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interest, but also the bond maker's interest. We realize that most of these situations, if the bondholder is going to work out on a basis that is at all to be adequate, he has got to do it by keeping his connection with the bond maker, the man who originally made the bonds, the poor fellow who is under the heavy debt structure and that cannot wiggle and manipulate and get any sort of credit. In many of those instances, these people are credit worthy. They are men of high character and integrity, of honor and honesty. They have had a long record of very wonderful achievement in their lines. They are just the best of our citizens. They could work it, if they had the means wherewith to navigate, and yet they cannot navigate.

Now, we feel- and I am now speaking from a standpoint more par ticularly of these bondholders, although I think we are sitting in the same boat with the bond maker-but these bondholders, widows and orphans, who have invested in these bonds upon the idea that they had a means of livelihood, just have a frozen asset that they cannot borrow on; and the maker cannot furnish any sort of a plan that will enable them to work out or get at all into a current position.

I would just like to state an instance or two that I think would illustrate, better than an abstract talk. The P. Bannon Pipe Co., a sewer pipe organization of Louisville, has been in existence there for over 83 years, and has been quite successful during all these years, furnishing sewer pipe to a territory there that would be included in a radius of perhaps a hundred miles around Louisville, or with a diameter of 200 miles, and perhaps more. Well, we represent 120 bondholders, now, made up of the type I have just described, some bonds

I , $100, $1,000, and $3,000 or $4,000, the largest amount held by any one bondholder, and the Bannon Pipe Co. went into bankruptcy.

Well, we did not want to sacrifice the property, and we went in and suggested to the court that he appoint or help to elect a trustee, although we could not vote for the trustee, but the general creditors did, and they elected a trustee, and the trustee then came to us and said, "You hold the bonds, and we would be guided by what you would say with respect to who is to operate this property.”. Well, we found a man we put in at $5,200 a year to operate the property. The first year, he just barely held his own, but paid his taxes, made enough to pay his taxes, and everything was splendid. In 1933,

he made $10,000. There are $102,000 of those bonds. This last year of 1934, he made $22,000 net in the operation of that property under trusteeship in bankruptcy, which was three and a half times the amount necessary to pay the interest on these bonds.

Now, there are people who feel like that is a good property, and it has shown its earning, and they would like to have it sold, and so there is pressure being brought to bear upon the referee in bankruptcy to insist upon a sale, and for over 6 months we have been out there practically every 2 weeks fighting and scrapping in every way possible to prevent a sale of that property, which would mean a practical wiping out of all of our bonds, except possibly 25 percent.

Now, the best offer we have been able to get is $75,000 for that plant that is earning $22,000 net, and that $75,000 includes a lot of current assets on which we have not any, lien in our bond issue; and after working it out, we would get, if that sale is put through, only 25 percent on a plant that had an appraisal of between $200,000 and

$300,000 when the bond issue was made upon it; and yet we are there without any means or method of working it out at all.

We have applied to the agencies which the Government has set up, for the purpose of trying to finance it. For a year and a half or more we have been before the Reconstruction Finance in Louisville, trying to get a loan. I made a trip here to Washington last November, and went over to Reconstruction Finance headquarters and talked with the men in charge there. Mr. Fisher has been to Washington here in this behalf, and we have been again in touch with them, and the requirements and the restrictions which they lay down are such that they just cannot be met under the particular circumstances of this bankruptcy situation, and yet this bill which is being considered by your committee is a bill which I believe, properly administered, with liberality, would mean that this whole situation could be worked out to the benefit of our city. This concern gives employment. It is a little seasonal work, but it gives employment to from 60 to 150 employees. It would be a benefit to the city, it would benefit these bondholders, and would benefit everybody concerned.

We have another situation, with respect to the Courtland Hotel, among these issues that I referred to. That was placed in receivership. It has been operated, with the result that, now, we finally after 34 years, have gotten some financing, but it is very inadequate. We have got to put the money right back into the building, which of course we are glad to do, and it will be another 5 years before any money whatever will be realized in the way of interest or part of the principal, to approximately 140 bondholders, little bondholders that hold $100,000-over $100,000 on that building.

