TRANSFER LAVACA COUNTY, TEX., FROM HOUSTON DIVISION TO VICTORIA DIVISION

JANUARY 8, 1932.-Referred to the House Calendar and ordered to be printed.

Mr. SUMNERS of Texas, from the Committee on the Judiciary, submitted the following

REPORT

[To accompany H. R. 6304]

The Committee on the Judiciary, to whom was referred the bill H. R. 6304, after consideration, reports the bill favorably with amendments and recommends that the bill as amended do pass.

The committee amendments are as follows:

Line 3, strike out the figures "25" and insert in lieu thereof the figures "28".

Line 7, after the word "Texas", strike out the period, insert a colon and the following language:

Provided, That no civil or criminal cause commenced prior to the enactment of this act shall be in any way affected by it.

This bill transfers Lavaca County from the Houston division to the Victoria division of the southern district of Texas.

The bill is recommended by 10 of the 13 members of the Lavaca County Bar, as well as the attorney general, who, in a communication to the chairman of the committee, Hon. Hatton W. Sumners, on December 29, 1931, said:

All points in Lavaca County are nearer to Victoria than to Houston and it would undoubtedly be of advantage to the Government, as well as to litigants residing in Lavaca County, to attend court in Victoria rather than in Houston. In accordance with Rule XIII as amended, there is printed below in brackets that part of the law which is repealed by this bill, and showing in italics the new language:

The southern district shall include the territory embraced on July 1, 1910 in the counties of Brazos, Colorado, Fayette, Grimes, Harris, [Lavaca], Madison, Montgomery, Polk, San Jacinto, Trinity, Walker, and Waller, which shall constitute the Houston division; also the territory embraced on May 29, 1912, in the counties of Calhoun, De Witt, Goliad, Jackson, Lavaca, Refugio, and Victoria, which shall constitute the Victoria division

CREATION OF A RECONSTRUCTION FINANCE
CORPORATION

JANUARY 9, 1932.-Committeed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. STEAGALL, from the Committee on Banking and Currency, submitted the following

REPORT

[To accompany H. R. 7360]

The Committee on Banking and Currency, to whom was referred the bill (H. R. 7360) to provide emergency financing facilities for financial institutions to aid in financing agriculture, commerce, and industry, and for other purposes, having considered the same, report favorably thereon with the recommendation that the bill do pass. The measure provides for the creation of a corporation with capital stock of $500,000,000 to be subscribed by the Treasury of the United States, with a board of directors, to be composed of the Secretary of the Treasury, the Governor of the Federal Reserve Board, the Secretary of Agriculture, and four directors, two of whom shall be appointed by the President of the United States and two of whom shall be appointed by the Speaker of the House of Representatives, and who shall be confirmed by the Senate. The term of office of the directors of the corporation is fixed at five years and the salary prescribed is $10,000 each. The corporation is authorized to issue its obligations to an amount aggregating not more than three times its subscribed capital, which obligations are to mature not more than five years from their dates of issue and which are guaranteed by the Treasury of the United States. The corporation is authorized to make loans for a period of one year and the President is authorized to extend the time for making loans one additional year. The obligations issued by the corporation are to be exempt from all taxation, except surtaxes, estate, inheritance, and gift taxes. It is provided that loans that may be made shall not exceed 10 per cent of the capital and obligations which the corporation is authorized to issue, and it is provided that the corporation shall not make any loans upon foreign securities or for carrying or liquidating such securities or acceptances.

The purpose of the bill, as indicated by the title, is to provide emergency financing facilities for financial institutions to aid in financing agriculture, commerce, and industry and for other purposes. The necessity for such relief is recognized on all hands. Agriculture is suffering to a point that has alarmed all students of public affairs. The farmers of the country are borne down by the burdens of debt and taxation. Thousands of them face the loss of their homes and complete bankruptcy. Trade and commerce have been curtailed and industry in many instances has collapsed. A prime underlying cause of all this is the disintegration of our banking system.

