poration legislation, as embodied in H. R. 5060 and H. R. 5116. Would you like to pursue the discussion further without interruption, in addition to the statement made by you at the former hearing? If so, we will be glad to hear you further.

Mr. MEYER. Thank you, Mr. Chairman.

The CHAIRMAN. Then, until such point as you desire to be interrupted, we will be glad to have you proceed.

Mr. MEYER. I think I had finished my general statement, Mr. Chairman. You gave me a generous allowance of time, and I not only covered the principles of the proposition, but discussed the provisions of the bill in a general way. I would prefer, therefore, to answer any questions that may occur to you or the members of the committee.

The CHAIRMAN. I want to ask you, Governor Meyer, if the language in the bill is broad enough and if it is intended that the funds of the corporation shall be used for loans upon the assets of closed banks?

Mr. MEYER. The bill in its present form would not permit such loans, Mr. Chairman. It would, however, permit the corporation to assist in the reopening of a bank by making loans to a new institution organized for the purpose of taking over some of the assets of the closed bank and assuming its liabilities in whole or in part. The bill is not intended, and does not authorize advances to receivers of closed banks. That matter, I think, was expected to be dealt with in a separate bill.

Mr. STRONG. Is there any more reason why an effort should be made to repay stockholders and depositors in a bank permanently closed than it would be to repay a man who lost money in any other investment?

Mr. MEYER. It is assumed, Mr. Congressman, that depositors will receive ultimately, in liquidation, repayment of a substantial proportion, if not all, of their deposits. I do not think the chairman meant to ask whether or not this corporation would assume the deposit liabilities of closed banks. I do not think that was your intention, was it?

The CHAIRMAN. No; I did not have that thought in mind.

Mr. STRONG. I have several letters from persons who evidently had some deposits in closed banks, and of which they did not expect to get a very large dividend but who thought in some way the Treasury was going to reimburse them for their losses. Of course no such action is contemplated by Congress?

Mr. MEYER. I did not understand the chairman's question to cover any such proposal.

Mr. STRONG. All right.

The CHAIRMAN. No; I had no thought of any effort to take care of the losses of depositors in closed banks. In fact, I do not understand that the purpose is to take care of the losses of any character. What I had in mind was loans to liquidating agents and only for the purpose of effecting a realization upon the assets of banks that have been closed and which are in process of liquidation, and to aid in reorganization or liquidation, thereby granting relief from those conditions in communities where business activity and trade are tied up and disturbed by the failure of local banks.

Mr. DISNEY. Is this what might be called a "revolving fund" in common parlance; is it a revolving fund plan?

The CHAIRMAN. I presume the capital stock is to be treated as a revolving fund.

Mr. MEYER. There is a great deal of merit in the idea that something should be considered from the point of view of facilitating the payment of dividends by receivers of closed banks, along the lines you have in mind. It was felt, Mr. Chairman, that this corporation would have such a large task and such a wide scope of operations, under the bill as drawn, that perhaps it might be better to develop the idea and perhaps find a way of covering that matter, which is one of very great interest, in a subsequent measure.

The Senate committee conducted hearings on an identical bill before the holidays, and quite a large amount of testimony was submitted by various witnesses, but only one of them testified, I think, that he thought provision for advances to receivers of closed banks should be included in the bill.

The require the corporation to make advances to receivers of closed banks would, I think, be loading it with a tremendous additional administrative task, and would possibly hamper the operation to some extent and retard the speed with which it could begin to function in meeting problems that are even more pressing, not minimizing, however, the importance of the suggestion you are making, Mr. Chairman.

The CHAIRMAN. I can readily understand the view that it would be more important to avert, if it could be done, the collapse of a banking institution than to attempt the work of relieving those who are interested in the assets of an institution that has been closed. But if it were possible under this bill to render assistance in both cases, it seems to me there would be instances where it would be highly desirable and highly promotive of business recovery and revival if we could grant this relief; of course, always under the control of the board, exercising its discretion?

Mr. MEYER. Yes.

The CHAIRMAN. And with due regard to preserving the assets of the corporations, but to make such loans in such manner and upon such security and in instances where there was peculiar need for such relief in communities suffering from bank collapses.

