Mr. FLANAGAN. What made you think, or what made you state here on this record that this American Lithofold Corp. loan was a problem loan?

Mr. HOWARD. Due to my experience with loans, or with the loan back on 1945 and 1946. At that time I headed up, I was chairman of the review committee, and I handled it through the review committee shall I continue?

Mr. FLANAGAN. Well, now, look, you are talking about the 1945-46 loan?

Mr. HOWARD. Yes.

Mr. FLANAGAN. I am not interested in that. I am talking about the loan in 1948.

Mr. HOWARD. Well, I am trying to give you the background of why I knew about the questionableness of the loan, because I learned during that time of the way the concern was being operated through the withdrawal for various things, through the sales agency, for one, here in Washington.

Mr. FLANAGAN. Well, that does not make it a problem loan. You knew it was a problem in 1944 and 1945.

Mr. HOWARD. That is right.

Mr. FLANAGAN. Did you think it was a problem loan in 1949?
Mr. HOWARD. I thought it was; yes, sir, I did.

Mr. FLANAGAN. Why did you think it was a problem loan in 1949? That is what I am trying to get at, Mr. Howard.

Mr. HOWARD. Because I didn't think they had corrected, or did not know that they had corrected the situation that existed in the company.

Mr. FLANAGAN. Well, was it a problem loan because it was difficult to handle in your section? That is what I want to know.

Mr. HOWARD. You mean the administration of the loan?

Mr. FLANAGAN. I mean the administration of the loan, before it was approved by the Board in either March or September.

Mr. HOWARD. I don't quite follow you there.

Senator MCCLELLAN. You mean that it was in process?

Mr. FLANAGAN. That is right, in the process of the loan within the RFC, was it a problem for your section?

Mr. HOWARD. No; that would be mechanical, wouldn't it?

Mr. FLANAGAN. Well, now, let's see if it was mechanical. On the first loan that was finally approved in the amout of $80,000 in March of 1949, we found that from the time that loan came from St. Louis in December, until it was finally approved in March, it was declined by Mr. Rochelle and approved by Mr. Dickinson, declined by Mr. Herman and declined by Mr. Brodie.

Now, Rochelle, Dickinson, Herman, and Brodie, all worked in your section, did they not?

Mr. HOWARD. Yes, sir. Mr. Herman was attached to the review committee, or maybe he was not at that time.

Mr. FLANAGAN. But they all worked for you?

Mr. HOWARD. Yes, sir.

Mr. FLANAGAN. And they all declined that single loan?

Mr. HOWARD. That is right.

Senator MCCLELLAN. For the record, you said, Mr. Flanagan, or I think you said that the loan was approved by Mr. Dickinson. Mr.

Dickinson approved the report of the examiner declining the loan, as I understood it.

Mr. HOWARD. That is right.

Mr. FLANAGAN. Yes, sir; that is right.

Now, did any one of these examiners, either Rochelle, Dickinson, Herman, or Brodie, ever discuss that loan with you?

Mr. HOWARD. No, sir.

Mr. FLANAGAN. Now, going on to the handling of the second loan, Mr. Williams, who approved that loan as an examiner, was one of your employes, was he not?

Senator MUNDT. Before that is answered, let me ask you one more question first.

In Mr. Toole's informative diary, on page 28, under the entry for February 4, 1949, we find this concluding statement where he says:

With Ernest Howard, Charlie Lewis, Frank Prince, Chauncey Dodds, Ed Willett, and Chairman Hise on our side, I hardly see how we can fail to get the kind of loan we need.

Were you on his side at that time?

Mr. HOWARD. I never gave Mr. Toole any indication that I was for the loan or would recommend it.

Senator MUNDT. You never did personally recommend this loan? Mr. HOWARD. No, sir.

Senator MUNDT. The only time that a loan was recommended by the people in your Division, apparently, was the time when you have just recently told me that it bypassed you, and it bypassed the man under you who normally would review it, is that correct?

Mr. HOWARD. Yes, sir.

Senator MUNDT. So you see no reason then why it should appear that you were on his side or any other side regarding the loan? Mr. HOWARD. No, sir.

Senator MUNDT. You told me you did confer with Mr. Dodds, but I think you denied conferring with him about the loan, but you said you conferred with him about whether or not you had ever conferred with him about the loan, is that right?

