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NATIONAL RESOURCES COMMITTEE NORTH INTERIOR BUILDING WASHINGTON June 16, 1939 • Honorable Marriner S. Eccles, Chairman, Board of Governors, Federal Reserve System, Washington,D.C. My dear Mr. Secies: I handed you the draft of a statement I prepared in re an effort to encourage the financing of the construction industry "by private capital. For the reasons explained in my statement I think this is very important, and even if my suggested method is not accepted, the problem is worth tackling. Curiously enough, my attention has just been celled to an article in the NEW YOEK SUN of June 14, which I am sending you herewith, as illustrative of the need. Very sincerely yours, Enclosure . Delano Chairman, Advisory Committee fii>- / ; Juno 9, 1939 A PL&K I'D* W i l l s * H I CONSTRUCTION WITHOUT DIRECT OQtlflWMlET SUBSIDY Prior to 1930 the constructIon industry s*4 for • period of tfer@# years M M I S B I « maximum of something like 14 billion it annually,— probably the most tnportiint iingl© gf1> of industries is tk@ country. Bits isds ^iTiaed iffl>l!tt<1 J Ips&f • billion IK so«« 2: blllione in •%••• Hsl the r@st dlrld«d «ppro3cis&t©ly squally bstwsen eiqpenditures by large $tiblie utilltis® esa private eorporsts «xp>«iiditiuraa« 1*h® f«»l#ral (MrsnsiBBl IMS iR M M yesr$ tried to rsTlt«lis« this industry through the W& *&& the PWA, but sr«n et tins p«@.k its largest aggregate expenditures h«® at M tlaa r«*ehed oae*h«lf of tJie tot«?l «nnu8l expenditures prior to 1930, Xt ig with this f&0tual background thet w« are attanptittg to forecast a plen of proo«dur# ^hlch will revltallte spending by prirate by corporatione, by cities and States* all without dirset Pedsral subTention. In rwlftttiog the ^sst ta«M is- • poimt liifnI tiWt to remeaber that there were la the eo&struction industry seny fS*f eompetunt groups, usually incorporated under tt%t* l*tws, vhlch were &bl© to finance and build gre*t uiidertttkinge; for ejc&mple, gre«t rv.ilroed projecte involving many millions, such e» union stntloas, terminal yards, grade-reduction projects* bridges and tunnels. H&ny of the . hotels, apn.rt®*nt bouses, hexik buildings, e t c , , were rt»tl«rtf planned, financed «nd constructed through th«* •gMMf of tfeese pv&ftol* ** Furthermore, even when ttie Federal (toTerzment, or State au&lolpsl goYern&ent* had to «ft4«rt«fcf l*rge public work©, i t M i usual to l#t the ed&traet to thase liTgl fltM and corporation^ e-ltiiayLgh ia thoxe c«©©^ ilw CtMMtlg WMi ftH directly ursdertakea by th« soastruetloa corporation* To i l l u s t r a t e , WMf noteble worses fti-Te been constriuct^d by thefc® iMSgl eonetruction for •xfueplft, BouXd«r ^ n , wfeieh was construot«d by • combia^.tioii of six gr#£i oorportitlon^, ©ach of Vfcltfc bid oa • part or wiiola of thu project sad finally und«rtook ibe work M % jc4nt offair* ttuay tunnel £nd klgjtiwey projects hare been *lr;ilttrly b u i l t j slid ey#n in th« field of publie buildings, i t i s to be noted tfc«1 e l l th« greet goywro MBl buildings in the "Triangle* in Ksshington wers built during tbe Hoover end Coolidge Admtnlstrstione by corporations ftfiiiffj directly with the t«4eral Tr«ft»ury. Since 19:30 priTrate industry «nd the fiscal difficulties of many of the States and c i t i e s has resulted, M w@ here already said, la throwing the rinanolng of a l l gr#«t pi«c®s of construction, large it«f®s of lii,ghw.»y buiidlag, into %IM lap of Ifae Ftiwa flW problem sow i s how to wor^ oat ^ plan by which the eoastinaction