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BOARD OF GOVERNORS • F THE FEDERAL RESERVE SYSTEM Office Correspondence Tft Mr. Thurston Fyftm Mr. Cherry Date May y>. mf? Subject: Hearings on f i n a n c i a l problems of small business before House gonpittee oyi Small gusjnQgg Secretary Wallace concluded his testimony t h i s morning» He said the most important thing to be done f o r l i t t l e business i s the continuance of f u l l employment. He said t h i s was 90 V e r cent of the problem. He would not commit himself nor would he discuss the question o f the amount of money necessary to insure or guarantee loans. He said he did not care t o go i n t o the d e t a i l s of any plan. Nor would he state vdaich Government agencies should handle the matt e r . He said there were several plans before the Congress and r e ferred to "the Mead b i l l and the Wagner-Spence b i l l s and suggested that the Committee get information on these matters from the HFC, the Federal Reserve Board, or the Smaller Yfer r l a n t s Corporation. He declined t o express his personal opinion on the quest i o n of increasing the tax exemption f o r small business without f i r s t conferring with the Secretary o f the Treasury and he also declined t o express his opinion on the e f f e c t of monopolies on small business without f i r s t conferring with the Attorney General. Congressman Robinson stated that perhaps one of the d i f f i c u l t i e s that small business has in obtaining necessary financing i s the r e f u s a l of banks t o get back to the old standard o f making loans on personal s e c u r i t y , stating that banks generally are content to invest t h e i r funds in Government s e c u r i t i e s and levy service charges. Secretary Wallace stated that he doubted i f banks w i l l ever get back to "character banking 11 . He said t h e i r experience in the depression and subsequent banking regulations set up under law has caused banks to go out of that type o f banking. He agreed, however, that l o c a l bankers who are acquainted with the smaller business man are best f i t t e d t o a s s i s t him. Congressman Patman asked the Secretary t o submit two quesr tions to his Advisory Committee on Small Business f o r i t s opinions namely, ( l ) what should be done to curb or r e s t r i c t the expansion or a c t i v i t i e s of national chain stores and ( 2 ) , explain in just # i a t way the Robinson-Patman Act works to the disadvantage of small business. The answers to these questions are t o be incorporated in the record of the hearings. f
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