probability it would not be necessary to enact this re-creation of what was then mentioned as the "Old War Finance Corporation." Mr. MEYER. I think, Mr. McFadden, if you will look at the public statement issued at that time by the President and which was read to the meeting, you will find the President stated that, if necessary, he would recommend the organization of such a corporation as this. Mr. MCFADDEN. I recognize that. Mr. MEYER. While the hope was expressed that it would not be necessary, the President stated that, in case it was found necessary, he would recommend it. Mr. MCFADDEN. I remember at that meeting it was stated that this matter of the organization of the National Credit Corporation had been talked over with the New York Clearing House banks, principally, and that they were taking the initiative in the organization. I am just curious, in connection with the organization of the National Credit Corporation, to observe the fact that that organization was instituted last October and now, three months later, is just beginning to ask the 10 per cent. The general impression is that the National Credit Corporation has not been very active, and I would like to ask you whether or not it is a fact that, because of the uncertainty in regard to the economic and financial situation, that the corporation does not desire to step in and take the risk, as it would be on the shoulders of individual bankers; but they were figuring on this governmental institution, which is literally the "back door of the Treasury of the United States," so that the whole people would assume the responsibility and risk on the advances which might be made. Mr. MEYER. That is not my understanding of the situation, Mr. McFadden. Mr. MCFADDEN. Is not that the practical situation? Mr. MEYER. The National Credit Corporation was proposed in October. It took several weeks to develop its organization and to get the subscriptions: $500,000,000 is not assembled in subscriptions all over the United States overnight. Mr. MCFADDEN. I appreciate that. Mr. MEYER. An undertaking like the National Credit Corporation requires a good deal of effort and machinery. I do not believe the corporation considered itself ready for business until five or six weeks after the President's announcement, pretty close to the middle of November. Mr. MCFADDEN. It was agreed that a large part of the benefits derived from that organization has been psychological? Mr. MEYER. Quite a lot; that was a very important result. I am not in close contact with the operations of the National Credit Corporation and I hope the committee understands that I do not consider myself qualified to testify with respect to them. But I happen to remember that it took some time to get it organized. It was desired to have it organized on a nation-wide scale and that, of course, required time. The corporation, however, was lending money long before the first call was made, because it arranged to borrow money in anticipation of the call. The fact that it has just made the first call has nothing to do with the question of having funds to lend, because it was assured by some of the larger banks in the East and West of the necessary funds to meet its loan require ments. The delay in making the call was not, I think, a factor in the corporation's activity. However, as I stated, I do not consider myself qualified to testify on the National Credit Corporation. Mr. MCFADDEN. Section 2 of the bill provides for $500,000,000 capital, all to be subscribed by the United States. What is the total amount of debentures or obligations that this corporation can incur? Mr. MEYER. Three times that amount. Mr. MCFADDEN. A billion, five hundred thousand? Mr. MEYER. A billion, five hundred million. Mr. MCFADDEN. A total of $2,000,000,000 is the outside expansion or financial limit in this corporation? Mr. MEYER. Yes. Mr. MCFADDEN. On page 5, section 5, of the bill, it says [reading]: The corporation is authorized and empowered to make loans, upon such terms and conditions not inconsistent with this act as it may determine, to any bank, banker, savings bank, trust company, clearing house, or other association of banking institutions, building and loan association, insurance company, or other financial institution in the United States. Mr. MEYER. Some amendments to that clause have been suggested. One is to strike out the word "banker." The other is substitute the following: "Or other bona fide financial institution in the United States having substantial resources whose obligation, indorsement, or guaranty would add materially to the security of loans to it by the corporation" for the phrase "or other financial institution in the United States." Mr. MCFADDEN. Of course, I recognize that this is the broadest kind of power being given to the corporation to make loans. In addition to this, I understand that one of the principal