Mr. KOPPLEMANN. And he made no improvements upon it? Mr. KOPPLEMANN. You do not know? You said you would give me all of the facts I would like. You made the assertion yourself on a purchase of $8,000 he wanted to borrow $50,000. Yet you made him a loan in spite of that. You say you will give me all of the facts that I would like? Mr. JONES. Yes; I will get them to you. Mr. KOPPLEMANN. He bought the property for $8,000? Mr. JONES. I will give them to you in written form. I will send you a statement for your records here, which is what you want, I suppose. I suppose to build a record on it, and I will give you the facts. Mr. KOPPLEMANN. It does not seem to me that it is conceivable that a property would be appraised at over $100,000, which was bought for $8,000, that did not have improvements made upon it which would bring up the value to the appraised valuation. Now, Mr. Jones, in this same letter, this gentleman speaks of having made his first application in 1933, and then started again, after the bill under which you are functioning was passed in June of 1934; and it was carried along and carried along and finally the Boston office refused to make the loan. Then I appealed to you, and if your memory will serve you right, you will remember that I called you out of a meeting in New York in order to get this man consideration, and you stated that, if he came to Washington, you would try to consider it; and as a result, part of the loan was made; that is, the loan was authorized for $35,000; $10,000 was to be advanced Mr. JONES. $10,000 on the plant, and $25,000 on the accounts. Mr. KOPPLEMANN. And finally, when this $10,000 on the property was allowed, one-half against the receivables Mr. JONES. No; not one-half against the receivables. $10,000 on the plant, and $25,000 on the accounts. Mr. KOPPLEMANN. One to one and one-half against the receivables? Mr. JONES. $25,000 on the $37,500 of accounts. Mr. KOPPLEMANN. It was finally given to him on November 30 and Mr. JONES. If the gentleman had asked for a reasonable loan, or a loan that he was entitled to in the beginning, he would probably have gotten it. He asked for $50,000 on what he paid $8,000 for. Mr. KOPPLEMANN. You still talk about $8,000, and you said you would give me the details of it. Mr. JONES. I am going to send them to you. I have not got them now, but I will send them to you. Mr. KOPPLEMANN. But in spite of that, you arranged for a $10,000 loan on the property? Mr. JONES. Yes; I thought we did pretty well when we loaned 125 percent of what he paid for it. Mr. KOPPLEMANN. Now do you not think, in all fairness, that the property that was bought for $8,000 and appraised for $100,000 must have had improvements put upon it? Do you not think it is unfair to keep expressing the fact that he paid $8,000 for the property? Mr. FARLEY. Who made the appraisal of the property? Do you know who did that? Mr. JONES. Who made it? Mr. FARLEY. Yes. Mr. JONES. No; I do not know who made it. Mr. FARLEY. I was just wondering if it was one of these Mr. JONES. He put it on the books, and finally filed a statement, at $108,000. Mr. FARLEY. I was wondering whether it was made by one of these appraisal companies, or it was done by the people themselves. Mr. JONES We certainly did not appraise it for $108,000. Mr. FARLEY. Somebody came in and he purchased the plant for $8,000, and then writes up the appraisal on it? Mr. JONES. I do not know about that. Mr. FARLEY. Somebody like the American Appraisal Co.- Mr. REILLY. Yes. Mr. HOLLISTER. Mr. Jones, if your office had appraised it at $108,000, you would have been glad to have lent considerably more than you did on this property, irrespective of what he may have paid for it, would you not? Mr. JONES. Yes; we would, provided he had an opportunity to succeed. Mr. HOLLISTER. Yes; but as far as the security went Mr. JONES. Oh, yes. Mr. HOLLISTER. And the fact that he only paid $8,000 for it was not a controlling factor, if the value had been there? It is merely a question of what the value is when they ask for a loan? Mr. JONES. Yes, sir. Mr. HOLLISTER. And the possibility of success of the business? Mr. KOPPLEMANN. And the possibility of success? Mr. HOLLISTER. Yes; and I wanted to get the idea. Mr. KOPPLEMANN. Now, on November 30, he finally received $10,000. He said: We have been fighting for nearly 6 months to obtain this money so necessary for our operations, and had we been able to obtain it at the start of our busy season, rather than at the end, we would have been able to show a substantial profit to carry us over our dull 6 months from the beginning of the year. Unfortunately, the assistance came too late to be of much benefit, even though we went to work full time the month of December. Mr. JONES. That is his statement. If he had asked