bear in mind in passing upon the desirability of this proposed legislation.

The credit facilities provided for in this bill should result in an upsurge of business activity. On the long-run basis these new credit facilities will bring about a greatly expanded economy. Approximately 26 percent of all new business enterprises undertaken annually are unable to survive for even as long as a year. All of these failures, of course, cannot be attributed to a lack of financial assistance. However, a fair proportion of them can be, and a large proportion of these failures can be directly attributed to a lack of management aids and technological knowledge which this bill also attempts to remedy. This bill would prevent many of these failures, and every single business enterprises that is saved is a net gain to the over-all prosperity and security of the United States.

Mr. Chairman, I do not want this committee to understand that I am in favor of providing credit to every Tom, Dick, and Harry. I am firmly opposed to aiding inefficient and fly-by-night businesses. This bill, it seems to me, will assist sound and efficient small-business concerns which at an emergency or crisis, need money and cannot get it. That is one of the things that I had in mind when I introduced this legislation.

The CHAIRMAN. As I understand the bill, and as the Senator understands it, it is a bill to help private industry and to help private business; that is, to help legitimate small business.

Senator LUCAS. That is correct.

The CHAIRMAN. They have to put up collateral and borrow the money, and to the extent of an RFC loan the amortization would be from 10 to 15 years. A capital bank would be set up by private banks through the Federal Reserve.

Senator LUCAS. It should be a boon to private banks.
The CHAIRMAN. Yes.

Senator LUCAS. The statistics contained in a recent committee print of the Joint Committee on the Economic Report reveal these extremely important economic facts. Ten percent of our total business enterprises go out of business every year. The number of discontinuances among new and established businesses during a single year are just about equal to the number of new business enterprises started during the same year.

An examination of these facts leads to this conclusion: If we can succeed by this legislation and through other governmental policies in reducing the number of business discontinuances by 50 percent, we can double the total number of business enterprises in the United States within a period of 20 years.

This is not only a worth-while goal; this is a necessary goal. Our population has doubled within the last 50 years and will continue to grow. Our business activity must keep pace. The business activity in the United States reached a high level during the war years, and it has continued at a high level in the years since the war. We are enjoying in America today an unprecedented prosperity, and there is no reason to assume at any time in the foreseeable future that there will be any slackening of business activity. However, on a long-range basis, steps must be taken to assure the continuation of our present high level employment and business activity. Published statistics of

the Department of Labor present the fact that the labor force in America, the men and women able and willing to work, is constantly growing. It becomes larger each year. This economic fact means one. thing: Business activity in the United States must also constantly and steadily expand.

I believe it is fair to say that we must look primarily to small-independent business as our main source of new business activity in the United States. Our large business corporations will continue to contribute to business activity and expansion, but the main source of business development is the hundreds of thousands of new enterprises which are undertaken each year and the millions of other small enterprises which can be expanded on a sound economic basis if we can succeed in creating a climate conductive to the growth and continuing vitality of small independent enterprises. This bill goes a long way toward creating this climate.

Mr. Chairman, under no circumstances can we afford to permit the small-independent-business man to get out of business. Under no circumstances can we afford to permit large business organization to absorb our small-business enterprises and in the end destroy small business as an institution. In my opinion, these small-independent businesses at every crossroads throughout America are the backbone of our country.

The CHAIRMAN. I want to say this, if the Senator will permit: I thoroughly agree with him that small business is the backbone of the country. I want to say that I presume that it is his intention, as it is my intention, certainly that the banks could do more for small business. Some banks have done a great deal. I was amazed to discover what the Bank of America in California was doing for smallbusiness interests in that State in the amount of loans they were making. I was also delighted to learn what the Chase Bank has done. I want to pay my respects, as chairman of this committee, and to congratulate them on how far they have moved forward toward small business. But some of the banks have not. The idea of this bill is to help the banks to move forward, as these two banks have done and as others have moved forward. I think that that is the soundest attitude to take: that private bankers can, through the sections of this bill, really aid small business. Through the 90-percent guaranty, they can really aid small business.

