employment by relieving the banks, who will be in position to aid the business man, the little business man, not the business man that can get all of the money from the five outstanding banks of New York; the little manufacturer, the little business man, and the banker through the rural sections.

This will do it, because a lot of banks are not insolvent, but they have assets that are frozen, and they can not secure loans from the Federal reserve system, and they can not secure loans from the big banks. The result is that you can not extend credit to a manufacturer, or to a business man, who used to secure financial aid from them. Consequently, business is at a standstill; the little manufacturer is obliged to close, and the little business man can not buy merchandise, because he has no credit. What we need is to increase the credit thing, and I know you gentlemen, as well as I, know that 95 per cent of the business of the nation, yes, of the world, is made and conducted upon a credit basis; and when you deprive people or the country or the business man of credit, you also deprive him of his ability to continue his business.

Now, I realize that some of you gentlemen may oppose this bill, or the propositions underlying it, under the provisions of this bill, because they have their own interests at heart alone, and not the interests of the country; but any man who knows the situation. that exists to-day throughout the nation must recognize the fact that we are in a dangerous position; and therefore, I pleaded with the president for over a year, and with the Federal reserve system for some relief for these unfortunate bankers.

It seems very proper now to send bankers to the penitentiary, or to jail. Most of them find themselves in serious trouble, not through their fault, but because the securities and collateral had dwindled down and by withdrawals and other things.

I have refrained from making this statement, and I give you my word that what I have done was with the best of intentions, without in any way trying to reflect on the administration. You may take my speech I made on December 9, 1929, when I preached that we should stop short selling. I was under the impression that short selling and stock manipulations which caused the deflations of the securities, was in a measure responsible for the closing of many of these banks, because the collateral became worthless in many instances; but I could not secure any aid or any assistance.

Therefore I think, when I came here to-day, I hoped that I would not be misunderstood by anyone, that I am trying to delay the consideration of this bill. I know that I have worked harder than you have trying to secure consideration and secure favorable action upon this legislation.

Now, the hour is getting late, and I will not take much time to-morrow, but I do want a few moments of your time to-morrow upon my bill.

The CHAIRMAN. I am sure the committee will be glad to have you resume to-morrow-I assume it will. We have the hearings from the Senate.

95808-32- -6

Mr. STEVENSON. I move that we adjourn until 10 o'clock to

morrow.

The CHAIRMAN. If you make it 10.30, we will be here. If you make it 10, we will be here at 10.30. Those hearings are available of the Senate, and we have just got a copy, and I have sent for some for you. I think we will have them in the committee room in a little while, so they will be available to you.

Mr. MCFADDEN. If there is nothing further, I move that we adjourn.

The CHAIRMAN. Until 10.30?

Mr. MCFADDEN. Yes.

The CHAIRMAN. Without objection, it is so ordered.

(Thereupon, at 4.55 o'clock p. m., the committee adjourned until Wednesday, January 6, 1932, at 10.30 o'clock a. m.)

RECONSTRUCTION FINANCE CORPORATION

WEDNESDAY, JANUARY 6, 1932

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met at 10.30 o'clock, a. m., in the committee room, Capitol, Hon. Henry B. Steagall (chairman) presiding.

The CHAIRMAN. The committee has before it for consideration this morning H. R. 5116, introduced by Congressman Sabath of Illinois, who is present and will be heard to discuss it. I will ask that the bill be inserted at this point in the record.

(The bill H. R. 6996, superseding H. R. 5116, is as follows:)

[H. R. 6996, Seventy-second Congress, first session]

A BILL To create a National Relief Finance Corporation and provide credits for industries and enterprises in the United States, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE I-NATIONAL RELIEF FINANCE CORPORATION

That the Secretary of the Treasury and Calvin Coolidge, of Massachusetts, Alfred E. Smith, of New York, William G. McAdoo, of California, and Eugene Stevens, of Illinois, are hereby created a body corporate and politic in deed and in law by the name, style, and title of the "National Relief Finance Corporation" (herein called the corporation), and shall have succession for a period of ten years: Provided, That in no event shall the corporation exercise any of the powers conferred by this act, except such as are incidental to the liquidation of its assets and the winding up of its affairs after six months following a proclamation by the President of the United States that there is no further need or use for the National Relief Finance Corporation.

