insist that something be done in which they may have their confidence and feel will accomplish the revival of business and will restore prosperity to the Nation. Why is it that people have lost confidence in the President? I am not going into that, but I do wish to call your attention to one fact, and that is this: A few months ago, in October, after the people-not the Democrats-but after the people of the United. States demanded a special session, and I think you agree with me that that demand was general all through the United States; they wanted a special session of Congress so that Congress would adopt some legislation that would relieve the conditions. What did the President finally do when forced? He called his private conference of whom? The very men or representatives of the very men who in a large measure have been responsible for the destruction of our Nation, financiers who are indifferent to the needs and wants and to the welfare of our Nation, who are looking for a commission to add millions and millions to their ill-gotten wealth. Now, that conference was called, as I have said, and on the following day a report was sent out that a private pool of $500,000,000 had been organized that would come to the rescue of the banks and business and the railroads and everyone. The people have been waiting ever since for some action upon the part of that private pool, and I would like to know from some one who is better informed than I am what that private pool has accomplished. How much of the $500,000,000 they subscribed has been utilized and used to relieve conditions of the Nation? People generally are under the impression that very little of that money has been actually used, and that it was in fact nothing but a camouflage to fool the people to believing that something was being done. It is for those reasons and because of such tactics that we have lost confidence in Mr. Hoover's administration. On the subject of that $500,000,000 pool I have written a letter and I have designated it properly. I question very much that money will ever be subscribed, and if it was subscribed that it would not be utilized for the purposes that they have stated, and only would be utilized for the purpose of relieving some railroad companies which mainly are owned by the same interests in New York. Now, I do not wish to read the entire letter, but I will just read an extract. I said this Mr. BRAND. Who is your letter addressed to? Mr. SABATH. This letter was written to the President, and it was submitted to the press and it was broadcasted, because I was fearful that they might delay real legislation for relief with the buncombe $500,000,000 private pool: But whether it materializes or not, I will persist in my demands for the creation of a Federal agency to deal with the serious situation practically and efficiently. I have often suggested that there be created a Federal Finance Corporation, capitalized for $1,000,000,000, with the power to issue bonds to the extent of five times its capital structure. Such an institution would not be difficult to create, if the oversubscription of the Federal bond issues be a criterion. What I meant by that is that only a few weeks before I sent the letter to the press it was given out by the Secretary of the Treasury that the Government bond issue, which was made shortly before, was oversubscribed four or five times. I was therefore under the im pression that there would not be any trouble in disposing any amount of these bonds that would be required to finance the Nation. so that we might again get back into stride. I have here a letter I wrote in July to the President, and I read an extract from that [reading]: May I also suggest, Mr. President, that you request the Federal Reserve Board to extend loans, or purchase for investment purposes, good mortgages on homes which otherwise might be taken away from their owners because the banks refuse to extend or renew them, and they thereby are looked upon as frozen assets? Such a step will immediately make them liquid assets and will not only save the homes for hundreds of thousands, but also will save and relieve 90 per cent of the banks. The letter is a little too lengthy, and I am not going to read it in full. I am only reading this and giving you this information to prove to your satisfaction that I have not been negligent; that I have been working on this since early in 1930. The latter part of 1930 I pleaded with the Federal Reserve Board to extend the privilege of rediscount to paper that I thought should have been entitled to the privilege. I realized the condition that existed in the country. I know the conditions of municipalities. They all are on the verge of bankruptcy, and it costs them 20 to 25 per cent to operate above the normal expenditure, because their bonds or their securities bring only 75 cents on a dollar, and consequently all these activities on the part of municipalities have ceased, and most municipalities are really on the verge of bankruptcy. The thing that would have more to do with widening the rediscount of the Federal Reserve-and I do not know whether you are considering that in conjunction with this proposition; if you are not considering that in conjunction with this-namely, widening the power of the