Mr. PATMAN. No. They just take the par value. I have never known any one of them taking less than the par value.

Mr. GOLDSBOROUGH. In every State?

Mr. PATMAN. I don't say that that is true in every State, but I have never known of any, myself.

But let me ask you this: In those 31 States that have selected this method are we going to change it? Are we going to put them at a disadvantage? Are the Members of Congress going to say to the assessor, "Stay out of the national banks. They are entitled to a 50 percent reduction," but the national bank that has not sold any stock to the Reconstruction Finance Corporation has to pay upon this $100,000 like they always have paid.

Mr. CROSS. When you take a debenture or when you take preferred stock in a national bank, it is just simply like a loan, a promissory note.. You are loaning them so much money. That is what you are doing.

When you go to determine the value of the stock of that bank, you take their liabilities, and you ask what the stock is really worth, what is against it, what are the libalities, and what are the assets. Then the assessor assesses the value of that property, what it really is worth when you deduct the liabilities. Whether it be one or the other, it amounts to the same thing, doesn't it?

Mr. PATMAN. Listen, Mr. Cross. But you are taking that power away from the assessor. If you pass this bill that you have before you, you are saying to the assessor: "You have that right, but I am going to deny you that right. Heretofore you have had that right, but I am going to deny you that right. I am going to say to the local tax collector in Waco, to this bank located at Waco, Tex., that you will have to reduce that 50 percent."

Of course, it is going to put an additional burden on the adjoining property owners here, because, when you pass a law and say you cannot do it

Mr. CROSS. Just a minute. Take a bank that owes a lot of money or it has liabilities. It simply goes to the Reconstruction Finance Corporation and borrows money and transfers those liabilities from the debts that it owes to the Reconstruction Finance Corporation.

Now, you are still in the same fix. The stock is worth just as much and no more. When you have deducted the liabilities, you are taxing upon the real value of the thing. And it is the same way with the State banks.

Mr. PATMAN. But the point is, Mr. Cross, that this bill creates discriminations instead of removing discriminations. The State banks will have to continue to pay taxes on the same basis as heretofore.

Mr. GOLDSBOROUGH. And so will the national bank.

Mr. PATMAN. No; it won't. You are giving them here, by congressional act, a 50-percent tax reduction.

Mr. HOLLISTER. Do you have your Texas statute here?

Mr PATMAN. I don't have it with me.

Mr. HOLLISTER. But you have read it?

Mr. PATMAN. Yes. I have read quotations from it that were given

to me by the comptroller at Austin.

Mr. HOLLISTER. But doesn't the State of Texas

Mr. PATMAN. But you must remember that you don't assess the banks in Texas at the par value of the stock. You take the capital stock according to the valuation just like any other property. You take the capital stock, the surplus, and the undivided profits, and add them together and deduct the value of the real estate. That is the way you assess in Texas.

Mr. HOLLISTER. And add the debentures?

Mr. PATMAN. You deduct them, do you say?

Mr. HOLLISTER. Yes.

Mr. PATMAN. Oh, you are mistaken. You are trying to give them privileges that others don't have.

Mr. HOLLISTER. Then there is no discrimination.

Mr. PATMAN. Yes. There is discrimination, because shares of stock are not debentures.

Mr. HOLLISTER. If you are trying to tell us that debentures of the State banks of Texas are taxed, they are not.

Mr. PATMAN. I am not trying to say any such thing. I have never said that in my life.

Mr. CROSS. Let me tell you why your position would not be sound. Mr. PATMAN. I beg your pardon. I said that the taxes are based upon the equities in Texas.

Mr. CROSS. Regardless of its value?

Mr. PATMAN. If they assess real estate at 75 cents on the dollar of its value, they assess the bank stock at 75 cents on the dollar.

Mr. WILLIAMS. Let me ask you this: Take this case of a bank having a capital stock of $500,000. You have said repeatedly that that bank paid on that amount of stock.

Mr. PATMAN. It did.

Mr. WILLIAMS. The taxing authorities, the financing authorities, come along as they did in that particular case, as I understand it

Mr. PATMAN. Yes.

