain skill in the mechanics and science of public administration. This is the goal to which the University of Oklahoma has addressed itself in connection with the advanced program in governmental

studies.

Years ago, Congress recognized that our civil servants must have greater opportunities to continue their formal education while gaining experience in their special fields of endeavor. The Government Employees Training Act of 1958 asserted that self-education, self-improvement, and self-training by Federal employees should be encouraged, supplemented, and extended by continuous Government-sponsored career development programs.

Since the passage of the 1958 law, there have been made available to the Federal service, many good, short-term interagency and intra-agency training programs. But up until this time, the Government worker has not had available to him a format so adaptable to his individual academic need as is the concept which is now being advanced by the University of Oklahoma in the advanced program in governmental studies.

This plan was developed after several years of careful study by University of Oklahoma officials, working closely with training and personnel officers of key Government agencies.

This courageous departure from stereotyped concepts of educational techniques and the learning process is designed to develop executive talent at all levels; intern, midcareer, and senior staff. It is entirely consistent with the Government Employees Training Act enabling qualified employees to receive tuition support and other expenses from agency budgetary funds.

Oklahoma University's advanced program in governmental studies offers members of the Federal service, as well as all other qualified applicants, a fully accredited graduate degree, the master of arts in public administration.

This fresh approach to continuing career education offers, through independent study at home, and relatively brief on-campus intensive study sessions, the opportunity to derive maximum educational fulfillment with minimum time lost from the job.

For instance, an employee with a bachelor's degree can plan his studies at home in such a way as to qualify for the master's degree over a period of 5 years, spending 1 week on campus in intensive study for each 3 hours of credit.

A modern approach to course content, unique methodology, outstanding faculty and facilities combine to give this program special appeal for the employee who is unable to afford a semester-long break from his career.

I am proud to report that this program has been developed by the University of Oklahoma over a period of years through

close cooperation with the U.S. Civil Service Commission and an interagency committee on improved educational opportunities for Federal employees. I consider it to be a most significant breakthrough in employee career development consistent with the Government Employees Training Act of 1958.

The intensive study programs connected with this advanced program format will be conducted at the Oklahoma Center for Continuing Education, which is part of the university's campus at Norman, Okla. This has frequently been described as one of the Nation's finest adult education facilities, located on a 20-acre site in a $4 million building com20-acre site in a $4 million building complex adjacent to the main Sooner plex adjacent to the main Sooner campus.

I should like to make one other point in bringing this advanced program to the attention of the Senate. As a result of the excellent cooperation between agency officials and the university, this program can result in substantial savings in Federal funds of those agencies whose employees are enrolled.

I congratulate the agency people and the leaders of the University of Oklahoma, including its distinguished president, Dr. George L. Cross, upon the inauguration of this new adventure in scholarships.

NEW YORK TIMES APPRAISAL OF MIKE MANSFIELD, A REMARKABLE MAJORITY LEADER

Mr. PROXMIRE. Mr. President

The PRESIDING OFFICER (Mr. KENNEDY of New York in the chair). The Senator from Wisconsin is recognized.

Mr. PROXMIRE. Mr. President, Theodore White, in his "Making of the President, 1964," makes an observation that strikes at the sensitivity of almost all of us who are active in political life. He points out that if a news account praises a political figure greatly, but mentions some slight human fault, that political figure is likely to be deeply offended. All we tend to see is the critical word or phrase, the rest of the statement, the remainder of the statement, the intent of the statement, we tend to ignore.

This is true of most of us in Congress. I am sure that it is not true of our majority leader. A more modest, self-effacing, gentler soul I have never met.

The Senator from Montana [Mr. MANSFIELD] is a man who has been criticized often and vigorously, as have all majority leaders, but he has never, to my knowledge, showed petty, mean, or vindictive resentment of such criticism. He has become increasingly recognized for the highly effective leader that he is.

In this connection, the New York Times this morning publishes a detailed appraisal of Senator MIKE MANSFIELD. This is not a puff or a laudatory elegy. It is a dispassionate and accurate analysis of this unusual Senator.

This appraisal is so thoughtful and perceptive that I ask unanimous consent to have it printed in the RECORD.

OUTSPOKEN SENATE CHIEF: MIKE MANSFIELD

WASHINGTON. September 1.-At the conclusion of his remarks at the opening Senate

Democratic caucus last January 4, Majority Leader MIKE MANSFIELD dealt with the delicate question of what Members owed to the President and to their own conscience in the field of foreign policy.

"I would hope that Democratic Members, indeed all Senators," he said, "would bear in mind at all times the great burdens which

the President carries for all of us in these decisions of foreign policy. I would hope and expect that we will give him every support, by word and vote, which can, in good conscience, be given.

