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Senator MCADOO: You have got a State counsel in the southern district of the State, and you have got a State counsel in the northern district. Mr. RUSSELL. Yes.

Senator McAdoo. They can look after the business. What does the regional counsel do?

Mr. RUSSELL. We find it necessary to supervise the operations in the State.

Senator McAdoo. Have you got such a very incompetent man in that organization in the State that you have to pay the regional counsel to supervise him?

Mr. RUSSELL. I worked for 4 years with Ewell D. Moore, of Los Angeles, and I think he is very competent.

Senator McAdoo. Why, if he is very efficient, do you have to have someone over him to look after it?

Mr. RUSSELL. Because of the complexity of the business we are engaged in.

Senator MCADOO. It is utterly unnecessary.
Mr. RUSSELL. I just do not agree with you.

Senator MCADOO. I do not care whether you agree with me or not. I tell you it is foolishness, and if it reflects the way your whole organization is set up, it shows a perfectly impossible organization insofar as employing counsel is concerned.

Senator Adams. I gather, Mr. Russell, from what you say, that your cost is $2 a case?

Mr. RUSSELL. Roughly.
Senator Adams. I mean $2 a case at your regional office.
Mr. RUSSELL. That is for all costs. Supervision is less than $2

a case.

Senator McAdoo. Take your regional counsel. What can he do in Montana? With the means of communication, unless you fly, it means that it takes a long time to exchange communications with Montana from San Francisco.

Mr. RUSSELL. Yes.

Senator McAdoo. Now, what possible service can he render in Montana?

Mr. RUSSELL. The regional counsel in the city of San Francisco can keep in touch with the State counsel of each of the nine States. He can follow that work up when it is not done and see that it is done. When it is improperly done, he can see that it is properly done. He can do whatever supervision is necessary, and he does supervise them, gives them information and follows up their work.

Senator MCADOO. Why can that not be done in Washington ? Your State attorney in Montana-I presume that most of it is done under the laws of the State and he must be a responsible man or you would not employ him, I assume. Why could he not report direct?

Mr. RUSSELL. Senator, it is possible to do it from Washington, and we did it from Washington for a year or two, and we found it to be wasteful. The Farm Credit found the same thing, and it has a regional office. The Federal Reserve has a regional office out there, and every Government establishment in Washington practically has regional offices. The big insurance companies have regional offices. Everybody has a regional office for different sections of the country. Practically everybody who operates a business of this character has a regional office.

Senator McAdoo. I think that nine-tenths of it is absolutely unnecessary.

Mr. RUSSELL. The practical experience of all people engaged in business is to the contrary.

Senator McAdoo. Now, I do not concede that. You say that. You assert it. I do not.

Mr. RUSSELL. The Federal Reserve has got a regional attorney.

Senator McAdoo. The Federal Reserve is an entirely different organization dealing witb all of the banks in the district.

Mr. Russell. The difference is that a wholesale operation is much more simple than a retail operation.

Senator McAdoo. The Federal Reserve has not got any regional attorneys at all. They do not have any such a thing.

Mr. ŘUSSELL. I wrote a letter to him last night at 11 o'clock. I wrote a letter to the attorney for the region, Federal Reserve, and sent it to San Francisco last night at 11 o'clock.

Senator MCADOO. The regional attorney?

Mr. RUSSELL. Yes, sir; wrote a letter to him last night at 11 o'clock. He is in San Francisco.

Senator McADOO. It is a new development then?
Mr. RUSSELL. Why, Senator, he has been there--
Senator McAdoo. I never heard of it before.

Mr. RUSSELL. I have a letter which I received from him last week, and he wrote me that he had been there for 17 years. He sent me an analysis of the mortgage laws of the State of California, Oregon, and Idaho. That is the same one as

Senator McAdoo. Excuse me a minute. When I finish, you can do the talking

Mr. RUSSELL. I will be glad to.

Senator McADOO. And do not interrupt' me when I am asking questions.

The Federal Reserve Bank for that district has a counsel, of course. Mr. RUSSELL. Yes, sir.

