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The amendments to the S. E. C. Act and the practical application of the act seem to be in the right direction, but please do not forget that the mortality of the small- and medium-sized investment bankers has been high since 1929, and the majority of those still in existence are faced with capital impairments which preclude underwriting in the real sense of the word.

Sponsorship for new issues from capitalists having ready cash or credits seems, in the face of restrictions and liabilities, involved in the new regulations, an impossibility. No matter how attractive the returns may be, they seem to prefer liquidity the same as the banks.

Now, as to relief that we might expect under H. R. 5918, if enacted.

First. It seems to be drawn to especially help those who have had no assistance from established agencies.

Second. If those appointed to administer the act are sympathetic with the underlying causes of the poor showing made during the depression years, much good should come from it.

Third. If and when the bill is enacted and we are able to obtain a loan, we can and will profitably employ a minimum of 300 men, and get by far the great majority of funds so borrowed to go into materials and labor; we can and do propose to pay back the loan on a per-car basis, much as we pay our excise taxes.

Mr. KOPPLEMANN. How many men do you employ now

Mr. Gill. Only about 20. We are running our service department only. Operating on a short-term loan, we found it was much too expensive to do otherwise.

Mr. KOPPLEMANN. I think it would be well to advise the committee how you propose to be able to step up your employment from 20 to 300, if you get this loan.

Mr. Gill. I can cite our performance in 1933, Congressman, when we put out 4,802 cars in that year with very restricted credit facilities.

When we first started operations in 1931 this concern was in bad shape; when we took it over retail credit facilities were not available. Retail credit facilities, with the article in demand today, are available. We have proved the sale of our products; we have a considerable number of orders on our books; and we have inquiries from every State in the Union for our product, even though it is not a nationally advertised product.

The principal demand for our product is occasioned by the fact of the low operating cost, the gasoline consumption being from 45 to 50 miles per gallon.

Mr. FORD. What concern is this?

Mr. GILL. The American Austin Car Co. We have created a class of buyers not now being supplied by any other maker of motor transport.

Mr. KOPPLEMANN. In your opening statement you mentioned loans you had made at very high rates of interest, and said that you were able to pay them.

Mr. Gull. Yes, sir.
Mr. Wolcotr. Do you make the cars yourselves?

Mr. GILL. Yes, sir; we manufacture the engine ourselves, and we assemble the bodies and chassis and paint and trim the job at Butler.

Mr. Wolcott. Where is your factory?

Mr. GILL. At Butler, Pa. During 1931, 1932, and 1933, during the conditions then existing, we were able to put into the community of Butler, in wages and salaries and in amounts paid for supplies, very close to $600,000.

Mr. WOLCOTT. What is the trade name of your car?

Mr. Gill. The American Austin. It is a small car patterned after the British make of car by the same name. Mr. Cross. What rate of interest did you say you had paid?

Mr. Gill. It amounted to 120 percent in the case of the banker and 130 percent in the case of the distributor. The distributor furnished the money and took what we would have enjoyed the use of had we had sufficient funds with which to operate.

Mr. KOPPLEMANN. In other words, the distributor was asked to make an advance on cars that would be delivered, and in order to get the distributor to advance the money you were obliged to make him such concession as would equal 130 percent on the loan?

Mr. GILL. That is right. I do not wish to mislead the committee and to say that there were not risks involved, but our working capital was depleted by that amount, or it cost us that amount, in effect.

Mr. Ford. What percentage of cars do you manufacture that are used for light delivery?

Mr. GILL. About 40 percent. Unfortunately, that market has not been covered, because we were without the necessary working capital.

Mr. FORD. Your car does not cost much more than a motorcycle. Mr. GILL. It costs considerably less; the first costs are less.

Mr. REILLY. Is there any other statement you desire to make to the committee?

Mr. GILL. No, sir.
Mr. REILLY. We are much obliged to you for your statement.

Mr. KOPPLEMANN. Mr. Chairman, I will now ask the committee to hear a statement by Mr. Krieger.

Mr. Reilly. Will you give to the reporter your full name, your address, and state whom you represent?

