Senator MCKELLAR. Mr. Jones, you said that the banks had reduced their loans to $300,000,000. Senator GLASS. He did not say to $300,000,000. Mr. JONES. Yes; a little less than $300,000,000. Senator MCKELLAR. About what were their loans? Mr. JONES. A billion and a half. That is, about that, but the actual disbursements amounted to about a billion and a hundred and some million. We have collected about-right about 72 or 73 percent from the banks. Senator MCKELLAR. Yes. Mr. JONES. But, you see, the most of our bank loans now will be slower. We have got the cream. Senator McKELLAR. Yes. Mr. JONES. We have got the cream. Senator MCKELLAR. What percentage of the loans have been taken in all, about? Mr. JONES. Forty-six percent. We have had 46 percent on repayments on loans. Senator MCKELLAR. Forty percent on actual disbursements? Now, the amount that might be available for transfer for the immediate emergency, relief administration of the present, depends, of course, on the requirements of the corporation for all other purposes and would not be very easy to estimate. Senator MCKELLAR. Could you give us a general idea? Mr. JONES. Well, I should say $250,000,000 to $350,000,000. Senator MCKELLAR. What about the unobligated balances? Mr. JONES. Well, it depends on how much we lend on industrial loans. It would depend upon the requirements of the mortgage-loan companies and various other things and different people who are qualified to borrow. Senator MCKELLAR. Then, $300,000,000 is a good big sum added to the sum that we have appropriated.. Mr. JONES. Yes; it is a good big sum. I think we could easily say that $250,000,000 could be taken from our funds for relief purposes, but I do not believe that you could take more than that. Senator MCKELLAR. I thought that you said $300,000,000 to $350,000,000. Mr. JONES. I said $250,000,000 to $350,000,000. Senator MCKELLAR. Possibly $300,000,000? Mr. JONES. I would also like to be safe. Senator DICKINSON. You are contending that unobligated balances necessary to carry on the general purposes of your activities will absorb a billion dollars over and above your payments? Mr. JONES. Well, if we lend. I think that we will probably lend another $250,000,000 to closed banks to pay out on closed banks. You see, we have authority now for about $800,000,000, slightly less. To do that job, I believe we will be safe in having another $250,000,000, or possibly $300,000,000. We are reappraising and will, after this act becomes law-this one that I suppose will become a law in a day or two-we will, as we are able, reappraise these assets, and we hope to do it in a careful way.. Now Senator DICKINSON. You mean that you have already appraised w them once, and made advances, and you are going to reappraise w them and make additional loans. Mr. JONES. We have authority to do that to the extent of about es? $800,000,000, for distribution to depositors of closed banks. Now, we had a sort of a schedule of lending up to 75 percent of the probable value of the liquidating value on banks that closed in 1933 and the last half of 1932. On banks that closed prior to that we held it down to about 50 percent. Now, we are able by reappraisal, because that work was done in a great hurry, and we were trying to get the relief out, the money out to the depositors, and we find by going back we can increase those amounts, so that I think that about $250,000,000 or $300,000,000 will be available there. It could be more than that, because there is something like $100,000,000 or $125,000,000 in Detroit alone. When they get some litigation settled and that will probably be settled within a few weeks. Something was said about increasing the amount we could lend to any one institution. I do not think that is at all necessary. I do not know whether it is provided in the bill or not, having in mind the Detroit situation; but we can, I am sure, get the Detroit banks to cooperate with us so that we will not need any expansion of the amount of money and there are one or two States that have not borrowed at all, where the receivers and the banking authorities would not borrow. They felt that we were too conservative in our loans, the amount that we would loan, and that would not be sufficient to warrant their borrowing. Senator GLASS. Well, you say that you have put out $800,000,000 to pay depositors of closed banks.. Mr. JONES. Yes; we have authority to do that; put that out. Senator GLASS. Then, what, in addition to that, have you loaned the banks? Mr. JONES. We have loans out, Senator, to