14. Ap6/2: G74/948-2 SUPPLEMENTAL GOVERNMENT CORPORATIONS 64438 HEARINGS BEFORE THE SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS HOUSE OF REPRESENTATIVES EIGHTIETH CONGRESS COMMITTEE ON APPROPRIATIONS JOHN TABER, New York, Chairman RICHARD B. WIGGLESWORTH, Massachusetts CLARENCE CANNON, Missouri CHARLES A. PLUMLEY, Vermont FRANCIS H. CASE, South Dakota H. CARL ANDERSEN, Minnesota P. W. GRIFFITHS, Ohio LOWELL STOCKMAN, Oregon JOHN PHILLIPS, California ERRETT P. SCRIVNER, Kansas CHARLES R. ROBERTSON, North Dakota FREDERIC R. COUDERT, JR., New York LOUIS LUDLOW, Indiana JOHN H. KERR, North Carolina HARRY R. SHEPPARD, California JOE HENDRICKS, Florida W. F. NORRELL, Arkansas GEORGE Y. HARVEY, Clerk SUBCOMMITTEE ON GOVERNMENT CORPORATIONS APPROPRIATIONS WALTER C. PLOESER, Missouri, Chairman BEN F. JENSEN, Iowa GEORGE B. SCHWABE, Oklahoma FREDERIC C. COUDERT, JR., New York GEORGE H. MAHON, Texas JAMIE L. WHITTEN, Mississippi ALBERT GORE, Tennessee CLAUDE HOBBS, Executive Secretary to Subcommittee SUPPLEMENTAL GOVERNMENT CORPORATIONS APPROPRIATION BILL FOR 1948 HEARINGS CONDUCTED BY THE SUBCOMMITTEE, MESSRS. WALTER C. PLOESER (CHAIRMAN), BEN F. JENSEN, GEORGE B. SCHWABE, FREDERIC R. COUDERT, JR., GEORGE H. MAHON, JAMIE L. WHITTEN, 'AND ALBERT GORE, OF THE COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, IN CHARGE OF THE GOVERNMENT CORPORATIONS APPROPRIATION BILL FOR THE FISCAL YEAR 1948, ON THE DAYS FOLLOWING, NAMELY: MONDAY, JULY 14, 1947. RECONSTRUCTION FINANCE CORPORATION STATEMENTS OF JOHN D. GOODLOE, CHAIRMAN, BOARD OF DIRECTORS; HENRY T. BODMAN, DIRECTOR; HAROLD W. H. BURROWS, CONTROLLER; D. C. CARNES, DIRECTOR, BUDGET DIVISION PUBLIC LAW 132 Mr. PLOESER. This is a hearing of the new and renewed Reconstruction Finance Corporation as to its budget for the current fiscal year, 1948. It is being held in light of the 1947 RFC Act, which gives the Corporation 1 year's extension and brings about certain heavy liquidation programs of past activities of the RFC, and defines anew its authority. SUMMARY OF LENDING POWERS OF THE RFC Mr. GOODLOE. Mr. Chairman, I have here a fairly short statement prepared by our general counsel, which is a summary of the lending powers that are retained under the new law and a summary of those that have been repealed. Would you like to have them in the record? Mr. PLOESER. I think that is highly important and should be put in the record at this point. (The matter referred to is as follows:) RECONSTRUCTION FINANCE CORPORATION, MEMORANDUM TO THE DIRECTORS AND HEADS OF DIVISIONS AND OFFICES RE This office is preparing a detailed analysis of Public Law 132, which will be submitted in the near future. In the meantime, the following memorandum summarizes the more significant effects of the new law. Public Law 132 contains two titles: Title I, which reenacts the Reconstruction Finance Corporation Act, as amended by Public Law 132; and title II, which includes a number of miscellaneous provisions. 1 TITLE I. AMENDMENTS TO THE RFC ACT 1. The succession and functions of the Corporation are extended for 1 year through June 30, 1948. 2. Beginning July 1, 1947, the Corporation has the following lending powers: (a) To purchase the obligations of, and make loans to, business enterprises, including interstate railroads and air lines. Loans to railroads and airlines require the approval of, respectively, the Interstate Commerce Commission and the Civil Aeronautics Board. (b) To purchase the securities or obligations of, or make loans to, public bodies to aid in financing projects authorized under Federal, State, or municipal law. This is substantially the same authority as was contained in the first paragraph of section 5d of the RFC Act, except that the authority to make loans to States has been eliminated. (c) To make loans to financial institutions. (d) To make catastrophe loans not exceeding $25,000,000 outstanding at any one time. The following limitations apply to the Corporation's lending powers: (1) Except in the case of catastrophe loans, no financial assistance may be extended unless it is not otherwise available on reasonable terms; (2) All securities or obligations purchased and loans made (except catastrophe loans) must be of such sound value or so secured as reasonably to assure retirement or repayment; (3) There is a 1-year limitation on disbursements following a commitment to make a loan; and (4) The maturity date of loans may not extend beyond January 31, 1955. It should be noted that the Corporation is no longer required to impose a limitation upon the salaries which a borrower may pay to its officers and employees. 3. The total amount of new loans, purchases, or commitments, may not exceed $2,000,000,000 outstanding at any one time. 4. The authority to purchase veterans' home loans, guaranteed or insured under the provisions of the Serviceman's Readjustment Act of 1944, is eliminated. 5. The powers of the RFC Mortgage Company are eliminated and its assets and liabilities transferred to the RFC. 6. The Federal National Mortgage Association is continued, with authority to purchase mortgages insured under titles II and VI of the National Housing Act, as amended. 7. Effective July 1, 1947, the Corporation must pay interest on its borrowings from the Treasury at a rate determined by the Secretary of the Treasury taking into consideration the current average rate on outstanding marketable obligations of the United States. 