STATEMENT OF MARVIN W. KRIEGER, MANAGER CHAMBER OF

COMMERCE, MUSKOGEE, OKLA.

Mr. KRIEGER. Mr. Chairman, my name is Marvin W. Krieger; I am manager of the Chamber of Commerce of Muskogee, Okla.

My statement will also pertain to my experience during the past 5 or 6 years in the State of Illinois.

In presenting my story, as it were, Mr. Chairman, it must necessarily be rather general, from the conversations I have had and the investigations I have made along the line of the operation of small and large business houses throughout the Mississippi Valley.

Undoubtedly, when the legislation was passed authorizing the organization of the R. F. C., an intent or purpose was set up.

As we see it, meaning the businessmen in the Mississippi Valley, the Kopplemann bill also expresses an intent to carry on that directional, so that the smaller businessmen can get the same service that the larger businessmen and larger industries are enjoying at the present time.

My story can be found in literally thousands of business houses throughout the entire Nation. I speak only generally for the Mississippi Valley. But particularly I shall refer to a specific problem, which is typical of many cases of businessmen who have talked with me about their problems.

The intent of the R. F. C. was to make it possible for industry to borrow money on long-time loans. It did not particularly name large industry, but apparently large industry has been the only organization that has found it possible to take advantage of the Ř. F. C. loaning facilities.

At the present time, there are throughout the entire country thousands of small businessmen fighting with their backs to the wall, who must necessarily quit business unless there is the possibility of having long-time loans extended to them.

It is purely from observation, and again coming from a discussion with businessmen, that I have found that a man making an application for a R. F. C. loan must be in such financial condition before he makes the application that it would not be necessary for him to receive the loan.

That statement has been made to me by literally a hundred or more businessmen throughout the Mississippi Valley. The statement is made by those men after they have made applications to the regional office of the R. F. C.

It seems to us that if we are really in earnest about this business of recovery, we will have to go back and see what is wrong.

At one door a department of the Government is telling the banker who goes in that he must loosen up and must extend larger and better credit, or, shall we say, more credit to the businessmen.

In another door, apparently, a Government representative who probably hails from just across the hall comes in and goes over the note case, and says,

“You must take this one, and this one out”, and the condition of mind of the poor banker is one yet of fear.

So the average small businessman has as yet not been able to take advantage of the R. F. C. intent. I take it that this bill is intended to carry out that intent to make it possible for the small businessman to get a long-time loan.

If that is done, gentlemen of the committee, I believe it will be one of the greatest incentives to immediate recovery, because assistance given that great mass of businessmen now fighting throughout the country for money enough to carry on is the one thing that will help push us around the corner.

Now, I would like to mention a specific case, and I prefer not to name the man, but I will be glad to assure you that it is an exact case.

The representative of a business house in Miami, Okla., came to me for advice. He came to me in Oklahoma City, and we went together to the R. F. C. office to try to get some money to enable him to carry on his business. In his set-up he has machinery that is easily worth in excess of $65,000, in a printing establishment. This machinery has been recognized as being worth far in excess of that amount originally, and at the reduced prices it would be easily worth $65.000.

The business was forced into a friendly receivership on the part of four or five creditors. The business has been operated under this friendly receivership for 2 or 3 years during the depresssion.

If this man could procure $5,000 on a long-time credit basis, it would be a great help to him. His business at the present time is making money, not very much, but he is able to come back, and he now sees a way by which to get in the clear if he could procure the $5,000; but the local banker apparently is unable to help him in his present situation, because the banks have to insist on 30-day, 60-day, or 90-day notes, which runs his interest rate entirely too high.

If this bill is passed, this man will be able to procure his $5,000 loan, and in doing so he will keep 23 or 24 people off of the F. E. R. A. rolls. He will be able to keep a business going that has been going for a great many years, although up until the time of the depression he, no doubt, made some errors in buying too much and in having bought too much when the crash came.

His story, gentlemen of the committee, is really the story of thousands of small business firms, at least throughout the extent of the Mississippi Valley.

It is our sincere hope that the intent of the R. F. C. Act may be carried out in the spirit of this particular bill, giving us a poor man's, or a junior, R. F. C., if you please, whereby we may be able to take care of that exigency until normal times come back again, when banks can extend credit on long-time notes.

