Memorandum from Milton P. Kayle to David Stowe

Stuline (Stee) THE WHITE HOUSE WASHINGTON April 3, 1952 MEMORANDUM FOR DAVE STOWE Sub ject: Meetings with officials of Defense Department and Atomic Energy Commission regarding Section 18 - seizure authority. Holmes Baldridge, Assistant Attorney General in charge of the Claims Divi- sion, Ellis Lyons of the Justice Department, and I met with Assistant Secretary of Defense Coolidge and his staff this morning to discuss problems involved in invoking Section 18 seizure authority. We later met with Mr. Fred Warren, Chief of the Production Division of AEC, and members of his staff. Following are the conclusions resulting from these meetings: 1. It was agreed that on a strictly legal basis Section 18 authority could be invoked in the steel situation. However, there are numerable points at which the Government in exercising this power could be attacked by steel company opera- tors. The success of the Government's position would depend entirely on the court's reaction to the available facts. It seems fair to conclude that there is a 50-50 chance that on legal grounds resort by the Government to Section 18 author- ity would be sustained by the courts. 2. The Defense Department - particularly Under-Secretary Foster and Assis- tant Secretary Rosenberg - is opposed to using Section 18 because of the complex- ity of the procedure. However, it seems clear that by using the mechanics of the DPA allocation system we could readily identify those steel mills and iron ore companies which are supplying steel for end-products ultimately purchased by the military. The companies so identified could then be compared with the list of companies involved in the current dispute to see if the entire industry were covered. Once the Government seized the properties full pruduction would be main- tained consistent with efficient management of the industry. The AEC would have greater difficulty in identifying the contractors involved in procuring steel intended for AEC end-products, but AEC could give us a general estimate within twenty-four hours. It should be noted that the military does not buy a great amount of steel directly; its procurement consists mainly of end-products made of steel. AEC likewise purchases a negligible amount of steel directly. 3. The main objection to reliance upon the Section 18 authority in the current steel situation is the vulnerability of the Government to attack on tech- nical legal grounds in complying with the statutory requirements. After listening to the various problems raised by Defense in particular, both Lyons and Baldridge