Mr. KOPPLEMANN. What is the amount of the authorizations of the Federal Reserve banks for that purpose, Mr. Jones? Mr. JONES. What they have authorized?

Mr. KOPPLEMAN. No; I mean there is a certain fund to the extent of which they are underwritten or guaranteed by the Government50 percent?

Mr. JONES. They may lend, I think, approximately $290,000,000. The CHAIRMAN. That is about what the amount is.

Mr. JONES. One-half of which would be furnished by the Treasury. Mr. CROSS. Are most of these applications from little factories? Mr. JONES. Yes; we have occasionally a large application, but generally speaking, the big industry is able to get funds. In the first place, they had better reserves when trouble came along and they have been able to get credit better than the little fellows. Our loans average about $50,000, but some run pretty low, as low as $2,000 or $3,000, but we have made a few fairly good-sized loans.

Mr. CROSS. That is for operating expenses?

Mr. JONES. Yes; to operate the plant to buy materials. The law says we must only do it when it either continues or creates employment. That is the only kind of loan we can make.

The CHAIRMAN. When you go to make a loan, that is one of the fundamental considerations, its effect upon unemployment? Mr. JONES. That is it.

The CHAIRMAN. If you can prevent a reduction in employment, or start new employment, that is, of course, a strong inducement to you to make the loan?

Mr. JONES. Yes.

The CHAIRMAN. By making a loan, if you find it might result in business activity that would invade some field already occupied and drive others out of employment, you will not do it?

Mr. JONES. That is our attitude. We have received, I should like to say here, a good many protests and complaints where we made loans; and, Mr. Kopplemann, we have had more from New England than any place else. That applies especially to textiles. Textile mills that are still trying to get along on their own, claim that we are destroying their property by lending to mills that are not able to carry on and have not been as prudent and as careful in their management as some. We have quite as many complaints, almost, one way as the other.

Mr. ŠISSON. Before we pass from the subject, I am interested, Mr. Jones, in this: You said that the Federal Reserve Banks now-the net amount of the authorizations was about $76,600,000?

Mr. JONES. Yes; as I understand it.

Mr. SISSON. And they have loaned about $33,000,000, or disbursed about $33,000,000?

Mr. JONES. Yes.

Mr. SISSON. Has there been, during the past few months, a considerable increase in their making of those industrial loans?

Mr. JONES. In their applications?

Mr. SISSON. Well, in the loans that they have made, constituting their disbursements.

Mr. JONES. I have not kept up with that.

Mr. SISSON. I will tell you why I am asking you the question: I have not looked up the figures recently, but I recall that, when we

had this up for debate early in this session, on the construction of the Reconstruction Finance Corporation, the Federal Reserve Bank in New York, the New York Federal Reserve Bank had authorized— I think I am right about this-had actually disbursed only about $1,000,000, and I was very much surprised at the very insignificant amount that they had disbursed, and I was wondering if, since that time, you happen to know whether there has been very much increase in the New York Federal Reserve Bank's activities.

Mr. JONES. I do not believe there has been.

Mr. SISSON. It was almost impossible to pry anything out of them. Mr. KOPPLEMANN. Pardon me, Mr. Sisson. I would like to have Mr. Jones proceed. He has, only in part, gone into his activities, and I would like to have him proceed and tell us what he thinks about this measure before us.

Mr. JONES. There is no part of our activities that requires anything like as much of our time as the industrial loans. We try to qualify every application. We are as sympathetic with them as it is possible to be.

The CHAIRMAN. In that connection, you said that your applications were forwarded some with approval and some without approval; that you require both to be forwarded, whenever the applicant desires. In that connection, have you made any loans where the applications have not been approved by your State agencies? Mr. JONES. Yes.

The CHAIRMAN. To what extent.

Mr. JONES. I have not got the figures about that, but occasionally we do. Not only that, the directors occasionally make a loan when the review committee recommends declining it.

Mr. SISSON. Here is something I happen to know something about: As a matter of fact, Mr. Jones, with respect to the New York agency, if it is a fair question to ask you, in the majority of instances where the loans have been made, you have, in effect, checked them up or overruled them or reversed them?

Mr. JONES. We have done everything we could to encourage them to make loans.

