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INTERMEDIATE CREDIT CORPORATION
WEDNESDAY, MAY 29, 1935
HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Washington, D. C.
The committee met, pursuant to recess, at 11 a. m., Hon. Henry B. Steagall (chairman) presiding.
The CHAIRMAN. All right, gentlemen. I will ask Mr. Martin to come around, please.
STATEMENT OF J. A. MARTIN, FURNITURE MANUFACTURER, LIBERTY CHAIR CO., LIBERTY, N. C.
The CHAIRMAN. Give us your full name, Mr. Martin, and your address.
Mr. MARTIN. J. A. Martin, Liberty Chair Co., Liberty, N. C. The CHAIRMAN. We will be glad to have you discuss H. R. 5918, Mr. Martin.
Mr. MARTIN. Mr. Chairman and gentlemen, I hardly know how to proceed. The matter of financial assistance to small industry has been in my mind since the break-down of the banking system. I can possibly best give you my position by quoting some few letters or some correspondence I have had with Senator Bailey and with the Department of Commerce.
I will quote the second paragraph, as I will skip all except that that I think is pertinent to the question. This is dated May 5, 1933 [reading]:
I have been watching to see what if anything would be done for the average or small industry. It seems from the report in the papers that this will be the next
Since we have a small bond issue that we are trying to refinance by July the 1st, we realize that we are up against a real proposition unless there is something in the way of relief from the Federal Government.
Ön account of the time being short when we must meet this obligation, just thought that you would be able to give us information as to whether there was anything being done or had been done that would apply in our case. give us the name or names of parties that we can take the matter up with.
The CHAIRMAN. Who is that letter from?
Mr. MARTIN. That was a letter that I wrote as secretary of the Liberty Chair Co. to Senator Bailey.
The CHAIRMAN. All right; proceed.
Mr. MARTIN. In reply to that letter, I presume I am not betraying any confidence; I do not know of any reason why it should not be read
Mr. WILLIAMS. Who wrote the reply?
Mr. MARTIN. Senator Bailey replied May 12. [Reading:]
Thank you very much for your letter. The bills prepared by the President, if I may judge by the papers, do not provide for loans to small industries. However, I am inclined to introduce an amendment providing 500 million or a billion dollars for loans of this character, as I believe that would do more to stimulate business and employment and the purchase of raw materials than most any other plan. I have had the amendment in my hands for several days.
The CHAIRMAN. What is the date of that letter?
Mr. MARTIN. May 12, 1933.
The CHAIRMAN. All right.
Mr. MARTIN. On May 13, 1933, I again wrote Senator Bailey. I set forth some reasons why I thought there ought to be something done. I thought possibly the paragraph 3 will be adequate for this purpose. I am quoting paragraph 3:
I have been watching the papers daily for just a suggestion of an amendment you speak of. I certainly believe your amendment will do more than any other one piece of legislation that has been enacted, though there has been some farreaching legislation passed in the last few weeks. I wish to endorse the move and wish you success in putting it through. I have been highly pleased with your
stand on other bills, both passed and pending.
Mr. KOPPLEMANN. What do you mean by "paragraph 3"?
The CHAIRMAN. He is reading from another letter that he wrote Senator Bailey.
Mr. MARTIN. Yes; another letter that I wrote Senator Bailey after receipt of his statement that he had an amendment that he was considering putting in.
The CHAIRMAN. All right.
Mr. MARTIN. I might say that I do not have that letter, but later on I wrote him to know what had happened, and he told me that he did not present the bill; he did not present the amendment.
The CHAIRMAN. That disposes of his amendment. Now, give us your views about what we should do with this legislation.
Mr. MARTIN. Another letter I wrote Senator Bailey
Mr. KOPPLEMANN. What date was that letter you wrote to Senator Bailey, the one that you are just saying that you are going to read? Mr. MARTIN. January 23.
Mr. KOPPLEMANN. Of what year?
Mr. MARTIN. 1935. I do not have them in exact order, because I have some others. I am quoting from the third paragraph:
Most of the small industries are badly handicapped on account of loans from closed banks that are trying to liquidate as fast as possible. It seems that the small industry might be worthy of some consideration, since the banks, railroads, homeowners, and farmers have all been fairly well cared for.
It looks like a 10-year loan to take up existing indebtedness for payments that are in arrears, especially in closed banks that are liquidating and cannot renew, could be made with safety. Financing of this kind would save many worthwhile industries from bankruptcy and the usual unemployment following these disasters.
Mr. REILLY. That is another letter you wrote?
Mr. MARTIN. That is another letter I wrote to Senator Bailey on January 23, 1935. That is in January. I might say there that I talked in person to Senator Bailey in Raleigh in December 1934, late in December before the convening of Congress, with this same thing in mind, in regard to it.
I would like to quote a few sections from the correspondence with the Department of Commerce.
