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Mr. RHODES. That increase, Mr. Wigglesworth, is due to the fact that within the last year we have established and extended a stenographic pool in order to cut down so many individual stenographers, and that has more than doubled the stenographic pool. That is not wholly the duties of the secretary; it includes mail and messenger service, telephone service, and the stenographic pool.

DIVISION OF RESEARCH AND STATISTICS PERSONNEL

Mr. WIGGLESWORTH. You have another small increase in your research and statistics.

Mr. Fahey. Yes.

Mr. WIGGLESWORTH. You have got 61 now, and you want an increase. Why cannot that be cut down?

Mr. FaHEY. The fact of the matter is that the Board and the executives of its three agencies are continually confronted with the need for improved informational facilities in order to get better operating results.

Mr. CATLETT. I think those are almost entirely replacements, are they not, Mr. Rhodes?

Mr. RHODES. Yes, sir; entirely. Mr. WIGGLESWORTH. What do you mean by "replacements”? They are additional positions as compared with 1942, are they not?

Mr. CATLETT. They are not filled at present.

Mr. RHODES. Here is what we are up against to a certain extent. Research and Statistics is dividing its operations between here and New York, and we have to maintain a department here and also in New York, and that naturally is going to cause some little addition to that overhead expense.

QUESTION OF LIQUIDATION OF THE H. 0. L, C.

Mr. WigglESWORTH. When are we going to be able to liquidate?

Mr. Fahey. What do you mean by “liquidate"? Do you mean, to wind up the corporation as a whole?

Mr. WIGGLESWORTH. Yes.

Mr. Fahey. You cannot wind up the corporation as a whole until practically all these loans are in such shape that private institutions would be willing to take them off our hands, all at once.

Mr. WIGGLES WORTH. When will that be?

Mr. Fahey. Of course it will not be until they are in better shape than they are today.

Mr. DIRKSEN. Is that true of all the loans, Mr. Fahey?

Mr. Fahey. Well, your difficulty is that, if the Corporation were to sell off all its prime loans, it would then be left with the losing and nonproductive assets, and with the heavy servicing expense that these more dubious assets would entail. With its better loans transferred, the Corporation, while retaining the losses and the burden of servicing expense, would be minus the income, that it would otherwise have, to set off against them. The loss it would suffer would be tremendous.

Mr. Fitzpatrick. The loss would be much greater if you sold the prime loans?

Mr. FaHEY. Oh, tremendously.

Mr. FITZPATRICK. They would be turned back to the banks who wanted the Government to come to their rescue, when this organization took over all those bad loans? Now the idea is, when they are in good condition, they would like them turned back, letting you hold the bag and letting you lose more on the bad loans?

Mr. Fahey. If you could get these loans into 100 percent condition, then that would be a different matter.

Mr. FITZPATRICK. Oh, certainly.

Mr. Fahey. But, of course, private institutions do not want to take the doubtful loans or those that are expensive to service. Now, steadily these loans have been getting into better shape.

They are now in a condition where less than 10 percent of them are delinquent by 90 days or more. In other words, orer 90 percent of these loans are current, or less than 90 days delinquent. Approximately 230,000 of them, however, are loans extended under the provisions of the Mead-Barry Act. These, for example, are loans that private institutions would hardly care to take over. If, on the other hand, the Corporation were to sell off all its good loans, there is the loss of income it would suffer, and the resultant loss, additional to any others that might be sustained, that would thus be thrown back onto the Treasury to be made good through taxes. That is what would happen.

Mr. FITZPATRICK. The loaning institutions were very happy to turn over all those bad loans to your organization, and we took them out from under that heavy load. It seems now there are some of our people who would like to return that part of it that is in good financial condition, and our loss would be much greater, and I think it would be a very dangerous thing to do, and I think we ought to continue the good with the bad until you could liquidate at a smaller loss.

Mr. Houston. The bankers and the associations might pay up the ultimate loss that you have in your organization.

Mr. Fahey. Of course if private institutions were prepared to take over all of the Corporation's loans and all of its properties, then it could liquidate quickly.

Even on that basis, however, there would still be a problem, since a large proportion of these loans came from commercial banks and mutual savings banks, and these institutions, under the law, cannot take loans for more than some 60 percent of the value of the property. The Corporation's loans in many instances, moreover, are secured by properties in areas where there are no local institutions that could take them over at all. The lending practices of insurance companies, of course, would be equally restrictive.

Mr. Dirksen. Mr. Fahey, the record ought to show, in all equity and fairness, at this point, that in the case of building and loan associations and parenthetically, I do not know whether my friend, Mr. Fitzpatrick, has had any experience with them--they are obligated, they are mandated, under State law, that after a certain time, differing according to the different States, they have got to sell a property that is in arrears.

