RECONSTRUCTION FINANCE CORPORATION THURSDAY, APRIL 22, 1948 HOUSE OF REPRESENTATIVES, COMMITTEE ON BANKING AND CURRENCY, The committee convened at 10 a. m., Hon. Jesse P. Wolcott, chairman, presiding. Present: Messrs. Wolcott, Gamble, Kunkel, Talle, Sundstrom, McMillen, Buffett, Hull, Banta, Nicholson, Spence, Brown, Patman, Folger, Riley, and Buchanan. The CHAIRMAN. The committee will come to order. We have before us this morning the Reconstruction Finance Corporation Act, and the Senate bill, S. 2287. We will also have before us related bills, including H. R. 5129, introduced by Mr. Johnson of California, and H. R. 5637, introduced by Mr. Kilburn, of New York. (The bills referred to are as follows:) [S. 2287, 80th Cong., 2d sess.] AN ACT To amend the Reconstruction Finance Corporation Act, as amended, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 1 of the Reconstruction Finance Corporation Act, as amended, is amended to read as follows: "SEC. 1. (a) There is hereby created a body corporate with the name 'Reconstruction Finance Corporation' (herein called the Corporation), with a capital stock of $100,000,000 subscribed by the United States of America. Its principal office shall be located in the District of Columbia, but there may be established agencies or branch offices in any city or cities of the United States under rules and regulations prescribed by the Board of Directors. This Act may be cited as the 'Reconstruction Finance Corporation Act'. "(b) Within six months after the close of each fiscal year the Corporation shall make a report to the Congress of the United States which shall contain financial statements for the fiscal year, including a balance sheet, a statement of income and expense, and an analysis of accumulated net income. The accumulated net income shall be determined after provision for reasonable reserves for uncollectibility of loans and investments outstanding. Such statements shall be prepared from the financial records of the Corporation which shall be maintained in accordance with generally accepted accounting principles applicable to commercial corporate transactions. The report shall contain schedules showing, as of the close of the fiscal year, each direct loan to any one borrower of $100,000 or more, each loan to any one borrower of $100,000 or more in which the Corporation has a participation or an agreement to participate, and the investments in the securities and obligations of any one borrower which total $100,000 or more. After the end of each fiscal year, beginning with the fiscal year ended June 30, 1948, the Corporation shall pay over to the Secretary of the Treasury as miscellaneous receipts, a dividend on its capital stock owned by the United States of America in the amount by which its accumulated net income exceeds $50,000,000. "(c) Within sixty days after the effective date of this amendment, the Corporation shall retire all its outstanding capital stock in excess of $100,000,000 and shall pay to the Treasury as miscellaneous receipts the par value of the stock so retired." 1 SEC. 2. Section 2 of the Reconstruction Finance Corporation Act, as amended, is amended to read as follows: "SEC. 2. The management of the Corporation shall be vested in a board of directors consisting of five persons appointed by the President of the United States by and with the advice and consent of the Senate. Of the five members of the board, not more than three shall be members of any one political party and not more than one shall be appointed from any one Federal Reserve district. The office of director shall be a full-time position. The term of the incumbent directors is hereby extended to June 30, 1950. As of July 1, 1950, two directors shall be appointed for a term of one year, two directors shall be appointed for a term of two years, and one director shall be appointed for a term of three years. Thereafter the term of the directors shall be for a term of three years, but they may continue in office until their successors are appointed and qualified. Whenever a vacancy shall occur in the office of director other than by expiration of term, the person appointed to fill such vacancy shall hold office for the unexpired portion of the term of the director whose place he is selected to fill. After the confirmation of the directors by the Senate, the President shall designate one of the directors to serve as chairman for a period coextensive with his term as director. The directors, except the chairman, shall receive salaries at the rate of $12,500 per annum each. The chairman of the board of directors shall receive a salary at the rate of $15,000 per annum. SEC. 3. Section 3 (a) of the Reconstruction Finance Corporation Act, as amended, is amended to read as follows: "SEO. 3. (a) The Corporation shall have succession through June 30, 1960, unless it is sooner dissolved by an Act of Congress. It shall have power to adopt, alter, and use a corporate seal; to make contracts; to lease or purchase such real estate as may be necessary for the transaction of its business; to sue and be sued, to complain and to defend, in any court of competent jurisdiction, State or Federal; to select, employ, and fix the compensation of such officers, employees, attorneys, and agents as shall be necessary for the transaction of the business of the Corporation, in