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Mr. KOPPLEMANN. What do you mean by either you have got to have some money or you have got to close? Will you explain yourself?

Mr. Deaton. I beg pardon?

Mr. KOPPLEMANN. You have just said you have either got to have some money or you have got to close.

Mr. DEATON. Yes. We have got to stop. It means that about 40 people that I have been carrying for about 12 years, including their families and myself, have got to go out and get jobs some other place, and the machinery and stuff that we have have got to be sold for what we can get for it.

Mr. KOPPLEMANN. That is your condition?

Mr. DEATON. We have either got to close down or we have got to have some help. I can go down and borrow $10,000 on those invoices, but you see I can't get those invoices now. We can't go down now and say, "Give us $5,000.”

Mr. Ford. They have got to be acceptable invoices?

Mr. DEATON. Yes, sir; they have got to be passed on, and it is only somebody like the Reynolds Tobacco Co.--that they know by the time they look at it that it is worth a hundred cents on the dollarthat they will let have it.

Mr. KOPPLEMANN. And they charge you from 12 to 15 percent interest?

Mr. DEATON. They charge us a dollar a hundred.
The CHAIRMAN. As a matter of fact, they are not making loans?

Mr. DEATON. That is it. I used to get loans from the Jefferson Standard, but when the banks closed that closed the whole works, and when it looked like they were going to close up they said “The thing for you to do is to pay up what you owe.”

Mr. HANCOCK. What kind of security did you give the Jefferson Standard?

Mr. DEATON. I gave a mortgage on real estate. I put up good security.

Mr. HANCOCK. They didn't make you a straight commercial loan? Nir. DEATON. You could get it and do what you pleased with it. They have loaned as high as $10,000 or $12,000.

Mr. FORD. What is your plant worth, as a going concern?
Mr. DEATON. Well, it would be worth $10,000 or $12,000.

Mr. Ford. And prior to the trouble you were able to get a loan; you had a line of credit that amounted to about $10,000?

Mr. DEATON. Yes, sir,

Mr. Ford. And you paid it off and renewed it and went on and always had plently of money to meet your obligations, and when you collected it you paid it?

Mr. DEATON. Yes, sir. Another thing that is a little different: You see, in these closed banks we owed them a certain amount of money when they closed up. Well, now they are liquidating and they are calling on us and they were going to take our property for whatever we owed them, and that is going to be another loss. I owed this bank $8,000 when they closed and I paid it down to $3,000. They say they have got to close this thing up and got to have their $5,000. Well, what they have is worth a hundred cents on the dollar, but it cost me three or four time that.

Mr. FORD. You mean they are threatening you with foreclosure on the balance?

Mr. DEATON. Yes; that is what they are doing. You see, we were the worst hit in this section of the country than any others and especially the banks.

Mr. WILLIAMS. What kind of bank do you have there?
Mr. DEATON. We have a branch bank of the Page Trust Co.
Mr. WILLIAMS. Did the branch bank close?

Mr. DEATON. Yes, sir. The 14 banks closed, and they have only paid 20 percent in over 12 months, you see. But now they are calling everybody. You see, before it closed we could get up to $10,000. In other words, we had a line of $10,000.

The CHAIRMAN. It might be well enough to say to you-you are probably cognizant of it anyway: Congress in the Reconstruction Finance Corporation Act envisioned that they were authorizing loans on the assets of these closed banks to prevent sacrifice of securities just such as you have described in your case.

Mr. CavicchiA. Mr. Chairman, may I say this: I may be wrong in my construction, but my construction is this, that that provision is interpreted by the R. F. C. to hold onto the real estate so that the stockholders in each bank will not lose; but was not passed for the benefit of such a man as the witness here.

The CHAIRMAN. It was passed primarily for the relief of the creditors of those institutions. That is probably true. But it was intended to conserve the assets of those institutions and to prevent as far as possible distress due to losses on them.

Mr. FORD. Orderly liquidation was the object, over an extended period, so that such assets as they had would give the people who owned them an opportunity to pay out.

