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HOUSE BILLS NUMBERED 1, 27, 94, 4493, 4535, 4539,
5461, 6180, 6584, 6693, 7726, 8016, 9593, 9694,
9929, 10096, 10367, 11117, 11300, 11674

APRIL 11 TO 29, AND MAY 2 AND 3, 1932




JAMES W. COLLIER, Mississippi, Chairman
CHARLES R. CRISP, Georgia, Acting Chairman. WILLIS C. HAWLEY, Oregon.
HENRY T. RAINEY, Illinois.
ALLEN T. TREADWAY, Massachusetts.
ROBERT L. DOUGHTON, North Carolina.
LINDLEY H. HADLEY, Washington.
SAMUEL B. HILL, Washington.
HENRY W. WATSON, Pennsylvania.
EDWARD E. ESLICK, Tennessee.
JOHN W. McCORMACK, Massachusetts.
DAVID J. LEWIS, Maryland.
FRED M. VINSON, Kentucky


Statement of—
Addy, David V., Detroit, Mich
Allgood, Hon. Miles C, Representative from Alabama
Almon, Hon. Edward B., Representative from Alabama
Andrew, Hon. A. Piatt, Representative from Massachusetts
Armstrong, George W., Fort Worth, Tex
Beard, Fred, Dearborn, Mich
Boileau, Hon. Gerald J., Representative from Wisconsin
Castle, Col. B. F., New York City
Christgau, Hon. Victor, Representative from Minnesota
Clancy, Hon. R. H., Representative from Michigan
Clark, Gaylord Lee, Baltimore, Md
Cochran, Hon. John J., Representative from Missouri
Collins, Hon. Ross A., Representative from Mississippi
Condon, Hon. Francis B., Representative from Connecticut
Connery, Hon. William P., jr., Representative from Massachusetts._
Coughlin, Rev. Charles E., Royal Oak, Mich
Coxey, Gen. Jacob S., Massillon, Ohio
Davis, Bert, Barberville, Ohio
Dawes, Brig. Gen. Charles G., president Reconstruction Finance
De Coe, Darold D., Sacramento, Calif
Durham, Maj. Knowlton, New York City
Emery, James A., Washington, D. C
Evans, George D., Philadelphia, Pa
Fahey, John H., Watertown, Mass
Fish, Hon. Hamilton, jr., Representative from New York
Fisher, Prof. Irving, New Haven, Conn
Ford, J. W., New York City
Fraser, F. G., Washington, D. C
Garber, Hon. M. C., Representative from Oklahoma
Glover, Hon. D. D., Representative from Arkansas
Goldenweiser, Dr. E. A., Washington, D. C
Harriss, Robert M., New York City
170, 792
Hastings, Hon. William W.,Representative from Oklahoma
Hines, Brig. Gen. Frank T., Administrator of Veterans' Affairs
Hoeppal, J. H., Arcadia, Calif
Howells, Wallace J., Detroit, Mich
Jackson, W. D., Washington, D. C
Janney, John, New York City
Jeffries, Hon. Edward J., Detroit, Mich
Johnson, Hon. Jed, Representative from Oklahoma
Johnson, Hon. Royal C, Representative from South Dakota
Kemmerer, Prof. Edwin Walter, Princeton, N. J
King, Dr. Willford L, New York City
Kirby, Thomas, Washington, D. C
Knable, Harry, Philadelphia, Pa
Kvale, Hon. Paul, Representative from Minnesota
Lafferty, Hon. Walter, New York City
112, 796
LaGuardia, Hon. Fiorello H., Representative from New York
Lazar, J. A., Washington, D. C
Lea, Hon. Clarence F., Representative from California
LeBlanc, George, New York City
Lunine, Capt. Samuel M., Reading, Pa
McClintic, Hon. James V., Representative from Oklahoma
McConnell, Edward C, New York City




Statement of—Continued.
McGrath, Maurice P., Hyattsville, Md
McKeown, Hon. Tom. D., Representative from Oklahoma
Meyer, Hon. Eugene, Governor of the Federal Reserve Board
Mills, Hon. Ogden L., Secretary of the Treasury
Mitchell, Hon. J. R., Representative from Tennessee
O'Neill, Richard W., New York City
Owen, Hon. Robert L., former Senator from Oklahoma
Patman, Hon. Wright, Representative from Texas
Patterson, Hon. La Fayette L., Representative from Alabama
Pettengill, Hon. Samuel B., Representative from Indiana
Rankin, Hon. John E., Representative from Mississippi
Ray, L. S., Washington, D. C
Reynolds, Rev. F. C , Baltimore, Md
Simmons, Hon. Robert G., Representative from Nebraska
Simpson, John, Washington, D. C
Stember, S. J., New York City
Swank, Hon. Fletcher B., Representative from Oklahoma
Sweeney, Hon. Martin L., Representative from Ohio
Thomas, Hon. Elmer, Senator from Oklahoma
Withrow, Hon. Gardner R., Representative from Wisconsin
Wolman, Paul C , Baltimore, Md
Brief of—
Hennepin (Minn.) County Council, Veterans of Foreign Wars
Olson, N. A., Detroit, Mich
Paston, D. George, New York City

29, 821
2, 285, 757
121, 817

MONDAY, APRIL 11, 1932

Washington, D. C.
The committee met at 10 o'clock a. m., Hon. Charles R. Crisp
(acting chairman) presiding.
The ACTING CHAIRMAN. Gentlemen, the committee will please
come to order. I will state to the committee how I shall direct the
hearings to be held. The rules of the House are made specifically
applicable to the hearings before the committee. Under the rule»
of the House we have two periods of debate; we have debate under
the hour rule and under the five-minute rule.
Of course, the committee may invoke the five-minute rule whenever it sees fit. We will start the hearings under the broader rule
of the House, the hour rule.
I would suggest that the proponents of the measure first be heard
and when they have concluded, the opponents of the measure will be
given an opportunity to be heard. At the conclusion of their presentation, the porponents will be given an opportunity to offer rebuttal
It seems to me, taking into consideration how this committee has
worked during this session of Congress, it would be advisable not to
have afternoon sessions on these bills. The Members, of course,
desire to participate in the work on the floor of the House and they
have as well their own district matters.
Therefore, I shall fix the time for the hearings to start at 10 o'clock
in the morning and to run until 12.30, allowing us two and a half hours
each day.
It was suggested to me this morning by Mr. Patman, Mr. Rankin,
Senator Thomas, and Mr. Kvale, that the proponents of the measure
would be pleased if the committee would recognize a committee
selected by them to present their witnesses and as the authority has
been conferred upon me to direct this hearing, I shall pursue that
policy. If the Members of the House who are urging this legislation
will meet among themselves and agree on a committee of three to
have charge of the presentation of witnesses and as to the time each
witness shall occupy, subject to the hour rule, I shall endeavor to*
carry out their suggestions.
Mr. RANKIN. Mr. Chairman, shall we House Members who are
supporting this measure meet now and agree on that?
The ACTING CHAIRMAN. I do not think it is necessary to do that.
You may do it after we get through. I presume you have certain
witnesses you are prepared to present to the committee now. Of



course, it would be perfectly agreeable to the Chair if you gentlemen
have your conference now.
Mr. RANKIN. We know which witnesses we want to present to-day.
Shall we proceed with them?
The ACTING CHAIRMAN. That is quite agreeable to the committee.
The clerk of the committee has received a telegram from General
Butler expressing his favorable interest in the legislation and stating
that it will be impossible for him to be present. Without objection,
we will have the telegram placed in the record.
(The telegram referred to is as follows:)
APRIL 10, 1932.

Clerk of House Ways and Means Committee,
Washington, D. C:
It is a matter of very great regret to me that I can not attend the hearing of
the Ways and Means Committee on April 12 in person, to testify in favor of the
prompt payment to the soldiers of the unpaid portion of the bonus which I feel
justly due them. I have always been, and shall continue to be in favor of this
bonus. Unfortunately, however, I can not possibly leave the present campaign
in Pennsylvania to come to Washington at this time. I have traveled through
42 States in the past six months and everywhere find the soldiers in great need
of assistance. The Nation owes them this return for their services. Whether
elected Senator or not I shall make it my personal business to do all in my power
to secure justice to the soldiers in this and in every other matter concerning
their welfare.

The ACTING CHAIRMAN. Gentlemen, you may present your first
witness. We will hear Mr. Patman.

Mr. PATMAN. Mr. Chairman and members of the committee,
we appreciate the fact that this committee has worked very hard in
the last few months. I do not suppose there has been a committee of
Congress that has worked as hard and as faithfully as the Ways and
Means Committee of the House. We do not want unduly to burden
you. We appreciate the fact that you have given us this opportunity to present our side of the case and any arrangements that the
committee makes as to time for these hearings will meet with our
entire satisfaction. We shall certainly try to conform to the wishes of
the committee in every way in order that the committee may be
Senator Thomas has been invited to appear before the committee by
myself and other members of the House as well as by the Veterans of
Foreign Wars. Ex-Senator Owen of Oklahoma is here. He has been
invited to be a witness. Senator Owen can not be present after
this morning. In fact, he remained over at our request, in order to
make his appearance this morning. I hope the committee will hear
him after I have finished. For that reason I expect to cut the time of
my presentation as much as possible.
Dr. Willford I. King, the head economist of New York University,
who recently appeared before the Banking and Currency Committee,
will be a witness for the proponents of this legislation. He can be
here Thursday or Saturday and in accordance with the suggestion of
the chairman this morning, we suggest Thursday would be the best



day. I have asked the clerk of the committee to send him a telegram
inviting him to be here next Thursday.
Senator Thomas has also suggested that the committee should
hear Mr. Le Blanc, who has a reputation as an economist, not only
here in our own country, but internationally. We have requested
that he be invited to appear. Also Mr. Harris of Harris & Volts of
New York. We ask that he be invited.
The ACTING CHAIEMAN. I assume that you have given the clerk
their names and addresses?
Mr. PATMAN. The clerk is taking these names down.
Sergt. Alyin York, the greatest hero of the World War, is to be
here as a witness. He is to be in Louisville, Ky., I believe to-night,
and will get here probably to-morrow or the next day. I understand
his testimony will be short, will not take a great deal of time to
I hope the committee members will feel free to interrupt me if I
wander from my subject even the least bit, or any time any member
wishes to ask a question. I hope the committee will feel at perfect
liberty to interrupt me at any time.
The ACTING CHAIRMAN. May I say that under the rules of the
committee, witnesses appearing before the committee are not interrupted by members unless the witness yields to the member. If the
witness desires to be interrogated, that is entirely in his own control.
Of course, when the statement of the witness is completed members
of the committee have the right to ask questions.
Mr. RAGON. Mr. Chairman, may I ask Mr. Patman how long he
expects to take to conclude his statement?
Mr. PATMAN. Well, I must get through before 11 o'clock.
Mr. RAGON. I was going to suggest that Mr. Patman probably
knows more about this legislation than any man in the country.
Probably he will be on the witness stand for some time. I thought it
might be well to let Senator Owen precede Mr. Patman, if that would
not upset arrangements already made.
Mr. PATMAN. I felt that the more orderly procedure would be to
explain the proposal first, even for the benefit of Senator Owen who is
Mr. RAGON. Very well.
Mr. HAWLEY. Mr. Chairman, before Mr. Patman proceeds, may I
ask him whether he has a bill on which they are all agreed?
Mr. PATMAN. NO, sir; there is a difference.
Mr. HAWLEY. My only purpose in asking the question was that if
there is such a bill, to suggest that it be introduced in the record at
this time.
Mr. PATMAN. The bill that most of us have agreed on, I think, is
H. R. 7726, which is referred to as House bill No. 1 as amended by the
addition of section 2 to provide for the issuance of currency to pay
adjusted-service certificates.
Mr. HAWLEY. I suggest that bill be put in the record.
Mr. PATMAN. Very well.



(H. R. 7726, the bill above referred to, is as follows:)
[H. K. 7726, Seventy-second Congress, first session]
A BILL To provide for the immediate payment to veterans of the face value of their adjusted-service

Be it enacted by the Senate and House of Representatives of the United States of

America in Congress assembled. That Title V of the World War adjusted compensation act, as amended, is amended by adding at the end thereof three new sections to read as follows:

"SEC. 509. (a) The Administrator of Veterans' Affairs is authorized and directed
to pay to any veteran to whom an adjusted-service certificate has been issued,
upon application by him and surrender of the certificate and all rights thereunder
(with or without the consent of the beneficiary thereof), the amount of the face
value of the certificate as computed in accordance with section 501.
" (b) No payment shall be made under this section until the certificate is in the
possession of the Veterans' Administration, nor until all obligations for which the
certificate was held as security have been paid or otherwise discharged.
" (c) If at the time of application to the Administrator of Veterans' Affairs for
payment under this section, the principal and interest on or in respect of any loan
upon the certificate have not been paid in full by the veteran (whether or not the
loan has matured), then, on request of the veteran, the administrator shall (1)
pay or otherwise discharge such unpaid principal and so much of such unpaid
interest (accrued or to accrue) as is necessary to make the certificate available for
payment under this section, and (2) deduct from the amount of the face value of
the certificate the amount of such principal and so much of such interest, if any,
as accrued prior to October 1, 1931.
" (d) Upon payment under this section, the certificate and all rights thereunder
shall be canceled.
" (e) A veteran may receive the benefits of this section by application therefor,
filed with the Administrator of Veterans' Affairs. Such application may be made
and filed at any time before the maturity of the certificate, (1) personally by the
veteran, or (2) in case physical or mental incapacity prevents the making or
filing of a personal application, then by such representative of the veteran and in
such manner as may be by regulations prescribed. An application made by a
person other than a representative authorized by such regulations, or not filed on
or before the maturity of the certificate, shall be held void.
" (f) If the veteran dies after the application is made and before it is filed it
may be filed by any person. If the veteran dies after the application is made it
shall be valid if the Administrator of Veterans' Affairs finds that it bears the
bona fide signature of the applicant, discloses an intention to claim the benefit
of this section on behalf of the veteran, and is filed before the maturity of the
certificate, whether or not the veteran is alive at the time it is filed. If the death
occurs after the application is made but before the negotiation of the check in payment, payment shall be made to the estate of the veteran irrespective of any
beneficiary designation, if the application is filed (1) before the death occurs, or
(2) after the death occurs, but before the mailing of the check in payment to the
beneficiary under section 501.
" (g) Where the records of the Veterans' Administration show that an application, disclosing an intention to claim the benefits of this section, has been filed
before the maturity of the certificate, and the application can not be found, such
application shall be presumed, in the absence of affirmative evidence to the contrary, to have been valid when originally filed.
"SEC. 510. If at the time this section takes effect a veteran entitled to
receive an adjusted-service certificate has not made application therefor he shall
be entitled, upon application made under section 302, to receive at his option
either the certificate under section 501 or payment of the amount of the face
value thereof under section 509.
"SEC. 511. The Administrator of Veterans' Affairs, in the exercise of his
powers to make regulations for payment under section 509, shall to the fullest
extent practicable provide a method by which veterans may present their applications and receive payment in close proximity to the places of their residence."
SEC. 2. Payments of the face value of adjusted-service certificates under section
509 or 510 of the World War adjusted compensation act, as amended, shall be paid



in Treasury notes. The Secretary of the Treasury of the United States is hereby
authorized to have engraved and printed a sufficient amount of Treasury notes,
in the denominations of $1, $2, $5, $10, $20, $25, $50, $100, $500, and $1,000
each; such Treasury notes shall be full legal tender noninterest bearing, exempt
from all taxes, including Federal, State, and subdivisions thereof.
SEC. 3. This act may be cited as the "Emergency adjusted compensation
act, 1932."

Mr. PATMAN. The other school of thought is represented here by
Senator Thomas of Oklahoma. He has a little different plan of payment. I am not favoring his plan, I am not opposing it. He is not
favoring my plan. He favors his own plan. But I am very anxious
that the committee hear him.
In the beginning, I want to say to this committee that unless we
can show that the payment of these adjusted service certificates will
benefit the country, promote the general welfare, we are not entitled
to win; we are not entitled to have this bill pass.
It is true that the veterans need this money. More than 2,000,000
of them are out of jobs. But, at the same time, they realize that in
order for them to be helped, it must be done on the theory that it will
promote the general welfare. If it will not promote the general welfare, if it will be the least bit detrimental to the general welfare, we
are not entitled to ask this committee to pass or to approve this
Now, I say that 2,000,000 veterans are unemployed. That is a misstatement in this: Mr. John Arthur Shaw, who is Director of the
Unemployment Service of the Department of Labor, told me—and I
have his statement in the record—that 750,000 able-bodied veterans
are unemployed. They are able, willing, and anxious to work and
can not find jobs. More than 75,000 men who have disabilities not
sufficient to disqualify them for work, are unable to find jobs, although
willing to work. There are 800,000 veterans, so Mr. Shaw tells me,
who are working from 1 to 3 days a week at greatly reduced wages
and, of course, are not making sufficient money to pay their actual
running expenses, to obtain the comforts and necessities of life for
themselves and their families. That, of course, aggregates almost
2,000,000 veterans.
By reason of the fact that there are 3,666,000 of these certificates,
and that all except 800,000, approximately, of the veterans have
borrowed on those certificates, and further in view of the fact that
200,000 of those 800,000 can not borrow because their certificates are
not two years old, I think that is pretty good proof that at least fourfifths of the veterans are in need of this money.
Two hundred thousand can not borrow. Taking 200,000 from
800,000, approximately—I am not attempting to quote the exact
figures—would indicate that there are only about 600,000 who have
not borrowed because they did not want the money.
The question receiving the most consideration at this time in
regard to this legislation, throughout the country and among the
veterans is, can the payment to the veterans on a debt that must
be paid anyway be used as a vehicle to carry our country back to
House bill No. 1 as amended by 7726 was drawn by Mr. Beaman,
the gentleman who assists this committee in drawing bills. It was



very carefully drawn. Afterwards H. K. 7726 was introduced, which
provides this one addition—section 2:
Payments of the face value of adjusted-service certificates under section 509
or 510 of the World War adjusted compensation act, as amended, shall be paid
in Treasury notes. The Secretary of the Treasury of the United States is hereby
authorized to have engraved and printed a sufficient amount of Treasury notes,
in the denominations, of $1, $2, $5, $10, $20, $25, $50, $100, $500, and $1,000
each; such Treasury notes shall be full legal tender, noninterest bearing, exempt
from all taxes, including Federal, State, and subdivisions thereof.

Of course, that is for the purpose of paying the adjusted-service
certificates. In order to persuade Congress to pass a bill of this
nature, we realize we must present proof to show that the face or
maturity value of these certificates are due; at least, that the veterans would be entitled to a sum equal to the full face or maturity
value of these certificates now; that is, considering that the Government does not have to invoke a new principle in order to do that.
Here is the way we arrive at that conclusion:
Congress had hearings before committees for many months, over a
period of some three or four years. During this time, the committees
of Congress finally agreed—their reports disclosed and the debates in
the House disclosed—that there was a difference, after charging the
veteran with the amount of the pay that he received and his clothing
and board, all of which should be added, of course, in arriving at the
total amount, and deducting his daily wages from the lowest wages
paid to a civilian laborer during the war, of a dollar and a dollar and
twenty-five cents per day. You will find those figures in the committee reports in support of one of these bills. Therefore Congress agreed
that there was a difference, as I say, of a dollar and a dollar and twentyfive cents a day that should be paid to the veteran.
After many proposals were suggested, the committee finally agreed
upon one plan, the adjusted-service certificate form of payment.
That is to say, suppose a man served a certain length of time, 200 days
overseas. That would be computed at the rate of a dollar and twentyfive cents a day; also 210 days here at one dollar, making $210, or a
total of $460. Now, instead of giving that man $460, the Government gave him an adjusted-service certificate equal to $1,000, and
the amount of that certificate was arrived at in this way:
They said, " Well, we have already paid you $60. We paid you that
$60 when you came out of the service. Therefore we are going to
deduct the $60 from your $460. But we are going to add 25 per cent
for waiting, since you are going to have to wait a number of years in
order to get your money. Twenty-five per cent of $400 makes $100
which, added to the $400, makes a total of $500. We will give you
an adjusted-service certificate equal to what the $500 would pay for
if you were going to purchase an endowment policy from a private
life insurance company. In an average case that would amount to
So the man who was entitled to $460 got an adjusted-service certificate for $1,000. Now, we are asking that this payment be made as
of the time the services were rendered, with a reasonable rate of
interest to be computed from that time. We do that on the theory
tjhat the Government has invoked that principle for others; that it
has always been the policy of the Government to pay in that way.



instance, let us take one who served his country during the
time of the war by making war munitions and supplies. He had all
of his factory facilities engaged in war work. He paid an income tax
in 1917. After the war was over, he filed an application asking the
Government of the United States to allow him a refund on his income
tax for 1917, because he had failed to deduct a sufficient amount for
depreciation of his war facilities during 1917. If he had deducted a
sufficient amount, he would be entitled, let us say, to a $460 tax refund.
The Government would give him that refund and the Government
would give him that refund not as of 1925 but as of the time he paid
his income taxes, March 15, 1918, with 6 per cent interest from that
time, on the theory that if he had not paid a sufficient income tax
and had an assessment levied against him by the Government, he
would have had to pay 6 per cent interest from that time. Therefore, the Government turns around and says, if it is fair for you, it is
fair for us. The law says you must pay us 6 per cent from March 15,
1918. We will invoke that same principle in this case.
It does not seem to me to be unreasonable, and you may say what
is a reasonable rate of interest?
For years and years the Government caused the veterans to pay
6 and 7 and 8 per cent interest. That interest was compounded
annually on the money that they received as loans on their certificates. If it was fair and reasonable for them to pay 6 and 7 and 8
per cent interest compounded annually on their certificates, is it not
at least fair that the Government pay them at the minimum rate
from the time the services were rendered?
That is exactly what we are asking for, and no more. We are not
asking for the 25 per cent. We are asking you to exclude that—take
it out. That is the only bonus that is in that certificate—that 25
per cent; and we are asking you to take it out. Just give the veterans
a dollar and a dollar and twenty-five cents to-day as of the time the
services were rendered, with that reasonable rate of interest from
that time, the minimum rate at which the Government charged the
veteran over that period of years, and each veteran is entitled to
receive an amount from the Government equal to the face or maturity
value of his adjusted service certificates, October 1, 1931. I have
actually taken my pencil and figured it out myself. Others have
figured it out, and if you agree with what I have said, there is no
question about the amount.
Now, we do not think that a bond issue is the proper way to handle
this proposition. We feel it would be detrimental to the country at
this time to have a bond issue. I think it must be handled in another
way. I think that a bond issue would be so detrimental to the
country that we would not be justified in asking for it. Therefore,
no bond issue is being proposed, no bond issue is being asked.
I am not going to quote exact figures here, because General Hines
is present and he has the figures in his possession, although I got
those figures from his office a few days ago and I will refer to them in
a general way.
The number of holders of certificates is 3,539,507 of the amount of
$3,513,000,000. About 3 per cent of the population of any community are holders of these certificates; about 4 per cent are veterans. The veteran population bears a very definite ratio to the total
population of any community, county, or State. You can always



arrive at the number of veterans in any community who are holders
of certificates by taking 3 per cent of the entire population of that
These certificates range in value from $126 to $1,590 each. The
average certificate amounts to $1,000.
Two million six hundred and seventy-nine thousand seven hundred
and forty-four have borrowed the limit allowed by law, 50 per cent.
Now, the argument is being made that they are unpatriotic in asking
for the remainder; that they should sit idly by and allow the Government to liquidate those certificates in 1945.
Mr. Chairman, I am not going to ask that these letters that I have
here be read. I have pulled from my correspondence certain short
letters from all sections of the country, which I consider represent a
good answer to that suggestion. I have cut them down as much as
I possibly could; and I believe the members of the committee will
find them interesting to read—I would like to have the privilege of
inserting them as a part of my remarks.
The ACTING CHAIRMAN. IS there any objection?
(There was no objection.)
Mr. PATMAN. I will then file for the record at this point, along
with a few explanatory remarks by myself, a number of communications and clippings I have received bearing upon this proposal.
Following is a Tetter from a veteran's wife:



Washington, D. C.
MY DEAR SIR: I am taking the liberty to write you about the bonus.
I am an ex-service man's wife. We have six dependent children. My husband, whom you met while in Minneapolis, December 29, has not been working
for months.
We owe several months' rent. Our gas, electric, and water will be turned off
shortly. What are we going to do.
Mr. Patman, for God's sake get that bonus bill through and get it passed.
Not alone ourselves but thousands of ex-service men here in Minneapolis are in
the same condition and worse. Won't you for the sake of cold and hungry
children have that taken up now and not wait until the last thing. Mr. Patman,
I am asking you, send me a word of hope that we may at least have something
to hope for.
I am desperate. If we could get that bonus our bills could be paid and our
children have clothes and food. I just now received word that unless our rent
is paid by to-morrow evening (January 13) we must move—but where. We
haven't a cent. What can we do? Can you send me a word of hope?

The following newspaper item is self-explanatory:

PORT ARTHUR, TEX., March 10.—Four small children learned to-day from
their widowed mother that their father died last night trying to provide them
with food.
T. J. Veazy, a World War veteran, had been out of work for months. His
children and wife needed food and he had no money with which to buy it. Wednesday it was cold, colder than it has been this year. The children were crying
and hungry. Although he had insufficient clothing to brave the north winds he
borrowed a shotgun and a few shells and went hunting.
Rabbits ran better at night and he tramped the prairie looking for them.
Shortly before midnight he was found in a beach marsh near here. He had
•died from exposure, according to Justice B. H. Wiley who held the inquest.



Veazy served over a year in France. He enlisted for service July
21, 1917, six days after his 21st birthday. He was honorably discharged June 25, 1919, as a private in Company C, One hundred and
forty-first United States Infantry. He held an adjusted service certificate for $1,579. He had used the loans to the limit of 50 per cent.
Had he not died the other 50 per cent would have been practically
consumed by compound interest by 1945, or he would have owedl
the Government at that time.
The following letter is from an Oklahoma banker:

Ardmore, Okla., March 29y 1982.

Washington, D. C.

I see by the press that you are daddying a measure to pay the
soldiers the balance on their bonus certificates.
Since Congress met last December it has put in a lot of time discussing and
passing depression lifters and emergency measures that do not lift nor emergeThis measure that is being pushed by yourself and Senator Thomas is the only
simple, reasonable, and practical one that has been offered; that is, to pay the
soldiers the balance on their bonus certificates; that will put cash in every hole
and corner of the country, a total of more than $2,000,000,000. Let the Government issue bonds bearing say 2 per cent interest, turn these bonds to the 12
Federal reserve banks, the banks issuing Federal reserve currency and pay the
soldiers, the bonds to be retired as and when the funds are accumulated to pay
off the bonus certificates. This would increase the Government's obligations
but very little, in fact the only increase would be what little interest the bonds
would draw, and it would increase the credit over the whole country more than
There seems to be a fearful dread in the minds of some wizards offinanceof
inflating the currency of the country, but not so much fear of deflating values of
every kind of property, including labor, until it is so thin that it has to pass a
spot twice to make one shadow.
There also seems to be a fear in the minds of some people that these men will
spend their money on liquor and riotous living. It is too bad if those middleaged men could not be risked with four or five hundred dollars each of their own
Something must be done quick. The American people have held their poise
remarkably well, but if there is no change, many of the people who are out of
work and living practically on a dole and losing their farms and homes will go
There is no psychology nor soothing sirup about this measure; $2,000,000,000
distributed in cash over the whole country will pay for lots of rent, food, and
clothing and will be a practical depression lifter.
Yours very truly,


I have received letters from bankers from all over the Nation
approving the full-payment bill. If the money is paid it will go into
the banks. I hope it will be kept in the local communities as long as
possible. One dollar that moves rapidly in a local community will
pay lots of debts and relieve lots of distress. The people do not have
money. They are reduced to barter.
The following letters are self-explanatory:
EDGEPIELD, S. C , April 8> 1932.

I am writing to you about your proposed bonus pay by
issuing new currency. With the rank and file of veterans over the State of South
Carolina and in adjacent counties in Georgia, it is the most popular topic of
conversation. I am known in all parts of the State and travel a great deal. I
have yet to find my first veteran who is really opposed to this legislation. Some
half-heartedly oppose it. It is also popular with the small business man. Many
people who will not profit at all by being remotedly connected with a veteran, are
in favor of it for the reason that they think that this much new currency is bound
to help business and the depression. I wish that the men who are supposed to



represent the rank and file of the people could know and realize how important
this legislation is and also how popular it is with the public outside the veteran
circle. Needless to say the veteran is in favor of it.
I congratulate you on your courage and devotion in your fight for the man who
served his country in its hour of need, the man who made nothing while millions
were laid by by those who never went at all.
Yours sincerely,

Superintendent of Schools.

Montrose, Colo., April 2, 1982.

House of Representatives, Washington, D. C.

Some time ago you were good enough to send me a copy
of the Congressional Record containing your speech in regard to the paying of
the adjusted-service certificates. I have read it with interest but am still
undecided about the question, as some authorities say, that it can not be paid at
this time, and others with the same facts and figures at hand state that it can
and should be paid in full.
However, there is one argument which I have not yet seen advanced, and yet
to my mind it is one of the most important reasons why the veteran should be
paid in full at this time if any further expenditures on the part of the Government
are to be made as a kind of a stimulant to the present conditions. My contention
is that it would do far more good and be more far reaching in its effect if the
money was in the hands of the veterans than if it was expended for public works
and construction. We have a concrete example here in Montrose in the construction of a Federal building. Work on this was started late last fall, and at
the present time the basement is about completed. In all that time they have
not employed more than 6 to 10 men at one time, and nearly all of these were
specialists and skilled laborers. So far as doing anything to relieve unemployment here, it has been a flat failure, for most of the men who were working have
been brought in from the outside by the contractors, which, of course, was doubtless necessary. They employ little or no common labor or local men, and still,
because the employment department of the American Legion sees that a Federal
building is being constructed here, they keep sending us questions and literature
as though it were a great opportunity for us to put men to work. Now, if the
money which the Government is putting into public works, a lot of them not
being needed at all, was used to pay the adjusted-service certificates, the money
would be spread over a greater protion of the population and would get into the
hands of hundreds of thousands of men who are destitute to-day and in the most
dire need of the necessities of life, while, if it used in the construction of roads and
buildings, only a few such as the contractors and skilled laborers will benefit.
One reads every day of the agitation for construction as a relief measure for the
unemployed, but I am of the opinion that it amounts to nothing in the way of
actual relief.
The situation is growing more acute each day, and since the Government seems
more intent on raising money than on the reduction of expenses most of us have
about reached the point where we feel like "dig in, soldier, it is'nt going to last
forever." I am not speaking for myself but for the many, many sad cases where
families are in need of the severest kind.
Yours very truly,


Post Commander, No. 73, American Legion.
^Congressman PATMAN,

Washington, D. C.

