The figures show that for this past year between 80 and 90 percent of the relief that has been given has come from public sources. The private sources have been exhausted to the point where they are almost helpless.

Mr. KOPPLEMANN. When you speak of public sources, do you include the community chests?

Senator WAGNER. No; that is treated as private. I am speaking simply of appropriations out of the Public Treasuries of States, municipalities, and the Federal Government. The figures show that 89 percent of the money spent for relieving this situation has come from public sources. The Reconstruction Finance Corporation, which has had the administration of the fund which we provided last year, and which amounted to $300,000,000, shows that of that amount only $60,000,000 are left. That money will be exhausted by May 1; so that if we are to continue to supplement the funds of the States, we will have to make an additional appropriation that may be ready by May 1. That is the reason for the necessity for rather quick action as to this legislation.

I think it is proper to say that this bill has the approval of the President of the United States. As a matter of fact, some of its provisions were suggested by him.

The bill provides for an appropriation, or, perhaps, an authorization, if I am to speak technically, for the Reconstruction Finance Corporation to provide a fund of $500,000,000, which fund is to be administered by an administrator appointed by the President, with the advice and consent of the Senate. In that regard, the administration has been changed. The President thinks that this is more of a social problem than a mere banking problem, and that therefore it should be separated in its administration from the Reconstruction Finance Corporation, which has dealt primarily with financial questions relating to banks, railroads, and matters of that kind. It was felt that this fund should be administered by a person having knowledge of the social conditions throughout the country. That person is to administer it solely.

Mr. CROSS. If it would not bother you, I would like to interrupt you there.

Senator WAGNER. I have no objection.

Mr. CROSS. I notice that the bill, where it deals with the administration of the fund, provides that the administrator shall be appointed, but that all the other appointees are to be under the civil service. Are all of them to be under the civil service?

Senator WAGNER. Wes.

Mr. CROSS. Do you think you could find men peculiarly fitted for this work on the civil-service list, or would it be well to allow it to be discretionary as to whether they come under the civil-service regulation, or are to be appointed otherwise?

Senator WAGNER. The administrator can appoint experts without reference to the civil service, but as for the ordinary employees, such as stenographers, clerks, and so forth, we think they can be obtained from the civil-service list.

Mr. CROSS. The experts do not have to be employed under civilservice regulations?

Senator WAGNER. No; they do not.

This bill is different from the bill that passed last year in that in the other bill we provided for loans to the States, which money, as you remember, was to be subtracted from the funds coming to the States from Federal aid to State highway funds. I think one fifth was to be deducted each year over a certain period until the entire sum was repaid. Now, this is an outright grant by the Federal Government to the States, because it is regarded, and I think properly so, as a Federal function or a Federal obligation to help the States in that particular at the present time.

Mr. CROSS. I would like for you to discuss these provisions under which $200,000,000 are to be handled in one way and $300,000,000 in another way.

Mr. KOPPLEMANN. What section is that?

Mr. CROSS. That is under section 4 (b) and section 4 (d).

Senator WAGNER. $200,000,000 is provided in such a way that a portion of it may be used as a sort of matching fund, the purpose being to induce the States to do their utmost to collect funds out of their own people. As an inducement to do that, we say to them, "We will give you at the expiration of three months outright one third of the amount that you expended out of your own State funds to aid unemployment during the prior three months."

Mr. CROSS. One third of the amount that they expended during the 3 months prior thereto?

Senator WAGNER. Yes. We give them one third in addition to what they would have for the following 3 months as aid.

Mr. HOLLISTER. That extends only to October 1, does it not? Senator WAGNER. That is discretionary with the President. It may be continued if the President thinks that it is working well in the way of inducing States to collect funds in their own localities. The President may continue that system of matching funds until the $200,000,000 is exhausted.

Mr. KOPPLEMANN. What do you mean by the States collecting funds? It does not mean that they have to go out and collect it, does it?

