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INTERMEDIATE CREDIT CORPORATION

THURSDAY, JUNE 6, 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. REILLY. The committee will come to order. Mr. Kopplemann, you may proceed.

Mr. KOPPLEMANN. Mr. Chairman, a number of Members of the House have written me indicating their support of this legislation, H. R. 5918, and I desire to put in the record at this time some excerpts from their letters in support of this bill.

Mr. Sabath, of Illinois, says:

Your bill appears to be splendidly prepared, and the purposes of same meet with my approval.

Mr. Dickstein, of New York, says:
In my opinion the matter has great merits.
Mr. Dunn, of Pennsylvania, says:

I assure you that I will support any legislation which will help small business and industrial concerns.

Mr. Rogers, of Oklahoma, says:
Command me when I can be of assistance.
Mr. Gray, of Pennsylvania, says:
Your idea seems to be right.
Mr. Cummings, of Colorado, says:

I know to be true many of the things you say regarding the lack of credit accommodations.

Mr. Peterson, of Florida, says:
The bill looks good to me.
Mr. Wolverton, of New Jersey, says:

I am in full accord with the views you have expressed with respect to the necessity of providing for direct loans to industry, particularly the small busi

It is this latter class that must be encouraged and helped if employment is to be increased. I will be glad to cooperate in whatever way may be within my power.

Mrs. Jenckes, of Indiana, says:

I think that this effort to assist the small business man and to provide credit for industries will be the outstanding accomplishment of this session. 145152-35

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ness man.

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Mr. Lea, of California, says:

I believe the relief program has in part failed because it has not given proportionate attention to credit or industrial enterprises. I am in favor of the purposes announced in your letter and wish it success.

Mr. Smith, of Washington, says:

I am heartily in favor of this legislation and shall deem it a privilege to support same vigorously.

I am of the opinion, and have been for a long time, that the only way we can establish a permanent recovery is to get industry operating in normal manner again and restore the men to the industrial pay rolls. No amount of experimental or temporary measures will suffice.

Please be assured of my complete cooperation.
Mr. Quinn, of Pennsylvania, says:

I agree with you that thousands of the smaller concerns and struggling independents are facing demoralization because funds for financing are not available, and until something can be done to give these deserving industries the aid they require we cannot hope for normal recovery.

You can count on my hearty and energetic support and I shall be pleased to discuss the matter with you at the first opportunity.

Mr. White, of Idaho, says:

Realizing the need of a source of finance for the business organizations in question, and realizing further the failure of the Government to make available to the country an adequate volume of primary money as a medium of exchange, I feel as you do that some expedient, such as outlined in your bill, is necessary, and until the country can be brought to a realization of the absolute necessity of the Government functioning in the creation of an adequate, workable money system to supply a volume of money that will be sufficient to the needs of the people, we will not see a real business recovery.

Thanking you for calling the matter to my attention, and assuring you of my desire to cooperate, I am

Mr. Cravens, of Arkansas, says:

There is only one criticism I can make of your bill, and that is it permits of too many varied activities, and I would prefer a simple bill, providing for an intermediate credit corporation for commerce and industry, whose sole business should be aiding and financing small and medium-sized commercial and industrial establishments.

Personally, I shall be glad to support any reasonable measure along this line.
Mr. Cochran, of Missouri, says:

It looks like you have a good bill. What can we do to get some action from the Committee on Banking and Currency?

Mr. Smith, of Washington, says:
I am in complete sympathy with this legislation.
Mr. Jenkins of Ohio says:

This is important legislation which I hope your committee may favorably report to the House.

While my district is largely agricultural in character, there are thousands of small industrial and commercial concerns operating in it and upon whom the economical well-being of my people as a whole is largely dependent. During recent years they have been severely handicapped by the lack of proper credit facilities, as have smaller firms in the country as a whole. In fact, they have suffered to such a large extent that it has been necessary for many of them to use their capital investment in part to meet operating costs.

This is 'a serious situation which threatens the very foundation upon which competitive capitalism rests, and I am strongly of the opinion that in view of the liberal, but secure, provisions of H. R. 5918 and the restrictions placed upon the type of administrative officer which it directs, the enactment of this bill will go far toward alleviating this condition and permit a real and permanent recovery.

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Many of these concerns have bone fide orders in hand for their products but cannot secure the working capital necessary to finance them. If a source is furnished by which the necessary credit can be given to these sound concerns, they will reemploy thousands of workers now on relief rolls and will stimulate through their increased purchasing power the return and maintenance of normal economic conditions.