I hope you are successful in having the balance of our
bonus paid.
Am slowly starving and my home is gradually being broken up.
For God's sake and my family's sake please fight for us.
Loyally yours,

[Name deleted.] *



MONTGOMERY, ALA., February 22, 1982.

United States Congress, Washington, D. C.

I am a World War veteran (now an
officer in the United States Army Reserve) I am indorsing your fight for the immediate payment of the balance of the veterans' adjusted-service certificates, as
hundreds of other veterans in this section of Alabama are doing. May God help
you in this fight to help the ex-service men. They need it.
I used my last year's "bonus" money to pay medicine, hospital, and burial expense for my late wife. I am buying a small farm that I have found if the balance is paid this year.
I wonder if any of the Government officials or the officials or stockholders of
the large banks, railroads, and other large corporations that the Government has
helped in a financial way, have ever had their little boys and girls come to them
and ask for food when they were hungry, or when their school shoes are worn out
have they found it almost impossible to get more? Do you think that they have
had to make excuses when their kids asked for more school supplies, books, etc.?
Has one single one of those gentlemen been forced to buy the cheapest food obtainable for his family to eat, such as grits, potatoes, etc., day after day? Thousands of we, the working class, are in that condition now, the class that actually
go into the trenches and crawl around in the rotten filth and mud on our bellies
like snakes and fight like devils against whoever our Nation directs us against,
and if we come out alive we are proud of it, glad of the chance to offer our lives for
our country. And when the next call comes we are ready for more of it. We
would all rather hear the whine of a shell than the whine of our hungry kids.
Please beg them to do something for us now. We will appreciate it more than
they know.
Wishing you success in your fight, I am,


Representative PATMAN.

SAN ANTONIO, TEX., February 25, 1932.

DEAR SIR: The soldiers' bonus bill will soon come before the House. I ask
you in the name of humanity to do all you can to put it over.
I have five little children and a wife who are insufficiently fed and are at this
present moment hungry,
I have stood in water, mud, and filth up to my waist fighting for my flag, until
now, broken in health, out of work, I am obliged to accept charity. To-day
they left me a bunch of spinach and a small, very small, piece of meat to feed
eight people.
My God, gentlemen, do you think have I no pride? Let me tell you Representatives of the American people, I am as good an American citizen as any
of you, and so were my forebears before me. I want work, not charity, and
the people must have it.
If the Government will pay us what they owe us it will put just that much
money in circulation, for there is no doubt that almost all of the World War
men need money as badly as I do.
If this letter could be read by the Representatives of all the States there would
be no doubt about the result.
There are thousands of ex-soldiers in actual want right now. I know I am,
for as God is my judge, there is not a single penny under this roof at this writing
and none in sight, and furthermore, I am willing to make oath to everything I
have written.
I have just read a draft of your bill in Congressional Record, and I want
you to know I thank you personally, for what you have done for the soldiers.
Would to God there were more men in Washington like you—men who know
what the Government owes us, and what is our due.
Mr. Patman, I thank you, so do my babies and my dear wife, and we all say
God bless you.
Sincerely yours,



FORT MORGAN, COLO., February 22, 1982.


Washington, D. C.
I am writing this letter in an effort to tell why I think the balance
of the adjusted compensation certificates should be paid off in the very near
I am a disabled World War veteran, rated at 75 per cent disabled. There
is absolutely no chanced for me to get any employment which I am able to do.
I have a wife and three children, and we have to accept charity from different
organizations. If I could receive the balance of myt Government pay I could
get a little tract of land, with chickens and a cow or two, and I'm quite sure I
could make my own way and be better physicially.
I feel, as many others do, that the United States Government paid off their
civilian employees at $10 and $15 per day, and the soldiers were paid $1 a day
to be lined up and shot down. I certainly think we should be paid off, when we
can't possibly get jobs and the foreigners are holding down a good many of the
jobs. We are desperately in need of the money which is rightfully ours. With
what we have borrowed, by the time the certificate is payable, the interest will
have eaten it up. We'll simply be cheated out of it. I hope this letter will leave
an impression, that the Government will come to our rescue before it is too late
and every one of us will be paupers, depending on our individual counties. And
it's pretty hard getting things from counties, too, and it's not pleasant feeding
one's children on a biscuit and bean diet.
Very sincerely,


(Veteran serial number C1424234.)

319 West Beaver Avenue.

I will not name the city from which the following clipping came.
Many clippings disclosing similar conditions in different sections are
in my possession:
Because he struck a man who tried to wedge into a food line at the garbage
dump located at Thirty-second and Cicero Avenue, John Reyee, 3439 West
Thirty-ninth Street, spent three days in the local jail house.
Lines form every day at the garbage dump from 8 in the morning to 5 in the
afternoon, awaiting truckloads of city refuse that is dumped here daily. Men
and women come there to see if they can't find food to carry back home with
them. They get some if they come early enough.
Two billion, two hundred million dollars placed into circulation
will help everybody. It should be called "stimulating currency,"
because it will stimulate conditions.
Here is what a veteran's wife thinks:
FEBRUARY 25, 1932.

Washington, D. C.
May I give you a woman's point of view on the
bonus? I am a soldier's wife, so I speak for millions of women and children.
Day by day we see our children needing the things our bonus would purchase
such as stockings, handkerchiefs and underwear. We see our men getting thin
and weary worn looking for jobs and wondering where the rent is coming from.
We ask our God how much longer must we be victims of this manmade depression *
Now we look toward the bonus as a help. We're trying very hard to be brave
and loyal.
Won't you help us to get what is really ours?
In my estimation its an ideal way to get those idle dollars working, for one
may rest assured they will be spent for the real necessities of life.


If the certificates are not paid now, compound interest on previous
loans will consume the remainder and in many cases the veterans will
owe the Government from $100 to $200 more interest than they will
receive in 1945.



A California veteran writes as follows:
Congressman WEIGHT PATMAN,

Washington D. C.
DEAR CONGRESSMAN PATMAN: I served all through the World War.

My wife

is sick and can not help me any more, 4 little babies starving, the man took my
home away from me for I could not keep up the payments. Had over $3,000 paid
in even 7 per cent war bonus. Now I live in 3-room house starving slowly. I
was born in Garden Valley, Tex., lived there my first 21 years of life. I was on the
Jacob Jones and Chancey when they went down during the war, laid in the water
so long I am slowly losing the use of my left side. I am desperate for work. I
gave my all to the Government, now they refuse me work.
Wishing you the best of luck, health, and happiness, I beg to remain.

The following story is from the New York Daily News:

He was one of a dozen men swept into west side court yesterday by police in
their attempt to clear Broadway of panhandlers.
He said his name was John Hogan, that he enlisted at 15 as a bugler, when the
United States entered the World War, and that he was gassed at Chateau Thierry.
Hogan is 30 now, as years go. But he looks 50. His hair is white, his face is
seamed and his hands trembled as he stood before Magistrate Edward Weil.
"You've been convicted of panhandling four times," said the Magistrate.
" But you've had your share of bad breaks. I think I'll let you off."
"I'd rather go to jail, Judge," Hogan answered. " I can't get a job. I work
maybe one day a week and get $1.75 for it. Panhandling is bad enough, but that
sort of work is worse. You've been very kind. Please give me 30 days."
" As you will," said Magistrate Weil. "Thirty days it is."
Four others seized in the drive were given jail terms.

The following letter illustrates that the money will be used for good
FEBBTJAKY 23, 1932.

DEAR SIR: AS an ex Y. D. war veteran I want to thank you for your stand on
the bonus question.
I was gassed during the war but I am not getting anything from the Government. I have been out of work for a long time; fortunately my wife is working
a little and we manage.
But now the unavoidable is about to happen, that is, a baby is coming about
August. But my wife will be obliged to quit work soon. Then I don't know
what we will do for expenses. Unless we receive either the bonus or some form
of payment.
I am respectfully,

The following clipping from a Detroit paper is self-explanatory:

"I've had to send my baby girl away so she wouldn't be put out on the street
with us."
This cry of despair was found in a letter from the wife of a war veteran, asking
Mayor Murphy to help her husband find a job, even if it were for only two or
three days a week.
" I don't want to be on the welfare," she said. "All I ask is coal and rent, and
I can feed myself. We haven't been able to pay our rent, and the trust company
threatens to put us out any day. We have been living on $2 a week, which I get
from a girl roomer."
With the recent onslaught of low temperatures, coal is a more serious problem
for the welfare department than it has been previously.
Fifteen years ago Mrs. B's husband was ready to give his life for his country.
Now it is up to his countrymen to make his life worth living.



Following is a report of a case in the East:

Red Cross chapter was trying to-day to get nursing services from United
States Veterans' Bureau for an ex-soldier and his wife who both have double
The family lives on a farm and there are five young children. A neighbor
woman is coming in occasionally to help.
"It is one of the most pitiful cases I ever have seen/' Miss Emma Justus,
Red Cross secretary, said to-day.
" When I went to see them yesterday, the mother was unconscious and the
father was almost too ill to speak. They also need groceries."
Since he is a disabled ex-soldier and unable to be moved to a Government
hospital, Miss Justus has applied to Veterans' Bureau for a nurse to care for him.

The following letters explain themselves:

My family and I are on the verge of loosing our home and will
have to resort to charity if some relief don't come soon I have been out of work
five months.
I served 11 months in France during the World War in the One hundred and
fourteenth Machine Gun Battalion and will appreciate more than words can
express my gratitude and thanks to you if you will do all in your power to help
us at this time by putting above-mentioned bill across.
Sincerely yours,




DEAR SIR: I am taking the liberty of writing to you in regard to the noble
stand you have taken in behalf of the ex-soldiers during these hard times of
depression. I served in the Army 22 months—12 months in France. I am
married; have two children and unable to find employment of any kind; so am
living on associated charities. Words can not express the gratitude and appreciation of your good work, and hope you are successful in getting the balance of
the bonus paid to the ex-soldiers.
Sincerely yours,
CHAS. A. O'DELL, Pampa, Tex.

BONUS, T E X . , February 21y


I am writing you a few lines for the need of my money.
I have a wife and five children. Times are so tight; things is so high; work
is so cheap and scarce; cotton was so cheap last year I did not get out of debt
and I owe half of my grocery bill yet from last year, and that makes it still
harder for us.
And yet and still I am trying to farm.
I am needing for clothes and shoes for the family.
I like to get it if I could.


If more money is put into circulation, prices of commodities will
rise. The country will be destroyed if we try to adjust our living
standards to present prices.
The following letter was written by a veteran's wife:


To whom it may concern:

Please give my husband a job of any kind. My husband left me and three
children here in Detroit and went himself to Dayton, Ohio. He left me here
penniless. We are simply starving, picking up food after other people. We
also have no clothes, no shoes, and no fuel. Our gas and electric is shut off



three months ago. My children are going to have consumption from lack of
So please have pity on me, my husband, and my children, and give him a job
of some kind so he could help me out of this what I'm in. Any favor done to
my husband will be greatly appreciated by me and my children.
Respectfully yours,

I have received thousands of similar appeals from every section
of the United States. It is true that the suffering is not restricted
to the veterans and their families, but by paying the veteran this
debt it will stimulate economic conditions and help everybody.
In connection with the question of whether or not the veterans are
unpatriotic, let us see what they will get in 1945 if these certificates
are not paid now.
You have over 2,000,000 men who need this money for the comforts
and necessities of life. They need it to buy clothing and food for
themselves and for their families. It is all right to tell them they
should be patriotic. They are patriotic. They manifested their
patriotism in the past. But it is awfully hard to convince them that
it is right for them to sit idly by and see their families and themselves
suffer while the Government is consuming the remainder of their
certificates in compound interest. That is something that is very
difficult to understand.
Let us see what these veterans will get. We will take the average
certificate of a thousand dollars where a veteran has borrowed the
limit allowed by law. He got his money in little dribs until the 50
per cent loan act was passed and then he got a substantial sum. If
he pays 4K per cent interest compounded annually from now until
1945, let us see what he will have. He can not borrow any more
money until 1944 and then he will be permitted to borrow $16.55.
The next year, 1945, the Government will settle with him, and will
pay him $66.25 and the certificate will be canceled. But all the
veterans are not so fortunate as to receive even that sum. Some of
them will continue to pay 6 per cent interest compounded annually
because they borrowed from the banks and the banks at the end of
six months have turned their certificates in to the Veterans' Administration.
It is the ruling of the Veterans7 Administration that where a veteran
borrowed from a bank, using his adjusted-service certificate as collateral, and pays the bank 4% per cent interest, compounded annually,
as the present law requires, such a veteran will be required to pay 6
per cent interest, compounded annually, on this loan when the bank
transfers it to the Government at the end of six months. This will
result in the veteran who is the holder of a certificate of the average
amount, $1,000, being indebted to the Government in the sum of
$112.18 on the date of the maturity of his certificate in 1945.
The following table is based upon an assumed case. It is assumed
that the veteran has a certificate for $1,000; that it was dated January 1, 1925, and made payable January 1, 1945; average age of 33
at the time of issuance; that loans were made by a bank in the eleventh (Texas) Federal reserve district each year on January 1, from
1927 to 1931, inclusive, then a loan on March 1, 1931, for the 50 per




cent loan value and redemption of the note by the Government in
six months:


Emergency loan act, Mar. 1,1931
Kedemption by the Government Sept. 1,1931
1934. , ._
1937-— 1938
Jan. 1, 1945

rate effective at
date of

due beginning
of year

Cash to

Per cent

535. 73
765. 86




649. 28

272. 56


170. 66
384. 59
595. 26
716. 74


* At this point the amount of principal and interest due on account of the amount paid the bank on Sept*
1,1931, would exceed the face value of the certificate.
The above tabulation was prepared by the Veterans' Administration at m y request and forwarded to
me by Gen. Frank T. Hines.

By deducting the amount of cash received-by the veteran from
the amount of interest due by the veteran it will be discovered that
the veteran will owe the Government $112.18 instead of the Government owing him one penny.
Veterans who have borrowed on their certificates are paying
$166,000 a day interest.
A veteran of the average age, who was 33 years of age January 1,
1925, received from the Government an adjusted-service certificate for
$1,000, the average value. He has borrowed on the certificate every
opportunity and will continue to do so as a majority of the veterans
have done. He will not repay any part of the principal or make any
interest payments. The following computation furnished by the
Veterans' Administration shows the amount the veteran receives in
cash, the amount of compound interest charged, and other information:


153. 59
Emergency loan act,
March, 1931._. 500.00

due be- Cash to
ginning veteran
of year *


$87 99
274. 62



Jan. 1,1945 (10 months).

535. 73


due be- Cash to
ginning veteran
of year i


450. 20


* Interest at maximum rate of 6 per cent to March, 1931, and maximum of 4H per cent after March, 19311



It will be noticed that the veteran will receive less than $100 more
on his certificate than the Government will receive in interest; or
will receive $49.80 more than one-half the value of his certificate.
Only one substantial payment has been or will be made on the
certificate. The other payments are in dribs and not sufficient to
afford substantial relief for any purpose. After the 50 per cent loan
is granted the remainder of the certificate will be practically consumed
by compound interest. His next loan will be granted January 1,
1944, for $16.55. The Government does not pay compound interest
for the money it borrows.
Now, it is awfully hard to convince people, 2,000,000 of them who
need this money for the purposes for which they do need it, that in
order to be patriotic they must sit idly by and let the balance of this
certificate be consumed by compound interest, and not say a wordabout it. It is awfully hard to convince them that that is the right
thing to do.
Mr. ESLICK. Will the gentleman yield for a question?
Mr. PATMAN. Yes,


Mr. ESLICK. DO you mean that where veterans have borrowed from
banks on the basis of 6 per cent interest, and that certificate is turned
in to the Government, it continues to bear a 6 per cent interest rate?
Mr. PATMAN. I mean that where he has borrowed on the basis
of .6 or 4% per cent and the bank turns it in to the Government, as I
understand it, there was one section of the law that was not changed—
possibly the Congress intended to change it, but it did not change
it—when it is turned in to the Government at the end of six months,
counsel for the Veterans' Administration has held that they must pay
6 per cent from then on. Am I right about that, General Hines?
General HINES. That is right. One section of the law, Mr. Chairman, requires that whenever the Government redeems a loan from
the bank the certificate went into the adjusted-service certificate
fund and the veterans paid 6 per cent interest. We have submitted
the matter to the comptroller hoping that he might agree with the
feeling that I have, that while Congress did not specifically change
that provision, we felt that when they expressed the wish that they
pay not more than 4% per cent, it was the intention to apply it to the
entire law, though they did not apply it. There was one provision
that was not amended, although it was mentioned at the time. If the
comptroller will agree with the Veterans' Administration, we will
continue at 4% per cent under that provision, although technically
and legally, I feel sure the provision is correct and requires 6 per cent.
The ACTING CHAIRMAN. The comptroller has not yet rendered a
General HINES. He has not yet rendered a ruling. In the event
he feels there is not sufficient law, the Veterans' Administration
would be favorable to a change in that provision.
Mr. MCCORMACK. Will the gentleman permit me to ask the
general a question?
Mr. PATMAN. Yes.
Mr. MCCORMACK. YOU state technically and legally it is correct?
General HINES. Yes, sir.
Mr. MCCORMACK. But from the practical angle it is incorrect?
General HINES, NO. From the practical angle it would be much

simpler, administratively, to have them all at 4^ per cent.
quite specific. The provision is not ambiguous.

The law is




Mr. PATMAN. Thank you, General. At any rate, the law as it is
now means that the veterans are being charged 6 per cent. I have
statements in my office that disclose that and there is no question about
it. Of course, as the general says, if the comptroller does not agree
with him that the law should be changed, they will probably continue
to do it.
Mr. BACHABACH. May I interrupt the gentleman?
Mr. PATMAN. Yes, sir.
Mr. BACHAKACH. HOW many of the veterans.are paying 6 per cent?
Mr. PATMAN. Well, not so many; just those who borrowed through

the banks.
Mr. BACHARACH. YOU do not know the number?
Mr. PATMAN. I do not know the number, but it is a small number.
If the gentlemen will pardon me, I would like not to be diverted at
this pomt.
Mr. BACHARACH. Surely.
The ACTING CHAIRMAN. The gentleman does not have to yield for
any question, if he does not desire.
Mr. PATMAN. The main feature of this proposition at this time is
what I would call the reflation feature. Inflation is putting too much
money in circulation; deflation is taking out too much. Reflation is
restoring the amount of money that should not have been taken out,
in order to bring the country back to prosperity.
I will admit it is not so much the volume of money that makes a
prosperous country as it is the velocity of the money and credits.
Since 1929, the velocity of money and credits has decreased 50
per cent. There is only one way to make up for lack of velocity
and that is by increasing the volume of money. We are hopeful
in asking for the passage of this legislation that this will not only pay
these certificates, but that it will put sufficient money in circulation
to cause commodity prices to rise and when commodity prices rise,
money will be brought out of hoarding, because there will be some incentive to bring money out.
The manufacturer manufacturing his goods on the basis of a certain
wage scale, by purchasing his raw materials at a certain price, can
see a little profit in the transaction. There will be some incentive
for him to put men back to work in the factory to produce goods.
As it is now, the manufacturer of these goods, if he were to set
about manufacturing them, by the time they were manufactured
and sent out on a declining market, would lose money. Therefore
the best thing to do is to lay off men and cut down their force and
save as much of the expenses as possible. But, with a rising market,
there is every incentive for them to put men back to work. That
will restore the prosperity of our country.
Well, you will ask, "How much money should be put into circulation?" I am not going to try to answer that. We are going to have
economists here yho will answer that. But I do make this statement>
that I do not think it is possible that the amount of money to be put
into circulation will be too much. The question in my mind is, is it
enough? I doubt that it is.
The people are being reduced to barter. Down in Houston, Tex.,
the other day I read a great big advertisement that said, "Mr.
Farmer, you have no money; neither have we. We have gas and oil.
You have chickens. Bring your chickens and we will trade you gas
and oil for them." People do not have enough money with which



to do business. Something has got to be done to get money out
among the masses.
It is true that the President of the United States and other patriotic
people in our Nation have been striving to get money out into circulation, sufficient for people to do business with. But to my mind it
has not yet percolated down to the masses and it does not look as
though it is going to percolate down to the masses. Our theory is
you must start with the masses and let the money go upward. If you
will put purchasing power in the hands of the consumer, in the hands
of people who have the consuming power but do not have the purchasing power, you will cause goods to be bought. You will see these
veterans and their families in the stores the next morning buying
clothing and hats and shoes and food for them to eat. You will see
a demand for goods and with a demand for goods and other things,
there will be an incentive for manufacturers to borrow some money
and get back to manufacturing. As it is now, why should a man
borrow money from the bank, even if the bank is willing to lend it
to him? He has no business into which to put money that will
make him money. There is a declining market. There must be
something done to cause or to bring about a rising market.
I have a letter from a man who visited 97 Kansas towns and cities.
He called on the drug stores. He said that he started out against
this proposal. He said that these gentlemen on whom he called were
not particularly for the veteran, but they wanted this money in circulation. He said without exception those 97 managers of those
drug stores said that the only salvation to this country was to pass
this bill and get this money in circulation so that there would be
enough money with which to do business.
These are all typical letters. I have another letter here from a
merchant down in Texas. He is not even remotely connected with
the veterans, but he says that unless something is done to get money
out to the masses of the country in this country, that we are in a
deplorable condition.
A banker from Oklahoma says that the people have maintained their
poise remarkably well, but unless some thing is done in the very near
future to get this money out among the masses, he does not know
what is going to happen in a very short time. It is a dangerous
The Federal reserve system is buying some Government bonds, but
who gets that money? The people who hold these bonds are already
buying as much as they want to buy. They are not going to buy an
extra pair of shoes or an extra hat or an extra suit of clothes because
the Federal reserve system has issued to them those Federal reserve
notes that would circulate as currency. They already have plenty.
But if that money can reach the masses, the people who are in need
of these things but do not have the purchasing power, there will be
a great incentive for them to buy and of course that will help conditions generally.
I have talked to many economists about this and I believe that
this theory is sound, that we can issue paper currency for the difference
that is due on these certificates. I believe that we can issue United
States notes. I have referred to them as United States Treasury




notes, but it makes no difference how you refer to them. But in
order to make them the same as the money we now have outstanding,
that should be changed to United States notes. The same principle
is involved.
We have this prejudice to overcome. They will say, "Look at the
inflation in Europe, in Russia, in the South American republics.
How are you going to overcome that?"
Well, we do not expect to start out here on any kind of a program
that would cause such wild inflation as occurred in Germany. We
do not expect to try to put five tons on a 1-ton truck. We do not
expect to try to issue several times as much money as this country
needs. It will be all right with us to tie to a 40 per cent gold base
and just say that the policy of this Government is, as it has been in
the past, that we would never issue currency that will be in excess
of a 40 per cent gold base.
I believe it is sound, and I believe that many economists in the
United States will say so. But here is the prejudice. They will say,
"Take the Civil War; think about the greenbacks." They went
down to almost nothing; and some of our friends claim now that those
greenbacks were backed by 40 per cent gold, which, of course, was a
mistake. They were not backed by 40 per cent gold. And in support
of that I want to insert an excerpt from the Encyclopaedia Americana,
page 427, volume 13, on the greenbacks issued during the Civil War.
(The statement referred to is as follows:)
February 25, 1862, $150,000,000 authorized; not receivable for import dues
nor payable by the Government as interest on its obligations.
June 11, 1862, and March 3, 1863, further issues were authorized; and on
January 3, 1864, they reached their maximum amount of $449,338,902. The
great inflation, the uncertain fortunes of the war, and the belief that even if
victorious the United States neither could nor would pay its enormous debt
at face value, but would reduce or scale it, combined to depreciate the value of
the notes; throughout 1864 they were worth on an average only about 45 cents
on the dollar, and on one day, July 11, when Early was threatening Washington,
they dropped in panic to about 35 cents.

Mr. PATMAN. That statement shows that these greenbacks were
not backed by any 40 per cent gold. They had nothing behind
them. All they had behind them was the credit of this Nation; and
when General Early of the Southern Confederacy was about to take
Washington, this article discloses, the credit of the Nation was impaired, and when the credit of the Nation was impaired the greenbacks went down to 35 cents on the dollar. But when the war was
over and Secretary of the Treasury Sherman issued an order that
"hereafter these greenbacks shall not only be good for certain debts
that are specified, but they shall be good for all debts"—I sent to
the Library and got a copy of that order; it was issued in 1879—from
that time on those greenbacks remained at 100 cents on the dollar,
and they have never gone down. In 1900 there were $346,000,000
worth of these greenbacks and Congress set aside $156,000,000 as a
gold reserve, and since that time they have had a gold reserve of 40
per cent behind those United States notes.
Well, there is nothing else behind them. There is no 60 per cent
eligible paper behind them. That is the same principle that we want
you to invoke here, except that the other 60 per cent in our case



will be backed by Government obligations—these service certificates
that are held by veterans of the World War. Now, if United States
notes are fiat money—of course, our plan would probably be called
fiat money; but our plan is no more fiat money than any other paper
currency that is now being circulated in this Nation, except the gold
certificates, which are 100 cents on the dollar.
Now, we have $4,000,000,000 worth of gold in this Nation. That
statement can be verified by reports from the Treasury Department.
Four billion dollars' worth of gold is enough to justify the issuance
of $10,000,000,000 worth of currency. But do we have $10,000,000,000
worth of currency in circulation? No; we have five and a half billion
dollars' worth of currency in circulation. So it is not the gold standard of 40 per cent that our Nation is suffering from, but it is the
double gold standard that we are suffering from. If you would just
issue money as long as you had a 40 per cent gold base, we would
have plenty of money in circulation; and I venture to suggest that
this depression, if it happened at all, certainly would not have been
so harmful and detrimental as it has been if that money had been
I want to insert in the record some excerpts from statements
recently gotten up by economists from Cornell University, Doctors
Pearson and Warren.
The ACTING CHAIRMAN. Without objection, they will go in the
Mr. PATMAN. Here is one statement:
The unemployment in the United States is variously estimated at from six to
eight million.
Since 1929, the decline in prices in England, France, Germany, Italy, have
been very similar, France 33 per cent; England, 28; Italy, 27; United States, 26;
and Germany, 22.
Since 1929, prices in China have risen 8 per cent. China is on a silver basis.
In the same period, prices in gold-using countries have declined from 22 to 33 per
cent. At the same time that other countries are feeling the effects of declining
prices, China is feeling the effects of rising prices. There is full employment
and profits are large. It does not follow that the prices in the gold-using countries would have been the same as the prices in China had these countries been
on a silver basis. The use of any metal as money changes the demand for it and
hence changes its value.

Here is a statement about the debts of the country, private and
public—a statement to the effect that all debts amount to about
$203,000,000,000. Therefore this $2,000,000,000 that we are asking
to put in circulation would only represent about 1 per cent of the
total public and private debts, and certainly 1 per cent would not be
too much.



(The statement referred to is as follows:)
TABLE 2.—Estimated public and private debts of various classes in the United States
[000,000 omitted]
Gross public debt less sinking fund assets of all classes of Government organizations in the United States


1912 —
1930 .


Life insurance
Incorporated BuildFarm Corpo- policy
places and all ing and Bank mortrate lia- loans
other civil divi- loan s loans 3 gages
bilities * and
notes 8
30,0001 places

2 $1,029 2 $346 2 $372 8 $1,809 $1,874 $1,138 $14,041 »$3,320
3,281 8,200 3,343 27,684 i° 7,858
7 834 * 1,273
16,000 11,662
5,530 6,970 8,695 41,782
16,000 1,800
8,000 7,000 8,829 40,510 9,241
18,000 2,000
8,000 9,000 7,000


Figures in italics are estimates.
i Financial statistics of cities having a population of over 30,000: 1929, United States Department of
Commerce, Bureau of the Census, p . 5.
»8 Statistical Abstract of the United States, 1930, Fifty-second number, pp. 220 and 277.
Comptroller of the Currency for 1930, Reported loans and discounts as of 1930 for banks, pp. 737 and
745. Statistical Abstract of the United States, 1912, pp. 622-625,1922, pp. 516 and 521; 1924, p . 243; and 1930,
pp.4 267 and 271-273.
Yearbook of Agriculture, 1924, p . 190, reports the farm mortgages for 1920. Later data by E. Englund
and D . L. Wickens, of the United States Department of Agriculture.
* Furnished through the courtesy of E. White, chief statistician, office of Commissioner of Internal
United States Treasury.
Insurance Yearbooks of the Spectator Co., and furnished through the courtesy of W. A. Berridge, of
the Metropolitan Life Insurance Co.
' Financial Statistics of State Governments: 1929. Bureau of the Census, p. 3.
»• 1920.

Extremely rough estimates of the total indebtedness are shown in Table 3. The
total debt is approximately $1,700 per capita, or about one-half of the national
wealth in 1929. If the value of commodities is to drop one-third and remain at
that level, the debt would become about 75 per cent of the value of the property,
So much of this can never be collected that it is probable that the lenders would
have a greater buying power if they were paid in full at a price level of 150. The
usual argument for reducing wages is that a dollar has more buying power. This
same argument might be applied to debts which are the most serious result of
TABLE 3.—Rough approximation of public and private debts (from Table 2)
Urban mortgages 1
Bank loans
State, county, and local
Farm mortgages.
Life insurance policy loans
and premium notes
Retail installment paper 2
Pawn brokers loans and unlawful loans of all kinds

Amount, Per cent Per capita





1 Based on estimates furnished through the courtesy of George Terborgh of the Brookings Institution.
2 Based on reports of the National Association of Finance companies.
» Eyan, F. W., Family Finance in the United States, the Journal of Business of the University of Chicago,
vol. I l l , No. 4, pt. 1, p. 404, October, 1930.



