White House Statement on the Reconstruction Finance Corporation.

THE FOLLOWING are the conclusions of the Rapidan conference between President Hoover and the Directors, Governor [Eugene] Meyer, General [Charles G.] Dawes, Messrs. [Jesse H.] Jones, [Harvey C.] Couch, [Wilson] McCarthy, [H. Paul] Bestor, and [Arthur A.] Ballantine, of the Reconstruction Finance Corporation. They spent some hours yesterday and this morning reviewing the work which has been accomplished since the Corporation was established on the 2d of February and discussed the Board's plans and recommendations for the future. They also discussed methods further to coordinate all economic agencies engaged in assistance to business, employment, and agriculture.

The review of the work of the Corporation showed that in the 14 weeks of its life loans of about $500 million were authorized to something like 4,000 banks, agricultural credit corporations, life insurance companies, and other financial institutions, and in addition thereto about $170 million to railroads.

An analysis of the institutions and the purposes served showed that:

First: Of nearly 3,000 borrowing banks, more than 70 percent are located in towns of 5,000 in population or less; while 84 percent are located in towns of 25,000 in population or less; and that only 4.5 percent of money loaned to banks has gone to institutions in cities of over 1 million in population.

In all these communities, these banks have been able to meet the demands of their depositors and to minimize the necessity of forced collections, foreclosures, and sales of securities and have thus contributed to protect community values. One hundred and twenty-five closed banks have either been reopened or their depositors paid out. And bank failures which amounted to nearly 100 a week when the Corporation began are now down to about the casualties of normal times. It is estimated that altogether over 10 million individual depositors and borrowers have been benefited by the margins provided by the Reconstruction Finance Corporation to these banks.

Second: Over 250 building and loan associations have borrowed from the Corporation in order to enable them on the one hand to make their routine payments to their depositors and participants and on the other to avoid the foreclosures of mortgages. The result again has been benefits to hundreds of thousands of individuals.

Third: In the agricultural field, the Corporation has underwritten or subscribed for issues placing $68 million of the Federal intermediate credit bank debentures, the whole of which sums are loaned directly to farmers for production and marketing purposes. Loans have been made to a number of agricultural, market, and livestock finance corporations, which in turn has enabled them to extend and continue loans particularly upon livestock and loans to a great number of farmers. Beyond this, loans to the extent of $75 million have been made directly to about 450,000 farmers for seed purposes through the Department of Agriculture. Altogether probably 1 million individual farmers have been directly or indirectly helped.

Fourth: The net result of approximately $170 million authorized loans to railroads has been on one hand to increase employment by continuing necessary construction work and on the other hand by preventing receiverships, and thus safeguarding the great investments of the trustee institutions such as insurance companies, savings banks, etc. The deterioration of service and other standards which accompany receiverships have also been avoided.

Generally about $670 million of loans authorized to date have filtered through to the use and protection of a very large segment of the whole country. An encouraging feature is that the repayment of loans has begun, some $30 million having been repaid.

The conference conclusions as to immediate policies necessary to speedy economic recovery embrace four principal items affecting the Reconstruction Corporation.

1. In order at once to stimulate employment and to stiffen the whole agricultural situation, to extend the authority to the Reconstruction Finance Corporation to increase its issues of its securities to the maximum of $3 billion to enable it (a) to buy bonds from political subdivisions or public bodies or corporations so as to start construction of income-producing or self-liquidating projects which will at once increase employment; (b) to make loans upon security of agricultural commodities so as to assure the carrying of normal stocks of these commodities and thus by stabilizing their loan value and thereby at once steady their price levels; (c) to make loans to the Federal Farm Board to enable extension of loans to farm cooperatives and loans for export of agricultural commodities to quarters unable otherwise to purchase them; (d) the authority to loan up to $300 million to such States as are unable to finance themselves for distress.

It was considered desirable that temporary nonpartisan committees should be set up to pass upon loans to States for distress and of engineers to pass upon loans for income-producing works. Both of these committees to function in much the same way as the Interstate Commerce Commission now acts in passing upon loans to railroads.

2. The enactment of the legislation which has been recommended creating the system of home loan discount banks. Surveys by the building and loan associations and the Department of Commerce show that these institutions would not only protect great numbers of homes from foreclosures, but that they would immediately stimulate from $500 million to $1 billion of construction work in new homes in many under-built localities and in renovations. It was considered that these institutions were a necessary complement to the Reconstruction Corporation and could well be financed by the Corporation from its funds if the legislation creating that system is enacted.

3. The joint committee of industry and finance now being created by the Federal Reserve System in each district for the purpose of organized application of the credit facilities now available through the System to be developed in other cities and coordinated with the work of the Reconstruction Corporation.

4. That Government expenditures must be held down absolutely to within the tax income now provided and that no programs of expenditure should be undertaken which cannot be paid for from current tax income. Expansion of nonproductive public works requiring the issuance of Government securities for any other lines of expenditures would at once create a deficit and again unbalance the budget, and would render financing of the operations of the Reconstruction Corporation extremely difficult, if not impossible and would increase rather than decrease unemployment.

The Board presented to the President a high tribute to the thousands of members of committees and of the staff of the Reconstruction Finance Corporation, working in every city and located in every part of the Union who have given their undivided time and service to enabling the Corporation to function on such an enormous scale and so effectively in the short period of less than 3 months.