in cash or, at the option of the corporation, by the transfer of corporate bonds in the face value of the credit certificates, without interest. That avoids the question, which has been raised frequently, as to the floating of a large bond issue because, as a matter of fact, that provides for the acceptance by those who honor these credit certificates of the bonds themselves at face value, and surely in this time it is hardly to be imagined that large buying will be rejected on the basis of payment in United States Government bonds, which is what this amounts to.

Section 12 provides that U. S. E. C. will be authorized to make loans to railroads and other essential enterprises to finance deferred maintenance of existing properties essential to supply a future demand for necessary goods or services; the amount of such loans not to exceed an aggregate of $250,000,000. This will stimulate the immediate employment of several hundred thousand men.

One of the purposes of that, Mr. Chairman, is that on the railroads particularly, and in other enterprises, there is accumulating a very large amount of deferred maintenance. The properties are being permitted to run down. The rebuilding of the properties, their rehabilitation, is absolutely essential to the future prosperity of the country, not only in the case of the railroads, but in the case of many other large enterprises dealing with essentials. If advances could be made for such deferred maintenance, these would operate immediately to put back to work, as is suggested here, several hundred thousand men.

In the case of the railroads, the deferred maintenance, both as to equipment and as to right of way, reaches enormous amounts, and the men laid off at the present time run to the number of several hundred thousands.

This is work which must be done eventually. This work is more costly the longer it is deferred. A railroad could well afford to pay interest rates to do the work now, particularly if that program were put into effect, coincident with a general increase in purchasing power, which would mean the moving of a large amount of goods over the railroads and the creation of a large amount of traffic which would immediately begin to produce additional revenues.

At the present time we have reduced revenues, and the railroads may well hesitate to engage in further borrowings, although I have heard it stated by responsible railroad officials of high standing that if they were given the money to-morrow earmarked For maintenance," that they would put thousands of men to work. I have had that direct from railroad officials of high responsibility within the last two or three weeks and I do not doubt it is true.

Senator CoSTIGAN. Is it your judgment that such legislation is necessary to supplement the Federal Reconstruction Finance Corporation?

Mr. RICHBERG. The difficulty with the Reconstruction Finance Corporation, as I understand it, is that all the moneys are being received, or are being used, to bolster up financial conditions, to pro tect security values, to take care of interest payments, and not earmarked in any way for maintenance work; and as one high railroad official said to me, with some exasperation," If we only had some of this money earmarked for maintenance alone, so that it could not be

diverted to other channels, we would put our railroad back into condition."

It is not unfair to say, Mr. Chairman, that the railroads are rapidly approaching a very dangerous condition as to deferred maintenance of right of way particularly, and they are approaching a very unsound condition as to deferred maintenance of equipment which is not now required but which, with an increase of business, would be very soon required and is in no condition at the present time for operation.

Similar conditions exist in other essential industries.

Section 13 provides that where State and municipal relief agencies apply for credits to meet charitable relief needs for those incapable of self-support, after the exhaustion of other sources of relief, credits may be extended upon the notes of such State or municipal bodies, if the credit facilities of U. S. E. C. have not been exhausted, to the extent of not more than $250,000,000. This will provide additional funds for direct charitable relief for those incapable of self-support. You note, Mr. Chairman, the bill applies specifically, in its major provisions to unemployed persons capable to self-support, and is not intended as a charitable relief bill but to relieve those to whom loans can be made who would repay the loans. But there is also a fraction of the population which is dependent upon what is essentially charitable support, and the present conditions press heavily upon such persons. The thought in this section is that if, as a result of the operations of this corporation, there should be such an increase in employment so that the facilities for credit would not be entirely utilized, it would be possible to extend some of this credit aid to these State and municipal agencies which at the present time are unable to meet their charitable requirements.

In that connection, I should point out that an undoubted effort of this vast increase of purchasing power would be the stimulation of a large amount of new employment. It would be utterly impossible to satisfy the demand created by the purchasing power of say seven million families at $400 apiece for six months, it would be utterly impossible to satisfy that purchasing power, without employing more people than are at present being employed. The stores would require new salesmen, new delivery men, and new employees would be required on the railroads, new employees in factories and various production enterprises to the extent of thousands, and, in fact, hundreds of thousands of persons, inevitably, to satisfy such a demand as would be created.

