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that practically no small employer is able to secure any credit of any amount.

During the past 5 or 6 years, I have been particularly active with the baking industry, but the same thing applies to many other of the industries, where the employers have businesses which range between $20,000 and $100,000 capitalization. It has become apparent that people who used to be able to secure from banks sufficient credit, either for seasonal purposes or for carry-over conditions, are now absolutely unable, in spite of the fact that these business people have been in their own business for 10 or 20 years, to do so, although they are honest, well known, and have a balance-sheet condition which is not bad.

As to the baking industry, I wish to point out to you that it is an industry with a prevalence of small people, in the State of New York there being 4,500 employers. These people have in the past 5 years

5 suffered tremendously from the depression. The baking industry has a product which is very perishable. It is near to the consumer. The price of the product is usually affected by the condition and purchasing power of the individual consumer, and cannot command sufficient to meet all the conditions as they change.

In the past few years, first with the decreasing purchasing power of the individuals, and then with the increasing costs of the products, the bakers have depleted their circulating capital, and now they find that whenever they turn around for additional assistance they are unable to obtain either credit from friends or from banks. The condition is so serious that unless something is done along the lines of the bill which is before you now, most of these employers will go out of business, with consequent serious loss to the economy of the country.

I wish to point out specially the particular effect which this has. Small employers employ skilled laborers, who are well paid. The rate of payment in these industries is from 65 cents to $1.50 per hour, for skilled labor. When these small employers are wiped out by conditions as adverse as they are now, they are replaced by the mechanized industry, which uses one man out of every four to ten in the handcraft divisions. In other words, the fact that credit is denied to the small units is a contribution to the centralization of production and the control of commerce. In other words, also, it means that these people who have been for years independent operators, who have been sympathetic to the public, who have worked with the public, worked with their own employees, are driven out of a trade for which they have spent practically their whole life in the open market, and to no benefit at all. If credit were extended to these people, this money would be flowing right back into employment, and would be more beneficial than the relief money.

Relief money is given to people who cannot appreciate it. Money lent to business men of this type goes right back into the heavy industries. The bakers, for instance, very few of them have been able to replace any of their machinery or their equipment in the past 6 or 7 years. They need plenty of things, which they would be buying. These funds would go, then, into the heavy industries which in turn would reemploy people.

The stock whích is carried over by this industry is very small at this time, and the facilities granted to them would permit them to increase their stocks, and therefore to help the market for agricultural production.

We must not forget that these employers also have people who are well paid, and who have families, who are keeping the country together better than the heavy industry and then the industries which employ mechanized methods of production.

I will be glad to supply other information to you, Mr. Chairman, if you wish to ask any questions.

Mr. CAVICCHIA. You mentioned, a little while ago, that a lot of these small bakers would go out of business, and that that business goes to the larger concerns.

Mr. BRAIDA. Yes, sir.

Mr. Cavicchia. And that tends to centralize the baking into a few hands. Does any good accrue to the consuming public by centralizing the baking business into a few hands?

Mr. BRAIDA. There may be room for difference of opinion.

Mr. Cavicchia. Well, I am asking you. I do not know. I am asking you whether it does.

Mr. BRAIDA. Yes, sir. The fact is today that those people who have the highest labor costs are selling at the lowest price.

Mr. KOPPLEMANN. Therefore, the consuming public benefits?

Mr. BRAIDA. The consuming public has the benefit, and it is having it in two ways.

Mr. KOPPLEMANN. At the present time?
Mr. BRAIDA. At the present time.

The HAIRMAN. Well, the centralization of those operations inevitably tends toward monopoly, does it not

Mr. BRAIDA. Yes, sir.

Mr. KOPPLEMANN. What you are arguing for, as the representative of the small bankers, is just what, Mr. Braida?

Mr. BRAIDA. That the Congress should consider extending facilities to the small industry, which is now hampered in its development of its small industries, over such a large part of the country,

and are so important to the economy of the United States, that they should not be ignored. At this time they are suffering tremendously, and you will find an expression of their demand in trade magazines.

For instance, here is one that I would like to submit which mentions credit for small industries, and is the voice of one of the divisions of the baking industry, representing those handcraft shops that use the old method of oven baking.