for the amount of money that he was entitled to, he would have probably gotten it promptly. Mr. FARLEY. Do you have appraisal men in your department who go out and appraise property? Mr. JONES. We have no appraisal department, but our agents, in a case like this, will send somebody to look at the plant, and they try to get somebody who knows something about that particular kind of business. Mr. KOPPLEMANN. Now, what do you say about this Mr. WILLIAMS. You say you have no appraisal department, and you also spoke of your agents. Who are your agents, Mr. Jones? Mr. JONES. Who are our agencies? Mr. WILLIAMS. Yes. Mr. JONES. We have 32 in the United States. This one is at Boston. This agency is at Boston. Mr. WILLIAMS. You mean that that is a kind of branch office? Mr. WILLIAMS. And they send out somebody who is familiar with that kind of industry and make an appraisal of it? Mr. JONES. They make an appraisal of it. I do not know that it is what the American Appraisal Co. would regard as an appraisal, but they go out and form their opinion as to what the property might be good for in the way of a loan. Mr. WILLIAMS. They are men of experience? Mr. JONES. Supposed to be; yes. Mr. KOPPLEMANN. What have you to offer to us as a reason for this delay of 6 months? Mr. JONES. My guess is the fact that he was trying to get more money than he was entitled to. Mr. KOPPLEMANN. What have you got to say about this: We could call attention to the actual amount of money we had to use from this $10,000. The expenses in connection with the granting of the loan were over $2,300, all of which expenses were approved by the R. F. C. Mr. JONES. We did not disapprove it. We do not approve those things. Mr. KOPPLEMANN. You call for certain information, which results in these high costs of providing the information? Mr. JONES. And the fact that the gentleman was trying to get more money than he was entitled to indicates we were right about it. Mr. KOPPLEMANN. I will not agree with that a minute, that he was trying to get more money than he was entitled to. Mr. JONES. I do not expect you to. Mr. KOPPLEMANN. I say he got less money than he was entitled to. Now, he says in his letter Only $10,000 would be advanced on the property, in spite of the fact that an appraisal by one of the most reputable firms in the State showed a value of over $100,000. Do you require an appraisal to be made by reputable firms in your questionnaire? This appraisal was made. But you have no information as to what your own appraisal of that property was? Mr. JONES. No; I have not. Mr. KOPPLEMANN. You are going to furnish that at a later time? Mr. JONES. Yes; I will give you a history of this loan in letter form; that will be as fair as it can be stated, and if it is not satisfactory to you, I cannot help it. That is the best I can do. Mr. KOPPLEMANN. We ask for nothing more than is fair. Mr. JONES. Why do you not go into more important matters? We have spent a lot of time on this particular one. Mr. KOPPLEMANN. This particular one is a sample of the letters I have received. All right; I will take another one. Mr. JONES. You have not got a good case here; you had better take another. Mr. KOPPLEMANN. All right; I will take another one. Mr. REILLY. Now, Mr. Kopplemann, I think if there are some of these other bad cases that you ought to make them as short as possible. Mr. JONES. May I be pardoned just a minute? I took the liberty of calling Mr. Kopplemann this morning about 10 o'clock and ask ing him the name of this borrower, so that I could look it up; and I told him also that if he had any other cases, if he would give me the names, and let me get the information we could make progress a lot faster. He said he would do that. I think that is in the interest of saving the time of all of us. Mr. KOPPLEMANN. I will be glad to give it to you. There are so many of them. Suppose I try another kind of loan. Mr. REILLY. Give us some example of what you claim has been a failure to recognize a loan. Mr. KOPPLEMANN. Here is the case of H. L. Baum Co., of Plainfield, Conn. That is a concern that has been in business over 30 years, which started with very limited capital, putting all of its profits back into its business. They were employing 35 women until March 1935, when the plant was destroyed by fire, not adequately covered by insurance. They applied for a loan of $10,000. The Boston office turned them down. They sent it to the Washington office with the loan application reduced to $5,000, and it was also turned down. They say: "The company will be forced to go out of business, or operate in a very limited manner, employing 5 or 6 people, instead of 35." This was an emergency case which was due to the fire, and up to the fire they needed no one's assistance or help. Mr. JONES. If you will