Senator WAGNER. No. We say to the States, "We will give you one third of whatever you expended during the prior 3 months' period." There is a provision in the law of New York State under which the communities get a certain percentage from the State of whatever they spend for these purposes during the prior 3 months period. That plan is working well. It is putting the communities on their toes, and they have been doing their utmost to meet their obligations in the following 3 months so as to get that contribution of one third.

Mr. KOPPLEMANN. In New York, is that an outright grant to the communities?

Senator WAGNER. Yes; it is an outright grant to the communities. Mr. GOLDSBOROUGH. What percentage of this fund do you anticipate will go into the cost of administration?

Senator WAGNER. Of course, that matter is entirely up to the administration. It is up to the administrator of this fund. He can prescribe the terms on which the grants are made, and he can limit the amount which may go into administration costs.

Mr. CROSS. I am sure you have given this matter close consideration, and that is an important factor.

Senator WAGNER. Yes; there has been some abuse in that direction. Mr. CROSS. You have some views about that feature of it, and I would like to hear you on that.

Senator WAGNER. You are speaking now of the administration of the funds by the States?

Mr. CROSS. Yes, sir. Of course, you have given some consideration to that question.

Senator WAGNER. Yes. The idea there is that after the funds go to the State, the administrator should see that it is not used to pay political followers, or to spend it that way rather than spend it for the relief of the needy and destitute.

Mr. GOLDSBOROUGH. You have had that in mind?

Senator WAGNER. Yes. There is no doubt that it we have an able administrator, he will not only limit the funds that may be used for administration purposes, or the portion that may be used for administrative purposes, but he will know exactly what is the efficiency of the administration within the State.

Where the administration is not efficient, he may suggest changes so as to make it more efficient. If we get a man of experience in that position, of course, that will be done. I think the President has that in mind, and that he will appoint somebody who has had long experience in this character of work.

Mr. CROSS. It is not to be used for political purposes within the State?

Senator WAGNER. No.

Mr. CROSS. As for this money that is to be given the States, I am sure that my State, Texas, would far prefer that the money be spent in work on their rural highways. I am sure they would prefer to have both the money they raise and the one third that is matched by the Federal Government, used in rural highway work, so as to let the men have the feeling that they are doing something for what they receive, rather than that they are being fed like mocking birds. It would be better if they had the feeling they were earning it, so as to maintain their self-respect. If there was some such provision in the bill so that the administrator would have the power to do that, I think it would be a good plan.

Senator WAGNER. That may be done under section 4 (a), which provides

Out of the funds of the Reconstruction Finance Corporation made available by this act, the administrator is authorized to make grants to the several States, to aid in meeting the costs of furnishing relief and work relief in the form of money, service, materials, and/or commodities to provide the necessities of life to persons in need as a result of the present emergency.

Mr. KOPPLEMANN. In view of your knowledge of the situation in New York, and your long study of this question, I would like to ask you some questions. As I understand it, there are agencies already existing in every State for this purpose that could administer this fund without cost to the State. There are agencies who could be put to work on this, and there are committees now formed to which men and women would be glad to be appointed to serve without pay, so that the only cost might be for clerical services in order to carry out the purposes of the act. Now, it seems to me that we ought in some way to provide that the States be not permitted to spend any money for administration purposes, aside from clerical assistance.

Senator WAGNER. I would be afraid of making an absolutely inflexible rule as to that, because from the debate in the Senate it appeared that in some States they have gotten to the point where they have had to use a portion of the money for the administration of the fund. That is where the State has become pretty desperate. Let me say this, that experience has shown very few abuses of that kind within the States.

Mr. KOPPLEMANN. Where an agency is already established, and in existence, could it be provided that none of this money should be used for administrative purposes? I have in mind a situation in my own State, where funds were used for political purposes or for patronage.

Senator WAGNER. The administrator would have the power to make conditions absolutely as to the way in which the money shall be spent, and, in addition to that, he would have power to make investigations and studies. That is provided for in section 3 (c), as follows:

In executing any of the provisions of this act, the administrator, and any persons duly authorized or designated by him, may conduct any investigation pertinent or material to the furtherance of the purposes of this act and, at the request of the President, shall make such further investigations and studies as the President may deem necessary in dealing with problems of unemployment relief. That gives him the power to investigate. Of course, you have got to have somebody to administer it.

