lumber from myself and the other fellows. Thirty days ago they struck out a bulletin that they could not pay that price. They were getting it cheap, but they wanted it for still less money, and they took the price of cross ties at 10 cents apiece. There is a difference in the price of the railroad companies. The code price of lumber their price to all railroad companies, the Norfolk & Southern, Norfolk & Western, was cut $10 to $13 under the code price, and they are themselves buying lumber under the code price, and telling me that I have to pay 24 cents an hour or they would shut my plant down. Recently on an order we had to sign affidavits and everything that we were absolutely paying every man exactly what they were entitled to get. The CHAIRMAN. Of course, the lumber business is a hazardous business. Any bank who carries it necessarily needs a margin of protection to start with. You are always subject to losses and controversies and lawsuits. Mr. DEATON. Yes. The CHAIRMAN. And all of those things. There are many things to tax the capacity of a man running a bank who protects himself in taking care of lumber transactions. There is no doubt about that. What you need is a credit facility somewhere. Mr. DEATON. Yes, sir. The CHAIRMAN. That will pay due regard to your method of doing business and your character and your capacity to handle it, and help you carry on your business. But you do not have such a facility in your community. I do not know whether you would have or not if we passed this law, because you would have something further from home than ever then. Mr. DEATON. I thank you. Mr. FARLEY. Mr. Chairman, just in line with what you suggested a moment ago, I don't think it would be possible for any bank to have a fixed rate of interest for all types of loans. It must take into consideration the individual ability always. Otherwise it would be out of business in no time. The CHAIRMAN. We have in nearly all the States, as far as I am advised, laws governing the rates, and national banks are required under the laws to conform to those rates. The difficulty about the citizen of small means is that he has got no remedy there except to. accept the terms imposed upon him, and after that is done there is no way to turn around and have a lawsuit with this institution, which he cannot afford to have and for which he is not legally and financially prepared. Mr. SISSON. Mr. Chairman, I suggest the absence of a quorum, which may be evanescent. The CHAIRMAN. Just a minute and we will see if we are through with this gentleman. Any further questions of Mr. Deaton? I think the committee understand your situation. We thank you very much. Everybody on the committee sympathizes with your situation, and many more like you, and wish we could help. I don't know whether we can or not. Now, gentlemen, have you anybody else here? Mr. KOPPLEMANN. Yes, Mr. Chairman; I have here a gentleman from your State, Alabama, Mr. W. K. Mullins, vice president of the Alabama Warehousing Co. The CHAIRMAN. All right, Mr. Mullins. STATEMENT OF W. K. MULLINS, VICE PRESIDENT ALABAMA WAREHOUSING CO., BIRMINGHAM, ALA. Mr. MULLINS. Mr. Chairman, I think that the best way for me. to proceed is to tell you about our particular case. The CHAIRMAN. What is your situation, Mr. Mullins? Mr. MULLINS. Back in 1929 it became necessary to refinance some bonds that were coming due. At that time the then president of the company died. His family had quite a bit of stock and of the bonds. Arrangements had been made with a New York concern to handle the bond issue. Before that could be consummated the bonding house went into bankruptcy and broke that up. So that it became necessary to finance a great portion of that former president's interest by short-term bank loans. These bank loans have been going on for several years since that time at a rate of 8 percent interest, until a short while ago when it was reduced to 6 on account of the recent passage of the 6 percent legal rate of interest in Alabama. The banks of course, and rightly so, are asking for their money. For the past 2 years the Commodity Credit Corporation have been making loans on cotton stored at the primary point in small towns. That has stopped the flow of cotton through the normal channels to our warehouses and compresses. We have operated only about 25 percent of normal for the past 2 years, which has resulted in the bonds being in default and the interest being paid on the bank loans. by straining, leaving nothing for improvements or proper maintenance. We tried to get a loan from the R. F. C., but they