give me a list of those, Mr. Kopplemann, I will tell you about them. Mr. KOPPLEMANN. That is all right. Let me ask you about this case a question or two, because the United States, as far back as the history of the Congress goes, and they start from its first day, has helped the people in the different sections of the country, has come forward with the opportunity to help people in need because of some great holocaust or catastrophe which was visited upon them. Here is a company which has a fire. Up to the time of the fire they needed no one's help. But because of the fire, because the fire was so devastating that the insurance did not cover their losses, they needed some assistance, and they go to your organization and ask for $10,000. You turned them down. They appealed to Washington for $5,000, and they are turned down, in spite of the fact that it was an emergency case, even with the record the company had in the past. Mr. JONES. You are making a statement, and I will have to find cut the facts about it. Mr. KOPPLEMANN. You cannot make any answer to that? If that is so, there is no sense in my asking anything about these other cases. Mr. JONES. If you will give me the names, I will be able to give you all of the facts. I know we have made many mistakes. Mr. DIRKSEN. Mr. Kopplemann, may I interpose a question? Mr. KOPPLEMANN. Yes. Mr. DIRKSEN. Paragraph 2 of the bill, section 5, page 7, reads as follows, that alters the authority of the new agency to be created herein To make loans direct to any corporation, partnership, association or individual in, or organized under the laws of any State or territory or the District of Columbia, and composed of a person or persons engaged in producing or marketing goods or services if the notes or other such obligations representing such loans are secured by warehouse receipts or shipping documents covering such goods, or mortgages upon land, other real estate, plants, warehouses, or equipment or other evidences of probability of repayment of the loan when due. That power is now exercised in its entirety by the R. F. C. organization, is it not? Mr. JONES. I assume so. Mr. DIRKSEN. I am speaking of the three mentioned cases, together with the loans which you have made, and it occurs to me that you have the authority to make any such loan at the present time? Mr. JONES. You mean that you are talking about there? Mr. DIRKSEN. No; that I am talking about here in paragraph 2. Mr. JONES. What kind of loan is that? Mr. DIBKSEN. Well, loans on warehouse receipts, on shipping documents, loans on real estate and plants. Both the R. F. C. and the F. R. B. can make loans? Mr. JONES. Yes. Mr. DIRKSEN. On warehouse receipts or equipment? You can take plant security? Mr. JONES. Yes; and do it every day. Mr. DIRKSEN. There is no authority contained in this bill that you do not already exercise, and it occurs to me that what you do here would be simply to set up an extra agency to do the things that, under the law, you are now empowered to do. Mr. JONES. Yes. Mr. DIRKSEN. There is, therefore, no guarantee or security that an intermediate loan corporation would deal differently with these loans than you are dealing with them at the present time? If they were going to take an adequate or reasonably adequate amount of security, or follow any other formula with respect to security, there is no assurance that they would do differently than what you are doing at the present? So it really resolves itself into the personal equation again? Mr. JONES. Entirely as to who is running the job. Mr. GIFFORD. Is there any significance in what follows in there, where it says that the loans shall be limited to 75 percent of the value? Is there not the suggestion that it might be an unusual loan? What would be the objecion, if the refusal was made-if they would not take 75 percent, it is not a good loan? Mr. JONES. No; there is no limit. We are the sole judges, or our Board is the sole judge about the credit risk. If we wanted to lend that man $50,000 on the plant, we could do it. If we wanted to lend him $100,000, we could do it. Mr. GIFFORD. Would you like me to present a hypothetical case, Mr. Kopplemann? Mr. KOPPLEMANN. That is perfectly all right. Mr. GIFFORD. Suppose a man took milk from the farmers around about who had experience of 25 years and suddenly lost his plant and had to find another location, and he brought to you assets that cost him, say, $60,000, including a milk separator of some sort that cost $10,000 a year ago, and 20 automobiles, some of them costing him $3,000, and he said they cost him $60,000, and he comes down to you and wants a loan of $35,000. You ask the date of the purchase of the automobiles and finally determine to lend him only $7,500. Do you think that would be an equitable case? |