Mr. KOPPLEMANN. My suggestion was that if there was some way by which it could be covered

Senator WAGNER (interposing). I will say this, that in my own State, and in nearly all the States, there is no abuse in the administration of these funds. There are many volunteers within the State who aid in the distribution of the funds. Except in rare cases, I do not think there is any abuse in the distribution of this money by the States.

Mr. LUCE. Senator, will you refresh my memory as to the $300,000,000 fund, which you said was nearly exhausted? Is that the original capital of the corporation?

Senator WAGNER. No. As you will remember, the Reconstruction Finance Corporation was authorized to issue bonds, or debentures, as I believe they were called, to the amount of $300,000,000. That money was set aside, or earmarked, for relief distribution purposes. It was to be loaned to the States or advanced to the States, and paid back by a reduction from their portion of the Federal-aid State highway fund over a period of years. In addition to that, under that act, municipalities were authorized to borrow on their security from the Reconstruction Finance Corporation.

Mr. LUCE. This, as I remember, will be the first proposal to come before the committee where it is contemplated that the Federal Government shall give the money outright to the States.

Senator WAGNER. Yes.

Mr. LUCE. Now, the Reconstruction Finance Corporation was conceived as an agency for borrowing money to lend, and this is the first departure from that principle that has been proposed.

Senator WAGNER. Yes; and we have to do a lot of things when emergencies exist.

Mr. LUCE. Under section 2 (b), the Reconstruction Finance Corporation may borrow $500,000,000 more: How is that money to be ultimately repaid?

Senator WAGNER. By the Federal Government.

Mr. LUCE. That is, by the taxpayers?

Senator WAGNER. Yes; there is no doubt about that.

Mr. LUCE. Why do you think it would be desirable to change our old system by having the Reconstruction Finance Corporation to take any part in the dispensing of charity by the Government?

Senator WAGNER. That is not a part of the current expenses of the Government, but it would be an emergency expenditure. Therefore, it does not belong in the Budget which is provided for the current running expenses of the Government.

Mr. LUCE. Why not? We have again and again appropriated money for relief in emergencies arising from acts of God, tornadoes, and disasters of all kinds. We have frequently made direct appropriations for those purposes. Why should we put this through a borrowing agency?

Mr. GOLDSBOROUGH. We gave $20,000,000 to Russia straight out. Senator WAGNER. This emergency provision is one that will probably continue for some time. I think it would be more satisfactory to handle it through the Reconstruction Finance Corporation, which is an agency that has already been created, than to create a new agency for the purpose.

Mr. LUCE. You do not need a new agency for the purpose. You have the Secretary of the Treasury who can pay over the money, just as has always been done in the case of disasters.

Senator WAGNER. This is simply the method that is used. Of course, it ought not to be paid out of current expenses. The taxpayers should not have to pay all of it in that way.

Mr. LUCE. But the Treasury could borrow the money just as is contemplated here.

Senator WAGNER. This is the method that has been used in the past.

Mr. LUCE. This method has not been used before.

Senator WAGNER. We employed this method of using the Reconstruction Finance Corporation as the fiscal agency rather than the Treasury of the United States.

Mr. LUCE. It was used as the fiscal agent for the purpose of borrowing money. That was the proposal, just as was done in the case of the War Finance Corporation. You are no grafting upon its powers, and diverting it from its original purpose, without accomplishing anything that I can see. You are proposing to do indirectly what has been done directly, under the uniform practice of the Government, through the Secretary of the Treasury.

Senator WAGNER. Of course, there was a very definite opinion among Members of Congress as to the appropriation of $300,000,000 which was to be advanced and which was to be repaid by deductions from the Federal aid State highway funds, that the repayment would never take place, so that in effect, that $300,000,000, if we look at it realistically, was a gift to the States, just as this would be. This is more realistic than the other.

Mr. LUCE. You are asking the Federal Government to give away $500,000,000.