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The CHAIRMAN. All three of these elements must be present? Mr. GOODLOE. All three of those elements must be present before any loan is made. They added to the general purposes for which we were to make loans "to encourage small business." And if public interest means anything remotely resembling national interest, that seems a little bit inconsistent.

The CHAIRMAN. You would have to find, as a matter of fact, that any investment which you made in any small business was in the public interest before you could make the loan.


Now, I am not sure what they meant by "public interest," and I suppose one man will have one idea about it and another man another. My own feeling is that what they really intended to say was that loans should not be made for the purpose of protecting the owner of any business, and that we ought to take into account the employment the business affords, the economic necessity for the business in the local town or community or the State. If that is what they meant, and that is made clear, then there would be no problem because those are precisely the concepts that we have attempted to follow all along.

If, on the other hand, it does mean public interest in a different concept, or national interest, then it would be very difficult for us to justify making very many loans, and would make it difficult for us to make a lot of the loans that we have been making and which we think ought to be made by such an agency.

Mr. BROWN. You would not be in a position to serve the people as the law intended that you serve them.

Mr. SPENCE. Is that the only change that is made in the conditions of loans?

Mr. GOODLOE. That is probably fundamental.

As to participation, they made one change in the law and included one statement in the report both of which, or a combination of which, certainly, will have a very sharp effect on the deferred participation of business loans with banks.

The reduction in the amount of the participation we can take to 65 percent, on loans under $100,000, and 50 percent on loans over $100,000, will, we believe, result in our being called on to make a great many more direct loans without bank participation than we are making today with bank participation. And, to the extent that that result does eventuate, it will throw an additional administrative burden on us from the standpoint of organization and staff because at the present time

Mr. SPENCE. How could you say that a private loan was in the public interest? It seems to me that would apply only to public loans-loans to governments or subdivisions.

How could you say, if a man was distressed and wanted a loan for his business, that that was in the public interest? I would not say that was in the public interest, in the broad sense of the term. It might be that the public might be benefited by any prosperity that might result, but I would not call that a loan in the public interest, primarily. Mr. GOODLOE. Well, you get into the question of the so-called tyranny of terms. It depends largely on what is meant by the term "public interest." ." To one man it means one thing; to another it might mean another thing. Someone might say that all the loans that RFC has made in the past were, in his opinion, made in the public interest.

The CHAIRMAN. Mr. Goodloe, what is your total volume of loans outstanding at this time? Is it $1,162,534,000?

Mr. GOODLOE. Including the loans made under the old law as well as those made under the new law, and all investments, it is $1,162,000,000 as of February 29, 1948.

The CHAIRMAN. Let me put the question this way: What is the total amount of your investments, loans, purchases and commitments-and I am using there the language of the bill-at the present time? Is that the figure you just gave us?

Mr. GOODLOE. I believe what you mean is, what is the total amount of our loans, investments and commitments made under section 4 of the act subsequent to July 1, 1947. In other words, how much of the prospective over-all limitation of one billion dollars has been used.

The CHAIRMAN. We are trying to find out what this reduction to $1,000,000,000 is going to do to you.

Mr. GOODLOE. As of February 29, 1948, the Corporation's position with respect to the 2-billion-dollar limitation, which, under the Senate bill is $1,000,000,000, was: Undisbursed authorizations and unpaid balances of disbursements of $130,600,000, in round figures. That is all that has been used since July 1, 1947. That is a net figure. That includes undisbursed authorizations and the unpaid balances of disbursements.

In other words, that is a net figure. That takes into account what has been paid back and what has been authorized since then. I have a statement giving a detailed break-down of that, if you would like to have it in the record.

The CHAIRMAN. I think it would be well to include it. (The statement above referred to is as follows:)


APRIL 19, 1948.

As at February 29, 1948, the Corporation's position with respect to the two billion dollar limitation imposed by Public Law 132 was as follows:

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The balance available for disaster loans is $23,883,248.66.


The CHAIRMAN. Also, this statement which you handed the committee headed "Lending and investment functions" as of February 29, 1948. I believe we will include that in the record, too.

(The statement above referred to is as follows:)

Reconstruction Finance Corporation and subsidiaries—Lending and investment functions, Feb. 29, 1948

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State funds for insuring the repayment of deposits for public moneys.

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Agricultural credit corporations.

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$2, 198, 202, 000
140, 158, 000
90, 693, 000
26, 195, 000
12, 972, 000
250,833, 000

178, 887, 000
13, 065, 000


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Domestic markets.

Public-school authorities.

Preferred-stock banks (loans and purchases).

Preferred-stock insurance companies (loans and purchases).
Public Works Administration securities:



Export Import Bank (loans and stock)

Federal home loan banks (stock).

Mortgage loans and mortgages purchased by the RFC Mortgage Company.
Mortgages purchased by Federal National Mortgage Association.

Loans and purchases of stock in connection with direct activities of the
Corporation for national defense, war, and related purposes.-

Secretary of Agriculture:

Rural rehabilitation.

Farm tenancy.

Rural Electrification Administration..

Total loans and investments.

Allocations to other agencies..


47,301, 000 790, 661, 000 23, 257,000 1, 170, 565, 000 52, 150, 000

199, 283, 000
453, 283, 000
124, 741, 000
486, 141, 000
273, 165, 000

2 224, 639, 000

1, 457, 000


135, 923, 000 6, 235, 000

3,035, 000 56, 434,000

139, 648, 000 5,778,000

26, 026, 000

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1 Does not include $29,939,000 of disbursements made by Disaster Loan Corporation prior to its merger with RFC.

Does not include advances made under contracts for procurement of 100 octane aviation gasoline in connection with which $57,854,000 was disbursed, all of which was repaid prior to Feb. 29, 1948.

