So the practical effect is almost to guarantee these bonds, notes, and debentures issued by the Reconstruction Finance Corporation. I shall not take up each section of this bill, because an analysis of it is here, in mimeographed form, following each section, so that each member of the committee has a copy, I think. As you recall, the President sent a letter to Senator Byrnes on the 21st of June, I believe, in reply to a letter which the Senator had written him regarding the $125,000,000 transfer of funds from the W. P. A. to the P. W. A., in the relief bill; and when Senator Byrnes wrote the President, asking his attitude on that, the President replied with this general program in which he suggested that instead of 125,000,000 allocated or earmarked for the P. W. A., he had been working on, and therein submitted a general program involving the P. W. A. program of $350,000,000. Senator ADAMS. Senator Barkley, the President's letter, if I am correct, contemplated a 7-year program? Senator BARKLEY. That is right. Senator ADAMS. This bill contemplates an indefinite program; there is no 7-year provision in this bill, because the money comes back and goes into a revolving fund. Senator BARKLEY. The suggestion in the President's letter was a program running 2 years in some respects, and up to 7; but the bill does not put any definite limit on it. If it could all be accomplished in 1 year, that would be the end of the bill—or if it took 3 or 4 years, or whatever the period of time. The theory was that under the P. W. A., for instance, we have been making loans and grants first starting out with 70 to 30, and for a while, probably, 66% to 33%; and finally we established the policy of making grants of 45 percent and loans of 55 percent. The thought has been that we had gotten far enough along to abandon the grant feature of these public works projects, and that there would be enough of them applied for to absorb the $350,000,000, whether in 1 year or in 2 years; and the President's letter suggested a 2-year program for that; to absorb the $350,000,000 as loans, self-liquidating, which would be returned to the Treasury, at a rate of interest sufficiently low to attract the borrower, and at the same time in comparison with the rate of interest which has been paid on the 55 percent of the projects represented by loans, to amount over a long period of time to practically a grant of 15 to 20 percent, depending upon the length of time and, of course, the rate of interest. The bill provides, here, that the rate of interest shall be one-eighth of 1 percent in addition to the yield of the longest-term Government obligation outstanding. Senator TOWNSEND. However, there is no limit on the time of the public-works projects? It could be 40 or 50 years if so desired? Senator BARKLEY. No. The limitation on the bonds to be issued by the R. F. C. for all these purposes is a maximum of 40 years. So it would be 1 to 40, whatever the terms might be. Senator ADAMS. Senator Barkley, do you have in mind the total that is to be authorized under the terms of this bill? Senator BARKLEY. Yes; the total maximum is $2,560,000,000. Senator ADAMS. The individual items total $2,700,000,000. Senator BARKLEY. That includes $100,000,000 already appropriated for farm tenancy and $40,000,000 already appropriated for the R. E. A. Senator ADAMS. Are those the items that are referred to as reappropriation of unobligated balances? Senator BARKLEY. Yes; and so, when you add those, you get practically $2,700,000,000. Senator TOWNSEND. Has any consideration been given to the Lea bill, giving $350,000,000 to the farmers? Senator BARKELY. That is a different sort of program, and the Secretary of Agriculture probably can differentiate between those two better than I can. So that the $350,000,000 for works program or P. W. A., as we have known it up to now, is taken care of in this bill; and it is not for a particular year, but it is until it is absorbed. It might run 2 or 3 or 4 years, but the probabilities are that it would be used during the next year or two. The question of equipment for railroads is one that Mr. Jones will discuss in detail, because he has been in charge of loans to railroads by the Reconstruction Finance Corporation. There has been a difficulty among the railroads, as all of you know, in borrowing money themselves. They have really not borrowed as much as they probably were authorized to borrow, because of their financial condition and the condition of the financial markets. They have been a little bit skittish, if I may use that word, about actually borrowing the amount of money they need for equipment. Senator TOWNSEND. They have had no trouble in securing money for equipment loans, have they? Senator BARKLEY. Well, where they have applied for loans, I think they have obtained them; but the information I have is that they have not made use of the borrowing power, because of that, to the extent which they would make use of the leaning provisions of this bill, by which the Reconstruction Finance Corporation is authorized to take charge of the equipment and loan it to the railroads on sort of an amortization plan, designed to pay for it and to enable them to own it. Senator TAFT. Any private banker will do that for them just as well as the Reconstruction Finance