Senator CoSTIGAN. Mr. Richberg, the demand exists at this time. Why is it not satisfied?

Mr. RICHBERG. Of course, it is not satisfied purely because of the lack of any purchasing power arising out of the lack of employment of these millions of unemployed. They have the demand and it is only being met in a very limited way by the smallest form of

charitable relief.

Senator CoSTIGAN. In other words, our industrial activity is being suspended by lack of confidence and by other factors with which we are all familiar.

Mr. RICHBERG. Because we can not start apparently the good circle of purchasing power. We simply keep spiraling down instead of starting an upward spiral.

Mr. Chairman, in that connection, let me point out that it is quite well accepted by economists that the business resulting from a new expenditure can be regarded as multiplying the original amount of the expenditure by anywhere from ten to thirty times the amount within the period of a year.

In other words, if you create a purchasing power of say $2,000,000,000, you are inevitably producing business results, a total business done, which will amount to, let us say, thirty, forty, or fifty billion dollars within a year, because of the fact that the money, once started moving, keeps turning over and over. So that the benefits to be derived from this increase of purchasing power are not the creation of two or three billion dollars' worth of business, but the creation of something like fifty or sixty billion dollars' worth of business within a year.

Section 14 provides that U. S. E. C. will be authorized to issue notes, debentures, and bonds to the amount of not more than five times its initial capital of $500,000,000, thus providing a total revolving fund of approximately $3,000,000,000.

I may point out that as soon as this borrowing commences and the borrowers themselves are put to work satisfying the demand which has thus become a purchasing power, of course the borrowers themselves automatically will begin to repay on the basis of 10 per cent of their earnings and the credit possibilities or facilities of the corporation will be returned and can be utilized again, so that the total amount of the credits extended may exceed in the aggregate far more than $3,000,000,000.

Section 15 provides for winding up the affairs of U. S. E. C. after a period of two years.

That is not winding up at the end of two years, but the beginning of winding up as is provided in the reconstruction finance act. That is subject to extension by the President under the terms of the bill.

Section 16 provides that all business of U. S. E. C. will be public business and its actions shall be public, which makes somewhat of a distinction between the provision in this bill and the provision in the Reconstruction Finance Corporation act.

Senator CoSTIGAN. The bill provides for quarterly reports of the operations of the corporation to Congress, does it not?

Mr. RICHBERG. This bill does, Mr. Chairman, yes; and it also provides that all the business of the corporation shall be public business and all decisions, regulations, and actions taken shall be public except that executive sessions of the board of directors and advisory councils may be held and the deliberations upon or tentative plans of administration and details of the business need not be made public; and it also provides that the corporation shall make and publish a quarterly report.

Section 17 authorizes U. S. E. C. to employ volunteer aids, without authority to obligate the corporation.

That, Mr. Chairman, was assumed as a part of the machinery to be set in motion to put this credit into operation. If I may use an analogy, more or less along the line of the selective draft act in 1918 where the local agents of the Government were found in every community and were largely volunteer aids.

With this corporation, operating through general regulations without discretion, any local agencies could utilize the services of a vast army of such volunteer agents; and I think it may be fairly said, Mr. Chairman, that the fact of creating such a machinery, the fact of bringing into every community the strength and hope that would come from a revival of purchasing power, that this organization in itself, the mere mechanics of it, would help stimulate business and spread a new hope, and might be well expected to turn the tide of the present depression, which so many people at the present time describe as largely psychological.

Section 18 makes provisions similar to those in the Reconstruction Finance act for the protection of the operations of U. S. E. C. from fraud or forgery and for enforcement of its regulations.

Permit me, Mr. Chairman, to repeat my conviction that the passage of such a bill as this will furnish a nation-wide insurance against privation in the coming winter, will increase employment rapidly, and will turn the tide of depression, restoring confidence and security to millions of American homes.

I would like to add to what I have said one or two observations, unless the chairman desires to ask some questions.

