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not Mr. Baldwin's opinion; and the bill provides only for an authorization, and they have to come back each year for an appropriation. This bill does not appropriate a dollar.

Mr. BALDWIN. Do you mean after this $500,000,000 has been used? Senator BANKHEAD. No, I mean before you get it.

Senator TOWNSEND. Congress does not have to appropriate it, in this case.

Senator BANKHEAD. It says, "There is hereby authorized to be appropriated from time to time such sums as may be necessary to carry out the provisions of this act."

As I understand it, it is a 2-year program; and of course, you get such an appropriation this year, if you get any at all, that is necessary for the first year, and then come back and get more, later.

Senator TAFT. Is it not clear that no further appropriation is required, under this act?

The CHAIRMAN. Yes; because they are loans on self-liquidating projects.

Senator TOWNSEND. Mr. Secretary, under the provisions of this act you cannot charge any excess for interest?

Senator HUGHES. I think we ought to have that other matter cleared up, because there is a misunderstanding as to whether this is an authorization bill or an appropriation bill.

Senator BANKHEAD. Read section 22.

Senator HUGHES. Perhaps the Secretary of the Treasury can help us on that.

The CHAIRMAN. This is an authorization to make loans.
Senator HUGHES. Yes.

The CHAIRMAN. And the money is secured from the Reconstruction Finance Corporation, with which the loans are made. Then, like every other self-liquidating project, there is a contract entered into for the repayment of the loan, at so much per year, to liquidate the debt. That is what the bill provides.

Senator HUGHES. The authorization section provides that the Reconstruction Finance Corporation is authorized to provide the money? The CHAIRMAN. Yes; to provide the money for the loan.

Senator HUGHES. But you do not come back to Congress, to get an appropriation?

The CHAIRMAN. No; any more than the Reconstruction Finance Corporation comes back.

Senator BANKHEAD. That may be right, but that is not the way I read it.

Senator TOWNSEND. Mr. Secretary, my question is this: Under the provisions of this act you cannot charge any excess, for interest; at the present time the Government is able to borrow at about 2.30, and for long term about 2.38, or about that. What effect will that low rate of interest have on these other lending agencies, such as the Federal Intermediate Credit Bank and the other lending agencies which get a higher rate than that?

Mr. MORGENTHAU. I do not think it would have any particular effect. For instance, I think the Federal Farm Mortgage Corporation is directed by Congress to charge a rate set at less than that at which they can borrow, and each year Congress makes up the difference.

As I say, in this bill the use of a low interest rate is recommended as opposed to giving a grant.

Senator TOWNSEND. I know; but the other agencies have been getting at least 4 percent, and some of them have been getting 5 percent.

Mr. MORGENTHAU. Some of them have been charging too much. Senator TOWNSEND. You think that should be reduced?

Mr. MORGENTHAU. In some cases I think it should be reduced. Senator TOWNSEND. Will this not have a tendency to cause a man to take his loan from that agency and put it in this?

Mr. MORGENTHAU. If it can qualify as a self-liquidating loan, it might.

Senator TOWNSEND. If he can borrow from the other agency, it ought to qualify as a self-liquidating loan from this one.

Mr. MORGENTHAU. Well, the fact remains that I do not feel that they made full use of the present money market, in order to use the money for useful work.

Senator TOWNSEND. I have another question that I am very anxious to ask the Secretary, but it comes under the provisions of a bill before another committee, and I shall not take up his time at present with this question.

Mr. MORGENTHAU. Thank you.

Senator MALONEY. Mr. Chairman, may I ask a question?

The CHAIRMAN. Yes. Mr. Secretary, Senator Maloney would like to ask a question.

Senator MALONEY. Mr. Secretary, I should like to ask you a question at this point.

Mr. MORGENTHAU. Yes, sir.

Senator MALONEY. You said that in the consideration of this bill you had rejected, I believe, billions of dollars worth of projects? Mr. MORGENTHAU. That is right.

Senator MALONEY. You said that was done because you had some doubt about their being self-liquidating?

Mr. MORGENTHAU. That is right.

Senator MALONEY. I think you also said that you had satisfied yourselves that the projects that had been approved were selfliquidating?

Mr. MORGENTHAU. That is right.

Senator MALONEY. The other day when Mr. MacDonald was before the committee, he listed 17 projects in his department. Mr. MORGENTHAU. Yes.

