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would put 1 or 2 hundred men to work, a million dollars loaned to small industries, at 5 or 10 thousand dollars for cach loan, would put 25,000 men to work. That is the point I am trying to leave with the committee.

Mr. KOPPLEMANN. How did you come to that conclusion, that $1,000,000 divided into small loans, would put 25,000 people to work.

Mr. BULLOCK. I took Dr. Deckman's report

Mr. KOPPLEMANN. Will you tell us, from your own knowledge of industry, from your knowledge of your own business, how you came to that conclusion.

Mr. BULLOCK. I started to say, if the R. F. C. would tell me this afternoon that they were going to approve a loan of $10,000, I could put a hundred men to work inside of 2 weeks.

Mr. KOPPLEMANN. And based upon that, you figure that a million dollars distributed in the same way would put 25,000 men back to work!

Mr. BULLOCK. Yes; that is from my own experience. I have covered in this report at least seven counties. I have contacted a lot of mills that have closed down, that could operate and operate profitably, if they could secure credit accommodations.

My banker tells me, as I have explained to you, that they would be criticized if they would make a loan of $1,500 for 1 year.

Mr. WILLIAMS. Who would criticize them?
Mr. BULLOCK. The Government, the bank examiner.
Mr. WILLIAMS. Did they give any reason for that?
Mr. BULLOCK. They must have.
Mr. WILLIAMS. Well, did they give you any?
Mr. BULLOCK. No; they did not.

Mr. WILLIAMS. Did they give you the reason why they would be criticized by the Government?

Mr. BULLOCK. Not exactly, any more than they said they would be criticized, and, from some reports I have received, I believe they would be.

Mr. WILLIAMS. What I am concerned about is would they be criticized because they did not consider the security offered sound, or they did not consider it liquid, or what was the reason they would be criticized for making that kind of a loan.

Mr. BULLOCK. If we go to the bank and ask them for a 30-day loan and tell them that we can pay it off and we assign an account of a high-rated concern, we could probably get a little money. But that account must be paid off and the interest paid off within 30 days.

What we must have is legislation so that we can go out and borrow on credit up to 4 or 5 years to finance any operation that would cover that period.

Mr. KOPPLEMANN. And that kind of a loan would be criticized ?
Mr. BULLOCK. That is right.
Mr. KOPPLEMANN. And I know that that is right.
Mr. BULLOCK. That is what they said.

Mr. WILLIAMS. What do you think would be the effect of this banking legislation now pending before Congress, making realestate loans eligible for discount, or eligible for loans in the Federal Reserve System? Do you not think that that would help to make a loan of the kind you referred to more eligible and more liquid than in the past?

Mr. BULLOCK. Yes; and the legislation that is provided for in Congressman Kopplemann's bill, H. R. 5918, will do more for recovery, and will put more men back to work in private industry through the little fellows, than anything else. The statistics will show that 60 percent of the Nation's business is accomplished by the small business concerns, and 60 percent of the work to labor is given by the small business concerns. If they are encouraged and given the credit which is due them, they will take off their coats and fight for recovery in their own business, the same as we are fighting for recovery here in Washington.

Mr. KOPPLEMANN. Based upon your experience, Mr. Bullock, in attempting to get a loan, do you think that if the bankers were permitted to make long-term real-estate loans, they would be inclined, or they would make you a long-term loan?

Mr. BULLOCK. I doubt it very much. I doubt that they will give you any assistance in that way.

I am not here to knock the bankers, but to criticize the people who say they will do certain things and do not do them, and that is the R. F. C.

Mr. WILLIAMS. I understand that you have an application pending before them.

Mr. BULLOCK. It was turned down, but I will call on them this afternoon.

You gentlemen doubtless know more about this than I do, but I would like to bring to your attention section 5 (d), security requirements as amended. For 2 years we had been trying to get this loan, but I knew that it would be impossible until this little pamphlet came from Washington, when I felt that we could comply 100 percent. It states :

The requirements of section 5 (d) of the Reconstruction Finance Corporation Act as amended require that all loans made thereunder shall be so secured as reasonably to assure repayment of the loans. It is the opinion of the Corporation that the amendment was intended to allow greater latitude as to what shall constitute security.

Then :

The words “ adequate collateral' as used in section 5 (d) prior to January 31, 1935, contemplate that loans made thereunder shall be secured by collateral of the character and amount which, taken into consideration with other factors, such as the character and the ability of the management and the prospective earnings, will afford reasonable assurance of repayment.