Mr. SISSON. Have there not been a good many instances where they have turned down loans and the applicant has insisted that they be made or be sent to you for review, and many of those instances where you have finally either made the loan or directed the New York agency to make it?

Mr. JONES. I do not know what percentage of them, but a good number; yes, sir.

Mr. KENNEDY. You mean that they are very conservative?

Mr. JONES. It may be they are unwilling to take the responsibility that rightfully belongs to the directors. These loans are, most of them, pretty hard to make, and you have got to use rosy glasses to make them, and the fellow that is running the business is not willing to take the responsibility, perhaps, that we are. I think that is the situation.

I would like to say, before I forget it—and I find I forget some things-we offer to take 50 percent of any loan, any industrial loan that any bank will make in the United States, without looking at it. We have done that.

The CHAIRMAN. That is a general order put out to the banks?

Mr. JONES. Yes, sir; any bank in the United States that wants to make a loan-not an old loan that is already on the books, that is slow, and that the bank would like to unload on the Governmentbut if it is a new industrial loan, we will take one-half of it and not look at it.

The CHAIRMAN. Have you done any business in response to that suggestion?

Mr. JONES. Very little.

Mr. GIFFORD. Take that loan without recourse to the bank?

Mr. JONES. Yes, sir; that is the way they ought to be made, because the banker is the fellow that sees the loan, he can keep up with it, and we feel that we are not reckless in that. We feel that if a banker can afford to lend his dollar, we are willing to lend our dollar.

The CHAIRMAN. You are willing to trust the judgment of the banker?

Mr. JONES. Yes.

Mr. GIFFORD. You would not demand to be the preferred creditor? Mr. JONES. No; we will sink or swim with him.

Mr. GIFFORD. As the old saying is, when they fail you share the profits evenly?

Mr. JONES. Yes.

Mr. CROSS. Say a banker already has a loan, say, for $20,000,000, and the banker is willing to advance $10,000 or $5,000 in addition, then you are willing to advance $5,000 additionally also?

Mr. JONES. Oh, yes. We do more than that. Suppose a concern owed a bank $20,000 and needed another $20,000, then we are willing to go so far with that concern and the bank as to make the additional $20,000 loan sharing with the bank, and dividing the collateral, providing the latter is sufficient to justify our participa

tion.

The CHAIRMAN. Of course, you are not going to take or that customer and carry him and give him a chance to work out his problem and pay them and not pay the Government?

Mr. JONES. No; we go 50-50 with them. We will divide his collateral, and very often when we have loaned as much as we thought we ought to lend, and we have gone as far as we ought to go, we have offered to share our collateral with a Federal or any bank that would go the rest of the way.

The CHAIRMAN. You said you had made some pretty good-sized loans. What are the largest loans you have ever made-and I do not mean to give the name?

Mr. JONES. I think the largest loan we made is an industrial loan up in New Jersey, up near New York City, where there are some six thousand or seven thousand people employed, of $2,000,000 or $3,000,000, probably $2,000,000, but I do not know the exact amount. We started out with a $1,000,000 loan and I think we finally raised it to about $1,800,000. That is about the largest loan.

Mr. CAVICCHIA. Do you remember, Mr. Jones, whether that was Paterson, N. J.?

Mr. JONES. Yes.

Mr. CROSS. Are those people making any payments?

Mr. JONES. They are not in default.

Mr. CROSS. Are they successfully operating?

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Mr. JONES. Well, that was a plant where there was some $10,000,000 or $12,000,000 invested and which has had a very prominent place in that industry for two generations. They suffered some great losses, and 6,000 or 7,000 people would have been thrown out of employment if they could not have a little more capital. I think some financing house is taking a part of it. They are lending all they can on the goods, and we are lending the balance on the plant. They are not in default. I think maybe we have got a payment on that loan of $10,000 a month. That is not a large amount on a $2,000,000 loan, but it is substantial. I do not think they are in default. We have a good many industrial loans, though, that are in default, a great many. Mr. KENNEDY. You made one loan up in New York of $20,000,000 on some real estate; that would not come in this classification at all? Mr. JONES. $20,000,000?