Senator BENTON. I would just like to point out to the senior Senator from Illinois that I very much like his addition of the word "independent" in the phrase he has just used, when he referred to small "independent" business, because to me the addition of the word "independent" enlarges the size of the businesses that are included in the word "small." I wondered if you would agree that the addition of the word "independent" enlarges the size of the business you are talking about. When you use the word "small," field by field, it would vary. But when you throw in the word "independent" it embraces businesses that may seem large in relationship to the mass of our small businesses throughout the country, but which are, in effect, small in their particular industries. This would be particularly true in a highly industrialized State like I'inois or my State of Connecticut.

Senator LUCAS. Yes; I agree with the Senator.

Senator BENTON. I think, Mr. Chairman, I would like to see the word "independent" used wherever we use the word "small" in our

discussions. I would like to adopt the Senator from Illinois's phrase and adopt it as a permanent addition to our vocabulary, referring to small independent business, instead of merely to small business. I think it is a better phase, a more exact phrase, and more nearly describes what we are talking about.

The CHAIRMAN. I thank the Senator from Connecticut for that suggestion, but in the Banking and Currency Committee we all use that word.

I want to say, further, that the Senator has referred to hearings before the Joint Committee on the Economic Report, various hearings on small business, and so forth. In my judgment, all of these hearings that have been held by the Joint Committee and the Banking and Currency Committee and by the Small Business Committee, with the aid of our good friends of the press, have brought the attention throughout the country to a situation that they are independent smallbusiness firms, and in my judgment the hearings have been greatly helped by the publicity that we have so generously received from the various newspapers and the press. I think it has had a lot to do toward a little better situation, although it is not by any means perfect, as far as the small independent-business man is concerned today. This is true also in connection with certain of the banks that have gone all the way out, like the Bank of America and the Chase Bank, and some others.

Senator BENTON. I think your efforts have even affected the banks, Mr. Chairman. I pay you higher tribute. It has not only affected the press, but the banks, and that is even a higher compliment to you and your committee.

The CHAIRMAN. The press has been very generous. I must say our desire is to have the banks throughout the United States cooperate in this thing through this bill.

Go ahead, Senator, I am sorry.

Senator LUCAS. Mr. Chairman, it has never been more necessary. than now that we have a sound and expanding system of competitive free enterprise in America. Because of the international obligations that face us as a nation, the financial burden on our Government is heavier today than it has ever been during peacetime. These heavy burdens make it absolutely necessary that we have a healthy and stable business economy. The financial resources of our Government are directly dependent upon the total national income of our people. This bill, with the salutary effects it will have on business activ vital place in our over-all national policy.

Several distinct methods of assisting small business are this bill. You will no doubt receive abundant testimony these aspects. I shall confine my remaining remarks to the lar points: The provisions dealing with the lending po RFC, and the provisions relating to technological assistan business. As the distinguished members of your comm I introduced S. 2947 on January 30 of this year which is identical with the RFC provisions in the bill before you. Also on March 14 I made an extended statement on ' the Senate on the subject of technological aids for sm At that time I prepared an amendment to S. 2947 whicl. dealt with the technological problems of small busines

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held this amendment, however, in view of the fact that I, along with other Senators, had decided to introduce the present bill which makes adequate provision for meeting the technological problems of small business.

Title III of the bill you are considering authorizes the RFC to participate with private lending institutions in making loans to small business. The RFC's participation, if on a deferred basis, operates for all practical purposes as a Government guaranty of a private loan. The private lending institution in making a loan to a smallbusiness firm would have the right to call upon the RFC at a later date to take off its hands a portion of the loan equal to the RFC's percentage of participation. Section 304 of this title limits the amount of participation by the RFC to 80 percent.

Parenthetically speaking, Mr. Chairman, there is a movement in this country to wind up the RFC. So far as the Senator from Illinois is concerned, he does not believe that that would be a sound policy or would benefit the economic affairs of this Nation. I am confident the RFC has a place in the Government, and any attempt to dissolve the RFC would meet with my resistance.