Mr. WILLIAMS. And require them to charge off there $300,000 and to that extent reduce the actual value of that stock to $200,000. Now, do you still say

Mr. PATMAN. The taxing authorities did not do that.

Mr. WILLIAMS. Do you still say

Mr. PATMAN. You are trying

Mr. WILLIAMS. Wait a minute. Let me ask you the question. Do you still say that the State of Texas would tax that $500,000 notwithstanding the fact that it had been determined that it was not worth more than $200,000?

Mr. PATMAN. Upon determination by whom? The taxing authorities or some board here in Washington?

Mr. WILLIAMS. By the bank authority.

Mr. PATMAN. And what is that?

Mr. WILLIAMS. By the authorities who run the bank.

Mr. PATMAN. Oh, I know. If you leave it to them, they won't pay anything.

to

Mr. WILLIAMS. They require them to charge off that amount, due to the fact that the stock was so impaired that it became necessary borrow $250,000 to replace that stock.

Mr. PATMAN. All right. Let me ask you a question. Suppose the authorities have increased it since that time to where it was worth more than it was before.

Mr. WILLIAMS. By direction of the board of directors?

Mr. PATMAN. They approve it.

Mr. WILLIAMS. They approve it?

Mr. PATMAN. Yes. They have increased it.

Mr. WILLIAMS. Your question is if the stock

The CHAIRMAN. If the bank has increased it, that would increase the value of the common stock regardless of the amount

Mr. PATMAN. Oh, no; but they would not assess it at more than par value. I never heard of

The CHAIRMAN. You say they would assess it for more than the par value?

Mr. SISSON. It would be the fault of the assessing authorities of the State.

Mr. PATMAN. Maybe it would be. I don't say that it is so, because I am not familiar with that.

Mr. GOLDSBOROUGH. You come here and try to destroy legislation when you say

Mr. PATMAN. That is merely an incidental part. The principle involved is greater than that, my dear sir.

Mr. GOLDSBOROUGH. The principle involved?

Mr. PATMAN. Yes.

Mr. GOLDSBOROUGH. What principle are you reasoning from? Mr. PATMAN. The principle is this: That you want to deny your local authorities the right to assess property like they have always done.

Mr. GOLDSBOROUGH. Absolutely. I have fought for over 16 years to give the State authorities the absolute right to tax shares of national banks.

Mr. PATMAN. That is the reason why I cannot understand why you now want to take it way.

Mr. GOLDSBOROUGH. But here the Reconstruction Finance Corporation is in a manner the Federal Government. All of its stock is owned by society. They go into a community where the institutions are unwilling to subscribe to the stock, and they save the institution. They do that for the purpose of helping the institution that far, so that it can perform service in the community. Why, you might as well advocate taxing the United States Government for the occupancy by its troops of the trenches in France.

Mr. PATMAN. I think the gentleman is entirely incorrect.
Mr. GOLDSBOROUGH. You talk about a principle-

Mr. PATMAN. I think that you are going to see it like I see it, sometime. When you do, you are going to hate the day that you voted for this bill.

Mr. HANCOCK. Will the gentleman yield for just one or two questions?

Mr. PATMAN. Yes.

Mr. HANCOCK. The main reason assigned by you in your debate on the floor in opposing this bill was, that most communities would be deprived of a great deal of their taxable value of property in which they have a vested interest.

Mr. PATMAN. That is right.

Mr. HANCOCK. Where would the local community that you had in mind, or the communities that you had in mind, have gotten the assets from, if the Reconstruction Finance Corporation had not purchased debentures or preferred stock in the institution?

Mr. PATMAN. Mr. Hancock, I don't think that is material, for this reason: I think it is based upon the theory that because you have helped them, you should keep on helping them; and I don't agree with that.

Mr. HANCOCK. Let me see if you agree with this: Isn't it a fact tha wherever this campaign has touched, whatever point this campaign of the Reconstruction Finance Corporation has touched, the values of institutions have been increased three or four or five times the amount that the bank might have had, so far as its preferred stocks and debentures are concerned?

Mr. PATMAN. I concede that the banks have been helped. I appreciate the fact that the Reconstruction Finance Corporation has done a good job. This is not a personal matter between Mr. Jesse Jones, of the Reconstruction Finance Corporation, and me.

