Mr. BRAIDA. Under the present circumstances I would regard a small industry as one employing from 5 to 100 men, and having a capitalization of their own of from $20,000 to $100,000.

Mr. KOPPLEMANN. How many of these do you represent?

Mr. BRAIDA. In the State of New York, there are 4,500 bakers, of all sorts and types.

Mr. KOPPLEMANN. How many employees do they have?

Mr. BRAIDA. They have 25,000 employees, according to information contained from the Census Bureau of the United States.

Mr. KOPPLEMANN. How many of these do you estimate are in need of financial aid?

Mr. BRAIDA. I would say 25 percent of these 4,500 would welcome funds over an extension of a few years, for the purpose of remodeling their shops and their plants, and putting in new machines; that is, the ordinary machines which are used by the handcraft operators, which are mixers, sifters, and flour storage, and increase their stock of flour, which is now down to the minimum. They are living from hand to mouth.

Mr. KOPPLEMANN. In other words, you testify that the providing of them with money or financial assistance would increase the velocity of business?

Mr. BRAIDA. Yes, sir. This is our view, and this view has been discussed at innumerable meetings, that the funds which would be lent on a long-term loan basis to the industry of this type, would fly right back into the basic industries of the country, in two ways-by increasing the stock of the agricultural products, which are carried in stock, usually; secondly, by creating a demand for heavy goods, thus benefiting an industry which is backward at this time. They need these funds to renovate their plants.

Mr. CAVICCHIA. A lot of these small bakers are in the line entirely different from these big bakeries, are they not?

Mr. BRAIDA. Yes, sir.

Mr. CAVICCHIA. And their necessities are in the neighborhoods in which they operate?

Mr. BRAIDA. Yes, sir.

Mr. CAVICCHIA. And if they go out of business these big bakeries cannot supply their needs?

Mr. BRAIDA. That is right, sir. That is why they are called "specialty bakers" and "retail bakers."

Mr. CAVICCHIA. I had in mind the Jewish bakers, the Italian bakers, the Portuguese, and so on, who operate in their own particular locality, and make the kind of bread that other bakers do not make.

Mr. BRAIDA. The economic value of their contribution is that they are employing a highly skilled type of labor, that is well paid, much better paid than those who work in the mechanized plants.

Mr. KOPPLEMANN. From your knowledge of these bakers, whom you represent, can you say to this committee, and for the record, what effect financial aid to them would have on the question of employment and unemployment?

Mr. BRAIDA. The question of employment today: it would stabliize conditions as they are now. Skilled laborers are not very abundant. They will be retained on their job if the employers have the demand. Increased employment would come, because of the actual demand for

products coming from these people for other industrial products, such as machines. I mean those things they need for renovation. On the other hand, if they are wiped out of business, for every 4 men that they let go, probably only 1 out of every 25 would return as an employee of a large unit, a mechanized unit.

Mr. SPENCE. Do those small bakers sell direct to the consumers? Mr. BRAIDA. Some of them. Some of them sell to the retail trade, and the majority of that product is distributed to restaurants which use specialty products.

Mr. SPENCE. What is the financial condition, now, of most of them? Are they heavily involved, or not?

Mr. BRAIDA. Well, the financial condition of the bakers has never been very prosperous, but at this time they find that they cannot carry any stock, and this results in a constant pressure for lower wages, friction with employes and with unions.

Unionization has proceeded to about 60 percent, within these specialties and the retail divisions. The other 40 percent which is still free from unionization is using its freedom to oppress the wages. We have a very vicious circle of things. Those who are well organized need the help most, because they have met the circumstances at all times. The others can afford to stay in business by oppressing the labor which they employ. Helping those who are well organized means to keep the standard of living, by avoiding this oppression. Mr. SPENCE. What is the character of security they could offer? They could offer the plant?

Mr. BRAIDA. Most of them can offer

Mr. SPENCE. That can be used only for that particular purpose; is not that true?

Mr. BRAIDA. Yes, sir; but most of them can offer a little more than that. Practically all of them own a little house, or sufficient cosecurity. These people would not be borrowing a large amount of money. They would not be borrowing more than from $5,000 to $25,000, and naturally they are not good prospects for the banks, now, yet a good many of them had a line of credit before.

The CHAIRMAN. All right. Thank you very much.

Our next witness will be Mr. Henry M. Johnson, of the Louisville Trust Building, Louisville, Ky. We will be very glad to have you discuss this legislation.