industry will e^aia plan &nd flnence such work throui^h Governat»t but without direct Oovaraaeitt subreatlon. this, suggestion 1© not tftly d#eimbl« frost t fiacel It is effect #otu#*l economies In construction; for it l l no CMI • I t l i m i l by tla® §i4MiNMMt| wbeth^r Fe4«gwla State or m ta«t tfeer© if* MVtftta dupliC£ti9&& of ooet and ©.ddltiaae to cost if* practically inevitable* IBm I government iMHtef for i contract or esks for s bid upon e project, It f l a i l it to mrrowtA projects «itb siaay sfffuguerdu whleh no prltMtt g^oup would Thtt#t eT«n HMM^I pitas mny i l f t i i y fesve b«»n ami® In d©tail| tb» co&tr&ctoTi because h« ie liable for e l l errors of omission or cosodsslon by vhonso«v«r BttASi must fJPtfllly check •r«Ty d*tsil of the plans or specifications, ead not infrequently m&k« hie OWE detailed drawiags. OQ top of tbi® the contraotor nuftt put up ». bug© bond for trhich fe# fea to pay a. very tiigk f©@; Ml tb# result i s thfit MMI GoT«r»Bieat p».yE in th<? sad njor« for the job than a priTs,t# group of Individuals or corporation would pay* IM thie i s not isholly du« to th<r blgh^r standards of excell»no« but to- ccmdltlona of tb« corntract referred to* lh©c i t comes, however, to •fctminlfi^ money for eoastruction, the Government1e credit i s »o far better tb&c any fin«aeiftl group§ th&t I t saesii s-8 though © way of siding the construct ion industry mlgjit fee found which would eoafolne the (tdTAnteges of privfit© i s i t i s t i v e well organized construction experience on tfctj one hand, «ttlj the ,T4#fitfg superior a b i l i t y to finance the vork. In 0 nut shell, tta plan we* propose i s to invite corporation« to undertake large construction project® with the under#tftn&ing tbAt the Govtrnaant will guf5rnnt«e the -4eimrges for • tens of yatir* M 4 et the «@a« $1$* proride for an amortisation of »t least one-half of the f i r s t cost; far ex».npl«» It reasonable to ne^us* tl*t4t s M .u»*i~$»ubile un*»rtsHa§ Ilk® t bridg* or twtfttti i gr*^>t Ijuftej project f r sow* iwportsEt i public or p r l t e t e suoi) M feospltsiliii e^sesrt .hetlli9 »rt t ft#«| night bm »o un4.ertfi.k«a OB • busts of p»>j|»fl 2 #r r&lly guar3mt#©ilf vitli * further sllewssc* of*f of one ptr©#Et for AscrtlsustlOQ* This rould « f t out ta pr«etic« that thd eorforatioae would b© t t i up on tbe ! • • ! • whiefe wts but trith a G^veyfimaat ga«r»Bt«« IBi p t t t i s l li<|uidetlom. When th«* HAI duft* s^y one*bftlf of the iuim© will taft ba@a snfl the usdert«kin£ turned bask to the ftMttMAttf or the group vhieb h&d uadertaksn the work with t*orern»«nt ?id. It is @o»- ceiTsble tfa«t th®@© QorporntionB should b© corporatloo* not for profit» or thai b«n«fiois.l t&terost or i f ell r@pr@a8iittiig the 0wm#rs'lilp be no par Tslu#i sto©k vhoss ultimata wnln® would dtpand entirely the a b i l i t y ea& •ffloleaoy of it# mafiftgemeoat* It i s alto tlMkt th# VtttOTtl G©v#rait#»ti w %1MI c i t i e s o&d &t?stss In wea 4o®.$ should r a t a l s an iut^rest in stoek, though sot eostrol la the corporations* Th« aboTft p&MI Is adl lltitiTIi ' &® a ayg^eetiom to ilNHrfbMi either t i e FiA or fPA, RFC or any t t t o f plan of proe#4ure sHiill >ff—ft to te.T# la other word@t i t ! • an sddltlone.l or nupplettetitery methsd of should b© &dopt«d uuder suitable ©nsbling This article is protected by copyright and has been removed. The citation for the original is: New York Sun, “Finds Main Recovery Problem Is Dependent on Construction,” June 14, 1939.
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