Chairman Proxmire, members of the Committee: You have requested my views on the proposed Federal aid to the Chrysler Corporation and I am happy to offer them to whatever they may be worth.

Since receiving the Chairman's request to appear here, I've had an opportunity to examine some of the expert testimony that has been offered here by others, and I must say that they have covered the subject so exhaustively that there seems to be little for me to add. I am impressed both by the quality of your witnesses and the complexity of your problem.

What has struck me with particular force in perusing the record of these proceedings is the enthusiasm being expressed on all sides for the American system of free enterprise. My own views on this subject are well known to you, since I have appeared in many forums to express the hope that the many benefits of that system might someday be extended to the nation's financial marketplace. Finding the Committee in such a receptive mood, however, I thought it might be useful to at least mention this competitive situation in order to provide the context within which I shall endeavor to answer any of your subsequent questions.

Nothing I have ever said, nor any statement made before this Committee that has come to my attention, states the case for free competition so eloquently as the late Justice Hugo Black in his opinion on the "Northern Pacific Railway" case: "It rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resource: the lowest prices, the highest quality, and the greatest material progress, while at the same time providing an environment conducive to the preservation of our democratic political and social institutions.

So said Justice Black, and no one ever agreed with him more firmly than myself -- which is why I have appeared on so many occasions to ask why there is scarcely a vestige of his principle to be found in the Government's regulation of banking and finance. I have observed on occasion that so far as our nation's financial affairs are concerned, the amount of competition to be found in the marketplace is inversely proportional to the degree of Government Intervention: that, in other words, those parts of the financial marketplace where we find the least competition are precisely those areas where the Government's hand is most visible.

I believe that, at one time or another, I may even have gone so far as to suggest that if our entire regulatory structure had been designed for the sole purpose of suppressing financial competition, it could not have been more successful.

Evidence of what this does to the public is never hard to find. Right now, for example, millions of families with only modest savings are being paid interest at the rate of 5 or 6 percent, while those who can accumulate $10,000 or more are getting between 12 and 13 percent. That at least gives them a fighting chance of keeping up with inflation.

One of the Government's justifications for this glaring inequity is that cheaper money is necessary to provide residential mortgages so that people can buy homes. Even if this proposition were true, which is highly questionable, it only means that a family which has been unable to save $10,000 is being asked to subsidize some more fortunate family when it buys a $200,000 house. The only possible justification for that which comes to my mind is the Biblical adage that "unto every one that hath shall be given...but from him that hath not, shall be taken away even that which he hath." Yet this has been the policy of the Government, and of the Congress, for decades.

Whatever the reasons for such a policy, and we all know there are many of them, it clearly owes nothing to Justice Black's notion about the interaction of competitive forces yielding the best allocation of our economic resources and producing the best deal for consumers.

Regardless of the reasons, the fact is that less affluent Americans must settle for half as much return on their savings as their richer neighbors because banks are forbidden to compete for their deposits by offering higher rates of interest. People are denied the normal benefits of competition among their suppliers by laws against interstate banking, by arbitrary interest ceilings, by restrictions on the use of modern electronic technology, and by a host of other discriminatory laws and regulations, many of which are more than forty years old.

This is the context, Mr. Chairman, in which you have solicited my views on the Chrysler financial situation. You can see my problem.

If I had any words of wisdom to offer, they would have to be derived mainly from the ancient Greek axiom that the beginning of wisdom is to know that you do not know. What I do not know is the basis on which the Committee believes that economic issues should be resolved. It cannot be anything so simple as the greatest good for the greatest number of people, or else we would not have all those millions of Americans collecting interest at half the inflation rate.

It cannot be anything so obvious as defending the free enterprise system because, unless I am mistaken, there are those who would subject Chrysler to the discipline of the marketplace on the one hand, but deprive the oil companies of their so-called windfall profits on the other --a hands-off policy that extends to the liability side of the corporate balance sheet but not to the asset side. Doubtless there is some logic which makes those views compatible, but it is not a logic that is common in banking circles.

I do not envy you your responsibility. It makes a banker's customary problem of judging the credit worthiness of a loan applicant and then negotiating a fair rate of interest seem simple by comparison. But if I am correct in deducing that you find yourselves to be facing a decision that cannot be resolved by simple considerations of equity, or based on any clearcut free enterprise principle, then I presume the question is one of expediency: Which is the lesser of two evils, to make the loan guarantees or not to make them? Let me address the matter on those terms.

As I remarked at the outset, other witnesses seem to have explored the options in this situation with thoroughness and candor. It has been pointed out, for example, that Congress has already provided for the relief of corporation in Chrysler's difficulty through the new and streamlined method of corporate reorganization permitted under Chapter XI of the Bankruptcy Reform Act of 1978.

The observation has been made that even without the streamlined procedures, corporations operating under the original Federal Bankruptcy Act of 1934 have successfully extricated themselves from similar difficulties. And witnesses have accordingly suggested that no loan guarantee is necessary for Chrysler. That is, I believe, essentially the position you yourself have taken, Mr. Chairman, and I cannot quarrel with it.

All of us realize that the short-term consequences of a corporate reorganization fall most heavily on the employees of the company and its suppliers, and no one should be expected to bear those personal costs without help.

If the provisions for unemployment and retraining assistance we have already built into our economic system over the past several decades are inadequate to cope with the present situation, then perhaps some special measures should be taken for that purpose. To say that the Government should avoid precedents that will make industrial productivity even lower than it is already does not mean that the Government cannot or should not take steps to cushion the impact of readjustments on American families. But perpetuating the situation that has brought them to this crisis in the first place can hardly be the most effective way to help them.

At the same, I am of course aware that many others take a contrary view. These include other members of the Committee, the Secretary of the Treasury, the Commerce, Labor, and Defense Departments and the President of the United States. I would prefer not to quarrel with them, either. But if I am asked whether this proposed legislation is in the long term interests of the country, the answer has to be, no. There is no avoiding the fact that it is an attempt by the Government to move economic resources to places where they would not otherwise go. Such distortions inevitably lead to less, not more productivity - and therefore to fewer jobs, less return on investment, and fewer lending opportunities for banks and everyone else.

Permit me to add one final thought, which no one else seems to have mentioned. Everyone concerned with this situation, including the management of Chrysler itself, is concerned that any loan guarantee will be in the nature of an exception to the rule and not a further precedent for Government intervention in the private sector. There may also be cause for concern about the which that intervention seems to be taking. Eight years ago, the Congress was debating something called the Emergency Guarantee Loans Act, which was the Lockheed loan. Now we find ourselves talking, not about loans in general, or help to a particular industry, but about something called the Chrysler Corporation Emergency Guarantee Loan Act.

We seem to be moving more and more in the direction of dealing, not with broad national problems, but with the affairs of specific corporations, and in ever greater detail. I wonder if this is not a dangerous portent. In the case of a loan guarantee, the recipient may find such specific attention very welcome. But once the Congress has accustomed itself to using a rifle instead of a shotgun, it may find itself under irresistible pressure to load the weapon with something stronger than tranquillizers.

We are already beginning to see this in connection with the present measure, and I wonder if we are not slipping into a relationship which everyone -- Congress, management, labor, and the public -- will soon come to regret. I should like to suggest that this aspect of the issue may deserve some attention.

Thank you.