would make loans for working capital only and none for any refinancing. We feel like that with this bill we would be able to refinance at a reasonable rate of interest and go ahead and do business and keep open. Otherwise not. Mr. HANCOCK. Mr. Mullins, they have liberalized their policy so far as the use of funds for refinancing is concerned, have they not? Mr. MULLINS. I think they have. You mean under the Reconstruction Finance Corporation mortgage department? Mr. HANCOCK. Under the act which we passed this year. Mr. MULLINS. Yes. Mr. HANCOCK. Which is a continuation of the act of last year. Mr. MULLINS. That avenue is being given consideration. We are figuring on that. Mr. REILLY. What do you mean by "refinancing", the paying up of an existing obligation and have the Government Mr. MULLINS. Yes, sir; paying up the existing obligations to the bank and the withdrawal or buying in of these few outstanding bonds that are now in default. Mr. KOPPLEMANN. Do I understand that if that is done it gives you working capital with which you can go on with your business? Mr. MULLINS. It does. Mr. KOPPLEMANN. That is the purpose of it? Mr. MULLINS. Yes, sir. It relieves us of the burden of interest that we are having to pay at high rates, and allowing us to go ahead and make the necessary repairs and maintenance to our plants in order to keep going. With the money that we are now paying out for interest it is impossible to do this. Mr. KOPPLEMANN. And if you do not succeed in getting a loan what is your prospect for continuing in business? Mr. MULLINS. The prospects are that the bondholders will foreclose. Mr. KOPPLEMANN. Have you any reason to believe that they will foreclose? Mr. MULLINS. Yes. Mr. HANCOCK. Did I understand you to say that interest is an item with you? Mr. MULLINS. Yes, quite an item. Mr. HANCOCK. You are paying 6 percent interest? Mr. MULLINS. Paying 6 percent. Mr. HANCOCK. And if you borrowed from the Government you could get it at 4? Mr. MULLINS. We hope so. Mr. HANCOCK. And that 2 percent is vitally important with you? Mr. MULLINS. It is. Mr. REILLY. Why can't you take up the question of refinancing with the present creditors of the company? Mr. MULLINS. They want their money. You see, the money was borrowed to get over this gap in there until such time as these bonds could be sold. There has been no market for bonds. The banks have waited and waited and waited. Mr. REILLY. Can they make their money if they do foreclose? Mr. MULLINS. I think so. We have two plants, one in Birmingham and one at Mobile. They are worth $2,000,000. Obligations outstanding are about $300,000. Mr. KOPPLEMANN. How many people do you have working for you? Mr. MULLINS. In normal times we have at the two plants about 300 people, white and black. Mr. KOPPLEMANN. If you secured this refinancing or a loan, what difference will it make in the number of people you have employed? Mr. MULLINS. It will increase employment so far as making our necessary repairs and improvements is concerned. Mr. KOPPLEMANN. Will it increase employment so far as the work that you are engaged in is concerned? Mr. MULLINS. No. On account of the character of our business, the warehousing and compressing of cotton, it will not. Mr. BROWN. What is your charge for storing cotton? Mr. MULLINS. Fifteen cents a bale a month. Mr. BROWN. That almost broke these small fellows in my section. Mr. MULLINS. It is about to break us. The 25-cent rate, if I may put this in, is now being paid by the Commodity Credit Corporatio n for storage, plus insurance. This rate is almost starvation to the small warehousers, yet they at seeking to keep this cotton, for some unknown reason, they have not figured out why. Their insurance costs them anywhere from 10 to 15 cents a bale a month, and it nets them only about 10. Our rate of 15 cents is based on compressed cotton in sprinkled warehouses. Our insurance rate will run about 22 cents a bale a month. Mr. SISSON. What is the amount of money that you require for your refinancing and repairs and your working capital altogether? Mr. MULLINS. About $300,000. i Mr. SISSON. And have you applied this year to the R. F. C. for a loan? 145152-35-6 Mr. MULLINS. Yes, sir; but if we could have met their requirements we would not have needed the money. Mr. KOPPLEMANN. What do you mean by if you "could have met their requirements"? Mr. MULLINS. Well, their requirements are very strict, Mr. Kopplemann, and there were just so many of them that I don't quite remember just what they all were. It was just out of the question. We could not do it and it was