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This bank never did open after that. It so developed that this bank had a number of their assets pledged with the R. F. C., of which this building was one of them Now, when it came to buying this property, my client, the Keep-Klean Cover Co., offered $18,000, which was satisfactory to the receiver of the closed bank. Because the KeepKlean Co. had extensive alterations to make on the building, they offered only $4,000 cash and balance of $14.000 first deed of trust, which they were willing to pay off one-tenth each year over a period of 10 years until finally paid off.

The receiver took the proposal up with the R. F. C. who declined to make the loan or release the collateral on the grounds that the closed bank receivership expired in 2 years and that was as long as they would make the loan. The Keep-Klean Cover Co., however, was not interested in only a 2-year loan as at that time when the loan became due they would have to take the chance of renewing the loan on the open market. If the market 2 years hence was like it is now there would absolutely be no chance to renew the loan as no private capital is being loaned on factory property to speak of. I wrote Senator Clark, of Missouri, and he in turn contacted Mr. Jesse Jones, of the R. F. C., and here is their correspondence corroborating the stand previously taken by the R. F. C. I have several letters here. Jesse Jones explains why he could not make this loan.

As a result the Keep-Klean Cover Co. withdrew, which thereby kept a number of workers from jobs. They are still in their present building hoping that some plan can be worked out to enable them to buy this building from the bank.

Another client of mine has a four-family flat building located in a fast-growing commercial district. His loan is coming due soon and he has an opportunity to rent stores if he can get financing to convert the flats into a store building. So he made application before the F. H. A. and was declined on the strength that his property was in a commercial district and that they were limited to making loans on property in commercial districts. The remodeling alone on the building would amount to $6,000, which would place a number of people to work, besides after the remodeling is completed it would afford additional opportunities for putting people to work due to these modern stores.

Another client has an old piece of property in the industrial center of St. Louis and has the opportunity of erecting a large garage building to take care of an increased demand for a garage in this community. He already has a mortgage on the property which bars him from getting help from the R. F. C. Mortgage Co. as they are only interested in making loans where they control the first mortgage.

Another client has a large interior-decorating business in St. Louis. I interested him in a large, rambling residence on Lindell Boulevard which is the show street of St. Louis. His plan was to buy this huge residence, remodel the front into a colonial type display and make additions in the rear. The price of this residence is $15,000 and his remodeling will exceed $5,000. He only had about $5,000 cash to invest in the completed property, so he tried to get the owners to sell with a small cash down payment and balance to be paid off monthly like rent. It so happens that this property is in an estate, and so tied up that it can only be sold for cash. If this company could get a Government loan to help them buy the building and finance the remodeling, people would be put to work on the remodeling as well as additional workers added to the interior-decorating business, due to increased business of this company being located on Lindell Boulevard.

Another client is one of the largest printing concerns in St. Louis. At present they are paying $14,000 a year rent and their lease expires about the first of next year. They want to get into another building which they can buy and make some financial arrangements to pay off on the property over a period of 10 years, correspondingly like rent.

They were planning on an entirely new building but the cost ran out of reason, so they abandoned that idea. I interested them in a large plant close in to the downtown district of St. Louis which can easily be remodeled. It covers a half city block and consists of a 2-story modern factory building and three huge warehouse buildings attached to one another. The plan is to take care of minor alterations on the 2-story factory building and rebuild the warehouses into a l-story modern printing plant with air-conditioning, moisture control, special lightning, and air-cooling plant. If you gentlemen are familiar with the printing business you will know that particularly on color work it is essential to have even temperature and moisture control wherever possible. Paper is like wood. The grain runs one way. If placed under a microscope you will see the fine grains running in one direction. In fine color work the idea is to get one color to hit directly next to the other color printed previously. If the temperature or moisture of the room changes during the time one color is put on and another is ready to put on, the paper may stretch and you may get a job where the colors do not hit exactly together. There is only one other printing plant in St. Louis, equipped in a factory building, containing all these modern improvements. So you can readily see what a wonderful talking point this company would have in getting additional business by being located in one of these ultra-modern printing plants.