"And I would hope that Members qualified in questions of foreign policy would not hesitate, after careful study, to speak out on them.

"Contributions have been made, from time to time, by Members of the Senate to the more effective formulation and conduct of our foreign relations. And clearly, we are at a stage now in world developments when prudent contributions of thought and idea can be very useful."

It was in this spirit that Mr. MANSFIELD made his speech today pointing out that both sides in Vietnam were setting certain conditions on a negotiated settlement. It so happened that Mr. MANSFIELD's idea coincided with those of the President and there

fore the President welcomed the speech.

HIS IDEA OF HIS TASK

But Mr. MANSFIELD Would have made the speech whether or not it had the President's approval. He has always believed it was possible, though admittedly difficult, for him to function as the administration's leader, to represent the President's views to the Senate

and still to be able to voice his own views

as Senator from Montana.

Those views have not always been welcomed at the White House. For example, Mr. MANSFIELD aroused considerable dismay there when, on June 14, 1961, he suggested that all Berlin be made a free city under international guarantees and protectionthe guarantees to be given by both the North Atlantic Treaty Organization and Warsaw Pact countries and access to be assured by international peace teams.

Again Mr. MANSFIELD believed the Kennedy administration had blundered badly in withdrawing support for the regime of Premeir Ngo Dinh Diem, in Vietnam. He said so at the time and has continued to say so.

The Senator freely conceded the mistakes and deficiencies of Premier Diem and he deplored the influence exerted on him by his brother and sister-in-law, Ngo Dinh Nhu, and his wife. Nevertheless, he maintained

that the Diem regime offered the only hope of a reasonably viable, dependable government.

Whether or not Mr. MANSFIELD'S ideas on Vietnam have found acceptance at the White House, he has earned his credentials as a commentator worthy of respect.

For 10 years before election to the House of Representatives in 1942, he was a professor of far eastern affairs at Montana made five trips to Vietnam. He was in State University. Beginning in 1953, he has

Hanoi in the final days of the French evacuation of the French forces. In 1959

he conducted a study of United States foreign aid in South Vietnam.

HE CONFERS ALMOST DAILY

Mr. MANSFIELD said today that he conferred almost daily with President Johnson on Vietnam. It is generally believed here that he has had some influence on the President's thinking.

For example, there is reason to believe that the President's speech at Johns Hopkins University last April in which he offered unconditional negotiations was partly the result of conversations with Senator MANSFIELD and Senator J. W. FULBRIGHT, of Arkansas, chairman of the Foreign Relations

Committee, in which they expressed their fears of expansion of the war.

It is also believed that Mr. MANSFIELD'S

cautionary views reinforced the President's reluctance to call up reserves.

The rise of MIKE MANSFIELD is a remarkable story. He was born March 16, 1903, at 98 Perry Street in Greenwich Village, N.Y. When he was 3, his parents moved to Montana. At 14 he left home and enlisted-

after some dissembling about his age-in the Navy in World War I. He served in the Navy for 2 years, then shifted to the Army

in 1919-20, and finally served as a marine in

China from 1920 to 1922.

Returning home, he worked in the mines from 1922 to 1930, earning the money to support himself while he went to high school. În 1931 he married Maureen Hayes, of Butte, a schoolteacher, who was determined that he was going to have an education. He spent a year in the Montana School of Mines and 4 years at Montana State, where he took his bachelor's degree in 1933.

OUT OF WORK IN DEPRESSION

His master's degree from Montana State in 1934 was a matter of necessity. He applied for a high school teaching position in two small Montana towns and was turned down because he was a Roman Catholic. He was out of a job in the height of the depression.

A professor at Montana State offered him a trifling stipend as an assistant. It was the only thing available. His wife cashed in her insurance and went to work, and he got

ease in 1958 and 1964.

In 1957 Lyndon B. Johnson, then the majority leader, made Mr. MANSFIELD his whip, or assistant leader. When Mr. Johnson became Vice President, the Democratic Senate conference elevated Mr. MANSFIELD to the leadership. He was the one man acceptable

to the southerners and the northern liberals. A REMARKABLE CONTRAST

No two men could be more different in character, in style, and in conduct than the ebulient, flamboyant Texan and the quiet ascetic-looking scholar from Montana.

Lyndon Johnson dominated the Senate. He cajoled and flattered, browbeat and insinuated, wheeled and dealed. He would let days go by without trying to press the Senate's business and then suddenly keep the Senate in grueling night sessions until weary Senators were prepared to do his will. He rarely confided his strategy to his colleagues, even to his assistant leader.

Mr. MANSFIELD has no such talents and

does not aspire to them. He is entirely with out wile or guile. He has no strategy and

he has no secrets.

During the long struggle over the civil rights bill last year, he gave Senator RICHARD B. RUSSELL, of Georgia, leader of the southern opposition, advance notice of every move he would make.

