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Mr. WILLIAMS. They never have been able to get long-time loans strictly on personal security, have they?

Mr. KRIEGER. I know lots that have. Mr. WILLIAMS. What do you call “ long time”? •Mr. KRIEGER. From that standpoint, I probably should not make that statement in reference to long-time loans. They have been able to renew, and they knew perfectly well that a renewal would be there when they needed it. The action may be different, but the intent was the same as a long-time loan.

Mr. KOPPLEMANN. For Mr. Williams' benefit, I want to say that under this bill, in the rediscounting features, it is expected that the rate on loans would be around 6 percent, or approximately 512 percent.

Mr. WILLIAMS. I see that in the set-up of the bill it provides for the sale of debentures, and the rediscount rate may be 112 percent above that, and the direct loan may be 2 percent above that. So, if you get your loan, you will pay not under 6 percent.

Mr. KRIEGER. Not under 6; that is all right.

Mr. REILLY. We thank you very much for your statement, Mr. Krieger.

Mr. KOPPLEMANN. Mr. Chairman, a gentleman, Mr. Edmund Wright, who was to have been here as a witness, has written me a letter, which I would like to read for the benefit of the committee, so that it will go into the record.

The letter is signed by Edmund Wright, executive secretary of the Textile Converters Association of America, with offices in New York City. The letter is addressed to the Committee on Banking and Currency, and it says [reading]: : TEXTILE CONVERTS ASSOCIATION OF AMERICA, INC.,

New York, N. Y., June 3, 1935. COMMITTEE ON BANKING AND CURRENCY, House of Representatives, Washington, D. C.

(Attention of Mr. Chairman.) HONORABLE SIRS : Testimony will be taken before you on the Intermediate Industrial Credit Corporation, House Resolution No. 5918, in which I am interested, not from a standpoint of personal gain, but from the standpoint of gain to small industries throughout the country, which at the present time, are deprived of all banking facilities.

In my 45 years of business experience I have been a director in numerous banks and have made credits running into hundreds of millions of dollars, having been connected with one concern for many years, whose volume ran between seventy-five and one hundred million dollars per annum. My contracts have been with the biggest enterprises in the tetxile and other fields, but also with the smaller industries.

In years past, before the chain banking system became so formidable, we had what was known as community or local banks.” Thees banking institutions were headed by men who knew their localities and every man engaged in business within a certain radius of that particular bank. When the small business man found himself temporarily cramped for funds, he could approach the bank president, tell his story, and secure what little assistance was needed so that he might be tided over the temporary period of stress. Today, with big banking institutions having branches in every part of a city, with managers having little power to make loans without consulting headquarters, where the applicant is not known from the man in the moon, such loans are a thing of the past. The personal element does not enter into the situation as it did in former years, because the average bank branch manager has no power.

The small merchant is still the backbone of industry and must not be crushed.

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The local retailer, embodying all branches of business, depends a great deal upon his Saturday business. If and when we have a stormy Saturday, and business is not as good as usual, the following week finds this type of local merchant cramped for funds, but he cannot now go to a bank and borrow two, three, or four hundred dollars to tide him over. The plumber, carpenter, barber, and other such types of businessmen, who may have a temporary setback through poor collections or otherwise, find no avenue through which they can make loans, except, perhaps, through such organizations as make loans with two endorsements, which, however, means that money costs anywhere from 16 to 22 percent.

We hear a great deal of advertising over the radio about the philanthropic duties performed by these many loan companies. Accommodations granted by such concerns are very remunerative to them and very destructive to the man who needs them often, because the interest rate is exorbitant and must, eventually, destroy the continual borrower, or his volume must be reduced to such an extent that he cannot make a decent existence. As an example, I recently saw a communication from one of the biggest loan companies in the country, making loans from $100 to $5,000. Two installments on a $200 loan amounting to $38 had lapsed. The interest averaged 40 days and the interest charged was $1.89. Taking it roughly, this interest charge figured in excess of 30 percent per annum.

There are hundreds of thousands of small merchants unable to secure as. sistance, which so many of them deserve, when occasions arise. For that reason, and no other, do I believe that the Government must establish an institution that will take care of these types of businesses. With all due respect to the chain stores and tremendous corporations functioning today, the local merchant is still a necessity.

I ask that you give serious consideration and look favorably upon the proposed bill for the establishment of the Intermediate Industrial Credit Corporation. Respectfully yours,

EDMUND WRI AT. (Thereupon the committee proceeded to the consideration of other business, after which it adjourned.)

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INTERMEDIATE CREDIT CORPORATION

WEDNESDAY, JUNE 5, 1935

HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The committee met at 10:30 a. m., Hon. Michael K. Reilly, presiding.

Mr. EILLY. The committee will come to order. We will resume the hearings this morning on H. R. 5918, introduced by Mr. Kopplemann. The first witness is Professor Dice.

Will you give your full name to the reporter and state your business or profession.

STATEMENT OF DR. CHARLES A. DICE, PROFESSOR OF BANKING,

OHIO STATE UNIVERSITY, COLUMBUS, OHIO

Dr. DICE. Mr. Chairman, my name is Charles A. Dice; I am professor of banking at Ohio State University.

I have been teaching in that institution, at the head of the banking department, for 15 years.

I have had a substantial amount of contact with practical banking. I have worked in the Chase National Bank, New York City, for some time. Also, I am on the board of directors of the Ohio National Bank, in Columbus, Ohio, the largest bank in central Ohio, and on account of my connection there, where I have access to what is going on, I feel almost like a practical banker.

Mr. KOPPLEMANN. What is your practical experience in banking?

