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at a very much greater expenditure of money than would have been necessary had not this property been condemned.

Mr. CAVICCHIA. Where are you located?
Mr. OSBAHR. Riverside in Newark on the Passaic River.

Mr. CAVICCHIA. They gave you a pretty good price when they condemned.

Mr. OSBAHR. Thirty-five thousand, when the people next door got a hundred and fifty.

Mr. CAVICCHIA. You did not have the right appraiser.

Mr. OSBAHR. No, Mr. Cavicchia, we did not. The company had to erect a certain type of building because of the loss of a section of the property, which necessitated piling and so forth under tanks and buildings, and it resulted in an investment of approximately $150,000 more than would have been necessary. Fortunately we were able to float a mortgage with one of the Jersey banks, but that mortgage or a balance on it becomes due on the 1st of January. In the meantime, due to the situation in the petroleum industry, with which probably you gentlemen are more or less familiar, continuous price wars and so forth, the company has not been able to operate at an over-all profit after depreciation. Before depreciation the company has shown a profit.

Up until the beginning of the depression we had a line at two banks totaling $75,000. At the time of the depression we had no outstanding obligations to the banks, and since then of course have been able to obtain no extension of line.

Mr. Cross. Just a question: What is the name of your company? Mr. OSBAHR. Northern New Jersey Oil Co.

Mr. Cross. You are not an affiliate or not one of the branches of the Gulf or Texas Oil?

Mr. OSBAHR. No; it is an independent company operating a chain of eight service stations and largely distributing fuel oil for industrial and domestic purposes.

Mr. KOPPLEMANN. With reference to Congressman Cross's question, if you were an affiliate of any of the big oil companies, you would not

Mr. OSBAHR. We would not be here.
Mr. KOPFLEMANN. You would not be asking for aid?

Mr. OSBAHR. Would not be here. That is the difficulty at the present time.

We are immediately concerned with the fact that of the original $160,000 mortgage we will owe $80,000 on January 1. It has been amortized at the rate of $1,000 a month and interest. That will be handled by the bank with difficulty. In addition to that, we have been doing business with the Standard Oil Co. for 5 years under most unfavorable purchasing circumstances. If we were able to finance through some means our obligation which has built up over 5 years as a result of competitive conditions in the industry, we would be in a position to go out and buy at prices which would enable the company to make a sufficient profit to retire its entire obligation in a period of about 5 years.

I have had one sample of the proof of that. We handle one grade of oil which runs into a tremendous quantity, approximately 25 million gallons, which could be bought, if we were able to buy elsewhere than our present source of supply, at an eighth of a cent a gallon less, which in round figures is approximately $30,000 a year on just one item. But being more or less mortgaged to the Standard Oil Co. on an obligation which has accrued over the past 5 years, we are in no position to go out and take advantage of our ability to buy, on the quantity that we handle, at an advantageous price.

Mr. Cross. Don't they block any loan you attempt to make, the Standard Oil Co.?

Mr. OSBAHR. In July 1934, we took up with the Reconstruction Finance Corporation and also the Federal Reserve bank the question of a loan. In the meantime, with the company operating at practically no profit for a period of 5 years and confining itself necessarily to automotive equipment and material for improvements, and so forth, its current financial position has gotten to about 1 current asset to 128 current liabilities, and the result is that in spite of the fact that the company has over $600,000 investment in service stations, real estate buildings, automotive equipment, tanks, and so forth, with an equity of approximately $400,000 of that, we are in no position to get from any banks a participation in any reconstruction or Federal Reserve loan.

And furthermore, while formal application was not made either to the R. F. C. or the Federal Reserve Bank, we were informed by the gentleman to whom we made the approach and submitted the preliminary figures that the condition of the company, that is, its current condition, would not warrant any loan on the part of the Government, because it was not alone, as these previous speakers stated, a workingcapital loan; it was a loan to take care of previously accumulated obligations.

Also we went to two of our banks, one of which we have done business with for 13 years.

The moral risk of the company is probably one of the most giltedged in the section. The company was originated by a resident of Montclair, who was a wealthy man before the depression, and the vice president of the company is also vice president of a large publishing company in New York. These two applications to our banks, one in Orange and one in Newark, were point-blank refused.

(Discussion off the record.)