But it seems to me, just in connection with that, that was rather ineffective, for the reason that many of these people who owned the banks, being deprived of any further capital, were unable to operate in a way where they could take care of their obligations in the normal course of time, and they were left high and dry. That is the class there has been very little done with, although we attempted to do it by letting the R. F. C. loan these banks money in order to keep these assets alive, and let them be liquidated in an orderly way. But in doing that we failed to do something else, and that was to make some provision for those who owed the banks, so that they could continue to operate and from their operations get enough profit to pay the banks back and save a loan.

Mr. DEATON. That is it exactly. Now, suppose that I had $8,000 or $10,000, or suppose I had $10,000 back that I paid this insurance company and the $5,000 that I paid this closed bank, to operate on--you see, with the rise in the price of lumber and everything now, in a very short time we could have paid the whole thing back. But what I did, you see, I sacrificed my home and other things and paid the Jefferson Standard and paid this bank, and now I am left sitting out on the rocks with nothing to do. You see, there are the people that are working for me and their families, and I have got to go out and hunt a job or do something, unless I get some relief.

The Chairman. Do you think if we passed this legislation that you could go and ask the accommodation that you feel you ought to have? Mr. DEATON. I just didn't get that. I am just a little hard of hearing.

The Chairman. Do you have an idea that if this legislation is passed it would enable you to secure the accommodation that you need?

Mr. DEATON. Yes; I think so. I don't see why.

Mr. Farley. Let me ask a question right there, please. They have withdrawn your open line of credit?

Mr. DEATON. That is it.

Mr. FARLEY. Have they done likewise with all other institutions down there?

Mr. DEATON. Yes; so far as I know.
Mr. FARLEY. No open line at all through the bank?

The CHAIRMAN. Of course, they are not making you a loan now in any true sense of the word; they are just simply acting as a collection agency?

Mr. DEATON. And charging about 15 percent interest for it. Suppose I go out here and sell a bill of lumber to some fellow that this bank don't know about, you see. If I take the invoice down there he would say, "No; you can't get a penny on it.” That is what we are up against down there.

Mr. FARLEY. That has been a policy of banking for years, as far as that is concerned, discounting your bills of lading and invoices. That has been the policy for years.

Mr. Cavicchia. Mr. Farley, it has not been the policy to pay 12 or 15 percent.

Mr. FORD. He does not know very much about little country banks.

The CHAIRMAN. Yes; that is what is the matter with this man right now; he hasn't got a little country bank; he has a branch that is owned outside and does not care a snap about the character of this man and does not know anything about it. The only thing he will accept is some kind of shipping document that he looks upon the same as money. He may get fooled some time, but it will be an honest mistake if he ever takes any risk whatsoever.

Mr. REILLY. What is the reason the Federal Reconstruction Finance Corporation would not loan you anything?

Mr. DEATON. It is just like I told you. I took my financial statement over there and he said it didn't look good to him. But I know it is good.

Mr. FARLEY. How much money would it take to cover your needs now?

Mr. DEATON. It would take from $8,000 to $10,000.
Mr. KOPPLEMANN. How much did you ask for?

Mr. DEATON. I told him it would take something like $8,000 or $10,000. Mr. Cross. They just don't want to make small loans like that

. Mr. DEATON. Under the rules I suppose I could not get it. I am not criticizing that. But the railroads got it, and the railroad is just simply choking us fellows to death. The Norfolk & Western Railroad when they commenced buying timber, after this whole thing started, issued a bulletin “We pay so much." That was the only source we had of getting any money, was selling it at whatever price we could. We sold it to them. Well, the railroad company couldn't use all the lumber from myself and the other fellows. Thirty days ago they struck out a bulletin that they could not pay that price. They were getting it cheap, but they wanted it for still less money,

and they took the price of cross ties at 10 cents apiece.

There is a difference in the price of the railroad companies. The code price of lumber—their price to all railroad companies, the Norfolk & Southern, Norfolk & Western, was cut $10 to $13 under the code price, and they are themselves buying lumber under the code price, and telling me that I have to pay 24 cents an hour or they would shut my plant down. Recently on an order we had to sign affidavits and everything that we were absolutely paying every man exactly what they were entitled to get.

The CHAIRMAN. Of course, the lumber business is a hazardous business. Any bank who carries it necessarily needs a margin of protection to start with. You are always subject to losses and controversies and lawsuits.