Mr. WILLIAMS. Do you not think that that is a reasonable requirement?

Mr. BULLOCK. It postively is, but they have not lived up to it.

Mr. WILLIAMS. Do you not think that that is the test that should be applied in all loans ?

Mr. BULLOCK. I should say so.

Mr. WILLIAMS. In general terms, that is the test that should be applied.

Now, the question to my mind is this: If we establish another banking system under the control of the Government, how much better off will we be ? Suppose that they apply the same rule?

Mr. BULLOCK. They have printed this rule, but have not applied it.

Mr. WILLIAMS. That, of course, is a matter of administration, and a matter of individual judgment.

Mr. BULLOCK. Surely it is.

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Mr. KOPPLEMANN. But let me say this for the benefit of the Congressman, that this bill contemplates an administrative body very far removed from the banking mind. It contemplates a body of men who understand credits, finance, industry, and business, and the purpose of the change in the set-up of those who make the loans is that we might then have men in charge of making the loans on behalf of the Government who would not see the picture from the bankers' point of view, but rather from the business point of view and the point of view of recovery.

Mr. BULLOCK. Positively. I went into the Philadelphia loan agency, and I said, “You refused my loan, I think, from a hardboiled bankers point of view. You did not take a business point of view, and if you will be good enough to send an investigator to Williamsport, we will be glad to pay his expenses."

Yet we find, even since the modification, that there is no credit for small business; there is not anything that will compare with Congressman Kopplemann's suggestion here.

Mr. WILLIAMS. I come back to the proposition that if you apply the same standard, we will be in the same shape.

Mr. BULLOCK. Well, I cannot answer your question any more than that I wanted to set forth the reasons

Mr. WILLIAMS. I might add in that connection that I have had considerable correspondence with constituents who have had a great deal of experience in efforts to obtain loans from the Federal land bank, and the same cry goes up all over the country, that they are too rigid and too strict in their appraisals, and they have not been able to get loans when they thought that they should have had them. Still, that is a Government lending institution, and the same complaints have been made against them as against the R. F. C. and the Federal Reserve System by the small industries of the country, and the thought in my mind is, if we establish another banking system, and they apply the same rules with reference to appraisals and the loans made as are now being applied in the Federal land banks in this country, there will still be no substantial aid to small industries.

Mr. BULLOCK. There will not be, no.

Mr. WILLIAMS. And, it being a question of administration, a question of individual judgment in passing upon that loan, I do not know how we can reach that situation by legislation.

Mr. BULLOCK. I know that the banks do not look favorably on the small fellow, on the small enterprise that wants to borrow some money unless they put up adequate collateral, 2 to 1, 3 to 1, or 4 to 1.

Mr. WILLIAMS. How big is the bank in your immediate neighborhood?

Mr. BULLOCK. We have three, and one bank is chartered for about $500,000. As I say, we have three banks.

Mr. WILLIAMS. And still they are not furnishing any credit to the small business people ?

Mr. BULLOCK. As far as I am interested, to my knowledge they are not. I am only speaking for myself and a few others that I know. I cannot tell you what they do with anybody else.

Mr. WILLIAMS. The fact is, is it not, that they are all on a good, sound business basis now. The capital structure has been built up, they have excess reserves, and money to lend.

Mr. BULLOCK. The fact is that they are bulging out with money.

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Mr. WILLIAMS. And still they will not lend.

Mr. BULLOCK. The R. F. Č. came to their assistance, but the little fellow is fighting with his back to the wall. If the banks, or the R. F. C., or somebody else, will come to his assistance and make him a loan of $2,000, $5,000, or $10,000, he will in a year or two regain his one-time large earning power.

Mr. WILLIAMS. I do not understand that you are criticizing the R. F. C. for coming to the aid of the banks of the country?

Mr. BULLOCK. I did criticize the R. F. C. directly.
Mr. WILLIAMS. On that ground?

Mr. BULLOCK. I wrote a letter directly to the R. F. C., after reading a statement of its chairman in which he criticized the banks for being hard-boiled and in not giving any consideration to the character, ability, and prospective earnings of a small business, and after I had had my experience of having my loan rejected

Mr. WILLIAMS. I want to finish that line of thought. You are not criticizing the action of the R. F. C., are you, with reference to helping the banks? You do not think that that was a wrong policy?

Mr. BULLOCK. No, sir; I do not.
Mr. WILLIAMS. That is the question that I asked you.