Mr. KENNEDY. I think so. That was the Prudence loan? Mr. JONES. That Prudence loan was made in 1932. That is when we were trying to stop the failure of those big mortgage companies up there. That would not be in this category. We have got grief enough about that loan; I do not mind admitting that.

Mr. FISH. Have you made loans to manufacturing plants?
Mr. JONES. Yes.

Mr. FISH. To wholesalers and retailers, or do they come within the provisions of the law?

Mr. JONES. We try not to make retail loans. We can lend to a butcher shop, if we want to, if it is qualified under the law. Soon after this law was passed, we had an association of merchants, retail merchants from one of the large cities, which came down and wanted to arrange for us to lend to their members. They had in their minds making loans to some 32,000 or 33,000 retail merchants. We decided we had better not undertake the retail field.

Mr. SPENCE. You have the authority under the act?

Mr. JONES. We have the authority; yes.

Mr. SPENCE. Have you made any loans to wholesalers or distributors at any time?

Mr. JONES. Not very many; none that I happen to know of at the time.

Mr. DRISCOLL. Mr. Jones, I understand there are some industries to which you will not make loans. In my district, we have a great many oil refineries; that is the major industry of the district, and as everybody knows, I presume, Oil City, Franklin, Warren, and the other towns where the oil refineries are located, where the industry was born, or at least where it has existed for over 70 years. I have a considerable amount of correspondence in the office from refiners that have asked me to find out whether or not your corporation has ruled that no oil refinery could be loaned under any circumstances; in other words, for some reason, they were placed on the black list.

Mr. JONES. Well, I confess and take responsibility for our Board, at least for the decision that we should not-at least we should avoid, as long as possible, making loans to the oil industry and to the automobile industry and to one or two others. There is ample credit available for such purposes. It might be done in an individual case, but the industry is a profitable industry and there is a lot of money available to the oil industry and these other industries. I have a

good many more applications from Texas and Oklahoma for these oil loans than any place else, but we found that it was largely one fellow competing with another fellow as to who was going to get his well down first.

Mr. DRISCOLL. These people that I am speaking of are all wellestablished firms, and the industry has been there for about 70 years, and they seem to feel-they have all come to me within the last few days and they seem to feel that the attitude of your corporation is a reflection on the banks and they cannot get it. But I agree with you thoroughly that if the loans were in new territory or wildcat territory they might not be desirable; but these are the patriarchs of the industry, you might say.

Mr. JONES. We have had them for 30 years in Texas and in Oklahoma.

Mr. DRISCOLL. We have had them 70 years in Pennsylvania and we feel up there I do not want to express my own opinion about it-that all the oil industry in the world should be credited to northwestern Pennsylvania for its knowledge of the industry; at least that is where the industry was born and it has continued and has been most successful. We have as much oil available as we had in 1869, it is claimed.

Mr. JONES. You have not as much?

Mr. DRISCOLL. I think they claim they have as much.

Mr. JONES. Have as much?

Mr. DRISCOLL. Yes. Of course, that does not compare to the oil fields of Texas or Oklahoma.

Mr. JONES. You mean they get as much out of the ground or they refine as much?

Mr. DRISCOLL. They are getting as much out of the ground as they could 60 years ago. Of course, there are many new strata of development. They are very much concerned over that situation, and I brought it up at this time because I have a bunch of letters in the last few days.

Mr. JONES. The only oil applications that we have had, I believe, without exception, were not good credit risks.

Mr. DRISCOLL. I do not think any of these fellows have made applications. They were writing me and asking me why it is, as one expressed it, that they are classified with these fly-by-night breweries and distilleries.

Mr. JONES. I expect if the man is a good credit risk he can get the money. A lot of people come to the Government because they think they would rather owe the Government than owe a bank.

Mr. DRISCOLL. A lot of people think that when they get money from the Government the debt is paid.

Mr. JONES. Well, a lot of people feel that way, and a great many people come to us to get money because they think the banks charge too much. A bank might be charging them 6 percent and they want to get it for 4 percent or 5 percent. That kind of loan we do not think we ought to make, as that is the customary rate; the law covers it.

Mr. DRISCOLL. These are sparsely settled communities and the three counties together along the Allegheny River, a distance of 125 miles, probably-the three counties together have barely 120,000