STATEMENT OF HENRY M. JOHNSON, LOUISVILLE, KY.

Mr. JOHNSON. May it please you gentlemen of the committee, I do not know very much technically about this bill. Of course, I have read it and scrutinized it from the standpoint of a lawyer, but I did seek the opportunity, of my own volition, to come here and express a plight which confronts a great body of people in our community. I am not sent here by anybody, but am here altogether because I felt that I might be able to render a public service to my own community in coming.

In order that you may understand the atmosphere out of which I come, I might make this statement. I practiced law for 36 years. We are not bragging about this particular thing that I am mentioning, but the biggest national bank that ever closed its doors was the National Bank of Kentucky, in our city, about 4 years ago. It

pulled down with it two other institutions-in fact, three, including a colored bank. You can appreciate what that meant, when this was the largest bank south of the Ohio River.

Most of our small industries in Louisville--and, by the way, we have a very large diversified bit of industry; we have a large tobacco interest, that is made up mostly of large corporations, widely and nationally held, whose stock is on the big boards. They have plenty of finances. Since prohibition has gone out, our distilleries have come back, and those institutions are ably financed, mostly out of Louisville; but our small industry, that constitutes a very large part of our industrial life, was very badly hit by the closing of the Bank of Kentucky and these other banks. They had been depending in large measure upon bond issues on their real estate bieng carried by title companies and mortgage companies. They had, of course, quite substantial capital in their business, for operating purposes, and then their current needs were largely met by the banking facilities of Louisville.

When this banking structure more or less collapsed, by the closing of these institutions, these little industries were pushed back into a situation where they nad no adequate financing. They were not able to keep up their mortgages and their interest, and the result is that they have gone into default.

A number of us-I happen to be on the committee of two of the big institutions that reorganized two of them; that is, the Louisville Trust Co. and the Louisville Title Co., which was a mortgage company. I might state that that was another bit of public service where we all served without pay, just for the purpose of the general weal.

There was another mortgage company called the "Consolidated Realty Co.", that went into trouble and into bankruptcy, and they were sponsors and guarantors of bonds of about 70 different issues. One of the courts appointed me and my associate, Mr. Thomas C. Fisher, as attorney for the receiver of these equitable liens, so it became our duty to try to work out solutions of these 80 issues that I have just referred to.

A great many of them were homes. We were able to work out quite satisfactorily the homes situations, through the Home Owners Loan. Quite a number of them were farms, and some of these farms have been worked out through the Farm Loan machinery. Quite a number of them were small industries and apartment houses, and right there is a realm where we have not been able to turn a peg in the way of getting any sort of financial help, in spite of the fact that these apartment houses-I will first refer to, are good substantial buildings, adequately built for the purpose for which they are to be used, and are kept up in good shape. In nearly every instance, we have had to have receivers for the physical properties, in order to keep them up; and yet these bondholders, sometimes 100 bondholders in one issue, made up of widows and orphans, that have not any means at all of realizing a thing on their bonds, and yet the property lying there, may be of great value, and no means or method of financing, either to the owner or to the holders of the bonds.

That is true of a number of industrial enterprises that were included in these series of bonds I just referred to.

Now, my experience, therefore, has been that in order to be faithful to our trust, we should not be merely mindful of the bondholders'

interest, but also the bond maker's interest. We realize that most of these situations, if the bondholder is going to work out on a basis that is at all to be adequate, he has got to do it by keeping his connection with the bond maker, the man who originally made the bonds, the poor fellow who is under the heavy debt structure and that cannot wiggle and manipulate and get any sort of credit. In many of these instances, these people are credit worthy. They are men of high character and integrity, of honor and honesty. They have had a long record of very wonderful achievement in their lines. They are just the best of our citizens. They could work it, if they had the means wherewith to navigate, and yet they cannot navigate.

Now, we feel and I am now speaking from a standpoint more par ticularly of these bondholders, although I think we are sitting in the same boat with the bond maker-but these bondholders, widows and orphans, who have invested in these bonds upon the idea that they had a means of livelihood, just have a frozen asset that they cannot borrow on; and the maker cannot furnish any sort of a plan that will enable them to work out or get at all into a current position.