Corporation. Senator BARKLEY. Well, they have not done it. Senator TAFT. They have been perfectly willing to do it. Senator TOWNSEND. Yes; they have been perfectly willing to do that. Senator BARKLEY. Well, I think Mr. Jones can give the details of that, and I am simply stating the general purposes of the bill. One of the divisions of the bill provides for self-liquidating roads. You recall that Mr. MacDonald, the Chief of the Bureau of Public Roads, made a report which is House Document No. 272 of this Congress. That report is dated April the 27th, and I think you all have copies of it, or will have; copies are available here. Mr. MacDonald will go into that matter; but in a general way that provision is intended, of course, to supplement existing roads. It is not intended to take over any existing highways and make toll roads of them; but in certain thickly settled portions of the country the result will be, as it is intended, to inaugurate the construction of highways that would be used by people who would prefer to use such toll roads as compared to the ordinary common roads over which all sorts of traffic will go. The theory is that many people would be willing to pay a reasonable toll rather than to incur the difficulties involved in travel on the present roads in thickly settled and much-traveled sections of the country. In that connection, I think it can be shown that in other countries these roads have turned out to be rather successful. I recall that 2 years ago I was in Naples; and they have a toll road leading from Naples out toward Sorrento, about 35 miles long, a very beautiful, straight road that misses the thick traffic in the towns that skirt around the Bay of Naples. The toll is reasonable; as I recall, it is from 30 to 50 cents, as a maximum; and anyone who is in a hurry or who wishes to avoid traffic would travel over that road in preference to creeping along the ordinary roads which pass through the more thickly settled portions of that country. That toll road is selfsustaining and, as we call it, self-liquidating. In other parts of Europe there are similar roads; and I think the theory is—and it is generally believed that in certain parts of this country it would be possible to build these highways or to help and cooperate in the building of them and, in the charging of a reasonable toll, that the traffic would be sufficient. Senator ADAMS. Do you think Congress could resist the temptation to be generous and take off the tolls? Senator BARKLEY. Of course we could not say. Senator TOBEY. Of course the Merritt Parkway and the Hutchinson River Parkway, in New York, have just had tolls placed upon them. Senator BARKLEY. So, as I say, those are the general purposes of the provisions. Senator ADAMS. May I ask how much attention have you given to the matter of acquisition by purchase of real property for investment purposes. Senator BARKLEY. Of course that has been considered here. We provide that the Commissioner of Public Roads can condemn lands for rights-of-way but not for any other purposes. In other words, the thought is that along these roads it might be possible to provide for concessions that people would be willing to pay for, and thereby help to make the roads self-liquidating, and help pay the expenses of the operation and construction of the roads. Senator RADCLIFFE. It is not contemplated to resell any of that, but only to rent it? Senator BARKLEY. It is not contemplated that the Government will buy it for speculative purposes. Senator TAFT. Oh, yes; that is what it says. Senator BARKLEY. Well, not purely for speculative purposes; but if the Government had an opportunity to make a profit, it is permitted to do so. Senator TAFT. Oh, no. The Government is permitted to buy it only if the Government can make a profit from it, by speculative land values. Senator TOWNSEND. What pages are you reading from? Senator TOWNSEND. This is paragraph (g), on page 7: To acquire by purchase, but not by condemnation for investment purposes, any real property in the vicinity of any highway improvements or Federal-aid construction if, in the opinion of the Commissioner of Public Roads and the Corporation the price at which such real property may be purchased is such as to make it probable that the United States will, as a result of appreciation in land values resulting from any highway improvement or Federal-aid construction, be able to dispose of such property. Senator TAFT. And "within 20 years." Senator BARKLEY. Of course that is intended to contribute to the liquidation of it, itself. Senator TOBEY. Of course you are putting the Government into the land business, as speculation; and the potential profit is the cause of the speculation. Senator ADAMS. We shall be able to regulate the kind of hot-dog stands put up. Senator BARKLEY. In other words, it might turn out that the traffic was not as heavy over it as contemplated; and therefore any profits that might be made out of concessions or even out of the purchases and the increase of the value of the land along the sides of the roadway, would be a method of assisting in repaying the Government for the expenditures involved in constructing the highway. Senator DANAHER. In any case, Senator Barkley, is it not a fact that if the Government does build a road, it is bound to