case of homes there may be a large surplus in one locality, or a large surplus in certain types of construction, while in other places and in other types of construction there may be a decided shortage.

The peak of home construction was in 1925, when provision was made for 499,000 homes in 256 cities as reported by the Department of Labor. At the peak of the boom in 1928 there were only 388,000 new homes provided in these cities, and these largely took the form of higher-priced apartment buildings in Park Avenue, Fifth Avenue, Euclid Avenue, Lake Shore Drive, and other high-class residence areas in the larger cities of the country. The construction of homes is presently proceeding at the rate of only 30,000 for the year 1932 for the entire country, which is only 6 per cent of the construction recorded for the year 1925. These statistics in themselves clearly indicate that the vast mass of our people of moderate means were neglected with respect to home provision during the boom period. There are still approximately 1,000,000 marriages per year.

The process of growth is still operative. The need for new housing is an ever continuing factor of our national economy. It is now found that apartment houses can be built containing every accommodation found in the most expensive and luxurious homes which can be rented at the rate of $12 per room per month, or $36 for a 3-room apartment and bath. The rooms contain from 2,800 to 3,000 cubic feet of space, with well equipped kitchens, electric refrigeration, There presently exists in one section of New York City, so I am informed by a high official of the State housing board, a waiting list of 1,800 people who are eager to avail themselves of such modern living accommodations at these extremely low rental rates. Similar conditions exist in other cities of the country. If capital were available a building program of considerable magnitude would promptly be set in motion.

etc.

The building industry is the largest in the country in normal times and is to-day the most depressed. It normally employs directly and indirectly 4,000,000 men, contributes 15 per cent of all the tonnage transported by the railroads, and has an annual turnover of seven to eight billion dollars exclusive of public works. Once this industry is infused with just a reasonable measure of activity it will exert a most important influence in affording employment for vast numbers of people.

Aside from the need for new homes is the question of repairs and improvements

Senator BULKLEY. Were you talking about building apartment houses?

Mr. WOOLLEY. In the statistical record an apartment is a home. If you put up a building with 265 apartments, that is counted as 265 homes.

Senator BULKLEY. That is what you are talking about, is it?
Mr. WOOLLEY. Homes.

Senator BULKLEY. Apartment houses or homes?

Mr. WOOLLEY. Well, both. They are used here as an illustrationthe new apartment buildings that have recently been completed in New York, a year or so ago, which rent for $36 per apartment, three rooms and bath, or $12 per room per month. [Continuing reading:]

Aside from the need for new homes is the question of repairs and improvements. Many houses need to be painted, leaking roofs need attention, but there is no capital available in a large way for such purposes. A reasonable sum made available to this industry would quicken it into a measure of activity, in my opinion, which would prove most beneficial in the public interest.

The question has been raised whether funds for this purpose should be provided through the Reconstruction Finance Corporation or by the proposed Home Loan 125985-32- -11

Mortgage Bank. In my opinion both agencies should be employed. The Reconstruction Finance Corporation under its present charter is not sufficient to handle it alone becuase it is not able to make sufficiently long-time credits to encourage the financing of new works, which could only be done by advancing credit up to 10 years, the normal period of a building and loan association and a number of other agencies.

The matter of securing management which is unbiased by sectional or other interest is of supreme importance.

3. Railroads.-The Reconstruction Finance Corporation already has the authority to make loans to the raliroads under certain prescribed conditions. Loans made by the corporation have been effective in aiding the roads and avoiding receiverships. They have not, however, been effective in employing more workers or even in maintaining the forces of the roads without decline. The reason for this is found in the very small volume of traffic and in the financial position of the roads in the face of this difficulty. So many roads have found their income inadequare to do more than cover their fixed charges and essential expenditures, or have even lacked sufficient sums for these items, that a general policy of retrenchment has been followed. The railroads are now employing four hundred to five hundred thousand less men than they would normally, and many of those at work are working greatly reduced hours. In addition, railroad purchases of equipment, rails, etc., have shrunk to almost nothing.

It is in fact in the equipment and steel industries that the worst unemployment situation is found. If the railroads are compelled to continue their neglect of maintenance of way and equipment it is reasonably fair to assume that in due course they will arrive at a condition which will render their service dangerous to their patrons. There is some indication of an increase in major accidents

Senator GORE. In what?

Mr. WOOLLEY. On the railroads. There were two accidents last week

Senator GORE. Yes. I did not catch what you said.

Senator STEIWER. Would you say that these accidents are due to faulty equipment?

Mr. WOOLLEY. I say, indications.

Senator STEIWER. You said, though, indications of an increase in accidents. That may be quite correct. I am not disputing that, but do you say they are due to faulty equipment?

