this measure recommend it along that line. They say, "We furnish this credit to the farmers of the country, and the home owners ought to have it."

I do not know what the feeling of the members of this committee is about the Federal land bank system of this country. My own observation and knowledge of it, from my study of it and my experience with it, is that it has been a miserable failure, and if they have not any higher recommendation for this measure than the Federal land bank system of this country, then it ought not to be enacted into law.

Now, what did they do? They came here at the beginning of this Congress, perhaps the very first measure we had, and it came before the committee of which I am a member-the Federal land bank system, which was organized in this country for the purpose of helping the farmers, extending credit to them, and tiding them over a period of stress-and just as soon as this period of depression came, what did the Federal land banks of this country do? Did they step out and say to the farmers of this country, "We will extend you additional credit; we will help you over this period of depression and this crisis in which you find yourselves?" Not at all. They found themselves with their bonds selling almost for nothing, so far as the joint-stock land banks were concerned, and the Federals themselves. selling generally around 75 cents on the dollar, and they came to this Congress and almost bludgeoned us-and I was one of them; I was a member of the committee that heard them and reported it out favorably, and voted for it and supported it, so far as that is: concerned into giving them $125,000,000 to help the farmers of this country.

And what did they do? The farmers of this country to-day are in worse shape, so far as their financial condition is concerned and so far as anything they have received from the Federal land banks is concerned, than they were the day we gave the Federal land banks of this country $125,000,000. There is $24,000,000 less in loans to the farmers to-day than there was then, according to their last report. The Federal land banks have $4,000,000 worth more of property, because they have gone on with their foreclosures, and they have $24,000,000 less loans to the farmers of this country to-day than they did when we gave them $125,000,000. They have used the money to pay the interest on their bonds and to bolster up the bond market of this country, I assume, but they have not used it in the interest of the farmers. And I say again that if the proponents of this measure can not point to something better than the Federal land bank system that we have established and sponsored during these years, in favor of this measure, it is on poor ground, because they have not rendered the help that they should have rendered. Mr. BANKHEAD. Are the Federal land banks lending any new money now?

Mr. WILLIAMS. Not that I know of; and I know their report shows that they have less loans to-day than when we gave them this: $125,000,000. I think the theory and principle of the thing is entirely

wrong.

Some one mentioned the Reconstruction Finance Corporation helping the banks. That is true. They are also helping the building and loan associations. Of course the members of this committee know that the building and loan associations are in the Reconstruc

tion Finance Corporation act just the same as the banks and the insurance companies. The claim made by the proponents is that they can not function so far as the building and loan associations are concerned. That is not entirely fair. At the time General Dawes was before our committee, about the 1st day of April, they had between four and five million in loans to the building and loan associations. I am speaking of them now because they make special application and special reference to them. On the 19th of April, less than three weeks later, those loans had been extended to the amount of $17,000,000; and while I was not able to get the figures from them, in a conference I had with them on yesterday they said that the loans were going right ahead to the building and loan associations throughout this country.

The claim is made that the building and loan associations can not get the loans from the Reconstruction Finance Corporation for the reason that they can not put up their securities as collateral. That same objection can be made to this bill, and is made to it. If that is true as applied to the Reconstruction Finance Corporation, it is true as to this measure. If they can not borrow money down there, they can not borrow money from one of these banks if it is established, because this bill provides that they put up their mortgages as security for advances made to them by the banks. The same argument would apply under the provisions of this bill that would apply down there."

Now, it seems to be the general understanding around here at least it is talked considerably-that the powers and the funds of the Reconstruction Finance Corporation are to be extended still further by legislation; and if that is true-and whether it is true or not-under our present arrangement, as an emergency measure, the Reconstruction Finance Corporation is authorized to make loans to building and loan associations and can take care of them, and is taking care of them to a very large extent to-day; and that is one reason why, in my judgment, there is no immediate emergency for the creation of this wide system of banks throughout the country. Mr. O'CONNOR. May I ask you one question?

Mr. WILLIAMS. Certainly.

Mr. O'CONNOR. I do not want to interrupt your train of thought, but can the Reconstruction Finance Corporation take their mortgages as collateral?