Mr. MEYER. I agree fully on the desirability of considering a measure to deal with that phase of the situation and do not underestimate its importance. Some time ago in September, I think it was-I wrote letters to the governors of the Federal reserve banks, asking them to canvass with local bankers the problem of devising ways and means by which, in proper cases, advances might be made by commerical banks to facilitate the payment of dividends to depositors of closed banks; and a good deal of that sort of work has been done. In some cases advances as high as 50 per cent have been made, such advances to be repaid out of the proceeds of the assets of the closed institutions. The Comptroller of the Currency, I understand, has been speeding up the distribution of dividends wherever it could be done; and a great deal of money has been paid out by the receivers of closed banks, both National and State.

I think it is generally the feeling that the matter is one that should be taken up without undue delay, but, nevertheless, it should be given

2.

sufficient consideration to see that whatever is done is done in a sound way, perhaps through legislation of a continuing or permanent character the Reconstruction Finance Corporation, as you know, will be a temporary institution.

The CHAIRMAN. I fully appreciate that.

Mr. MEYER. The problem of liquidating closed banks is, of course, a permanent proposition.

The CHAIRMAN. I appreciate that. But I would also express the view that everything we are attempting to do here is just as important as a permanent undertaking.

Mr. MEYER. We hope not

The CHAIRMAN. We would like to cure every situation permanently that we attempt to deal with in this bill, if we can, some plan of permanent law for dealing with the assets of closed banks. I. of course, realize that it must be worked out along sound lines. I have had that view for quite a while.

Mr. MEYER. This institution will have a lending period of one year, which may be prolonged for not to exceed another year; loans may be for periods not exceeding three years, and can not be extended beyond five years from the dates on which they are originally made. The closed-bank problem, I think, ought to be considered from the point of view of permanent treatment, instead of attempting to deal with it in a temporary way through this temporary institution.

The CHAIRMAN. It would be my thought that any temporary plan that might be considered as embodied in this legislation would have its place here along with temporary emergency plans, but purely supplemental of or in support of legislation of a permanent character, and not in any sense in conflict with it. That would be my suggestion.

Mr. MEYER. It is, of course, a matter for the Congress to decide, but I think it would be better to treat it as a separate problem and on a permanent basis, although it has emergency proportions.

The CHAIRMAN. Is not this true, when you analyze it, that the difficulties to which I refer, growing out of the failure to realize on assets in banks in process of liquidation, is, in the larger sense, a temporary difficulty?

We are hoping, are we not, that certainly by the time this corporation terminates we will reach the end of bank failures at least in large measure. We hope for that.

Mr. MEYER. I certainly hope the situation will have changed long before that time.

The CHAIRMAN. I hope so, too. If we were to attempt to set up separate machinery for the relief of the frozen assets in a closed bank to cover that entire difficulty both for the present and for the future, it would take a very different piece of legislation to accomplish that and larger funds than it would if we were dealing with a temporary requirement in that connection and then to attempt by a smaller financial organization or method to handle the other difficulties along permanent lines. It has occurred to me that that was peculiarly a temporary necessity, and that therefore probably the better place for it would be in connection with this legislation.

Mr. MEYER. That is a matter for you gentlemen to decide.

The CHAIRMAN. If I understand you, do you make the statement that Federal reserve banks have been making loans?

Mr. MEYER. Oh, no; I asked the governors of the Federal reserve banks, as leaders in the banking world in their own communities, to interest themselves in enlisting the cooperation of the bankers in their districts. The Federal reserve banks themselves could not make any advances to the receivers or depositors of closed banks. The CHAIRMAN. I am sure you do not mean to convey the idea that they could.

Mr. MEYER. Occasionally, under special conditions and in the public interest, the governors of the banks may be called upon to cooperate with local bankers in matters which are not strictly Federal reserve bank business.

The CHAIRMAN. You can readily understand, Governor Meyer, that in some communities in the country we must approach the difficulties in the banking world from the standpoint of banks that are in process of liquidation, because we have very few still running in many places.

