UNEMPLOYMENT RELIEF

TUESDAY, JUNE 7, 1932

UNITED STATES SENATE,

COMMITTEE ON Banking and CURRENCY,

Washington, D. C.

The committee met at 2.30 o'clock, p. m., pursuant to call, in the Interstate Commerce Committee room, Capitol, Senator Peter Norbeck presiding.

Present: Senators Norbeck (chairman), Goldsborough, Townsend, Walcott, Couzens, Wagner, Bulkley, and Gore.

Present also: Senator Barbour.

The CHAIRMAN. The committee will come to order. The meeting is called for the purpose of considering Senate bill 4822, introduced by Senator Barbour of New Jersey. The bill will be made a part of the record at this point.

(The bill S. 4822 is as follows:)

[S. 4822, Seventy-second Congress, first session]

A BILL To amend the Reconstruction Finance Corporation Act to authorize loans for the purpose of providing additional employment through the construction of economically sound projects, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Reconstruction Finance Corporation act is amended by adding after section 5a the following new sections:

"SEC. 5b. The corporation is authorized and empowered to make loans to any State or political subdivision thereof, or to any agency constituted pursuant to the authority of such State, or to any corporation organized under the laws of any State or of the United States and having resources adequate for its undertaking, for the purposes of enabling them to finance the construction, replacement, or reconstruction of economically sound and useful projects the construction, replacement, or reconstruction of which will provide employment at an early date for a substantial number of persons, subject to the limitations of section 5 of the Reconstruction Finance Corporation act as to the periods within which the corporation may make loans and amounts thereof. The corporation may make such loans in such manner and amounts, for such periods not in excess of five years, upon such terms as to repayment of principal thereof and interest thereon, and subject to such other conditions, as the corporation may determine. Each such loan shall be fully and adequately secured, and shall be made only upon a showing to the satisfaction of the board that the State, political subdivision, agency, or corporation applying for the loan is unable to obtain sufficient funds for the purpose upon reasonable terms through banking channels or from the sale of its bonds or other securities to the general public and that the operation of the project when completed will yield sufficient income to be self-sustaining, including the repayment of the loan made hereunder with the interest thereon in accordance with its terms and conditions.

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SEC. 5c. The corporation is authorized and empowered to make loans to bona fide financial institutions organized under the laws of any State or of 91

the United States and having resources adequate for their undertakings, for the purpose of enabling them to finance the carrying and orderly marketing of staple commodities produced in the United States. The corporation may make any such loan in such manner and upon such terms and conditions as it may determine subject to the limitations of section 5 of the Reconstruction Finance Corporation act as to the periods within which it may make loans and the amounts and maturities thereof, and all such loans shall be fully and adequately secured.

"SEC. 5d. The corporation is authorized and directed, until June 30, 1933, to allocate and make available to the Federal Farm Board such sums not exceeding in the aggregate $50,000,000 as the Federal Farm Board shall request from time to time to enable it to make additional loans to cooperative associations and stabilization corporations pursuant to the authority conferred upon said board by the agricultural marketing act of June 15, 1929, as amended.

"SEC. 5e. The corporation is authorized and directed, until June 30, 1933 to allocate and make available to the Secretary of Agriculture such sums, not exceeding in the aggregate $50,000,000 as the Secretary of Agriculture may request from time to time for financing the exportation of agricultural commodities produced in the United States. The exercise of the authority hereby conferred upon the Secretary of Agriculture shall be subject to the limitation of section 5 of the Reconstruction Finance Corporation act as to the periods within which loans may be made and the maturities thereof. The amounts which may be allocated and made available to the Secretary of Agriculture under section 2 of the Reconstruction Finance Corporation act shall be reduced by the aggregate of the sums made available to him under this section."

SEC. 2. The third paragraph of section 5 of the Reconstruction Finance Corporation act is amended by striking out the second sentence thereof, which reads as follows: " Except as provided in section 5a hereof, no loan or advancement shall be made by the corporation for the purpose of initiating, setting on foot, or financing any enterprise not initiated, set on foot, or undertaken prior to the adoption of this act: Provided, That the foregoing limitation shall not apply to loans made to agricultural or livestock credit corporations, or Federal land banks, joint-stock land banks, or Federal intermediate credit banks, nor to loans made to banks for the purpose of financing agricultural operations."

SEC. 3. The amount of notes, debentures, bonds, or other such obligations which the Reconstruction Finance Corporation is authorized and empowered under section 9 of the Reconstruction Finance Corporation act to have outstanding at any one time is increased to an aggregate of six times its subscribed capital stock.

The CHAIRMAN. There is a gentleman here from Oakland, Calif., I understand, who desires to be heard, and he may be heard now, without objection.

STATEMENT OF C. H. PURCELL, STATE HIGHWAY ENGINEER OF CALIFORNIA AND CHIEF ENGINEER SAN FRANCISCO-OAKLAND BAY BRIDGE

Mr. PURCELL. My chairman and gentlemen of the committee, my name is C. H. Purcell. I am State highway engineer of California, and chief engineer of the San Francisco-Oakland Bay Bridge. We in California are in the same position with our project, the San Francisco-Oakland Bay Bridge, as many others at this time. We have a project there which is the bridge connecting the city of San Francisco and the cities of Oakland and Berkeley. It involves a total expenditure of $75,000,000, and it is self-liquidating, and is of the revenue bond type, the State of California legislature having created the California toll bridge authority, with authority to issue bonds, and, through the department of public works of the State, to design and build the San Francisco-Oakland Bay Bridge.

