or any other agency. They are not supposed to go into private busi

ness.

Mr. DALTON. We fully realize there might be times when the Army and Navy might have to do such things, but in this case the facilities were here and the problem could have been worked out.

Senator WHERRY. Is this for the Army alone?

Mr. DALTON. The greater part of the work that was done by these firms was for the Army. The Navy has previously established it owns facilities.

Senator MURRAY. Thank you, Mr. Dalton.

Mr. Lubfin, of the Safeway Motor Coach Lines, 282 Divisadero, San Francisco, Calif., wishes to submit a statement regarding the elimination of 350,000 employees and 60,000 operators in this industry since the N. R. A. set-up. The committee grants him the right to file that statement, and will be glad to receive it at Washington whenever he has it prepared.

(At the time the hearings went to press, the statement referred to by the witness had not arrived. Material will be filed with the committee.)

STATEMENT OF ANDREW MILLER, SECRETARY, WASHINGTON BANKERS' ASSOCIATION, SEATTLE

Mr. MILLER. In considering the subject I particularly wish to commend the philosophy expressed in paragraph 8 of title I (S. 1913, 78th Cong., 2d sess.), which reads

to maintain for every individual, regardless of race or creed, the opportunity to establish and build his own independent business.

Bankers in this State are particularly concerned with the many threats to business, particularly small business, that may come about at the conclusion of the war. Termination of war contracts may result in freezing the capital of many concerns, thereby putting them temporarily out of operation and bringing about a serious community situation due to lack of employment. Steps have been taken whereby banks are cooperating now with the officials of the Army, Navy, and Maritime Commission in studying ways and means for business concerns to expedite the payments that may become due as a result of war contract terminations. We regard it as essential that an educational program be undertaken immediately to inform the management of all business concerns how they may expedite settlements with the various departments of Government.

The banks of Washington are in a particularly good position to take care of all legitimate loan requirements; moreover, they are more than willing to do so, and at the present time they are aggressively seeking loans. All applications are examined with the view of extending the loan if it can possibly be made. Should there be factors that make it undesirable for a bank itself to assume the risk involved, recourse can be had to either of the two plans offered by the Reconstruction Finance Corporation in conjunction with banks. The first of these plans contemplates a sharing of the risk by the R. F. C. up to 90 percent of the loan upon application by the bank with a proper adjustment of the interest as between banks and the R. F. C. The portion of the risk taken by the R. F. C. bears a maximum of

4 percent interest, which is available to any concern irrespective of size and seems to be about as low a rate for commercial loans as could be granted by any lending organization private or public. The fact that such loans have been made in amounts as low as $1,000 is evidence that it is available readily to small concerns. The local office of the R. F. C. is empowered to accept such participation loans up to $100,000 without referral to Washington and in some instances in even larger amounts.-

To return to the capacity and willingness of Washington banks to make loans, it may be stated that total bank resources in this State as of June 30, 1944, totaled $1,870,000, an increase of approximately $430,000,000 compared with June 30, 1943. On the other hand the total of loans advanced by our banks is practically the lowest in the history of the State on a percentage basis. The latest report available for this figure is that given by the F. D. I. C. as of December 31, 1943, when they stood at $231,728,000. It is obvious that a very great increase in loans can be taken care of by Washington banks on the basis of their present available funds.

In title I of Senate bill 1913, paragraph 3, it is stated that one of the objectives of the proposed corporation is to

stimulate and enourage private financing institutions to supply the credit needs of small business concerns upon terms and conditions no less favorable than those accorded to large concerns.

To those who are experienced in handling loans it is a well established fact that the cost of handling small loans is considerably greater than loans of larger amounts. However, the plan of participating loans already in operation between banks and the R. F. C. make it possible to handle small loans on a minimum rate basis. Private lending organizations cannot and should not lend their funds unless there is a reasonable assurance of repayment and they must also adjust interest rates so as to compensate them for actual expenses plus a small margin of profit, else they would be unable to continue in business.

The experience with some Government lending agencies, notably in the agricultural field, has been that the borrower was charged a nominal amount which actually is less than a true operating cost. In such instances the deficit was assumed by the department under which the lending agency operated, meaning that the other taxpayers contributed the portion of interest which the borrower had not paid. This is shown in many instances where the P. C. A.'s have been operating in this State.

It should also be apparent that all concerns, large or small, will be confronted in their future operations with conditions radically different than those existing in the past. It is no longer a reasonable assumption that, because a business was profitably operated in previous years, it can continue to do so under these changed conditions. I refer to the fact that tax payments required of business concerns are very much greater, the labor problem is more of a factor both in cost and the difficulty of obtaining adequate help, the restrictions imposed by the War Manpower Commission and the War Labor Board, materials are more costly and scarce due to actual shortages and to W. P. B. priorities and O. P. A. price regulations. These and many other

restrictions imposed by a network of directives are difficult for the management of any concern to comprehend and to observe. Management necessarily must give vastly more time and attention to these factors than in previous years. All these factors necessarily must be taken into consideration in arranging financing.

As it appears to me, one of the more necessary aids to small business is the relaxing of Government restrictions just as quickly as they can be done away with without impairment or jeopardy to our prosecution of the war. In short, what small business needs most today is not necessarily a new type of financing program, but the opportunity to go ahead with operations without so many hampering restrictions and with a clear understanding of the conditions under which they must operate. It is not only bad policy but a positive disservice to small business to increase its obligations for loans without giving it a chance to conduct its business and survive.

Senator MURRAY. The committee is glad to have your observations, Mr. Miller.

A statement has been sent to the committee from Ross R. Brattain, representing the West Coast Minerals Association. That statement will be filed for the record.