The decline in commodity prices has resulted in many business failures. During the last two years 3,635 banks have suspended, with deposits of $2,624,000,000.
In the same period, 54,640 business failures have occurred, with liabilities of

The home owner's security is in the value of a home. If commodity prices fall
so that the home can be built for 25 per cent less than he paid, his equity is gone
unless he paid more than 25 per cent down. But when all the bankrupt properties
are thrown on the market, buyers disappear as if by magic, and the multitude of
sellers depress prices so that an owner who paid 50 per cent down may see his
equity disappear. In such a time it is well to remember that well-constructed,
well-located homes have a permanent value even if they are unsalable for a time.

Mr. PATMAN. The next statement shows farm wages by the month,
with board. It shows that the decline in farm wages has been about
50 per cent in the last year or two, because commodity prices have
gone down so.
(The statement referred to is as follows:)
During the World War period, wholesale prices in the United States have
declined more than one-half since 1920, and union wage rates are beginning to

Farm wages for various States are shown in Tables 1, 2 and 3. Farm wages
are a compromise between city wages and farm prices. In States distant from
industrial centers, farm wages follow farm prices fairly closely. In States that
are near industrial centers, farm wages are influenced more by city wages than
by farm prices. For example, in 1919 union wage rates were 58 per cent above
pre-war. Prices paid to fanners were more than double pre-war, and wages in
North Dakota were 86 per cent above pre-war, but in New York State only 76
per cent above. For 1931, union wages were much more than double pre-war,
but farm wages in North Dakota were below pre-war, and in New York were 42
perr cent above pre-war.
lhe farm wages paid in Alabama average $11.83 per month in addition to
board. This is below pre-war. A considerable number of persons feel that the
present depression is a proper punishment for luxurious living. If this is the
case, conditions in Alabama ought to be good. Living could scarcely be luxurious enough to be injurious on $12 per month.
TABLE 1.—Farm wages by the month with board, 1910-1981
1910 ,
1916 _ . .
1925 L —
1926 !
1927 *
1928 1
1930 1
1931 i





$18. 74




43. 50


i The quarterly wages published by the United States Department of Agriculture were weighted in the
following manner to obtain the average yearly wage rate: Apr. 1, July 2, Oct. 2, and the following Jan. 1.
Index Numbers of Wages, 1840-1926. Monthly Labor Review, United States Bureau of Labor Statistics, Vol. 26, No. 2, p. 332, February, 1928, and Warren, G. F., and Pearson, F. A., Purchasing Power of
Wages, Farm Economics, No. 68, p. 1438, November, 1930.


TABLE 2.—Index numbers of wages, 1910-1981
Farm wages by the month with board




-- 1



— - -



Alabama Texas Iowa Dakota Oregon





United rates


Earnings of


Mr. PATMAN. NOW, these farmers during good times voted bonds
to build schoolhouses and construct roads and make other public
improvements. They did it on the basis of 20-cent cotton and more
than a dollar a bushel for wheat. Now, the citizen who holds these
bonds does not have a right to take a hundred-dollar bond of that
farmer and strike out "$100" and put "$400" there; neither does
the bondholder have a right to strike out "6 per cent interest" and
put "24 per cent interest" there. But by reason of contracting the
currency, and by reason of the low velocity of money and credits,
the dollar has become so dear that it is equal to that same thing—those
farmers having to pay $400 instead of $100 in commodities, and 24
per cent interest instead of 6 per cent interest.
So before we can ever get this country back, I plead with you that
something must be done to put money in circulation, and new money
that will stimulate trade and cause commodity values to rise, in order
that people may be able to pay their debts.
Doctor Pearson and Doctor Warren say:

All action, public or private, that is based on the idea that some person or group
of persons are to blame for the present situation, is unsound. All action that
assumes that the losses which one is sustaining are due to gains being made by
some one else is equally unsound. The losses are unequal, but practically everyone loses. The trouble is that civilization has not yet progressed far enough to
invent a stable measure of value. Not long ago, an outbreak of bubonic plague
was blamed on individuals. It is now known that the trouble was due to the
lack of development of science or education, or both. Economic diseases are due
to a lack of development of economic science and education. Vast sums of money
have been spent on chemical and medical research. Very little has been spent
on economic research. The little science that has been developed in economics
has not become common knowledge, as, for example, the knowledge about
Economic troubles are not acts of Providence any more than polluting a stream
with typjioid is an act of Providence. Both are acts of man and can be remedied,
when there is sufficient knowledge.



I have here a statement of monetary gold. This statement is from
1880 down to date. Thefirstcolumn shows the total money in circulation; the next is the monetary gold coin and bullion; the next, the
total monetary circulation; the next is the individual deposits; then
the percentage of gold to total money; and then the monetary circulation per dollar of gold.
(The statement referred to is as follows:)
TABLE 3.—Monetary gold, money in circulation, and bank deposits in the United
States on June SO, 1880-1931
Period of year


money i

8,422, 000
1,186, 000
1,472, 000
1, 487, 000
1,561 000
1, 633, 000
1, 659, 000
1, 752,000
1, 739,000
1,805, 000
1,819, 000
1,800, 000
2, 511,000
2, 594,000
2, 718,000
3,109, 000
3, 702,000
3, 777,000
4, 542,000
6,906, 000
7, 688,000

Total monetary circulation 2

Total individual deposits *

$563,000 $1,222,000
2, 596,000
4,029, 000
4,861, 000
352, 000
973, 000
1,114, 000
1, 230,000
1, 244, 000
1, 293,000
1, 253,000
655, 000
680, 000
1, 380, 000
696, 000
1, 429, 000
1, 597,000
2, 553,000
1,476, 000
2, 775,000
1,618,000 * 3,079,000

4, 962, 000
10, 792,000
44, 510,000
2, 539, 000
2, 756,000

gold coin
and bul-

4, 627,000
4, 945,000
5, 688,000
9, 554,000
12, 216,000
18, 518,000
22, 526,000

Percentage of
gold to
money *

circulation per per dollar
dollar of
of geld



* Statistical Abstract of the United States, 1930, United States Department of Commerce, No 52, pp.
246-247. 1930.
2 From 1880 to 1899, inclusive, Statistical Abstract of the United States 1923, No. 46, p . 605, 1924; and
from 1900-1929, Statistical Abstract of the United States, 1930, No. 52, p . 247,. 1930.
3 From 1880-1914, Statistical Abstract, 1923, No. 46, p . 798, 1924; and from 1915-1929 from Statistical Abstract of the United States, 1930, No. 52, p . 262. 1930.
6-year average, excluding 1883-1886, for which data are lacking.
« Annual Keport of the Comptroller of the Currency, Dec. 1, 1930, pp. 57 and 138. 1931; and text of
the Annual Report of the Comptroller of the Currency, pp. 128 and 146. December, 1931.



Whenever the countries again establish a free gold basis, the tendency to
hoard gold will be greater than before the war.
Banks in the United States and in other countries will, for some years, wish
to maintain a liquid position so that N they will not again be called on to sell
securities at a lost in order to get cash." This means that high cash reserves will
be held.
In some regions, there is a shortage of banks so that a much larger amount
of money will be kept in homes than formerly was the case. For some time,
fear of banks will increase the tendency to keep cash rather than bank accounts.
Because of low profits, many banks are introducing a charge for checks. This
will tend to reduce the number of small accounts and reduce payments by check.

Mr. PATMAN. By looking at this chart you will find that since 1880
the monetary circulation per dollar of gold has gone down from $2.17
to 97 cents. In other words, we have more gold than we have currency
in circulation. It is not the 40 per cent gold standard that is hurting
us, but it is that 80 and 100 per cent gold standard that has been
causing us so much trouble.
I think the members of the committee will find this statement to be
very interesting. It was prepared by Doctors Pearson and Warren
of Cornell University.
I have another statement here from the same gentlemen. They
Beginning in May, 1920, prices which were 244 per cent of pre-war started to
decline, and did not stop until prices reached 136 in June, 1921. This was the
beginning of the agricultural depression, of which the end is not yet in sight.

This was just prepared a short time ago.
Tens of thousands of young men returned from France married, went in debt,
and started farming. Many are now paying interest on a debt that it is impossible
for them to liquidate.

So, in inflating the currency and in cheapening the dollar, so to
speak, you are permitting people to pay their debts; some of them on
the same basis that those debts were contracted. You will say, "Yes,
but won't the creditor receive less?" Possibly so; but it is better to
receive less than nothing at all. You will say, " Won't the man who
has fixed wages receive less in commodities for his dollars?" Yes,
he will receive less; but it is better for him to receive less than not to
have any dollars to buy those commodities with. So I suggest to you,
my friends, that one of the main reasons for the passage of this legislation is for the reflation feature that is involved, in order that money
may be put into circulation and people will have sufficient money to
do business on.
The Federal Reserve Bulletin for March, 1932, has this statement
in it. I will not read the whole statement, but will just read the conclusion:
On the basis of these excess reserves, the Federal reserve banks could issue
3,500,000,000 of credit if the demand were for currency, and 4,000,000,000 if it
were for deposits at the reserve banks.

There is plenty of money right there if you want to change this
plan and adopt some plan similar to Senator Thomas's. The Federal
Reserve Board says they have got sufficient gold reserves to justify
the issuance of three and a hall billion dollars more money, and it
could safely be done that way. But what we want to do is to convert $2,000,000,000 noncirculating Government obligation into a
$2,000,000,000 circulating obligation. Government bonds do not circulate and they do not affect the price level; but United States notes
as currency will circulate, and they will affect the price level. And



this country, I repeat, can not possibly come back until something
is done to cause commodity prices to rise.
You will say, "What about impairing the credit of our great
Nation? Permit me to suggest—not for the purpose of suggesting
that we should be extravagant—that $400,000,000,000 represents the
national wealth of our Nation. Four hundred billion dollars. I
received that information lately, from the best source, I guess, in
the antihoarding drive that is being conducted through the newspapers. Representations were made by the committee appointed
by the President of the United States that the wealth of our Nation
is $400,000,000,000. What is the debt? How much are the debts?
We owe $18,000,000,000. That is the ratio, you might say of 22K
to 1 or equal to a $22,500 business owning $1,000. That is the ratio.
Now, our indebtedness is only 4 per cent of our national wealth.
After the Civil War it was 10K per cent. Of course that is no reason
why we should increase it, but it is just to let you know that we should
not be alarmed about it now. France owes 20 per cent of her national
wealth, and England owes 40 per cent of her national wealth.
I mention that not for the purpose of encouraging extravagance,
but to let you know that in these arguments that are being made that
the credit of our Nation is being impaired, certainly those gentlemen
should take into consideration the wealth of our Nation and the
indebtedness against it, before making such statements as that.
Now, if members of the committee desire to ask me any questions,
I shall do my very best to answer them.
The ACTING CHAIRMAN. Are there any questions?
Mr. HILL. Mr. Patman, you speak of issuing about $2,000,000,000
of United States notes on the basis of the monetary gold that the
United States now has. How much monetary gold have we in the
United States?
Mr. PATMAN. We have $4,000,000,000 in this country.
Mr. HILL. I mean in the Treasury of the United States?
Mr. PATMAN. In the Treasury of the United States, I do not know
the exact amount now, but I can take one item and show you where
you can get enough from that one item alone.
There is $1,600,000,000 worth of gold certificates outstanding.
They are backed 100 per cent by gold. Six hundred million dollars
would back those 40 per cent. There is a billion dollars of idle gold
right there that would justify the issuance of two and one-half billion
dollars in currency.
You will say, "Is 40 per cent enough?" Two per cent is enough
on your bank checks. When you put your money in a bank, if 2
per cent of the depositors go there and get their money, the other 98
per cent have not got any money there. Two per cent is enough for
the banks. Certainly 40 per cent ought to be. enough for the Nation.
We have other witnesses here who will be heard on that question.
Now, of course, Mr. Connery, of Massachusetts, is one of the proponents of this legislation, and Mr. Rankin and Mr. Kvale also, and
they want to be heard; but I would like for Senator Owen to be heard
at this time, if the members of the committee have no objection.
Mr. RAGON. Mr. Chairman, I suggest that Mr. Patman yield to
Senator Owen, because I would like to ask him several questions,
and I do not want to take the time now.
Mr. PATMAN. I will yield to Senator Owen. Will that be satisiactory, Mr. Chairman?


Mr. LEWIS. I would like to ask

Mr. Patman one question. Mr.
Patman referred to a very interesting incident in Texas, where some
oil and gas people advertised to the farmers, describing a situation
something like this: "Here is gas and oil that we would like to sell,
and you have calves and chickens that you want to sell, but neither
of us has any money; so bring in your calves and chickens and we
will give you oil and gas for them." Do you know anything more
about that incident and what its developments were?
Mr. PATMAN. N O ; I do not. I know that it is very inconvenient
for people to exist without money as a medium of exchange.
Mr. LEWIS. There were not further developments?
Mr. PATMAN. NO. Advertisements have been appearing in the
Houston papers. By the way, you know, oil in east Texas has been
cheaper than water in west Texas during the last few months.
Mr. RAINEY. Are you going to have some witness on the stand
who can give us the exact amount of the gold reserve, the exact
amount of Treasury notes and certificates, and how much is held
against them, and why?
Mr. PATMAN. Yes, sir.
Mr. RAINEY. Or do you want me to ask you those questions?
Mr. PATMAN. If it is not developed by Senator Owen's testimony,

or one other witness that we have, I will get those figures from the
Treasury report. They are available.
Mr. RAINEY. But you will have a witness?
Mr. PATMAN. Yes; we will have one.
Mr. RAINEY. From whom we can get those figures?
Mr. PATMAN. Oh, yes.
Mr. RAINEY. And you

would prefer to have me wait and get that

testimony from him?
Mr. PATMAN. Yes, sir.
Mr. RAINEY. And what Witness will
Mr. PATMAN. I think Senator Owen

that be?
will be able to give you those

Mr. RAINEY. All right.
The ACTING CHAIRMAN. Mr. Patman, if you will excuse yourself,
we will hear Senator Owen and you may come back later.
I would like to state, for the benefit of members of the committee
who were not here when we took the matter up, that on motion of
Mr. Hawley it was suggested that the chairman should control and
regulate the hearing; that in deference to the suggestion of some of
the Members of Congress, Mr. Patman, Mr. Rankin, Mr. Kvale,
Mr. Connery, and others, who said that they would like to have a
committee to present their case, the Chair announced that the policy
would be for the committee to meet at 10 o'clock and go until 12.30,
and not have afternoon sessions; that these proponents who are
interested could select a committee of two or three, or whatever
number they desire, to present their witnesses; and that when they
shall have concluded, then the opposition to the measure will be given
a hearing, and then the proponents will be given a rebuttal. So, if
you gentlemen, after we adjourn to-day, will agree on your committee,
you can then present your witnesses.
Mr. PATMAN. We shall be very glad to do that.
Here is one point that I overlooked:



The Veterans of Foreign Wars presented the other day petitions
from more than two and one-half million citizens of the United
States asking for this legislation to be passed. I have already filed,
and other Members of the House have filed, petitions; and the petitions that we now have, and those that have already been filed, will
contain more than 5,000,000 names of citizens from every community in the United States—not all veterans—asking for the payment of these certificates.
Mr. CROWTHER. Mr. Chairman, I would like to ask one question
at this time, due to the opening statement of Mr. Patman. You
rather laid the burden upon the committee of preparing and submitting this legislation which was known as the adjusted compensation
act—the committee and the Congress, I think you said. B u t is it
not a fact that the representatives of the American Legion and other
kindred societies appearing before us at that time wholeheartedly
supported that proposition of the 20-year adjusted compensation
Mr. PATMAN. I understand they did, except the Veterans of
Foreign Wars. I understand the other organizations did accept i t ;
but I was not a Member of Congress at that time, and of course I
am not familiar with that personally.
Mr. R A N K I N . Mr. Chairman, Senator Thomas has suggested, and
I think the suggestion is a wise one, that we ask the chairman to
invite the economists of the Federal reserve system and also of the
Treasury Department to come here after to-day and hear this argument, for the reason that we might want to propound some questions
to them or they might want to have some propounded to us.
The ACTING CHAIRMAN. Gentlemen, it is the intention of the
Chair, when the opposition is heard, to invite the Secretary of the
Treasury, the Comptroller of the Currency, Mr. Meyer, the chairman
of the Federal Reserve Board, and General Hines, to appear before
the committee; and then, of course, the proponents will be given an
opportunity in rebuttal.
Mr. R A N K I N . What Senator Thomas has in mind, and what I had
in mind, is for them to hear the arguments in favor of this legislation,
in order that we may have the benefit of their reactions to what is
said here.
The ACTING CHAIRMAN. Of course I will be glad for those gentlemen to be present, but I do not think that we could ask them to
stay here during the hearings.
Mr. RAGON. The testimony will be printed.
The ACTING CHAIRMAN. And I have no doubt, as suggested by
Mr. Ragon, that those gentlemen, before they appear, will read the
testimony that is now being introduced before the committee, and
they can, if they see fit, answer any suggestions.
• Senator Owen, the committee will be glad to hear you now.
Mr. O W E N . Mr. Chairman and gentlemen of the committee, I feel
it a duty to the country and to the soldiers of the late war to appear
here when they invited me to do so; and I am here under a sense of
very deep obligation—to these young men who were taken from their
homes, p u t into concentration camps, shipped to the battlefields of
Europe, and went through the scenes of unspeakable horror in defense




of the interests and welfare of the people of the United States. It
is impossible to express in adequate terms the obligation of the people
of the United States to these men. I speak of them with great respect
arid with the greatest affection. My familiarity with a certain branch
of this question—the financial system—was probably the occasion of
my being invited to appear.
I founded the First National Bank of Muskogee in 1890, and I was
president of it for 10 years. I was for eight years chairman of the
Committee on Banking and Currency of the United States Senate,
in the first year of which service it became my duty to frame the
Federal reserve bill adopted by the Senate, which was substituted
for the House bill and accepted by the House. The first draft of
the bill drawn by me and printed in May, 1913, and a draft made
under direction of the chairman of the Banking Committee of the
House were reconciled, redrawn, and simultaneously submitted in
identical form to the two Houses.
In that act was established a system of currency which has become the standard of the world. We are no longer on the old
gold basis, gentlemen of the committee. We are supposed to be
on a gold basis. But the American dollar is based on commodity
value, and the gold is only used for purposes of redemption, and the
redemption feature does not take place as a physical fact. It is
merely a bookkeeping entry to preserve the relationships to each
other of the 12 reserve banks.
Not long since—several months ago—the public press announced
that Reginald McKenna, formerly Chancellor of the Exchequer of
Great Britain, and for a long time president of the London City and
Midland Bank, one of the very great banks of the world, with 3,000
branches and with over two thousand millions of deposits, said in an
address that the gold dollar was no longer the standard in the world;
it was the American Federal reserve bank dollar. And the reason for
that was that the Federal reserve system has required these Federal
reserve notes that now constitute the bulk of our currency to be issued
against commodity bills. The structure of that act is such that a
farmer with a thousand bushels of wheat could go to his bank with a
warehouse receipt for that wheat as security to his note—his personal
promise to pay—and that note, indorsed by his member bank, would
be transferred to the reserve bank, the reserve bank would transfer
it to the Federal reserve agent, the Federal reserve agent would hand
back a thousand dollars of United States Treasury notes, promises
to pay. That thousand dollars in effect would be transferred from the
Treasury of the United States to the farmer at the point of production.
In other words, that money was emitted against actual value produced in the country for the purpose of moving that commerce to
market and to the point of consumption.
This is a very important consideration, and one which has a very
great bearing upon the question before you; because I take it that
there is no member of the committee, or of Congress, who would not be
glad to pay these men the amount which they, I think, very justly
claim, if it could be done advantageously to the United States, at a
profit to the United States, and not at a cost to the United States.
I wish to show to the committee, if I am able to do so, that the
payment of the soldier compensation at this time would be a veritable
godsend to the people of the United States, entirely independently



of any soldier who receives it—the so-called bonus. It should not be
called a bonus, I take it. It is a just obligation, not a bonus.
There are pending before the Congress of the United States a number of bills proposing to stabilize commodity values in this country.
That is another form of saying "to give stability to the purchasing
power of the dollar in this country." I need not tell this committee
that the dollar, which we supposed to have great stability, being based
upon the gold standard, so called, is now buying $1.50 worth of commodity values measured against the average of 550 commodities in
the wholesale markets. But when you come to deal with the dollars
in terms of other forms of property, it is not an increase of 50 per cent
in purchasing power, nor an increase of 100 per cent in purchasing
power, or of 200 per cent, or 300, or 400. The average value of stocks
on the New York Stock Exchange now, taking the 90 standard stocks
ordinarily used with the Dow-Jones index, shows that the dollar to-day
will buy approximately 500 per cent of what it did two and a half years
ago. United States Steel, one of the greatest of all of our industrial
companies, has its stock now selling so that the dollar will buy six
times as much, or seven times as much, United States Steel stock as it
did two and a half years ago. It is buying more than ten times as
much National City Bank stock—one of the greatest banks in the
world—as it would buy in the summer of 1929.
These facts are of very great importance. Something happened to
the United States and its financial structure, its credit structure, in
the fall of 1929—a colossal misfortune. There had been an era of
great construction of factories, residences, etc., of all kinds from 1922
to 1929. Probably fifty or sixty billions were expended in actual
construction during those years, and during those same years the
industrial companies, taking advantage of a prosperous condition,
when credit was at a low interest rate, and easily obtained, sold their
stocks and bonds to the public under conditions of high-powered salesmanship, this vast advertising, embracing from 10 to 30 per cent of
the entire columns of the leading papers in the United States, so that
they sold, as Doctor Goldenweiser testified before the Committee on
Banking and Currency, over $50,000,000,000 of securities, not including refinancing, between the years 1922 and 1929. They accumulated over twenty billions of cash reserves, and they loaned these
cash reserves to the public, in order that the people might obtain the
credit with which to buy these stocks and bonds on margin. The
people were led by the lure of the rising market to come in in increasing
numbers, until finally there were from fifteen to sixteen million shareholders who had bought shares of the industrial properties of this*
country. These stocks were issued in increasing volume, from about,
300,000,000 shares in 1923 to over 1,200,000,000 shares in 1931.
Shares were very abundant, but on the bull market they were
selling far above their intrinsic value; selling at 20 times their earnings—30, 40, 50 times their earnings—Radio, having no net earnings
at all, from a speculative fever, was selling at $550 a share. Split
five times, it is now selling for $7 a share. International Combustion
Engineering, which was selling at 103, and declared by its proponents
to be a stock that was going to 500, with great prospects of earnings,
collapsed under this debacle, until now it is selling for less than $1 a



Something happened to the purchasing power of the dollar,
in terms of stocks and bonds, that deserves the critical consideration
and the microscopic examination of those charged with the preservation and protection of the business of this Republic.
The market became increasingly vulnerable because of the expansion and inflation of the values or prices of these stocks and bonds,
because of the expansion of credit in the form of brokers' loans, which
finally reached the colossal figures of eight billion five hundred and
odd millions of dollars, 90 per cent of which was subject to summary
call and liquidation within 24 hours. It is impossible to conceive of
a credit structure made more vulnerable than that.
It was testified by Mr. Harold Aron before the Committee on the
Judiciary in the House of Representatives, in considering short selling,
on H. R. No. 4, Mr. LaGuardia's bill, that he knew of 20 great bear
operators who cooperated in the fall of 1929 for the purpose of raiding
that market. The records show a very remarkable circumstance to
which I have the honor to call your attention. It was this: That in
the week beginning October 23, 1929, there was withdrawn on account
of "out-of-town banks' 7 and "on account of others" (principally the
great industrial companies and great individuals who had accumulated
vast holdings of cash) $2,380,000,000 requiring the summary sale
within 24 hours of the stocks held on margin behind those loans.
Approximately, it meant that within that week there had to be sold
and buyers found, for cash, stock of somewhere around thirty-five
hundred million dollars. New York banks had to come to the relief
of the stock market to prevent a collapse. There were 68,000,000
shares sold in the eight days beginning October 23—an average of
nearly 10,000,000 shares a day. Within five weeks there was withdrawn from that market $4,500,000,000 of credit, which was destroyed
and vanished, which ceased to exist, by the simple process of requiring
the loans to be paid and summarily liquidated. It involved a huge
transfer of property and property rights under forced sales.
The loss from the high to the low under that particular movement,
at that particular time, amounted to over $24,000,000,000, distributed
among fifteen or sixteen million stockholders scattered throughout
the United States, affecting moreover the property value of men who
had no part whatever in speculating on the stock exchange—men
who had bought the stock with their savings, under the advice of their
bankers that it was a good purchase.
Up to this present time over eight thousand millions of dollars of
credit has been withdrawn from behind those margined stocks, and
the loss of value in the stocks listed on the New York Stock Exchange
alone amounts to more than $60,000,000,000, divided among fifteen
or sixteen million stockholders from the Atlantic to the Pacific.
The effect of these credit contractions breaking down the credit
structure of the United States was visited also upon every other stock
exchange in the United States—The Consolidated Stock Exchange in
New York, the Curb in New York, the exchanges of Boston, Philadelphia, Baltimore, Pittsburgh, Cleveland, Chicago, and others to the
extreme end of this country. The losses in property values due to
the breaking down of the credit structure of America will amount to
not less than $150,000,000,000. It is not a permanent loss. It does
involve permanent losses to the individuals who are compelled to
liquidate. Those losses to them will be transferred in actual property



to others who have stronger hands. It is a common phrase on Wall
Street to speak of stocks being transferred to " stronger hands/'
which means the creditor, the sagacious trader, the one who knows
how to play that game skillfully and who commands cash and credit.
The total debts of the United States are now estimated to be about
one hundred and fifty billions. The total property of the United
States was estimated in January, 1929, to be about four hundred
billions. It would now be about two hundred and fifty billions, allowing for these losses. With the one hundred and fifty billions of debts
remaining, with the dollar increasing its purchasing power, not 50
per cent but 100 per cent, 200 per cent, in ordinary property such as
real estate—it is a question whether or not the debts which are owned
do not cover substantially the values that remain.
But this is a transitory period, and must not be taken as a finality^
because the property of the people of the United States at last—their
fields, their forests, their mines and their factories, and their intelligent, industrious workers—are all here. The thing which has
happened is that the purchasing power of the dollar has been interfered
with in the most serious way. I want to call your attention to what is
really "the dollar" that we should consider. The stabilization bills
proposing to stabilize the value of the dollar found it necessary to
consider that question.
What is the "dollar"—"the means of payment," the means by
which the business of this country is transacted? Is it the gold dollar
or the paper money that we use?
That money, currency, which is pocket money, and till money,
and vault money, only functions in a small way. It probably does
not transact more than thirty-five or forty billions per annum. But
the check on the deposit in 1929, which was recorded as interbank
checks, represented seven hundred and thirteen billions—seven hundred and thirteen times as much, and more, than the actual currency
which all the banks of the United States at that time possessed.
The real dollar of the country is the check on the deposit. That check
dollar has shrunk at this time over three hundred bi!lions per annum—
or over a billion dollars a day of our ephemeral check money. These
exchanges only represent however the interbank checks. The intrabank checks and the obviated checks would raise that volume to
approximately nine hundred billions in 1929—in other words, about
$3,000,000,000 a day for every working day in the year. That has
now gone down to probably not much over half of what it was then.
So we have suffered a loss of check currency of fifteen hundred millions
a day—assuming the average life of a check is two days our loss of
money circulating as checks would reach $3,000,000,000.
The check functions as money. It is money, in the true sense of
the word. When I take a check of a hundred dollars and give it to
the hotel in payment and that hotel puts it in its accounts, it goes
to the various banks; it functions as money. There is no charge
under the Federal reserve system for collection of checks except in
special cases, and the check is the money of the country that transacts 95, 96, to 97 per cent of all the business in this country; and
anything which interferes with the freedom of the check and its issue
is responsible for the conditions which we are now afflicted with in
this country.
What has happened to the checking account? The banks, all told,
have twenty-nine billions of time deposits, which may be converted



Into demand deposits but ordinarily are not, and may be disregarded
for the purpose of this discussion. They have about twenty-one
billions of demand deposits subject to check. But the colossal losses
due to the credit hurricane or tornado that struck the stock exchange,
and interfered with the credit structure of the United States, have
made every depositor in every bank apprehensive about his affairs.
He does not feel free to spend his money or use the check. He
does not want to spend it beyond the amount that his necessities
require. Many of them became apprehensive of the banks. Indeed,
over 4,000 of the banks failed as an immediate consequence of this
breakdown of credit in New York just described. The banks were
frightened by the depositors withdrawing money for hoarding and
the terrible shrinkage of property value and personal worth. The
depositors withdrew over $1,200,000,000 for hoarding in 1931, and
that money was supplied by the Federal reserve system.
The banks are afraid now to lend their money. They have less
than $1,000,000,000 against $50,000,000,000 of deposits.
There was a man in Tupelo, Miss., named Clark, a banker. His
depositors began to come in and demand their money and he saw
that it meant the ruin of that bank. It had ruined several banks in
his neighborhood. He had the courage and the American common
sense to take the leading newspaper of his city and put out an " a d "
in big heavy type to the effect that he did not intend to pay any
depositor in cash upon his checks except for the purpose of paying
taxes, buying groceries, and the other normal uses of money; that he
was not going to allow a small number to take all the cash out of
his bank and leave his oth^r depositors without any cash. He was
going to conduct that bank in a common-sense way and protect all
the depositors and unless they supported him in that, he would close
the bank. The people supported him unanimously and Mr. Clark
won a victory of common sense and carried on his bank business
without interruption.
A great many of these banks which failed, failed because of the lack
of confidence on the part of the depositors. So we have had created a
condition where the banks are refusing to lend, where the depositors
are refusing to spend, where people who have currency in their pockets
are unwilling to part with it or issue "check money" and we have so
serious a congestion and so serious a lack of currency to carry out
the transactions of the country that this Nation is in a state of partial
industrial paralysis, in part—but not altogether. This country is still
producing approximately $60,000,000,000 annually of value. But
that is a far cry from what this country was producing in 1928 and
1929, when they were producing $90,000,000,000 of values.
Now, I have made this preliminary sketch, a sort of a charcoal
sketch, to show the reason why I regard the payment of the soldier
bonus as a Godsend to this country. We have made vain efforts to
restore prosperity in this country by the organization of the Finance
Corporation last fall. It served a useful purpose in helping those who
are in distress for debt and it served the purpose of a moratorium to
that extent, just as we extended a moratorium to the European
nations. And they had a right to demand it. Europe had a moral
right to ask it because our own action in this country had increased
their debt to us (in terms of commodities) approximately $11,000,000,000. That is why they went off the gold standard. It is perfectly