Dr. DICE. I had quite a little experience at the Chase National Bank.

Mr. KOPPLEMANN. In New York City ?

Dr. DICE. In New York City. Then at home, in Columbus, I have been on the advisory board of the Ohio National Bankwhich is the biggest one in central Ohio—for about 3 years.

Mr. KOPPLEMANN. In what town is that located ?

Dr. DICE. In Columbus, Ohio. It is the largest bank in central Ohio and in the State, outside of those in Cleveland and Cincinnati. And not only that, but the executive vice president of that bank was a student of mine, and I helped get him his job 10 years ago.

Mr. KOPPLEMANN. What did you do for the Chase National Bank?

Dr. DICE. I worked in different departments of that bank. First, I was in the foreign exchange department and worked there for quite a little while. Then I went into the tellers' department and worked there for some time. I did not get into the credit department, but I was also in the currency department, where I worked quite a while, and also in the investment department.

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Mr. KOPPLEMANN. Was this before you went to Ohio State University ?

Dr. DICE. This was while I was a professor at Ohio State. I went down there to the Chase National Bank to get the practical contacts and practical experience.

Mr. KOPPLEMANN. Are you now engaged in a practical way with
Dr. DICE. I am on this board of the Ohio National Bank.
Mr. KOPPLEMANN. That is the Columbus Bank?

Dr. DICE. Yes; the Ohio National Bank, which is the largest one in central Ohio.

Then I have some of my own students who are officers of banks. First, there is the executive vice president of the Ohio National Bank, and also the head credit man, who were under me as students 10 or 12 years ago. I discuss matters with them just like any other bank officer would.

Mr. KOPPLEMANN. So you have had practical experience in credit other than your association with the Ohio National Bank?

Dr. DICE. I would say yes; quite a good deal.

Besides that, I have written a book on the subject of the stock market. There were 25,000 copies of that book sold, and one reason why I can come down here is because I am still receiving some royalty on that book.

I also wrote a smaller book and a number of magazine articles. I am now writing a book on banking, which is to be published by the McGaw-Hill Book Co.

Mr. Cross. Doctor, what we need here is common sense and practical experience. We have had so many economists and professors before us, each one of whom says the other is profoundly ignorant and entirely wrong, that now we would like to hear from someone who has had practical experience and get some information from him. We would like to get some information and opinions from men who have had practical experience along this line.

Dr. DIÇE. I have had considerable practical experience, and that is the reason why, instead of going to the library, I have gone to the bank and worked with those men and helped them work out their credit problems. My teaching is not primarily out of books. I teach much of what I get from these men on the job.

Mr. REILLY. You may proceed with your statement in reference to the bill we have under consideration.

Dr. DICE. I want to make a few general statements.

Probably 15 years ago I began to think that we ought to have in this country an institution, or several institutions that would fill in a gap in our credit structure. That opinion was more confirmed than ever when the agricultural people, of whom I know quite a few, began to talk in terms of an intermediate credit system.

I began to advocate that among my banker friends. But I never could get very much sympathy.

Three years ago, in our board of directors at the Ohio National Bank I brought the matter up, expressing the idea that there should be an intermediate credit system. But I still did not get very much sympathy then from some of them, although others of them thought that might be helpful in taking care of a number of customers they

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had who wanted 1-year, 2-year, or 3-year credit. The bank officers could not supply it; they did not feel they could supply it.

I remember one day in one of our advisory board meetings the vice president said, “Do any of you men want any credit ?" One man said, “ Yes, I can use quite a bit of money.' He was a local manufacturer in Columbus.

They said to him, “What do want to do with it?" He said, “I have à certain machine I want to buy, and there are certain accessories to this machine, and that would take some $5,000 to $10,000.” “Well”, they said, “ how long do you want it for?” “Well”,

66 he said, “ for not less than a year; and if I cannot get this money for at least a year it will be of no use to me.”

The vice president said to the members of the advisory board, “ Should the bank make that loan?” Unanimously, the members of that board said, “ No; that is a type of a capital loan.”.

So I did get quite a little sympathy on that proposition from several of the officers of the bank because they saw that that would be an outlet for some intermediate credit.

Upon looking into the matter, I found that both England and France have organized and established such institutions. France, in 1919, began to organize intermediate-credit institutions. The way they did it over there was that they organized affiliates. That is, a regular commercial bank organized an affiliate which would take care of these loans which they did not feel should go into the regular commercial banks.

They organized the first one in 1919. This first one was organized by two of the largest commercial banks in France. By 1928 this particular thing became so successful that these same two banks organized another one.

In 1919, the Crédit Lyonnaise and the Comptoir National d'Escompte, two of the largest deposit banks in France, formed the first organization I referred to, the Union pour le Crédit à l'Industrie Nationale.

Then in 1928 the Société Générale and several other banks formed the Société Anonyme d' Crédit à l'Industrie Française.

Then, in 1929, these same two large banks, in connection with one or two others of the large banks organized a third one called the Union des Banques Régionales pour le Crédit Industriel.”

That was so successful that the same group of banks organized a fourth one in 1929, called “ Crédit Industriel et Commercial.” That was in 1929.

I do not have any record concerning any others, but there were some others of the same type organized.

The idea was to provide money for small industries in France. In France many industries are relatively small, so that that institution would have an appeal there.

In England there was a similar development in 1929. Governor Montagu Norman, of the Bank of England, saw this same need to fill this lack in the credit system, and put in what was called the Securities Management Trust, Ltd. That was formed under the auspices of the Bank of England. Governor Norman, I may say, was the chairman of this particular credit organization.

Mr. KOPPLEMAN. What do they call that?

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