stances and conditions, to create some special machinery of a temporary and unusual character to deal with the exceptional situation. That is the theory of the bill.

Of course, if you say that "financial agencies have broken down," perhaps it is fair to say, as I have indicated, that existing institutions were not built to deal with these extraordinary conditions; and I suppose that you, for many years Chairman of the House Banking and Currency Committee, in thinking of national legislation did not plan it with a view to such a situation, and I do not see how you could have been expected to.

Mr. MCFADDEN. You think there is a world-wide situation. is for the relief entirely of the domestic situation, is it not? Mr. MEYER. Yes; it is.

Mr. MCFADDEN. And not the international situation?

This

Mr. MEYER. No. But the situation in this country is certainly under the influence of world-wide conditions. The broken-down foreign exchanges especially interfere with the marketing of our agricultural and other products and bring about a change in our domestic financial situation. We had that to confront in 1920 and 1921, when the exchanges were broken down. I explained to the committee at the last hearing that foreign merchants and manufacturers naturally hesitate to buy cotton on credit, or to sell cotton goods on credit in the same way they did when European countries, generally, were on the gold basis.

The CHAIRMAN. Gentlemen, the House is meeting.

Mr. DISNEY. If this legislation passes, Mr. Meyer, substantially in this form, will it mean in practice the virtual abandonment of the National Credit Corporation?

Mr. MEYER. I should think that, so far as new business is concerned, the applicants would come to this corporation. That is my judgment. I can not speak either for the National Credit Corporation or for this corporation; I can merely express my personal opinion. I would assume that a bank wanting to borrow would prefer this corporation, with its ability to lend for periods up to three years, and to extend for two years longer, if necessary, rather than the National Credit Corporation.

Mr. GOLDER. Mr. Chairman, have you considered obtaining authority for this committee to sit when the House is in session?

The CHAIRMAN. I thought of that. I really do not anticipate it is necessary. I had thought this, that we would go to the House for awhile, and that we would resume our hearing some time in the afternoon, as the committee might think best.

Mr. LUCE. Just before you do that, unless Mr. Meyer is coming back, I would like to ask him if he has submitted all the amendments he has in mind. He spoke of having other amendments.

Mr. MEYER. I have memoranda here of all amendments. I think I have given some of them to Congressman Strong. It was contemplated that the cooperation of the Interstate Commerce Commission would be enlisted in connection with loans to railroads, and the commission is mentioned specifically in the section relating to examinations and reports. But during the Senate committee hearings, the point was made that the loans should be subject to the approval of the commission, and the Senate committee has under consideration the following amendment [reading]:

Within the foregoing limitations of this section, the corporation may also, subject to the approval of the Interstate Commerce Commission, make loans to or aid in the temporary financing of steam railroads engaged in interstate commerce, when in the opinion of the board of directors of the corporation such railroads are unable to obtain funds upon reasonable terms through banking channels or from the general public, and their prospective earning power, together with the character and value of the security offered, are such as to furnish reasonable assurance of their ability to pay within the time fixed therefor, and to meet their other obligations in connection therewith.

Any such railroad may obligate itself in such form as shall be prescribed and otherwise comply with the requirements of the Interstate Commerce Commission and the corporation with respect to the deposit or assignment of security hereunder, without the authorization or approval of any authority, State or Federal, and without compliance with any requirement, State or Federal, as to notification, other than such as may be imposed by the Interstate Commerce Commission and the corporation under the provisions of this section. In drafting this provision, use was made of some of the language contained in the transportation act of 1920, as amended.

Mr. STEVENSON. Where is that to be inserted?

Mr. MEYER. Page 6, instead of lines 12 to 19.

The CHAIRMAN. If anybody has any further questions for Governor Meyer, I am sure he will be glad to meet with us in the afternoon and let us finish. I think if we go to the floor of the House we should go now and use what time will be of benefit, because the day's plans will be under way unless we go at once.

Mr. MCFADDEN. I move that we adjourn until 2.30 o'clock this afternoon.

The CHAIRMAN. Without objection it is so ordered.

(Thereupon, at 12.15 o'clock p. m. the committee recessed until 2.30 o'clock this afternoon.)

RECONSTRUCTION FINANCE CORPORATION

TUESDAY, JANUARY 5, 1932

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

Has any

The committee met at 2.30 o'clock p. m. in the committee room, Capitol, Hon. Henry B. Steagall (chairman) presiding. The CHAIRMAN. Gentlemen, we will now come to order. body any questions for Mr. Meyer? I did not mean not to give a full opportunity to everybody. Mr. Goldsborough, have you anything? Mr. GOLDSBOROUGH. No; thank you.

