the community and set the wheels of factories turning once more, and send us up to greatly improved conditions.

There is complaint, we might frankly admit that there is widespread complaint, with the Reconstruction Finance Corporation, because it has not met the expectation of the great masses of the people, who did not comprehend the way the money we were putting out in that direction was working, and they feel that nothing has been done for them. That is an unfair attitude to take, and is due, of course, to the difficulties of understanding problems of big finance. Nevertheless, that feeling exists very widely.

This measure was designed to help the little man. It would not lend him money directly, but would lend his own institutions money, and give them the means of raising more money with which to function.

I have on my desk a file of correspondence which is now nearly a foot high, coming from all parts of the country; and of course, it would be idle for me even to summarize it by any extensive quotations. But I want to give you, as typical of the situation, this extract from a letter from a financier in Indianapolis, Ind. He says:

The importance of this bill at this juncture, particularly to the city of Indianapolis, can not be stressed too strongly. You can imagine what a calamity it would be if every bank in Indianapolis were to close its doors to-morrow, as they have assets of $150,000,000, and the town would be dead for a generation to come.

And yet the building and loan associations of Indianapolis have $150,000,000 to liquidate

I will interpose my own remark here, to emphasize that the building and loan associations of Indianapolis have $150,000,000, the same amount that is in the banks, and the tying up of these building and loan associations is as disastrous a thing for the people in moderate and humble circumstances as the closing of those banks would be for the well-to-do and those who are engaged in business and industry.

Mr. O'CONNOR. Right there, let me ask, how did they get tied up? Mr. LUCE. Let me finish the quotation, and then I will explain. Mr. O'CONNOR. That is all right.

Mr. LUCE. He goes on to say:

This $150,000,000 of building and loan association funds represents the savings of the middle class and the poor, and it is simply appalling that they can not get one dollar out of them to meet their great necessities. Of course, the building and loan associations can not give them even partial relief, because no one is paying in money. If there was a Federal home loan bank there to which they could go and get a few million at this time, it would tide over some of this great distress.

Now, these associations are in distress, because the middle class of people and the poor have used them as places in which to put their money against the rainy day. And the rainy day has come, and they can not get their money. They are thronging the doors of these associations, trying to get the money which they must have to buy bread and clothing, and they can not get it.

I am told, and believe it is true, as far as an inquiry can be made, that three-fourths or more-I think it is-of the building and loan associations of this country have deposits on what is known as "On notice"; that is, requiring from 60 to 90 days' notice before they will pay withdrawals. The withdrawals are such that it is estimated that

it would take $500,000,000 at this moment to meet the needs, the actual needs, of the middle class and the poor who have their money in these institutions.

Now, note this: Here is one city out of this whole country that has $150,000,000 of assets. I am told that there is one of those cases there where the depositors are chiefly, if not wholly, railroad men who live at a distance. Indianapolis is a great railroad center, you know. And I am told that there are from $30,000,000 to $60,000,000 tied up there which they can not get

Mr. BANKHEAD (interposing). Mr. Luce, at that point, will you let me interpose with this question? It is estimated that it will require $500,000,000 to be of any immediate relief. You say that if these associations can get just a few million dollars to tide them over, it might ease the situation?

Mr. LUCE. Yes.

Mr. BANKHEAD. Would it not take an almost unimaginable amount just to meet the immediate situation, if these requests for withdrawals are continued in the present proportion?

Mr. LUCE. If they will continue. But we are building up a structure of relief on the assumption that we are going to be able to get out of this morass that we are in. We always have gotten out heretofore. The pessimists say that we have now come to a period of depression from which we can not get out; they are predicting a crash. I think they are entirely wrong in their view, and I do not even like to give utterance to it.

Now, it is true that the $500,000,000 would put the building and loan associations in easy conditions, if you require the issue of a large number of debentures. But remember that the securities which these associations have to put up run up into the billions of dollars. They have the assets. They are not hard pressed for securities; they have the mortgages. What they ask is, "For heaven's sake, give us a chance to raise some money on these perfectly good securities."