functions of this institution will be to grant the necessary credit to the railroads of the United States? Mr. MEYER. I would not say one of its principal functions, Mr. McFadden, but rather one of its important functions. Mr. MCFADDEN. Is it in contemplation there, as soon as this institution is organized, to take over the business of the National Credit Corporation? Mr. MEYER. I can not speak for a corporation that does not exist. Mr. MCFADDEN. You would have the authority to do that? Mr. MEYER. There would be authority to do so. In the spring and summer of 1921, before the powers of the War Finance Corporation were broadened to cover loans to banking and financing institutions for agricultural and livestock purposes, a livestock-loan pool was organized at the request of the Secretary of the Treasury, very much as the National Credit Corporation was organized. When the amendment of August 24, 1921, was passed some of the loans made by the pool were taken by the corporation, not from the pool itself, but from banks or other financial institutions. Applications for loans were considered on their merits, and that would have to be done by s corporation. There is no understanding that anything will be taken over from the National Credit Corporation, if that is the point your question. of Mr. MCFADDEN. You have authority to do this? Mr. MEYER. The board here? Mr. MCFADDEN. Yes. Mr. MEYER. They would have authority to make loans in accordance with the terms of the act. I can not speak for the proposed corporation, but I would say that there would be no undertaking to take over any loans from anybody. There is no such undertaking now, so far as I know. Mr. MCFADDEN. Then, particularly, "The organization is authorized and empowered to make loans upon such terms and conditions not inconsistent with this act as it may determine, to any bank"? Mr. MEYER. Yes. Mr. MCFADDEN. That would mean that it could make any loans to any bank? Mr. MEYER. Yes. The War Finance Corporation had authority to make loans to any bank for agricultural purposes. Mr. MCFADDEN. Or it could purchase assets of any bank? Mr. MEYER. No; it could not. Mr. MCFADDEN. Could it take over acceptances? Mr. MEYER. Only on the obligation of the bank. When you talk about buying assets. I understand you to mean without recourse! Mr. MCFADDEN. No; I did not say without recourse. Mr. MEYER. That is what buying assets ordinarily means. Mr. MCFADDEN. Yes, I understand that. Mr. MEYER. All loans under the bill must be made against the obligation of the borrowing bank; the corporation would not be buying assets, as you suggest. Mr. MCFADDEN. Would this institution have authority to go into the open market and buy acceptances? Mr. MEYER. No. Mr. MCFADDEN. Nor Government bonds? Mr. MEYER. NO, I think not, I think there is no specific authorization to buy Government bonds. Mr. MCFADDEN. Would this institution have authority under the law that is proposed here to buy acceptances from the Federal reserve banks! Mr. MEYER. I should think not. Of course, the terms bank and financial institution" would include a Federal reserve bank, but certainly no Federal reserve bank needs to borrow, or will borrow; and there would be no occasion for this corporation to lend to institutions that do not need it. Mr. MCFADDEN. Of course, the Federal reserve bank could sell their acceptances in the market and buy these debentures to be issued by the Reconstruction Finance Corporation! Mr. MEYER. Ordinarily the Federal reserve banks do not sell acceptances. They allow them to mature, and run out, and be paid off. When you see a reduction in the bill holdings of Federal reserve banks, it does not result from sales; it results from maturing obligations. Of course, I can not speak for the Federal reserve system prior to September, 1930, but I think I can say that since then, no Federal reserve bank has ever sold any acceptances. Mr. MCFADDEN. What is the total amount of acceptances held by Federal reserve banks? Mr. MEYER. At this time? Mr. MCFADDEN. Yes. Mr. MEYER. My recollection is that it is somewhere between $300,000,000 and $400,000,000, less than half of what it was two months ago. The decrease has been due to the maturing of obligations that were held by the banks. Mr. MCFADDEN. What is the total amount of acceptances held by Federal reserve banks as security? Mr. MEYER. I think that, except in the case of foreign currency bills, they are all held by the Federal reserve agent as security for Federal reserve notes. Mr. MCFADDEN. In the $400,000,000 you would include the amount of the acceptances in Federal reserve agents' hands? Mr. MEYER. I think all are in the Federal reserve banks. Mr. MEYER. I should have said in the hands of the Federal reserve agents. I think it is the practice of the Federal reserve banks to place all their eligible paper, except foreign currency bills, with the