Mr. OSBAHR. We feel that to attempt that form of refinancing would be very much more expensive. The banks in that district, as you know, Mr. Cavicchia, are bulging with money.!

Mr. CAVICCHIA. You have done business with the Savings and Investment?

Mr. OSBAHR. We have done business with them for 50 years, the company in Montclair. You have probably heard of them.

Mr. CAVICCHIA. How much do you owe the banks?

Mr. OSBAHR. We do not owe the banks a nickel-thank God for which.

(Discussion off the record.)

Mr. Cavicchia. The main reason why the R. F. C. turned you down was because you had not made a profit in the last 4 or 5 years.

(Further remarks off the record.) Mr. CAVICCHIA. I am glad to have this on the record, Mr. Chairman, because the R. F. C., as I understand it from the people who come to me, refuse to make loans to those concerns who have not made a profit in these years, no matter how good the security might be, and I wanted to emphasize that point.

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Mr. MEEKS. I wanted to add right here in the record also that cases of that kind have been called to my attention over in our country in Illinois. Where the concern cannot show a record of profit in the last 4 or 5 years, no matter what they have in the way of assets, they cannot secure loans.

Mr. Osbahn. For instance, Mr. Chairman, in 1934 an investigation will disclose that there was quite a serious price war in the gasoline market in New Jersey. After charging off in round figures approximately $26,000 depreciation, the company showed a loss of $14,000, In other words, it made an operating profit of $12,000. Now, that $12,000 was not, of course, enough to enable it to liquidate its previous obligation, because of the fact that we are paying $1,000 a month on the mortgage, plus interest, which in round figures is $1,500. We are in no position to pay off an obligation which we owe the Standard Oil Co.

Mr. CavicchiA. Where are you located now?
Mr. OSBAHR. At 369 to 407 Riverside Avenue in Newark.
Mr. Cavicchia. In the same neighborhood where you were before?

Mr. OsBAHR. Yes. They condemned 75 feet of our property for the new highway there, and it put us out into the river where we had to put everything on piles, also had to build a bulkhead and fill and all of that. “We cannot make loans to an oil company under those conditions,” is the answer of the bank, the R. F. C., and the Federal Reserve. They even want that property as security, but it could only be used to store oil or molasses or something else maybe before prohibition.

Mr. Cavicchia. The mortgage is paid down from $160,000 to $90,000?

Mr. OsBahr. It will be down to $90,000 on January 1st, when the balance is recast, but we are not concerned with that.

Mr. Cavicchia. And you want money for working capital; is that it?

Mr. OsBAHR. Well, if the Reconstruction Finance would classify for such we would probably qualify for such a loan, but on account of the fact that it would be necessary to pay off the mortgage and also to put ourselves in a substantial current position, it would then fall into the class of paying off past due obligations.

Mr. CAVICCHIA. How much did you ask for?
Mr. OSBAHR. We asked for $135,000.

Mr. Farley. Have you been, approached for the sale of your business?

Mr. OSBAHR. Oh, in the oil business there is always lots of people running around making offers, a lot of real-estate agents.

Mr. FARLEY. I thought you might be between the devil and the deep sea and maybe someone wanted to buy you.

Mr. Cavicchia. If you bought these millions of gallons of oil on which you would save something, you could have a good showing soon?

Mr. OSBAHR. One-eighth of a cent.

Mr. Cavicchia. And you would not have to store it yourself, would you?

Mr. OsBAHR. No.
Mr. Cavicchia. Would it be subject to your order?

Mr. OSBAHR. We very deliberately, so as to show the Standard Oil Co., who have been controlling our financial position, making it

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difficult for us to ever liquidate our obligation to them, bought from one broker at an eighth of a cent a gallon saving on this particular grade which we handle in very large volume. While they will not admit that it is possible, we have the evidence in invoice and everything.

Mr. Cavicchia. How recently did you have correspondence with the R. F. C.?

Mr. OSBAHR. Not since July 1934.

Mr. FORD. Did you ever come down to headquarters to try to get it?

Mr. OSBAHR. No; because, as I read the Reconstruction Finance Act, or whatever this Circular No. 13 is, it appeared to me that it would be rather useless to go over the head of the district office up there in New York. Mr. FORD. I think that is where you have made your mistake.