Senator MALONEY. And under questioning he said that they were Federal projects, and that none of them had been sponsored by States.

What I should like to know is whether or not you feel it is possible under this bill to compel the States or subdivisions of the States or organizations created by more than one State, to guarantee the bonds. Mr. MORGENTHAU. May I have just a minute, please? I should like to confer with one of my assistants.

Senator MALONEY. Yes.

Mr. MORGENTHAU. The answer is no.

Senator MALONEY. Your answer is that you cannot compel the States to guarantee the bonds?

Mr. MORGENTHAU. No.

Senator MALONEY. Of course there are in many States, as you probably know, projects under consideration. In my own State I

know that there is more than one project under consideration, for selfliquidating projects, wherein the State is perfectly willing to guarantee the bonds. I am wondering why that is not true in other States. Mr. MORGENTHAU. It might be. However, aside from not wanting to force any State to do anything, it would not help any to have the State guarantee any of these bonds, so there would be no sense in asking them to do so.

Senator MALONEY. I think it might, if I might just point this out: I think it might be helpful to compel States to guarantee the bonds, because it would compel the States to practice self-restraint. There would be the restraining influence there, which seems to me to be important.

Mr. MORGENTHAU. Well, that is asking a little bit too much of us, and I do not think we should. I do not think it is our responsibility. Senator MALONEY. Let me ask you the question again, please: You do not think it is possible to have the States in any instance guarantee the bonds, under this program?

Mr. MORGENTHAU. No; I do not think it is.

Senator MALONEY. Thank you.

The CHAIRMAN. Thank you, Mr. Secretary. You have helped us a great deal, as always.

We shall recess now. The committee meets again at 3 o'clock in this room.

(At 12:30 p. m. a recess was taken until 3 p. m. of the same day.)

AFTERNOON SESSION

The committee reconvened at 3 p. m., upon the expiration of the

recess.

The CHAIRMAN. I have received a letter from the Associated General Contractors of America, with a request that the letter be inserted in the record. So we shall have it printed in the record. (The letter referred to is as follows:)

THE ASSOCIATED GENERAL CONTRACTORS OF AMERICA, INC.,

Washington, D. C., July 17, 1939. Re: S. 2759, Self-liquidating Projects Act of 1939, control of cost of self-liquidating projects.

Hon. ROBERT F. WAGNER,

Chairman, Senate Committee on Banking and Currency,

United States Senate, Washington, D. C.

DEAR SENATOR WAGNER: We submit herewith a proposed amendment to S. 2759. The reasons for our proposal are self-evident, being grounded in the very purposes and title of the act, "Self-liquidating Projects Act of 1939."

Section 17, duty of Federal agencies, as now written, aims to safeguard income by requiring “a rate or rates of interest which may reasonably be expected to reimburse the corporations for the cost to it." It is logical to go further and safeguard the original cost and subsequent maintenance expenses by methods found practicable in private business, and followed by most governmental agencies, namely, the preparation of adequate plans and specifications and the taking of competitive bids with the award to the lowest responsible bidder, wherever possible. The proposed amendment given below does not make mandatory the use of the contract system in all cases but under it Congress quite appropriately makes it the duty of the Federal agencies to use this method wherever possible in order to take advantage of proposal submitted by a contractor backed up by a performance bond which will guarantee final cost.

We propose that there be inserted in S. 2759 as introduced by Senator Barkley on July 10, 1939, on page 19, section 17, Duty of Federal Agencies, at the end of line 7 after the words, "with a view to", these words:

"safeguarding the self-liquidating features of this act by controlling the original cost and subsequent maintenance expense, shall require that no public works improvement may be commenced under this act until the cost thereof has been ascertained as a result of competitive bids, and where it may be determined to proceed on the basis of such bids, the contract shall be awarded to the lowest responsible bidder, and with the view to".

We submit this for your consideration and ask that you insert this communication as a part of the hearings and trust the committee will see the wisdom of inserting it as part of the bill which they finally draft.

Sincerely yours,

EDW. J. HARDING, Managing Director.

STATEMENT OF JOSEPH B. EASTMAN, CHAIRMAN, INTERSTATE COMMERCE COMMISSION, WASHINGTON, D. C.

The CHAIRMAN. We have the distinct honor of having Mr. Eastman as our next witness.