SEC. 2. That the capital stock of the corporation shall be $1,000,000,000, all of which shall be subscribed by the United States of America, and such subscription shall be subject to call upon the vote of three-fifths of the board of directors of the corporation and at such time or times as may be deemed advisable; and there is hereby appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $1,000,000,000, or so much thereof as may be necessary for the purpose of making payment upon such subscription when and as called. Receipts for payments by the United States of America for or on account of such stock shall be issued by the corporation to the Secretary of the Treasury, and shall be evidence of stock ownership.

SEC. 3. That the management of the corporation shall be vested in a board of directors, consisting of the Secretary of the Treasury, who shall be chairman of the board, and Calvin Coolidge, of Massachusetts, Alfred E. Smith, of New York, William G. McAdoo, of California, and Eugene Stevens, of Illinois, who shall be the directors of the corporation, to be appointed by the President of the United States, by and with the advice and consent of the Senate. No director, officer, attorney, agent, or employee of the corporation shall in any manner, directly or indirectly, participate in the determination of any question

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affecting his personal interest, or the interest of any corporation, partnership, or association in which he is directly or indirectly interested; and each director shall devote his time, not otherwise required by the business of the United States, principally to the business of the corporation. Before entering upon his duties, each of the directors so appointed, and each officer, shall take an oath faithfully to discharge the duties of his office. Whenever a vacancy by death or resignation shall occur among the directors so appointed, the President of the United States, by and with the advice and consent of the Senate, shall appoint a director to fill any such vacancy. Three members of the board of directors shall constitute a quorum for the transaction of business.

SEC. 4. That the directors of the corporation shall receive annual salaries, payable monthly, of $25,000. Any director receiving from the United States any salary or compensation for services shall not receive as salary from the corporation any amount which, together with any salary or compensation received from the United States, would make the total amount paid to him by the United States and by the corporation exceed $25,000.

SEC. 5. That the principal office of the corporation shall be located in the District of Columbia, but there may be established agencies or branch offices in any city or cities of the United States under rules and regulations prescribed by the board of directors.

SEC. 6. That the corporation shall be empowered and authorized to adopt, alter, and use a corporate seal; to make contracts; to purchase or lease and hold or dispose of such real estate as may be necessary for the prosecution of its business; to sue and be sued; to complain and defend in any court of competent jurisdiction, State or Federal; to appoint, by its board of directors, and fix the compensation of such officers, employees, attorneys, and agents as are necessary for the transaction of the business of the corporation, to define their duties, require bonds of them and fix the penalties thereof, and to dismiss at pleasure such officers, employees, attorneys, and agents; and to prescribe, amend, and repeal, by its board of directors, subject to the approval of the Secretary of the Treasury, by-laws regulating the manner in which its general business may be conducted and the privileges granted to it by law may be exercised and enjoyed, and prescribing the powers and duties of its officers and agents. The corporation shall be entitled to the free use of the United States mails in the same manner as the executive departments of the Government. The corporation shall have such incidental powers as its board of directors shall deem necessary or expedient in carrying out the provisions of this Act.

SEC. 7. That the corporation shall be empowered and authorized to make advances, upon such terms, not inconsistent herewith, as it may prescribe, for periods not exceeding three years from the respective dates of huch advances:

(1) To any bank, banker, or trust company, in the United States, which shall have made, after June 30, 1931, and which shall have outstanding, any loan or loans to any person, firm, corporation, or association, conducting an established and going business in the United States and which loan or loans are evidenced by note or notes, but no such advance shall exceed 75 per centum of the face value of the loan or loans; and

(2) To any bank, banker, or trust company, in the United States, which shall have rendered financial assistance, directly or indirectly, to any such person, firm, corporation, or association by the purchase after June 30, 1931, of its bonds or other obligations, but no such advance shall exceed 75 per centum of the value of such bonds or other obligations at the time of such advance, as estimated and determined by the board of directors of the corporation.