8. Possessory interests, pipe lines, power lines, or machinery or equipment owned by the Corporation may no longer be taxed as real property. This provision nulifies the effect of the decision of the Supreme Court in the Beaver County case. 9. The Corporation is authorized to carry out programs, projects, and commitments of the Offices of Defense Plants, Defense Supplies, Metals Reserve, and Rubber Reserve which were outstanding on June 30, 1947. 10. Effective July 1, 1947, the salaries of the Directors of the Corporation, except the Chairman, are increased to $12,500. The salary of the Chairman is increased to $15,000. 11. The Corporation is granted the same exemptions from the payment of court costs, charges, and fees as are granted to the United States pursuant to the provisions of the Judicial Code. 12. The right of employees of the Corporation to sue the Corporation for damages resulting from injuries suffered during the course of employment is eliminated, and the right to compensation under the Federal Employees' Compensation Act is made the sole remedy in such cases. TITLE II. MISCELLANEOUS PROVISIONS Section 201 authorizes the Corporation to disburse funds on purchases, loans, or commitments lawfully made, or liabilities lawfully incurred, prior to July 1, 1947. Section 202 extends the powers of the U. S. Commercial Company through June 30, 1948. Section 203 directs the transfer of all the assets and liabilities of the RFC Mortgage Company to the RFC. Section 204 abolishes the Federal Loan Agency. Section 205 directs the RFC to transfer to the Secretary of the Treasury the stock of the Federal home-loan banks now held by the RFC, and provides for cancellation of RFC notes in an amount equal to the par value of the stock so transferred. Section 206 repeals numerous acts and portions of acts relating to the RFC. Generally speaking, every provision of law affecting the RFC, other than the Reconstruction Finance Corporation Act, has been repealed. The significant exceptions are Public Law 24, Eightieth Congress, authorizing continuation of the synthetic-rubber program; Public Law 125, Eightieth Congress, authorizing the continued operation of the Texas City tin smelter; and sections 2 and 3 of the act of January 31, 1935, providing a 1-year limitation on disbursements following a commitment to make a loan and limiting the maturity date of certain types of loans to January 31, 1955. Section 207 abolishes the Smaller War Plants Corporation and authorizes the RFC to carry out the liquidation of its affairs. Section 208 authorizes the RFC to make the priority purchase of surplus property for resale to small business in substantially the same manner as such purchases were made, prior to March 10, under section 18 (e) of the Surplus Property Act of 1944, as amended. The Corporation is expressly prohibited from purchasing any real property for resale to small business in any case where the original owner gices notice in writing to the Corporation that he intends to exercise his rights under section 23 of the Surplus Property Act. Section 209 permits the Corporation, pending the enactment of its 1948 Appropriation Act, to use its general funds for payment of administrative expenses in accord with laws in effect on June 30, 1947. Section 210 provides that Public Law 132 shall take effect as of midnight on June 30, 1947. JAMES L. DOUGHERTY, General Counsel. SUMMARY STATEMENT OF BUPGET ESTIMATES Mr. PLOESER. Mr. Goodloe, we should be glad to have you submit a statement to the committee at this time. Mr. GOODLOE. Mr. Chairman, there has been distributed a brief summary statement, to the staff and members of the committee, which I might comment on briefly as I go along. Mr. PLOESER. I think it would be well to put that in the record at this point, and then we shall be glad to hear you, Mr. Goodloe. (The statement referred to is as follows:) SUMMARY STATEMENT CONCERNING THE BUDGET ESTIMATES, AS Revised, of the RECONSTRUCTION FINANCE CORPORATION AND ITS SUBSIDIARIES FOR THE FISCAL YEAR 1948, SUBMITTED BY JOHN D. GOODLOE, CHAIRMAN At the time the budget of the Reconstruction Finance Corporation and its subsidiaries for the fiscal year 1948 was first prepared, the basic assumption was made that the authority and powers of the Corporation and its subsidiaries contained in legislation expiring on June 30, 1947, would be continued after that date in substantially their then existing form. The provisions of Public Law 132, Eightieth Congress, which extended the life of the Corporation to June 30, 1948; the provisions of other legislation, both enacted and pending; and other changes that have occurred affecting the future activities of the Corporation and its subsidiaries have necessitated material net downward revisions in our budget requirements. In view of the foregoing, the budget has been revised in accordance with the exhibit A and schedules 1 and 2 of the revised budget document. This exhibit, and the related schedules, also show a comparison with the budget as origir lly submitted and the revisions made therein, all analyzed according to individual program requirements. The revision gives effect not only to the changes resulting from legislation but also to the following factors which had not been anticipated at the time the original budget was prepared: (1) A more rapid rate of liquidation |