As you know, Commissioner, we are considering Senate bill 2759, and we have been informed that you had a good deal to do with assisting in drafting certain portions of this bill. We are very anxious to get your views with relation to any part of the bill or all that you care to discuss.

Now we shall be glad to have you proceed, if you please.

Mr. EASTMAN. My name is Joseph B. Eastman, and I am a member of the Interstate Commerce Commission. I appear here at the request of Chairman Wagner. However, I do not speak for the Commission, this afternoon, but must speak personally only.

Senator TOWNSEND. Would it interfere if I asked you a question at this point?

Mr. EASTMAN. No.

Senator TOWNSEND. In formulating the bill, did you formulate it personally, as Chairman of the Commission, or was the Commission as familiar with the writing of the bill as you were?

Mr. EASTMAN. I think the Chairman is under some misapprehension in regard to that matter; because so far as I know, I played no part in formulating the bill except, I think, in talking with a man who was interested in it, I did suggest the inclusion of shop equipment along with rolling stock. But I had nothing to do with the drafting of the phraseology of the bill.

Senator TOWNSEND. Then that was your contribution to the drafting of the bill?

Mr. EASTMAN. Yes; that is all.

Senator TOWNSEND. Very well.

Mr. EASTMAN. I may say that the Commission has had a request, however, for a report on this bill, and that report will be rendered in written form. We did not receive the request until yesterday, so that report is not ready.

Senator TOWNSEND. That will have the full endorsement of the whole Commission?

Mr. EASTMAN. Yes; or at least of the legislative committee.

As you know, Senate bill 2759 contemplates the use of Government funds up to $2,500,000,000 for what is called a self-liquidating improvement program. The projects are grouped under six different heads, including highway improvements, crossings on navigable waters, non-Federal public works, railroad equipment, rural electrification projects, and rural security projects. I have no experience or knowl

edge which would justify me in expressing an opinion on any other than the railroad-equipment group, and what I have to say will be confined to that group.

On page 4, railroad equipment is defined for the purposes of the bill. The definition appears at the bottom of page 4, and is stated as "engines, locomotives, tenders, freight and passenger cars of all types and classes, and parts thereof, and appurtenances thereto, and other rolling stock and railway shop equipment."

The questions which seem to be presented by this portion of the bill are these, as I see them; and I shall discuss these three questions in order. They are, first: Have the railroads need for new equipment to the amount of an investment of $500,000,000, which is what the bill provides for, and would they now profit from its acquisition?

Second: If the answer to the first question is "yes," is there need for new legislation for the further promotion of such acquisition, through the use of Government funds?

Third: If the answer to the second question is "yes," are the provisions of the bill adequate for this purpose, and do they go further in any respect than is necessary and desirable?

Now turning to the first question-which is, as I have indicated, whether the railroads have need for the new equipment contemplated, and could profit from its acquisition-my answer to that will be based upon knowledge and information which I have acquired when I was Federal Coordinator of Transportation, in the years from 1933 to 1936, and as a member of the so-called Committee of Three, which was the committee of three Commissioners who reported to the President last year, in regard to the transportation situation, and as a member of the Commission. What I shall have to say will be an expression of general opinion. Of course, I am unable to say specifically what particular railroads need equipment and what particular equipment they need. I can give you my general opinion as to the situation.

So far as my experience as Coordinator is concerned, a report was prepared by my staff at that time on consolidation or joint use of railroad major repair shops and modernization of repair-shop facilities; and that report indicated a very considerable need for modernization of railroad shop facilities, and that the railroads would profit from such modernization.

No similar report was made on locomotives or cars; but there was considerable discussion of such rolling stock, scattered throughout the various reports which the Coordinator made.

The Committee of Three, of which I spoke, was a committee made up of Chairman Splawn, of the Commission, Commissioner Mahaffie, and myself; and we made a report to the President, at his request, on March 24, 1938. That report was pusblished as House Document No. 583, of the Seventy-fifth Congress, third session. In making that report, we went into this matter of improvement in railroad equipment and facilities, and that was discussed on pages 29 to 31 of the printed report. I shall not read all that is said in that discussion, but I am sure that it will be included in the written report which we are going to make to you on behalf of the Commission.

I may say also that the so-called Committee of Three, which made that report, in this particular part of its study was aided by Mr. Frank C. Wright, of the staff of the Reconstruction Finance Corporation,

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