Now, that is the exigent need in the case, and that is the reason that a few men (including Members of the House) have come to me and said that this will do more good than any other proposition yet presented to Congress or acted upon by Congress; because this plan reaches the confidence of 12,000,000 thrifty people. They are not the wasters. They are the people who think; they are the people who foresee; the people who save money; those in moderate circumstances. And if you will tell these 12,000,000 of our people, as speedily as you can, that their savings can be made use of in this way through these institutions, I know of nothing that will more quickly help to restore confidence and get the people of the country again to spending their money in some moderate degree and thus start up all business activities.

The CHAIRMAN. Mr. Luce, may I ask you this question: Suppose the House is provided with machinery for the prompt passage of this bill, would you apprehend a long drawn out contest in the event that this bill got to the Senate?

Mr. LUCE. In the Senate?

The CHAIRMAN. Yes.

Mr. LUCE. One always hesitates to predict what will happen in the other branch of Congress. I have reason to think that, while the subcommittee there has closed its hearings, it has delayed action in

the hope that we might send over to it a perfected bill which would not require long study. And certainly, if measured by the work put into a bill, we may appraise this bill-it is a perfected bill.

Now, I might say, following what Mr. Reilly said, that there are members of our committee who object to details of this bill. And there is a small proportion who object to the whole bill, for one reason or another; the chief reason being that by reason of State laws there are States that can not instantly take advantage of this legislation.

Some six or seven States, I think it is, in order to anticipate the passage of this bill, have already in recent sessions of the legislature changed their laws. When the Federal reserve system was started, as I recall it, about 20 States had to change their laws in order that the State banks might become member banks of the Federal reserve system. There is a difference of opinion among the lawyers as to how many States will have in addition to change their laws in this instance. There seems to be agreement-or, at least, it looks as if we are going to pass some legislation to lend money to the States. I can not see how any State can borrow that money and give security without the passage of legislation authorizing it-certainly no gov ernor is authorized to give the note of the State, or to finance any State securities. It follows that, if we do pass that legislation, as now seems probable, every State in the country will have to hold a special session of the legislature if they want us to give them any of that money.

Mr. BANKHEAD. Some of them will have to change the State constitution.

Mr. LUCE. Yes; some will have to change their constitutions. Mr. GARRETT. Has your committee a list of the States that could come in under this act without any additional legislation?

Mr. LUCE. Well, we have gone into that very thoroughly; and, as I said, the lawyers differ as to how many States might at once come in. But there are certainly six or seven that can come in, by reason of recent legislation; and, in our judgment

Mr. GARRETT. You can readily understand how a State like Texas, with the number of Members we have in the House of Representatives, would want to know whether, in the opinion of your committee in drafting this bill and in going over the laws of the respective States with reference to it, Texas would be able to come in under the provisions of this bill and get the benefits of it.

Mr. LUCE. I do not recollect that Texas is in the list of States where, in my mind, there is any serious doubt.

Mr. GARRETT. I am pretty sure, from the way they have been writing me about it, that they think they can come in under it. Mr. LUCE. Yes.

Mr. GARRETT. That is, the lawyers have advised them that they can; but I do not know anything about that, and I thought perhaps your committee had gone into that, or some subcommittee, for that particular purpose of determining how many States could come in and how many could not.

Mr. PURNELL. I think my State of Indiana is one that would require special legislation. But certainly that would not deter me from supporting this measure.

Mr. Cox. What is your opinion as to whether the House will adopt this bill?

Mr. LUCE. Perhaps the hope is the father of the thought; but I am of the belief that this measure will sweep through the House if it ever gets on the floor. There will be much discussion of proposed amendments to come back to the chairman's question, there will be much more discussion of amendments than of the bill as a whole. In a bill so jammed with technicalities as this, there can not help but be differences of opinion in point of details. So I think you had better expect that when the bill is read section by section a good deal of time will be taken. But to expound the general principles of the bill would not require an extended debate.

Mr. O'CONNOR. Let me ask you this question, Mr. Luce, as I was not here during all of the time that Mr. Reilly was addressing the committee this morning: Are there any objections from State banking authorities or State authorities?

Mr. LUCE. No.