There is one, here, representing the Jewish bakers' voice, also mentioning the dire needs of that group. This division employs people who are paid $75 a week for 48 hours. Their assistants are paid $72, and their third man, the helper, is paid $68, under contracts to last 2 years. These people find that without circulating capital added to them, they are absolutely unable to stay in business.

Mr. CavicchIA. What kind of work do they do?
Mr. BRAIDA. Baking.
Mr. Cavicchia. I know, but what particular kind?

Mr. BRAIDA. Pumpernickle, rye bread. That is the particular division.

Mr. SPENCE. What do you call the small industry? What is the line of demarcation between the small industry and the large industry?

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Mr. BRAIDA. Under the present circumstances I would regard a small industry as one employing from 5 to 100 men, and having a capitalization of their own of from $20,000 to $100,000.

Mr. KOPPLEMANN. How many of these do you represent?

Mr. BRAIDA. In the State of New York, there are 4,500 bakers, of all sorts and types.

Mr. KOPPLEMANN. How many employees do they have?

Mr. BRAIDA. They have 25,000 employees, according to information contained from the Census Bureau of the United States.

Mr. KOPPLEMANN. How many of these do you estimate are in need of financial aid?

Mr. BRAIDA. I would say 25 percent of these 4,500 would welcome funds over an extension of a few years, for the purpose of remodeling their shops and their plants, and putting in new machines; that is, the ordinary machines which are used by the handcraft operators, which are mixers, sifters, and flour storage, and increase their stock of flour, which is now down to the minimum. They are living from hand to mouth.

Mr. KOPPLEMANN. In other words, you testify that the providing of them with money or financial assistance would increase the velocity of business?

Mr. BRAIDA. Yes, sir. This is our view, and this view has been discussed at innumerable meetings, that the funds which would be lent on a long-term loan basis to the industry of this type, would fly right back into the basic industries of the country, in two ways-by increasing the stock of the agricultural products, which are carried in stock, usually; secondly, by creating a demand for heavy goods, thus benefiting an industry which is backward at this time. They need these funds to renovate their plants.

Mr. CAVICCHIA. A lot of these small bakers are in the line entirely different from these big bakeries, are they not?

Mr. BRAIDA. Yes, sir.

Mr. CavicchiA. And their necessities are in the neighborhoods in which they operate?

Mr. BRAIDA. Yes, sir.

Mr. CAVICCHIA. And if they go out of business these big bakeries cannot supply their needs?

Mr. BRAIDA. That is right, sir. That is why they are called "specialty bakers" and "retail bakers."

Mr. Cavicchia. I had in mind the Jewish bakers, the Italian bakers, the Portuguese, and so on, who operate in their own particular locality, and make the kind of bread that other bakers do not make.

Mr. BRAIDA. The economic value of their contribution is that they are employing a highly skilled type of labor, that is well paid, much better paid than those who work in the mechanized plants.

Mr. KOPPLEMANN. From your knowledge of these bakers, whom you represent, can you say to this committee, and for the record, what effect financial aid to them would have on the question of employment and unemployment?

Mr. Braida. The question of employment today: it would stabliize conditions as they are now. Skilled laborers are not very abundant. They will be retained on their job if the employers have the demand. Increased employment would come, because of the actual demand for

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products coming from these people for other industrial products, such as machines. I mean those things they need for renovation. On the other hand, if they are wiped out of business, for every 4 men that they let go, probably only 1 out of every 25 would return as an employee of a large unit; a mechanized unit.

Mr. SPENCE. Do those small bakers sell direct to the consumers?

Mr. BRAIDA. Some of them. Some of them sell to the retail trade, and the majority of that product is distributed to restaurants which use specialty products.

Mr. SPENCE. What is the financial condition, now, of most of them? Are they heavily involved, or not?

Mr. BRAIDA. Well, the financial condition of the bakers has never been very prosperous, but at this time they find that they cannot carry any stock, and this results in a constant pressure for lower wages, friction with employes and with unions.