Mr. MANSFIELD is also selfless to the point of shunning credit. He even gladly assigned it to Senator EVERETT M. DIRKSEN, of Illinois, the Republican leader, as he did on the passage of the treaty limiting nuclear tests, the Civil Rights Act of 1964, and the voting rights bill this year.

BANK MERGERS: HOW THEY CONTRIBUTE TO CONCENTRATION AND COMPETITION

Mr. PROXMIRE. Mr. President, the Mr. President, the Congress is now dealing with bank merger legislation that may have hisCXI-1428

toric significance. Earlier this year the Senate passed and sent to the House a bill that would be in my judgment significantly improve and clarify the present bank merger situation. In doing so it would strengthen the hand of the Department of Justice to stop mergers that have a substantially adverse effect on competition while removing the overhanding, confidence undermining effect of threatened legal action against hundreds of banks throughout the country. The measure has another very salutory consequence. It would prevent the necessity in the future of de-merging banks. It would make it unnecessary to unscramble banks and in doing so prevent the agony to borrowers, depositors, trust accounts and business and the public generally that such a process is likely to involve.

Mr. President, one of the most revealing analyses of bank mergers and why they are sometimes necessary and desirable in the public interest as well as sometimes destructive of the public interest was made by Governor George Mitchell of the Federal Reserve Board. Governor Mitchell appeared before the House Banking Committee on August 26.

In the course of his remarks, Mitchell showed just where and how and to what extent banks are actually in competition. He based his analysis on years of study by the Federal Reserve Board. This statement by Mitchell reveals so much about this highly important field in which Congress is legislating this year that I call it to the attention of the Senate.

Incidentally, I disagree in partthough in small part-with some of the conclusions of Mr. Mitchell with regard to the pending bill as expressed in this statement.

I ask unanimous consent that the Mitchell statement I have just described be printed at this point in the RECORD.

There being no objection, the statement was ordered to be printed in the RECORD, as follows:

STATEMENT OF GEORGE W. MITCHELL, MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, BEFORE THE SUBCOMMITTEE ON DOMESTIC FINANCE OF THE COMMITTEE ON BANKING AND CURRENCY OF THE HOUSE OF REPRESENTATIVES ON S. 1698 AND RELATED BILLS, AUGUST 26, 1965

Mr. Chairman, I thought it might be helpful to your deliberations if I offered a brief summary of my views on the substantive issues involved in commercial bank mergers. I will do this by reference to the cases considered by the Federal Reserve Board in the past 31⁄2 years-roughly the period of my service on the Board.

As both this statement and my voting record will testify, I regard the competitive impact of mergers the most difficult and complex question posed in bank merger cases; but I also believe that, when properly analyzed, competition turns out to be significantly affected in only a minority of bank merger proposals. When competition is significantly reduced I favor denial unless the bank to be acquired is an unsound operation or woefully inadequate to meet its community's needs.

Let me explain the reasoning that underlies this conclusion. The Bank Merger Act of 1960, under which the Board operates, requires the supervisory authorities to consider a set of seven factors in each merger

case. The first five are called banking factors. They cover such considerations as the financial history and condition, the adequacy

of capital, the quality of management, and the earning prospects of the institutions involved. The relevant supervisory agency is to judge such questions as whether the status of the surviving bank is strong enough to support a merger or if the position of the bank to be merged is so weak as to impel usually are operating institutions and have one. Since banks involved in mergers their performance recorded in the form of statistical, examination, and field contact reports, supervisory authorities, with such differences in judgment as reasonable men exhibit, have little difficulty in sorting out and evaluating the banking factors.

During the past 31⁄2 years the Board of It has approved 97 applications and denied Governors has considered 107 merger cases. 10.1 Banking factors were the major or a significant consideration in 44 approvals and 4 denials. The banking factor that most frequently represented a basis for approval was a needed improvement in management. In every case of approval except three where competitive factor was judged to be neutral or, on occasion, slightly adverse. In the three approved mergers where there was significant competition between the merging institutions, the acquired bank faced management, capital, or earnings problems that the Board felt were sufficiently pressing to the other hand, in each of our 10 denials of warrant their resolution by merger. On merger applications during this period, the banking factors, even though of concern in 4 cases, were finally judged of lesser importance than the competitive factors in every instance.

banking factors were of significance, the

The record makes clear that there are very, very few cases in which the competitive factor is significantly adverse but in which banking factors are nonetheless judged to provide an overriding reason for approval. Such fortunately rare cases typically involve a serious management breakdown, selfdealing or evident incompetence.

As compared with the banking factors, the other two factors that supervisors are reAct pose much knottier problems, both of quired to consider under the Bank Merger information and analysis.