Mr. WILLIAMS. Undoubtedly. Mr. O'Connor, if——

Mr. MCMILLAN. If they can do it.

Mr. WILLIAMS. As Mr. McMillan says, if they can do it. There are certain State laws which do not permit them to put them up as collateral, because they are nonnegotiable. As to those States, they can not accept them, for the reason that they are not negotiable. That is true of a number of States. But that exact provision, remember, applies to this legislation. We have the same situation here. That is a provision in this law. They can not borrow except temporarily. There is a temporary provision here that the committee will notice by reading it, and I am not trying to avoid that. There is a temporary provision here by which they can borrow. But as a permanent institution, as a going concern, to meet the needs of this country, they can not borrow from these banks under the laws of many States as they now exist. I am coming to that proposition.

I get back to the proposition that there is no general, urgent, national need for this system.

There are places, of course, where it is needed. For instance, practically half of the building and loan association business of this country is done in three States-Ohio, Pennsylvania, and New Jersey. We have had men before our committee and before the Senate committee from the Central West and the Western States, and I think I can say without a single exception they have said that there is no need and no necessity for the establishment of this system in their country, and that whatever need there was the banks were furnishing to the building and loan associations; and one man-and he is a representative of the building and loan associations, toofrom Minnesota said that they did not need it, and if they did they could not get it under the provisions of this bill.

Mr. MCMILLAN. If I may interrupt you a moment, with reference to the Reconstruction Finance Corporation, and under the act as we passed it, the corporation has authority to make loans to building and loan associations.

Mr. WILLIAMS. Yes.

Mr. MCMILLAN. Now, am I to understand that the Reconstruction Finance Corporation can make a loan irrespective of what the value of that security may be, in line with the question I asked you a moment ago?

Mr. WILLIAMS. Oh, no, indeed.

Mr. MCMILLAN. My understanding is that they have got to put up valid security.

Mr. WILLIAMS. Undoubtedly.

Mr. MCMILLAN. I want to get the record straight, in compliance with the question I asked a moment ago, that the security must undoubtedly be a good security and must be valid and something that can be passed on by that corporation.

Mr. WILLIAMS. Yes; there is no question about that. The trouble with it is I say again-the trouble with the Reconstruction Finance Corporation in making some of these loans is, frankly, and there is no concealing it, that they can not make them because the building and loan associations of a great number of the States in this country can not put up the security for the reason that their State law prohibits it; and they can no more put it up under this bill than they can down there, because this bill requires that the securities be put up; and if they can not put them up to get a loan from the Reconstruction Finance Corporation-which they can not do under our State laws, and there is no use in trying to conceal that fact-they can not do it here either. The only hope and the only expectation of the proponents of the measure, whether they get the loan from the Reconstruction Finance Corporation or from this system of banks if it is set up, is to secure a modification of the State laws in these various States which will permit them to put up their securities.

That question has been gone into; and right at the start it occurred to me as one of the members of that subcommittee that, under the general law of this country, in the States generally-I do not speak with authority on the subject, but the general proposition is that the banks and the building and loan associations can not purchase stock in another corporation. I think that is generally true, and I think we will all recognize that as a fact: That these insti

tutions that are organized under the State law can not go out and invest in the stock of another concern. One of the safeguards that are thrown around them, and especially around the building and loan associations, is that they shall not dissipate their funds in some outside business. And that is true of the banks; they can not purchase this stock. And yet here is a provision which requires them to become stockholders in this institution here if it is established. Now I ask you how are they going to get into it? They can not purchase this stock under the laws of the State; and the only answer that the proponents of this measure have is, "We will get the State law amended to meet that situation and permit them to come in." Well, that is all right if they will do it. The States can do that. I concede, of course, that the States can amend their laws authorizing their building and loan associations and authorizing their banks to purchase stock in this or any other corporation that they may see fit to go into.