- 35

easy to understand. They were entirely justified in going off the gold
I am strongly opposed to yielding $1 to Europe on the war debts.
But I do not want to take .from Europe dollars that are worth $1.50
in commodities as a result of our own conduct in this country. I
regard that as unfair and unjust and it will not be done, because these
things are going to correct themselves. They are going to be corrected now, I hope, by the Congress of the United States. They can
be corrected and they can be corrected quickly.
It is my deliberate judgment, and I say it under a sense of solemn
responsibility, that the most important way in which you can reach
this difficulty now is to emit this money in payment of the soldier
bonus, not for the mere sake of the soldiers, although they deserve
every consideration, but for the sake of the business men of this
country, for the sake of the banks and the debtors, for the sake of
balancing the Budget that has given us so much trouble. In emitting such currency clear cut provision should be made by statute for
withdrawing and canceling such money when the immediate emergency has passed.
What is the trouble with the Budget, I pray you? Is it not because
the income of the people of the United States has dropped from
$90,000,000,000 to $60,000,000,000 and therefore all forms of revenue
have been cut off? If you had a production now of $90,000,000,000
instead of $60,000,000,000, you would have an income making it
unnecessary to-day to pass these taxes which have so distressed and
disturbed the Congress in their effort to adjust the situation conscientiously and wisely.
How can you restore this country to activity until you remove the
fear on the part of the banker, on the part of the depositor, whose
check constitutes 95 per cent of the money in this country? How
can you do it unless you remove the fear?
Well, we have attempted to remove the fear by putting on a campaign of exhortation. I am in favor of exhortation. I have tried
"to exhort" a little in that direction, but I never thought that exhortation was sufficient. It is not enough to tell a man who is about
to drown to take courage; but, for God's sake, throw him a life preserver. That is what is needed right now—more money.
There are various ways in which that can be done. It can be done
by emitting notes from the Treasury, as is proposed by the bill under
discussion for current expense, or for construction of public works.
It can be done in another way which I think would be more judicious
I mean by that, the issuance of and the payment of these bills and
accounts by Federal reserve notes secured by United States bonds,
retained by the United States but put in the hands of the reserve banks
and pledged as security for the Federal reserve notes.
(See Exhibit 1.)
Another way which has been suggested in the Senate of paying it
is by requiring the Federal reserve banks to emit Federal reserve
bank notes against 2 per cent bonds. I think that that should be
examined very critically, because to ask Congress to compel a bank
owned by the member banks to incur the obligation of emitting two
billions of its own notes, its "promises to pay" secured by 2 per cent
bonds is liable to raise a controversial question. The question is apt
to arise whether or nor under the fifth amendment to the Constitution, the Congress of the United States would have the power to




require this corporation owned by the member banks to assume such
special obligations. But those banks could, as agents of the United
States, be required to receive bonds they should be 3 or 4 per cent
bonds and to deliver those bonds to the Federal reserve agents and
receive (on those bonds as security, Federal reserve notes. Those
Federal reserve notes are not bank notes. They are far from being
bank notes. They are promises of the United States to pay.
This note [indicating note] says: "The United States of America
will pay to the bearer on demand $10." It is a Treasury note but
called a "Federal reserve note." But it is a Treasury note that has
the safeguard of being handled through the reserve banks. It is a
Treasury note that under the terms of the Federal reserve system
requires a backing of gold. I wish to say to the committee that I do
not regard the question of gold as having any serious importance in
this matter, and if you will pardon me, I will with extreme brevity
give a reason why.
To start with, there are eleven billions of gold in the world and the
United States has five billions of it; not four billions, as Mr. Patman
said, but five billions, approximately. France has three billions, and
the other 52 nations of the world have about three billions.
The real value of gold, which is primarily a commodity, is the
monetary demand on gold. The industrial demand on gold is only
about $20,000,000 per annum. The actual, output will average somewhere around $300,000,000 per annum. About $280,000,000 per
annum is required by the monetary demand for gold.
Well, with various nations going off the gold standard and others
following suit, gold is not in the same urgent demand as it was before.
If you will examine the extent to which we employ gold in this
country, you will observe that it has vanished as pocket money.
It no longer exists for ordinary currency uses, nor is it used to any
extent even by the banks except* to furnish the means of sending
balances to Europe.
We have had occasion to remit some gold balances because of the
speculative fever that took place in this country in 1929, during which
Europe, participating on a large scale sent over large amounts of
money for that purpose. When the "seance" was over, that foreign
money remained in New York, earmarked, ready to go back, and a
large part of it has gone back and I hope that it will all go back and
stay there.
But we have the balance of trade always in our favor. The world
owes us $22,000,000,000 upon which they are paying interest, and that
indebtedness is increasing. We are in no danger of losing gold. We
have got the greatest gold hoard in the world and we have got also
in the Federal reserve system an automatic means of preventing any
gold from going out of this country, if we want to. I merely mention
that in passing. The Federal reserve act only compels the redemption of Federal reserve notes in gold in Washington. Those notes do
not have to be redeemed in gold by a reserve bank. They may be
redeemed in gold "or lawful money."
In other words, gold or lawful money may be employed, and therefore gold itself is not necessary for redemption in any of these banks,
if we chose not to have it done.
But there is no reason why we should raise any point about that,
because there is no demand on this gold and there can be no demand
on this gold that will disturb our financial system a particle.



I refer to that because some have thought that if we were to expand
our currency, it would result in people having a fear that our money
was going to be "inflated," so called, and they might attempt to
redeem it in gold and take the gold away. There is no danger of that.
Moreover nobody wishes to inflate the currency—we have enough gold
to inflate it, if we wished even on a gold standard—we have in the
United States, so called "in circulation," five and a half billions, of
which the banks have approximately one billion. About a half billion is abroad or destroyed, burned up, or lost, and is merely kept on
record because its loss can not be identified. But there remains in
the hands of the people about $4,000,000,000 of which one and a half
billions are hoarded and a part of the balance very inactive.
A great many people do not use the banks. They do not want to
use the banks. They want to keep the money in their own pockets,
in their own control. Those people naturally are disposed to hoard.
Then, when the fear of the banks came on, there were $1,200,000,000
of extra money distributed and hoarded through the Federal reserve
banks and the member banks, passing out to individuals.
So that there is available about two and a half billion of dollars, a
part of which is hoarded and a part of which is in circulation. If you
will add $2,000,000,000 or whatever is necessary to pay the soldier
bonus, you will immediately put into circulation a volume of money
sufficient to compel a raise in commodities in the United States—not
only in the United States, but in the world, for I wish to say to this
committee in the most solemn manner, that the American dollar,
secured by commodities redeemable daily in gold, is now the monetary
standard of the world and on a good redemption basis. Sir Reginald
McKenna spoke the truth. He understood what he was talking about
and he was confirmed in that opinion by Sir Edward Holden, who was
the former Chairman of the Board of the London City and Midland
Bank, and a man who thoroughly understood these questions.
Therefore, I say that the payment of the soldier bonus is the quick
way to restore prosperity in this country, and you are not going to do
it by these other measures.
I say that the Reconstruction Finance Corporation, while useful,
very useful to stop a series of bankruptcies about to take place,
was at last but a moratorium, extending credit in dollars, but requiring those dollars to be paid back again; and if the dollars are just as
difficult to get, or more, as they appear to be gett'ng more and more
difficult, for the commodity market is not going up—it is going down—
and even the stock market is not going up—it s going down—what
good will be done except to delay the date of " execution" and final
bankruptcy or ruinous liquidation?
There is only one way to increase the value of commodities and to
put this country back in a normal condition, and that is to remove the
fear of the depositor and the banker and to put the money in circulation from one end of this country to the other.
There is no more equitable way in which to accomplish it than
through these soldiers who are distributed from Maine to California,
and in a fair percentage of the population everywhere. It is a nationwide distribution.
Now, these are the considerations that moved me to appear before
the committee, because I regard it as one of the first steps toward the
stabilization of the commodity value, bringing commodities back to
their normal value, and bringing down the fantastic purchasing



power of the dollar, thus dealing fairly with the debtor class in this
country, upon whose welfare to a very serious extent depends the
welfare of the creditor class.
And more than that, gentlemen, I want to say to you most earnestly
that 8,000,000 people are not going to remain silent and content under
a political system that deprives them and their families of the opportunity of life. That is a political consideration to reflect on. The
thing which is needed in this country now is to correct the contraction
of credit and currency which has taken place as a result of the volcano
in finance that took place in October and November, 1929, and whose
flames have not yet died out. The best way to do this is to expand
currency and thus expand credit.
I would be glad to answer, if I can, any questions that any member
of the committee might care to ask me. It is easier to ask questions
than to answer them always with intelligence and accuracy; but I
should be glad to answer any questions that might be asked me about
this matter.
Mr. RAINEY. Mr. Chairman, I believe I shall ask the Senator some
questions. Senator, you are recognized nationally as an expert in
these matters and I am not. I have no reputation at all in that
Mr. OWEN. I do not claim any, Mr. Rainey.
Mr. RAINEY. Well, everybody else does for you, Senator, and so do
I. Now, in order to clear up some matters in my mind, as well as to
get some figures in the record, I would like to ask you some questions.
How much is our gold reserve at present?
Mr. OWEN. It is about three billions. There are about one thousand four hundred millions of gold available in the Federal reserve
system to support reserve notes and deposits.
Mr. RAINEY. Before we got to free gold, I want to ask another
question to lead up to that.
Mr. OWEN. The words "free gold" have a double meaning.
Mr. RAINEY. My information is, from data that I have checked
up for myself, that on the 29th day of February last our gold reserve
amounted to $3,448,011,378. It has been shaved somewhat since
then, but I presume that is substantially correct.
Mr. OWEN. It is fluctuating from time to time.
Mr. RAINEY. But that is substantially correct. How much of that
amount is held for Federal reserve banks and agents, and how much
of that amount can not be touched for any other purpose?
Mr. OWEN. The law requires a 35 per cent reserve against the
deposits of member banks, but that reserve may be in "gold or
lawful money." It need not be in gold.
Mr. RAINEY. IS not that 40 per cent, Senator?
Mr. OWEN. NO, sir; it is 35 per cent. It is 40 per cent against the
reserve notes that are issued.
Mr. RAINEY. Oh, yes; that is true.
Mr. OWEN. That 40 per cent against the reserve notes issued,
together with the 35 per cent against the member-bank deposits or
the member-bank reserves, so called, leaves about one thousand
four hundred millions of available gold as security against the issue
of additional Federal reserve notes.
Mr. RAINEY. My data is that on the 29th day of February the
amount would be $1,769,600,717. I think that is substantially



correct. That amount is the actual gold reserve of the United States
against the United States notes and gold certificates.
Now, the amount held in trust against the gold and silver certificates
and Treasury notes of 1890, as I have it here, is $1,613,569,629. I
think that is substantially correct, is it not?
Mr. OWEN. It was $1,877,000,000 June 30,1931. You are speaking
of the Treasury not of the reserve banks.
Mr. RAINEY. This amount, as I understand under the law, must
be held intact and we can not touch that at all?
Mr. OWEN. Under the law of 1891, under the Federal reserve act,
all moneys are exchangeable in the United States Treasury and those
reserves substantially are there as a backlog against our entire currency system and under legislative control.
Mr. RAINEY. Yes. Now, we had a circulation on February 28 of
$346,661,018, and against that we had a gold reserve of $155,039,028.
That is substantially correct, is it not?
Mr. OWEN. I think so, but the physical existence of these notes isu
largely mythical.
Mr. RAINEY. NOW, if we add to these United States notes—and on
this we now have a 45 per cent coverage, a 45 per cent gold base—now,
if we add to that $2,000,000,000 of Treasury notes—and that is the
proposition, as I understand it—the coverage of gold would drop to
6.7 per cent, according to my figures.
Mr. OWEN. Yes; your arithmetic is right, but we are talking of
two entirely different things. You can retire the gold certificates asthey pass through the Treasury and substitute United States notes
and then put this gold behind all notes without legislative difficulty.
Mr. RAINEY. In other words, as against these United States notes
which are in circulation and to which it is proposed now to add
$2,000,000,000, if the $2,000,000,000 be added, we will then have a
coverage of only 6.7 per cent. Do you think, Senator, to keep these
United States notes an international standard from the Orient and
the South Seas to Washington and back again, that that would be
Mr. OWEN. I think this, that your suggestion appears to put the
new issue upon the basis of those Treasury notes against which there
is $150,000,000 of gold as a reserve, and I think that gold reserve is
purely artificial and can be easily changed, even as to those rates, if
desired and the gold which is available in the United States Treasury
for any purpose can be made available for the purposes of this legislation, if the Congress in its wisdom sees fit to pass the legislation.
Mr. RAINEY. Under existing law, though——
Mr. OWEN. I am talking about the power to change the law, if
necessary. I am talking about the remedy, if Congress desires to
make a remedy. That answers your question, I think.
Mr. RAINEY. Under existing law, and unless we change the law,
we could not take that $1,700,000,000 and make that security
Mr. OWEN. Oh, any gold reserve which has been fixed under a
a rule of Congress will, of course, remain there until the rule is
changed. That is obvious. You are talking of gold certificates and
Treasury notes of 1890. I am talking about Federal reserve notes
Mr. RAINEY. DO you know what the gold coverage is in England?
Mr. OWEN. It was 8 per cent during the war.
Mr. RAINEY. I mean now. It is now 35 per cent.



Mr. OWEN. And they got along very well with it during the way
by just simply taking the position that anybody who wanted to
redeem the Bradbury notes in gold was "simple minded'7 and they
would arrest him.
Mr. RAINEY. HOW much is it now?
Mr. OWEN. I think it is about forty; I have not noticed it lately.
Mr. RAINEY. My information is that it is only thirty-five.
Mr. OWEN. It fluctuates.
Mr. RAINEY. DO you know what the gold coverage is in France
at the present time?
Mr. OWEN. It is very high. They have got about three billions
of gold there.
Mr. RAINEY. Seventy per cent?
Mr. OWEN. It is very high.
Mr. RAINEY. Seventy per cent, according to my figures.
Mr. OWEN. Yes; it is very high, but their currency is completely
flexible, which is of very great value in giving stability to currency
and credit when wisely used.
I want to say this with regard to the question of gold: We have
adopted a 40 per cent rule, which can be relaxed, of course; but I
wish to say to the committee that the demand upon our gold, as I
have stated, is so small that there is no real necessity for keeping so
high a reserve, except, perhaps, a sentiment of national pride.
I submit in writing the remedy I propose for the depression and
pray for sincere criticism.
The ACTING CHAIRMAN. Senator, on behalf of the committee, we
thank you for your presence.
(Mr. Owen submitted the following statement:)

Let the United States issue 4 per cent bonds for $2,400,000,000, payable in 20
years with right of redemption at par after 10 years from date of issue.
Place these bonds with the Federal Reserve Banks as agents of the Uiiited
States, proportioned to their respective resources.
Instruct them to place these bonds to the extent and as required with the reserve
agents and to receive from the reserve agents at par Federal reserve notes to be
1. Either in paying the compensation to the soldiers of the World War now
requested by them;
2. And/or to pay for the buildings now authorized by the Government amounting to a billion dollars for which no appropriations have been made;
3. And/or other current expenditures.
The effect of this emission of currency would be to expand the currency which
is now dangerously contracted by hoarding and by lack of confidence and fear.
The immediate effect would necessarily be to raise the price of commodities,
of property, of stocks and bonds, now dangerously depressed by credit and currency contraction.
The coincident, collateral, and equivalent effect would be to decrease the unnatural and dangerous excess purchasing power of the dollar.
It is proposed that this operation shall cease the moment commodity values
rise to the average wholesale market prices prevailing between the years 1922
and 1929 as recorded in the general commodity index of commodity prices in the
wholesale markets of 1926 measured by the index number 100 of the Bureau of
Statistics of the Department of Labor.
It is proposed that in the event the market value rises above 100 aforesaid
and the dollar should begin to depreciate in purchasing power below the normal
100 of that date any depreciation of the dollar shall be prevented by the sale of
such bonds for cash and the cancellation of the money received therefor.



This proposed remedy would have the immediate effect of overcoming the
shock to the credit system from which the country is suffering, will relieve the
banks and their depositors of fear, will check and correct the depression now
grievously afflicting the Nation.
The passage of the so-called stabilization bills in form or substance set forth
by the House bills introduced by Keller, of Illinois, and Goldsborough, of
Maryland, and others would make effective as a principle the remedy above set
forth and the stability of commodities and of the dollar and of business a permanent policy of the United States.
It would cause the return of hoarded money and restore to activity the chief
credit source and supply of dollars by causing the bank checks of bank depositors
to return to normal activity.
It would restore individual, corporate, and national income and the normal
revenues of counties, cities, States, and of the United States, and automatically
balance their budgets without further borrowing and without further special
The United States has approximately five billions of gold and far more than
sufficient to put an abundant gold reserve behind every dollar issued by this
proposed remedy.
It would require suitable legislation to make the remedy effective.
The failure of existing attempted remedies through the Reconstruction Finance
Corporation and the Glass-Steagall bill to restore prices is due to the fact that
under these acts no addition to the currency has taken place.
The author of this proposal requests the thoughtful and conscientious consideration of men and statesmen who are informed in this field and respectfully
suggests to the American press that publicity be given to the plan in order that
its merits or demerits shall be disclosed.

Mr. CONNERY. Mr. Chairman and gentlemen of the committee,
first of all I would like to say that these stories that we have read in
the newspapers recently, to the effect that the soldiers should be
patriotic enough not to ask the Government to-day to pay the soldiers' bonus—in other words, trying to teach the soldiers patriotism—
seem to me like carrying coals to Newcastle. The gentleman from
Texas, the gentleman from Mississippi, and myself, and others in the
House who have sponsored this legislation, and who favor this legislation at this time, have no intention of doing this for the purpose
simply of helping the American service men. It really angers one
after a time to be told that because you are a service man, because
you are asking the Congress of the United States to pay these certificates in cash, that all you are thinking about is a graft on the United
States Government, getting something out of the Treasury to give
to the soldiers.
Now, we do not intend to be taught our patriotism by any of the
great metropolitan newspapers or anybody else. We are doing this
because we think it is the best thing for the American people. As
chairman of the Committee on Labor, I have had the opportunity
since Christmas, at hearings which we held on the Lewis bill, hearings
on the Mississippi River, on the prevailing rate of wage bills, and
kindred bills before our committee, to hear people from all parts of
the United States, to hear their story of unemployment, to hear their
story of trying to bring up a family—a man, for instance, with five or
six children trying to bring up a family on $25 a week. We have
heard the sorrowful tale of fathers and mothers of families trying
just to get bread in the United States to-day. They are not service
men; they are not service men's families. They are simply American



The gentleman from Texas (Mr. Patman) has given such a fine
exposition of this matter, followed in such a brilliant manner by
Senator Owen, that I am not going into the financial aspects of this
question. This committee knows all about the gold in the Treasury,
the 40 per cent reserve, the Federal notes, and how we propose to
pay this. I am in favor of the Patman bill, H. R. 7726. But some
of the things that the Senator said impressed me very deeply, and
particularly when he said that 8,000,000 citizens of the United States
will not sit idly by and go hungry. That is what he meant. Twelve
and a half cents and hour, on the Mississippi River, paid by the
United States Government for doing the work of flood control!
That is from a letter I got from Louisiana yesterday. The Government took the contract away from the contractor, who was paying
20 cents an hour, and the Government is paying 12% cents an hour.
We had one man before our Committee on Labor who worked for
10 days on the Mississippi River. At the end of the 10 days, after
they took out what he paid for his tent, what he got from the commissary of the contractor, and 45 cents for ice water which they
charged him for—after 10 days, he was discharged, and he owed the
contractor $1.10.
The gentleman from Texas says that our veterans, many of them,
in 1945 will owe the Government money on their adjusted service
certificates, with the 4% per cent now—the million of men who have
borrowed from the United States Government. Congressman Perkins
of New Jersey, who is an insurance expert, told me one day that less
than one-half of 1 per cent pay back loans which they make from
insurance companies—not the veterans, but in general throughout
the United States. Well, if that applies to the soldier—and it must,
because he lost his opportunities during the war and had a hard time
getting back on his feet, and now is borrowing for his little family,
for a house, or whatever it is—in 1945 we are going to have a million
soldiers who have lost the rest of their bonus which they borrowed
under this borrowing bill which we now have.
Now, I am appealing to you for the people of the United States;
the people who are out of work; the people who want money to buy
groceries, who want money to pay the interest on the mortgage on
their homes, who want money to buy a dress for little Mary and a
pair of shoes for little Johnny. And, gentlemen, I say to you, as I
have said often before, publicly, you know all about your communists.
You can hit your communist on the head, as they did last week
down here in Washington—we saw the picture of a girl laid out on the
ground—you can knock them on the head on Boston Common, or in
Union Square in New York, and you can say that the great menace of
the country is the communist, the red, the Bolshevist. You can look
into his mind and you know what he is thinking; but there is not a.
man here who can look into the mind of the man who is trying to
raise his little family, who has five or six children, and who looks
across the breakfast table in the morning, and his wife says to him,
"There isn't any bread." There is nothing to eat for that little child
of 4; there is nothing to eat for this little boy of 2; and we are living
under the Stars and Stripes, representing liberty and equality—
"life, liberty, and the pursuit of happiness."
They always call you "wild," Mr. Chairman, when you do not
like to see little children suffer. I was in my home city last week.
A man from the city of Cambridge, a friend of mine who is in the



coal business came in. He had been out making collections. He had
been to 25 of his customers trying to get some money for the coal
which he had sold. He went into 25 homes. From three people he
got a little here and there—a dollar, $2, or $3. Before he finished
with his 25, he had given out grocery orders to 22 out of the 25
people. They could not pay him a cent. They would say, "Here is
my family; here are my children; I haven't got anything to eat."
I made a statement a few weeks ago. I said that people were
starving. When they found them in their rooms dead of starvation, they said, "It is pneumonia," or some other disease, and the
Boston Transcript, said: "Congressman Connery is talking wildly;
he is loose-tongued; he is making statements that impugn the good
faith of the doctors of the country"—the doctors who said that men
died of pneumonia when they died of starvation. Well, it does not
take any great logic to find out that a man can get pneumonia, or
can get any number of diseases, from malnutrition or going hungry.
There are actually people starving in the United States to-day.
They are too proud to go to the poor departments and the welfare
departments of their cities and towns. They look to the Congress of
the United States. They saw us pass the reconstruction finance bill.
As Senator Owen said, it was a good thing. I voted for it. It helps
the banks. But we have had experience in the last few weeks as to
where this money is going, a great deal of it—the Missouri Pacific,
back to Kuhn-Loeb, or Pierpont Morgan in New York, and then the
moneys filtering through the banks to pay debts; back to New York;
back to the "stronger hands," as the Senator said. "Strongerhands,"
meaning the concentration of wealth in the United States in the hands
of a few; and after every depression and every panic economists tell
us that concentration becomes even more marked.
Gentlemen, we are living in the United States of America. If we
want to represent our constituents; if we want to do something for
those 8,000,000 men who are out of work; if we want to bring back
prosperity to the United States, we can not do it simply by passing
reconstruction finance laws, and we can not do it by cutting salaries
of Federal employees. The quickest and surest way to do it at the
present time is to pass the soldiers' bonus bill.
This goes into 48 States of the Union. It is not money that is going
to the banks. It is money going directly to John Brown, John Jones,
William Green; and it does not affect merely 3,000,000 soldiers. It
affects their families; and taking an average family of three or four—
because the old mother is not working; we have no old-age pensions;
the old mother must be supported, the old father, and the little children, and sometimes brothers and sisters—multiply that by 3, or
multiply it by 5, and you have 15,000,000 people in the United States
directly affected by the soldiers' bonus.
In conclusion, Mr. Chairman, I want to say this: The commander of the American Legion gave out a statement recently in which
he said that to his knowledge only 23 posts of the American Legion
out of 10,000 in the country had gone on record in favor of the
passage of the soldiers' bonus bill at this time. Well, I do not know
where the commander got his figures, but I do know that there are
32 posts of the American Legion in Essex County—that is one county
in Massachusetts, my own county—and those 32 posts absolutely
and positively, without ands, ifs, or buts, went on record in favor



of the soldiers' bonus. That is one little corner of Massachusetts.
I have received so many letters from members of the American Legion
throughout the United States—not just Massachusetts but throughout the United States—that my secretaries could not do the work of
answering those letters on the typewriter, and I had to have it done
by mimeograph.
I challenge the commander of the American Legion to make a poll
of every Legion post. I am not talking about the Veterans of Foreign
Wars. That organization—I belong to both of them—has gone absolutely on record in favor of the soldiers' bonus at their convention,
and the American Legion convention would have gone on record last
fall for it, except for the fact that they had to pull the President of
the United States out there and request him to make a speech to
stop this agitation for the soldiers' bonus. They would have gone
on record, but they were told that they were going to be a danger
to their country if they passed it; that it would be a menace to the
country; that it would disturb the financial interests of the country
if they passed it; and so they did not go on record. But I challenge
the commander of the American Legion to make a poll of every
Legion post in the United States, and he will find that 95 per cent
of the American Legion in this country are in favor of the passage
of this Patman bill now. I am issuing the challenge. If he wants to
take it up, let him take it up. He has the power. He could do it
in two days; and let him come in with Mr. Taylor and give this
committee the result of that poll. I challenge him to do it.
That is all I have to say, Mr. Chairman, except that I feel that this
bill should be passed; not for the soldier—and, as I say, we do not
need to be taught patriotism—not for the soldier, but for the
American people; to give that man who is out of work a chance to
spend some money; to give him a chance to buy his groceries and to
pay the interest on his mortgage and save his little home. That
money goes into circulation—not to New York, not to Wall Street
but into 48 States of the Union; and that is what we want to bring
back prosperity.
Thank you, Mr. Chairman.
The ACTING CHAIRMAN. Gentlemen, the committee will stand adjourned until 10 o'clock to-morrow morning.
(Thereupon the committee adjourned untii to-morrow, Tuesday,
April 12, 1932, at 10 o'clock, a. m.)


Washington, D. C.
The committee met at 10 o'clock, a. m., Hon. Charles R. Crisp
(acting chairman) presiding.
The ACTTNG CHAIRMAN. The committee will come to order.
Mr. PATMAN. Mr. Chairman, at a meeting yesterday at noon, in
compliance with a request from the chairman, those assembled favoring the proposal for the payment of the adjusted-service certificates
suggested that I have charge of the time for the proponents; and in
compliance with their request we have arranged for certain ones to
go on this morning.
The ACTING CHAIRMAN. All right, Mr. Patman.
Mr. PATMAN. Father Coughlin, of Detroit, Mich., is here. He has
been invited by those who are favoring the proposal to make a statement, and we would now like to present Father Coughlin.
The ACTING CHAIRMAN. May I make this suggestion to you? The
clerk of the committee informs me that Mr. George W. Armstrong,
of Fort Worth, Tex.; Mr. Donald D. De Coe, of Sacramento, Calif.,,
and Mr. E. Levin, of New York City, are present, and they were
invited to be here to-day.
Mr. PATMAN. Yes, sir.

Of course you gentlemen can take charge
of the presentation of your witnesses in favor of the bill, because
that action the committee authorized yesterday, and the committee
appreciates the action of you gentlemen in selecting some one to take
charge of the matter.
Mr. PATMAN. I will assure the chairman that these gentlemen have
been conferred with in making the arrangements for this morning.
The CHAIRMAN. The first witness, then, is Father Coughlin.
Mr. PATMAN. I would like to have Senator Thomas introduce
Father Coughlin.
Senator THOMAS. Mr. Chairman, I will just say that Father
Coughlin has a radio broadcasting station at Detroit. He has a
nation-wide hook-up on every Sunday, and he will tell you about the
response he is receiving to this identical proposition in the statement
that he is now about to make.
The ACTING CHAIRMAN. Father Coughlin, the committee will be
glad to hear you now.







The ACTING CHAIRMAN. Father Coughlin, you may conclude your
statement without interruption from the committee if you desire to
do so.
Father COUGHLIN. Thank you, Mr. Chairman.
Mr. Chairman and members of the Ways and Means Committee:
I am appearing before you to-day not through any personal desire
of my own, but rather upon the request which originated with one of
your own colleagues.
Appreciating the importance of the question which you are deliberating, and also realizing the manifold intricacies both of financial and
of moral import which are associated with it, I do not pretend to
make the ensuing remarks appear as if they are dogmatic and conclusive. Rather, they are my personal opinions based upon observations with which I am more or less intimate.
The question which you are considering deals with the practical
wisdom of paying immediately the sum of $2,400,000,000 to the
soliders who served in the World War.
That this so-called bonus is due not before the year 1945 is readily
admitted. But that it would be to our national advantage to fulfill
this financial obligation to the soldiers immediately appears to me to
be of practical wisdom.
There are those who remind us that at the American Legion Convention held in Detroit last year the ex-soldiers went on record to have
this payment of the so-called bonus deferred. Let us remember,
however, that for the most part this Legion convention at Detroit
was attended by veterans who were able to pay their fares and their
hotei bills. The poorer class of veterans was forced to remain at home
and to remain inarticulate. However, I feel quite confident that the
decision arrived at in Detroit in 1931 would have been final; that the
veterans would have believed they were playing a valorous part in
heeding the advice of our honorable President, to the end that burdensome demands should not be imposed upon the current budget of the
United States Treasury, had not a new circumstance altered their
Suddenly the Reconstruction Finance Corporation was hurried
through both the House and the Senate. Suddenly the sum of
$2,000,000,000 was appropriated from the funds of the American
people for the purpose of financing the financiers and of strengthening
the tottering railroads.
At this moment, the mental attitude of the American Legion and of
the American public underwent a noticeable change. I am speaking
of an absolute fact when I refer to this change of mind. I am not
inserting this thought as a piece of rhetorical argument. I am offering
it for your consideration, based upon over 1,500,000 letters which
came to my desk within the short period of six weeks, reflecting the
change to which I am referring.
To summarize the general character of this tremendous amount of
mail, I may crystallize it in the following words:
If the Government can pay $2,000,000,000 to the bankers and to the railroads,
having had no obligation toward them, why can it not pay the $2,000,000,000 to
the soldiers already recognized as an obligation?