Federal Reserve Board-I will refrain from further discussion along that line. Mr. STEVENSON. That is not now under consideration, Mr. Sabath. Mr. SABATH. It is not? Therefore, I will desist as to that. I have here correspondence between Mr. Eugene Meyer and my self on that point, in November or December, 1930, where I pleaded for some relief. Mr. STEVENSON. Mr. Sabath, may I call your attention to the fact that in this bill, as it now reads, there is a proposition to widen the scope of eligibility of paper, making the debentures of this corporation acceptable for rediscount; but that has practically been eliminated by merely giving them the right to buy and sell. So that in reality that section is in it. Mr. SABATH. I thank you very much for that information, but due to the fact that I stayed over one more day, and the train was two hours late, I did not get here yesterday forenoon until half past 10. Immediately the meeting of the Rules Committee took place, and I was kept busy all day and did not have a chance to familiarize myself with the bill introduced by Mr. Strong, H. R. 5060; but last night I started to glance over it, and I found there are some provisions there relative to the Federal Reserve Board, and therefore I did not know whether you had given the matter any thought or consideration. If you have, I would like to speak on it. but if it has been eliminated, I will not do so. Mr. BRAND. I will make this suggestion, if I may: The President on different occasions has said something ought to be done to protect the depositors in the banks of the Nation. But he has never yet furnished any member of this committee, so far as I know, any proposed legislation along that line. If he does do so, that would be a good time for you to come here and have a hearing on that question and on your bill at the same time. Mr. SABATH. Oh, I am not going to wait that long before demanding legislation for broadening the power of the Federal Reserve Board. Mr. BRAND. What I want to say is this: That is a distinct proposition, and you are not going to get in this bill, certainly not in the Senate, any broadening of the law allowing the other paper to be made eligible. Mr. SABATH. I understand. Mr. BRAND. Senator Glass will never consent and neither will Governor Meyer and Mr. Mills, Under Secretary of the Treasury, to increase the eligible list in this bill. Mr. SABATH. I know; and I greatly regret that the eminent Senator from Virginia, the former Secretary of the Treasury, is so set against broadening the powers of the Federal Reserve Board. I actually believe that if he would receive the knowledge and the underlying reason why they refuse to budge and extent the power of the Federal reserve-well, I have enough confidence in the Senator to believe he would change his view on that point. But, unfortunately, he has taken a negative stand, and he is a gentleman of whom it may be said it is hard to change his views. Mr. DISNEY. If it is in order Mr. BRAND. I mean to say you could not get that in this bill. Mr. DISNEY. If it is in order, I would like to have any suggestions Mr. STRONG. May I ask a question? Mr. SABATH. Yes, Mr. STRONG. Did your bill contemplate the wiping out of the Federal reserve? Mr. SABATH. No; I have a separate bill. Mr. STEVENSON. Are you going to take up your bill and give us you consider to be the essential differences between it and the Strong bill? what Mr. SABATH. Yes. Mr. BRAND. Mr. Disney, did you want to ask some questions? Mr. DISNEY. I wanted to ask, Mr. Sabath, if your bill has been introduced widening the scope of the Federal Reserve Board? Mr. SABATH. No; but it will be introduced to-day, also in conjunction with another important bill that has to do with that matter. I have been working pretty hard. I have been devoting so much of my time to gathering ammunition that I could not do all these things at one time. But I am in good shape now and ready to hold forth. The difference between these two bills, as I might hurriedly summarize, it would be this: In the first place, the name of my proposed corporation would be the "National Relief Finance Corporation." First I advocated the name some months ago, of "Prosperity Finance Corporation "; but later I changed the name into "National Relief Finance Corporation." My bill provides for $1,000,000, whereas the Strong bill provides for $500,000,000. Mr. STRONG. One million or one billion? Mr. SABATH. One billion, pardon me. Even a million, seems very large to me, in money, but when it gets into billions, it makes me perspire. But, my bill provides for $1,000,000,000. Mr. SABATH. Let me tell you that the conditions in the South are not any wores than they are in the Middle West, or than they are in the West and in the North. We, in Chicago alone, after a careful survey, found that we had 648,000, people out of employment. Mr. STEVENSON. The first distinction, then. you make is that you provide for a billion dollars and Mr. Strong provides for a million? Mr. SABATH. Yes, sir; and mine provides five times and Mr. Strong three times the amount of bonding power. Mr. STEVENSON. You provide for the issuance of bonds to the amount of five times the capital stock and Mr. Strong's bill provides for the issuance of bonds to the amount of three times the capital