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disasters, but it also makes an important contribution to the economic stabi of the country through the financial assistance which it gives to States, count municipalities, and other public agencies toward financing projects such as wa works, sewer systems, transportation facilities, bridges, tunnels, hospitals, drain facilities, irrigation works, airports, docks, college dormitories, and a host of ot projects undertaken by State and local governments. As in other catego of loans, such financial aid is not given unless credit from private sources is available on reasonable terms.

The gaps in the credit structure vary with the different geographical areas a through its various types of loans, particularly its loans to both large and sn business enterprises, RFC has been instrumental in promoting the industriali tion of economically under-developed areas of the country. In brief, in nor times RFC has an essential function to perform-that of supplying the finan needs of the economy not otherwise available from private sources.

In this connection, it should be particularly remembered that this Nation attained its present state of development and productive capacity largely becau new enterprises were able to obtain the financing needed to transform ideas reality. American history clearly demonstrates that new and expanding busines have always needed financing and that small business, the foundation of a prosp ous and happy nation, is essential to the preservation of our economic system Especially in these days of emergency when the Nation is bending eve effort to strengthen its defenses, the know-how, experience, and operating fle bility which repose in the RFC are valuable resources which the Nation can afford to scrap. In this connection, I would like to emphasize that the prese staff of the RFC includes many individuals who held key positions during t years when the RFC and its subsidiaries made an outstanding record in promoti first, the National Defense program preceding Pearl Harbor, and later, t actual waging of World War II. RFC's contribution to these efforts, it will recalled, included the construction and operation of more than 2,500 plants, t procurement of strategic and critical materials costing more than $7%1⁄2 billion, t establishment and operation of a synthetic rubber industry, the waging of ed nomic warfare on a global scale through a program of preclusive buying, and t lending of $2,033,000,000 to private business engaged in producing the gur tanks, and other armaments, equipment, and supplies needed for successf prosecution of war.

The proposals to abolish the RFC stem, I believe, from dissatisfaction with t conduct of a few individuals holding high office in the Corporation. To abolis the RFC for that reason is as logical as it would be to scrap a very useful aut

nation require that, instead of destroying or dissipating the resources which RFC represents, greater use of those resources be made in meeting the grave problems confronting the Nation.

In short, the legislative proposal is in my opinion not only unwise, but actually detrimental to the public interest, and I would therefore recommend against enactment of the resolution.

In view of the urgency of this matter, there was no opportunity to present this statement to the Bureau of the Budget and it is, therefore, not possible to advise you at this time whether the views herein presented are in accord with the program of the President.

Sincerely yours,

W. E. HARBER, Chairman.

Senator ROBERTSON. Mr. Chairman, I wish to commend the junior Senator from Arkansas for a very clear and illuminating discussion of his viewpoint on this matter and to say that if RFC is continued he has certainly offered some very helpful suggestions that will improve its operations.

Senator FULBRIGHT. I thank the Senator from Virginia.

The CHAIRMAN. Any further questions, gentlemen?

If not, the next witness will be Mr. Eccles.

STATEMENT OF MARRINER S. ECCLES, MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Senator ROBERTSON. As I understand, the text of S. 1376, the analysis prepared by the Staff of the committee, and the analysis prepared by the Senate legislative counsel will be in the record at this point before Governor Eccles testifies?

The CHAIRMAN. That was unanimously agreed upon.

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in the loan contract or other agreement or commitment, but the Secretary m in aid of orderly liquidation, exercise a sound discretion in respect of the t which shall be allowed any obligor of the Reconstruction Finance Corporation make interim payments on an outstanding obligation.

(e) The Secretary of the Treasury is authorized to incur and pay out of funds of the Corporation all administrative expenses necessary to carry out functions vested in him as a result of the enactment of this Act. Such exper

shall be limited to and charged against amounts made available to the Corporat or to the Secretary of the Treasury in appropriation Acts for applicable administ tive expenses, which amounts shall not include any sums transferred to an offi or agency of the Government, other than the Secretary of the Treasury, un sections 3 and 4 of this Act. The activities engaged in by the Secretary of Treasury as a result of the enactment of this Act shall continue to be subject the provisions of the Government Corporation Control Act.

SEC. 3. Effective one hundred and twenty days after the date of enactment this Act, all the functions, powers, duties, and authority of the Reconstructi Finance Corporation with respect to the administration and supervision of rubber program (Rubber Act of 1948, as amended), the tin program (Public L 125, Eightieth Congress, as amended), and the abacá program (Public Law 6 Eighty-first Congress), together with all properties, assets, funds, contracts, loa liabilities, commitments, authorizations, allocations, personnel, and records p marily related to the exercise of such functions, powers, duties, and authority a hereby transferred to the Secretary of Commerce. Except as specifically provid herein, this section shall not be construed to modify or repeal any of the A under which such programs are carried out.