It might be of interest to note that the letters to which I refer
were written not only by veterans of the World War, but by citizens
of every type, including thousands from professional men—doctors,
engineers, lawyers, bankers, and clergymen. And I may further
add, as those of you can attest who have listened to the national
broadcast which weekly originates from the Shrine of the Little
Flower, that in no wise were these letters solicited. They came
spontaneously. In one sense they manifest the pulse of public
opinion in an almost clearer and more efficacious manner than do
the 2,000,000 and more signatures of American legionnaires and war
veterans now in possession of this Government, and which petition
the immediate payment of the so-called bonus.
In other words, honorable gentlemen, if the question has arisen
for the immediate payment of the so-called bonus, it has come to
the front chiefly due to the fact that doles of a financial nature have
been extended through the Reconstruction Finance Corporation to
the gigantic banks, insurance companies, and corporations of this
Nation. At least that is what the American public thinks.
There is no necessity for my endeavoring to describe to you the
present suffering of our Nation. May I briefly refer to it, in order to
correlate the facts which will follow with the immediate payment of
the so-called bonus.
There are approximately 8,000,000 men out of employment. Let
us also be mindful of the fact that there are approximately 8,000,000
more men working only two and three days a week. Recollecting
that there have been depressions in the past, let us not identify this
present catastrophe with any of them. On this occasion the so-called
"depression" is not national; it is universal. On this occasion it has
not been caused by a lack of production or by famine or by any
obvious action directly accountable to the Providence who guides our
destiny. It is superfluous for me to mention that our granaries are
filled, while millions of our unemployed and their dependents are
underfed; that our textile mills are idle while millions of children
shivered through the cold of this past winter; that our boats are rusting at anchor while foreign nations are begging for our surplus grain
and for the products of our factories.
In other words, this is the first time in the history of civilization,
to the best of my knowledge, that such universal suffering has resulted due to causes and to reasons attributable to the unintentional
mismanagement and distribution of our national products and
wealth, on the part of our leaders. Unintentional!
Well, so much for that thought.
What is its relation to the immediate payment of the so-called
bonus? First of all, this immediate payment would enable many of
these 8,000,000 idle men and 8,000,000 part-time workers, who are
veterans, to purchase some of the necessities of life. That is the
obvious thought which comes into the minds of most people. Secondly, the vast proportion of this $2,000,000,000, if it were paid
immediately to the ex-soldier, would not find its way into savings deposits. Rather, it would be used to pay the grocer, the butcher, the
physician, and the thousands of tradesmen and professional citizens
who have been rendering service to their jobless fellow-citizens without having received pay. It would be $2,000,000,000 sent into the



channels of trade and commerce. This thought is likewise obvious
and has been mentioned many times before.
But I am in hopes that the immediate payment of this $2,000,000,000 and more will produce an effect more far-reaching than these
obvious effects; namely, that it will compel us to revaluate the American dollar to the approximate level which it attained in 1929.
With this thought in mind, what are the current evidences in our
midst which suggest it?
First of all, there is the real-estate situation viewed from the angle
of mortgages or contracts or loans. If in the year 1929 I had purchased a small home for the sum of $10,000, having made only a
$2,000 payment on it, and if my contract read that a monthly payment averaging $40 on the principal should be made, I would still
owe on the principal of that house $7,000. Is it necessary for me,
honorable gentlemen, to inform you that real estate has dropped to
such a low price level to-day that it would be more advantageous
for me to move out of the house; to let it fall back upon the hands of
the seller, since it is now possible for me to build a 1929 $10,000
house for approximately $5,000?
The example which I have cited is but indicative of the catastrophe
which, if not checked, is about to overthrow the real estate values of
our Nation.
Secondly, I can view this real-estate collapse in another way: For
example, in the county of Oakland, Mich., with a population of
approximately 211,000, we have witnessed during the last 10 months
of 1931 more than 71,000 home sites and farms being confiscated by
the State government for nonpayment of taxes. This is the county
in which the Oakland-Pontiac and Yellow Cab factories are situated.
This is the county where many of the elite of Detroit have their
princely estates, among whom is Senator Couzens. This is the
county where the Shrine of the Little Flower is located, from whose
shingled walls we are necessitated to feed and to clothe thousands of
people every month. This is the county which, in many instances,
reflects what is transpiring over the entire United States.
Bear in mind, gentlemen, that the residents of this county and
those who own property in this county are forced to assume the tax
burden of these 71,000 defaulters; and also remember that the tax
levy was predicated not on 1932 values but on 1929 values.
No wonder there is an ugly movement on foot throughout our
Nation to refuse to pay taxation on real-estate appraisals, which are
as unreal to-day as they were when the Indians inhabited this Continent of North America.
It is not necessary for me to draw a conclusion; the acuteness of
your own intelligence easily penetrates the meaning of these facts in
their relation to the immediate payment of the so-called bonus, which,
it is hoped, will compel us to revaluate the dollar.
I make this statement in view of the fact that many opponents to
the immediate payment of the so-called bonus maintain that such
payment would so embarrass the American dollar that it would be
necessary to revaluate it. To my mind, this is exactly what is hoped
will eventuate for the purpose of alleviating our national financial



It might be well for me to pause for the purpose of recollecting that
our total indebtedness, both as a Nation and as private citizens, surpasses $150,000,000,000, all of which is detailed in the Congressional
Record of March 31, 1932, on page 7396, in a speech made by Senator
Thomas of Oklahoma. This vast, incomprehensible sum of debts
was accrued for the most part before the American dollar suffered the
tremendous deflation since 1929. To-day, with cotton selling at
5 cents a pound, when its former price was 20 cents; with wheat going
begging on the market at 30 cents a bushel, when but a few months
ago it was well over a dollar; with oats offered at 11 cents a bushel,
when in 1929 they were 50 cents; with corn just a quarter of what it
was but a few years ago—how can the farmer pay his debts, his
mortgages, and his obligations, which, in one sense and to all practical
purposes, have quadrupled, due to the deflation of the dollar? To
all practical purposes his 1929 debts have automatically increased
three to four times in 1932.
Gentlemen, although such thoughts are not frequently expressed
in the financially minded news journals of this Nation, nevertheless
you would be astoundingly surprised to discover that they are
latent in the minds of the American public, and that they have been
made articulate through millions of letters which have come to my
In the presentation of the above paragraphs I see associated a
very pertinent relation to the immediate payment of the so-called
bonus. We are told by those who are opposed to this immediate
payment that it would impair our credit. The fact of the matter is
we are asking credit from no foreign nation at the present moment,
and are likely to refrain from asking credit for the next few years.
The foreign-credit argument is a contingency which does not exist.
But the immediate payment might do one thing: Probably it would
throw us off the gold standard, to which I will refer later. Probably
it will force us to reyaluate the dollar so that cotton, instead of being
5 cents a pound, will be 15 cents or 20 cents; so that the present
$5,000 house to which I referred will be closer to its 1929 value,
$10,000; so that the present $1 wage being earned to-day, at this
hour, will multiply itself beyond $2, and perhaps to $3; so that the
debts accrued in 1929 and thereabouts can be met with money which
approximates in purchasing power the dollar of 1929.
And more than that, it will put us at least on speaking terms with
England, Canada, and other foreign nations who have learned wisdom.
They have proven to us that it is possible to conduct business independent of the conventional gold standard, while we who are clinging
to it are barred from their markets.
I readily appreciate that such a suggestion is heresy to the vested
interests of wealth who have their dollars represented by bonds, and
which bonds will not automatically increase in value. I understand
perfectly why the articulate and organized few are heartily opposed
to the pre-payment of the so-called bonus, because it will seriously affect
the value of these bonds. Others will term the suggestion radical
and communistic. But the real radicals, to my mind, are those
who have operated indiscreetly and selfishly during the past few
years, with the result that one thirty-third of 1 per cent of our population controls 60 per cent of our wealth, according to verified facts in
your own Congressional Record. These people are opposing the




revaluation of the dollar, which they say will inevitably follow the
payment of the so-called bonus.
For their own sakes, as well as for the welfare of the American
public, and as well for the sakes of the ex-soldiers, these people
must suffer a loss and share some of the hardships which have been
borne so patiently by the American public. Eventually, the revaluation of the dollar will absolutely come, either legally or revolutionally.
Thus we can employ the stepping-stone of the so-called soldiers'
bonus to get down from the dais of the unjustifiable gold standard,
upon which a few have enthroned themselves.
For almost two years we have persisted in giving transfusions of
financial blood to the sickly system which we are nursing. But we
will soon have a corpse on our hands, because the last financial transfusion has certainly been given through the agency of the Reconstruction Finance Corporation, and in no wise has it removed the
major cause of our troubles. The disease known as the concentration of wealth in the hands of a few still remains. It seems to me
that if through the payment of the so-called bonus we can increase
the value of the farm products, of the laborer's toil, of the 1932
earned dollar, even at the expense of decreasing the hoarded wealth
represented in bonds and hidden gold, a mighty victory will have
been won over the massed armies of depression and growing discontent. Let us remove the cause legally, lest this growing discontent in the minds of our people shall do it illegally. Remember
Russia of 1917; remember the French Revolution; and remember,
also, our owii Revolution in 1776. These things have happened
before; and if history has taught us one lesson, it teaches us this:
that it perpetuates itself.
On the other hand, gentlemen, we are informed that approximately
$31,000,000,000 is owed us by foreign nations, provided we fund both
public and private debts.
As a matter of fact, the foreign nations borrowed this money from us
when our dollar was inflated, or, in other words, before our 1929
dollar represented 33 % cents, as it does in 1932. In order for the
foreign nations to pay back the $31,000,000,000 borrowed before 1929,
it means that they, who likewise have suffered a deflation in their
currency, will be forced to pay, according to their present money
values, approximately $93,000,000,000. Of course, it is preposterous
to expect the people of foreign nations to permit their governments to
make such outrageous payment. It was on that basis that Hitlerism
grew apace in Germany. It will be upon that same basis that our
foreign debts will be renounced in their entirety, unless we give the
nations of Europe and of South America and elsewhere an opportunity
of doing what is equitable.
I repeat that the immediate payment of the so-called soldiers'
bonus is not only a thing good in itself but will be good in its effects,
both national and international, if it will force the inflation of the
American dollar. The foreigners will be more likely to pay us what
they owe, and then our own citizens will be better able to pay their
taxes, their mortgages, and their other debts, which now they are
gradually repudiating for reasons above mentioned.
A half a loaf is better than none.



Some one is apt to suggest that if we make immediate payment to
the ex-soldiers by virtue of the printing press, we should also pay off
all other debts through the agency of "fiat" money. Such a suggestion, in my opinion, seems ridiculous and absolutely unsound. Is it
not possible for us to issue consols against the year 1950 or 1960?
Is it not possible for us to let the future generations share our burdens
despite the fact that we were responsible for them? If I recollect the
Scriptures correctly, "the sins of the parents shall be visited upon
their children, to the third and fourth generation."
Again, some one is liable to tell us that inflation is a very dangerous
thing. They will point to Germany and to the events which transpired there when their printing presses worked overtime, and when
their government artificially inflated the mark. Bear in mind that
Germany had no gold with which to substantiate their policy of inflation. We, on the other hand, have approximately $4,500,000,000
of gold in our vaults, and can easily suffer a sane inflation, provided
we cease shipping gold abroad and learn to keep intact what we have,
in the face of the fact that nations are debating whether or not to
pay us what they owe.
Governor Harrison of the New York Federal Reserve Bank made
the following statement in February of this year regarding this very
point. You will find it contained in a publication put out by the
National City Bank of New York. Governor Harrison stated:
That the gold reserves of the country would permit an expansion of some
$3,500,000,000 of reserve bank credit before reducing the reserve percentage
below the legal minimum. Such expansion would increase the loanable funds
of the member banks by as much as $35,000,000,000. Evidently the United
States is under no credit pressure traceable to the gold standard.

End of quotation from our most eminent and most learned financier.
Others are liable to interpose an objection on the ground that our
national pride will suffer injury by going off the gold standard
as a
result of the immediate payment of the so-called soldiers7 bonus.
Well, it is better for our pride to suffer than for our industrialists,
our laborers, our women and children to be forced either into bankruptcy or into starvation. Let pride find no place in our considerations when we are confronted with the fact that 451 farms every
day of last year passed into the hands of receivers. Averaging each
farm-family at four persons, it means that 658,460 indigents have
been cast from their homes to join the ever-increasing throng, as
they trek over the hills to the poorhouse. Is that something to be
proud about?
Gentlemen, these are my opinions, which I hope are expressed
simply as opinions and not as dogmas. I have come before you to-day
not representing the Catholic Church, but merely as representing a
sector of the American public who, unsolicited, in the past 27 weeks
have written to me their thoughts and their views on our public
conditions. More than 2,500,000 letters during that time have come
to my desk. One hundred and eighteen clerks have been busy reading
and compiling this mail. I hope I have condensed their aggregate
views for your consideration.
Moreover, in nowise am I implying that the immediate payment
of the so-called soldiers7 bonus shall be a complete remedy to remove
our present misery. However, it will act as a stimulant. It will
manifest to the American public that the conscientious legislation




which you have already inaugurated will not be satisfied with halfmeasures. It will indicate that you have adopted the policy that
all true reconstruction begins from the bottom and not from the top.
And, above all, it will revive in their minds the Jeffersonian principle
that human rights take precedence over financial rights; will revive
in their minds the immortal words of our immortal Lincoln that this
country is "of the people, and for the people."
I thank you, gentlemen.
The ACTING CHAIRMAN. Gentlemen, are there any questions?
(There were no questions.)
The ACTING CHAIRMAN. We thank you, Father, for your contribution to the hearings.
Mr. PATMAN. Mr. Chairman, Mr. George W. Armstrong was to be
a witness this morning. I had a telegram from him a few minutes ago
saying that he had had an airplane accident in Little Rock, Ark., and
would* be delayed there. He is expected to be here this afternoon.
The telegram was addressed last night.
At this time we would like to introduce Senator Thomas, who is
interested in the proposal.
The ACTING CHAIRMAN. Senator Thomas, the committee will be
glad to hear you.

Senator THOMAS. Mr. Chairman, gentlemen of the committee,
I appear here at the suggestion of the proponents of this suggested
legislation. Otherwise it might be presumptuous, knowing how
busy you gentlemen are, for one engaged in the same building, so to
speak, to come here and take your time. I remember quite well,
however, that I stood in this place in 1924 urging the passag;e at
that time of the original so-called bonus bill. I remember the many
courtesies extended me by the then chairman of this committee, now
the distinguished ranking member on the minority. I likewise
remember well the courtesies extended me by the members on the
minority at that time, but now on the majority.
It is, I might say, very gratifying to get back on this side of the
Capitol, where I was initiated into the major league of legislation.
When I come on this side of the Capitol and see that a change has
taken place since I left it, and see this magnificent office building
across the way, I am almost compelled to regret that I have left
this side of the lawmaking body.
Mr. Chairman and gentlemen, in addition to having the invitation
of those standing for this legislation, I appear here as the agent of one
State—-the State of Oklahoma.
I exhibit to the committee a number of telegrams, which I have not
counted. These telegrams come from the individual American Legion
posts of Oklahoma. There must be a hundred and fifty or two hundred
here. You can take this list of telegrams from the Legion posts of
my State, and you will find practically unanimous demand for the
passage of this legislation. In some places there was one objection.
Special meetings were called. The Legion boys turned out. I think
44 was the least number that I remember reading in the telegrams,
and from that up to 600. Practically every telegram advises me that



the motion in favor of the payment of the bonus was unanimous.
Occasionally there was one objection, and occasionally there were two
These are the telegrams.
Then I have here letters signed officially by the officers of the
Legion posts, in additional number; and I will say that these give
the vote of the legionnaires in the various posts of one State. Occasionally there was one objection; one soldier boy was not in favor
of the full payment now. Sometimes there were two. The largest
vote against the matter was in Bartlesville, Okla. One hundred and
eighty-seven boys were present at the meeting, a few nights ago. Of
the 187, 12 voted no; the balance voted yes. That is the largest
number of any post reported to me, and here is the evidence.
So I appear here as what might be termed the agent or representative of the public sentiment of my State, which is better than 99
per cent, speaking for the soldiers, in favor of the enactment of some
legislation making it possible for them to secure some benefit from
their certificates.
Mr. MCCORMACK. Mr. Chairman
Senator THOMAS. AS I proceed, I shall be glad to have any questions asked me.
Mr. MCCORMACK. I just want to make this suggestion, Senator:
Will you include in your remarks at this time the names of those
American Legion posts?
Senator THOMAS. If it be agreeable, and I have the time, I will
have the messages transcribed as to the name of the post and the
person signing each message, and I will likewise have transcribed
the other list of documents, which are the formal resolutions signed
by the proper officials, with the seals of the various posts; and I will
have that information transcribed to appear at this point in my
The ACTING CHAIRMAN. Of course, Senator, I do not think that
all those documents should go in this record.
Senator THOMAS. I do not mean that, Mr. Chairman. I mean
a statement simply giving the name of the post, with the names of
the two or three officials signing the message.
The ACTING CHAIRMAN. That will be all right. Without objection, the statement will be included in the record.
Senator THOMAS. I did not ask to have these inserted, because I
may want to use them later.
Mr. KAGON. Senator, how did you come to get those telegrams?
Was it a meeting of all the posts in Oklahoma?
Senator THOMAS. Here is what happened: The American Legion
convention in my State, which met at Enid last September, on Labor
Day passed this resolution; and if I may, I will read the resolution.
It was sent me by Milt Phillips, department adjutant, and the letter
is dated April 7. It is a letter of transmittal. Here is a copy of the
resolution passed by the State convention in my State:
Whereas the unemployment situation in this country is very serious and
affects a large part of our population, including many former service men and their
families; and
Whereas greater distress is certain to result if the present depression is not
relieved soon; and



Whereas, the immediate payment of the remainder of the Federal adjusted
compensation and the refunding of interest on part payments of adjusted compensation already advanced would relieve to a considerable extent the deplorable
conditions, we believe; now, therefore, be it
Resolved by the American Legion, Department of Oklahoma, in regular convention
assembled at Enid, Okla., the 6th, 7th, and 8th of September, 1931, That the

remainder of the adjusted compensation conceded to be due to our ex-service
men be paid them without further delay, and as soon as possible, and that all
interest paid by them on part payments of their adjusted compensation be refunded to them without further delay; and, in our opinion, the payment of such
compensation and the refunding of such interest paid is a fair, just, and proper
procedure, and much good will result from such action on the part of the Government.

After the State convention had passed that resolution, the national
organization had its meeting in Detroit. The national organization
went on record as being unwilling to ask the Congress at this time,
for the full payment. Of course that raised an issue; and, being apprehensive of how my State would stand, and not desiring to appear
before any committee and urge the full payment unless my State
would back me up in it, I suggested to the Legion posts of my State
that they take this referendum and at the proper time advise me.
This is the advice.
Now, Mr. Chairman and gentlemen, I am not appearing before the
committee with any new proposition, so far as I am concerned. I
know the members of this committee will not remember what I said
eight years ago; but I exhibit to the committee a publication containing
the hearings on the soldiers' adjusted compensation of 1924, which
contains, on pages 36, 37, and following, a copy of my remarks. I
desire to read three lines from my statement made on either March
4 or 5, 1924. At that time I was a Member of the House, had a bill
pending, and was urging the consideration of my bill. In support of
my bill at that time I made this statement:
My bill proposes to raise this money in this manner: Congress authorizes a
bond issue in the sum of $1,500,000,000. These bonds are not to be sold to the
public, but they are to be sold to the Federal reserve banks in proportion to the
demands made upon those banks.

That is the substance of the speech that I made then. It is the
substance of the bill that I have pending in the other branch of the
Congress. I have copies of this bill, and if any one should care to
see it, I shall be very glad to have the members accept them.
I will say that when this Congress convened I introduced another
bill, and further study and conference impelled me to introduce some
amendments. The amended bill was introduced on yesterday.
This bill which I now hand to the members of this committee is the
copy of the bill introduced on yesterday. It is substantially the bill
introduced in the Senate more than two months ago, but it contains
amendments, and rather than have those marked on the bill, I simply
reintroduced the bill so that it might appear exactly as I desire it to
The ACTING CHAIRMAN. DO you desire to incorporate a copy of
that bill in your remarks?
Senator THOMAS. If I may have that permission, I at this time offer
for the record a copy of the bill as amended.
The ACTING CHAIRMAN. Without objection, it will be made a part
of the record.
(The bill, S. 4350, above referred to, is as follows:)



[S. 4350, Seventy-second Congress, first session]
A BILL To provide for the immediate payment of World War adjusted service certificates, and for other

Be it enacted by the Senate and House of Representatives of the United States of

America in Congress assembled, That notwithstanding the provisions of the
World War adjusted compensation act, as amended, the adjusted-service certificates issued under the authority of such act are hereby declared to be immediately payable. Payments on account of such certificates shall be made through
the several Federal reserve banks in the manner hereinafter provided upon application therefor to the Administrator of Veterans' Affairs, under such rules and
regulations as he may prescribe, and upon surrender of the certificates and all
rights thereunder (with or without the consent of the beneficiaries thereof). The
payment in each case shall be in an amount equal to the face value of the certificate; except that if, at the time of application for payment under this section,
the principal and interest on or with respect to any loan upon any such certificate
have not been paid in full by the veteran (whether or not the loan has matured),
then, on request of the veteran, the administrator shall (1) pay or discharge such
unpaid principal and so much of such unpaid interest (accrued or to accrue) as
is necessary to make the certificate available for payment under this section, (2)
deduct the same from the amount of the face value of the certificate, and (3)
provide for making payment in an amount equal to the difference between the
face value of the certificate and the amount so deducted. No interest shall be
charged on any loan authorized by section 502 of such act, as amended, made after
the date of approval of this act, and no interest shall be charged to the veteran
after such date on loans heretofore made by the administrator; but in the case
of any such loan made by the administrator out of the United States Government
life-insurance fund, the fund shall be entitled to receive interest to the date of
maturity of the loan at the rate agreed upon at the time such loan was made, but
the amount by which such agreed interest exceeds the amount of interest payable
to the date of approval of this act shall be paid out of the adjusted-service certificate fund created under section 505 of such act, as amended. Upon payment
under this section the certificate and all rights thereunder shall be canceled.
SEC. 2. For the purpose of providing funds for making the payments authorized
in section 1, all amounts in the adjusted-service certificate fund created by section
505 of such act, as amended, are hereby made available and, in addition, the
Secretary of the Treasury is authorized and directed to provide for the issuance
from time to time of bonds of the United States, to be known as "adjusted-compensation payment bonds," and to be delivered to the Administrator of Veterans'
Affairs. An amount equal to the face value of all bonds so issued shall be credited
to such fund and the bonds shall be distributed to the several Federal reserve
banks as hereinafter provided. Such bonds shall be payable thirty years from
their respective dates of issue; except that the Secretary of the Treasury may in
his discretion provide for a later period of payment of any issue of such bonds if in
his opinion it is necessary in the public interest. Such bonds shall be in such
denominations as the Secretary of the Treasury may prescribe, shall bear interest
payable quarterly at the rate of 2 per centum per annum, and shall have all the
rights and privileges accorded by law to other 2 per centum bonds of the United
States: Provided, That the rate of interest paid upon said bonds while on deposit
with the several Federal reserve banks shall be an amount fixed and agreed upon
by and between the Secretary of the Treasury and the Federal Reserve Board,
and in no event shall such rate be more than the rate specified herein. The total
amount of such bonds shall not exceed the total amount required for the purpose
of paying such adjusted-service certificates.
SEC. 3. Upon the receipt by the Administrator of Veterans' Affairs of any such
bonds he shall distribute them to the several Federal reserve banks in proportion
to the number of applications received from veterans within the various Federal
reserve districts for payment of their adjusted-service certificates. Each bank
receiving any such bonds is hereby authorized to issue Federal reserve bank notes
in an amount equal to the face value of the bonds received by it and such bonds
shall be held as collateral security for such bank notes as provided by the Federal
reserve act as amended by Public, Numbered 2, Seventy-second Congress, being
an act to provide "emergency financing facilities for financial institutions, to aid
infinancingagriculture, commerce, and industry, and for other purposes, approved
January 22,1932, and as further amended by Public, Numbered 44, Seventy-second
Congress, being an act to improve the facilities of the Federal reserve system for
the service of commerce, industry, and agriculture, to provide means for meeting
the needs of member banks in exceptional circumstances, and for other purposes,
approved February 27, 1932. Such notes shall be of such denominations (in



eluding denominations of $1 and $2) as may be authorized by the Federal reserve
bank and except as provided in this act shall be subject to all the provisions of law
relating to the Federal reserve notes. Payments on account of such certificates
shall be made by means of such bank notes upon the order of the Administrator
of Veterans' Affairs and in such manner as he shall prescribe: Provided, That the
Federal Reserve Board shall have supervision over the payments to be made to
the holders of such certificates and at any time in the discretion of the said board
the best interests of the Government and the public demand that payment be
made in actual cash be suspended in any Federal reserve district by resolution
adopted and order made and served upon the Administrator of Veterans' Affairs,
whereupon and thereafter the said Administrator of Veterans' Affairs shall cease
payments in cash and shall begin payments by checks and drafts. Such bank
notes shall be legal tender in payment of all debts, public and private, except
where otherwise expressly stipulated by contract, and shall be receivable for customs, taxes, and all public dues.
SEC. 4. (a) An application for payment under this act may be made and filed
at any time before the maturity of the certificate (1) personally by the veteran,
or (2) in case physical or mental incapacity prevents the making or filing of a
personal application, then by such representative of the veteran and in such manner
as may be by regulations prescribed. An application made by a person other
than a representative authorized by such regulations, or not filed on or before the
maturity of the certificate, shall be held void.
(b) If the veteran dies after the application is made and before it isfiledit may
befiledby any person. If the veteran dies after the application is made it shall be
valid if the Administrator of Veterans' Affairs finds that it bears the bona fide
signature of the applicant, discloses an intention to claim the benefit of this act
on behalf of the veteran, and isfiledbefore the maturity of the certificate, whether
or not the veteran is alive at the time it is filed. If the death occurs after the
application is filed but before the receipt of the payment under this act, or if the
application is filed after the death occurs but before mailing of the check in payment to the beneficiary under section 501 of such act, as amended, payment shall
be made to the estate of the veteran irrespective of any beneficiary designation.
(c) Where the records of the Veterans' Administration show that an application
disclosing an intention to claim the benefits of this act, has been filed before the
maturity of the certificate, and the application can not be found, such application
shall be presumed, in the absence of affirmative evidence to the contrary, to have
been valid when originally filed.
(d) If at the time this act takes effect a veteran entitled to receive an adjustedservice certificate has not made application therefor he shall be entitled, upon
application made under section 302 of such act, as amended, to receive, at his
option, either the certificate under section 501 of such act, as amended, or payment under this act.
SEC. 5. Section 2 of Public, Numbered 44, Seventy-second Congress, entitled
"An act to improve the facilities of the Federal reserve system for the service of
commerce, industry, and agriculture, to provide means for meeting the needs of
member banks in exceptional circumstances, and for other purposes," approved
February 27, 1932, to read as follows:
"SEC. 2. The Federal reserve act, as amended, is further amended by adding
immediately after such new section 10 (a), an additional new section reading as
" ' SEC. 10. (b) In exceptional and exigent circumstances, and when any member
bank, having a capital of not exceeding $5,000,000, has no further eligible and
acceptable assets available to enable it to obtain adequate credit accommodations
through rediscounting at the Federal reserve bank or any other method provided
by this act other than that provided by section 10 (a), any Federal reserve bank,
subject in each case to affirmative action by not less than five members of the
Federal Reserve Board, may make advances to such member bank on its time
or demand promissory notes secured to the satisfaction of such Federal reserve
bank: Provided, That (1) each such note shall bear interest at a rate not less
than 1 per centum per annum higher than the highest discount rate in effect at
such Federal reserve bank on the date of such note; (2) the Federal Reserve
Board may by regulation limit and define the classes of assets which may be
accepted as security for advances made under authority of this section; and (3)
no note accepted for any such advance shall be eligible as collateral security for
Federal reserve notes.
"'No obligations of any foreign government, individual partnership, association, or corporation organized under the laws thereof shall be eligible as collateral
security for advances under this section.'"



SEC. 6. Section 3 of Public, Numbered 44, Seventy-second Congress, being an
act "to improve the facilities of the Federal reserve system for the service of
commerce, industry, and agriculture, to provide means for meeting the needs of
member banks in exceptional circumstances, and for other purposes," approved
March 27, 1932,- is hereby amended to read as follows:
"SEC. 3. The second paragraph of section 16 of the Federal reserve act, as
amended, is amended to read as follows:
" 'Any Federal reserve bank may make application to the local Federal reserve
agent for such amount of the Federal reserve notes hereinbefore provided for as
it may require. Such application shall be accompanied with a tender to the local
Federal reserve agent of collateral in amount equal to the sum of the Federal
reserve notes thus applied for and issued pursuant to such application. The
collateral security thus offered shall be notes, drafts, bills of exchange, or acceptances acquired under the provisions of section 13 of this act, or bills of exchange
indorsed by a member bank of any Federal reserve district and purchased under
the provisions of section 14 of this act, or bankers' acceptances purchased under
the provisions of said section 14, or gold or gold certificates: Provided, however.
That should the Federal Reserve Board deem it in the public interest, it may,
upon the affirmative vote of not less than a majority of its members, authorize
the Federal reserve banks to offer, and the Federal reserve agents to accept, as
such collateral security, direct obligations of the United States. In no event
shall such collateral security be less than the amount of Federal reserve notes
applied for. The Federal reserve agent shall each day notify the Federal Reserve
Board of all issues and withdrawals of Federal reserve notes to and by the Federal
reserve bank to which he is accredited. The said Federal Reserve Board may
at any time call upon a Federal reserve bank for additional security to protect
the Federal reserve notes issued to it.' "
SEC. 7. There is hereby authorized to be appropriated, out of any money in
the Treasury not otherwise appropriated, such amounts as may be necessary to
carry out the provisions of this act.
SEC. 8. This act may be cited as the "Adjusted compensation payment act."

