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Reconstruction Finance Corporation

1352

HEARINGS

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BEFORE THE

COMMITTEE ON BANKING AND CURRENCY
us.
.S. Congress. HOUSE OF REPRESENTATIVES

SEVENTY-SECOND CONGRESS

FIRST SESSION

ON THE BILLS

H. R. 5060 and H. R. 5116

TO PROVIDE EMERGENCY FINANCING FACILITIES FOR
BANKS AND OTHER FINANCIAL INSTITUTIONS

AND FOR OTHER PURPOSES

DECEMBER 18, 1931, AND JANUARY 5, 6, AND 7, 1932

UNITED STATES
GOVERNMENT PRINTING OFFICE

WASHINGTON : 1932

COMMITTEE ON BANKING AND CURRENCY

HENRY B. STEAGALL, Alabama, Chairman
CHARLES H. BRAND, Georgia.

LOUIS T. McFADDEN, Pennsylvania.
WILLIAM F. STEVENSON, South Carolina. JAMES G. STRONG, Kansas.
T. ALAN GOLDSBOROUGH, Maryland. ROBERT LUCE, Massachusetts.
ANNING S. PRALL, New York.

GUY E. CAMPBELL, Pennsylvania.
JEFF BUSBY, Mississippi.

CARROLL L. BEEDY, Maine. MICHAEL K. REILLY, Wisconsin.

JOSEPH HOOPER, Michigan. FRANK HANCOCK, North Carolina.

GODFREY G. GOODWIN, Minnesota. CLYDE WILLIAMS, Missouri.

BENJAMIN M. GOLDER, Pennsylvania.
PERCY H. STEWART, New Jersey.

FRANCIS SEIBERLING, Ohio.
WESLEY E. DISNEY, Oklahoma.
WILLIAM L. TIERNEY, Connecticut.

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HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met at 10.30 o'clock a. m., Hon. Henry B. Steagall (chairman) presiding.

The CHAIRMAN. The committee will this morning consider H. R. 5060 and 5116, which are as follows:

[II. R. 3060, Seventy-second Congress, first session)

A BILL To provide emergency financing facilities for banks and other financial institu

tions, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That there be, and is hereby, created a body corporate with the name “Recnstruction Finance Corporation (herein called the corporation). This act may be cited as the reconstruction finance corporation act.

SEC. 2. The corporation shall have capital stock of $500,000,000, all subscribed by the United States of America, payment for which shall be subject to call in whole or in part by the board of directors of the corporation, with the approval of the Secretary of the Treasury, at such time or times as may be deemed advisable. There is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $500,000,000, for the purpose of making payments upon such subscription when and as called. Receipts for payments by the United States of America for or on account of such stock shall be issued by the corporation to the Secretary of the Treasury and shall be evidence of the stock ownership of the United States of America.

SEC. 3. The management of the corporation shall be vested in a board of directors consisting of the Secretary of the Treasury, the governor of the Federal Reserve Board, and the farm loan commissioner, who shall be memHers ex officio, and two other persons appointed by the President of the United States by and with the advice and consent of the Senate. Each director shall devote his time not otherwise required by the business of the United States principally to the business of the corporation. Before entering upon his duties each of the two directors so appointed and each officer of the corporation shall take an oath faithfully to discharge the duties of his office. Nothing contained in this or in any other act shall be construed to prevent the appointment and compensation as a director, ofiicer, or employee of the corporation of any officer or employee of the United States in any board, commission, independent establishment, or executive department thereof. The terms of the two directors so appointed by the President of the United States shall be five years from the date of the enactment lereof, and thereafter the term of each director so appointed shall be five years from the date of the expiration of the term for which his predecessor was appointed. When ever a vacancy shall o cur among the directors so appointe l the person appointed to fill such vacancy shall hold office for the unexpired portion of the term of the director whose

place he is selected to fill. The two directors of the corporation appointed as hereinbefore provided shall receive salaries at the rate of $12,000 per annum each: Provided, That any director receiving from the United States any salary or compensation for other services shall not receive as salary from the corporation any amount, which, together with any salary or compensation received from the United States, would make the total amount paid to him by the United States and by the corporation exceed $12,000 per annum.

SEC. 4. The corporation shall have succession for a period of ten years from the date of the enactment hereof, unless it is sooner dissolved by an act of Congress. It shall have power to adopt, alter, and use a corporate seal; to make contracts, to purchase or lease and hold or dispose of such real estate as may be necessary or convenient for the transaction of its business; to sue and be sued, to complain and to defend, in any court of competent jurisdiction, State or Federal; to select, employ, and fix the compensation of such officers, employees, attorneys, and agents as shall be necessary for the transaction of the business of the corporation, without regard to the provisions of other laws applicable to the employment and compensation of officers or employees of the United States; to define their authority and duties, require bonds of them and fix the penalties thereof, and to dismiss at pleasure such officers, employees, attorneys, and agents; and to prescribe, amend, and repeal, by its board of directors, by-laws, rules, and regulations governing the manner in which its general business may be conducted and the powers granted to it by law may be exercised and enjoyed, including the selection of its chairman and vice chairman, together with provision for such committees and the functions thereof as the board of directors may deem necessary for facilitating its business under this act. The board of directors of the corporation shall determine and prescribe the manner in which its obligations shall be incurred and its expenses allowed and paid. The corporation shall be entitled to the free use of the United States mails in the same manner as the executive departments of the Government. The corporation, with the consent of any board, commission, independent establishment or executive department of the Government, including any field service thereof, may avail itself of the use of information, services, facilities, officers, and employees thereof in carrying out the provisions of this act. The corporation shall have such incidental powers as its board of directors shall deem necessary or expedient in carrying out the provisions of this act.