I would just like to state an instance or two that I think would illustrate, better than an abstract talk. The P. Bannon Pipe Co., a sewer pipe organization of Louisville, has been in existence there for over 83 years, and has been quite successful during all these years, furnishing sewer pipe to a territory there that would be included in a radius of perhaps a hundred miles around Louisville, or with a diameter of 200 miles, and perhaps more. Well, we represent 120 bondholders, now, made up of the type I have just described, some bonds $100, $1,000, and $3,000 or $4,000, the largest amount held by any one bondholder, and the Bannon Pipe Co. went into bankruptcy.

Well, we did not want to sacrifice the property, and we went in and suggested to the court that he appoint or help to elect a trustee, although we could not vote for the trustee, but the general creditors did, and they elected a trustee, and the trustee then came to us and said, "You hold the bonds, and we would be guided by what you would say with respect to who is to operate this property." Well, we found a man we put in at $5,200 a year to operate the property. The first year, he just barely held his own, but paid his taxes, made enough to pay his taxes, and everything was splendid. In 1933, he made $10,000. There are $102,000 of those bonds. This last year of 1934, he made $22,000 net in the operation of that property under trusteeship in bankruptcy, which was three and a half times the amount necessary to pay the interest on these bonds.

Now, there are people who feel like that is a good property, and it has shown its earning, and they would like to have it sold, and so there is pressure being brought to bear upon the referee in bankruptcy to insist upon a sale, and for over 6 months we have been out there practically every 2 weeks fighting and scrapping in every way possible to prevent a sale of that property, which would mean a practical wiping out of all of our bonds, except possibly 25 percent.

Now, the best offer we have been able to get is $75,000 for that plant that is earning $22,000 net, and that $75,000 includes a lot of current assets on which we have not any lien in our bond issue; and after working it out, we would get, if that sale is put through, only 25 percent on a plant that had an appraisal of between $200,000 and

$300,000 when the bond issue was made upon it; and yet we are there without any means or method of working it out at all.

We have applied to the agencies which the Government has set up, for the purpose of trying to finance it. For a year and a half or more we have been before the Reconstruction Finance in Louisville, trying to get a loan. I made a trip here to Washington last November, and went over to Reconstruction Finance headquarters and talked with the men in charge there. Mr. Fisher has been to Washington here in this behalf, and we have been again in touch with them, and the requirements and the restrictions which they lay down are such that they just cannot be met under the particular circumstances of this bankruptcy situation, and yet this bill which is being considered by your committee is a bill which I believe, properly administered, with liberality, would mean that this whole situation could be worked out to the benefit of our city. This concern gives employment. It is a little seasonal work, but it gives employment to from 60 to 150 employees. It would be a benefit to the city, it would benefit these bondholders, and would benefit everybody concerned.

We have another situation, with respect to the Courtland Hotel, among these issues that I referred to. That was placed in receivership. It has been operated, with the result that, now, we finally after 3%1⁄2 years, have gotten some financing, but it is very inadequate. We have got to put the money right back into the building, which of course we are glad to do, and it will be another 5 years before any money whatever will be realized in the way of interest or part of the principal, to approximately 140 bondholders, little bondholders that hold $100,000 over $100,000 on that building.

We have the same situation with respect to a number of other properties. The specific ones, I could mention. I have this in mind, a client who came the other day-and I am not able to metnion this particular firm, for the reason that it is a confidential communication, and I would rather not embarrass him, but he is a man that has invested $30,000 cash in a grain business. They have a plant, a big elevator, that is appraised at $125,000. They at present have $30,000 first-mortgage lien on it, which is due. That lien is held by the receiver of this National Bank of Kentucky that I referred to a minute ago, that closed. Now, pressure is being brought to bear by the receiver, upon this company, to pay off that debt, and they are just under the heavy weight of that, as the sword of Damocles, practically, hanging over them, and they do not know what they do. They have sent men up to St. Louis, where our Fedral Reserve headquarters is for our district, and they have tried their best to get a loan. They have referred them back to the bank. The bank has said to this particular client of mine, who is a young man of 32 years of age, and who invested $30,000 cash in the enterprise-they say to him, and he has some little chance of getting a legacy from his grandmother in the future time. In fact, his grandmother has already made a will, and it is probated, and under that will he does get something in remainder. They are saying to him that he ought to guarantee, personally, this $30,000 debt.

Well, he is a young fellow, about to get married, and he just feels like, having invested $30,000 cash in an enterprise that has got a net value of as much as $200,000, that it certainly ought to be good for a