I served for years on a building and loan board. We had no choice under the laws of Illinois, when a property got delinquent up to a certain point you were mandated under the law to sell it.

Mr. FITZPATRICK. That is why so many people lost their homes, That is why this body was created.

Mr. DIRKSEN. But you generally charge banks with being loan sharks. You had just as well charge me, when under the laws of Illinois as a director I had no choice except to vote for the foreclosure of a property, because the law said so.

Mr. FITZPATRICK. Would you like to have turned back to the institutions those individuals we rescued them from?

Mr. DIRKSEN. Certainly, if they are sound institutions and sound loans, and the institutions want that thing.

Mr. FITZPATRICK. The institutions that we rescued, and to whom we gave 100 percent on their loans?

Mr. DIRKSEN. I am thinking about building and loan associations. I am not thinking about the banks, because I doubt very much whether banks would want to take those loans.

Mr. WOODRUM. Is there anything else, gentlemen?

Mr. WIGGLESWORTH. Mr. Fahey, would you put in the record, if you have not already, the figure for your nonadministrative expenditures?

Mr. Fahey. Yes, sir.
Mr. WOODRUM. Thank you, Mr. Fahey, and thank you, gentlemen.

WEDNESDAY, JANUARY 7, 1942.

RECONSTRUCTION FINANCE CORPORATION

STATEMENTS OF HON. JESSE H. JONES, FEDERAL LOAN ADMIN. ISTRATOR; CHARLES B. HENDERSON, CHAIRMAN; H. A. MULLIGAN, DIRECTOR AND TREASURER; CLAUDE E. HAMILTON, JR., GENERAL COUNSEL; M. J. MCGRATH, CHIEF, EXAMINING DIVI. SION; R. A. BROWNELL, CHIEF, AGENCY DIVISION; AND D. B. GRIFFIN, ASSISTANT TREASURER

ADMINISTRATIVE EXPENSES

Mr. WOODRUM. We will take up the Reconstruction Finance Corporation, the item for which is as follows:

Not to exceed $10,335,292 of the funds of the Reconstruction Finance Corporation, established by the Act of January 22, 1932 (47 Stat. 5), shall be available during the fiscal year 1943 for administrative expenses of the Corporation and of The RFC Mortgage Company, including personal services in the District of Columbia and elsewhere; travel expenses, in accordance with the Standardized Government Travel Regulations and the Act of June 3, 1926, as amended (5 U. S. C. 821-833); printing and binding; lawbooks, books of reference, and not to exceed $1,500 for periodicals and newspapers; procurement of supplies, equipment, and services; typewriters, adding machines, and other labor-saving devices, including their repair and exchange; rent in the District of Columbia; transfer of household goods and effects as provided by the Act of October 10, 1940, and regulations promulgated thereunder; use of the services and facilities of the Federal Reserve banks; and all other necessary administrative expenses: Provided, That all necessary expenses in connection with the acquisition, operation, maintenance, improvement, or disposition of any

real or personal property belonging to the Corporation or The RFC Mortgage Company or in which they have an interest, including expenses of collections of pledged collateral, shall be considered as nonadministrative expenses for the purposes hereof: Provided further, That notwithstanding any other provisions of this Act, except for the limitations in amounts hereinbefore specified, and the restrictions in respect to travel expenses, the administrative expenses and other obligations of the Corporation shall be incurred, allowed, and paid in accordance with the provisions of said Act of January 22, 1932, as amended (15 U. S. C. 601-617).

JUSTIFICATION OF ESTIMATE Mr. Mulligan. We submit the following detailed justification of the estimate for the Reconstruction Finance Corporation and the RFC Mortgage Company.

JUSTIFICATION OF INCREASE The estimate of $10,335,292 approved by the Bureau of the Budget for administrative expenses of the Reconstruction Finance Corporation and the RFC Mortgage Company for the fiscal year 1943, represents an allocation from the earnings of the two corporations, rather than an appropriation for the payment of administrative expenses.

This sum is $444,612 more than the amount approved by the Congress for the fiscal year 1942. The increase is made up as follows: Personal services.

$260, 432 Outside professional services. $10,000 Supplies and materials 25, 080 Custodian expense--

25, 000 Communication service. 20, 000 Furniture and fixtures..

25, 000 Travel expense--

30, 000 Transfer of funds to other Transportation of things - 10, 000

agencies.-

14, 100 Printing and binding--

15, 000 Special and miscellaneous.

10,000
Total.--

444, 612

PERSONAL SERVICES

Although the defense affiliates of this Corporation have been organized especially for the purpose of handling defense activities unprecedented in the history of this country, the Reconstruction Finance Corporation has had a marked increase in its defense work and other functions. Therefore, while most of new employees' salaries will be reimbursable, which has been considered in the preparation of the 1943 Budget estimate, some of the salaries will be due to increased business of this Corporation, hence the Budget increase $260,432. Of that amount $30,292 is for administrative promotions authorized by act of Congress approved August 1, 1941.