Mr. DEATON. Yes,

The CHAIRMAN. And all of those things. There are many things to tax the capacity of a man running a bank who protects himself in taking care of lumber transactions. There is no doubt about that. What you need is a credit facility somewhere.

Mr. DEATON. Yes, sir.

The CHAIRMAN. That will pay due regard to your method of doing business and your character and your capacity to handle it, and help you carry on your business. But you do not have such a facility in your community. I do not know whether you would have or not if we passed this law, because you would have something further from home than ever then.

Mr. DEATON. I thank you.

Mr. FARLEY. Mr. Chairman, just in line with what you suggested a moment ago, I don't think it would be possible for any bank to have a fixed rate of interest for all types of loans. It must take into consideration the individual ability always. Otherwise it would be out of business in no time.

The CHAIRMAN. We have in nearly all the States, as far as I am advised, laws governing the rates, and national banks are required under the laws to conform to those rates. The difficulty about the citizen of small means is that he has got no remedy there except to accept the terms imposed upon him, and after that is done there is no way to turn around and have a lawsuit with this institution, which he cannot afford to have and for which he is not legally and financially prepared.

Mr. Sisson. Mr. Chairman, I suggest the absence of a quorum, which may be evanescent.

The CHAIRMAN. Just a minute and we will see if we are through with this gentleman. Any further questions of Mr. Deaton? I think the committee understand your situation. We thank you very much. Everybody on the committee sympathizes with your situation, and many more like you, and wish we could help. I don't know whether we can or not.

Now, gentlemen, have you anybody else here?

Mr. KOPPLEMANN. Yes, Mr. Chairman; I have here a gentleman from your State, Alabama, Mr. W. K. Múllins, vice president of the Alabama Warehousing Co.

The CHAIRMAN. All right, Mr. Mullins.



Mr. MULLINS. Mr. Chairman, I think that the best way for me to proceed is to tell you about our particular case.

The CHAIRMAN. What is your situation, Mr. Mullins?

Mr. Mullins. Back in 1929 it became necessary to refinance some bonds that were coming due. At that time the then president of the company died. His family had quite a bit of stock and of the bonds. Arrangements had been made with a New York concern to handle the bond issue. Before that could be consummated the bonding house went into bankruptcy and broke that up. So that it became necessary to finance a great portion of that former president's interest by short-term bank loans. These bank loans have been going on for several years since that time at a rate of 8 percent interest, until a short while ago when it was reduced to 6 on account of the recent passage of the 6 percent legal rate of interest in Alabama.

The banks of course, and rightly so, are asking for their money.

For the past 2 years the Commodity Credit Corporation have been making loans on cotton stored at the primary point in small towns. That has stopped the flow of cotton through the normal channels to our warehouses and compresses. We have operated only about 25 percent of normal for the past 2 years, which has resulted in the bonds being in default and the interest being paid on the bank loans by straining, leaving nothing for improvements or proper maintenance.

We tried to get a loan from the R. F. C., but they would make loans for working capital only and none for any refinancing. We feel like that with this bill we would be able to refinance at a reasonable rate of interest and go ahead and do business, and keep open. Otherwise not.

Mr. HANCOCK. Mr. Mullins, they have liberalized their policy so far as the use of funds for refinancing is concerned, have they not?

Mr. MULLINS. I think they have. You mean under the Reconstruction Finance Corporation mortgage department?

Mr. HANCOCK. Under the act which we passed this year.
Mr. HANCOCK. Which is a continuation of the act of last year.

Mr. MULLINS. That avenue is being given consideration. We are figuring on that.

Mr. Reilly. What do you mean by "refinancing", the paying up of an existing obligation and have the Government

Mr. MULLINS. Yes, sir; paying up the existing obligations to the bank and the withdrawal or buying in of these few outstanding bonds that are now in default.

Mr. KOPPLEMANN. Do I understand that if that is done it gives you working capital with which you can go on with your business?

Mr. MULLINS. It does.
Mr. KOPPLEMANN. That is the purpose of it?

Mr. Mullins. Yes, sir. It relieves us of the burden of interest that we are having to pay at high rates, and allowing us to go ahead and make the necessary repairs and maintenance to our plants in order to keep going. With the money that we are now paying out for interest it is impossible to do this.

Mr. KOPPLEMANN. And if you do not succeed in getting a loan what is your prospect for continuing in business?

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