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I don't believe, for example, that if you added that 5 percent that would be necessary for this purpose, that you need add a full 5 percent to a defense order. Competition should help to cover that cost. With a proper tax system part of the profits ought to come back to the Government through their excess-profits tax. In other words, my theory is, let's keep our books straight. If a plant costing a million dollars is going to be written off in 5 years, although it may live for 20, and you are going to charge that to defense program at the price you charge for the product, let's charge the cost of maintaining these workers that you are not going to use after the end of 5 years, in the same way. Don't hide it.

Dr. ANDERSON. Isn't there another problem involved quite as important as the dismissal wage? The presumption is that this is technological displacement. Shouldn't your suggestion also contain one further step, namely, a retraining and replacement program for these dismissed workers?

Mr. LUBIN. I was coming to my third constructive suggestion, namely, that this same policy be carried over into the field of technological employment as we know it generally, that is, the displacing of workers by machine, and there, as in the case of dismissals due to the defense program coming to its peak, retraining be a fundamental part of the program.

Dr. ANDERSON. Of the general dismissal wage program.

Mr. LUBIN. Yes.

The CHAIRMAN. Does that conclude your statement?

Dr. LUBIN. Yes.

The CHAIRMAN. Are there any other questions?

We are very grateful to you, Dr. Lubin, for a very interesting statement. I am sure the members of the committee could remain here much longer.

The committee has now heard from the Department of Justice, from the Department of Commerce, from the Department of Labor, from the Federal Trade Commission, and the Securities and Exchange Commission. The S. E. C. presented its story yesterday on small business. It is to make another presentation on Friday, and on Saturday the Federal Trade Commission will appear for the conclusion of its recommendations. There will be no meeting tomorrow.

The Chair ventures to ask the representative of the Treasury Department whether the Treasury Department is going to ask for time. Mr. O'CONNELL. I wish you would ask me that again on Friday. The Treasury Department as such will not ask for time, but the representative of the Treasury Department on the committee, if he can equip himself in the meantime, might like a little time, possibly just part of the morning, to make some suggestions to the committee. The CHAIRMAN. It will be obvious that by Saturday we shall have completed the presentation by all of the agencies represented upon the committee. Senator Mead spoke yesterday with respect to small

business.

Under the program which we announced at the outset, the congressional members of the committee as well as the members representing the agencies are at liberty to make presentations, and though there aren't many of them here at the moment-I don't seem to see any-I feel that I ought to say that we would be very glad to have the congressional members of the committee make their presentation.

In any event whatever, that will take place next week, and by Friday or Saturday it is to be hoped that we shall know definitely what program should be arranged for next week, because it would be necessary, obviously, for the committee to act finally upon its recommendations within the next 2 weeks, I think, at the outside, if we are to meet the deadline of filing the report by the 3d of April.

The committee then will stand in recess until 10 o'clock Friday morning.

(Whereupon, at 1: 10 p. m., an adjournment was taken until Friday, February 28, 1941, at 10 a. m.)

INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER

FRIDAY, FEBRUARY 28, 1941

UNITED STATES SENATE,

TEMPORARY NATIONAL ECONOMIC COMMITTEE,

Washington, D. C.

The committee met at 10:15 a. m., pursuant to adjournment on Wednesday, February 26, 1941, in the caucus room, Senate Office Building, the chairman, Senator Joseph C. O'Mahoney, presiding.

Present: Senator Joseph C. O'Mahoney (chairman); Senators Wallace H. White, Jr., Maine, and James M. Mead, New York; Representative Hatton W. Sumners, Texas; Thurman Arnold, Assistant Attorney General, Department of Justice; Wayne C. Taylor, Under Secretary of Commerce; Joseph J. O'Connell, Jr., special assistant to General Counsel, Department of the Treasury; A. Ford Hinrichs, chief economist, Bureau of Labor Statistics, Department of Labor; Joseph Meehan, Department of Commerce; Sumner T. Pike, Commissioner, Securities and Exchange Commission; Gerhard Gesell, Securities and Exchange Commission; Joseph T. Sheehy, assistant chief examiner, Federal Trade Commission; H. Dewey Anderson, executive secretary of the committee.

The CHAIRMAN. The committee will please come to order.

We have assembled this morning to hear a presentation on life insurance by Mr. Sumner T. Pike, the representative of the Securities and Exchange Commission upon the T. N. E. C. Are you ready to proceed, Mr. Pike?

Mr. PIKE. Yes, sir.

STATEMENT OF SUMNER T. PIKE, COMMISSIONER, SECURITIES AND EXCHANGE COMMISSION

Mr. PIKE. This is a pretty big memorandum, but it is a pretty big subject. With that small apology, I will go ahead.

This morning I will present recommendations and suggestions based upon the study of life insurance which the staff of the Securities and Exchange Commission conducted in cooperation with the Temporary National Economic Committee. The Securities and Exchange Commission itself has, of course, never had occasion to consider life-insurance problems in detail, and as a consequence it should be understood that the recommendations and suggestions which will be presented this morning are my own and those of Mr. Gesell, special counsel in charge of the insurance study-not those of the Commission.

When the study of life insurance was undertaken over 2 years ago, there was much ground to cover. There had not been an over-all survey of the life-insurance business since a committee of the New York State Legislature, with Charles Evans Hughes, now Chief Justice, as counsel, made an exhaustive inquiry into the operations of the business and in 1906 recorded its findings in what is now known as the Armstrong report.

At the present time there are approximately 365 legal reserve lifeinsurance companies in the United States. These companies have assets of more than $28,000,000,000. One out of every two people in the country is a policyholder. The income of the companies reaches over $5,000,000,000 a year. There are over 124,000,000 policies with a face value in excess of $111,000,000,000 outstanding. The rapid development of the insurance business may be seen by comparing the present size of the companies with the situation which existed at the time of the Armstrong report. At that time there were only 138 companies. The assets, which have since increased by upward of 800 percent, were then only $3,000,000,000, and the amount of insurance in force was then only $15,000,000,000.

It seems a little awkward saying that when there are any number of billions now.

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The life-insurance testimony fills six volumes of hearings before this committee and there are two committee monographs on the subject. We were aided in the inquiry from many sources. Not only did many State insurance commissioners give valuable assistance by making statistical data and other information available, but the lifeinsurance industry itself was, with few exceptions, cooperative and generously anxious to assist us in our efforts to present the facts before this committee. We are confident that the inquiry made was sufficiently broad and penetrating to present a true cross section of the business and adequate to justify the general recommendations and suggestions which follow. As was pointed out in more detail in our monograph report the life-insurance business was shown to be generally healthy. Our recommendations are not an attack on the lifeinsurance business. They are made solely because we believe certain improvements in management practices and the supervisory machinery are desirable both from the point of view of the policyholders and of the companies.

Before turning to our specific recommendations and suggestions, it will be desirable to review briefly the existing machinery which the States have set up to regulate life-insurance companies. Life insurance has been subject to some form of State regulation throughout its history. As early as 1851, New Hampshire created an insurance board to examine companies. At the present time, every State in the Union, as well as the District of Columbia, has a governmental unit responsible for regulating insurance. Most States have created separate insurance departments headed by a State official whose title varies but whom we will call, for purposes of convenience, the insurance commissioner.

The State insurance commissioner is usually responsible for all insurance regulation, including not only life insurance but fire, casualty,

1 T. N. E. C. Hearings, Parts 4, 10, 10-A, 12, 13, 28; T. N. E. C. Monographs No. 2. Families and Their Life Insurance, and No. 28, Study of Legal Reserve Life Insurance Companies.

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