banks now to the extent of about $280,000,000. Senator MCKELLAR. What Senator Glass asked was a little different from that. Is that $800,000,000 included in the $1,200,000,000 you have loaned? Mr. JONES. No; this $800,000,000 loaned to banks, refers to closed banks for distribution to depositors. In other words, if Mr. Steagall's bill had gone through as he had written it, and they had paid out, they would not have gotten any money, because first they would have had to pay out $800,000,000 to get the assets. So that the thing that was an empty matter he was talking about. Now, getting back to the subject, I should say $250,000,000 to $350,000,000 on that industrial loans will probably take $250,000,000, up to that; bank loans, we probably will have $50,000,000 to $75,000,000 or $100,000,000 there. There will be some few railroad loans, probably some substantial mortgage loans. We have been trying very hard to lend some money to protect the guaranty-mortgage securities, particularly in New York where they sold about a couple of billion dollars of them, and they have got sound value behind them, and they are held largely by people of small means. I have seen the statement that they averaged something like $800 to the holder, or something about that. hey th alt Sen Sen M M 20 hen Se Now, we have been trying to encourage the people of New York, and we have said "yes" every time they have come down and asked "If we organize a corporation with $10,000,000 or $20,000,000, will you lend us some money if we will lend 25 percent on those mortgages?" We have said "yes" every time they have come down there for a year, and we have never loaned them anything yet. They do not raise their capital. Some of these days they might and get the loans, when it is more encouraging, and it is a good thing to do and that might take a substantial amount of money. Senator DICKINSON. What happened to that guaranty-mortgage company-they have three of them in New York, do they not? Mr. JONES. You mean new ones? Senator DICKINSON. Old ones. Mr. JONES. More than that. Senator DICKINSON. But, there are three big ones? Mr. JONES. I have the impression that there are more than three big ones; but I may be wrong about that. Senator DICKINSON. Have they arranged to have some advancements to them through the various securities that they could put up? Mr. JONES. We have said and we have offered to cooperate with them; we have offered to lend them money. Senator DICKINSON. But, to date, you have loaned them nothing? Mr. JONES. Very little. Senator DICKINSON. Very little. Mr. JONES. They have gotten some loans up there but they have been fussing among themselves and they have not found the vehicle. We have said that if they would organize a corporation having substantial capital, then we will lend them up to and not greater than 25 percent of the face of the mortgages. Senator ADAMS. You have another phase of this bill that you want to take up, too? Mr. JONES. Yes. Mr. GLASS. I want to ask Mr. Jones a question there. You speak of paying off depositors in closed banks. Do I understand then that you propose to actually carry out the terms of the McLeod bill? Mr. JONES. No; carry out the terms of the bill as passed. Senator GLASS. Well, the bill as passed does not give any additional authority. Mr. JONES. I appreciate that, Senator, but we have been a little conservative in our loans. I think for instance these loans were, when we loaned 50 percent, conservative and we can probably increase those some. Senator GLASS. Well, I know, but those are loans on the assets of the bank. Mr. JONES. Absolutely. Senator GLASS. That is not a pay-off proposition. Mr. JONES. I know, but it takes money. Senator GLASS. I know, but it is not a pay-off proposition to depositors. Mr. JONES. No, We have no thought of doing anything we have not been doing except to reappraise the collateral when we think that there is enough-there is a possibility of our being able to increase the amount of the loans. Senator GLASS. You could have made a different appraisal if you en had wanted to in the first instance, could you not? Mr. JONES. Senator, this work was done in a great hurry. Senator GLASS. You could have made a different appraisement in the first instance. Mr. JONES. Yes. Senator GLASS. Therefore the bill as we agreed upon it and—— Mr. JONES. I do not construe it as giving us any additional authority. Senator GLASS. Not a particle. Mr. JONES. Except to buy the assets; we did not have that before. Senator GLASS. Well, the Insurance Deposit Corporation