stock? Mr. SABATH. Yes, sir. But it is not mandatory upon the board to issue any more than they actually need or require. Mr. STEVENSON. That is what I understand from reading the bill. Mr. SABATH. In my new bill. gentlemen, as I stated yesterday, they changed the plan of the bill, and that is the most important change, and it is not because I desire to take away from the President any power, but Mr. Strong's bill provides that the Secretary of the Treasury, the governor of the Federal Reserve Board and the Farm Loan Commissioner shall be the three members of the board. Now, I was rather reluctant in providing that the Congress should designate the men who should be the directors, and that is because, as I have said, confidence throughout the United States in the President has been shaken. The governor of the Federal Reserve Board has been sitting here for two years and refused to act, when his action as head of the Federal Reserve Board would have relieved and saved perhaps one-half of the banks that closed. If he had accepted-and he had the power, I insist-for rediscount the Finance Corporation paper it would have saved those banks. But they refused to move. The governor of the board has refused to recommend to Congress to broaden the power, if he did not already have it. And because of those facts-and I want you gentlemen to read my letters and his answer--to me. Mr. STEVENSON. Are you going to put them in the record here? Mr. SABATH. All right. I do this only because I want to show that because of his failure to act that confidence in him and the President and the administration has been shaken. We have the third gentleman, the farm loan commissioner. You gentlemen know all about the experience with that institution, and I am not going to dwell on that, because I desire to reestablish confidence, so that the masses, the business men and all the people will say "Now, here is a body of men that will look after the welfare and financial interests of the Nation to relieve the banks and business generally. We have confidence in them." Everything will be all right then, and I feel it will help to restore confidence in that way; and it is for that reason, and that is more for the purposes of infor mation Mr. STEVENSON. Mr. Chairman The CHAIRMAN. Will the gentleman from Illinois yield to the gentleman from South Carolina? Mr. SABATH. Yes. Mr. STEVENSON. I would like to ask this-I do not know whether you have considered it: We are asked to legislate and provide that four of the directors shall be private citizens. If one declined to act or one died, or two of them dies, what provision is there for that? Mr. SABATH. The President then would have the power to appoint. Mr. STEVENSON. Do you make that provision in your bill? Mr. SABATH. Yes, sir; I do, in my bill. Mr. STEVENSON. By and with the advice and consent of the Senate? Mr. SABATH. Yes, sir. Mr. STEVENSON. I want to suggest to you my view about that is this, that the Congress has a very large responsibility about this matter, and I agree with you that confidence in the board that has been appointed has been rather weakened, and that Congress should have some say in the House of Representatives. I propose to offer an amendment here to provide that of this board two be appointed by the Speaker of the House, two of them by the President, with the advice and consent of the Senate, and let the others be ex officio, and there is no reversion to anybody else. I think if the Speaker of the House's appointees should drop off or decline, the Speaker is always here to make any necessary appointment. I just make that as a suggestion as you go along. Mr. SABATH. Right in that connection let me tell you, gentlemen, this is my thirteenth term in the House. I have been a Member for nearly 25 years. I have made it a point to familiarize myself and get acquainted with the membership of this House from the very day that I entered the House. It was my opinion then and it is my opinion now, and I sincerely believe that there is not a body in the United States composed of that number of men whose members are more honest, more sincere, or more devoted to their duties than the great majority of the Members of the Congress, whether on the Democratic or Republican side. I resent the insinuation on the part of certain professional lobbyists to attack the integrity of the membership of the House. These lobbyists should be eliminated and laws should be passed that such propaganda should be prohibited, because it weakens our entire structure. The confidence of the people in Congress and in our institutions is being destroyed by these continuous attacks. It is for that reason that I feel we should demonstrate-we have the chance now-to the country that Congress is ready and willing in crises like these to assume its responsibility and legislate. For that reason I feel that it would be in the interest of our Nation that you would embody in the legislation that appointive feature. The President has a lot of other appointments to make. My suggestions for appointment are not political, as you know. I started with former President Calvin Coolidge. The next gentleman is Mr. McAdoo-and you, Mr. Strong, know that Mr. McAdoo and I do not agree on things. He is not quite as wet as I would like |