Sec. 5. The corporation is authorized and empowered to make loans, upon such terms and conditions not inconsistent with this act as it may determine, to any bank, banker, savings bank, trust company, clearing house, or other association of banking institutions, building and loan association, insurance company or other financial institution in the United States (herein referred to as financial institutions). All such loans shall be fully and adequately secured in such manner as the corporation shall require. The corporation, under such conditions as it shall prescribe, may take over or provide for the administration and liquidation of any collateral accepted by it as security for such loans. Such loans may be made directly upon promissory notes of such financial institutions, or by way of discount or rediscount of obligations tendered by them for the purpose, or otherwise, in such form and in such amount and at such interest or discount rates as the corporation may approve. Each such loan may be made for a period not exceeding three years, and the cor-. poration may from time to time extend the time of payment of any such loan, through renewal, substitution of new obligations, or otherwise, but the time for such payment shall not be extended beyond five years from the date upon which such loan was made originally. The corporation may make loans under this section at any time prior to the expiration of one year from the date of the enactment hereof; and the President may from time to time postpone such date of expiration for such additional period or periods as he may deem necessary, not to exceed two years from the date of the enactment hereof. Within the foregoing limitations of this section, the corporation may also make loans to or aid in the temporary financing of steam railroads engaged in interstate commerce, when in the opinion of the board of directors of the corporation such railroads are unable to obtain funds upon reasonable terms through banking channels or from the general public and the corporation will be adequately secured.

Sec. 6. Section 5202 of the Revised Statutes of the United States as amended (U. S. ('. Title 12, ch. 2, sec. 82) is hereby amended by striking out the words

War Finance Corporation act” and inserting in lieu thereof the words “Reconstruction Finance Corporation act."

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SBc. 7. All moneys of the corporation not otherwise employed may be deposited with the Treasurer of the United States, subject to check by authority of the corporation, or in any Federal reserve bank, or may, by authorization of the board of directors of the corporation, be used in the purchase or redemption of any notes, debentures, bonds, or other obligations issued by the corporation, The Federal reserve banks are authorized and directed to act as depositaries, custodians, and/or fiscal agents for the reconstruction finance corporation in the general performance of its powers conferred by this act.

SEC. 8. In order to enable the corporation to carry out the provisions of this act, the Treasury Department, the Comptroller of the Currency, the Federal Reserve Board, the Federal reserve banks, and the Interstate Commerce Commission are hereby authorized, under such conditions as they may prescribe, to make available to the corporation in confidence such reports, records, or other infomation as they may have available relating to the condition of financial institutions and/or railroads with respect to which the corporation has had or contemplates having transactions under this act, or relating to individuals, associations, partnerships, or corporations whose obligations are offered to or held by the corporation as security for loans to financial institutions or railroads under this act, and to make through their examiners or other employees for the confidential use of the corporation examinations of such financial institutions or railroads. Every applicant for a loan under this act shall, as a condition precedent thereto, consent to such examinations as the corporation may require for the purposes of this act and/or that reports of examinations by constituted authorities may be furnished by such authorities to the corporation upon request therefor.

SEC. 9. The corporation is authorized and empowered, with the approval of the Secretary of the Treasury, to issue, and to have outstanding at any one time in an amount aggregating not more than three times its subscribed capital, its notes, debentures, bonds, or other such obligations; such obligations to mature not more than five years from their respective dates of issue, to be redeemable at the option of the corporation before maturity in such manner as may be stipu. ‘lated in such obligations, and to bear such rate or rates of interest as may be determined by the corporation : Provided, That the corporation, with the approval of the Secretary of the Treasury, may sell on a discount basis shortterm obligations payable at maturity without interest. The notes, debentures, bonds, and other obligations of the corporation may be secured by assets of the corporation in such manner as shall be prescribed by its board of director's. Such oligations may be issued in payment of any loan authorized by this act or may be offered for sale at such price or prices as the corporation may determine, with the approval of the Secretary of the Treasury. In the event that the corporation shall be unable to pay upon demand, when due, the principal of or interest on notes, debentures, bonds, or other such obligations issued by it, the Secretary of the Treasury shall pay the amount thereof, which is hereby authorized to be appropriated, out of any moneys in the Treasury not otherwise appropriated, and thereupon to the extent of the amounts so paid the Secretary of the Treasury shall succeed to all the rights of the holders of such notes, debentures, bonds, or other obligations. The Federal reserve banks shall have the same powers (1) to discount notes, drafts, and bills of exchange secured by obligations issued by the corporation under this act, (2) to make advances to member banks on their notes secured by such obligations, (3) to use all paper so acquired, and (4) to purchase and sell such obligations, as they have with respect to bonds and/or notes of the United States: Provided, That the rate at which any such discount or advance shall be made by any Feveral reserve bank shall be 1 per centum per annum above its discount rate on ninetyday commercial paper then in effect.

SEC. 10. Any and all notes, debentures, bonds, or other such obligations issued by the corporation shall be exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, by any Territory. dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. The corporation, including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority, except that any real property of the corporation shall be subject to State, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.

SEC. 11. In order that the corporation may be supplied with such forms of notes, debentures, bonds, or other such obligations as it may need for issuance

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