Senator THOMAS. Mr. Chairman and gentlemen, I am not here in
any sense to make a speech. I am here to answer questions, and if I
may, to he helpful. I will take no time whatever to discuss with the
committee the conditions throughout the country, because you
know those as well as I do. I will take no time to discuss various
forms of relief. You know what forms are now pending as well as
myself. But it might not be out of place to recount that during this
Congress we have undertaken to provide some relief and we have
provided some relief.
It will be remembered that in the fall, before we convened, when
the President announced his so-called credit corporation, voluntary
bankers' pool, that gave us some encouragement. In our several
districts we thought we could see that the country had some hope;
the stock market rebounded and the public thought that the tide
had turned, the bottom had been reached, and from that time
henceforth times would improve.
The public thought that, gentlemen, in my judgment, on the theory
that credits were to be expanded. In other words, there would be an
inflation of credits, if not of money. And when I say inflation, I do
not mean a German inflation. I mean bringing down the value of
the dollar to where it was a few years ago.
As soon as the public ascertained that there was no credit expansion
or inflation in the bankers' pool, the stocks began to fall and when we
convened in December it was proposed to create the Reconstruction
Finance Corporation.
That was advertised throughout the country, in the public press, as
being a measure that would make money more plentiful, give us some
new credits; and upon the announcement of that bill, the stocks began
to mount. Times apparently began to get better. Commodity




prices began to advance. Wheat went up, corn went up, everything
went up somewhat. But it was shortly discovered that there was no
money in the Reconstruction Finance Corporation—simply credit.
In place of making money more plentiful, the public at large did not
see any benefits from that, they have not seen any as yet, the stock
market began to fall, commodity prices began to fall and they went
down to their lowest level.
Then a little later, when the Glass-Steagall bill was proposed,
we saw a duplication of what I have just described. The announcement of the bill caused confidence to rise, caused stocks to go up,
caused the commodity prices to increase; but it was soon found that
there was no expansion in the Glass-Steagall bill. And when the
public found that, the wise boys—I will call them that, because that
is what they are—started to sell and stocks began to fall again. And
the stocks, gentlemen, have not stopped falling. At this time there
is no plan, no program, so far as I know, to increase circulation.
The facts are that circulation is being decreased daily. Notwithstanding the fact that we have passed all these bills, such as the
Reconstruction Finance Corporation bill, notwithstanding this
corporation has placed in circulation credit—not money—to the
extent of $300,000,000 and in addition to that the Federal reserve
banks are now buying bonds to the amount of $25,000,000 weekly—
yet, notwithstanding these accumulations of bonds at the rate of
$100,000,000 a month, and notwithstanding that the Credit Corporation is putting credit into circulation, circulation is decreasing daily.
The month of March saw going out of circulation $147,000,000.
The actual amount of money in circulation has decreased more than
$200,000,000. Now, I contend that money is controlled by the same
economic law that controls wheat, that controls cotton, that controls
livestock. When wheat is plentiful, wheat is cheap. When cotton is
plentiful, cotton is cheap. When wheat is scarce, wheat is dear.
When cotton is scarce, cotton is dear.
Money is controlled by the same economic law. When money is
plentiful, money is cheap. When money is scarce, money is high.
To-day I make the assertion that we have the least amount of
money in actual circulation that this country has seen since before
the World War. During the World War and after the World War,
when we had the best times that I have ever seen, when wheat was
selling for two and a half and three dollars a bushel, and cotton was
selling for 40 cents a pound, and oats and other things in proportion,
we had six and a half billion dollars in circulation.
That statement may be challenged. If I may at this point, Mr.
Chairman, I will offer for the record a copy of the circulation statement of February 1, 1921. This, I will say to the majority of this
committee, was a statement published when our party yet had control
of the Government, February 1, 1921, a month and three days before
the change came. I read from this statement and it shows that on
that date there was in circulation $6,340,436,718.
At that time we only had gold in this country to the extent of
The ACTING CHAIRMAN. Without objection, the statement will go
in the record.
(The statement referred to is as follows:)

Circulation statement—February 1, 1921


Circulating medium

General stock of money in
the United States: Includes gold held in the
Treasury for the redemption ol outstanding gold
on Feb. 1, 1921), Federal
reserve sold settlement
fund ($1,413,199,808.59 on
Feb. 1,1921), and standard
silver dollars held in the
Treasury for the redemption of outstanding silver
certificates and Treasury
notes of 1890 ($149,782,352
on Feb. 1, 1921). Does
not include gold held with
foreign agencies of Federal
Amounts of Federal reserve bank notes and national bank notes are
amounts issued by Treasury to banks

Feb. 1, 1921

Feb. 1, 1920

Held in the Treasury as assets
of the Government: Includes the gold reserve fund
held against issues of
United States notes and
Treasury notes of 1890
($152,979,025.63 on Fob. 1,
1921), and the gold or lawIII
ful money redemption
funds held against issues of Held by Federal reserve
national bank notes, Fedbanks and Federal reserve
eral reserve notes, and Fedagents against issues of
eral reserve bank notes
Federal reserve notes: In($282,349,891.39 on Feb. 1,
cludes the gold reserve
1921). Does not include
by banks against
deposits of public money in
issues and gold or other
Federal reserve banks, nafunds
deposited by banks
tional banks, and special
with agents to retire Feddepositaries ($325,679,322.63
notes in circuon Feb. 1, 1921), nor does
lation and own Federal
it indude funds held in
held by Fedtrust in the Treasury for
eral reserve banks
the redemption of outstanding gold and silver
certificates and Treasury
notes of 1890. (See column
I, ante). For a full statement of Treasury assets
and liabilities see daily
statement of the United
States Treasury and monthly debt statement
Feb. 1, 1921

Feb. 1, 1920

Feb. 1, 1921

Feb. 1, 1920

Money in circulation: Amounts of various kinds of
money in circulation determined by deducting from
the apporpriate item in the general stock of money
(column I, ante) the amount held in the Treasury as
assets of the Government (column II, ante) and the
amount held by Federal reserve banks or Federal
reserve agents against issues oi Federal reserve notes
(column III, ante). Gold and silver certificates and
Treasury notes of 1890 in circulation are represented
in the general stock of money by equal amounts of
gold coin or bullion and standard silver dollars held
in Treasury ior their redemption. (See column I,
ante). Amounts of Federal reserve bank notes and
national bank notes are amounts of issues by Treasury to banks less amounts held in Treasury as assets
of the Government

Feb. 1, 1921

Feb. 1, 1920

Jan. 1, 1921 Jan. 1, 1879

Gold coin (including bullion
in Treasury)_._ __
__ $2,853,480,649 $2,762,905,481 $427,621,611
$365,779,472 i $1,005,907,276 $796,438,360 2 $960,224,657 $961,329,559 $851,025,400 $96,262,850
Gold certificates
155, 358, 280 231, 748, 280
304,368,825 407,609,810 336,835,853 21,189,280
Standard silver dollars
269, 746, 326
284,784, 505
97, 720,180
Silver certificates
148,177,905 137,343,827
Subsidiary silver,
271, 511,384
251, 307,010
263, 674, 536 246,043,213 265, 590,222 67,982,601
Treasury notes of 1890
1, 604, 447
1, 605,352
1,693, 525
United S tates notes _ _
346, 681, 016
346, 681,016
342, 742, 668 320,727,328 341, 321,872 310,288,511
Includes $933,879,860 credited to Federal reserve agents in the gold settlement fund deposited with Treasurer of the United States.
Includes $479,319,948.59 credited to Federal reserve banks in the gold settlement fund deposited with Treasurer of the United States.




Circulation statement—Februaryjl, 1921—Continued

General stock of money in
the United States: Includes gold held in the
Treasury for the redemption of outstanding gold
certificates ($459,727,105
on Feb. 1, 1921), Federal
reserve gold settlement
fund ($1,413,199,808.59 on
Feb. I," 1921), and standard
silver dollars held in the
Treasury for the redemption of outstanding silver
certificates and Treasury
notes of 1890 ($149,782,352
on Feb. 1, 1921). Does
not include gold held with
foreign agencies of Federal
Amounts of Federal reserve bank notes and national bank notes are
amounts issued by Treasury to banks

Circulating medium

Feb. 1,1921

Held in the Treasury as assets
of the Government: Includes the gold reserve fund
held against issues of
United States notes and
Treasury notes of 1890
($1.52,979,025.63 on Feb. 1,
1921), and the gold or lawful money redemption
funds held against issues of Held by Federal reserve
national bank notes, Fedbanks
Federal reserve
eral reserve notes, and Fedagents against issues of
eral reserve bank notes
notes. In($282,349,891.39 on Feb. 1,
cludes the gold reserve
1921). Does not include
deposits of public money in
issues and gold or other
Federal reserve banks, nafunds
tional banks, and special
with agents to retire Feddepositaries ($325,679,322.63
circuon Feb. 1, 1921). nor does
lation and own Federal
it include funds held in
Fedtrust in the Treasury for
eral reserve banks
the redemption of outstanding gold and silver
certificates and Treasury
notes of 1890. (See column
I, ante). For a full statement of Treasury assets
and liabilities see daily
statement of the United
States Treasury and monthly debt statement

Feb. 1,1920

Feb. 1,1921

Federal reserve notes
3$3.484,226,195 $3,125,885,275
Federal reserve bank notes..
225, 938, 400
National bank notes _ _




625,142, 749

Total _



Feb. 1,1920

Feb. 1, 1921


Feb. 1,1921

Feb. 1,1920

Jan. 1, 1921 Jan. 1, 1897

$369, 348, 520 $245,353,675 $3,104, 653,864 $2,844,890,405 $3,349,389,117
220,911, 066 201,223, 665 236, 597, 570
697,186, 864 655,076,814
707,759,142 $314,339,398
1, 530,614,076 1, 273, 540, 315 6,141, 265, 012 5,864,171,213 6,340,436,718

Population of continental United States estimated at..
Circulation per capita

Feb. 1, 1920

Money in circulation: Amounts of various kinds of
money in circulation determined by deducting from
the apporpriate item in the general stock of money
(column I, ante) the amount held in the Treasury as
assets of the Government (column II, ante) and the
amount held by Federal reserve banks or Federal
reserve agents against issues of Federal reserve notes
(column III, ante). Gold and silver certificates and
Treasury notes of 1890 in circulation are represented
in the general stock of money by equal amounts of
gold coin or bullion and standard silver dollars held
in Treasury for their redemption. (See column I,
ante). Amounts of Federal reserve bank notes and
national bank notes are amounts of issues by Treasury to banks less amounts held in Treasury as assets
of the Government

Includes own Federal reserve notes held by Federal reserve banks.



• Revised figures.





Senator THOMAS. In other words, on February 1,1921, $2,800,000,000 of gold kept us on the gold standard, when we had $6,300,000,000
in circulation.
Mr. MCCORMACK. How much was in the Treasury, if you can tell
Senator THOMAS. Held in the Treasury as assets of the Government on February 1, 1921, there was gold coin in the amount of
Held by Federal reserve banks and Federal reserve agents against
issues of Federal reserve notes, on February 1, 1921, $1,005,907,276.
If I may, Mr. Chairman, as a comparison, I ask permission to
insert in the record the last statement that I have from the Treasury.
It is of the date of February 29, 1932. May I put that statement in
the record?
The ACTING CHAIRMAN. Without objection, the Senator is given
that permission.
Senator THOMAS. I will read just two items from the statement.
It shows on February 29, 1932, that we had in circulation $5,603,542,630. It also shows that on that date we had gold coin and bullion in the sum of $4,353,638,971; double the gold and a billion
dollars less of money. I submit that as an answer to those who
contend that this will of necessity throw us off of the gold standard.
Mr. MCCORMACK. May I suggest that you also give the figure of
what was in the Treasury on that date?
Senator THOMAS. I will give you the total amount in the Treasury
and then if you desire to have it itemized, I will itemize it for you.
The total amount is $3,442,011,378.
(The statement referred to follows.)


Circulation statement of United States money, February 29, 1932
Money held in the Treasury

Kind of money

Total amount

Amount held
in trust
Held for Fedagainst gold
and silver
notes eral
banks and
(and Treasnotes of
ury notes of ury 1890)

Gold coin and bullion . _. 3 $4,353,638,971 $3,442,011,378 $1,613,561,629 $156,039, 088 $1,583,643,272
Gold certificates
Standard silver dollars
499,312, 784
Silver certificates
* (491,566,977)
Treasury notes of 1890
* (1,227,550)
Subsidiary silver__
4, 515,239
Minor coin . ._
United States notes
Federal reserve notes
Federal reserve bank
National bank notes._ ___
732,377, 223
Total Feb. 29, 1932. 9,320,730,167 53,975,138,219
Comparative totals:
Jan. 31, 1932
Feb. 28, 1931.
Oct. 31,1920
Mar. 31,1917
June 30, 1914
Jan. 1, 1879


5 212,420,402


Money outside of the Treasury
In circulation>
All other








Held by Federal reserve
banks and
agents 1










of continental United

44.93 $124,716,000


156,039,088 1, 583,643,272 6129,099,703 7,451,948,104 1,848,405,474 5,603,542,630

2,164,930, 770
1, 507,178,879

156,039,088 1,580,633,136 126,188,455 7,515,142,023 1,873,936,977 5,641,205,046 45.26
156,039,088 1,575,421,578 94,317,813 6,734,579,, 534 2,114,166,025 4,620,413,509 7 37.33
152,979,026 1,212,360,791 352,850,336 6,761,430,672 1,063,216,060 5,698,214,612 53.21
117,350,216 5,126,267,436 953,321,522 4,172,945,914
188,390,925 3,459,434,174
3,459,434,174 34.93
90,817,762 816,266,721


' l2 Includes money held by the Cuban agency of the Federal Reserve Bank of Atlanta.
The money in circulation includes any paper currency held outside the continental limits of the United States.
' Does not include gold bullion or foreign coin other than that held by the Treasury, Federal reserve banks, and Federal reserve agents. Gold held by Federal reserve banks
under earmark for foreign account is excluded, and gold held abroad for Federal reserve banks is included.
* These amounts are not included in the total since the money held in trust against gold and silver certificates and Treasury notes of 1890 is included under gold coin and bullion
and standard silver dollars, respectively.
* The amount of money held in trust against gold and silver certificates and Treasury notes of 1890 should be deducted from this total before combining it with total money
tside of the Treasury to arrive at the stock of money in the United States.





This total includes $55,743,036 gold deposited for the redemption of Federal reserve notes ($1,083,085 in process of redemption), $30,COO,129 lawful money deposited for the redemption of National bank notes ($15,978,315 in process of redemption, including notes chargeable to the retirement fund), $1,360 lawful money deposited for the retirement of additional
(act of May 30, 1908), and $16,182,757 lawful money deposited as a reserve for postal savings deposits.
Revised figures.

NOTE.—Gold certificates are secured dollar for dollar by gold held in the Treasury for their redemption; silver certificates are secured dollar for dollar by standard silver dollars
held in the Treasury for their redemption; United States notes are secured by a gold reserve of $156,039,088 held in the Treasury. This reserve fund may also be used for the redemption of Treasury notes of 1890, which are also secured dollar for dollar by standard silver dollars held in the Treasury; these notes are being canceled and retired on receipt. Federal
reserve notes are obligations of the United States and a first lien on all the assets of the issuing Federal reserve bank. Federal reserve notes are secured by the deposit with Federal
reserve agents of a like amount of gold or of gold and such discounted or purchased paper as is eligible under the terms of the Federal reserve act. Federal reserve banks must maintain a gold reserve of at least 40 per cent, including the gold redemption fund which must be deposited with the United States Treasurer, against Federal reserve notes in actual
circulation. Lawful money has been deposited with the Treasurer of the United States for retirement of all outstanding Federal reserve bank notes. National bank notes are secured
by United States bonds except where lawful money has been deposited with the Treasurer of the United States for their retirement. A 5 per cent fund is also maintained in lawful
money with the Treasurer of the United States for the redemption of National bank notes secured by Government bonds.



^ Senator THOMAS. NOW, Mr. Chairman and gentlemen, if you will
permit me to make some references
Mr. ALDRICH. May I ask a question at this point?
Senator THOMAS. I shall be glad to answer it.
Mr. ALDRICH. Have you the figures of the amount in circulation in
the intervening years between 1921 and the present?
Senator THOMAS. Here is the 10-year period, not all the months are
there, but most of them.
Mr. ALDRICH. They include some of the most prosperous years we
have had in this country.
Senator THOMAS. Will you suggest some year?
Mr. ALDRICH. I have the figures here. There is a table in the
annual report of the Secretary of the Treasury. I simply want to
point out that in some of the years that we considered prosperous,
such as 1927,1928, and 1929, the total amount of money in circulation
was very much less than it is now or than it was in 1921.
Senator THOMAS. Let me give you then the month that shows the
lowest amount in circulation. That is July 31, 1930. A similar
statement showing at that time the circulation had gone down to
this point of $4,426,493,631, and at that time we had gold in the
Treasury in the total sum of $4,516,509,645. In other words, we
had over $100,000,000 of gold in the Treasury more than money of all
kinds in circulation.
Mr. ALDRICH. But in 1928 we had $4,796,000,000 in circulation,
and conditions were prosperous at that time. That was the only
point I wanted to make.
Senator THOMAS. In answer to the suggestion made—I think it
is an entirely appropriate one—in good times money is of no particular
value, because nobody cares for money and by money I mean gold,
silver, and currency. They have plenty of checking accounts and
plenty of credit. Until the slump came two and a half years ago,
money did not serve a very large part in the life of the people, because
the work was done by checks. When we have confidence and credit
our bills are paid by check. It is only when you have to have money
to pay your carfare or patronize some strange individual that it takes
actual money. For that reason, in good times, the business can be
transacted by checks and credit; but in bad times like these, when
credit is frozen and there is not any, we must then fall back to actual
Mr. ALDRICH. Have you the figures of the total bank deposits of
this eountry at the present time?
Senator THOMAS. I can give them to you.
Mr. ALDRICH. It is something like fifty billions.
Senator THOMAS. Let me make my statement for the record.
In 1924, when I appeared before this committee, we had $55,000,000,000 on deposit. In June of last year, we had just a little less
than $60,000,000,000 on deposit. That is June of 1931. Since
June, 1931, we have lost approximately twenty billions of bank
deposits. The gentleman suggests that there are now forty-six
billions on deposit?
Mr. ALDRICH. I do not know exactly. I think it is in the neighborhood of fifty billions.
Senator THOMAS. The last time I made a tabulation and made
inquiry was in February and at that time they were down to fortysix billions. That is the information I received from the comptroller's



office. So we have lost approximately twenty billions of deposits
in the past several months.
Now, while we have five and a half billions of money in circulation
I want to give you an idea where this money is.
There are $500,000,000 of this money in foreign lands; $100,000,000
in Cuba alone. The only money in circulation in Cuba is American
money. This money is in the big banks of Cuba. By the way, they
are American banks. The National City Bank has 24 branches in
Cuba. So Cuba, while it has an independent government, is practically altogether American.
The American Telephone & Telegraph Co. has 451 exchanges in
Cuba. Everything in Cuba worthwhile that you would have is owned
by some American already. It takes $100,000,000 of our money to
transact the business of Cuba.
The banks are required to keep in their vaults as a reserve almost
$1,000,000,000. There has not been a time in 10 years when they
have had $1,000,000,000 in their vaults at one time. The number of
banks have now dropped until we only have about eighteen or nineteen
thousand of them, and the last statement I saw was that they had
cash in their vaults of $888,000,000. So the banks on June last had
on deposit approximately sixty billions of money when they did not
have in their vaults a billion dollars. That is a ratio of less than 1
to 60.
Now, of this $5,500,000,000 we have now outside of the Treasury,
$500,000,000 in foreign countries, and the banks have $1,000,000,000
approximately. Of course, that is theoretically in circulation, but not
practically. You can not get it out of the banks, because if you take
it out, they have got to get more to put back in the banks to keep up
their reserves in accordance with the law. So that that $1,000,000.000
which is theoretically in circulation is not where people can get it.
Then the Presided told us not so long ago that the people of the
country had hoarded a billion and a half dollars.
Add these three amounts that are not in circulation, the money
in foreign countries, $500,000,000, the money in the banks, $1,000,000,000; that makes a billion and a half; and then a billion and a
half dollars which is being hoarded. That makes a total of $3,000,000,000 that you can not get to. Take that from five and a half
billion dollars and its leaves you two and a half million dollars of
money to transact the business of the United States, the largest,
the strongest, the richest Nation on the face of the earth.
I contend that is not enough. I contend that because this money
in circulation has shrunk and because credits have ceased to exist
through being frozen, that the cause of the high price of the dollar
to-day is the scarcity of that dollar. It is my contention that no
relief is possible until we bring that dollar down within the reach
of the masses of the people of this Nation.
Mr. RAGON. May I ask you a question?
Senator THOMAS. Gladly.
Mr. RAGON. If Mr. Owen's statement is correct that there was
less money in circulation in 1928 than there is now or there was in
1921, how is that consistent with the statement that you are making



Senator THOMAS. He goes by the figures. I have tried to show you
that at that time there was four and a half billions in circulation
according to the statement and it was all in circulation; I mean,
easily gotten at, the banks would loan it.
Mr. RAGON. In other words, this billion dollars that the banks
have tied up was liquid at that time?
Senator THOMAS. A dollar in the bank is the basis of $10 of
credit. While the banks have a billion dollars, that is the basis of
$10,000,000,000 of credit but they are not exercising that potential
liquid credit.
3 In good times the money we had in circulation was ample, because
we had more gold than we had all kinds of money in circulation. We
had vast deposits and everybody had confidence. You could get
loans any place. Probably one of the troubles was that it was too
easy to get loans. Now, things are changed. Credit does not exist.
Money is being hoarded, a billion and a half dollars of it, and what
is in the bank is not liquid but is kept there as a reserve through fear.
Mr. RAGON. Right along that line, let me ask you this question.
Perhaps you can give me some light on it. This money that is
frozen in the banks as a practical proposition is held largely by the
banks for self-protection against runs and things of that kind; is
that true?
Senator THOMAS. I agree with you.
Mr. RAGON. In back of an issue of any kind of Federal reserve
notes you have- to have a reserve of 40 per cent of gold?
Senator THOMAS. I am going to come to that in a few minutes, if
you will allow me to postpone that discussion for just a little while.
Mr. RAGON. YOU are coming to that?
Senator THOMAS. Yes.
Mr. RAGON. That is what I want to hear discussed.
Senator THOMAS. I am trying to lay a foundation for it.
Mr. RAGON. But it seems to me this is significant. You say this
billion dollars is tied up in the banks. It seems to me that that is a
matter that affects the elasticity and the velocity of the money in
circulation. Will you explain that?
Senator THOMAS. I shall be glad to take that up.
Mr. ALDRICH. A billion dollars is not very much against fifty
billion dollars of deposits.
Senator THOMAS. Well, it is more than $1,000,000,000 as against
$60,000,000,000 deposits. Six months ago we had $20,000,000,000 or
more greater deposits than we have now and the circulation is practically the same. In effect, it is less because, as I say, this money is
hoarded. While theoretically it is in circulation, it is outside of the
Treasury and you can not get it. It is locked up in safe deposit boxes
and it is hidden in secret places and the folks who have it see fit to
keep it there. It is their property and there is no power that we can
exert over the owners of this money to get them to divest themselves
of it.
I will admit that the President's program of antihoarding has produced some good results. But here is another result that it has produced. The pleading of the Government has induced men and women
who had money to bring that money forth and expend it or deposit it.
But what have the banks done when they have gotten the money?



As soon as the money reached the banks, the banks have done this:
As soon as they get a little money on hand, money for which they do
not see an immediate need, they owe the Federal reserve and they
bundle up this money and send it down to the Federal reserve to pay
their obligations and to reduce their overhead. So, as a result of the
President's antihoarding campaign, I make the statement that he has
reduced the actual money in circulation by over $200,000,000.
Mr. HILL. May I ask a question?
Senator THOMAS. Surely.
Mr. HILL. If you had all of this $5,500,000,000 in circulation and
did not have circulating credit, the effect on the prosperity of the
country would be rather slight, would it not? The point is, you have
to restore the circulating credit in order to restore prosperity.
Senator THOMAS. I agree with you, Judge, that if we were to fill
the banks running over with money—that is an exaggeration, but if
we were to put another $1,000,000,000 into the banks, it might not
help the situation a particle and for this reason. There is no property now that I know of on which the banks will loan, not even
Government bonds. There is nothing now that I know of that is
making money. Banks will not lend on collateral and on farm lands,
or factories, unless those farm lands and those factories are operating at a profit. Now, farms are not operating at a profit. Factories,
many of them, are not operating at all and those that are running,
are not running at a profit. For that reason banks have no outlet
for loans. Until something is done to reinvest the public, the masses,
these millions, with buying power the banks can not take any collateral that is worth anything. Until a farmer can get more than 5
cents a pound for his cotton and more than 30 cents a bushel for his
wheat, his land will not be worth anything as collateral.
Factories will be worthless as collateral until orders commence
coming in to them. It is my contention that if we will pay these
soldier boys—and that is only an incident; I stand on the statement
made by Mr. Patman yesterday that unless we can convince the
committee and the Congress that the payment of this bonus will help
the country at large, the millions and the tens of millions—not soldiers—as much as if not more than it will help the soldier boy, I
would not take your time to make this presentation.
I contend that the only way you can help the country, all of it, is
to get the buying power back in the hands of the 120,000,000 of our
people. If you put buying power in their hands, they will begin to
spend their money. They will fill some empty stomachs, their own
and their families. They will buy some better clothes, they will pay
their bills. That puts this money in circulation. It gets it into the
banks eventually, but when it does the banks will have renewed
confidence, because bills will have been paid, credit will be reestablished in the folks who have liquidated their indebtedness; and so I
am presenting this matter on the theory that the passage of this bill,
paying this out in cash, not in credit, not by checks, but in cash, will
do the thing that we all want done. If it will not do that, our case
The boys need the money. We all admit that.
Mr. WATSON. Will the gentleman yield?
Senator THOMAS. Gladly.



Mr. WATSON. What effect did the seven or eight hundred million
dollars that we paid the soldiers a few years ago have upon the prosperity of the country? Why would this proposed $2,000,000,000 issue
have any greater effect?
Senator THOMAS. That money was paid last year by credit, by
checks. There was not a dollar paid to the boys that would be the
basis of additional credit. It is my contention that if it had been
paid last year in currency, the circulation would have increased to
the extent of the payments made and every dollar placed in circulation
would have been good for $10 of expanded credit.
We did not pay them that way. They were paid by checks, just
like the Reconstruction Finance Corporation is paying to-day. They
are not paying out currency. They are paying by checks and while
they put $300,000,000 in circulation, the currency has not been expanded a single dollar.
Mr. WATSON. But the same argument was made then as is made
now, that the payment then would be of great advantage to the
Senator THOMAS. I will make the further statement, and I have
many letters to sustain my position, that the payment last year to
the soldier, to the extent to which they were paid, saved sections of
the country. This information comes from my State, localities that
I have heard from, to the effect that had it not been for those payments
banks would have failed and chaos would have reigned.
Mr. WATSON. Then it did put money in circulation?
Senator THOMAS. Credit money, true. If you were to go to the
bank to-day and say, "Mr. Banker, I want $10,000," the banker
would give you a note, you would sign the note for $10,000 and he
would give you a credit on your passbook or a credit slip, and immediately you have converted your credit into $10,000 of deposit
money. That is in the bank. The deposits of that bank would
jump up $10,000, but you have not put a penny in the bank. Circulation has not been increased a single red penny.
Mr. Chairman, I will not take up very much more of your time,
but let me call your attention to an article that appeared in the
Washington Post yesterday. It is their leading editorial, and I want
to read only a few lines because they are pertinent. This editorial
voices my viewpoint entirely. The article is headed, "The Underlying Problem." The first paragraph reads as follows:
A fresh wave of deflation swept over the country last week, leaving the people
in a confused and uneasy state of mind. For a time the forces of depression were
checked by the new blood poured into the veins of commerce by the Reconstruction Finance Corporation and other constructive measures. But these factors
were not sufficient to turn the forces of deflation into a positive movement
toward recovery. It is well for the public to face the fact that heroic measures are
necessary to turn the tide of depression.

A little further on:
AH chance of recovery seems to hinge upon a turn in commodity prices. On
April 1 a group of 110 representative commodities were selling for 17^ per cent
less than they brought a year ago. This is superimposed upon a decline of 20
per cent in the previous year. So long as this condition remains unchanged
business will be paralyzed. All the credit in the world can not induce business to
go deeper into the red.
Value in the United States is being slowly concentrated into money. The
dollar increases in value every day, while everything else loses some of its relative worth.



Reading further:
The value of the dollar has reached such a high point that the people are tempted
to convert all their holdings into dollars to avert further shrinkage. Unless this
vicious movement is checked it will result in panic.