I Mr. Sisson. That is where you made your mistake. I don't know that you could get your loan, but there have been a great many loans that have been in the first instance turned down by the New York agent of the R. F. C. where the applicant has come afterwards perhaps informally down here and succeeded in getting the loan through. I happen to know of two or three personally, and I have heard of a great many more.

Mr. KOPPELMANN. I would like to ask just a few questions. How many employees have you?

Mr. OsBAHR. We have at the present time approximately 75.

Mr. KOPPELMANN. What difference will it make to you if you can secure the loan, in the matter of employment?

Mr. OSBAHR. That is peak. That was another reason why the Reconstruction Finance Corporation did not look on the application so favorably, because it did not provide any relief of unemployment; but the failure of the company would create further unemployment.

Mr. KOPPELMANN. One more question: What will happen to your company if you are unsuccessful in securing the loan?

Mr. OSBAHR. Well, we have worried along for 5 years, and I guess the only thing, if the Standard Oil Co. did not step in and take it over, we would just try to worry along for another 5.

Mr. KOPPLEMANN. Are there any possibilities of your being forced out of business if you do not get the money?

Mr. OSBAHR. That I could not say, Mr. Kopplemann, because that would impugn the intentions of the Standard Oil Co., whether or not it is an effort in the oil industry to absorb small independents like ourselves who have built up a tremendous business, through the methods that they pursue. I would not be prepared to say, but of course the business is a very valuable one. It results in a million dollars worth of business a year and approximately $800,000 a year purchases from the Standard Oil Co.

So that, no matter what happens, Standard Oil Co. would certainly absorb the thing. Whether or not it would be worth anything to them afterwards is another question.

Mr. KOPPLEMANN. Your purpose in coming here before this committee urging the enactment of this legislation is so that it will protect you against being driven out of business by people who are financially stronger than you?

Mr. OSBAHR. Exactly so.

Mr. CAVICCHIA. What I want to get on the record is, besides the $90,000 that you owe on this mortgage, what other liabilities have you?

Mr. OSBAHR. We owe Standard Oil Co. approximately $85,000. Whether or not it would be called a current liability or an accumulated liability would depend on the opinion of the person looking it over, because we have owed them that much practically continuously.

Mr. CavicchiA. If you had gotten that $135,000 from the R. F. C. to pay off the mortgage, you would now be in a satisfactory condition to do business independently?

Mr. OsBahr. And it would put us on a current basis with the Standard Oil Co., where we would be in a position to go out and invite quotations from their competitors.

The CHAIRMAN. All right, gentlemen.

Mr. Sisson. Just one question: If you were applying for a loan, how much would you apply for?

Mr. OSBAHR. $135,000 would put us on a current position. Mr. Sisson. And that $135,000 includes the $80,000 mortgage?

Mr. OSBAHR. Yes; and we owe Standard Oil Co. in all about $85,000. About $50,000 or $55,000 of that is past due.

Mr. Sisson. You have $85,000 to pay off to the Standard Oil Co.? Mr. OSBAHR. Yes.

Mr. Sisson. Have you made any effort to find out who holds this $80,000 mortgage?

Mr. OSBAHR. The Jersey City Title & Trust Co. in Jersey City.

Mr. Sisson. Then if you got a loan of say $85,000 and you could get the bank to would the bank subordinate its lien with the R. F. C.?

Mr. OSBAHR. I doubt whether the laws of the State of New Jersey would permit them to do that. I think they are in New Jersey a mortgage company or a bank. That is why we have had to apply for the full amount, so that we could liquidate the first mortgage obligation and then in turn obligate ourselves to the Government' on a strictly first-mortgage basis.

Mr. CAVICCHIA. How long would you want the loan for?
Mr. OSBAHR. Not over a period of 5 years.
Mr. CAVICCHIA. You could liquidate it in that time?
Mr. OSBAHR. Yes, amply.
The CHAIRMAN. All right. Thank you very much, gentlemen.

, . we will adjourn until 3 o'clock.

(Accordingly, at 12:25 p..m., a recess was taken until 3 p, m.)


(The recess having expired, the committee reconvened at 3:30 p. m., and proceeded further with the consideration of H. R. 5918, as follows:)

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Mr. BRAIDA. Mr. Chairman, I wish to submit to you the plight of a very large number of small businesses and industries, and in particular that of the baking industry, in the State of New York. The credit conditions in the last few years have become so difficult

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