Mr. HOWARD. I think it was last

Senator MUNDT. When was that?

Mr. HOWARD. Yesterday a week ago, sometime during that week. Senator MUNDT. About a week ago?

Mr. HOWARD. Yes, sir.

Senator MUNDT. Where did that conference take place?
Mr. HOWARD. Sir?

Senator MUNDT. Where did that conference take place?

Mr. HOWARD. In Mr. Dodds' office in 1115.

Senator MUNDT. Is Mr. Dodds still with the RFC?

Mr. HOWARD. Yes, sir. He is assistant to Mr. Pukowski, the Deputy Administrator.

Senator MUNDT. You went down there in the morning and talked with him about a week ago?

Mr. HOWARD. No; not in the morning. I went down there in the afternoon, about 4:30.

Senator MCCLELLAN. I believe that was the room number.
Senator MUNDT. Oh, 1115 was the room number?

Mr. HOWARD. That is right.

Senator MUNDT. What time in the afternoon did you go down? Mr. HOWARD. About 4:30.

Senator MUNDT. About how long did you you confer with him? Mr. HOWARD. Probably 10 minutes. I went down and asked him if I had ever discussed this loan with him, and he said "No." Senator MUNDT. Does he keep a diary, to be sure?

Mr. HOWARD. No, sir.

Senator MUNDT. It was just to the best of his recollection?
Mr. HOWARD. That is right.

Senator MUNDT. Who else did you discuss with in the last week or 2 weeks-who else have you discussed your part in these transactions with?

Mr. HOWARD. I asked Mr. Rochelle, who handled the loan, if I had ever discussed a loan with him.

Senator MUNDT. What did he tell you?

Mr. HOWARD. He said "No."

Senator MUNDT. No?

Mr. HOWARD. Yes.

Senator MUNDT. Who else?

Mr. HOWARD. Mr. Frank Williams, and he said, "No."
Senator MUNDT. Williams. That is the St. Louis examiner?
Mr. HOWARD. Yes, sir.

Senator MUNDT. What did he say?

Mr. HOWARD. Sir?

Senator MUNDT. What did he tell you?

Mr. HOWARD. Frank Williams?

Senator MUNDT. Yes.

Mr. HOWARD. He said, "No."

Senator MUNDT. No. All right. Whom else did you discuss it with? Mr. HOWARD. Mr. Brodie.

Senator MUNDT. Who is Mr. Brodie?

Mr. HOWARD. He is the man who wrote one of the reports.
Senator MUNDT. Favorable or unfavorable?

Mr. HOWARD. Unfavorable.

Senator MUNDT. What did he say?

Mr. HOWARD. He said, "No."

Senator MUNDT. Whom else did you discuss it with?

Mr. HOWARD. I don't recall having discussed it with anybody else. Mr. Dickinson, who worked for me, I have asked him about it.

f

Senator MUNDT. What did he say?

Mr. HOWARD. He knew no more about it than I did.

Senator MUNDT. All the people you talked with, then, told you that you had nothing to do with it?

Mr. HOWARD. Yes, sir.

Senator MUNDT. And your memory led you to believe that you had nothing to do with it?

Mr. HOWARD. That is correct.

Senator MUNDT. Therefore you had nothing to do with approving this loan? You never certified to it, and the man that you delegated the responsibility to do it did not?

Mr. HOWARD. That is correct.

Senator MUNDT. All right.

Senator HOEY. You may proceed, Mr. Flanagan.

81249-51-pt. 3-11

Mr. FLANAGAN. Mr. Howard, going on now to the second loan, the large loan in the amount of $565,000, which was approved in September 1949, that loan, as you know, was handled by Examiner Williams.

Mr. HOWARD. Yes, sir.

Mr. FLANAGAN. Who recommended the loan, and you have already testified that you did not know how the loan was assigned to Williams. Mr. HOWARD. Yes, sir.

Mr. FLANAGAN. Is it the usual procedure, or was it at that time the usual procedure in your Division for someone in the Division, either Mr. Dickinson or Mr. Hendrick, to approve the reports of the examiners in your Division?

Mr. HOWARD. What do you mean by "approve" the report? Do you mean to approve the report or the recommendation?