Mr. BANKHEAD. Mr. Williams, I do not want to break in on your line of argument, but I would like to ask you this question on the point as to whether or not the building and loan associations can secure money from the Reconstruction Finance Corporation and whether or not the building and loan associations are actually in need of some Federal assistance, as indicated by this bill. I notice in the papers-I think it was yesterday-that in your own State of Missouri the Farm Building and Loan Association of Nevada, Mo., which was said to be one of the very largest in the country, had to close its doors. Are you familiar enough with the facts to give any answer to the query I have suggested, as to whether or not they could have secured sufficient funds from the Reconstruction Finance Corporation to tide them over, or whether this bill, if it had been enacted, would have saved them?

Mr. WILLIAMS. No; I am not familiar with that situation, Mr. Bankhead. I am frank to say that I did not know that they had closed.

But I will say this: "We have the testimony in the hearing here of Mr. Hall, who is a member of the legislative committee of the United States Building & Loan League and also president of one of the largest, if not the largest building and loan associations in the West, at St. Louis; and while he is a building and loan man and is in favor of the general purposes of this legislation, he frankly said that the borrowing of money was not a primary purpose of the building and loan associations; that they did borrow, so far as he knew, from the banks, and that there was no immediate need for this legislation.

Mr. Cox. Mr. Williams, in that connection, what need is served by this legislation that can not be taken care of under the provisions of the Reconstruction Finance Corporation act?

Mr. WILLIAMS. I do not see any. I say that frankly; and the situation, gentlemen of the committee, can not be met, in my judg ment, without an entire revamping of the State laws.

Right in that connection, talking about the conditions, I want to read further from the record a statement made by Mr. Bodfish, who is the representative of the interests behind this bill, and a man who represents the building and loan associations. Here is what he is reported to have said, and I read it for the purpose of showing you

the condition. This was issued and reported in the New York Times, as set out here, since the hearings. It is not his testimony; but this was reported, and I have made the statement a number of times and have quoted it, and it has never been controverted, so far as I know. I assume that it is correct. Here it is:

Evidence of a gradual return of confidence among savings investors throughout the country is reported by the United States Building and Loan League through Mortimer Bodfish, its managing director. He says:

66

Investors in building and loan associations increased by 10,527 in Feb

ruary"

That is, February of this year

a figure which exceeds by more than 30 per cent the average monthly gain of 7,897 during the boom year of 1929."

Now, if you take that statement at its face value, they are in better condition now than they were then, and they are progressing. I do not know whether that is true or not.

Mr. RANSLEY. He covered what territory; what States?

Mr. WILLIAMS. The entire country, I assume.

Mr. RANSLEY. Well, that is not true of Philadelphia.

Mr. WILLIAMS. I do not know. That is his statement, and he is the man that is advocating this bill above everybody in the world.

Mr. SABATH. They might have been increased, because many of these small banks have closed, and people that have little money find that the building and loan association is the safest place for them to invest. In the State of Illinois only one building and loan association out of a thousand was obliged to close its doors, and of the thousand I venture to say 990 were in favor of this bill.

Mr. WILLIAMS. Now, I am not going into a discussion-which I could do of the question of the failure of the building and loan associations. There is a difference of opinion among lawyers and there is a difference in the laws of the different States on that subject. The laws of many of the States do not permit them to fail. They can not fail. You can not throw them into the hands of a receiver. They can not do that, because there are reciprocal, mutual agreements. I mean outside of a loan that is made to some outside party, to a bank or something of that kind; in that case it could be done. But as long as there is a mutual agreement among the various members of it-it depends upon the question whether it is in there or not-there is no fixed obligation; there is no definite mutuality for which you can go into court and have a judgment declared against them and throw them into bankruptcy, and for that reason a good many of them-universally, almost-have not failed.

Mr. O'CONNOR. What happens if they can not pay their rent?

Mr. WILLIAMS. Well, as I say, if there is some obligation to some third party that would be true; but so far as the mutual arrangement among the members is concerned, under the laws of most of the States, as I understand it, they could not be thrown into the hands of a receiver.

I just threw that in, together with this statement by Morton Bodfish.

The further position is taken that if there is a necessity for it it is largely local, and when I say "local" I do not mean this particular locality. It may be confined to States. But there are entire