That was prophetic, because yesterday the stock marked continued
to decline.
Mr. BACHARACH. What paper is that?
Senator THOMAS. This is the Washington Post dated April 11,1932.
Mr. BACHARACH. I would like to ask you a question, but I do not
desire to interrupt your statement.
The ACTING CHAIRMAN. The Senator has said that he is willing to
Senator THOMAS. For any question. I would not want to get into
any argument.
Mr. BACHARACH. I do not want any argument myself. I wanted
to find out what you were thinking of when you said that the boys
should be paid in cash rather than by check. I would like to understand your viewpoint on that. It seems to me—this is just my viewpoint—that what we want these boys to do when they get this
money, of course, is to help themselves to the things that they require. It seems to me that if we give these boys, a great many of
whom are not accustomed to bank accounts, all of this money, they
will probably waste a good deal of it. I do not suppose that was
your thought.
Senator THOMAS. Not at all.
Mr. BACHARACH. That is the way it struck me.
Senator THOMAS. Let me make this statement, if I may, in explanation of what I said. There is just as much difference between the
Government putting out a million dollars in currency and putting
out a million dollars by check as between day and night.
The Reconstruction Finance Corporation has put out $300,000,000
by checks, in credit, and circulation has not been increased a single
penny; $200,000,000 have gone out of circulation at the very time
that they were putting out $300,000,000 in credit circulation. But
if the Reconstruction Finance Corporation had put out $300,000,000
in currency, immediately that currency would have been reflected in
the circulation statement of the Treasury.
Mr. BACHARACH. YOU said something about banks not having the
opportunity to loan money to manufacturers. As a matter of fact,
the banks will not lend money and I believe that has caused a great
deal of the trouble in a great many manufacturing industries.
Senator THOMAS. DO I understand you to say that the banks will
not loan money?
Mr. BACHARACH. I think as a general statement that is pretty
nearly correct. At the present time it is very difficult, as you said,
to borrow money from banks, no matter what the security is that is
Senator THOMAS. YOU are exactly right. They will not loan money
for the best reason in the world. There is nothing to-day on which
to loan money.
Mr. BACHARACH. Well, I happen to know of a concern located in
New Jersey which to-day is running 24 hours a day. It has 4,200
employees. It has very substantial bank connections and yet they
can not borrow money from their bank, and they were compelled




to pass dividends on their bonds for that very reason. It is a very
substantial concern and doing a profitable business.
Senator THOMAS. Let me continue with this editorial just for one
or two further sentences, because the editorial states exactly my
viewpoint. If I am wrong, the Washington Post is wrong. If the
Washington Post is right, Mr. Chairman and gentlemen, I am right.
I invite your attention to the next statement. I quote:
The extension of credit will not be sufficient. Heroic, emergency measures
that will arrest the fall of prices seem to be in order. How that can be done
without unwarranted inflation of the currency is not clear, but every fresh wave
of deflation makes more urgent the necessity of restoring some measure of balance between money and commodity prices.
Palliatives will not yield the desired effect. Business can not turn toward
stability unless the whole tendency toward lower price levels is reversed. Some
powerful agency must be thrown into the breach to restore the value of goods
and services against the exaggerated value of money.
But some method of currency expansion on a sound gold basis might be necessary. Emergencies of this kind call for drastic action which goes to the heart
of the problem. All the benefits which have accrued through bank stabilization
will be lost unless the forces of deflation are arrested. It is time for the leaders
in Government and financial circles to focus their minds upon a realignment
of values.

That states my conviction entirely, Mr. Chairman. Now, as I
stated a moment ago, after the American Legion convention met
and decided not to ask the Congress for an extension of loans or the
payment of the balance due, there was no demand, so far as I know,
audible that the balance of this payment should be made.
When Congress convened, we were kept in the Senate one night
until 11 o'clock to pass a bill to provide for $2,000,000,000 to be
loaned to railroads and banks, life insurance companies, and other
forms of corporations.
The ACTING CHAIRMAN. Senator, did not that also authorize a loan
of $200,000,000 to the farmers?
Senator THOMAS. Exactly so; $50,000,000 directly. Three times
fifty millions, possibly amounting to $200,000,000. Let me say in
passing that in my section of the country the farmers not only can
not get that money, but they can not even get the blanks upon which
to make the applications. So, as a practical relief measure, it did
not reach those whom we expected it to reach.
The ACTING CHAIRMAN. I am sure the Senator will agree that the
legislative branch of the Government has no control over that.
When they pass the law, that is all the legislative branch can do.
Senator THOMAS. I agree with the Chairman entirely. The bill
I have pending before the Senate and which has been made a part
of this record provides for the immediate making due and payable
the balance of these certificates. It does not provide for the issuance
of any bonds to be sold to the public. We can not sell bonds to the
public now and I would not be so untrue to my convictions as to
propose a bond issue that I am convinced could not be sold to the
This bill proposes not a single new theory of financial legislation.
It does not even suggest a new section of law.
Under existing law—and I refer to the Reconstruction Finance
Corporation; I have the bill here and I will refer to it just briefly;
we passed this bill this winter—the Reconstruction Finance Corporation is not selling its bonds, yet it either has or will get the money on
its bonds to loan to these institutions that I have mentioned.



How does the Reconstruction Finance Corporation expect to
operate? Under the law, they have the right to issue a billion and
a half of debentures, notes, or bonds. Under the law, those debentures are the direct obligations of the Government. Every dollar in
the Treasury is pledged to pay the interest on those debentures.
Every dollar in the Treasury is pledged by law to pay the principal
of those bonds when they become due. Thereby, they are the direct
obligations of the Government.
When the .bill was passed, objections were made to making these
bonds rediscountable at Federal reserve banks. So when the bill
was finally passed and signed by the President, the only avenue the
board had of disposing of these bonds was first to the public and second
to the Treasury.
Now, they soon found that they could not sell these bonds to the
public at par when Liberties were selling at 89 or 90. The Treasury
did not have the money to advance upon this one billion and a half
of bonds and the board found itself with $500,000,000 of appropriations, and with a billion and a half dollars of bonds that it could not
handle. The Federal reserve banks could not use them.
So, at another meeting, those who were responsible for initiating
this financial legislation decided that the Reconstruction Finance
bill would have to be amended, the clause prohibiting these bonds
from being handled by the Federal Reserve Board would have to be
amended. That was one of the main provisions in the Glass-Steagall
bill, to make the Reconstruction Finance Corporation bonds rediscountable and subject to purchase by the Federal reserve banks.
Now, here is the way they operate, if they are operating. This
board that we created this year, will issue its bonds. It will either
take these bonds to the Treasury and deposit them—not sell them to
the public, but put them in the Treasury and the Treasury is authorized to issue its credit upon those bonds.
Secondly, under the Glass-Steagall bill, the board can take those
debentures to the Federal reserve bank, lay them on the desk in front
of the Federal reserve officials, and the Federal reserve officials are
directed to present those bonds to the Federal reserve agent in the
bank and the Federal reserve agent is directed to advance the notes
for these bonds. They are not sold to the public. It is nothing more
than a camouflage way of the Government issuing its notes, with
nothing behind them save the promise of the Government to pay.
Now, I know Mr. Aldrich suggests that these bonds are backed by
Mr. RAGON. Senator, why is not that sufficient? Why does not
that have thfc effect of inflating the currency?
Senator THOMAS. Because they are not putting out the money.
They are putting it out in eredit.
Mr. RAGON. YOU said a while ago that the Government would issue
credit on those bonds. What character of credit do you mean?
What did you mean by that?
Senator THOMAS. The Reconstruction Finance Corporation, when
it makes a loan to the B. &. O. or the Pennsylvania, or what not, does
not give them the currency. They write them a check. There is
no currency involved in the transaction, not a penny. If this board
continues its present policy and puts out the entire $2,000,000,000
that we have authorized in the form of checks, circulation will not be
extended a single dollar.




Mr. ALDRICH. YOU said there was nothing back of these bonds. Of
course, there is the credit of the people to whom they loan the money,
the railroads and the banks, in back of the bonds.
Senator THOMAS. If they do not pay, then what?
Mr. ALDRICH. We hope they will.
Mr. HILL. YOU say that the Reconstruction Finance Corporation
can take its debentures and present them to the Federal reserve agent
and as I understood you get currency for these in Federal reserve notes.
Is that true?
Senator THOMAS. Absolutely.
Mr. HILL. Does not that expand the currency to that extent?
Senator THOMAS. If they will do it; yes. But they will not do it.
The Federal reserve bank has the power to-day to put $1,000,000,000
in circulation through the purchase of bonds. They will only buy
$25,000,000 weekly. They could buy $100,000,000 weekly and
increase the circulation that much faster. But to-day, as fast as they
are going, or as fast as they are willing to go, the money is going into
the banks, it is being retired faster than all these agencies are putting
it out.
Mr. HILL. What is the form of this credit that the Treasury is
putting out?
Senator THOMAS. It is in the form of Treasury checks. They make
them available to the credit of the Reconstruction Finance Corporation. The Reconstruction Finance Corporation, of course, writes
its draft upon the Treasury and it is honored. It is all credit, just
as in the instance of the gentleman who interrogated me a while
ago; after he is credited with his $10,000 which he deposits in the
bank, he can write checks against that to the extent of $10,000,
but not a penny of money is involved necessarily.
Mr. HILL. Who pays these checks, where are they paid?
Senator THOMAS. The banks pays them.
Mr. HILL. They get back to the Treasury some time? .
Senator THOMAS. Yes; but it is all credit. There is no money
Mr. HILL. There are no Treasury notes issued?
Senator THOMAS. Not a penny's worth necessarily; not a penny.
So, the Congress has provided for the issuance of a billion dollars
and a half by the Reconstruction Finance Corporation of so-called
fiat money.
Mr. RAGON. Senator, as I understood you a while ago, you said that
under the terms of the Glass-Steagall bill it was possible for them to
place the bonds in a Federal reserve bank?
Senator THOMAS. Correct.
. Mr. RAGON. And that the Federal reserve bank would take that
and treat it as eligible paper?
Senator THOMAS. Yes.
Mr. RAGON. And would issue Federal reserve notes?
Senator THOMAS. They could do that.
Mr. RAGON. At whose instance was that provision put in the GlassSteagall bill, if it was not done at the instance of the Reconstruction
Finance Corporation? I understood you to say a while ago that it
was put in at somebody's request.
Senator THOMAS. I am not a member of the Banking and Currency
Committee of the Senate and I can not answer that.




Mr. RAGON. I thought you made the statement that they found
they could not sell their bonds and therefore there was incorporated
in the Glass-Steagall bill provisions to enable them to do what you
have just described.
Senator THOMAS. The Reconstruction Finance Corporation could
not sell its bonds to the public. It did not try to, because it knew
it could not do it. The Treasury was not prepared to finance this
one billion dollars and a half because the Treasury is having difficulty
now financing the payment of your salary and the payment of mine.
It is going in the hole. So the Treasury could not take the money
out of its vaults and advance this amount. The Reconstruction
Finance Corporation was forced to do something. There was the
Federal reserve bank with plenty of money, plenty of credit, plenty
of gold. But the Reconstruction Finance Corporation could not get
its bonds in the Federal reserve bank because of an inhibition in the
original finance corporation act. Then the Glass-Steagall bill made
it possible for the Reconstruction Finance Corporation to take any
direct obligation of the Government and pledge it with the bank for
the issuance of notes, of course, or credit. The Reconstruction
Finance Corporation could get the notes, but it does not want the
notes. The credit serves its purpose. It is not interested in inflating
the currency or deflating the currency.
Does that explain what I am trying to say?
Mr. RAGON. They have the power, though, it seems to me, to
inflate the currency by a billion dollars and a half.
Senator THOMAS. They have the power. So has the Federal
Reserve Board the power to-day to put $,5,000,000,000 in circulation,
if they would do it. But there is some power, some place, that keeps
them from it.
Mr. RAGON. Assuming that they were to do that, assuming that
the Reconstruction Finance Corporation did that—and there are
members of the Federal Reserve Board on the Reconstruction Finance
Corporation Board—I say, assuming that they were eventually to
do that, and issued notes to the extent of $1,500,000,000, how would
that affect this $2,000,000,000 proposal here, if it would affect it in
any way?
Senator THOMAS. If the Reconstruction Finance Corporation would
go to the Federal reserve bank and hypothecate its bonds and take
out of the bank actual Federal reserve notes and then make the loans
with notes, they would assuredly place that much money in circulation, which would be reflected in the statement of the Treasury.
But here is what would happen. It would give millions to one corporation and two millions to another corporation and two millions to
another corporation. What would they do with the money? They
would take it and put it in the banks and pay their bonds or their
overhead expenses. There would be no wide circulation of that money.
It would be piled up in some bank here or some bank there in the
millions. To an extent it would increase circulation, but it would be a
slow process to get that scattered over the whole United States.
This proposal provides immediately for the spreading of this
$2,400,000,000 into every State, county, hamlet, and nook of the
United States and puts it in the hands of the person who will spend it>




I made the statement a few days ago that it would be better for
the Government to appropriate $1,000,000 and give a dollar to each
one of a million persons that it would be to appropriate a million
dollars and put it in the hands of one person.
Mr. RAGON. My point is this: If they should issue one and a half
billion dollars in notes, and then we should make provision for placing an additional issue of $2,400,000,000 to take care of the adjusted
service compensation certificates, do you think that would hurt us
in any way with reference to the gold basis?
• Senator THOMAS. Absolutely not; because in 1920, as I showed
awhile ago, we had over a billion dollars more in circulation than we
have now. It is not on my opinion alone that I rely when I say
that inflation is necessary, and by "inflation," I mean a reasonably
controlled inflation.
Now, I want to read from an address by the present Secretary of
the Treasury. This address was made on January 26 before a group
of bankers in New York. The Secretary of the Treasury being a
competent man and addressing those who understood what he was
talking about, did not make any mistakes, and he told them at that
time exactly what he thought. I want to read one or two paragraphs
from his address. At one place he said:
The essence of the problem is to arrest deflation, to make available the credit
needed by American business, industry, and commerce, and to encourage its use.

Of course, Mr. Mills and the others will not admit that they are
in favor of inflation, but they are in favor of arresting deflation. A
little bit later in his address, he made this statement:
Some overtimid critics claim to have detected in this program the germ of
inflation. They fail to distinguish the unmistakable dividing line between
inflation and the arresting of a deflationary process which has gone to extreme
lengths. When reporting member banks credit has been deflated by over $1,500,000,000 in three months, or at the rate of more than 25 per cent a year, and when
through fear the existing volume of credit is not used to anything like its capacity,
I do not know of anyone except perhaps the cartoonist Webster's "Timid Soul"
who could be seriously troubled by the specter of inflation.

Then, a few days ago in the Senate the author of the Reconstruction Finance Corporation bill, in speaking on the Glass-Steagall bill
made this statement, and I refer to Senator Walcott:
Consequently, our dollar, always backed by gold, became unduly valuable.
Our dollar to-day buys too much, because commodity prices are lower than they
should be.

Again he says:
So we find ourselves in the predicament that we had commodity prices much
too low, the dollar corresponding too valuable, the purchasing power of the dollar
too great, strange as it may seem, and business very largely paralyzed. What
are we going to do about it?

In connection with the same discussion, that is, of the GlassSteagall bill, Senator Glass made this significant statement:
Who will say that if we might expand to-day to the extent of $4,000,000,000
the situation would not be cured?

Senator Glass told the Senate that if we could expand to the extent
of $4,000,000,000, the situation would be cured. The Glass-Steagall
bill was intended to have some inflation about it. Senator Glass
submitted a report, and he says in one line:
The bill is not intended nor should be used for undue inflation.



He admits that inflation to some extent might be due inflation.
Now, a few days ago the distinguished Senator from Mississippi,
addressing himself to the Senate, made this significant statement:
I am not advocating that this country should go off the gold standard or suspend it. I do think, however, that something ought to be done by those who
direct the Federal reserve system or the fiscal policies of the country, if it be
possible, to put a stop to further decline of commodity prices. What we need
now is—I will not say inflation, but, as Irving Fisher said, reflation—or something so that prices can at least go up to some measure of what they should be.

Again, Senator Harrison said:
I then voted for the so-called Glass-Steagall bill as a temporary measure. I
hoped that the Federal Reserve Board would heed the admonition, because it
appeared at that time that the administration was strongly in favor of such
legislation and that it was going to use it as a means of putting more money into
circulation and causing some inflation. I do not mean radical inflation; I do not
mean skyrocketing inflation, but I mean reasonable, rational inflation; because I
realize, as every Senator and every American citizen must realize, that no one who
incurred indebtedness in the flush times of four or five years ago and who to-day
is in debt the value of his property, whatever it may be, whether stock or land or
commodities, or whatnot, having declined to the present figure under the enormous deflation which has occurred, can ever expect to see the light of day so far as
being removed from under the burden of debt is concerned. So we have got to
inflate in some rational way in order to increase the prices of commodities in this

Again he says:
I believe yet that those who direct the fiscal policies of this Nation can work
out some policy through the Glass-Steagall law which may give us a little inflation; at least, I hope so.

Now, Mr. Chairman, just a moment further, and I will be ready to
answer questions. This bill provides for making these policies due
now; it provides for the issuance of 2 per cent consols, exactly like we
issued in 1862 to try to get back on the gold standard, following the
Civil War, and exactly like those we issued at the time we built the
Panama Canal. Those bonds draw 2 per cent interest; they have the
circulating privilege, and national banks can take over those bonds
with the privilege of depositing them, having the full amount in
currency issued against the bonds, getting the 2 per cent interest all
the time, and getting the money free all the time without interest.
Therefore, I propose the issuance of $2,400,000,000 in 2 per cent
consols; I propose that the Veterans' Administration shall take those
bonds and deposit them with the Federal Reserve Board, and the
Federal Reserve Board, in turn, would distribute those bonds to the
12 member banks in proportion to the demand made upon those
banks for the money. General Hines knows exactly how many
soldiers reside in my district, and he knows exactly how many soldiers
reside in every one of the 12 Federal reserve districts. The bill provides that the various Federal reserve banks receiving those bonds,
shall issue Federal reserve bank notes in an amount equal to the face
value of the bonds received by it, and those Federal reserve bank
notes are placed to the credit of the Veterans' Administration, under
this fund, in the full amount of those Federal reserve bank notes.
They are not Federal reserve notes, but Federal reserve bank notes.
Now there is no new principle in this legislation. I have here the
Federal reserve act, and there is a section of the Federal reserve act
that provides now that Federal reserve banks can acquire these 2 per
cent consols. They could take those 2 per cent consols to Federal



reserve banks and get money to-day. There is nothing back offthis
tiaoney, or these Federal reserve bank notes, except the 2 per|cent
Mr. HILL. Would those consols come into competition with
other obligations of the Government in the form of the 3# or 4 per
cent bonds?
Senator THOMAS. In no sense; because the public now gets their
true value.
Mr. HILL. There is nothing obligatory upon the Federal reserve
system to take those bonds and distribute them, is there?
Senator THOMAS. It is true the Federal reserve banks are not
governmental agencies. They are only quasi so, but they would not
Fail or refuse to obey the manaate of Congress. The present banking
system has fallen down. They are not making loans to enable us to
get over the ridge. The banks in the country are not making loans,
and what has happened within the last few years? Well, we first
provided a system of banks to make loans to farmers. We provided
the Federal land bank system, and there we have national banks
making loans to farmers. Then we have the Federal Farm Board,
which is nothing more nor less than a bank making loans to cooperatives. Then we have the Shipping Board, which is nothing more nor
less than a bank under one provision, making loans to the shipping
interests. When the entire banking system had fallen down, we
created a new supernational bank system, called the Reconstruction
Finance Corporation to make loans to the banks themselves. Our
banks have fallen down, and we are adopting new forms and creating
new banks to take the place of the old ones. There is now pending
in the Senate, and it is probably pending here, a bill called the home
loan aid bank system, which proposes to put branch banks throughout the United States. Then a bill was introduced a few days ago
providing for some system of loans to agriculture throughout the
United States.
Now, if the Federal reserve banks are not willing to do the things
that Congress directs it to do, how long would they continue to live?
I am apprehensive that it is on the decline.
The ACTING CHAIRMAN. May I ask a question at this point about
the practical application of your bill?
Senator THOMAS. Certainly; I will be glad to have you do so.
The ACTING CHAIRMAN. I am referring to the feature about issuing consols and making them eligible >for the issuance of Federal
currency on them. What provision is there in your bill for the
ex-service man to obtain currency in the amount due him? Would
he take his adjusted service certificate to a local bank, and would
the local bank act as his agent to go to the Federal Reserve Board
and obtain the money? I would like to have you explain the practical operation of it and show how this bill would work.
Senator THOMAS. After the issuance of the bonds, we have a credit
from the Federal reserve bank system, and that credit exists in the
12 banks throughout the United States. Those 12 Federal reserve
banks have in their vaults plenty of money to make the payments.
If they do not have the Federal reserve bank notes now, or if they
are not printed, they can have them printed. They have the plates.
In the meantime those banks could place Federal reserve notes in
circulation to take care of the emergency.



Now then, as to these soldiers, more than two million of them have
borrowed on their certificates, and those certificates are now in the
hands of General Hines, or are under his jurisdiction. They have lost
control over them. Now, if this bill should pass, new rules and regulations would be prescribed by the Veterans' Administration. General
Hines would prescribe rules and regulations, and would furnish
blanks to John Doe, we will say, in some far-off State. John Doe
would fill in those blanks, and answer the questions in the form
prescribed by General Hines. They would fill in the amount of the
certificate, showing how much was borrowed, where the certificate
was, etc. That eventually gets to General Hines, and he then takes
this application of the soldier and checks it against the records. If
he finds there is no loan, he sends the certificate in and gets the full
amount. If he has a loan, the interest is deducted. They will make
an audit of it at the office, and find out how much is still due John
Doe. When that has been done, some sort of statement will be sent by
the Veterans' Administration back to John Doe, directing him to go
to the nearest member of the Federal reserve bank, and that would
be the nearest national bank or State bank belonging to the Fedeial
reserve system. He would be directed to go there and present his
The ACTING CHAIRMAN. And get his money?
Senator THOMAS. Yes.
The ACTING CHAIRMAN. Are you contemplating that the payment
would be made in cash or by check?
Senator THOMAS. This is the plan I proposed: There would nob be
much objection to payment according to the plan I suggested, if they
could be paid by check. A few days ago I was in New York City,
where I met with some friends who were interested. I will say that
I met there people who were supposed to represent the best brains in
financial New York, and when I suggested the plan of paying in cash,
they said, " N o , " and when I suggested paying it by check, they
said that would not be so bad. Now, there is the " nigger in the woodpile"; and there is the " b u g under the chip." My bill does not
provide that this money must be paid in cash. I have information
that I can give you by an economist of world-wide reputation that
it would not take $2,000,000,000 to do what we want to do, and that,
perhaps, $1,000,000,000 would do it. My bill provides that the
Federal Reserve Board shall have supervision over the payments, and
when the board finds that the best interests of the Government and
the public demand that cash payments be suspended in any Federal
reserve district, it can be done by resolution of the7 Federal Reserve
Board, and an order can be made on the Veterans Administration
directing them cease to paying in cash. They would then proceed
to pay in checks.
So far as the soldier is concerned, he does not care. He is not
interested in economics, and that is a purely economic question.
That is purely a banking question. On one side of that question you
find the people who have fixed investments, and the producers on
the other side.
Mr. CANFIELD. Suppose he elects to take payment at the bank in
the form of a cashier's check?
Senator THOMAS. He could take it in any way he wanted to. Of
course, if one of these boys takes his money out, he pays his bills
with it. These soldiers do not have many bank accounts. They
115338—32 «




not only do not have bank accounts, but they do not have money.
If you will read these telegrams and letters, you will see that legion
after legion post in this country has lost its membership, because the
men could not pay their dues. v
Mr. ALDRICH. The effect of your bill would be practically the
same, so far as the effect on the currency is concerned, as that of Mr.
Patman's bill, would it not?
Senator THOMAS. I wxmkl rather not go into that controversy.
Mr. ALDRICH. I was just asking for information.
Senator THOMAS. I will say, since you have suggested that, I think
I should make my statement as to the Patman bill. If that bill were
enacted, it would bring into circulation kinds of money not under
the jurisdiction of the Federal Reserve Board. If the Patman bill
passes, Treasury notes comparable to greenbacks to the extent of
$2,400,000,000 would be issued, and they would drive out of circulation Federal reserve notes. The Federal reserve system lives on its
profits from buying and selling notes, buying and selling acceptances,
buying and selling bonds, and upon the interest income it receives
from the banks. Now, if you put into circulation a different kind
of money from the Federal reserve money, that money will drive
out of existence Federal reserve money. It will force them to desist
and will eliminate further interest to them, because the banks will
not be paying it. These notes issued under the Patman bill would
drive out of existence the Federal reserve notes, and would therefore
cut off from the Federal reserve system all revenue derived through
loans to the member banks. If the Patman bill should pass, it might
kill the Federal reserve system. It would deprive it of all possible
income, except as Congress might appropriate money to support the
12 Federal reserve banks.
Mr. ALDRICH. YOU would practically force the Federal reserve
banks to take these 2 per cent bonds you have mentioned.
Senator THOMAS. Yes.
Mr. ALDRICH. That is mandatory?
Senator THOMAS, Yes.
Now, Mr. Chairman, it is very unpopular for any one to make a
speech like this. The papers of the country are against you, and
the folks who run the country are apparently against you. They
call you all sorts of names. I want to read to you a sample letter
I have just received. I will say that it is not directed altogether
towards me. This letter came to me on Monday, and it was dated
April 8. It is written on very fine stationery, and at the head of
the letter I find the name "Dr. John J. White, 27 West Eightysixth Street, New York City." I will not read all of this letter. The
writer of this letter signs himself "John J. White, M. D." I will
read that part that has a wider application than to me, as follows:
If they shot traitors in peace times, the same as they do in war times, God
knows what would happen to many of the Washington politicians.

I will read further:
I am glad that you know so much about dishonest dollars. All of mine have
been honestly earned, and I sure hope that they will stay at their present value
and not go to the bad with the insane actions of a lot of fools and jackasses who
ought to be in museums and menageries instead of in places of legislation.

I submit that as a sample of the letters that come to those who are
asking for the payment of these adjusted-compensation certificates.



Now, I want to summarize my statement for just a minute. Without exception it is admitted that the passage of the proposed legislation will make money and credit more plentiful and thereby cheaper.
To be specific, the passage of a bill to pay the veterans the remainder of their adjusted-service certificates in cash will bring down,
reduce, and cheapen the buying power of the dollar and to the extent
that this is accomplished, commodities of all kinds will rise in price
and value.
That is because the proposal will have the exact effect claimed by
its proponents—that is, that it will cheapen the dollar and thereby
raise prices—prices of wheat, cotton, livestock, farm lands, city
property, and property of all kinds. Some of those who have their
wealth in fixed investments are opposing the enactment of this
suggested legislation.
I contend that with money plentiful and credit expanded, commodity prices will rise. The depression will be checked and prosperity
will return. This is what the unemployed, the wage earner, the farmer,
and the business man want and demand.
This is not a political question. It should not be decided upon
political grounds.
Of course, I can not speak for any citizen who opposes the enact* ment of this bill, but I would not be frank with this committee if I
did not state that I have been appealed to to cease my support of the
proposal for the reason that its passage will react to the benefit of
the party in power and thereby influence if not control the coming
The enactment of this legislation, in my opinion, will do the exact
thing that all claim to want done.
Its passage will start commodity prices upward; will rekindle and
reestablish confidence, and will bring an end to this terrible depression.
No otlier bill or program promising relief, so far as I know, is pending or is even being considered.
In the West the disastrous effects of two and a half years of downward price trends have converted once happy and prosperous farms into
ghost farms; and the white-robed monster is traveling rapidly toward
the East, and if not checked, he will soon reach the financial metropolis of the world and there he may choose to abide in that short,
narrow, crooked street, beginning at the river and ending at the
The ACTING CHAIRMAN. May I ask you one further question.
Senator THOMAS. Certainly.
The ACTING CHAIRMAN. I have listened with great interest to
your argument and to the other arguments that have been made
before the committee. I am not an economist, but here is a thought
I would like to get your views on: I apprehend that practically all
the State and municipal bonds issued by the various States, counties,
school districts, and so forth, are payable in gold, and that a great
many private obligations outstanding are doubtless payable in gold.
Now, if the dollar should be depreciated in value, it seems to me they
would require more dollars to pay those obligations that are payable
in gold, and if that is correct, what effect would that have upon the
various cities, counties, and so forth, relative to levying taxes to get
additional dollars with which to pay their outstanding obligations
that are payable in gold? I would like to have your answer to that.



Senator THOMAS. Your question anticipates or is predicated upon
the theory that this bill would drive us from the gold standard,
because this buying power of paper would disturb the buying power of
gold. Is that correct?
The ACTING CHAIRMAN. The thought I had in mind was that we
have all these outstanding obligations payable in gold, and then if the
dollar depreciates in value, from the gold standard view, it would take
more dollars to pay the obligations which are payable in gold.
Senator THOMAS. That question is predicated, I assume, upon the
theory that the enactment of this bill would drive us from the gold
standard. I do not care to go into that argument, except that I
want the record to show that we can issue $3,500,000,000 of notes and
not go off the gold standard. The Wall Street Journal makes the
statement, with reference to the anticipated fear that we will go off
the gold standard, that it does not matter what Congress does, we will
still be on the gold standard. Now, I do not want to go back as far
as we were in 1921. I do not want to go back to the dollar that will
buy oil at $3.50 per barrel. I would want to bring it down to the
basis where you would buy wheat at $1.50 per bushel and oil at
$1.75 per barrel or $1.50 a barrel, as it was in 1920, with other things in
proportion. We were on the gold standard then. At a time when
we had a billion dollars more in circulation and only one-half the gold
that we have to-day, we were still on the gold standard.
Mr. RAINEY. Senator, we now have in the Treasury $1,769,000,000
in gold, there held in trust for the redemption of $1,613,000,000 of
gold certificates, speaking in round numbers. Now, a large part of
the mortgages that the farmers have given and those obligations that
municipalities have issued are payable in gold, I think,.of a certain
standard of weight and fineness, so that they will all have to be paid
in gold. These can be paid in gold, because every one of those outstanding gold certificates are really warehouse receipts, and%re payable in gold at the Treasury upon demand. We must leave enough
gold there to pay them. Now, as I have said, those obligations are
payable in gold, and they are, therefore, payable only in those gold
certificates which are outstanding. Now, if we issue $2,000,000,000
worth of additional currency, those mortgagees and the holders of
those bonds are not compelled to accept that currency in payment of
the obligations that are due them. They can depend upon their
mortgages and demand payment in gold or gold certificates. Now,
would we not then have two kinds of money in circulation, one being
the gold certificates we now have, and would they not be greatly
enhanced in value? The large amount of cunency that would be
issued under your bill, or any of these bills, would not be acceptable
to those mortgagees, would it?
Senator THOMAS. Your statement is likewise predicated upon the
assumption that we would go off the gold standard, but I will not
admit that. Nobody thinks it will have that effect, so far as I know,
and I have many letters here from people on that point, that I can
Mr. RAINEY. We can not go off the gold standard under the Constitution, because we have this large amount of gold against which
we have gold certificates, which are really gold. We must pay them.