SUPPLIES AND MATERIALS

Considering the increased cost of supplies and materials, it is doubtful whether the increase of about $20,000 over the actual for 1941 is sufficient.

COMMUNICATION SERVICE
The estimate is less than $12,000 over the actual for the fiscal year 1941.

TRAVEL EXPENSE

Experience from year to year has indicated that some of the older loans are becoming much more troublesome and require closer supervision, which increases the cost of travel. The estimate was made without considering a possible increase in per diem allowance now under consideration by the Congress.

TRANSPORTATION OF THINGS

The Corporation is now confronted with the scarcity of equipment and supplies and is compelled to buy where the goods are available and pay the additional cost of transportation. It will be observed that the actual for 1941 is about $8,000 less than for 1943. .

PRINTING AND BINDING

The increase appears reasonable, in view of increased costs, and by comparison with the actual for 1941.

SPECIAL AND MISCELLANEOUS
The increase is less than 10 percent over the estimate for 1942.

OUTSIDE PROFESSIONAL SERVICES

The increase is to provide for the increase in cases in litigation and the resultant increase of cost of handling.

CUSTODIANS It will be observed that the 1943 estimate is only $6,000 more than the actual for the fiscal year 1941, or an increase of about one-half of 1 percent.

FURNITURE AND FIXTURES

Considering the increased cost of office equipment, furniture and fixtures, the increase for 1943 appears proper. Heretofore, some of our custodians have rented us some equipment on a part-time basis; but due to unusual demands on the Federal Reserve banks in the past few months, many of them have requested us to buy equipment to replace bank-owned furniture. Normal replacements of Corporation-owned equipment have been considered since this Corporation is now 10 years old.

OFFICE OF THE SECRETARY

The functions of the office of the Secretary involve a vast amount of administrative work and touch upon the activities of almost every other division of the Corporation. Such functions include

Preparation of the minutes of the Corporation, recording every action of the board of directors and executive committee, which minutes constitute the official record of the Corporation's action.

Advising other divisions of the Washington office and loan agencies in the field of the action of the board and executive committee.

Preparation of a large volume of correspondence resulting from board and executive committee action; editorial work in connection with revision of printed matter relating to Reconstruction Finance Corporation and affiliated organizations for inclusion in the Congressional Directory, United States Government Manual, Official Register of the United States, encyclopedias, bankers' directories, etc., and preparation of general correspondence.

Compilation and annotation of pamphlet containing laws relating to Recon struction Finance Corporation and circular of information relating to Corporation's activities.

Maintenance and supervision of the general files of the Corporation.
Telephone and telegraph services.
Printing and duplicating for Washington office.

Purchase of furniture, equipment, and supplies for Washington office and loan agencies in the field.

Supervision, maintenance, and repair of building occupied by Corporation in Washington.

Preparation and certification of pay rolls of Washington office.

Maintenance of personnel record for each employee in Washington; personnel card for each employee in loan agencies; individual leave-of-absence record for each employee in Washington; personnel records of advisory committee members of Reconstruction Finance Corporation loan agencies and local committee members of Disaster Loan Corporation regional offices;

Approval of all applications for leave.
Codification of instructions to loan agencies relating to internal affairs.

Passing upon monthly and quarterly reports of the Corporation required to be made by law.

Affixation and attestation of seal to a large number of documents and some 3,000 proxies issued in connection with annual meetings of banks and insurance companies, the stock of which has been purchased by the Corporation or held by it. All such proxies and documents are checked in the Secretary's office for accuracy and authority for their execution.

The office of the Secretary of the Reconstruction Finance Corporation also prepares and keeps the minutes of The RFC Mortgage Company, the Disaster Loan Corporation, the Federal National Mortgage Association, the Metals Reserve Company, the Rubber Reserve Company, the Defense Plant Corporation, the Defense Supplies Corporation, and the Defense Homes Corporation.

The Secretary of the Reconstruction Finance Corporation is Secretary of Defense Supplies Corporation; the Acting Secretary of the Reconstruction Finance Corporation is Secretary of Defense Plant Corporation; an Assistant Secretary of the Reconstruction Finance Corporation is Assistant Secretary of Defense Plant Corporation; and an Assistant Secretary of the Reconstruction Finance Corporation is Secretary of Disaster Loan Corporation, Metals Reserve Company, and Rubber Reserve Company.

The Acting Secretary of the Reconstruction Finance Corporation is a member of the board of trustees and President of Electric Home and Farm Authority; an Assistant Secretary of the Corporation is Secretary of that Authority; and an Administrative Assistant is Assistant Secretary of that 'Authority.

Maintains and supervises the general files of The RFC Mortgage Company, Disaster Loan Corporation, Federal National Mortgage Association, Metals

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