Mr. STEVENSON. In reference to the relief of the depositors in failed banks: That is a matter that would more properly be controlled by the bureau of failed banks and their organization? Mr. MEYER. You mean in the comptroller's office?

Mr. STEVENSON. Yes.

Mr. MEYER. So far as national banks are concerned.

Mr. STEVENSON. Now, if we were to set up machinery to help the depositors in those failed banks it would be merely a machinery for buying the assets that are of any value in those banks, I take it? Mr. MEYER. Making advances secured by those assets.

Mr. STEVENSON. When the banks are in the hands of a receiver, there is no power to borrow.

Mr. MEYER. Any legislation that might be enacted should cover that point and give the receivers of failed national banks power to borrow.

Mr. STEVENSON. And give some institution, if you please, the power to loan?

Mr. MEYER. Yes.

Mr. STEVENSON. And naturally the comptroller's bureau of failed banks, I will say from my experience, are a pretty efficient crowd, and that would be a pretty good nucleus itself with which to build an organization to take care of that situation.

The CHAIRMAN. Would we not encounter this difficulty in any legislation giving the comptroller power to grant relief of this character? Would you not run into the difficulty of dealing with two systems-State banks and National banks-whereas this emergency corporation set up in this bill would be free from any difficulty in that connection and in just as good position to extend relief under the machinery of this legislation to State banks as it would be in a case of National banks?

Mr. MEYER. Legislation could be enacted by Congress which would cover both State and National banks. It would not be necessary to restrict it to National banks; a separate fund could be set up for the purpose of making loans to receivers of both State and National banks. In other words, Mr. Chairman, the alternative is not between this bill and a bill dealing only with closed National banks. The CHAIRMAN. Not necessarily so. But it occurred to me there would be an inharmonious situation should we attempt legislation

putting the machinery in the hands of the comptroller to grant this relief; that there would be difficulty as to State banks that would not exist if we authorized that relief through the machinery of this legislation.

Mr. BUSBY. I want to ask you if the Federal reserve advocates the measure that is presented here by you, known as H. R, 5060? Mr. MEYER. What do you mean by the "Federal reserve "-the board?

Mr. BUSBY. Yes.

Mr. MEYER. I am governor of the board. The board has not passed on this measure.

Mr. BUSBY. It is in harmony with the administration's idea of what ought to be done-I will put it that way?

Mr. MEYER. I think it is. But, as I stated at the last hearing, the details of the measure are subject to discussion, and I suggested some amendments at that time.

Mr. BUSBY. Surely.

Mr. MEYER. I made a few suggestions at the last hearing.

Mr. BUSBY. I have no criticism of that, but what I wanted to get at was the purpose of our assembling here, and it was my understanding that we were trying to do something before it was too late to save live banks, instead of dealing with dead ones, that is, those in the hands of receivers and those broke; that the two subjects are not related at all, and that we are tweedling our thumbs in discussing the question of reclaiming closed institutions when we ought to be trying to save some of these which are still up and going, and that will join the ranks of the inactive, if we keep on talking about what should be done for those which already have their doors closed.

Mr. MEYER. I think, as Mr. Busby states, that time is important and that delay is undesirable. However, I do not feel that the question is one that should not be discussed, Mr. Busby.

Mr. BUSBY. I do not think so.

Mr. MEYER. We ourselves thought of it a good deal when the bill was being drafted.

Mr. BUSBY. But, so far as I have been able to familiarize myself with the bill, I do not think it is one of the matters that is yet incorporated in it.

Mr. MEYER. I gave the committee the reasons for not including in the bill authority to make advances to receivers of closed banks. It was felt, not that the question should not be considered, but that it would be better to deal with it in separate legislation.

Mr. BUSBY. I agree with you, so far as my judgment goes, that the legislation dealing with closed banks should be enacted and there should be a separate bill considered from the separate standpoint; but that haste, being one of the elements that we must regard now, we ought to go ahead with legislation that would give confidence and strength to banks that are yet trying to do business-banks that have their doors open. My understanding is that that is the purpose of our assembling here in such haste to consider the measure that is before us. What is your idea in that regard?

Mr. STRONG. If it is in order, I would like to make a motion to read the bill 5060 for amendment.

Mr. BUSBY. All right.