The statute specifically refers to these factors as (1) "the convenience and needs of the community to be served" and (2) "the effects of the transaction upon competition, including any tendency toward monopoly."

How does one go about judging whether the convenience and needs of the community will be benefited by a change in banking ownership and management? This involves determining the actual breadth and intensity of community demands for various tity and quality of services that the existing banking services, as distinct from the quanand proposed new combinations of banks intend supplying. To do this one needs to quo, to find out how both business and survey community opinion on the status household customers appraise the quantity and quality of the banking services available to them.

But it is hard for bank customers to compare services they are accustomed to with those they have never had the opportunity to try out. Such survey results, therefore, must be supplemented by a more knowledgeable appraisal. In this appraisal, the broad experience of examiners in the qualitative and quantitative aspects of banking services can usually be helpful.

1I might add I have not seen eye to eye with the majority in all of these cases. I would have turned down 11 applications that were approved and approved 1 application that was denied.

Another aspect of the impact of bank mergers upon the "convenience and needs of the community" concerns the contribution that banks can make to economic growth and stability in their own communities. A bank that is investing heavily in out-of-State business loans, tax-exempt securities, or mortgages contributes less to its community than one that is playing an active role in satisfying the credit needs of local businessmen, farmers, consumers, and governments. Clearly, so far as the community's convenience and needs are concerned, a merger involving the first bank would be far less objectionable from the public point of view than would a merger involving the second. Accordingly, a careful inventory of the extent of local and nonlocal credits in the bank's loan and investment portfolio is called for in order to clarify its role in community financing.

In these ways-through surveys of community views, informed professional judgments, and a review of the record of the bank's participation in financing its community-reasonable bases for judgment can be established as to what the "convenience and needs" of the community are and how well the existing institutions have met them. Against this must be weighed the record and assurances of the merging bank as to what it can and will supply. The final balancing of these considerations remains a matter of judgment but, with evidence before them of the type I have outlined, supervisory authorities can judge with a fair degree of assurance how well a proposed merger meets the "convenience and needs" test. In the 97 approvals noted above, the convenience and need factor was the major or a significant consideration in 53 cases. It was not a significant consideration in any denials. In my judgment, the "convenience and need" factor should ordinarily be accorded more weight than the "banking factors."

The hardest criterion of all to apply, however, is the effect of the proposed merger on competition. At the outset it should be clear that the competitive factor cannot be disassociated from consideration of "convenience

and needs," inasmuch as the overall objective

is to provide the banking services desired by

the customers on reasonable terms and at fair prices. Indeed, the most conclusive way of assuring that a community's convenience and needs will be met is by the maintenance of so many alternative banking choices that the resulting competition among them will give customers all the opportunity they could wish to move from one bank to another in order to obtain whatever mix of services they desire. But this is rarely a practical criterion. There is a limit to the number of practicable banking alternatives that it is possible to make available to any given community.

In dealing with a change in the status quo there is a popular presumption that any decrease in the number of independent banking units in a given market area will, of itself, decrease competition and increase the tendency toward monopoly. It is my own feeling that this presumption is too harsh a standard to apply without corroborating evidence. Such evidence is to be found in the extent of any unfilled needs of business and household customers in the market areas affected by the proposed merger. And it is to be found in an analysis of the markets involved in the merger-the alternative sources of banking services, the extent of market power exercised by the banks in these markets, and the role in these markets of the particular banks to be merged and the merging bank.

In contrast to the concept adopted in the Philadelphia National Bank case that "the cluster of products and services denoted by the term 'commercial bank' composes a distinct line of commerce," I am of the view that the great variety of unrelated services that banks offer are far more significant than their related services. The corrolaries of

this view are that banks compete with other businesses fully as much as they do among themselves and that for each service they offer there is ordinarily a different market area and a different competitive situation.

Thus, in order to evaluate the competitive factor, a reasonably accurate delineation of the areas that the merger candidates serve must be developed. From the approximate boundaries of the various service areas for each type of bank activity it is possible to identify the markets that might be affected by the merger, as they are revealed in the overlap of respective service areas.

Among all the services that banks provide, only one of major importance is truly unique and not vulnerable to nonbank competition-the checking account. In all other activities commercial banks face varying degrees of competition from other financial intermediaries or the money and capital markets. As lenders, banks compete with each other and other financial intermediaries or with capital markets in extensions of credit to business (large and small), to consumers, and to governments (Federal, State, and local).

It is quite evident that in many of these markets the merging of any but the very largest banks is unlikely to have significant anticompetitive effects. Nonbank and nonlocal bank competition are major factors insuring competitive performance in the Government securities market, in lending to large businesses, and in the market for most tax-exempt State and local bonds. Nonbank competition is typically vigorous in the consumer credit markets, where hard goods suppliers have their own sources of credit independent of local banks. The same is true of mortgage markets, where other specialized financial intermediaries are

dominant. In whatever markets banks face substantial nonbank or nonlocal-bank competition, it is a fair presumption that the impact on competition of any bank merger will be negligible.