increase the value of the property through which it runs, in which event the Government certainly ought to have the profit, if there be any? Senator BARKLEY. Well, that is true, just as in the case of the road from here down to Mount Vernon. It is just a natural improvement of highways through any part of the country. Senator TAFT. It also decreases the value of all the land bordering the roads from which the traffic is taken. Senator BARKLEY. Of course that is also speculative. Senator DANAHER. One thing that is bothering me is this: A few years ago the President caused a survey of the toll-road proposition to be made, at which time he was advised against the extension of toll roads, on the ground that the plan just would not work. Do you happen to recall the result of that? Senator BARKLEY. Well, Mr. MacDonald is here and no doubt can give the details of that. There was, several years ago, a rather superficial survey made as to the possibility of inaugurating a general program like that, over the country. Senator TOWNSEND. Who made that report? Senator BARKLEY. At that time I think it was felt that there might be certain thickly settled portions of the country where roads like that would pay, but that as a general matter we would have to try it out along routes where there was sufficient traffic and sufficient business probably to make it possible to pay out the costs of operation and construction. However, Mr. MacDonald will give you more detailed information about that than I can. Senator TAFT. The proposal is that these be Federal-owned roads throughout? Senator BARKLEY. Not altogether. Wherever the Government goes in and buys a right-of-way and constructs a road itself, of course that would be a Federal-owned highway; but the bill also permits the Commissioner of Roads to cooperate with States and localities in the construction of roads, and also provides for a division of the authority which would be exercised over them. Senator DANAHER. Before you leave that condemnation provision with respect to highways, Senator, may I ask whether it is not a fact that unless the power to acquire at private purchase be granted, people can insist on condemnations, and tie up the whole plan? Senator BARKLEY. Do you mean for the right-of-way itself? Senator DANAHER. Yes. Senator BARKLEY. Yes; of course. Senator DANAHER. For instance, out in Washington right now they have over 300 condemnations pending in the district court, for one road. Senator BARKLEY. That is right. This law also adopts the general condemnation law heretofore passed by Congress, with respect to national parks and things like that: that the Government may take possession of the land upon the filing of the condemnation suit, the matter to be settled later as to the price, so as to bring about no delay in the beginning and completion of the program. Senator DOWNEY. Senator Barkley, may I ask if the proposal here is at least in part a result of the data developed on savings before the National Economic Committee? Senator BARKLEY. I am not aware to what extent this program is an outgrowth of that investigation. I have no doubt it links up with it in part. Senator DOWNEY. I might say that this particular part of it very closely follows the suggestions made by Professor Hanson, of Harvard, and I should like to say to the committee that that investigation showed that when we crashed in 1929 we had about eight billions of excess savings accumulated in that year, and when we crashed in 1937 we had about eight billions of excess savings beyond what we utilized or could utilize for capital formation. If this plan is designed in any way to meet the situation developed by that data, to me it seems totally insufficient. It would take away perhaps three or four million of about $8,000,000,000 of excess savings. Senator BARKLEY. Of course, if we assume that this $2,600,000,000 program is carried out and accomplished, that money has to be drawn. in some way from private sources. The agencies of the Government, of course, are the vehicle through which it will be put into this program, so that if all of it were utilized, you might say, at least to the extent that this does authorize it-two billion and a half, or more-it might be possible that a considerable part, if not the greater part of it, would be taken from the excess savings to which you refer. Senator DOWNEY. I understand that is undoubtedly true, Senator; but if you have excess savings of eight or ten billion dollars, and if you have expenditures of four or five hundred million dollars a year under this program-which is optimistic-that would be about 4 or 5 percent of it. Let me say that it looks like a repetition of 1929, when the bankers and investors were feverishly trying to force out the savings of States and counties, and the result was totally inadequate. It merely would seem to me that we are trying to provide a totally inadequate method, and it would merely take us further into debt. Senator BARKLEY. Well, I do not suppose it would be possible to provide a law by Congress which would absorb the whole of the $8,000,000,000 of excess savings to which you refer. Senator DOWNEY. Yes, sir. Senator BARKLEY. This may not be adequate from the standpoint of anybody who would like to see all that $8,000,000,000 become 165717-39-2 |