It so happens that the company which now owns these buildings is willing to sell at a sacrificed price but they want all cash. Or if they would finance, they would expect a substantial cash down-payment and balance first deed of trust. The remodeling will come to about $50,000 on these buildings. Application was made to the R. F. C. Mortgage Co. but in order to get the loan the R. F. C. Mortgage Co. would expect to control the first mortgage. This practically bars this company from getting a loan through the R. F. C. Mortgage Co. Now if there were some governmental agency which would enable this printing company to buy this property and improve it, it not only would give additional work to printing craftsmen but it would also increase a number of workers in the printing plant.

Another growing industry is the trucking industry. I do not know the conditions of the trucking industry in Washington, but in St. Louis these long-distance haulers are located in old warehouse buildings, garages, stables, and other old buildings which offer some facilities for a truck depot. For a most efficient terminal it should consist of a 1-story building, setting back at least 30 or 40 feet from the street and 30 to 40 feet from the alley or the street in back, to permit trucks to back up from both sides for easy loading and at the same time avoiding congestion. The platform or loading dock should be 4 feet high from the ground to permit easy loading from truck to platform

and vice versa. These trucking concerns have grown so rapidly the last few years that most of their terminals are too small, inadequate, and cumbersome. I know of a number in the St. Louis area who would like new locations and are desperately in need of them right now. Because most of their money is tied up in equipment they do not want to invest much in real estate, so that the next best thing is to lease a large piece of ground close to the business district and erect a building on the leased ground. As far as I know there is no governmental agency to take care of financing these terminals. Yet I will venture to say that trucking companies in every metropolitan city in the United States are confronted with the same problem, and I know a tremendous number of men would be put back to work if adequate credit were extended for the enlargement of terminals for these trucking concerns.

I have tried to show you gentlemen that in the commercial and industrial real estate field no complete financial agency has been established by the Government to help the small industrialists and business men.

The CHAIRMAN. What you have in mind is for the Government to supply capital loans to these men?

Mr. Marx. Yes.

The CHAIRMAN. To set them up in business, and of course, if it is possible for them to make money, if these private investors prosper they will reimburse the Government. If they have bad luck and do not succeed they cannot do that. That is about the size of it.

Mr. Marx. In every case that I cited here they have in my judgment sufficient collateral but they cannot borrow at the bank.

The CHAIRMAN. They want the Government to go in partnership with them.

Mr. Marx. Not necessarily.

The CHAIRMAN. That is what it amounts to. That is what you do when you go in business with another man and supply part of the capital. It would be a corporation, a partnership,

Mr. Marx. If I am satisfied with the collateral and the investment? Then the loan would be safe.

The CHAIRMAN. I am not talking about what is safe. That would depend on each individual transaction, how the business got along, and what the conditions were. That would be a matter of judgment. I am just speaking of the nature of the business. The practical effect of the proposition is that the Government would go in partnership with these people in business.

Mr. Marx. As much as it has gone in business with the railroads and with other corporations.

Mr. KOPPLEMANN. Are any of these cases you have cited in danger of not being able to continue?

Mr. Marx. No; they are all going concerns. They have pulled through the depression and made money, but because of inadequate credit they cannot expand to take care of their expanding business, so far as real estate is concerned, and they need larger facilities in their real estate, but they cannot get the financing to do it.

Mr. KOPPLEMANN. If they could get the financing, will you tell this committee as well as you know conditions, whether or not it means employment of more people?

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Mr. MARX. In practically every case I feel satisfied that it would mean a tremendous employment of people. I was citing the trucking industry before, and I locate as many trucking companies in St. Louis and in the St. Louis area as any other one real-estate man, and I have been pretty actively in touch with all of them, and I have seen these men grow from a 1-truck industry to a fleet of 50 and 100 trucks. They just grow overnight, so to speak. It has been only in the past 4 or 5 years that this trucking industry has grown so rapidly. As I say, they locate in an old garage, or a stable or a barn, where they can back up to the door, and build a platform, a wooden platform, and unload their freight. They have grown now to proportions where they are taking a city block for terminals, but they could not get the means or get sufficient credit to build those terminals, and I know in every case they are employing additional men. Every time they build a larger terminal it means more men employed, additional drivers, and more women employed in the offices.