dropped. Mr. KOPPLEMANN. You could not meet them? Mr. MULLINS. Could not meet the requirements. Mr. SISSON. Let me ask a question: If we are going to have a specific case here let's see what it is. How much of this $300,000 is required for paying off existing obligations? Mr. MULLINS. It would be about $275,000. Mr. SISSON. You are asking for a loan of $300,000, $275,000 of which goes to creditors? Mr. MULLINS. Refinancing. Mr. SISSON. Won't those creditors go along with the Government on any part of that? Mr. MULLINS. I think that they would. Mr. SISSON. Then is that $275,000 the full amount that is owed by your two concerns there? Mr. MULLINS. Approximately. Mr. SISSON. What security do you have to give for the $300,000? Mr. MULLINS. What security would we have? Mr. SISSON. Yes. Mr. MULLINS. A first mortgage on all the real estate and personal property in the two plants. Mr. ŠISSON. What are your plants worth? Mr. MULLINS. About $2,000,000. We want the loan for a period of 5 to 10 years, or a period of 5 years with the privilege of refinancing at the end of that time. Mr. FORD. If your plant was running normal what would it produce what would the income be? Mr. MULLINS. About $50,000 a year. Mr. FORD. You employ how many men? Mr. MULLINS. About 300. Mr. BROWN. Have you lost any money in the last few years? Mr. BROWN. Warehouses in my section have all made money. Mr. MULLINS. Well, that is just the case. We have lost money because of the cotton being impounded by the loans at the primary points. We have suffered. Our business-well, take the Mobile plant, for instance: Three years ago we handled 100,000 bales of cotton. Last year we handled 25,000, and this year it will run about the same thing. There is no cotton raised in the immediate vicinity of Mobile. There is none raised in the immediate vicinity of Birmingham. Birmingham is a mineral district, as you know, and Mobile County is largely given over to truck farming. The CHAIRMAN. Mobile is also a shipping port. Mr. MULLINS. Yes, sir; that is a port and a shipping point. That is another sore spot too, sir. Exports have fallen off, as you probably have heard. Mr. CAVICCHIA. That is the main reason for the falling off in your business? Mr. MULLINS. No, sir. The main reason is the storing of this cotton at the primary point in the small warehouses; and these small warehouses, by the way, are barns, old stores, and gin sheds and what-have-you. Mr. CAVICCHIA. If cotton was being exported as it was 4 or 5 years ago Mr. MULLINS. There is none being sold. There is no trade in cotton. It is at a standstill. Mr. CAVICCHIA. If cotton were being exported today in the same quantity that it was 4 or 5 or 6 years ago, your Mobile warehouse would have business? Mr. MULLINS. Oh, yes, sir; undoubtedly. Mr. CAVICCHIA. Those are the two factors: The fact that we are not exporting cotton, and the fact that it is being stored back in the primary points? Mr. MULLINS. Yes, sir; that is correct, and I think it applies to both plants. Mr. MEEKS. Your business has been principally the storage of cotton? Mr. MULLINS. Yes, sir. The CHAIRMAN. How much cotton does Birmingham handle? Mr. MULLINS. We have handled as high as 120,000 bales a year. The CHAIRMAN. You mean they sell that on the market in Birmingham? Mr. MULLINS. Oh, no. It is concentrated in there from all over north Alabama. The CHAIRMAN. Why is it concentrated? Mr. MULLINS. On account of the rail and reshipping privileges allowed in Birmingham, which makes it a strategic point from the cotton merchant's standpoint. The CHAIRMAN. It is also the financial side, too? Mr. MULLINS. Oh, yes. The CHAIRMAN. And then they have a pretty large milling interest there? Mr. MULLINS. They have a fairly large milling interest in Birmingham, the Sylacauga district, for instance. The CHAIRMAN. Any further questions? All right, Mr. Mullins; we thank you. Mr. KOPPLEMANN. We have another witness who wants to get away. The CHAIRMAN. Mr. Kopplemann, the House is meeting under unusual circumstances today, and I don't think we should be absent too long. Mr. KOPPLEMANN. I don't think this man will take over 5 minutes. It is Theo. W. Osbahr of the Northern New Jersey Oil Co. The CHAIRMAN. Very well; we will hear Mr. Osbahr. STATEMENT OF THEO. W. OSBAHR, SECRETARY NORTHERN NEW JERSEY OIL CO., NEWARK, N. J. Mr. OSBAHR. Briefly, gentlemen, the history of our financial difficulty dates back to the beginning of or just prior to the depression. Due to condemnation of part of our property by the State Highway Commission, it became necessary to relocate our bulk storage plant |