Mr. WOOLLEY. Neglect of equipment may lead to that condition. There are present indications of it.

The CHAIRMAN. I want to say to the committee, some members of which came in after I made the statement, that the witness asked, when he opened, that he might be permitted to read his statement for about 10 minutes and answer questions afterwards.

Senator GORE. I asked him a question because I did not understand what he said.

The CHAIRMAN. I am not criticizing anyone. I am just explaining the situation, that he would like to complete his statement and he will be very glad to try to answer questions afterwards. I am just conveying his request.

Mr. WOOLLEY. Thank you, Mr. Chairman. [Continuing reading] If the railroads were to restore their personnel to a point necessary for reason able maintenance, and were to resume normal purchases of equipment, it is fair to assume that many hundreds of thousands of men would find work in the areas and industries now hardest hit.

As the United States Government has for many years past assumed a measure of responsibility for the control of the railroads, a peculiar obligation, in my opinion, rests upon us with respect thereto.

In addition, the position of our banks and insurance companies is much affected by the value of railroad bonds, which have always been regarded in this country as prime investments. The present condition of the bond market, which is now practically closed to most new borrowers, in that way has operated

to check and diminish business activity, in its turn is affected more largely by the situation of railroad securities than by any other influence.

In the light of all these facts it appears to me most important that a means be found promptly for bettering the financial position of the railroads. The plan which has appealed to me most of those which I have heard is that the Reconstruction Finance Corporation should be authorized to lend money to the railroads which they might use for the purchase of their own bonds at present depreciated prices. In this way the railroads could bring about a substantial reduction in their annual interest charges and so effect an important improvement in their financial position. Moreover, the purchase of these bonds in the market would be most beneficial to the banks, insurance companies, and other institutions holding railroad obligations and would bring nearer the time when the general bond market would be able to resume its function of financing the new business undertakings which are so necessary to normal business activity and a larger measure of employment.

4. Projects of private corporations. I understand that one important question before this committee is whether legislation upon this subject should provide for loans to private industry for productive purposes, or whether loans shouid be restricted to public or semipublic bodies.

This is a practical question. I fully realize from my experience with the War Trade Board the difficulties encountered by any organization which has the power to extend privileges to private enterprise. Such experience certainly indicates that if the bill which you gentlemen finally recommend contains a provision authorizing loans to private enterprises that it should contain limitations and qualifications which would support the administrative authorities in declining loans which are unsuitable. Just what these limitations should be I am not prepared to suggest in detail, but I should think they might sitpulate that any concern receiving aid from the Reconstruction Finance Corporation must be an established enterprise with earning capacity demonstrated over a period of years, and must have a sound credit position indicated by a ratio of quick assets to quick liabilities of at least 2 to 1.

It would also seem wise that any concern applying for a loan to go forward with a project employing people should be itself required to furnish one-third of the necessary funds, calling upon Reconstruction Finance Corporation for only two-thirds. This would have the advantage of restricting loans to those which are sound in character and make Government money stimulate employment beyond the limits thereby created.

With these or similar safeguards it would seem to me not only wise but eminently desirable that facilities of the Reconstruction Finance Corporation should be available to private enterprises in a position to put men to work. The economical, and in fact the only feasible, way of dealing effectively with unemployment is to employ men where they live in occupations with which they are familiar. Most of the unemployed have been released by private industry. Most of them can not be reemployed until private industry is prepared to give them work. It is a basic principle of American economy that we rely primarily upon private enterprise to conduct the Nation's business. I believe it will be seen, when this period of emergency is over, that the principal channel for reemployment was found in private enterprise.

I recognize that it is difficult to foresee exactly what projects private enterprise may put forward to utilize idle man power, particularly while the upward turn in business is not yet apparent. I am sure, however, that the minute that upturn appears many private enterprises will be eager to increase their undertakings, and anything we can do to facilities that process when the time appears will be most effective. Meanwhile, I believe that there are in American industry many men of imagination and public spirit who will find ways of employing workers if funds are made available under the safeguards and restrictions which you may find it wise to introduce.

Since time immemorial private enterprise has been our main reliance in the growth of American civilization. Private enterprise has created the greatest industrial machine the world has ever known. Why then should it not be employed, encouraged, and in every way assisted in expressing its great power to offer employment by giving it the essential credit facilities, which in recent months have been inadequate.

Commodity loans.-I may add that I am in complete sympathy with the provisions of the Barbour bill for loans on commodities. I am leaving comments

respecting that provision to others who have special knowledge of the subject.

The CHAIRMAN. Have you completed your statement?
Mr. WOOLLEY. Yes, sir.

The CHAIRMAN. Senator Brookhart has to leave in a moment, and he would like to ask you a few questions.

Mr. WOOLLEY. Certainly, sir.