We have the same situation with respect to a number of other properties. The specific ones, I could mention. I have this in mind, a client who came the other day—and I am not able to metnion this particular firm, for the reason that it is a confidential communication, and I would rather not embarrass him, but he is a man that has invested $30,000 cash in a grain business. They have a plant, a big elevator, that is appraised at $125,000. They at present have $30,000 first-mortgage lien on it, which is due. That lien is held by the receiver of this National Bank of Kentucky that I referred to a minute ago, that closed. Now, pressure is being brought to bear by the receiver, upon this company, to pay off that debt, and they are just under the heavy weight of that, as the sword of Damocles, practically, hanging over them, and they do not know what they do. They have sent men up to St. Louis, where our Fedral Reserve headquarters is for our district, and they have tried their best to get a loan. They have referred them back to the bank. The bank has said to this particular client of mine, who is a young man of 32 years of age, and who invested $30,000 cash in the enterprise--they say to him, and he has some little chance of getting a legacy from his grandmother in the future time. In fact, his grandmother has already made a will, and it is probated, and under that will he does get something in remainder. They are saying to him that he ought to guarantee, personally, this $30,000 debt.

Well, he is a young fellow, about to get married, and he just feels like, having invested $30,000 cash in an enterprise that has got a net value of as much as $200,000, that it certainly ought to be good for a $30,000 first-mortgage loan, and yet he cannot get any consideration, or has not, this time.

Now, I do not care to extend this, except just to say this, by way of conclusion, that I think the "forgotten man” is not the owner, because you have already set up the machinery to help him, and it has been splendidly administered Oh, there may have been a few

. exceptions, perhaps, but it has done a splendid work in our particular community. You set up the Farm Loan, and that has helped. Now, this particular realm represents a gap which has not yet been filled, and it does seem to me that in fairness to bondholders--and I appear here primarily for them, but also for the bondmaker, secondarilyand I feel like our destiny is linked with him; that some method that liberality in the way of appraisal, some method of higher percentage than 50 percent in the way of a loan, is absolutely essential, in order that you do not kill the spirit of these men, who are the bone and sinew and the real asset of America. I realize that the money, in gold and silver that we have in our vaults, and all the other material wealth that we tabulate, is of great value, but the biggest asset of America to day are its boys and its girls coming on, and these men and these women in middle life, the man that I think I feel the greatest sympathy for is the young fellow that has started out about 8 or 10 years ago, and who got out on a limb, who was heading a business, and who has got real character and real ability and the factors that entitle him to credit, and they are the most important of the factors, after all; and yet he cannot get a thing unless he can lay down a certificate or a thing, and become a pawn broker; and even then he cannot get anything on his real estate.

Of course, there are certain securities that he can take and borrow on, and you have plenty of facilities and machinery to lend on them, but when it comes to that big asset, we do not want to kill these young men, many of whom I have had men to come to my office sometimes, several—who have just said to me, “Well, I walked and paced the floor.” One, not long ago, said, “Why, Mr. Johnson, I might just as well commit suicide. I might just as well jump from this window, leaving $60,000 in a policy on my life. My wife would get it. Now, what in the world can I offer? No mortgage companies are making loans. No banks are loaning any money on long-term loans”; yet there is a man of character and integrity,

with a long record of achievement. People believe he is honest. He is straight. He has got real estate that is static. Suppose it is not in esse, producing income. One of these rigid requirements that these present agencies are requiring is that property should at the moment bring income.

Well, anything that is able to bring in income at the moment would probably not need a loan, but the business is sick. Business, at the moment, is more or less needing hospitalization. They need some nursing. They need some nurture. They need a little care. They need a little friendly interest. They need somebody who will .not say, "Well, things are so rigid you will have to come and do all this and do all that.” We rather feel that somebody and some agency should say to them, "Well, now, here you have got a wonderful record here, you have had a record of achievement during the years, you have made money, you have got a good business, you got good character, you have got brains, you have got integrity. We would like to lend you something. You have got a good asset here and we will lend you 80 percent of your asset," and some little liberality like that, gentlemen of the committee, will put heart in folks.

Now, we represent, we are a big Anglo-Saxon body of folks down in our section. You remember the Anglo-Saxons came over into Virginia and crossed into Tennessee and into Kentucky, and we are thoroughly Americanized. We have very little of what you might term a foreign population. We are a wonderful body of people, and we will stand everything; and I think the marvel is that our people have stood, with their abiding faith and hope, all of this time, in this depression. I think there is a branch, there, that has been overlooked, and I think your committee has a marvelous opportunity to include them in the help and the succor that you have already extended some other branches.

