To the Senate and House of Representatives:
There are certain measures looking to the promotion of economic recovery which have been under consideration by the Congress and are so advanced toward completion or understanding as to seem possible of enactment during the present session.
1. It is most necessary that the principles of the Bankruptcy Bill which has already been acted upon by the House should be passed by the Senate. The whole object of the bill is to secure orderly cooperation between creditors and debtors, whether farmers, individuals, general corporations or railroads, for mutual adjustment which will preserve the integrity and continuous operation of business, save the values of good will and the continuation of people in their occupations and thus avoid destruction of the interest of both parties. This legislation is of the most critical importance in this period of readjustment. Incidentally such a workable system is highly necessary in order to permit a certain minority of railroads to be so reorganized as to reduce fixed charges and thus relieve the Reconstruction Finance Corporation of drains in prevention of destructive receiverships.
2. The Great Lakes-St. Lawrence Seaway Treaty should be ratified. It not only will serve a great national purpose but is of importance now also to relieve unemployment by its construction.
3. The enactment by the House of the general principles embodied in the Glass Banking Bill which has already passed the Senate will greatly contribute to reestablish confidence. It is the first constructive step to remedy the prime weakness of our whole economic life--that is organization of our credit system.
4. Authority should be given to the Reconstruction Finance Corporation to increase the amount of loans to states and municipalities for purposes of assistance to distress on the same terms as the present act. While the corporation has funds available which will last until July, it is desirable that they should be supplemented.
5. It seems clear that the domestic allotment plan is wholly unworkable. It will do far greater harm than good to agriculture.
Pending the return of the great commercial countries to the gold standard and the consequent increase in world consumption and thus rise in world prices, it is essential temporarily to reduce farm production so as to remove the backbreaking surpluses of agricultural products and thus to raise agricultural income. The plan proposed by the Secretary of Agriculture some time since for temporary leasing of marginal lands is the least harmful and the most hopeful of all the plans which have been proposed. It has the merit of direct action in reducing supply to demand and thus unquestionably increasing prices; it would affect all farm products; give equal benefits to all farmers; is free of increased bureaucracy; very much less costly; and could be covered by a manufacturers' excise tax of probably 1% to 2 % upon these commodities. It would also largely eliminate the tax and interest problems which the Congress is seeking to solve at much greater cost.
6. I earnestly recommend repeal of the procedure of the House of Representatives in publishing loans made by the Reconstruction Finance Corporation. These transactions should be open to the fullest degree to the representatives of the Congress, but their publication in the last few months has led to widespread, mostly innocent misinterpretation, vicious in effect, by depositors and alarmists who do not recognize that such borrowings represent an endeavor of the institution to provide funds needed in service to their respective communities. This publication is destroying the usefulness and effectiveness of the Reconstruction Corporation, is exaggerating fears and is introducing new elements of grave danger. It is drying up the very sources of credit. The effect of such publication is forcing payment by distressed debtors to replenish bank funds. It is causing the hoarding of currency.
7. While the Congress could not enact such a law during this session I recommend that it should institute an inquiry with view to the early expansion of the Home Loan Discount Banks into a general mortgage discount system to be owned cooperatively by banks and mortgage companies (with adequate encouragement of the special activities of Building and Loan Associations) and thus to parallel in the field of long-time credit the service of the Federal Reserve system for short-time credit. Such a system would relieve the Reconstruction Finance Corporation of many of its functions, would assist in the orderly readjustment of the present situation, and through private initiative would serve many purposes for which the Congress is striving through direct action by the government.
8. Peace would be promoted and the killing of men checked in various parts of the world today, if the Executive had the authority to join with other nations in preventing the shipment of arms to such localities. I earnestly recommend that the legislation proposed for this purpose be enacted.
The White House,
February 20, 1933.