What, then, are the remaining markets in which competitive considerations must be weighed particularly carefully? The most important single market in this category is the market for demand deposit services to local business and individuals. These are services that can be provided only by a bank, and for most such customers only by a local bank. Another important local market is that for savings accounts; in this instance, however, local offices of other financial intermediaries usually offer a similar service. Lately some rate-conscious savers have escaped the orbit of local alternatives altogether and exported their savings from one end of the country to the other.

The small business borrower is another bank customer that may suffer from the removal of an alternative source of bank credit by merger. Even though such borrowers can often obtain trade or supplier credit, the price of such financing may be high and the attendant conditions can be confining. Small businessmen usually find their local banks to be their cheapest, most accessible, and most flexible source of external financing.

In considering the definition of the service area of the bank, then, particular attention should be paid to the potential service areas for small business borrowers and individual and small business depositorsthese are the markets most likely to be significantly affected one way or the other by merger.

When chief concern about the possible competitive impact of bank mergers is narrowed down to these two or three market sectors, a great many merger proposals can be said not to raise the competitive issue at all. This is because the banks involved have little or no overlap in their service areas for small business and personal customers. Such is the case when the major objective of the

acquiring bank is to extend its activities into another geographical market or into another service field. For example, in Virginia, a State where there has been a great deal of merger activity in the past 3 years, the preponderance of cases have involved the extension of service areas for banking institutions that are, under a recent State statute, becoming statewide in their operation. The competitive effect in these cases is not that of the withdrawal of an alternative source of banking service, but typically the substitution of a branch of a larger institution for a community bank.

It is sometimes said or implied that branches of large banks in small communities are unfair competition for local banks. But there are too many instances in which local banks have held their ground in growth and profitability to support a broad generalization along that line. As a practical matter, it may well be that the communities that are most blessed with banking facilities are those that possess a mixture of local banks and branches of larger institutions.

This brings us down to what might be called the hard core of merger proposals— those that turn out, upon examination, to involve two or more banks with overlapping service areas for small business and individual customers. In such circumstances, consummation of the merger undeniably will eliminate one competing bank from the relevant markets. The loss of one alternative for customers in choosing their banking connections in these market areas is almost certain to lead to denial unless the number of actively competing banks is already large, or the bank to be acquired is so small or ineffective a competitor as not to create any appreciable gap in bank alternatives by its disappearance as an independent entity.

Let me turn to the record to give you some indication of how these principles have worked out in practice. The Board's 10 denials in the past 31⁄2 years have, without exception, been base primarily on the judgment that the proposed merger would appreciably lessen competition in one form or Bank management factors have

another.

significantly weighed for the merger in some

of these cases, but in each instance they have been relegated to a secondary consideration.

In the 97 Board approvals of mergers during this same period, the effect on competition was, in the Board's judgment, negligible in 70 cases, favorable in 16, slightly adverse in 23 and in only 4 cases there was significant competition between the merging banks.

You will note that I mentioned 16 cases in which it was judged that the effect of the proposed merger would be to increase competition. The favorable effect that a merger can have on competition, while not common is, in my opinion, often overlooked by critics of mergers. This favorable effect may arise when the consummated merger puts an end to the monopolistic policy of "home office protection." It usually accompanies the merging of small banks in an area where a dominant competitor holding a very large proportion of the local deposits can only be effectively challenged by a larger institution.

Occasionally merger applications pose a confrontation of an adverse effect on competition, on the one hand, and a favorable effect on serving the community's convenience and needs. For example, the bank proposed to be merged may have exhibited a very limited interest in serving the credit needs of its community-then the only competition lost by merger would be the potential of a new management with a different philosophy. In these circumstances the better alternative may well be a merger.

In an isolated community, to take another example, it is possible that neither of two banks can meet the credit needs of

local businesses and farms in the surrounding area but that their combined resources and higher lending limit would enable them to do so. In such cases, the proposed merger might eliminate substantial competition between the merging institutions for some types of banking services but at the same time the resultant bank could do a markedly better job at serving the area's convenience

and needs.

My work and experience with the Bank Merger Act in the past 31⁄2 years persuades me that even among the most sophisticated experts in law and economics, the understanding of what it takes to make a com

petitive market is still quite imperfect. Progress in deepening such understanding comes slowly, and it depends partly upon improvements in analytical techniques designed to define the markets affected by mergers and to appraise the possible impact of mergers upon these markets. I have tried to outline some of the complexities of this task and to indicate my own predilections.