Mr. Ludlow, of Indiana, says:

I am writing to express my approval of Representative Kopplemann's bill which is designed to provide a method of making direct loans to small businesses and industries through a system of intermediate credit banks. I regard this bill as one of the most important before Congress at the present time. We have all witnessed the tragic failure of the Reconstruction Finance Corporation to fulfill expectations as an agency of business and industrial recovery. The plain intent of the Congress was that the Reconstruction Finance Corporation should pursue a liberal policy of making loans to business and industry, yet the fact is that the administration of the “loans to industries” law by the Reconstruction Finance Corporation has been so rigid that industries seeking aid have found it as difficult to get loans from the Government as from their local banks. Administrative inflexibility and red tape have thus virtually nullified the act authorizing loans to industries through the Reconstruction Finance Corporation.

In this emergency the Kopplemann plan for credit banks for industry looms up as the Nation's hope, as far as industrial recovery through Government aid is concerned. Thousands upon thousands of small business concerns and factories are literally starving for working capital. The way to bring about solid and permanent recovery in America is to provide these concerns with capital through Government credit, so that they may start the whistles to blowing, the furnaces to roaring, and the wheels to whirring. The intermediate credit banks would function quite apart from the ordinary commercial banks. They would study the financial needs of industry, receive applications for loans to businesses and industries, advise business men and manufacturers, and extend the helping hand that is so much needed at this particular time to help industry to get on its feet.

There will be no permanent and substantial recovery until millions of our fellow citizens are transferred from relief rolls and synthetic jobs to regular jobs. The Kopplemann bill points the way to bring about this " consummation devoutly to be wished.” It provides a practicable, workable, sensible plan to aid recovery and, in my opinion, it ought to pass Congress unanimously.

I thank you for this opportunity to tell what I think of the Kopplemann bill.

Mr. Hart, of New Jersey, forwarded the following letter and resolution:

RETAIL GROCERS ASSOCIATION OF NEW JERSEY,

Jersey City, N. J., June 4, 1935. Hon. EDWARD J. HART, House of Representatives, House Office Building,

Washington, D. C. DEAR MR. HART: We are attaching herewith a copy of a resolution passed at the forty-eighth annual convention of our association in Camden on May 20, 1935.

Assuring you that your cooperation in this direction, stated in the resolution, will be deeply appreciated, we are Very truly yours,

A. F. GUCKENBERGER, Secretary.

Whereas Congressman Kopplemann has introduced a bill known as “H. R. 5918”, providing for the creation of an Intermediate Credit Corporation for) Commerce and Industry to aid in financing small and medium size commercial and industrial establishments; and

Whereas this bill will, under very reasonable conditions, permit our members to make loans covering a period up to 5 years with the provision of further extension if needed : Therefore be it

Resolved, that the Retail Grocers Association of New Jersey, assembled here in Camden for their forty-eighth annual convention, heartily endorse this bill and petition the New Jersey Senators and Congressmen for their support and cooperation in its passage.

Statements concerning H. R. 5918 were also presented as follows:

Barish Textile Co., 392 Broadway, New York, N. Y., by Meyer Barish:

I have been urging the establishment of such an institution for the last 8 years. I feel without a shadow of a doubt that had such steps been taken before, thousands of small merchants would have been saved from bankruptcy and millions of unemployed would have been engaged at the present time. This same process of elimination of the small merchant is still continuing as a result of his inability to obtain financial credit for one excuse or another.

I refer you to some of my comments on the subject, which I believe Dr. Beckman has published in his report.

If there is a shadow of a doubt in the minds of any of you as to this condition, I would suggest that you spend a few hours amongst the small merchants in any industrial section of the country. You will then find that the greatest part of our present plight is due to the inability of the small merchant to obtain financial assistance as he had in the past.

I fully believe that your recommending the passage of this bill will do more to solve our present economical plight than any measure introduced in recent years.

Textile Converters Association of America, 1450 Broadway, New York, N. Y., by Edmund Wright, executive secretary:

Testimony will be taken before you on the Intermediate Industrial Credit Corporation, House Resolution No. 5918, in which I am interested, not from the 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 75 and 100 million dollars per annum. My contacts have been with the biggest enterprises in the textile 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. These 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.

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 business men, who may have a temporary set-back 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. Acommodations granted by such concerns are very remunerative to them and very destructive to the man who needs them often, because the interest rate is exhorbitant and must, eventually, destroy the continual borrower, or his volume must be reduced to such 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

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