Unionization has proceeded to about 60 percent, within these specialties and the retail divisions. The other 40 percent which is still free from unionization is using its freedom to oppress the wages. We have a very vicious circle of things. Those who are well organized need the help most, because they have met the circumstances at all times. The others can afford to stay in business by oppressing the labor which they employ: Helping those who are well organized means to keep the standard of living, by avoiding this oppression.

Mr. SPENCE. What is the character of security they could offer? They could offer the plant?

Mr. BRAIDA. Most of them can offer

Mr. SPENCE. That can be used only for that particular purpose; is not that true?

Mr. BRAIDA. Yes, sir; but most of them can offer a little more than that. Practically all of them own a little house, or sufficient cosecurity. These people would not be borrowing a large amount of money. They would not be borrowing more than from $5,000 to $25,000, and naturally they are not good prospects for the banks, now, yet a good many of them had a line of credit before.

The CHAIRMAN. All right. Thank you very much. Our next witness will be Mr. Henry M. Johnson, of the Louisville Trust Building, Louisville, Ky. We will be very glad to have you discuss this legislation.

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STATEMENT OF HENRY M. JOHNSON, LOUISVILLE, KY. Mr. Johnson. May it please you gentlemen of the committee, I do not know very much technically about this bill. Of course, I have read it and scrutinized it from the standpoint of a lawyer, but I did seek the opportunity, of my own volition, to come here and express a plight which confronts a great body of people in our community. I am not sent here by anybody, but am here altogether because I felt that I might be able to render a public service to my own community in coming

In order that you may understand the atmosphere out of which I come, I might make this statement. I practiced law for 36 years. We are not bragging about this particular thing that I am mentioning, but the biggest national bank that ever closed its doors was the National Bank of Kentucky, in our city, about 4 years ago. It

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pulled down with it two other institutions-in fact, three, including a colored bank. You can appreciate what that meant, when this was the largest bank south of the Ohio River.

Most of our small industries in Louisville--and, by the way, we have a very large diversified bit of industry; we have a large tobacco interest, that is made up mostly of large corporations, widely and nationally held, whose stock is on the big boards. They have plenty of finances. Since prohibition has gone out, our distilleries have come back, and those institutions are ably financed, mostly out of Louisville; but our small industry, that constitutes a very large part of our industrial life, was very badly hit by the closing of the Bank of Kentucky and these other banks. They had been depending in large measure upon bond issues on their real estate bieng carried by title companies and mortgage companies. They had, of course, quite substantial capital in their business, for operating purposes, and then their current needs were largely met by the banking facilities of Louisville.

When this banking structure more or less collapsed, by the closing of these institutions, these little industries were pushed back into a situation where they nad no adequate financing. They were not able to keep up their mortgages and their interest, and the result is that they have gone into default.

A number of us—I happen to be on the committee of two of the big institutions that reorganized two of them; that is, the Louisville Trust Co. and the Louisville Title Co., which was a mortgage company, I might state that that was another bit of public service where we all served without pay, just for the purpose of the general weal.

There was another mortgage company called the “Consolidated Realty Co.”, that went into trouble and into bankruptcy, and they were sponsors and guarantors of bonds of about 70 different issues. One of the courts appointed me and my associate, Mr. Thomas C, Fisher, as attorney for the receiver of these equitable liens, so it became our duty to try to work out solutions of these 80 issues that I have just referred to.

A great many of them were homes. We were able to work out quite satisfactorily the homes situations, through the Home Owners Loan. Quite a number of them were farms, and some of these farms have been worked out through the Farm Loan machinery. Quite a number of them were small industries and apartment houses, and right there is a realm where we have not been able to turn a peg in the way of getting any sort of financial help, in spite of the fact that these apartment houses—I will first refer to, are good substantial buildings, adequately built for the purpose for which they are to be used, and are kept up in good shape. In nearly every instance, we have had to have receivers for the physical properties, in order to keep them up; - and yet these bondholders, sometimes 100 bondholders in one issue, made up of widows and orphans, that have not any means at all of realizing a thing on their bonds, and yet the property lying there, may be of great value, and no means or method of financing, either to the owner or to the holders of the bonds.

That is true of a number of industrial enterprises that were included in these series of bonds I just referred to.

Now, my experience, therefore, has been that in order to be faithful to our trust, we should not be merely mindful of the bondholders'

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