I believe that all concerned with the regulation of bank mergers are sincerely concerned with promotion of the public wel

fare. It seems to me that the differences

in our conclusions rest not on any lack of faith in the efficacy of competition but essentially on differing views as to the relevant markets and evaluation of the impacts

of mergers on these markets. The Board is devoting considerable professional resources to solution of these problems in hopes of improving the basis for its judgments. As these efforts progress, I hope they can lay the foundation for a more widespread consensus among all authorities as to where the public interest in bank mergers lies.

Turning now to S. 1698, while I share many of Governor Robertson's reservations concerning the immunity it would grant to past mergers, I strongly support the prospective features of the bill. Even though I regard more seriously than many the troublesome problems of divestiture that have arisen, or may arise, in a few cases, I still do not conclude that the situation warrants general immunity from the antitrust laws for all bank mergers that took place before the enactment of this bill.

Clearly these difficult situations should be avoided in the future. Fortunately, cases in which a bank supervisory agency approved a merger but the Attorney General brought suit to prevent it have been infrequent. In fact, none of the 97 mergers approved by the Board in the past 31⁄2 years has been contested under the antitrust laws and I understand the Attorney General has said he has no intention of doing so. Nevertheless, the difficulties of undoing a merger are great enough that I believe a procedure should be established by statute to prevent such cases from arising.

One of my reasons for being concerned about the problems of divestiture is that I see no practical device for spinning off depositors in nonbranching States. A bank can spin off assets in the form of securities and loans without difficulty; it is the very essence of banking that it be in a position to do so. A bank can, neglecting the human problems of its staff and officials, spin off personnel and operating know-how. A bank can, with considerable disruption to customer relationships and convenience, sell or spin off branches and with them the

propensity of local residents and business to patronize that branch. But how can a unit bank sell or spin off its depositors, assigning them to a new bank or existing institution? And how can it organize a new institution without owning it or controlling it indirectly? While spinning off assets, operating personnel, and branches involves difficulties and hardships, spinning off depositors in a nonbranching State may defy solution. S. 1698 offers an effective preventive remedy for this problem.

U.S. BALANCE-OF-PAYMENTS PROBLEM STILL SERIOUS: EQUILIBRIUM AND LIQUIDITY PROBLEMS FAR FROM SOLVED

Mr. PROXMIRE. Mr. President, the Joint Economic Committee's Subcommittee on International Exchange and Payments, chaired by Representative REUSS, held hearings last month to deREUSS, held hearings last month to develop guidelines for international monetary reform. Its report, which is to be released shortly, will make an important contribution to the preparations now underway for an international monetary conference.

The reason that international monetary reform has become more urgent is that the very success of our own efforts that the very success of our own efforts to end our balance-of-payments deficiton the official settlements definition recommended by the Bernstein committee-threatens to lead to a shortage of international liquidity.

Former Secretary of the Treasury Dillon focused on this problem in a much publicized publicized commencement address at Middlebury College, which may have been a factor in the administration's decision to move now toward an international monetary conference. Mr. Dillon said:

The end of our payments deficits will mean that the United States-which has financed an $18.5 billion rise in official and private foreign holdings of dollars since World War II-will no longer be contributing anything at all to those holdings. International trade and investment cannot continue to expand at anywhere near an adequate rate if forced to rely on newly mined gold as the sole source of new reserves. The free world, therefore, is rapidly approaching a financial crossroads. There is an urgent need to strengthen the international monetary system, so as to insure that the needed increases in reserves will be forthcoming. For inadequate growth in international liquidity would hamper world trade, slow up the economic growth of individual countries, and threaten a world-wide recession.

I strongly favor our efforts to secure an improved international monetary system.

We must forestall a competitive scramble for reserves, brought on by an overall insufficiency, with disastrous consequences for economic and political stability in the free world.

At the same time, I feel equally strongly that we must not look to international monetary reforms for the answer to our own balance-of-payments problem. For one thing, increasing liment to imbalance. So our balance-ofquidity does not in itself promote adjustpayments deficit must be corrected regardless of what is done with international liquidity. Second, we would doom our hopes of achieving international monetary reform if other countries believed that we were only trying to find new ways of financing our deficits instead of trying to correct them.

I believe that it was wise of Treasury Secretary Fowler to emphasize the need for correcting our deficits at the same time that he announced that the United States is now ready to participate in an international monetary conference. Mr. Fowler said:

It is essential to the viability of the international monetary system as it exists

today that the usefulness and value of those dollars remain unquestioned throughout the world. And, whatever changes might be introduced into that system, the dollar will have to continue to carry a heavy burden as a reserve currency.