The CHAIRMAN. Mr. Brand?

Mr. BRAND. No.

The CHAIRMAN. Mr. Hancock?
Mr. HANCOCK. No, sir.

The CHAIRMAN. Mr. Stewart?

Mr. STEWART. I would like to ask what comes within the further limitation of this "Within the foregoing limitations of this section, the corporation may also make loans to or aid in the temporary financing of steam railroads?" Would that exclude electric railroads?

Mr. MEYER. The electrification of steam railroads; no.

Mr. STEWART. I mean if the railroads were made electric.

Mr. MEYER. The Interstate Commerce Commission classifies steam railroads as being railroads using steam; but there may be some electrification of some part of them.

Mr. STEWART. For instance, take the Pennsylvania.

Mr. MEYER. The Pennsylvania is a steam railroad distinctly. Mr. STEWART. I know, but in my section, down through my State, it is going to be electrified.

Mr. MEYER. It is still a steam railroad; the Pennsylvania Railroad System is a steam railroad system. It is a steam railroad, even if there are sections which are electrified, of course. The New Haven has electric power, a greater part of the New York Central is somewhat electrified, and those are all steam railroads.

Mr. STEWART. Considered under that classification?

Mr. MEYER. Yes; I would say they were so classified by the Interstate Commerce Commission.

Mr. GOODWIN. These are real electric lines?

Mr. MEYER. What do you mean; electric street railways?

Mr. GOODWIN. Yes.

Mr. MEYER. They are not prohibited, but they are not included.

The CHAIRMAN. You have electric lines that are not by any means

within city limits and

95808-32- -4

47

Mr. MEYER. No; interurban lines.

The CHAIRMAN. Or suburban operations from city to city.

Mr. MEYER. Interurban.

The CHAIRMAN. And which may cover a considerable distance, interurban, and the like. I had observed the language of that, and before we left this I was going to ask another question. This does not seem to touch the short line.

Mr. STEVENSON. I call your attention to the fact that the term "steam railroad" does not mean anything. The Federal courts have held that railroads that are built with the usual equipment and everything are steam railroads, for the purpose of carrying freight and passengers between cities; and although an interurban, in one sense of the word, is distinctly a steam railroad and not entitled to extend without the permission of the Interstate Commerce Commission, we have had that all litigated out in my district. I had an amendment put into the act when it was passed, and Mr. Esch and myself thought it over very carefully, providing this should not apply to street railways, electric interurbans, or electric railways of any kind, as we thought, and they have held that the railroad that the Dukes are building-they have built about 50 miles, and they have held that it comes within that, and there never has been a steam engine on it, never has run anything except by electricity, but I will be hanged if they have not held that it was a steam railroad and is within that section. So, when you say steam railroad, you mean all the great commercial railroads?

The CHAIRMAN. That would probably be true in any case. However, that construction might not apply in this particular enactment, because this will be construed by the board and there will be appeals from it, and we will be limiting it to the construction and kind, and we plan that the interpretation of it will be governed by the purposes contemplated in the enactment of the law; and I suggest this to you, Mr. Stewart, and I am sure you want to do the thing correctly.

Mr. STEVENSON. That is, the circuit court of appeals has decided it?

The CHAIRMAN. Yes.

Mr. STEVENSON. It is in the Supreme Court now, and they may reverse it.

The CHAIRMAN. I am sure what you say about it is correct, and for the purposes involved in that decision it would seem to me to be good law, in so far as I would attempt to pass upon it; but I do not think that would govern us in the framing of the langauge of this bill; because this is to grant emergency relief in the form of loans, and anything that is done would have to be done quickly and we would leave it to the interpretation to be put upon it by the board of what was evidently contemplated by the framers of the legislation. And so far as anything that so far has been disclosed goes to show, the purpose is to limit this to the actual steam roads, as contradistinguished from electric lines, interurbans, or otherwise.

So that, if it is desired to extend the benefit of this to the electric lines, I think it would be well to follow the suggestion that Mr Stewart has made, and change that language. Now, whether it is desirable to do that or not, I do not know, and I will be glad to hear from anybody else here, not with any particular thought about it, but if we want to fix it for the electric lines, we had better make it known.