has had that authority. Mr. JONES. Yes. Senator GLASSs. And never exercised it to the extent of a dollar, although they have got $400,000,000 capital set-up. Mr. JONES. Yes. Senator GLASS. We have not modified that in any respect. Senator GLASS. They are still authorized to do that. Senator GLASS. So, we have not given you authority that you not already have and that you could not already have exercised. Mr. JONES. That is right. did Senator GLASS. In other words, I do not want the hundreds of thousands of depositors in failed banks to be disappointed by this talk that this bill that we have adopted means a pay-off substantially according to the provisions of the McLeod bill. Mr. JONES. There is no danger of it being done by the Reconstruction Finance Corporation. In the first place, we would not thave the money and in the second place we would not do it if we had all of the money in the world. I am on record about as many times as a man can be that we have loaned substantially the value of these securities. Senator GLASS. Yes. Mr. JONES. And that is all. Senator GLASS. And you are not authorized in this bill and there is nothing in it to justify you in indulging in any pay-off. Mr. JONES. Absolutely not. Senator GLASS. Not the least bit. You have simply a suggestion, a statutory suggestion that you may, if you please, make a different appraisal. Mr. JONES. But, a little more, possibly than that. Senator BYRNES. That is all there is to it. Senator MCKELLAR. Just a suggestion. Senator DICKINSON. What about the authority in this bill to permit you to purchase from the Public Works Administration its various securities? Mr. JONES. Well, that is what we are going to come to. Senator ADAMS. That is the next section that we want to have Mr. Jones take up. ras Lave dere Mr Ser M Senator DICKINSON. Before you take that up, as I understand it, so far as your funds are available, there would be nothing that you could use for emergency purposes other than $1,300,000,000, and that would have to be used also for the purpose of additional loans made under yur present authority. Now, what are the applications on file and that are now being considered by your organization? Have you any idea as to their amount? Mr. JONES. No. Senator DICKINSON. You are still considering new applications? Mr. JONES. Yes; we keep our work pretty well up to date. We have got, oh, a good many industrial-loan applications, for a hundred or so million. There are a great many who cannot qualify. Senator HALE. If you wanted to, could you turn in that whole $1,300,000,000 for emergency relief? Mr. JONES. Not without closing up shop. Senator HALE. And, you estimate that you will probably be able to turn over to them not over, or between $200,000,000 and $300,000,000. Mr. JONES. I should think $250,000,000 to $350,000,000 would be all that ought to be expected of our organization. There may be some more, but you gentlemen, or anybody else that has the responsibility in the matter, should not expect more than about this much from the Reconstruction Finance Corporation. Senator HALE. And, if you turned over $1,300,000,000—— Senator HALE. You would have to go out of business? Mr. JONES. We could mark time, draw our salary, go fishing. Senator DICKINSON. Well, you would have a right to exercise your judgment as to whether favorable consideration should be given new loans or as to the making of additional loans for the relief, would you not? Mr. JONES. Well, that depends upon the language of the act. Senator DICKINSON. Well, the language of the act is amply definite. Mr. JONES. What I am talking about transferring is the unallocated, unobligated balance. Senator DICKINSON. What it says is that the unobligated balances in funds of the Reconstruction Finance Corporation may, in the discretion of the President, be transferred and applied to the purposes of the Federal Emergency Relief Act. Senator MCKELLAR. What is that? Senator DICKINSON. This reads: Provided, That any savings or unobligated balances in funds of the Reconstruction Finance Corporation may, in the discretion of the President, be transferred and applied to the purposes of the Federal Emergency Relief Act of 1933. That is what this says. Senator MCKELLAR. Where would what you are saying apply there? Mr. JONES. Authority beyond our apparent requirements. Mr. JONES. It would be in part. Senator DICKINSON. That goes into a revolving fund. Mr. JONES. There would not be much interest. We are paying interest. We are lending at 4 percent, and borrowing at 3 percent. |