Senator MCADOO. All right. Now, he is the counsel for the Federal Reserve bank. He does not have a regional attorney or an attorney in every one of the States in that Federal Reserve system out there. He has no such thing as that. Of course, the Federal Reserve bank which operates over each one of these regions or States has a counsel, and they report direct to the counsel here in Washington; but they have nothing which would be analogous to your organization, where the Federal Reserve banks would have to have a counsel in each one of the States of the region. It does not have, unless it was instituted recently.

Senator McCARRAN. You do not have a State counsel in each one of those nine States?

Mr. RUSSELL. Yes.

Senator McCARRAN. Did you not do away with that some time ago? I am referring to my own State, Nevada.

Mr. RUSSELL. In Nevada, Senator, we have a man on part time; but we have a State counsel there instructed to give such time as he is required to work.

Senator McCARRAN. That is Mr. Finch.
Mr. RUSSELL. Yes.

Senator Hale. You have about 125 regional attorneys employed all of the time, do you not?

Mr. RUSSELL. That is about right, Senator.

Senator HALE. These men, regional employees, are doing this checking up work on the State work?

Mr. RUSSELL. Yes, sir.

Senator HALE. I mean, do you hire outside attorneys to do it at all?

Mr. RUSSELL. The regional attorneys take all of the records, and supervise the work, you see.

Senator HALE. Do they employ outside attorneys to do the work?

Mr. RUSSELL. The foreclosure itself is handled by an attorney employed on a fee basis.

Senator HALE. Fee basis?
Mr. RUSSELL. Yes, sir.

Senator HALE. Well, you do not mean that the expense for that amounts to about $2 in each case?

Mr. RUSSELL. I say, the expense of supervising in Washington is less than $2. The expense for supervising the regional office is less than $2. I said that the total expense of the foreclosure is about $150. Of that, about $75 is attorneys' fees.

Mr. Fahey. Fee attorneys' fees.
Senator HALE. And for attorneys' fees in the States?
Mr. RUSSELL. That is right. This is local.
Senator McKELLAR. That is the fee attorneys.
Mr. RUSSELL. Yes, sir.
Senator HALE. That is the fee attorneys.

Mr. RUSSELL. For foreclosures. Take a foreclosure at San Diego, Calif. We will send these papers down there and hire a man and pay him $75 or $100 or $125, or whatever our established fee is there to handle the case.

Senator HALE. All work which is done by the regional office in connection with foreclosures amounts to only about $2 a case?

Mr. RUSSELL. About $2 a case; yes, sir.
If

you include the fees of the fee attorneys in it, I just explained that cost would be about $75 a case. But there is—in addition to that $75 a case there is about $2 a case for regional office supervision.

Senator HALE. What is the $75 fee, will you state?
Mr. RUSSELL. The $75 fee is paid to the local attorney.
Senator HALE. That is paid to the local attorney?

Mr. RUSSELL. That is paid to the local attorney. He receives a fee in each case.

Senator HALE. Beyond that, how do you get up to the $140 or $150 a case?'

Mr. RUSSELL. Advertising and court costs.
Senator HALE. In the State?
Mr. RUSSELL. Yes, sir.
Senator HALE. And only $2 is for work done in the region?
Mr. RUSSELL. Supervising.
Senator HALE. Including the employment of all outside attorneys?
Mr. RUSSELL. Yes, sir.

Senator Adams. Mr. Russell, then three attorneys touch each case? Mr. RUSSELL. Yes, sir.

Senator Adams. The local, county, or State attorney actually conducts the foreclosure?

Mr. RUSSELL. Yes, sir.

Senator ADAMS. And the State counsel through whose hands it goes and the regional counsel at the regional office, to whom goes the supervision?

Mr. RUSSELL. That is exactly right.

Senator ADAMS. And the cost in the regional office is approximately $2 a case?

Mr. RUSSELL. That is right.
Senator ADAMS. What is the cost at the State office?

Mr. RUSSELL. Senator, I do not have that figure, and I am afraid it would be impracticable to get it, because in the Washington office and the regional offices we have a section for foreclosures altogether, but in the State offices they do foreclosure work, collection work, and they do everything else.

Senator ADAMS. That is, the general counsel in charge of the Colorado office reports to the regional office.

Mr. RUSSELL. In Colorado, we have only got two men, and they do a little bit of everything.