I think it is a foregone conclusion that the average banker is afraid of long-time notes, and must require such paper that makes it impossible for the average small business man to take advantage of a long-time loan.

Finally, gentleman, I think we need this bill in this country for recovery, under which we set up a long-time loan process whereby the small business man can come out on even terms with the big business man.

Mr. WILLIAMS. What kind of a bank have you in Miami, Okla.? Mr. KRIEGER. To which bank are you referring?

Mr. WILLIAMS. In connection with the case in Miami to which you referred.

Mr. KRIEGER. There are three banks there; there is a national bank and a State bank.

Mr. WILLIAMS. One national bank and one State bank?
Mr. KRIEGER. One State bank, I think.
Mr. WILLIAMS. Two banks?
Mr. KRIEGER. Yes, sir.

Mr. WILLIAMS. You referred to one agency which asked them to be more liberal, and then another one came along requiring them to contract credit. To whom do you refer?

Mr. KRIEGER. I am merely repeating the statements of bankers I have talked to throughout the Mississippi Valley out there, saying that the Federal Government requires them to be more liberal, and at the same time the officers who come through there and go over the banks' books and look over the note cases, are not letting them extend the credit as they did in the old days.

Mr. Williams. Were these banks closed during the bank holiday? Mr. KRIEGER. Some of them were.

Mr. WILLIAMs. Let us take this particular instance that you refer to. They were closed temporarily, of course. Did they open up again without restriction?

Mr. KRIEGER. Yes; I believe they did.

Mr. Williams. They have been going along just the same as they riid? In what way has their credit policy changed ?

Mr. KRIEGER. That question I am not able to answer.

Mr. WILLIAMS. They are extending credit on short-time paper, as I understand you.

Mr. KRIEGER. That is right.

Mr. WILLIAMS. Then they are giving the printer credit along that line: he has a line of credit there, has he not?

Mr. KRIEGER. I do not know that he has.

Mr. WILLIAMS. I understood you to say he could get a short-term loan.

Mr. KRIEGER. He could, if he would apply for it, but he has not applied for it recently.

Mr. WILLIAMS. What rate of interest do they charge him?
Mr. KRIEGER. Six and eight percent.

Mr. WILLIAMS. Of course, they have a limit, have they not, under the State law?

Mr. KRIEGER. Yes, sir.

Mr. Williams. His complaint is that that is too high a rate of interest to pay; is that right?

Mr. KRIEGER. That is right.
Mr. WILLIAMS. What security does he give, if any?

Mr. KRIEGER. He has around $65,000 worth of machinery and stock in his place of business.

Mr. WILLIAMS. Of course, that is a moral obligation and a financial responsibility of himself. Just what additional security does he give? Does he give a mortgage?

Mr. KRIEGER. Yes.

Mr. WILLIAMS. In other words, he gives a chattel mortgage on his equipment. Mr. KRIEGER. On his machinery and stock. Mr. WILLIAMS. Does he own any real estate ? Mr. KRIEGER. I am not sure about that; I think he owns his home.

Mr. Williams. Would you expect any governmental agency to make a loan for 5 or 10 years on a chattel mortgage? You would not expect them to do that, would you !

Mr. KRIEGER. Well, I do not know.
Mr. WILLIAMS. That is not your idea of loaning, is it?
Mr. KRIEGER. We did it in the old days.

Mr. WILLIAMS. Made a loan on a chattel mortgage for 5 or 10 years?

Mr. KREIGER. No; not for 5 or 10 years. The conditions now are a little bit different.

Mr. Williams. Do you think it would be sound financing to do that now?

Mr. KREIGER. No; I do not think particularly it would be sound financing at all. But here is a business that is surely but slowly coming out. If we can find a way to extend this man's long-time loan, then this man will come out and will keep a certain number of families off of the F. E. R. A. roll.

Mr. WILLIAMs. He has paid his interest on his obligations right along?

Mr. KREIGER. Yes; and he has paid off some of his debts.
Mr. WILLIAMS. And still the bank will not accept further credit ?

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