If we allowed our deficits to continue, or if we lapsed back into prolonged deficit after a brief period of surplus, we would undermine world confidence in the dollar and mpair its usefulness as a world reserve and leading currency. Dollars would return to our shores as claims on our gold, thus depleting, instead of supplementing, world financial resources.

To prevent such a contraction in world liquidity and the widening circles of deflation and restriction that would surely follow, we must reach and maintain equilibrium in our payments as a matter of the highest national priority, along with sustaining the economic advance that has marked the last 53 months.

as

Preliminary balance-of-payments statistics released 2 weeks ago indicate that we have achieved a significant improvement in our international accounts during the second quarter. Seasonally adjusted, we had a surplus of nearly $300 million, according to the Commerce Department's "liquidity" definition, compared with a deficit of $640 million in the first quarter. The favorable shift between the first and the second quarters was therefore almost $1 billion. However, we benefited from some exceptional circumstances in the second quarter, and we cannot count on the third and fourth quarters being as good as the second quarter was.

The most important of the special in

fluences was undoubtedly the impact of the President's new program for limiting capital outflows. This program extended the interest equalization tax to commercial bank loans abroad with more than 1 year's maturity and enlisted the cooperation of banks and businesses in the task of curtailing capital exports. Although the program went into effect during the first quarter, its full impact was not realized until the second quarter.

The Department of Commerce said the following about the favorable shift

in capital movements:

During the first quarter, long- and shortterm claims on foreigners reported by banks (including claims reported for their domestic customers) increased by about $440 million, but in the second quarter they declined by about $380 million, a total shift of over $800 million. (Seasonally adjusted figures indicate the same change.) The net increase during the 6-month period as a whole was billion in the second half. about $60 million, compared with about $1.2 billion in the first half of 1964 and $1.4

Undoubtedly, the freshness, publicity, and enthusiasm for the new program was a major factor in its big impact during the second quarter. However, many of the things which banks and businesses did were of a "one shot" variety-shifts

in funds which have a large effect on the balance of payments but which, once executed, will have no further large impact. Moreover, while I am sure that banks and businesses will continue to cooperate in the program, we cannot count indefinitely on such a program for the answer to our balance-of-payments problem. It may well be that the program will not have as much impact in

the third and fourth quarters as it had in until Tuesday. the second. "carrot."

Another specially favorable influence in the second quarter was the effect of the shipping strike, which caused exports to be abnormally low in the first quarter and shifted shipments into the second quarter. In addition, we received unusually large payments for military equipment in excess of current deliveries. The Department of Commerce press release on the balance of payments stated:

Because the shipping strike and other developments caused substantial but compensating shifts between the first and second quarters, the balance for the second quarter alone is not as useful in evaluating the current state of the balance of payments as the balance for the first half of 1965 as a whole. During that period the comparable balance was negative by about $390 million. This compares with negative balances of about $840 million in the first half, and $1,940 million in the second half of 1964.

It is clear, therefore, that while we have made progress, we cannot relax our efforts to achieve equilibrium in our balance of payments. This task may be made more difficult as economic growth abroad slows down, and as other countries become more competitive in international markets. The Department of Commerce noted that our exports have been on a relatively flat trend since mid1964. The press release stated:

After allowing for the effect of the strike, merchandise exports are seen to have been relatively stable since the middle of 1964. The interruption of the upward trend at that time was in part, at least, related to a slowdown in the rate of foreign business expansion which seems likely to continue for a time in several countries.

Moreover, a Wall Street Journal columnist, Alfred L. Malabre, Jr., wrote on August 23, 1965, that our export surplus is endangered by some increase in U.S. export prices in the face of declining export prices for other countries. His article was disturbing and persuasive, I thought. I received unanimous consent to have that article printed in the RECORD at that time.

In conclusion, I firmly believe that we are right, indeed late, in calling for a new international conference. But at the same time I believe that we must sharply distinguish our own balance-ofpayment problem from the problem of international liquidity, and continue to press vigorously for an end to our deficits on the official settlements definition.

ORDER OF BUSINESS Mr. MORSE obtained the floor. Mr. MORSE. Mr. President, I shall yield to the Senator from Michigan and the Senator from New York.

I have the sincere hope that we can shortly proceed to the consideration of the higher education bill. I have some good hopes that we might be able to finish that bill this afternoon, and, if we can finish it this afternoon, it is my understanding that any session that we have tomorrow will be only a pro forma session and that the Senate will adjourn

That would be called a That would be called a

I yield to the Senator from New York.