accordance with laws, applicable to the Corporation, as in effect on June 30, 1947, and as thereafter amended; and to prescribe, amend, and repeal, by its board of directors, bylaws, rules, and regulations governing the manner in which its general business may be conducted. Except as may be otherwise provided in this Act or in the Government Corporation Control Act, the board of directors of the Corporation shall determine the necessity for and the character and amount of its obligations and expenditures under this Act and the manner in which they shall be incurred, allowed, paid, and accounted for, without regard to the provisions of any other laws governing the expenditure of public funds, and such determinations shall be final and conclusive upon all other officers of the Government. The Corporation shall be entitled to and granted the same immunities and exemptions from the payment of costs, charges, and fees as are granted to the United States pursuant to the provisions of law codified in sections 543, 548, 555, 557, 578, and 578a of title 28 of the United States Code, 1940 edition. The Corporation shall also be entitled to the use of the United States mails in the same manner as the executive departments of the Government. Debts due the Corporation, whether heretofore or hereafter arising, shall not be entitled to the priority available to the United States pursuant to section 3466 of the Revised Statutes (U. S. C., title 31, sec. 191) except that the Corporation shall be entitled to such priority with respect to debts arising from any transaction pursuant to any of the following Acts or provisions in effect at any time: Sections 5d (1) and 5d (2) of the Reconstruction Finance Corporation Act added by section 5 of the Act entitled 'An Act to authorize the purchase by the Reconstruction Finance Corporation of stock of Federal home-loan banks; to amend the Reconstruction Finance Corporation Act, as amended, and for other purposes', approved June 25, 1940 (54 Stat. 573); sections 4 (f) and 9 of the Act entitled 'An Act to mobilize the productive facilities of small business in the interests of successful prosecution of the war, and for other purposes', approved June 11, 1942 (56 Stat. 354, 356); section 2 (e) of the Emergency Price Control Act of 1942 (56 Stat. 26); the Surplus Property Act of 1944 (58 Stat. 765 and the following); sections 11 and 12 of the Veterans' Emergency Housing Act of 1946 (60 Stat. 214, 215); and section 403 of the Sixth Supplemental National Defense Appropriation Act (56 Stat. 245)." SEC. 4. Section 4 of the Reconstruction Finance Corporation Act, as amended, is amended to read as follows: "SEC. 4 (a) To aid in financing agriculture, commerce, and industry, to encourage small business, to help in maintaining the economic stability of the country, and to assist in promoting maximum employment and production, the Corporation, within the limitations hereinafter provided, is authorized— "(1) to purchase the obligations of and to make loans to any business enterprise organized or operating under the laws of any State or the United States: Provided, That the purchase of obligations (including equipment trust certificates) of, or the making of loans to, railroads or air carriers engaged in interstate commerce or receivers or trustees thereof, shall be with the approval of the Interstate Commerce Commission or the Civil Aeronautics Board, respectively: Provided, further, That in the case of railroads or air carriers not in receivership or trusteeship, the Commission or the Board, as the case may be, in connection with its approval of such purchases or loans, shall also certify that such railroad or air carrier, on the basis of present and prospective earnings, may be expected to meet its fixed charges without a reduction thereof through judicial reorganization except that such certificates shall not be required in the case of loans or purchases made for the acquisition of equipment or for maintenance. "(2) to make loans to any financial institution or insurance company organized under the laws of any State or of the United States. If the Secretary of the Treasury certifies to the Corporation that any bank or trust company, under the supervision of the Comptroller of the Currency or a State banking department, or any insurance company, is in need of funds for capital purposes, the Corporation may subscribe for or make loans upon nonassessable preferred stock in such bank or trust company or insurance company. In any case in which, under the laws of the State in which it is located, such institutions so certified are not permitted to issue nonassessable preferred stock, or if such laws permit such issue of preferred stock only by unanimous consent of stockholders, the Corporation is authorized to purchase the legally issued capital notes or debentures of such institutions. "(3) in order to aid in financing projects authorized under Federal, State, or municipal law, to purchase the securities and obligations of, or make loans to, (A) States, municipalities, and political subdivisions of States; (B) public agencies and instrumentalities of one or more States, municipalities, and political subdivisions of States; and (C) public corporations, boards, and commissions: Provided, That no such purchase or loan shall be made for payment of ordinary