Mr. O'CONNOR. Are there any from those who are interested in building and loan association matters?

Mr. LUCE. No.

Mr. O'CONNOR. The objections are mostly from the money lenders, the corporate money lenders, are they?

Mr. LUCE. The objections started with the mortgage brokers. If we had been willing to let them into this thing, I do not think there would have been any objections; but we did not dare to let in the mortgage brokers, because as a class they are not State inspected, and we do not believe the bonds would be accepted if we let in anybody that was not subject to State inspection.

Now, the mortgage brokers invest the funds of the life-insurance companies; and who instigated the others who were objecting I do not know; but the life-insurance companies put up a good deal of opposition. And the reason for that is this: The life-insurance companies pick out the best loans in the country. For instance, witnesses have testified in these hearings who said that the life-insurance companies will lend money only in specified sections of the city; they will lend money only on new houses; they will not lend any money for reconstruction-and a good deal of this money could be wisely used to-day for reconstruction, which would furnish employment of labor.

Mr. GARRETT. Their loans are usually confined to revenue-producing property, that takes care of interest payments, and things of that kind?

Mr. LUCE. Yes; and as I understand they do not go into the country districts at all, nor into the smaller towns and villages at all. Their loans are generally the cream of the business.

Furthermore, their objection is this: They have extensive loans on apartment-house property. And with that self-interest, which is legitimate and which is the basis of all human competition, they desire to see those apartment houses filled up before anybody can get a home anywhere else.

Mr. Cox. You spoke of the reception that this legislation would get throughout the country. I think it would be most favorable, because I think it comes within the understanding of the class that has

been complaining against the action of Congress; and, therefore, I think the reaction would be most favorable throughout the country. Mr. PURNELL. You refer to the criticisms that we have not done anything?

Mr. Cox. Yes; anything to relieve the situation.

Mr. O'CONNOR. When you speak of the insurance companies, do you include the title companies with their associates, the mortgagt companies?

Mr. LUCE. The only interest of the title companies is to get in, and their disturbance or uncertainty is as to whether, under this bill, they can get in or not.

Mr. O'CONNOR. I do not mean the title companies exactly; but most of these companies have a mortgage company associated with them in this mortgage-loan business. What attitude do they take? Mr. LUCE. We think that if they are incorporated and under State supervision they will class as banking organizations and can come in. Mr. PURNELL. I want to ask if there is any hope under this bill for a building and loan association that is in process of liquidation. In other words, would this legislation make it possible for a reorganization and a taking over of the assets of a building and loan association that is in process of liquidation so that they might save something out of the wreck and carry on?

Mr. LUCE. I should not say that there would be any direct help, but there would be indirect help. That is, if a new group of men saw fit to take over an association and put up some money, they would be encouraged to do so by the prospect that they could rediscount the mortgage.

Mr. PURNELL. But there is no hope, then, for an association that is now in process of liquidation?

Mr. LUCE. No.

Mr. GREENWOOD. Just one more question: Now, take a company in the process of liquidation, and they have good securities but they can not get the money on them. What is to hinder another building and loan association from taking an assignment of those mortgages and notes and then taking those to the Federal home-loan bank, as provided in this bill, and getting funds on them to pay the institution that is in process of liquidation?

Mr. PURNELL. That is just what I suggested a moment ago-I asked why that might not be done.

Mr. LUCE. Yes; that would be possible.

Mr. PURNELL. Then indirectly, if not directly, that association might receive help.

Mr. BANKHEAD. Mr. Luce, I want to ask you if you do not think it would be feasible to remove the tax-exemption feature from this proposition? This tremendous volume of tax-exempt securities is going to become rather a menace to the receipts and the condition of the Treasury, with people investing their money, and sometimes large fortunes, in tax-exempt securities. I want to ask, therefore, whether or not the committee gave any consideration, before framing this bill, to the possibility or the feasibility of eliminating the provision that these debentures should be exempt from Federal and State taxes?

Mr. LUCE. We certainly did; and when the measure gets on the floor of the House there will be more consideration given to that, I am very sure, with earnest debate on the subject.