Mr. HANCOCK. Of course not. Nobody has insinuated that at all. Mr. PATMAN. I thought you said that the Reconstruction Finance Corporation had done such a good job.

Mr. SISSON. The common stock has been increased.

Mr. HANCOCK. Is there a community in the United States, to your knowledge, that has not been benefited wherever the Reconstruction Finance Corporation has purchased debentures or preferred stock in the banks?

Mr. PATMAN. In every community in which they have put their money, all have been benefited.

But, because they have, do you mean that we have to keep on giving them tax-exemptions? Do you mean that because somebody helped the chairman of this committee, they have to keep on helping him?

Mr. HANCOCK. Is there a single institution which has not been affected by this campaign whose other properties have not been materially enhanced as the result of this campaign?

Mr. PATMAN. That is not material to this, Mr. Hancock, the way I view it. I have been getting telegrams from the president of the Texas Bankers Association asking me to vote for this bill.

I am just going to give you one case as an illustration. This is of a man—and he is worth every dollar that the bank pays him—but the Republic National Bank & Trust Co. of Dallas purchased 2 million dollars worth of preferred stock in the Reconstruction Finance Corporation. That is the bank that he is the president of. Now, if you pass the bill, it will save his bank $86,000 a year.

Somebody will have to make it up to help support the schools and the roads of the county of Dallas. The State of Texas will lose $86,000 a year.

They pay that man a salary of $30,000 a year. If they are able to pay salaries like that, although the man may be worth it, they are certainly able to pay their local taxes like anyone else.

Mr. HOLLISTER. Are you through?

Mr. PATMAN. I am.

Mr. HOLLISTER. You say that this bill will save that bank $86,000 a year?

Mr. PATMAN. Yes.

Mr. HOLLISTER. It is the Reconstruction Finance Corporation that they save it for, isn't it?

Mr. PATMAN. Oh, no; the bank has always paid this tax. You cannot make me believe that Mr. Jesse Jones got himself into a mess on this, so that the Reconstruction Finance Corporation would have to pay the tax.

Mr. HOLLISTER. Let me ask you a question here.

Mr. PATMAN. Let me finish, please.

Mr. HOLLISTER. We are the committee, and you are appearing before the committee. We let you finish. Now you let us finish. Mr. PATMAN. All right. I will let you finish

Mr. HOLLISTER. If this bill is so worded that it will save the tax to the bank and not to the Reconstruction Finance Corporation, we should appreciate it very much if you would give us language to put in the bill so as to make it perfectly plain that this can only mean that it will save the tax to the Reconstruction Finance Corporation.

If what you say is true, that it is not a question of saving the bank tax, it is a question of saving the tax to the Reconstruction Finance Corporation, which is what this committee wants to do, if you are convinced that it is not properly worded, we would appreciate it very much if you would give us the wording that would make that clear. Mr. PATMAN. I think that you have worded it to do just what you wanted it to do. You have used words and phrases that will demonstrate just exactly what you are trying to do. I don't mean that you are trying to deceive anybody. You are not. I am just saying that this is worded in the way that it will accomplish what you Iwant it to do.

You can call it a protecting amendment or you can call it a qualifying amendment. It is called a qualifying amendment here. Remember, all of the bad legislation that ever went through and destroyed the Federal Reserve Act was called protective amendments. This is called a qualifying amendment; and I think that from your viewpoint you have used the right words to accomplish your end.

Mr. HOLLISTER. Do you mind my finishing?

Mr. PATMAN. You have worded it so that they are exempt.

Mr. HOLLISTER. Exempt from taxation when they are in the hands of the Reconstruction Finance Corporation.

Mr. PATMAN. Yes; they are exempt.

Mr. HOLLISTER. You wanted us to correct you if you were wrong. You said that they were exempt. Exempt from what?

Mr. PATMAN. That is right, but you are going further than that, in this bill.

Mr. HOLLISTER. Then give us the wording. If this doesn't exempt them, how would you word it so as to exempt them in the hands of the Reconstruction Finance Corporation?

Mr. PATMAN. You don't need any language in this bill. Taxing is what I want done.