governmental or nonproject operating expenses as distinguished from purchases and loans to aid in financing specific public projects; "(4) to make such loans, in an aggregate amount not to exceed $25,000,000 outstanding at any one time, as it may determine to be necessary or appropriate because of floods or other catastrophes. "(b) The powers granted in section 4 (a) of this Act shall be subject to the following restrictions and limitations: "(1) No financial assistance shall be extended pursuant to paragraphs (1), (2), and (3) of subsection (a) of this section, unless the financial assistance applied for is not otherwise available on reasonable terms. All securities and obligations purchased and all loans made under paragraphs (1), (2), and (3) of subsection (a) of this section shall be of such sound value or so secured as reasonably to assure retirement or repayment and such loans may be made either directly or in cooperation with banks or other lending institutions through agreements to participate or by the purchase of participations, or otherwise. "(2) All such loans made, or obligations and securities purchased under section 4 (a) (1), (2), and (3), shall bear such interest or yield such return as to be reasonably calculated to enable the Corporation to operate without loss. The fees charged for agreements to participate in loans shall be at such rates as reasonably to assure the Corporation that these operations will be conducted without loss. Loans made under section 4 (a) (4) shall bear interest at such rates as the Corporation may determine. "(3) No loan, including renewals or extensions thereof, may be made under sections 4 (a) (1), (2), and (4) for a period or periods exceeding ten years, and no securities or obligations maturing more than ten years from date of purchase by the Corpooration may be purchased thereunder, except that capital notes and debentures purchased, and loans made on preferred stock, capital notes or debentures, under section 4 (a) (2) may have matu rities not to exceed twenty years: Provided, That the foregoing restriction on maturities shall not apply to securities or obligations received by the Corporation as a claimant in bankruptcy or equitable reorganization: Provided further, That any loan made or securities and obligations purchased prior to July 1, 1947, may in aid of orderly liquidation thereof or the interest of national security, be renewed or the maturity extended for such period not in excess of ten years and upon such terms as the Corporation maye determine: Provided further, That any loan made under section 4 (a) (1) for the purpose of constructing industrial facilities may have a maturity of ten years plus such additional period as is estimated may be required to complete such construction. The Corporation may, in carrying out the provisions of subsection 4 (a) (3), purchase securities and obligations, or make loans, including renewals or extensions thereof, with maturity dates not in excess of forty years, as the Corporation may determine. “(4) In agreements to participate in loans, wherein the Corporation's disbursements are deferred, such participations by the Corporation shall be limited to 65 per centum of the balance of the loan outstanding at the time of the disbursement, in those cases where the total amount borrowed is $100,000 or less, and shall be limited to 50 per centum of the balance outstanding at the time of disbursement, in those cases where the total amount borrowed is over $100,000. "(c) The total amount of investments, loans, purchases, and commitments made subsequent to June 30, 1947, pursuant to section 4 shall not exceed $1,000,000,000 outstanding at any one time. "(d) No fee or commission shall be paid by any applicant for financial assistance under the provisions of this Act in connection with any such application, and any agreement to pay or payment of any such fee or commission shall be unlawful. "(e) No director, officer, attorney, agent, or employee of the Corporation in any manner, directly, or indirectly, shall participate in the deliberation upon or the determination of any question affecting his personal interests, or the interests of any corporation, partnership, or association in which he is directly or indirectly interested. "(f) The powers granted to the Corporation by this section 4 shall terminate at the close of business on June 30, 1958, but the termination of such powers shall not be construed (1) to prohibit disbursement of funds on purchases of securities and obligations, on loans, or on commitments or agreements to make such purchases or loans, made under this Act prior to the close of business on such date, or (2) to affect the validity or performance of any other agreement made or entered into pursuant to law. "(g) As used in this Act, the term 'State' includes the District of Columbia, Alaska, Hawaii, Puerto Rico, and the Virgin Islands." SEC. 5. Section 203 of title II of the joint resolution entitled "Joint resolution to extend the succession, lending powers, and the function of the Reconstruction Finance Corporation", approved June 30, 1947 (Public Law 132, Eightieth Congress), is amended (a) by inserting, immediately after "SEC. 203", "(a)”, and (b) by adding at the end thereof the following: "(b) All assets and liabilities of every kind and nature, together with all