Federal reserve agents as security for currency. Is that right, Mr. Morrill? Mr. MORRILL. Yes. No foreign currency bills are held by the Federal reserve agents. Mr. MCFADDEN. The bill also provides that these debentures can be held as security for public deposits. To what extent————— The CHAIRMAN. Mr. McFadden, will you suspend for a moment, before you take up this new subject? Mr. MCFADDEN. Yes. The CHAIRMAN. I wanted to ask, does this bill authorize loans to intermediate credit banks? Mr. MEYER. They are banks, and loans could be made to them. The CHAIRMAN. It does not authorize loans specifically to intermediate credit banks? Mr. MEYER. It does not mention them specifically, but they would be covered by the terms "bank" and "financial institutions." The CHAIRMAN. What I had in mind is, this bill makes it possible, if the board in charge of these funds sees fit, to make advances, to intermediate credit banks? Mr. MEYER. Yes. The CHAIRMAN. They, of course, would have also Mr. MEYER. If it was necessary. The CHAIRMAN. Well, that would be a matter of discretion, whether it was necessary? Mr. MEYER. Yes. The CHAIRMAN. They would also have the authority to loan to a Federal land bank or joint-stock land bank, would they not? Mr. MEYER. Yes. The CHAIRMAN. Let me ask you, in that connection, if it is contemplated that such loans or any such loans would be made under this corporation? Mr. MEYER. Gentlemen, I do not want to appear to be speaking for an organization which does not exist, but in the Senate committee the question was raised whether this corporation would have power to make loans to Federal land banks or joint-stock land banks, and I think it was very clearly indicated that the power would exist. Mr. MCFADDEN. It says or any other financial institution in the United States. That would include anything? Mr. MEYER. It is a broad provision. I believe the Attorney General held that joint-stock land banks are banks. The CHAIRMAN. Would there be any objection, so far as you are concerned and I would like to have your judgment of the matterto putting specific language in here as to intermediate credit banks? Mr. MEYER. I have no objection, but I am not sure it would be desirable. The CHAIRMAN. That is the very thing I am talking about. Mr. MEYER. I would not mention them specifically, because it is unnecessary to do so. Some of them might want some loans, but the present language would cover them. I certainly do not think Federal land banks will need anything from the corporation if the pending bill to provide them with $100,000,000 of additional capital is passed. The CHAIRMAN. I had this in mind, that the land banks would not have access to this fund, but that the intermediate credit banks should have, and that it should be specifically stated in this law. Mr. MEYER. It does not need to be stated. As a matter of fact, you know that the Federal reserve banks have power to buy intermediate credit bank debentures and to buy them. The CHAIRMAN. But that is a different proposition from this. I am one of those who has always had some faith in the operations of the intermediate credit banks as a facility for the accommodation of farmers; and that situation is certainly very distressing in many sections of the country now, and I am hoping that somewhere along the line we should be able to secure some kind of legislation that would put the intermediate credit banks to functioning. To do so I am confident they will require aid in some way. Mr. MEYER. They are functioning. The CHAIRMAN. And I have thought they should be specifically named and let it be understood and let this committee so express itself. Mr. MEYER. I have no objection to putting them in if the committee feels that it should be done. The CHAIRMAN. And that is one of the things we contemplate doing. Mr. MEYER. If you want to put them in, I have no objection. In fact, they are already in, and you would merely be referring to them specifically. Mr. BEEDY. Mr. Chairman, might I suggest this thought? Referring to "any bank," a bank has been held to be any kind of a bank. If you start to inserting phraseology to fine the banks that are to participate in the benefits of this act, would you not run up against the rule that by attempting to find you have excluded all those you have not named? The CHAIRMAN. That is one of the points that I had in mind. Mr. BEEDY. I think you would hurt the intermediate banks by inserting that. But you refer under that broad phrase to any banks. The CHAIRMAN. I think that is probably true, but my own thought of the matter is really that the land banks stand in a different category from the others, and that they should not be included in this bill. But, I am exceedingly anxious that we make it plain that we do contemplate service to intermediate credit banks, and I think it would help this bill, in the view of quite a number of the Mem |