Mr. BULLOCK. I criticize the R. F. C. for criticizing the banks when they would refuse a loan for the same kind.

Mr. WILLIAMS. I have heard the chairman of the R. F. C. say that they would divide a loan with any bank that would make it.

Mr. BULLOCK. I understand that they will take probably 80 percent.

Mr. WILLIAMS. And if you can induce the local bank to make the loan, with its knowledge of the local situation, the R. F. C. will at least divide that loan with them.

Mr. BULLOCK. If it were possible to do anything with them, I would not be down here today.

Mr. KOPTLEMANN. In other words, you cannot get the banks to act at all?

Mr. BULLOCK. Positively not. I represent my small enterprise as well as a good many other small mills that I have handled, that are today shut down, not operating. I can point out five mills where $10,000 will put them in operation, and I can sell the material, too; I have a market for the material. But where are you going to get the financing! Where will you get a loan? You have a $1,500 in

? ventory and 700,000 feet of timber and a mill, a going concern, with a past record of 20 years of ability and honesty, built up from 1 mill to 7 mills, with a balance sheet showing $100,000 in less than 7 years. Yet that does not count any more.

Mr. WILLIAMS. I think that we understand your position, Mr. Bullock. You have a very strong case, and I am very much in sympathy with you.

Mr. BULLOCK. And that applies to the country over.

Mr. KOPPLEMANN. Mr. Bullock, would you mind coming back to Mr. Williams' question?

The Congressman has struck at the crux of the entire situation. I do not believe that the proponent of this bill would be for it if he did not think that the administration of this bill would relieve the situation which now is not relieved, namely, making loans to small industrialists for the purpose of providing employment.

Now, he asked you, in effect, what difference would it make if we had another set-up of the Government that applied the same requirements.

Now, you have probably read this bill, H. R. 5918, and formed some opinions on it, because you have come here to express them. What have you to say on that point? Let us hear that.

Mr. BULLOCK. If you mean, if you had something the same as the R. F. C.; if you had the same

Mr. KOPPLEMANN. If it appeared that the new set-up would do the same thing. After having read this bill, what is your opinion?

Mr. BULLOCK. The set-up that they have is not doing anything.

Mr. KOPPLEMANN. Do you think that under this bill, that situation would be improved ?

Mr. BULLOCK. This bill is the only bill in any of the legislation that I have studied for the past 2 years that is going to be of assistance to little business. The bill will do more for the small business man, do more for recovery, than anything that I have come in contact with, or any legislation that I know anything about.

Mr. KOPPLEMANN. In other words, as you read the bill, you see in it the purpose of making these loans about which you have been telling the committee? Mr. BULLOCK. I do; yes, sir.

Mr. BLOOME. May I clarify this one viewpoint, for I see that Congressman Williams has asked a very definite question.

I will say this, that up to now the agencies that have handled loans for $1,000,000, half a million dollars, or $100,000, are geared for that purpose, and their minds run in big figures, and if I come in with an application for a loan of $2,000, I do not get much consideration.

But if an administration is set up such as under your bill, Congressman Kopplemann, then they will know that they are specifically set up for the poor fellow, and when he comes in with an application for $1,000, $2,000, or $5,000, their entire philosophy, their entire mental attitude, will be wrapped up in the thought of taking care of that kind of a loan. But the fellow who handles applications for half a million dollars cannot get the viewpoint of the little fellow.

Therefore, I feel that the administration set up under your bill will know that it was the wish of Congress to take care of the little fellow, and it will not be such a case as that of the queen, who, when she was told that they had no bread for the people, said, “Let them eat cake.” She had that mental attitude of cake. Here would be an administration that would know that they have to cater specifically to the little fellow. That is my humble opinion.

Mr. WILLIAMS. All right, Mr. Bullock.

Mr. BULLOCK. I do not feel that the little fellow has any chance to get a loan out of the R. F. C. of $5,000 or $10,000, regardless of what he furnishes for collateral or assurance of repayment.

I would be glad to do anything that I can, to come back at any time to support this.

Mr. WILLIAMS. We will be glad to have you at any time.

Mr. BULLOCK. And I appreciate this opportunity, and I thank you very kindly.

Mr. WILLIAMS. We have enjoyed having you with us. If there are no other witnesses for today, I suppose that we will adjourn this committee until 10:30 o'clock tomorrow morning.

(Thereupon, at 12:20 p. m., an adjournment was taken until Tuesday, June 4, 1935, at 10:30 a. m.)

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