This structure has been under way, from an engineering point of view, surveys and traffic studies, for the past three years, the State having expended over $700,000 in the engineering to date. We have as a consulting board, five of the most eminent engineers in this country as advisers. We have proceeded to the state where construction can begin immediately, were financing available.

This structure involves the employment continuously directly on the work of 7,000 men, which does not include the indirect employment made possible by the purchase of the structural steel and other materials. This involves 150,000 tons of steel, which is one of the major steel orders in this country in size over a period of many years. It involves 1,250,000 barrels of cement. It involves 50,000,000 feet of lumber in the foundation work. In addition to this, there are over 2,500,000 yards of aggregate. Were we able to have a simple and direct way to proceed, through the Finance Corporation, on a showing of the soundness of the proposition, the same as we would expect to do in any market, and are prepared to do, in a simple and direct manner, we could immediately proceed to make available this employment by the letting of contracts.

This bill as originally drawn, in many ways, fits our conditions, but due to some basic law, which is a State law, it did not fit the conditions. We suggest some amendments that would make this bill fit our case.

As you know, a public agency of the State, the toll bridge authority, must sell bonds before they are issued. There is no collateral to loan on prior to the sale. In order to sell bonds, we must proceed according to law, so, therefore, the loan feature did not offer relief to our proposition. If this bill should become a law, with the amendments which we propose, we could function under it. I might say that the amendments we are prepared to suggest

Senator COUZENS (presiding). Do you know the amendments drafted in legal language?

Mr. PURCELL. Yes; we have them in legal language.

Senator COUZENS. I do not think it is necessary to read them. If you will have them placed in the record, the committee will give them consideration.

Senator WAGNER. I think I have a copy of those proposals.

Mr. PURCELL. Yes; we have one item in here that is the language of the Wagner bill, which we like very much. Item 7 is simpler. Senator COUZENS (presiding). The proposed amendments will be entered in the record at this point.

(The amendments referred to are as follows:)

MEMORANDUM RELATING TO H. R. 12410

1. Amend the title by inserting after the word "loans" the words "and the purchase of bonds of States."

2. Amend section 5-b, line 7, page 1, by inserting the words "or purchase bonds of" after the words "loans to."

3. Change the words "such State" in line 9 of page 1 to read States."

66 one or more

4. Amend line 9 of page 1 by striking out the word "or" and inserting the words" and to make loans."

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5. On line 11 of page 2, before the words "such loan" insert the words

such purchases in such manner and amounts as it may determine and may make."

125985-32-7

6. At line 15 on page 2, before the word "shall," at the end of the line, insert the words "each such loan or purchase."

7. At lines 22 and 23 on page 2, change the word "self-sustaining" to "selfliquidating," omit the balance of the sentence and insert the following: "A project shall be deemed to be self-liquidating if it may be made self-supporting and financially solvent and if the construction cost thereof will be returned within a reasonable period by means of tolls, fees, rents, or other charges." The corporation may make such purchases in such manner and amounts as it may determine and may make such loans in such manner and amounts, for such periods not in excess of five years, upon such terms as to repayment of principal thereof and interest thereon, and subject to such other conditions as the corporation may determine. Each such loan shall be fully and adequately secured, and shall be made only on a showing to the satisfaction of the board that the loan is reasonably necessary to enable the State, political subdivision, agency, or corporation to carry forward a given project, and that when completed the project will be self-sustaining or self-liquidating. A project shall be deemed self-sustaining or self-liquidating if it may be made selfsupporting and financially solvent and if the construction cost thereof will be returned within a reasonable period by means of tolls, fees, rents, or other charges.

Senator COUZENS. Have you any further statement?

Mr. PURCELL. There is one item I would like to refer to further. We are particularly concerned with the showing called for, that we must show that the bonds can be sold to the public. This is a very difficult showing to make. We could not make this showing, because you can not prove that the bonds could be sold to the public, and they can not at this time. I believe that this should be simplified, and that authority should be given to the Reconstruction Finance Corporation, in general language, to accomplish the safeguards necessary, and we offer a suggestion that we believe meets that situation.

Senator WAGNER. Do you think, in a project of that kind, you would be able to liquidate an indebtedness of that kind within five years?

Mr. PURCELL. No, Senator Wagner.

Senator WAGNER. I have no such limitation.

Mr. PURCELL. No, you have not; and that is an advantage. That is an essential to the carrying on of any of these projects, either the New York project, the California project, the New Orleans project, or anywhere else in the country.

Senator WAGNER. If you had to liquidate in five years you could not do it.

Mr. PURCELL. No.

Senator BARBOUR. Do you think you could sell your bonds within five years if you got this relief you ask for?

Mr. PURCELL. I do not think anyone can answer that. Our project has a relation of earnings to charges at the present time that is ample. We show a ratio of one to one and three-quarters. We think all those things are sound, but no one could answer the question on the basis of five years, on the purchase. On the loan basis, you possibly could, if conditions improved.

Senator ČOUZENS. Senator Barbour wishes to make a statement. Senator BARBOUR. Mr. Chairman, on May 23, two days prior to the introduction of the Wagner bill, I introduced in the Senate and had referred to the Banking and Currency Committee my unemployment emergency relief bill. I had been working on this for several weeks when it became apparent that the administration