Senator CoSTIGAN. Please proceed.

Mr. RICHBERG. In the first place, I want to say a word as to the responsibility of the borrowers. I have discussed this proposal with a great many people in and out of Congress. In response to that question, I want to express the opinion which I have found concurred in by many others. In the first place there is no responsibility of any organization in the market for loans or other credit extensions that is not based on the earning power of the American people. No railroad, no bank, or other institution can obtain credit except upon the basis of its expectation of being able to pay out of the earning power of the workers of this country. And as long as the earning power of the workers of this country is steadily declining, securities for every loan made are steadily declining, as is shown very clearly in the constant downward trend of prices on the New York Stock Exchange since the operations of the Reconstruction Finance Corporation began.

In other words, the security behind all loans is the earning power of the worker. He must give it the value that is found in property because property is productive only because someone works and produces an income out of that property. We must rely on the earning power of the American citizen. That is the security behind every loan; and I am personally unable to see where there is any greater security to-day in lending to a corporation which is merely an organization of the earning powers of a great many men, than in lending directly to the mass of the workers who are going to produce this earning power.

Now, as to the repayment, I have given some indication of vast groups of employees whose repayment would be absolutely positive. It may be readily conceded that in any such program as this there would also be a large amount of default occurring from death and from other causes that could not possibly be avoided, and occurring from mere evasion. That is undoubtedly true and can be frankly faced. But, Mr. Chairman, the cost of direct relief which is absolutely essential to keep the people from starvation to-day, is

growing and mounting to an enormous amount, and the total loss under this program could not possibly equal the cost to the country in the next year of direct relief if this present situation continues and the tide is not stemmed.

I do not suppose there would be the slightest hesitation on the part of the Congress of the United States to vote $3,000,000,000 or $5,000,000,000 in bonds, if we were threatened with an enemy off our coast, or threatened with invasion. If we found ourselves involved for some reason in a war, the money so voted would be largely used for purposes of destruction and purchases would be destroyed.

I am going to call attention to the fact that it has been stated, I believe, on responsible authority, that the cost of the ammunition fired in the Meuse-Argonne offensive in 45 days was something like $762,000,000. We can afford such costs and we can certainly afford to face the loss of one billion or two billion dollars if by the action taken we should turn the tide of depression; and if in the meantime we have positive assurance that we have destroyed the possibility of destitution in 8,000,000 or 10,000,000 American homes in the coming winter.

Senator CoSTIGAN. Are we to infer from your last statement that such a loss is probable under this measure?

Mr. RICHBERG. I think it is exceedingly improbable that there would be any loss equalling the losses which I believe will be suffered by the Reconstruction Finance Corporation, and I may state that I saw an editorial in a conservative newspaper of Chicago the other day which opposed this idea of small loans to the workers, but said it was probably true that this would cost less than the Reconstruction Finance Corporation.

Senator CoSTIGAN. Is it not true that in the case of workers who are employed under such a program, the losses will probably be negligible?

Mr. RICHBURG. I think in the great mass of skilled and regularly employed workers the losses will be negligible because those are the men upon whom the future possibilities of the country depends and they will have the means for repayment, and I think repayment can be readily inforced, and I think it would be honestly inforced.

I may state I have talked with men who have had experience in dealing with the regular and common everyday American worker and his financial obligations, and they have told me that they had always been surprised at the integrity with which those obligations were met.

Incidentally, Mr. Chairman, I would like to point out that, not for the purpose of attempting to advertise the book, it being one that I did not write, but in a book by Mr. Woodward, entitled 'Money for Tomorrow "

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Senator COSTIGAN. The full name of the author, please?

Mr. RICHBERG. W. E. Woodward, entitled "Money for Tomorrow." Mr. Woodward has advocated the idea of loans to individuals, not exactly along the lines of this bill, but of loans to individual workmen, industrial loans in the amount of $3,000,000,000 or $4,000,000,000.

Senator CoSTIGAN. When was this book published?

Mr. RICHBERG. This book has been published this year, 1932. In his book Mr. Woodward, who is a former executive of the Morris