I thank you very much for giving me this little opportunity to have appeared here, as I have done voluntarily, to present this little plea for the benefit of these bondholders and bond makers, who are sitting in the same boat, and are in practically the same plight.

The CHAIRMAN. We thank you very much. Mr. KOPPLEMANN. Mr. Fred A. Berlin, secretary National Board of Trade.



OF TRADE Mr. BERLIN. We are located in Washington, an organization of independent merchants throughout the United States, and the civic bodies in the smaller commurities up to 10,000.

Mr. KOPPLEMANN. Would you care to state, Mr. Berlin, how many organizations you represent, and how many people?

Mr. BERLIN. There are 1,700 organizations, different trade bodies, in towns of less than 10,000, representing a total membership of about 500,000 independent merchants. Our constitution provides that we cannot take in a bank, chain store, or public utility, consequently we are free to say what we please on constructive banking legislation.

The National Board of Trade goes on record as in favor of this bill, endorsing it 100 percent. There are many good features about the bill. Had this bill been in effect during the last banking crisis, there is one section, there, that would have been very beneficial, and there would have been probably a different story; that is, that a bank could rediscount their own time paper, and had this bill been in effect at that time, in 1933, a great many of our financial institutions would not have gone under.

The independent merchant-as we know, the farmer comes first. He is the backbone of the Nation, and next to him is the independent merchant; that is, in my opinion. I may stand corrected on that. The independent merchant is always a credit to his community. He tries to educate his family. He usually owns real estate, and he owns, throughout the United States, nearly 3,000,000 automotive vehicles; that is, trucks and automobiles. The annual upkeep of those is over $300,000,000 annually.

Now, let us take the chain stores. We hear much about the chain stores. Somebody will say, “Why, they employ a million people, the chain stores here in the United States." That is true, but the


independent merchants employ nearly 6 million people, and they pay 25 percent more in wages than the chain stores. That is given here in one of our Federal Trade Commission documents.

Mr. KOPPLEMANN. According to information you have, the independent merchant pays a rate 25 percent higher than the chain stores?

Mr. BERLIN. Yes, sir. That is taken from the Federal Trade Commission Document No. 82. The title of that is “Chain Store Wages.". The table is found on page 19. That is an official document of the Federal Trade Commission, and these other figures that I gave you are all compiled from the Bureau of the Census, and the Department of Commerce.

As I can see it, this is a very safe bill, so far as Government funds are concerned, for this reason, that you will have a large number of small loans. During the last financial crisis, and all of the subsequent panics or "hard times” that we have had, the building and loan associations have come through better than any other institutions. There were a few failures this last time, and they were very small and insignificant.

Although a bank shies very much, most of them will not loan on a home, because they say it is not income producing, the building and loan associations for the most part make loans which are limited to the home owner, which, by the way, is the very foundation of the Nation.

As near as I can see, from careful analysis, the reason that the building and loan associations have weathered all the storms and are so sound, is because they do not get too many eggs in one basket. They have that large number of small loans.

Now, this bill creates the same thing in relation to industry. It is true you are going to have some bad loans, and the Reconstruction Finance Corporation, when the history of it is written, Mr. Dawes' $90,000,000 that he borrowed, there, and the Missouri Pacific, will not be the only loans that are defaulted, but in this bill you will have some; but under the law of averages, as I can see it, it is going to come out like the building and loan association-it is going to come out on

Now, let us take the poor, independent, retail merchants. Of course, we have manufacturers and wholesalers, and quite everyone connected with the independent distribution of goods. We also have some farm organizations. If he could get $5,000 to, say, $25,000, and that is about the average loan that a retailer would want-in many cases, $2,500. He has plenty of equipment and fixtures, and generally owns his own building. He has ample collateral, from the standpoint of banking as we used to know it a few years ago—well, say, 25 years ago, but not banking as we know it today. He would immediately replace some of his obsolete equipment. He would probably buy himself a new truck, trade in his old one. He would maybe put a new front on his building. He would make many improvements, creating labor. He would probably put on another employee or two, because his business would expand, if he could get the proper loan, and could do advertising and other things that he needs.

As I can see this bill and the whole financial situation, if the durable goods—that is, the heavy industries—are ever brought up, that is what you gentlemen and Congress in general have been fighting

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