The CHAIRMAN. In connection with your reading of correspondence with Senator Bailey, of course, you have not read the entire correspondence, but I might as well say that there may have been very sound reasons why he did not introduce the amendment suggested. Members often contemplate moves that they abandon for reasons that they find to be good reasons, that they are impracticable or they are about to undertake something that is impossible of accomplishment, and they would rather devote their time where they may accomplish results that are desirable. There are lots of things that many Members would be glad to work at and undertake to do if there were any hope of success, which we run from, because it is more important to devote our time to things that we have some chance of accomplishing. I merely suggest that to you, in view of that correspondence.
Mr. KOPPLEMANN. Supposing that the witness, without reading, as well as he can, say to the committee what is Mr. Bailey's attitude at the present time with reference to this. He happens to be the witness's Senator from his State, and that is why he consulted him and got his information from him.
The CHAIRMAN. I only made my suggestion because the entire correspondence has not been offered, and the impression might prevail that the Senator did not follow it up; but there could be very good reasons for that.
Mr. MARTIN. I do not have the letter, but as I recall he did not present it because he felt like that possibly other matters might have taken place, or somehow or other I am of the opinion some way that he did not think it would be successful or something to that effect. Mr. FORD. May I ask a question, Mr. Chairman?
The CHAIRMAN. Certainly.
Mr. FORD. Assuming that this bill would pass, to what extent, in your judgment, could the various units of the industry that you represent supply adequate security or reasonable security for such loans as they would need to conduct their business.
Mr. MARTIN. You have especial reference to the bill
Mr. FORD. Before us.
Mr. MARTIN. It looks to me like that would relieve the situation to the extent of taking care of all worthy applications that are really of merit and are of such nature that it would be advantageous to the community and to the employment of labor and protecting those who had their life's work in the business from a loss because of unforeseen knowing-I don't know just how to say it.
Mr. FORD. Give us an example. In your own case, for instance; you are a manufacturer of furniture. What kind of a set-up have you, an incorporation or an individual operation or partnership or what? Mr. MARTIN. There is an incorporation with some 45 stockholders. Mr. Coward and myself own approximately 50 percent; the balance to smaller stockholders throughout the community.
Mr. FORD. You have applied to the R. F. C., have you, for a loan? Mr. MARTIN. Someone from the Department, or Chairman Jones, or someone when I was following that up before Congress adjourned last summer, as soon as Pamphlet No. 13 was out sent me one. I believe it was Chairman Jones himself. I immediately went to the
branch office in Charlotte and presented the case to Mr. John Campbell, the manager of the Charlotte branch. We are operating under a branch from Richmond.
His idea was at that time that we had got a slight extension from the Virginia Trust Co. on the bonds-and at that time we owed the Page Trust Co., a local bank which was then in liquidation, $13,000. Consequently there was at that time $16,000 Virginia Trust that was not due, but $13,000 of Page Trust Co., of course, that could not be renewed because of liquidation. He took the position that the R. F. C. could not handle it unless I could get a stand-by agreement from both the Page Trust, first and second mortgages, as a stand-by for $16,000 for the first mortgage and a stand-by of $13,000 for the second mortgage.
Mr. FORD. Let me ask this question: What is the value of your plant?
Mr. MARTIN. The plant, machinery, real estate, the cost will stand $163,000. Book value as shown with depreciation, $104,000.
Mr. FORD. Were there any other liabilities outside of these two? Mr. MARTIN. About $26,000 current.
Mr. FORD. There was 26, 13, and 16?
Mr. FORD. $55,000 of liabilities?
Mr. MARTIN. Yes, sir.
Mr. FORD. How much were you trying to borrow?
Mr. MARTIN. Asked for I only went to them and discussed the matter, but my idea was to borrow $55,000 to liquidate-not $55,000, but borrow $40,000 I asked in that particular case-to liquidate the two mortgages and have operating capital.
Mr. FORD. What other assets did you have?
Mr. MARTIN. About $68,000 current assets, but around $38,000 book account.
Mr. FORD. If a loan had been offered you with the proviso that you and your partners who owned 50 percent of the stock would be personally responsible for it, would you have signed such a note?
Mr. MARTIN. We were already on the two notes and would have been glad to continue.
Mr. FORD. I know, but if you had gotten $40,000 and wiped out those two notes
Mr. MARTIN. Yes.
Mr. FORD. Then would you have been willing to become personally responsible, in addition to the corporation, for the sum you were borrowing?
Mr. MARTIN. Yes, sir.
: Mr. FORD. Was any such proposition made to you?
Mr. MARTIN. It did not come to that point. But I believe it was clear in that particular case, however, that we were already on the other notes then. There was no objection. Since they were past due, there would certainly be no objection to endorsing an extension.
Mr. CROSS. Let me ask some questions. How long has the mill been in operation?
Mr. MARTIN. We started business with $5,000 capital in 1910. We were fairly successful in the operation up to 1926, February, when we had a fire that destroyed all the burnable property except some stock on the yard.