The records show that there have been during the year just ended 2,290 bank failures with deposits of $1,759,000,000. Of these failures 410 were national banks with deposits of $473,000,000. One hundred and eight State banks that were members of the Federal reserve system suspended business with deposits of $302,000,000. During the last quarter of 1931 there were 1,049 bank failures, 199 of which were national banks and 51 of which were State banks that were members of the Federal reserve system. During the month of October, 1931, there were 522 bank failures, 100 of which were national banks and 25 of which were State banks that were members of the Federal reserve system. During the month of December, 1931, there were 353 bank failures, 64 of which were national banks and 18 were State banks that were members of the Federal reserve system. Failures are still occurring in large numbers. During the month of December the failing banks that were members of the Federal reserve system had deposits of $133,000,000.

The best advices are that the net losses to depositors in failed banks will average about 50 per cent. There are, of course, no definite figures on the subject, but this estimate may be accepted as fairly reliable. The total net losses by depositors in national banks and banks that were members of the Federal reserve system from the enactment of the national banking law down to 1930 was about $80,000,000-an amount not far in excess of the total net losses of depositors incurred during the single year of 1931. These figures tell the story of what is happening to the banking structure of the United States. It presents an emergency that demands swift and effective action if relief is to be afforded in time to prevent most serious and farreaching developments. The outstanding difficulty that confronts us springs from the loss of confidence and the general state of fear that has been created. Meantime, the banks that are members of the Federal reserve system find themselves without such paper to offer for rediscount as the Federal reserve banks will accept. State banks that are members of the Federal reserve system are in the same situation, and State banks that are not members of the Federal reserve system are in the midst of practical difficulties equally as unfortunate if not

worse.

These developments have resulted in tying up deposits in large amounts destruction of confidence, the breaking down of local credit facilities, widespread depreciation in values, and general demoralization of business. This has unquestionably had a part in bringing about the widespread depression from which we are suffering and regardless of other remedies we must have an improvement in our banking system before we may expect a return of normal conditions in economic affairs.

Many of the banks to which reference has been made are entirely solvent but not in position to liquidate their holdings nor to take care of their liability to depositors in the present situation unless something is done to provide accommodations or to relieve the present disturbed state of mind on the part of the public. The credit facilities provided in H. R. 7360, if the measure is administered wisely and well, will unquestionably afford relief to many banks that are worthy of credit but unable to command necessary accommodations that are afforded in normal times. In addition to the relief which is sought to be furnished to other institutions, the bill provides for loans upon the assets of any banks that are closed, insolvent, or in process of liquidation, to aid in the reorganization or liquidation of such banks. It is hoped this provision will afford some measure of relief to communities that have been deprived of normal banking accommodations and aid such communities in the struggle for economic recovery.

The railroads of the country have been seriously affected in their revenues by the slackening of business, causing tremendous decreases in their freight loadings and income, as well as in their passenger traffic. The state of the financial market also affects their ability to refinance maturities that are coming due and in some instances pressing. There are some railroads who were in the course of construction, having made substantial progress with a certificate of necessity from the Interstate Commerce Commission and financing themselves without difficulty until the collapse of the security market which has in a few instances left projects, apparently necessary and helpful to the public if completed, in an incompleted condition. The maturities of 128 Class I roads which fall due during the first quarter of 1932 are as follows: Bonds, $2,677,550; loans and bills payable, which includes bank loans, $35,984,395; equipment trust obligations, $35,560,820. The making for the first quarter, $70,299,513, and the total amount of maturities during the year 1932 is $110,782,506.

Under the present market conditions it is impossible for these to be refinanced and there is danger of disaster overtaking the transportation system if they are not afforded some relief. They are, therefore, provided for in this bill when, in the opinion of the board of directors of the corporation, such railroads or railways are unable to obtain funds upon responsible terms through banking channels or from the general public and the corporation will be adequately secure. The loans are limited in terms to the same terms as loans to banking and other financial institutions, and can only be made upon approval of the Interstate Commerce Commission. The committee is of the opinion that the aid promised them in this legislation will probably enable them to secure financial accommodation elsewhere in large part but the importance of the transportation system of the country is such that it would be calamitous for the country if a collapse in that system should be projected by the conditions recited. Insurance companies throughout the country are confronted with unprecedented applications for loans by their policyholders. To meet these conditions the insurance companies are compelled to sell their securities to take care of such loans and to pay losses. The measure under consideration provides a method of affording some degree of relief in this connection which the public welfare requires.

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