THE HELLER PLAN

Mr. JAVITS. Mr. President, much attention and energy has been directed in recent years toward efforts to strengthen recent years toward efforts to strengthen the fiscal capacity of State and local govthe fiscal capacity of State and local governments to deal with significant problems of primary concern to them. The lems of primary concern to them. The increasing need of local governments to remain financially viable and able to meet their fiscal responsibilities within the context of Federal-State matching grant programs has highlighted the imgrant programs has highlighted the importance of insuring that local governments maintain sufficient sources of revenue. The so-called Heller plan which calls for the redistribution of a certain percentage of Federal tax revenues to the States according to a predetermined formula is one very interesting method of strengthening the States and local governments capacity to handle their own financial problems. I have been working financial problems. I have been working on the outlines of such a formula and have been giving serious study to the question of the extent of the Federal question of the extent of the Federal supervisory role. Such a formula for redistribution of Federal funds to the of Federal funds to the States ought, I believe, to take into consideration both the needs of the State, sideration both the needs of the State, the size of the State's own efforts to meet these needs, and the relationship of the State's revenues to its overall needs.

In its 1965 report, the Advisory Commission on Intergovernmental Relations concluded:

The division of revenue sources among Federal, State, and local governments does not match their relative revenue require

ments. The States, and more particularly local governments, are disadvantaged in comparison with the National Government. The parison with the National Government. The disparity between their relative resources and disparity between their relative resources and revenue requirements, moreover, is not likely

to decline.

The effect of State tax and expenditure policy has many ramifications varying policy has many ramifications varying from its capacity to deal with necessary from its capacity to deal with necessary social services to the location of industry and economic development within its State. The stimulation of new fiscal capacity on the part of the States by use pacity on the part of the States by use of the Heller plan is, I believe, deserving of new and intensified efforts.

I ask unanimous consent to include in the RECORD at this point an article on the Heller plan entitled a "Republican the Heller plan entitled a "Republican Opportunity" appearing in today's New Opportunity" appearing in today's New York Herald Tribune.

There being no objection, the article was ordered to be printed in the RECORD, as follows:

A REPUBLICAN OPPORTUNITY

(By Raymond K. Price, Jr.)

One of the Republican Party's chief problems in these days of the Great Society is the simple one of identity. In terms of social goals the Johnsonian "consensus" leaves precious little room for any one else. Yet the GOP has to establish a distinct image; its problem is one of building a distinct image within the broad range of consensus which in fact does exist, across party lines, on the evolving nature of our society.

But if there is a consensus on ends, there is none on means, and here the Republican

Party has a golden opportunity quite specifically in line with its present needs: to present itself as the party that can make State and local government work, because it believes in State and local government.

The Goldwater debacle last year cost the GOP heavily in those offices at State, county, town and district level on which political organizations are based. The recovery of these is an essential element of the fromthe-ground-up rebuilding of the party now being attempted.

remember, Republicans have been the guardFor as long as most present-day voters can ians of individual, local and State prerogatives against Federal encroachment. Though on any given issue the lines might get smudged, the Democratic orientation has been toward greater centralization of power, the Republican toward decentralization.

This has been more than a campaign stance. It represents a philosophic commitment to the ideals of diversity and plurality, a concern for the manageability of the Federal colossus and also a greater measure of faith than the Democratic Party has shown in the capacity of States and localities to govern themselves.

There is, of course, another side to the coin

of this faith. As Governor Rockefeller put it

in his Godkin lectures at Harvard in 1962:

"The essential political truth is that-today more than ever-the preservation of States rights depends upon the exercise of States responsibilities. States responsibilities. We stand, in fact, upon the threshold of a new test of leadership at the State level. For so great and urgent are the demands of national defense and foreign policy upon all resources of the National Government-that, now as never in our history, State governments are challenged to face and meet the pressing domestic concerns of our society.

"This, then, can prove to be a historic moment in the long evolution of our Federal

idea. For it summons us to remember and to apply a basic fact of American political history-the fact that our States are de

signed to be our great centers for political experiment. This as Lord Bryce discerned long ago is perhaps the key role of the State: to be the proving ground for evernew ventures in free government.

"The time is upon us now to * call upon our States to be active where they have been passive-progressive where they have been timid-creative where they have been merely cautious. In a word, it is time for the States to lead.”

ly:

Or, as the Ripon Society put it recent

"The United States is entering upon a period of political turbulence, in which a new and much younger population will con

front issues which are different in kind and in scope from those of the past generation. They are the sort of problems which convince us that the exciting new area of politiCal action, the great new opportunity for boldness and creativity and innovation, will be found more and more at the State and local level."

The plain fact is that the very size and complexity of the existing Central Government and its programs argue persuasively for a shift of the political pendulum toward initiatives at the State and local level. In any human organization, there comes a point at which the limits of comprehension set the limits of manageability. And the Republican Party is ideally situated to capitalize on this shift.

Nor would the GOP, by pitching its claim to State and local offices on its faith in State and local government, be compromising its own claim to national office. For the party could then argue, plausibly and legitimately, that to make the entire national structure of government work requires making the