The CHAIRMAN. Now, on page 11, line 19 of the Senate bill:

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.

Do you interpret that to mean that that is a billion dollars in addition to what is presently outstanding in investments, loans, and purchases?

Mr. GOODLOE. No; I think that is a billion dollars in addition to what was outstanding on June 30, 1947.

The CHAIRMAN. Then what, as of the present date, would be your authority?

Mr. GOODLOE. We had only used up, as of February 29, on a net basis, 130 million dollars of the 2-billion-dollar limitation.

The CHAIRMAN. That would mean that there are approximately $870,000,000 of authority that you have not used.

Mr. GOODLOE. That is correct, if the Senate figure governs.

Mr. GAMBLE. Since June 1947?

Mr. GOODLOE. Yes, sir.

The CHAIRMAN. I may be somewhat confused-probably I am— and I do not want to take up too much of the time of the committee. But, under this language, what is the total amount of loans, investments, purchases, and commitments that you can have outstanding at any one time?

Mr. GOODLOE. It would be the unliquidated portion which we had outstanding as of June 30, 1947.

The CHAIRMAN. What is the limit on the amount of loans, and so forth, that you can have outstanding at any one time?

Mr. GOODLOE. It would be $2,000,000,000, on the basis of the present law, with respect to any business-new business-done on and after July 1, 1947.

The CHAIRMAN. That would be in addition to what you have outstanding at the present time.

Now, as you liquidate your present holdings, you can use that over again?

Mr. GOODLOE. No, sir. The date-July 1, 1947-established what we call an accounting period, almost the same as if a new RFC had been set up at that time under the new law.

The CHAIRMAN. What it means, then, is that you have got to reduce your outstanding balances down to a billion dollars.

Mr. GOODLOE. That is correct, sir. None of that old stuff can be used as a revolving fund; it has to be liquidated and paid off.

Mr. GAMBLE. And is it to be paid into the Treasury?

Mr. GOODLOE. Yes, sir.

The CHAIRMAN. What effect is that going to have upon the activities of the Corporation in the different fields in which we have used the Corporation to effectuate the purposes set forth in the act?

Mr. GOODLOE. Does that mean solely within the framework of the act as it now exists, or do you have reference to such things

The CHAIRMAN. I am now speaking of the Senate bill. What effect will the limitation of $1,000,000,000 have upon your activity in any or all fields in the future if your authorization is cut to $1,000,000,000? Mr. GOODLOE. It was our feeling at the time that with the authority which was retained in RFC under the Senate version, plus the period of extension, that certainly $1,000,000,000 was quite tight.

We told them very frankly, over on the other side, that $2,000,000,000 was perhaps on the liberal side.

It is a very difficult thing to evaluate.

The CHAIRMAN. Would the 2 billion dollars be on the liberal side if they caused you to pay into the Treasury all but 50 million dollars of the surplus.

Mr. GOODLOE. I have never thought about how that would affect it. I do not believe that would affect the billion-dollar limitation. You see, in the past, under what I keep referring to as the old law, there was no limitation as to the amount Reconstruction Finance Corporation might have outstanding at any one time. The limitation was

a limitation on its borrowing power. In other words, it could not have outstanding at any one time more than its capital surplus and what it could borrow.

Last year, when this committee did a major job of rewriting and revamping the whole Reconstruction Finance Corporation set-up, you may recall that rather than monkey with that borrowing-power provision which was already complicated, because there was general borrowing power, and specific borrowing power, we shifted over to what I thought was a preferable basis and instead of putting the limitation on the borrowing power, the limitation was put on the amount that we might have outstanding at any one time under the new law, with the understanding that nothing that was recovered under the old law would constitute a revolving fund. The result of that is that our activities are limited, but our borrowing power is not. The CHAIRMAN. For that reason, you were able to make available a billion dollars to the European recovery program?

Mr. GOODLOE. That is right. We have authority under the present act, as I understand it, to borrow from the Treasury whatever amount is required to carry out the provisions of this act or any other provision of law. That means that, to the extent the Congress from time to time authorizes and directs Reconstruction Finance Corporation to make a certain amount of money available for some purpose-which they have done frequently in the past-the borrowing power is automatically increased. Sometimes in the past when they did that, our borrowing power was increased by a corresponding amount and sometimes not. In those cases in which they did not, in the past, it was not fatal because our borrowing power had enough leeway to take it up. But under the present provision, it would not make any difference. When they came along and authorized or directed us to make a billion dollars available in advance of the European recovery appropriation, it was not necessary for them to increase our borrowing power because that direction itself increased it.

Mr. GAMBLE. It automatically gives you the right, and takes it out from under the 2-billion-dollar limitation, or the billion-dollar limitation?

Mr. GOODLOE. That is correct, and since the two-billion-dollar limitation was imposed, three situations like that have occurred. The first one was an advance at the direction of Congress of a hundred million dollars in connection with the Greek-Turkish program, to be repaid out of the 400 million dollars we appropriated. That was done.

Then, later, on what, I believe, was known as the foreign relief bill, we were likewise authorized to make an advance of $75,000,000.

And the recent case, of course, is that of the European recovery program, under which we were authorized and directed by a request of the President to make an advance of up to $1,020,000,000. All of those situations automatically increase our borrowing power by that amount. The CHAIRMAN. Is there any limitation upon your borrowing power in the Senate bill?

Mr. GOODLOE. No, sir; the whole limitation is on the amount that can be outstanding at any one time under the new law.

Mr. GAMBLE. Then, if the Senate bill was in effect at the time European recovery program was passed, and you had this $1,000,000,000,

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