Mr. FLANAGAN. Or the recommendation.

Mr. HOWARD. Mr. Dickinson, as I said a while ago, tried to review the reports for grammatical mistakes, but as to the recommendation, he made no recommendation.

Mr. FLANAGAN. You mean that Mr. Dickinson merely went over them to look at the grammar?

Mr. HOWARD. To get the technical idea, if there were any mistakes in the set-up, or if all the information that was needed was in there as to financial statements, and all, before we sent it to the Review Committee.

Mr. FLANAGAN. Did he do that on every loan?

Mr. HOWARD. He tried to, but in lots of them, due to pressure of work, he could not do it.

Mr. FLANAGAN. I asked that because I noticed that the report of Mr. Williams was not reviewed by anybody in your Division.

Mr. HOWARD. Yes.

Mr. FLANAGAN. Do you know why it was not reviewed?

Mr. HOWARD. No, sir; I do not.

Senator NIXON. Is that customary practice?

Senator NIXON. Not to have it reviewed by anybody in your Division? Is that the customary practice?

Mr. HOWARD. No, this review we are speaking of was just to see that the report was gotten up in proper shape, that all the information-I mean, that all the different paragraphs are filled in, which called for certain information.

Senator NIXON. I understand that, but my question, is Is that ordinarily done? Is that review ordinarily given to loans in your Division?

Mr. HOWARD. We have not been doing it lately, because we just have not had the time.

Senator NIXON. What was the practice at that time?

Mr. HOWARD. At that time it was the practice.

Senator NIXON. It was the customary practice at that time?
Mr. HOWARD. Yes, sir.

Senator NIXON. In the case of all loans; is that right?

Mr. HOWARD. Yes, sir.

Senator NIXON. Then this was an exception; was it not?

Mr. HOWARD. They were routed back to Mr. Dickinson, and he went over them and sent them on to the Review Committee, if they were in order.

Senator NIXON. That is right. In other words, in this case, the fact that this loan did not receive what you call this customary review, that was an exception, is that right, to the practice that existed then?

Mr. HOWARD. If it did not have some indication from Mr. Dickinson I would say "Yes."

Senator NIXON. Did it have any indication?

Mr. HOWARD. Not to my knowledge.

Senator NIXON. Not to your knowledge?

Mr. HOWARD. No, sir.

Senator NIXON. So far as your knowledge is concerned it had no review by your Division?

Mr. HOWARD. That is right.

Senator NIXON. And that was an extraordinary practice, is that right, or at that time it was?

Mr. HOWARD. That is right; yes.

Senator NIXON. It was an exception to the general rule?

Mr. HOWARD. Yes, sir.

There have been cases where there is a rush

and the examiner would take it directly to the Review Committee, in real exceptional cases, but very few, to my knowledge, but I know nothing about what happened to this one.

Senator NIXON. Did you try to find out what happened?

Mr. HOWARD. When?

Senator NIXON. Then.

Mr. HOWARD. No, sir.

Senator NIXON. Do you know why this review was not made? I mean, why it did not go through the usual channels-this loan? Mr. HOWARD. No, sir.

Senator NIXON. Why your Division was bypassed?

Mr. HOWARD. No, sir; I do not.

Senator NIXON. Your Division was bypassed and this was an exceptional practice, yet you made no inquiry to find out why that was the case?

Mr. HOWARD. That is what the record shows.

Senator NIXON. I am sorry for the interruption. Go ahead.

Senator HOEY. You may proceed, Mr. Flanagan.

Mr. FLANAGAN. The fact that your Division was bypassed on this loan, would that be one of the reasons why you might have told Mr. Toole that it was handled by the Board of Directors?

Mr. HOWARD. Well, I don't know. I don't recall having told him that in the first place, but it could have been.

Mr. FLANAGAN. If you did tell him that, that would be one of the reasons why you told him that; would it not?

Mr. HOWARD. That would probably be my conclusion only.

Mr. FLANAGAN. Was it the usual practice for examiners in your Division to consult with members of the Board of Directors?

Mr. HOWARD. Yes, sir, when called upon; it has been done in many

cases.

Mr. FLANAGAN. If an examiner in your Division conferred with a member of the Board, would he ask your permission to confer?