Relief after Recess

After two weeks of work, Congress last week scattered for two weeks of rest. President Hoover had tried to induce Congress to forego its usual holiday and legislate economic relief but the leaders told him that not a corporal's guard, much less a quorum, could be kept in Washington to work through Christmas and New Year's Day. Gently they hinted that his present anxiety would be more becoming if he had summoned a special session last summer or autumn.

Good God! Congress, however, was held in session long enough for the Senate to approve the Hoover Moratorium whereunder 15 nations are relieved of paying the U. S. $252.566,803 on War Debts between July 1, 1931 and June 30, 1932. Xenophobia reached its peak when Senator Johnson of California, the Moratorium's arch foe, oratorically machine-gunned the Senate:

"For the love of God, aren't there enough Americans here to stand up for Americans? Good God, let your eyes rest upon Americans for a while! Don't look across the water all the time. . . . Today we're standing at the crossroads of the destiny of the United States of America. . . . For the love of God. let's take the American road!"

But the Senate was unimpressed. After voting down six amendments to the Moratorium resolution, it overwhelmingly (69-to-12) approved the measure exactly as the House had passed it. including the proviso that Congress was against further reduction or cancellation of War Debts.

Interim Activity. With its holiday adjournment Congress did not shut up shop altogether. Relief legislation requested by the President had to be made ready by committees. Announced the President: "Leaders of both houses assure me that the measures which are uncompleted will receive immediate attention after reconvening; that the Reconstruction Finance Corp. will be the first to receive consideration and that it has sufficient support to be passed by Congress."

The brunt of this Congressional pledge fell heaviest upon members of the Senate Banking & Currency Committee who were compelled to hold double hearings during the holiday recess. Before them were the two most important measures of the Hoover relief program: 1) the Reconstruction Finance Corp.; 2) increased capital for Federal Farm Land banks.

R. F. C. Patterned along the lines of the War Finance Corp., Reconstruction Finance Corp. would receive as primary capital $500,000,000 from the Treasury and then issue and sell $1,500.000,000 in Government-backed debentures. These two billions of assets would be lent to hard-hit industries able to get credit nowhere else. At last week's hearings it became all too plain that the first and hungriest industry to seek R. F. C. aid would be the railroads. Daniel Willard. president of Baltimore & Ohio, appeared before the Senate Committee to urge the corporation's speedy enactment, explaining that the carriers must have this new source of credit to refinance nearly a billion dollars' worth of obligations maturing in the next three years. His views were stoutly supported by an impressive array of savings bank officials whose institutions held large blocks of depreciated rail bonds. Frederick H. Ecker, president of far-flung Metropolitan Life Insurance Co., informed the committee that this year $243.000.000 in rail securities were to fall due and that only two roads, with $24,000.000 between them, had funds on hand to meet this debt. According to Mr. Ecker conditions are worse now than in June and the crisis would soon come "when the patient either dies or gets well."

Senator Couzens of Michigan advanced the most serious objection to letting the railroads have any of the proposed Federal credit pie. Fearful lest they gobble it all up, he proposed re-enactment of the 1920 law whereby the carriers could borrow directly from the U. S. Treasury.

Traylor's Day. A new and fertile idea as to the possible uses of the R. F. C.'s funds was advanced by Melvin Alvah Traylor, president of Chicago's First National Bank (and a Democrat with White House dreams). With convincing enthusiasm Banker Traylor suggested that R. F. C. credit be applied to closed banks in the form of loans with which to pay off needy depositors. He argued for a 25-c-- on-the-dollar arrangement to put nearly two billion dollars worth of frozen funds back into circulation.

As he saw it, the National Credit Corp., a private and voluntary organization, might steady going banks by shifting bad loans from weak to strong hands but it was no help to banks which had already gone under. He observed that N. C. C. would cease to function the minute R. F. C. was on the statute books. Loans to closed banks in the process of liquidation, he contended, would not only furnish luckless depositors with real cash but would also recall from hiding a billion dollars in, hoarded currency by re-establishing banking confidence.

Banker Traylor's suggestion looked like a smart political stroke. President Hoover had specifically asked Congress to devise some means of assisting depositors in closed banks but up until last week Congress had been at a loss as to what to do. Democrat Traylor now had impregnated it with a new idea.

Farm Money. Also before the Senate Banking & Currency Committee was the House bill to add $100,000,000 to the capital of the Federal Farm Loan Board.* Into this measure the House had tucked a provision for a five-year moratorium on agricultural loans at the discretion of Farm Loan bankers. Before the Senate committee, last week, appeared Paul Bestor, Farm Loan Commissioner, to explain the working of his board, plead for more cash.

Through its district banks the Farm Loan Board had outstanding advances of $1,171,000,000 to 408,000 rural borrowers on Nov. 30. About 23 1/2% of these debtors, owing $275,450,000, were delinquent in their payments--11 1/2% over 90 days, 12% under 90 days. Last year delinquencies ran about 10%. That about three out of four farmers had kept up their Farm Loan payments Commissioner Bestor thought was "an excellent showing under the circumstances." To rebut the notion that the Farm Loan Board was a harsh moneylender, he declared that only 3,848 loans --less than 6% of the delinquencies--had been foreclosed this year. Said he: "There are some individual farmers who owe everybody in the country and it's not worth while to carry them."

*A rural credit agency of the Treasury not to be confused with the Federal Farm Board and its loans to agriculture.

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