All advances shall be made upon the promissory note or notes of such bank, banker, or trust company, secured by the notes, bonds, or other obligations, which are the basis of any such advance by the corporation, together with all the securities, if any, which such bank, banker, or trust company may hold as collateral for such notes, bonds, or other obligations.

The corporation shall, however, have power to make advances (a) up to 100 per centum of the face value of any such loan made by any such bank, banker, or trust company to any such person, firm, corporation, or association, and (b) up to 100 per centum of the value at the time of any such advance (as estimated and determined by the board of directors of the corporation) of such bonds or other obligations by the purchase of which financial assistance shall

have been rendered to such person, firm, corporation, or association: Provided, That every such advance shall be secured in the manner described in the preceding part of this section, and in addition thereto by collateral security, to be furnished by the bank, banker, or trust company, of such character as shall be prescribed by the board of directors, of a value, at the time of such advance (as estimated and determined by the board of directors of the corporation), equal to at least 25 per centum of the amount advanced by the corporation. The corporation shall retain power to require additional security at any time. SEC. 8. That the corporation shall be empowered and authorized to make advances from time to time, upon such terms, not inconsistent herewith, as it may prescribe, for periods not exceeding one year, to any savings bank, banking institution, or trust company, in the United States, which receives savings deposits, or to any building and loan association in the United States, on the promissory note or notes of the borrowing institution, whenever the corporation shall deem such advances to be necessary or contributory to the general welfare: Provided, That such note or notes shall be secured by the pledge of securities of such character as shall be prescribed by the board of directors of the corporation, the value of which, at the time of such advance (as estimated and determined by the board of directors of the corporation), shall be equal in amount to at least 133 per centum of the amount of such advance. The rate of interest charged on any such advance shall not be less than 1 per centum per annum in excess of the rate of discount for ninety-day commercial paper prevailing at the time of such advance at the Federal reserve bank of the district in which the borrowing institution is located, but such rate of interest shall in no case be greater than the average rate receivable by the borrowing institution on its loans and investments made during the six months prior to the date of the advance, except that where the average rate so receivable by the borrowing institution is less than such rate of discount for ninety-day commercial paper the rate of interest on such advance shall be equal to such rate of discount. The corporation shall retain power to require additional security at any time.

SEC. 9. That the corporation shall be empowered and authorized, in exceptional cases, to make advances directly to any person, firm, corporation, or association, conducting an established and going business in the United States, whose operations shall be necessary for the general welfare (but only when in the opinion of the board of directors of the corporation such person, firm, corporation, or association is unable to obtain funds upon reasonable terms through banking channels or from the general public), for periods not exceeding three years from the respective dates of such advances, upon such terms, and subject to such rules and regulations as may be prescribed by the board of directors of the corporation. In no case shall the aggregate amount of the advances made under this section exceed at any one time an amount equal to 121⁄2 per centum of the sum of (1) the authorized capital stock of the corporation plus (2) the aggregate amount of bonds of the corporation authorized to be outstanding at any one time when the capital stock is fully paid in. Every such advance shall be secured by adequate security of such character as shall be prescribed by the board of directors of a value at the time of such advance (as estimated and determined by the board of directors), equal to at least 125 per centum of the amount advanced by the corporation. The corporation shall retain power to require additional security at any time. The rate of interest charged on any such advance shall not be less than 1 per centum per annum in excess of the rate of discount for ninety-day commercial paper prevailing at the time of such advance at the Federal reserve bank of the district in which the borrower is located.

SEC. 10. That in no case shall the aggregate amount of the advances made under this title to any one person, firm, corporation, or association exceed at any one time an amount equal to 10 per centum of the authorized capital stock of the corporation.

SEC. 11. That the corporation shall be empowered and authorized to subscribe for, acquire, and own, buy, sell, and deal in bonds and obligations of the United States issued or converted after September 24, 1917, to such extent as the board of directors, with the approval of the Secretary of the Treasury, may from time to time determine.

SEC. 12. That the corporation shall be empowered and authorized to issue and have outstanding at any one time its bonds in an amount aggregating not more than six times its paid-in capital, such bonds to mature not less than one year nor more than five years from the respective dates of issue, and to bear