documents, books of account, and records of the Federal National Mortgage Association, a corporation organized under title 3 of the National Housing Act, all the capital stock of which is owned and held by Reconstruction Finance Corporation, are hereby transferred to Reconstruction Finance Corporation and the said Federal National Mortgage Association is hereby dissolved. With respect to the assets, liabilities, and records transferred, 'Reconstruction Finance Corporation' for all purposes is hereby substituted for 'Federal National Mortgage Association,' and no suit, action, or other proceeding lawfully commenced by or against such corporation shall abate by reason of the enactment of this Act, but the court, on motion or supplemental petition filed at any time within twelve months after the date of such enactment, showing a necessity for the survival of such suit, action, or other proceeding to obtain a determination of the questions involved, may allow the same to be maintained by or against Reconstruction Finance Corporation." SEC. 6. Subsection (m) of section 206 of title II of the joint resolution entitled "Joint resolution to extend the succession, lending powers, and the functions of the Reconstruction Finance Corporation," approved June 30, 1947 (Public Law 132, Eightieth Congress), is amended to read as follows: "(m) The first section and sections 2, 3, 9, 11, and 13 of the Act approved January 31, 1935 (49 Stat. 1), as amended." SEC. 7. Section 208 of title II of the joint resolution entitled "Joint resolution to extend the succession, lending powers, and the functions of the Reconstruction Finance Corporation," approved June 30, 1947 (Public Law 132, Eightieth Congress), is hereby repealed. SEC. 8. Section 209 of title II of the joint resolution entitled "Joint resolution to extend the succession, lending powers, and the functions of the Reconstruction Finance Corporation," approved June 30, 1947 (Public Law 132, Eightieth Congress), is amended to read as follows: "SEC. 209. During the period between June 30, 1948, and the date of enactment of legislation making funds available for administrative expenses for the fiscal year ending June 30, 1949, the Corporation is authorized to incur, and pay out of its general funds, administrative expenses in accordance with laws in effect on June 30, 1948, such obligations and expenditures to be charged against funds when made available for administrative expenses for the fiscal year 1949." SEC. 9. The third paragraph of section 24 of the Federal Reserve Act, as amended by section 328 of the Banking Act of 1935, as amended, is hereby amended to read as follows: "Loans made to established industrial or commercial businesses (a) which are in whole or in part discounted or purchased or loaned against as security by a Federal Reserve bank under the provisions of section 13b of this Act, (b) for any part of which a commitment shall have been made by a Federal Reserve bank under the provisions of said section, (c) in the making of which a Federal Reserve bank participates under the provisions of said section, or (d) in which the Reconstruction Finance Corporation cooperates or purchases a participation under the provisions of the Reconstruction Finance Corporation Act, as amended, shall not be subject to the restrictions or limitations of this section upon loans secured by real estate." Passed the Senate April 6 (legislative day, March 29), 1948. CARL A. LOEFFLER, Secretary. [H. R. 5129, 80th Cong., 2d sess.] A BILL Relating to the taxation of certain property owned by the Reconstruction Finance Corporation Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 8 of the Reconstruction Finance Corporation Act (Public Law 132, Eightieth Congress) is hereby amended by striking out ": Provided, That the special assessment and taxation of real property as authorized herein shall not include the taxation as real property of possessory interests, pipe lines, power lines, or machinery or equipment owned by the Corporation regardless of their nature, use, or manner of attachment or affixation to the land, building, or other structure upon or in which the same may be located". [H. R. 5637, 80th Cong., 2d sess.] A BILL To amend the Reconstruction Finance Corporation Act, as amended, so as to eliminate the exemption of certain real property of the Reconstruction Finance Corporation from State, Territorial, county, municipal, and local taxation Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That, effective as of midnight June 30, 1947, the first sentence of section 8 of the Reconstruction Finance Corporation Act, as amended, is hereby amended to read as follows: "The Corporation, including its franchise, capital, reserves and surplus, and its income shall be exempt from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to special assessments for local improvements and shall be subject to State, Territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed: Provided, That the special assessment and taxation of real property as authorized herein shall not include the taxation as real property of possessory interests, pipe lines, or machinery or equipment owned by the Corporation regardless of their nature, use, or manner of attachment or affixation to the land, building, or other structure upon or in which the same may be located." |