Mr. WILLIAMS. I notice in two or three cases you cited that they were prevented from obtaining a loan because there was already a loan on the property.

Mr. Marx. Yes.

Mr. WILLIAMS. You would not expect the Government to establish a loan and take a second mortgage?

Mr. Marx. No. I should think the Government would endeavor to assist them up to 80 percent of the total value of the property, and in no one of these cases would the loan exceed 80 percent of the value of the property.

Mr. WILLIAMS. Do you know any loan institutions in this country who would furnish loans up to 80 percent of the mortgage value of the property?

Mr. Marx. The Government is making 80 percent loans on residences, and on 2-family and 4-family flats, according to the F. H. A.

Mr. WILLIAMS. Loans?
Mr. MARX. Yes.
Mr. Williams. You mean under the Federal Housing Act.

Mr. Marx. They are supposed to make loans up to 80 percent of the total value of an improved building.

Mr. WILLIAMS. Do you not know that the Government is not making any of those loans at all?

Mr. Marx. That is through the Federal Housing Administration.

Mr. WILLIAMS. Do you not know that the Government is not making those loans?

Mr. Marx. The Government is guaranteeing part of those loans.

Mr. WILLIAMS. Guaranteeing part of them, but the loans are made by other financial institutions. That is a different proposition. Do you know of any other? You fall down on that illustration because the Government is not making those loans. Do you know of any one else that is loaning on the character of business you described here up to 80 percent

Mr. Marx. Along with it, while they want to borrow 80 percent of the total value of the ground and buildings they have additional assets which would help reduce the actual loan value down to prob

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ably 50 to 60 percent, with these additional assets, or maybe even less than that.

Mr. WILLIAMS. These examples that you have given are all cases in which the business men were going concerns but they want to branch out into some other form.

Mr. Marx. Yes. I can illustrate it this way. If they were to get an 80 percent loan and they agreed to amortize that loan one-tenth each year over a period of 10 years, including the taxes, interest, and pay off on the mortgage, in practically every case those payments will be less than rent, what they were paying in rent. So if their past experience showed that they could take care of a rent schedule of $200 or $300 a month, and they were enabled to buy a piece of property with the interest, pay off and taxes not exceeding that amount, it is reasonable to assume that they will satisfy their obligations.

Mr. WILLIAMS. You mentioned deeds of trust. Are there institutions doing that character of financing in St. Louis?

Mr. Marx. When they buy property they may have a trust and the man who has the property will take a deed of trust, but in a lot of cases it is impossible because it may be tied up in a trust estate or possibly the owners want to get their cash out of their real estate.

Mr. WILLIAMS. Is it sound business policy for the Government to go into it to the extent of 80 percent and leave 20 percent to the person to go on?

Mr. Marx. As long as it is a going concern and if their schedule of rents in the past was not in excess of what they were able to pay in reducing this loan, it just means there is no agency at present which will enable the small industries to get these long-time loans,

The CHAIRMAN. The small industry and the big industry, business big and small of all kinds, are in that way now?

Mr. MARX. Yes.

The CHAIRMAN. Do you think the Government ought to go in and attempt to resuscitate all kinds of business, revive all kinds of private endeavors and activities?

Mr. Marx. Previous to the time that I was in the real-estate business for myself, I was with a big mortgage company in St. Louis. I left them in 1927 as soon as I saw the market was getting a little bad. Prior to 1927 people would get financing on real estate and go to a mortgage-company house and have these mortgage bonds issued and the investing public bought them, but because of the tremendous casualties in defaulting of mortgages, I doubt seriously today if that practice can be resorted to again and I feel that the Government in some way will have to step in and help in the real estate financing in order to bring back normal conditions again.

The CHAIRMAN. Have you considered what the situation might be if the Government embarked upon these activities on a large scale over a number of years as to foreclosures and accumulations of properties that would naturally fall into the hands of the Government unless the Government foregoes its right to attempt to collect its holdings?

Mr. Marx. I feel that each case is taken on its own merits and if the Government were careful in making these loans that the casualties would be proportionately small.

The CHAIRMAN. Our experience shows that the casualties in this field of financing have been pretty large.

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