(By direction of the chairman, the following is inserted:)

STATEMENT OF Ross R. BRATTAIN, REPRESENTING WEST COAST MINERALS ASSOCIATION, MERCER ISLAND

GOLD PROPERTIES LOCATED AT OROGRANDE, IDAHO

The first note that I have is to change our tax structure on the production from mining properties so as to favor, instead of penalizing, new corporations as against the old.

Also, give new mining ventures special exemptions until they have built up reserves against depletion and to tide them over unpredictable expenses in development. Further relaxation of Securities Exchange Commission regulations as to the amount that can be raised without registration during any one year.

Quit making Government loans on any mining ventures at all. Present practice (referring to peacetime practice) was wasteful and placed restrictions that really retarded rather than helped develop small properties and was of real value only to large companies that did not need the help. Money could be much better spent by establishing prospecting schools and provide the students sustenance after graduation for a certain length of time actually spent in prospecting without any restrictions or expectation of the money being returned. Make all forest trails and the roads open to prospectors and build more trails with prospecting in view. And make it the policy of the Forest Department to aid the prospector and small miner rather than hinder him. Have few, if any, closed districts. Repeal all time limits placed on prospecting in any area.

These apply to all mining prospects. But gold, because of the treatment it has received during the war, deserves special treatment. All gold properties, large and small, should immediately be given priorities to commence operation. They should also be given a special exemption from taxation until they have been able to build up reserves to repay them for the damage and costs that were incurred during the shut-down. Gold should be revalued somewhere near the average world price of today to compensate the gold producer for increased wages and expenses that he will face under present conditions.

It is admitted by Government employment agencies that closing the gold mines did not release sufficient men for other mining activities or war production to accomplish the purpose for which they were closed. And in most of the districts the employees of those closed down mines are waiting for their reopening without ever having been employed elsewhere.

Senator MURRAY (continuing). Gentlemen, this will end the conferences here in Seattle. I want to thank everyone here for the fine

cooperation he has given our committee at these hearings. I want to express the committee's appreciation to the chamber of commerce, and to all the citizens of Washington who have been helpful in making the hearings a success. I should also like to say that I think the testimony we have received will be of great benefit. It will constitute a record of immense value; for it will contain a reservoir of facts and figures that will be extremely helpful in considering the post-war problems of this area. Personally, I find myself possessed of a great satisfaction in having come here and having met with this successful cooperation from these people.

Senator WHERRY. I want to add our appreciation to the press for their cooperation in helping to make these hearings a success. Senator MURRAY. Yes. The press certainly gave splendid cooperation.

(Whereupon, at 5:30 p. m., July 27, 1944, the hearing was closed.)

APPENDIX I

STATEMENT OF HARVEY F. SWENSON, SEATTLE

It is indeed a pleasure to have the privilege of expressing my views to the committee regarding the problems facing the American small businessman.

It is my opinion that basically the small businessman has sufficient intuition to cope with his problems caused by boom or hard times. I am more in fear that legislation will complicate his difficulties rather than help him. As a small business is quite flexible, the laws of supply and demand which have always been with us have been met in our operations and on our own initiative.

I believe one must divide the small businessmen into two classes, for their problens will vary widely. The first group would cover those firms or individuals which have started in business by the opportunities offered through the tremendous volume of business caused by the war. Lack of experience and the fact that their business is based on a war economy is certain to cause many business casualties. It is my opinion that an attempt to artificially keep those businesses in operation will cause unfair hardship to others and in the end only prolong the agony of their failure. I do not mean to say that every business that has started up since Pearl Harbor should be in this classification, but I do believe that Government action should not be so lenient as to attempt to take care of such situations.

I am concerned with regulations that will be imposed by legislative bodies in their zeal to protect the so-called underprivileged man, that makes it profitable for a lazy man to be unemployed. Although young myself, I still believe in the old-fashioned theory that hard work and careful savings is the best answer to oldage security. I would rather risk the use of an old or even an obsolete policy that favors the industrious than hazard the dangers of artificial economy by pampering those that wish to get something for nothing.

I am concerned with labor legislation that forces me to employ an individual with little skill or ambition at the same compensation as an individual that is industrious and high skilled. I am concerned with legislation that does not allow me to award advantages to the ambitious over the less ambitious, simply because it just happens that the less ambitious was on the job first.

I am likewise concerned about my inability to set the prices of my products upon the true cost of their production. One must recognize the need for price control during periods of scarcity, but I am in favor of releasing price control as soon as raw materials are available and return to the natural laws of supply and · demand. The tremendous amount of accounting and record keeping, as well as endless reports, will be greatly eliminated. This extra effort is unbelievably difficult for the small businessman, as we have neither the staff, facilities, nor the finances to handle it.

It would greatly assist the small businessman if consideration from a tax standpoint was given to favor the capital gains that are invested in permanent improvements. This would particularly favor small businesses, inasmuch as capital investment in permanent improvements are most often paid from capital gains. It would encourage such improvements and would permit the small business to make plant improvements and purchase new equipment. It would give increased employment, not only through the production of improvements but would give employment to individuals after they are in operation. It would enable the small businessman to obtain the equipmet that will be greatly needed to keep up with the highly competitive conditions that will exist in the future. Under present conditions the small businessman cannot afford to make these improvements, for he will not have the cash to pay his taxes on the very same capital gains with which he must make the improvements.

In large businesses, it is possible to make these improvements with the use of investments of excess capital. It is not possible to follow this procedure in a small business. Investments in small companies are not desirable to investors, as their securities do not have a ready market and the policies of the company are usually controlled by one or two individuals, which does not make a desirable condition for a minority investor. The difficulty of this situation is particularly true with the unincorporated business. This suggestion is not made with the thought of shifting the tax burden, for I believe you will find that the average small businessman is anxious to pay his share of legitimate Government cost.