Senator BROOKHART. You concede that private enterprise has failed in that it is not able to furnish the credit necessary to start these things?

Mr. WOOLLEY. Everything has failed, Senator. The world is out of balance. I do not think that private enterprise is any more out of balance than

Senator BROOKHART. Private enterprise was running it, and got it out of balance, and now calls on the Government to get it into balance again?

Mr. WOOLLEY. With all due respect, I can hardly concede that private enterprise is responsible for the unbalance that presently exists.

Senator BROOKHART. The Government loaned about eleven billions to foreign countries that it probably can not collect, and private enterprise has loaned about $34,000,000,000 more.

Mr. WOOLLEY. Senator, I am dealing only with American industries.

Senator BROOKHART. All right. Then we will drop that. You said you wanted to prime this pump particularly for the railroads. In 1920 we primed them with $529,000,000 the first six months after they were turned back into private ownership, and since then we have provided by law that they should return to the Government half of their earnings above 6 per cent, and they themselves have primed themselves by collecting $361,000,000 more; and then in the 15 per cent rate case they showed that they were primed by collecting four and a half billion dollars more in surplus. When are we going to get through priming this railroad outfit?

Mr. WOOLLEY. That is up to the Government of the United States. Senator BROOKHART. Don't you think it would be better to squeeze the water out of the thing and get it down to its actual value? Then we would not need so much of this priming business.

Mr. WOOLLEY. I think that natural conditions have created a terrific disturbance to industry that this is not the time to start a project of that sort. If you can get them on their feet, I think it would then be in order, perhaps, to see what you can take waay from them.

Senator BROOKHART. You are aware of the fact that the EschCummins law fixed the value of the railroads at $18,900,000,000 and that their value on the stock exchange was about eleven and threequarter billions?

Mr. WOOLLEY. No; I am not familiar with that.

Senator BROOKHART. I would like to have you look it up. That is what you will find to be the fact. So we primed them about $7,000,000,000 in valuation at that time. Is not that the cause of the trouble, and if we had squeezed the wtaer out, would not that put the railroads upon a sound basis?

Mr. WOOLLEY. I have not studied that problem, and my opinion on it would not be of any value.

Senator BARKLEY. You fix a standard there for credit, a standard that would entitle any private corporation to get money from the

Government. Is not any such corporation that comes up to your standard able to get money from the banks and, if not, why not? Mr. WOOLLEY. Not for new enterprise.

Senator BARKLEY. Why not?

Mr. WOOLLEY. I do not know, but the credit facilities of the country are inadequate.

Senator BARKLEY. The banks have got money, but they are not loaning it?

Mr. WOOLLEY. I can not answer for the banks.

Senator BARKLEY. Do you think the Government ought to step in and loan its credit to private industry when the banks will not do it? Mr. WOOLLEY. I think there are many industries which, perhaps, if they should go to a bank, could borrow money for 90 days, but with regard to the Reconstruction Finance Corporation the law gives them a period of five years to make the terms.

Senator BARKLEY. We gave the Reconstruction Finance Corporation power to loan money to banks, and when the banks get it they can loan it to any of their customers. But what I am troubled about is the question of the Government going in as a lender of money to private enterprise in competition with the banking institutions that have been set up by the Government for that very purpose.

Mr. WOOLLEY. The question there, Senator, I imagine-I do not feel competent, perhaps, to dig very deeply into the economics of the problem

Senator BARKLEY. It is a very deep problem and it has got to be dug into.

Mr. WOOLLEY. It seems to me that since the member banks of the Federal reserve system can only loan on 90-day paper, the average business concern would not feel justified in taking up a new enterprise without some assurance that it could get a loan on a sufficient length of time to make a turn in the enterprise.

Senator BARKLEY. Is there not more need for injecting some life into old enterprises that are already established and suspended, rather than to start any new ones just now.

Mr. WOOLLEY. I can not visualize specific projects, but I believe that if the Reconstruction Finance Corporation had the power to look into each specific case as it develops and if it were found to be sound and met the conditions that you gentlemen have lain down governing that activity, I think it would be responsible for creating an enormous amount of employment for idle workmen.

Senator GLASS. Where do we get the theory that it is a proper function of government to tax you and loan your money to me?

Mr. WOOLLEY. I would not say, Senator Glass, that that was generally a practice that should be constantly applied, but in a great emergency when millions of men are out of employment, it is perhaps justifiable to resort to these emergency measures in the public interest to bring those people into a position of earning a living.

Senator GLASs. Is not that what the soviets are doing now under their amended 5-year plan? We won't even associate with those people, we will not trade with them, and yet here we are proposing to follow their example. I do not think it is ever a proper function of government to tax the people and loan their money to special interests, whether they be called private interests or any other sort