Senator ADAMS. I know.

Mr. RUSSELL. And it would be impracticable to attempt to discover what the cost for the supervision of the State counsel is. It is nominal, however.

Mr. Fahey. I would like to point out from the practical operating standpoint the importance of following up and supervision on these

cases.

The difficulty that we encountered before we had adequate supervision was that the cases would go out to the fee attorneys in the field, and then too frequently they neglected them. I mean, they did not act on them promptly. Now, from the moment we actually start foreclosure proceedings, we cannot get a cent from our borrower. Consequently, every week that passes without our getting possession of the property promptly is an expense to the corporation. In the State of New York alone it costs us about $150 a month, taxes, and everything else; interest, loss of principal, interest on principal, loss on all of the rest of it, while we are getting possession of that property.

And in that State the average has been, elapsed time, of about 4 months, because of all the difficulties, I mean that is the very best we can do on it. There the local attorneys were delaying 2 or 3 months until we followed them up. You see, that expense and loss is exaggerated.

Senator McAdoo. Now, Mr. Russell, I would like to know a little bit more about how your legal machinery works. You have got a regional attorney in San Francisco? Mr. RUSSELL. Yes, sir. Senator McADOO. For that district? Mr. RUSSELL. That is right. Senator McAdoo. Montana is a part of it? Mr. RUSSELL. Yes, sir. Senator McAdoo. The regional attorney is located at San Francisco.

If you have a case at Bozeman, Mont., who has charge of that work in that region?

Mr. RUSSELL. The regional manager at San Francisco determines to foreclosure and hands that matter to the regional counsel.

Senator McAdoo. To the regional attorney in San Francisco?
Mr. RUSSELL. Yes, sir.
Senator McAdoo. You mean?

Mr. RUSSELL. I say, the regional manager would determine to foreclose and he would hand that to the regional attorney.

Senator McAdoo. I see.

Mr. RUSSELL. You see, he determines on the facts of the foreclosure, and whether or not there will be foreclosure. The regional counsel receives the order for foreclosure and makes a record of the facts, the foreclosure order, and sends this case on to the Montana State counsel, Mr. Bottomly, and the State counsel immediately causes the fee attorney to institute suit in that matter, and be maintains a record of it. The regional counsel follows that up after appropriate time. He has a record showing how long it ought to take for foreclosure in the State of Montana. He has reports coming to him when the suit has actually been filed, on the record up there, and if it is not filed he follows it up and sees why it is not filed. His records show when the answer should come in, and his records show if no answer did come in, and he finds out why there is not a default judgment taken and follows it up step by step. This lawsuit, you see, at no time is lost sight of in the process of the lawsuit.

He also, of course, has to follow up the question of advertising and the rates charged us for advertising and the question of the selection of newspapers, and other problems of that character that are involved in the process.

Senator McAdoo. Now, the chief responsibility on following up on all of these details develops upon the State counsel. He is the man who has to do most of the work.

Mr. RUSSELL. He is the man in immediate charge.

Senator McAdoo. That is what I said. He has to follow the details, has to follow up the local counsel, fee counsel.

Mr. RUSSELL. Yes, sir.

Senator MCADOO. And then he has to report to San Francisco and then San Francisco has got to report here and if any instructions are necessary from the board here they have got to go to San Francisco and then out to the State counsel, we will say to Helena, the capital of the State, if that is where he is located, and he has got to send them to the fee counsel in Bozeman, and you have got a lot of lost motion and lost time, and unnecessary expense, as I see it.

Now, if your State counsel is competent, and he knows the laws of the State, the regional counsel has not got anything to do with that. He is the man who ought to follow this up, and it would simplify this very much, it seems to me, by having a State counsel who ought to supervise these things. Of course, he would report to headquarters.

Mr. RUSSELL. Senator, I am glad to point out to you that I approached this thing with exactly the same idea, and this establishment was set up to be operated from Washington through the States, and we tried it for about a year and a half, and I had a legal staff going down here three shifts a day, down in the Standard Oil Co.'s Building and the building got so full with three shifts a day that we could not keep them there. We got some space in an old building on F Street and filled that up and we got lawyers in Washington here until it just looked hopeless, and prior to the establishment of these regional offices

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