SEC. 4. The President may transfer to the Secretary of the Treasury, t Federal Reserve banks, or any existing department, agency, official, or corpor tion of the Government he may designate, or to a new agency (other than corporation), the functions, powers, duties, and authority conferred by him the Reconstruction Finance Corporation under section 303 of Executive Ord 10161, dated September 9, 1950 (15 F. R. 6105), with respect to the producti defense loan program authorized by section 302 of the Defense Production Act 1950, together with all assets, funds, contracts, loans, liabilities, commitment authorizations, allocations, personnel, and records primarily related to the exe cise of such functions, powers, duties, and authority. In the event that th President does not transfer such functions, powers, duties, and authority withi one hundred and twenty days after the enactment of this Act, such function powers, duties, and authority, together with all assets, funds, contracts, loan liabilities, commitments, authorizations, allocations, personnel, and record

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SEC. 8. (a) Upon the termination of succession of the Reconstruction Finance Corporation the Administrator of the Reconstruction Finance Corporation shall make a full report to the Congress.

(b) During such period of time as the Secretary of the Treasury shall be engaged in liquidating the assets and winding up the affairs of the Reconstruction Finance Corporation, pursuant to section 10 of the Reconstruction Finance Corporation Act, he shall make quarterly reports to the Congress setting forth the progress of such liquidation and winding up of affairs.

STAFF MEMORANDUM on S. 1376

S. 1376, introduced on April 24 by Senator Byrd, for himself and Senators Bricker, Kem, Robertson, Williams, and Ferguson. Entitled the Reconstruction Finance Corporation Liquidation Act, this would terminate the Corporation's lending powers on the date of enactment of the bill and would dissolve the Corporation 120 days following that date. It expressly refers to sections 9 and 10 of the RFC Act providing for liquidation of assets and winding up of affairs of the RFC by the RFC itself, after the date of enactment of the bill, and by the Secretary of the Treasury, after the following 120 days have passed. While prohibiting the Secretary of the Treasury from extending maturities or renewing loans, it does permit the Secretary to allow RFC debtors to make interim payments. It permits the Secretary of the Treasury to use RFC funds for administrative expenses to the extent they are made available in appropriation acts to the RFC or the Secretary of the Treasury. However, no funds connected with the administration of the tin, rubber, or abacá programs or the defense loan program may be so used by the Secretary of the Treasury in view of other provisions in the bill concerning the transfer of these programs. Any unused balance of RFC moneys after liquidation shall be paid into the Treasury and used only to reduce the public debt.

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functions related to national defense heretofore vested in the Reconstru Finance Corporation.'

Section 1

This section provides a short title to the bill which is "Reconstruction Fin Corporation Liquidation Act."

Section 2

Subsection (a) amends section 3 (a) of the RFC Act with respect to the upon which succession of the Corporation shall terminate. Existing law prov that the RFC shall have succession "through June 30, 1956." Subsection (a the bill amends existing law by providing that the RFC shall have succes "until the close of business on the one hundred and twentieth day following date of enactment of the Reconstruction Finance Corporation Liquidation Act Subsection (b) amends section 4 (f) of the RFC Act by providing that lending powers of the Corporation under section 4 of the act (the general len authority) shall terminate at the close of business on the date of enactment of Reconstruction Finance Corporation Liquidation Act. Section 4 (f) prese provides that such termination of lending powers shall occur at the clos business on June 30, 1954.

Subsection (c) provides that the liquidation of assets and winding up of aff of the RFC shall be carried out in accordance with sections 9 and 10 of the R Act, except that the unused balance of moneys belonging to the Corpora required by such sections to be paid into the Treasury as miscellaneous rece shall be used instead for the reduction of the public debt. Section 9 of the R Act directs the Board of Directors of the RFC to liquidate the assets of Corporation and wind up its affairs in the event that its lending powers un section 4 are terminated prior to the expiration of succession of the Corporat Section 10 directs the Secretary of the Treasury to complete the liquidation if completed prior to the termination of succession of the Corporation. Un existing law the Board of Directors have 2 years, from June 30, 1954, to June 1956, to liquidate the assets and wind up the affairs of the Corporation. Un the bill the Board of Directors, or the Administrator of the RFC as the case n be, will have 120 days after the enactment of the Reconstruction Finance Corpo tion Liquidation Act to liquidate the assets and wind up the affairs of the Corpo tion, and at the end of such 120-day period the task will be assumed by Secretary of the Treasury under section 10 of the RFC Act.

It would appear to be very clear that under section 10 of the RFC Act, wh gives the Secretary of the Treasury all the powers and duties of the Board

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