The CHAIRMAN. I want to thoroughly agree with the Senator from Illinois and the majority leader, that I think it would be nothing short of a tragedy to do away with the RFC. It has its place in the Government, just as the other private institutions have. When we were in trouble, and we may well be in trouble again some day, it was the RFC that helped so many of the private banks who now want to do away with it.

Senator LUCAS. They helped our banks in 1932. They were the first fellows to come here for help.

Let me emphasize at this point that, under the terms of this bill, assistance from the RFC would be available only as a last resort. Section 302 specifically provides that no financial assistance shall be extended by the RFC unless the aid applied for is not available on reasonable terms from any other source including the national investment companies to be established under this bill. Another point I wish to emphasize again is that, even when recourse is made to the RFC, the loan by all probability will be made by a private lending institution with the RFC standing behind a certain percentage of it.

A very important feature of title III is that provision which permits financial assistance to be given small business enterprises with emphasis upon management abilities and potential earnings rather than upon collateral security.

I do not believe that we should be the least hesitant in adopting this approach in aiding small business. I am confident that loans can be made to small business enterprises with primary emphasis being given to management skills and potential earnings without appreciably increasing the risk of loss.

At this point, I should like to make it clear that this bill does not contemplate that collateral security will be dispensed with entirely. My purpose in originally proposing this method in S. 2947 was merely to take the primary emphasis from collateral security and place it on other criteria which, I think, in the long run are far more accurate measurements of the ability of the small-business man to meet his financial obligations than is collateral security.

The traditional practice of placing the greatest emphasis upon collateral security may be open to some questioning. The usual form of collateral is unencumbered physical assets of a business. These may be practically worthless if the business is inefficiently operated or has no economic justification. I recognize that any lending institution, private or public, must consider the factors of potential earnings and management skills when it makes a loan; that is not new. The trouble, however, under existing practices is that many requests for worthwhile loans are turned down because of the lack of collateral security even before the lending institution gets around to considering the factors of potential earnings and management ability. It is this fact which I am attempting to change.

Title III of this bill also allows the RFC to extend loans over a period of 15 years. As I earlier emphasized, longer maturities are very essential. The President in his state of the union message and in his message on small business made this recommendation. The Committee: for Economic Development, from which I quoted earlier, a private research organization, has stated:

One of the fundamental needs of small and medium-size business is more longterm credit (P. 30, Meeting the Special Problems of Small Business, June 19, 1947, Committee for Economic Development).

I have received numerous letters from businessmen all over the United States who have complained of the inability to obtain adequate long-term credit. These longer maturities meet one of the most pressing needs of small business.

The question very properly arises whether or not it is necessary to liberalize the lending facilities of the RFC in the interest of small business in view of the other provisions in this bill intended to ease the flow of capital to small enterprises. In my opinion these RFC provisions are very necessary. The insurance provisions of this bill are not intended to provide any substantial amount of capital to small business on a long-term basis. The amount of loans to any concern is limited to $25,000 and the duration of these loans is limited to 5 years. The national investment companies to be set up under this bill are intended to make long-term capital in substantial amounts available to small enterprises. If these national investment companies function. as successfully as we expect they will, there should be very few occasions when small business enterprises will turn to the RFC for assistance.

There is one distinct fact, however, which, in my opinion, justifies broadening the authority of the RFC. That fact is this: The national investment companies are, for all practical purposes, private lending companies. Most of their capital stock will be owned privately. The debentures of these companies will be marketed privately and in competition with the debentures of other private business concerns. If these investment companies are to succeed they must have earnings sufficiently high to attract private capital. It is my personal view that they will, as I believe the present loan requirements encountered by small-business firms can be substantially relaxed with the lending institutions still able to maintain a fair earnings record.

However, the fact is that the proposed national investment companies and private lending institutions will for competitive reasons, require a larger profit on their investments than is required by the