Senator THOMAS. If the time ever comes when every dollar of
paper money must represent its value in gold, then we will be off the
gold standard, because we can not provide for that. When the time
comes that the gold dollar is not available, we must have more
paper dollars to pay the obligation.
Mr. RAINEY. The money that you are advocating would be payable in gold, would it not?
Senator THOMAS. Let me say this, that we have now about six
kinds of money. We have paper money, and we have gold certificates, which are nothing more nor less than receipts for so much gold
somewhere, and we have silver certificates which are nothing more or
less than receipts for silver somewhere. There is nothing back of
them except that, and the silver back of that $1 silver certificate is
worth less than 30 cents. Therefore, to-day if you have in your
pocket a silver certificate, and make your demand for payment, the
silver back of it is worth 30 cents. Next, we have Treasury notes,
with 40 cents in gold back of them and 30 cents in silver, and, as I
have shown, the silver in the dollar is worth 30 cents. We have a
gold redemption fund of $156,000,000. This means about 40 cents
worth of gold and 30 cents worth of silver behind the Treasury notes.
Then, we will take the greenbacks, and there are $350,000,000 in
greenbacks in circulation to-day. Here is a greenback, and when
that was issued, it was issued with nothing back of it except a promise
to pay. Later we got together $156,000,000, representing our redemption fund, and that $156,000,000 in gold stands back of more
than $350,000,000 in greenbacks. This greenback has back of it
less than 50 cents in gold.
Mr. EAINEY. What would you have back of this new money?
Senator THOMAS. I will come to that in a minute. The Federal
reserve notes have back of them now 40 per cent gold and 60 per cent
commercial paper. Now, what is commercial paper, if the banks can
not collect it? Commercial paper is backed by some form of commodity, and if the price of the commodity falls, the commercial paper
falls with it. It will be recognized by everyone as not being worth its
face. Therefore, even a Federal reserve note, having 40 per cent
gold and 60 per cent commercial paper back of it, on that basis, would
not be worth par. Now, would you say that Federal reserve notes are
not worth par? The national-bank notes and the Federal reserve
bank notes have back of them the 2 per cent consols. If you have a
national-bank, note, there is nothing in the world back oi it except 2
per cent consols and 5 per cent redemption fund, which is not necessarily gold, but any kind of lawful money to make up the redemption
fund. National-bank notes and Federal reserve bank notes have no
gold back of them. All they have is 5 per cent of lawful money in the
redemption fund and these 2 per cent consols. Now, I propose to use
the same system in raising money that the national banks use in
raising money, by taking these bonds and pledging them at the proper
places for the issuance of Federal reserve bank notes.
Mr. RAINEY. Against which you have a gold reserve, and on which
you say you are going to predicate this new issue of $2,000,000,000.
vSenator THOMAS. Let me say in answer to that, that this Congress—not to my credit, because I did not vote for the bill—this
Congress has authorized the Reconstruction Finance Corporation to
make its bonds good for money with no gold back of those bonds.




Now, is there any question about that? I have a letter here from
Mr. CaseMr* RAINEY (interposing)* Do you mean to say that this issue of
$2,000,000,000 in notes will not have any gold back of them?
Senator THOMAS. All the gold we have
Mr. RAINEY (interposing). I am not talking about the 40 per cent
gold reserve provided under the law. That secures the issue of Federal
reserve notes, and the law requires the 40 per cent to remain there
Senator THOMAS. I am afraid I am not making myself plain. Let
me read from this letter.
Mr. RAINEY. YOU are not answering my question.
Senator THOMAS. YOU are asking the question in the language of
some one else, and I will answer in the language of the chairman of the
National City Bank, Mr. Mitchell. I read from his letter as follows:
According to your statement, the bill proposes to increase the amount of
money in circulation by $2,400,000,000. Should this aim be realized, and the
circulation so increased, the effect would be to reduce the reserve ratio from its
figure of 71 to 46, or close to the legal 40 per cent minimum, while the
'free gold" would be reduced from $1,500,000,000 to a little over $500,000,000.
In short, any such increase in currency outstanding would bring us dangerously
near the limit of expansion of our banking system, and leave very little margin for
the further demands upon our gold reserves which would almost certainly be
precipitated by the radical nature of the legislation itself.

In answer to your question, Mr. Mitchell tells me that we can
issue $2,400,000,000 in bonds and the money that I propose, and still
have $500,000,000 in gold left after I take sufficient gold to put a
reserve back of these bonds.
Now, to give you another thought, I can quote a statement from
Mr. J. H. Case, the Federal reserve agent at New York City. Mr.
Case, in commenting upon the bill, makes this significant statement:
At present the free gold of the Federal reserve system totals approximately
$375,000,000 and, if advantage were taken of the provisions of the act of Congress,
H. R. 9203 (the so-called Glass-Steagall bill), which permits the pledging of
Government securities purchased by the system as collateral for Federal reserve
notes, this free gold total could be increased to approximately $1,250,000,000.

Mr. Case tells us there that under the Glass-Steagall bill we can
issue all this credit down there with no gold whatever. It is contended
that they can take that gold, make it free, and by taking advantage
of the provisions of the Glass-Steagall bill, they can increase that free
gold to the extent of $1,250,000,000.
Mr. CROWTHER. In the statement written by President Harrison,
of the New York Federal Reserve Bank, reference was made to expanding credit. I think you said, " credit," and I want to be sure
whether you said a "credit" or "currency" expansion over $3,000,000,000 under the present conditions. Did you say "credit" or
Senator THOMAS. I was quoting from a publication put out by the
National City Bank, dated February, 1932, on page 20, as follows:.
In an address to the New York State Bankers Association during the past
month Governor Harrison, of the New York Federal Reserve Bank, stated that
the gold reserves of the country would permit an expansion of some $3,500,000,000
in reserve bank credit before reducing the reserve percentage below the legal
minimum. Such expansion would increase the loanable funds of the member
banks by as much as $35,000,000,000. Evidently the United States is under no
credit pressure traceable to the gold standard.



That would be increased ten times the basic amount.
Mr. CROWTHER. His statement is wholly with reference to credit
rather than currency.
Senator THOMAS. I do not so construe it. You must put money in
circulation to become the basis of this ten-times expansion. You can
not expand credit ten times, so that when he makes the statement
that $3,500,000,000 would be expanded ten times, basically the money
must be put in circulation.
The Acting CHAIRMAN. Are there any further questions?
Senator THOMAS. Of course, that brings up the question of the
difference between credit and currency. There is no trouble to get
bills passed to extend the credit of the Government, but when the
Government proposes to put it out in dollars, then the brakes are put
on. It is easy to control money in circulation, but it is hard to control
credit. There is some power somewhere that seems to hold the strings
upon the purse, and that controls the matter.
The CHAIRMAN. Mr. Patman, do you have another witness who
will take a short time?
Mr. PATMAN. We have a short witness, Mr. Chairman, who will
not ask for more than 15 minutes. Before I introduce the witness,
I would like to take half a minute to suggest to the gentleman from
New York that the reference was to currency, as is disclosed by the
Federal reserve bulletin for March. I will be glad to furnish a
copy of it.
Mr. CROWTHER. I wanted to have it clear in my mind whether
the statement of the Federal reserve bank president referred to credit
or currency.
Mr. PATMAN. It is currency.
Mr. CROWTHER. He said it was credit.
Mr. PATMAN. He was quoting from one document and I am quoting from another.
Mr. HASTINGS. I would like to ask how long the committee expects to remain in session, and whether it contemplates reconvening
this afternoon?
The ACTING CHAIRMAN. NO ; there will not be any afternoon session.
The committee has agreed to hold these hearings from 10 a. m. to
12.30 p. m. The members of the committee want to participate in
the House proceedings, as well as look after matters in their offices.
Mr. HASTINGS. I am just asking for information. Some of us did
not have an opportunity to be here this morning.
The ACTING CHAIRMAN. I will say further, that the committee decided to allow the proponents of the measure to select a representative
to present their witnesses, and they selected Congressman Patman.
The committee is hearing witnesses in the order in which they are
presented by Congressman Patman, representing the Members of
Congress who are proposing this legislation.
Mr. MCCLINTIC. Whom does the Member who has introduced a
bill get in touch with in order to find out what arrangement shall be
made for his appearance as a witness?
The ACTING CHAIRMAN. Mr. Patman, under the authority of the
committee, has been designated as the member to present the witnesses for those who favor the legislation. When the proponents shall
have concluded, then the opposition will be given a hearing and then




subsequently, if it is desired by the proponents, they will be given a
chance to rebut.
Mr. SWANK. May I ask Mr. Patman if he is going to give every
Member of the House who is in favor of this proposal an opportunity
to present & statement to the committee?
Mr. PATMAN. All of the proponents of this measure or these
measures I hope will meet with me right after we conclude with this
Mr. SWANK. Some of us have to go and can not be here.
Mr. PATMAN. That is all that I can say right now.
The ACTING CHAIRMAN. Please present your next witness, Mr.
Mr. PATMAN. I desire to introduce at this time Judge Jeffries, of
Detroit, Mich.
The ACTING CHAIRMAN. Judge Jeffries, you may proceed.
Mr. JEFFRIES. Gentlemen, I know your time is short. I regret
that much can not be said that ought to be said. I am beginning to
realize also that a great deal of this is more or less repetition and the
value of it perhaps is that it may add to your convictions of the.
sentiment abroad in the land in favor of this bonus proposition.
I have the honor to represent to-day the Wayne Council, in which
Detroit is situated, of the World War veterans, and also that department of the World War disabled veterans of Michigan; and I have
the honor also to represent the Learned Post, of Detroit, Mich., the
fourth largest post in the American Legion, and I would like to read
this into the record from the Learned Post, which is a Legion post.
Among other things this post says:
The Learned Post, with its 1,600 members is the largest Legion post in Michigan
and the fourth largest in the whole American Legion. Our membership represents a cross-section of the American people and is an adequate mirror of the
condition of our time. The reflections of that mirror are not pleasant or encouraging. Over 60 per cent of our members are unemployed. Many are without
adequate food or shelter. Hundreds are subsisting on the barest necessities of
life. Poverty, hunger, need are written on the faces of most of our men. Our
needs are critical.

Then it goes on in extension of that sentiment.
Now, I desire to say here in a few words what my viewpoint is on
this proposition. I have written it down, because time does not
allow for any extended argument.
No one denies the fact that the Government, in fixing the delayed
compensation of the soldiers, in the form of compensation certificates,
acknowledged the merits of the claim.
No one will deny the further fact that these certificates, by reason
of economic distress, have heen hypothecated to the' money lending
class, and if not redeemed before the date of their maturity will leave
little or nothing to the soldier.
This Congress is confronted with this situation: It will either grant
the payment of this so-called bonus immediately and insure the soldier
the balance of his compensation, or it will delay it until the average
soldier will receive no further compensation at all. In other words,
this Congress stands between the soldier's compensation and the



money lender, and must decide who is to get payment, eventually,
upon the certificates.
That is one side of this question. The claim is just. And deferred
payment means that instead of being paid to the soldier it will be
paid to the money lender. But this bonus has raised a much more
important question than even the immediate payment of the cash
balance to the soldier.
The country has come face to face with the problem of how best to
introduce not only money already issued but not in free circulation but,
if necessary, more money to be issued and put into circulation as a
means of stopping not only the fall of prices to a much further level
but of raising prices back to a level to prevent the bankruptcy of public
life through overburdened taxation, and also to private industry and
private life through lack of the sale and exchange of products.
The last two years have proven beyond a doubt that this is not a
condition due to the lack of confidence but due to the lack of money
in circulation.
While Mr. Hoover has frantically attempted to stem this tide of
industrial collapse by the appropriation of five hundred millions of
governmental money and the hope of a billion and a half more of
private money through bond issues to help railroads, banks, and insurance companies, outside of these public and semipublic utilities,
it now becomes apparent that general industry, agriculture, and almost every form of human energy have not benefited in the least
and is still suffering from the lack of money.
If there is enough money in the country that has already been
issued to furnish the necessary exchange for business life, then it
would seem that the methods of inducting it into circulation have
been either paralyzed or exhausted.
The indebtedness of the country, public and private, has absorbed
about 100 per cent of the present or prospective values of wealth, and
thus the lending process of putting money into circulation has come
to the end of a blind alley.
Generally speaking, there are no more securities left, outside of
governmental securities, and these are fast diminishing, that the
banks dare loan on, or the manufacturers dare borrow on, in order to
stimulate the return of prices.
So that, aside from any other question involved in this controversy,
what addresses itself to you generally, in spite of anything else you
may do and in spite of all your academic talk for further adjustment,
is how can you immediately, in order to save the situation, induct
money into circulation for the stimulation of basic industry and
stabilization of prices to a point equal to meet the overhead demanded
by the lending class and the bare necessities of government?
This bonus proposition affords the easiest, the quickest, and the
safest method of accomplishing what is desired in this matter.
Within 30 days, if the governing authorities are so disposed, they
may authorize the Secretary of the Treasury to issue to the soldiers
directly United States Treasury notes, good for the payment of all
debts public and private, and, of course noninterest bearing; and to
further provide that, as these notes come back into the Treasury in
the payment of taxes and any other obligations due this Nation, they
be immediately reissued for services rendered the Government.



I am sure all you gentlemen here, as well as the President of the
United States and I, as a public officer myself, would be only too glad
to take these Treasury notes as full payment for our salaries. There
is not an officeholder in the United States who would rather not take
money our Government issues directly to them under these circumstances than any other form of money that could possibly be given
to them by the banking system of this country.
Here you have immediately an issue of money that will be free and
unhampered. It will not come back into the banks to be canceled
and taken out of circulation like money on bond issues. It will
keep up its routine of serving the country in the matter of paying
debts and effecting exchanges.
A great deal has been said in this Congress, and a gesture was made
along that line in the establishment of the Farm Relief Board, for the
. stabilization of imperishable farm products purely as a means of
stimulating the prices of the country. The purpose intended, I
understand, by the framers of this legislation, was to induct money
into circulation by the arbitrary purchase of imperishable farm
products at a fixed price as a means of raising the prices of these
products primarily to create purchasing power and a market for the
sale of manufactured goods in the city.
The philosoplu of this movement was, after all, a means of stopping
deflation and fixing the price of imperishable farm products, as a basis
of stabilizing prices at a point where the interest, taxes and overhead
could be met and paid by the legitimate income of the Nation.
Thus, these gestures of Mr. Hoover and the so-called farm legislation missed the point because their execution, even if contemplated
in the enactment itself, did not accomplish the induction into business
and commercial life of any extra circulating medium.
It ought to be clear to the Members of Congress that there is no
relief in sight, and that these conditions will continue and, by force of
the pressure of the load on top, will not stop until American industry,
American Government, and American energy will have been so reduced and impaired that no man can tell what the outcome will be.
The people are now stunned. They know that something is radically
wrong. They see the savings of a lifetime vanishing away.
They see no hope for the farmer. They see no hope for the laborer.
They see no hope for the legitimate business man. And they see no
hope for government. The very foundation upon which this glorious
country was based is, too, fast crumbling. If this situation is not
rectified soon the wreck will be common, not only to those who have
caused it but to those who are the victims of it.
Therefore, it strikes me that there is absolutely no excuse whatever
or no successful alibi to be urged as an opposition to the payment of
these compensation certificates. Nothing but blind and stupid greed
will prevent it.
If Congress does not pass this bonus, so called, or if it does not pass
some stabilizing influence to some basic industry, such as agriculture,
then there will be many new faces in the next Congress of the United
States; and if these new faces do not immediately do what you are
now asked to do, and if it is not too late, no man can tell whether
there will another Congress to meet to work out this solution. This
is the accepted time. This is the hour. If the men who love their
country, who know their country, who know its system, who know the



history and have knowledge of its development, who know what the
matter is, can not see the handwriting OD the wall, then this kind
of a civilization is hopeless.
I appeal to you men to shake off your lethargy and shake off any
influences that may be upon you and address yourselves to the problem of the hour. 1 believe the granting of this bonus payment with a
Treasury issue as here indicated will immediately lead to the final and
complete solution of this distressing industrial problem. At least it
can not do any harm. The talk that it will undermine the credit of the
Nation is but idle vaporing. The credit of the Nation is already at
the end of its string, and ui>less something is done to strengthen
values again, there is no way compatible with our American set-up
to correct the situation. The credit of the Nation is fast fading away
by reason of the depressed values of everything, and when it gets to
the diminishing point nothing can save the Nation from total collapse.
If the credit of the Nation is to be sustained and maintained, then
you men must do something to at least stimulate the values of this
country back again to the point where the people will have some
values upon which to base the credit of the Nation.
Let me say right here, gentlemen, it was estimated in 1925 or 1926,
that the wealth of this country totaled something between $3,000,000,000 and $350,000,000,000.
It is acknowledged that our debt to-day, public and private, is
about $148,000,000,000. I want to ask any man if the deflation of
prices has not sunk and lowered the wealth of this country at least
conservatively $150,000,000,000.
In other words, we have loaned up to the limit of the value of the
wealth of this country, based upon the price of the dollar to-day. As
the Senator from Oklahoma well said, you have come to the end of
the blind alley, and you have no means, under your system, of
extending any more credit. You have no way of getting money out
into circulation. You are stopped dead in your tracks and industry
is languishing.
I come from a city, if you please, that is a cross-section of typical
American industrial and economic life. The greatest industry in the
city is the manufacture of automobiles. Automobiles as a means of
transportation have become a fixture, and so much of a fixture that
they are more permanent, even the railroads will agree, than the railroads themselves, as a means of transportation. The industrial life
of the city then is based upon one of the necessities of our economic
life, a great system of transportation. Yet, when I go back to my
home, I am not so sure that my next month's salary will be paid.
This city has developed typically as an American city. As I have
said, it represents a cross section of American industrial life, as we
understand it. It is absolutely on the flat of its back. Notwithstanding the tremendous effort to bring back, if you please, the automobile industry, I say to you, gentlemen, that it is not coming back
and it can not come back, because while thousands and hundreds of
thousands of people are shopping for automobiles and looking in the
windows, and looking these cars over, they have not the money with
which to buy them and there is no means of putting them into
So I say to you that Senator Thomas was absolutely correct when
he said to you that this effort to extend credit is futile. You have



loaned the farmer up to the point where he is in distress. You have
loaned up every form of industry until it is in distress. You have
deflated the prices of real estate until it has become almost altogether a frozen asset. I own some real estate and I know that real
estate to-day is not worth a dollar in the market, except potentially
with an expected rise in value. There is not any man who has real
estate to-day, whatever it may be or wherever it may be located,
that has any value in it compatible with the interest that he has to
pay on it, or that can get a sufficient income out of it to make it at
least a liquid form of transfer.
The great insurance companies, like a great many of the largest
industries of this country, are wavering, if you please—wavering for
the want of what? For want of something to sustain them, and
nothing but money can do it.
I appeal to you gentlemen that this is the one measure, above all,
that has been presented to this Congress which, if passed promptly
by your honorable body, will do justice to the American soldier and
bring substantial relief to the American people.
At the outbreak of the Civil War Lincoln did this very thing and
this saved the Union. The Union is again menaced by as deadly
and as destructive a foe. Is there a Lincoln in either party to again
save the Union? Your action on this measure will answer the
That is all I have to present, gentlemen.
The ACTING CHAIRMAN. We thank you for your appearance, Judge
Jeffries. The commitee will stand adjourned until 10 o'clock
to-morrow morning,
(Whereupon, at 12.30 o'clock p. m., the committee adjourned to
meet on Wednesday, April 13, 1932, at 10 o'clock a. m.)


Wahsington, D. C.
The committee met at 10 o'clock a. m., Hon. Charles R. Crisp
(acting chairman) presiding.
The ACTING CHAIRMAN. The committee will please come to order.
Mr. Patman, will you present your next witness?
Mr. PATMAN. Mr. Chairman, we would like to introduce at this
time Mr. Darold D. De Coe, commander in chief of the Veterans of
Foreign Wars of the United States.

The ACTING CHAIRMAN. Please give your name and the organization you represent for the record.
Mr. D E COE. Mr. Chairman and members of the committee, my
name is Darold D. De Coe. I am commander in chief of the Veterans of Foreign Wars of the United States.
My remarks will be very brief. I come before you as the commander in chief of the Veterans of Foreign Wars of the United States,
an organization that has consistently for the last four years had a
bill similar to this bill now being considered before Congress.
We represent hundreds of thousands of service men of the World
War. Our position is unquestioned. In my duties as commander in
chief, since last September, I have traveled from the Atlantic to the
Pacific coast and from the Canadian border to the Mexican border.
I have visited practically every State in the Union.
May I tell you, gentlemen, sincerely, that the rank and file of the
veterans of the World War—perhaps 98 per cent of them—are
behind this bill. These men are desirous of having Congress recognize
a very just cause.
They feel that the money that has been granted to them, evidenced by the adjusted-compensation certificates, in the act of 1924,
they are entitled to have without waiting for the period of time
named in the certificate.
In this connection, they feel that they should be given the same
consideration as was given the railroads and the war contractors
and munition manufacturers, and representatives of other industries
during the war. They received a bonus, if you please, following the
war, based on the loss that they claimed they suffered by reason of
the service rendered to their country.




The adjusted-service certificate, as you well know, was an adjustment on the wages that the soldiers received, representing the difference between the wage paid the lowest salaried civilian employee
and the wage paid to the average soldier, sailor, and marine, amounting to a dollar and a dollar and twenty-five cents per day. It is not
in any manner, shape or form, a bonus. It is just what the act calls
for, an adjusted-compensation certificate.
These various other firms were given adjustments following the
war. We have been compelled to wait until this late date. True,
we had a 50 per cent loan value given last year, but our original bill
last year was for the full face value of the certificates.
We are again asking the Congress to see the justness of our cause
and are asking Congress to pass H. R. 1, or a similar bill, in this session
of Congress.
The rank and file of the service men throughout the country along
with thousands and hundreds of thousands of other citizens are very,
very serious about this. I believe the gentleman who is reading the
paper now asked the question yesterday, What assurance have the
Members of Congress that this money, if given to the service men,
will be spent wisely?
I can only say that that can be answered by the facts and figures
given by one who I think may be taken as an authority. Following
the 50 per cent loan provision of last year, General Hines, Director
of the Veterans' Administration, procured for the President of the
United States an estimate of how the money was spent by the veterans
following that act of last February a year ago. His figures are as
follows: They were gathered by the regional offices of the Veterans'
Administration throughout the United States. Sixty-five per cent
of the money was spent for necessaries of life, the payment of doctors,
grocers, clothing, and other bills; 20 per cent was spent for investment
purposes, paying back rents, paying off mortgages, and like expenses;
8 per cent was spent for the purchase of automobiles, many of them
necessary in business, and other necessary commodities; out of the
100 per cent, 7 per cent was spent for purposes, which perhaps did not
provide benefits to the veteran. Those were the figures supplied to
the President by General Hines.
So, you see, gentlemen, as a class of men, only 7 out of every 100
probably will spend their money inadvisedly. That is a pretty fair
May I say to you in conclusion that the rank and file of the veteran
organizations—I speak now of the individual units of various organizations—have sent me hundreds, yea, thousands of resolutions which
they have passed indorsing H. R. 1, or a similar bill. It merely goes
to show that the rank and file of the veterans are behind this measure
100 per cent.
Congress has been very good to us in many ways. We are very
appreciative of what you gentlemen and your colleagues have done
for us. But we feel, in view of the fact that you are trying to do something to bring back an era of prosperity—at least, you tried in the
passage of the two billion dollar Reconstruction Finance Corporation;
you showed a desire to do something for the people of this country—
we are asking now that you give to this country the weapon to bring
back prosperity, by giving to the rank and file as represented by
3,866,000 veterans, something that will relieve their frozen assets



which are in the shape of their adjusted-service certificates and which
will, in effect, be the biggest and best pay day that this country has
seen in many, many months. I thank you, gentlemen, for your
The ACTING CHAIRMAN. We thank you for your appearance.
Mr. Patman, will you present your next witness?
Mr. PATMAN. Mr. Chairman, we have two witnesses from out of
town who have asked to be put on this morning and they only want
a few minutes each.
The ACTING CHAIRMAN. Under the rule of the committee, you
have the privilege of presenting whatever witnesses you choose.
Mr. PATMAN. I will present Mr. Howells, of Michigan, who organized a veterans7 association several years ago. He has been a
national official of the organization since that time.

The ACTING CHAIRMAN. May I say, before Mr. Howells begins,
that any witness who has appeared before the committee has the right
to revise his testimony and make such extensions to it as he sees fit.
Mr. HOWELLS. Mr. Chairman and gentlemen of the committee,
the veteran body, as I have found it, is appreciative of all that has
been done for their relief and the organization I represent is conscious
of the fact that all appropriations for such relief must originate within
the House of Representatives; therefore, as a veteran group, we look
to the House of Representatives for the answer to the question.
Where is the money coming from to pay the bonus? In the New York
Times, Mr. Hurley spoke of the country being at war, but this time
it was a war against depression. Gentlemen, somehow or other, the
Congress of the United States found a way to finance the war for
democracy during 1917 and 1918 and I am sure the same body will
not fail the country at this time. We have not lost faith and will
carry on regardless. However, there is but one question about the
payment of the so-called bonus at this time. It is just a yes-or-no
proposition and those of you who are with the idea will stay with it
and those opposed will likely stay opposed, but there is one thing to
take into consideration, and that is the veteran of to-day did not start
the war but he was successful in his operations for this country and
even though you may think at this time the veteran body is costing a
great amount, ask yourselves, gentlemen, what would the cost have
been had the veteran of to-day not been successful as the soldier in
1917 and 1918.
In the city of Detroit one of our assessment engineers checked up
a section of the city and found that there were 4,300 former service
men who had not paid their taxes because they had been out of work
for quite sometime. These men had built their homes when materials
were high and their taxes cost them around $200 per year as an
average. The city needs that tax and the payment of the bonus
now would save their homes and help the city to a great extent.
The service men's bureau, working in conjunction with the community fund, has given help to approximately 20,000 veterans in the
city of Detroit and Wayne County, Mich. The soldiers and sailors




relief has about used up their appropriation of $50,000 per annum
in helping the married veteran and during all this the veteran holds
a certificate on which he, no doubt, has a 50 per cent loan, for which
he is paying an exorbitant interest rate.
Gentlemen, my home city, the city of Detroit, Mich., will have
better than $27,000,000 put into circulation if the bonus is paid at
this time, and the public and the citizen are in need of it. The
veteran will pay his debts and buy with what he has left. He did
before and will do it again.
This bonus question was kept free from partisan politics a year
ago and for the good of the country I hope partisan politics will
not enter into the question at this time. We hear of the deflation,
the inflation and the reflation of the dollar, but the main issue is to
pay the bonus and put some real cash into circulation, and you,
gentlemen, of the committee, have the power to start the ball rolling
toward a new day of prosperity. Do not forget this veteran body
of to-day was the successful soldier of ;17 and '18.
I thank you.
The ACTING CHAIRMAN. We thank you for your appearance.

There are many reasons why the ex-service men should receive monetary compensation on their adjusted certificates by this Congress. One that stands out
in the minds of the ex-service man as well as many civilians is this. When the
boys returned from active service in the World War they found, in the majority
of cases, that their billets had been filled by civilians and that employers were
loath to dispense with empldyees who had been and were giving satisfactory
Many ex-service men were compelled to accept and seek work in fields of
endeavor foreign to their training and knowledge and so had a hard time getting
acclimated to new duties. As a consequence they failed to earn money in the
sums they had prior to serving their country.
This attitude of employers was unfair, really unjust and entailed unwarranted
suffering on individuals and families ordinarily accustomed to a decent percentage of the good things in life.
Their time of military service whether at the front, in cantonments or in any
branch of the military, took its toll of physical disability, nervous strain or just
plain inertia and many of these men who served their country were not as well
fitted to cope with the business world when they entered civilian ranks again as
they had been heretofore. They should be compensated for what they gave so
freely and whole-heartedly when the call to the colors was sounded at which time
there was no thought of monetary compensation for donning the khaki.
The results of wounds received, hardships suffered and diseases acquired has
put otherwise efficient workers in a variety of vocational fields at such a disadvantage that they are unable to cope with others on an equal footing and this
handicap has militated against them to such a degree that they can not compete
with fellow workers on the same basis.
The compensation will come to them sooner or later so why not anticipate pay
day by action of this session of Congress; the debt has been admitted by our
legislators and the Nation as a whole. The payment of this debt will help outfit
a needy and deserving body of men, many of whom only require the amount
they would receive in order to be placed at a point where they can rehabilitate to
the degree that they would be secure from poverty and charity) and on an equal
basis with those who have had the opportunity of making good.
Abraham Lincoln, the great emancipator, liberated the souls of millions of our
dark-skinned brothers out of love for any human in a state of servitude. Many
of our ex-service men are in the toils of physical and financial servitude. Men
who become masters of the world are in turn, slaves of penurya, a hellish plight
for those who have scaled the heights of service to the red, white, and blue.



Lincoln, were he alive to-day, would not let any thought of political aggrandizement or preferment; no, not even the thought of political oblivion swerve him a
moment from categorically demanding that our ex-service men be given what is
justly due them irrespective of what political henchmen or anyone else had to
say or did.

Mr. PATMAN. Mr. Chairman, the next witness is Mr. Fahey, representing the Army and Navy Union.

Mr. Chairman and gentlemen of the committee. At the outset
I want to say that I emphatically indorse what Father Coughlin said
yesterday in his very able and brilliant speech in support of the pending bill. I also indorse the remarks of Mr. DeCoe, national commander of the Veterans of Foreign Wars and the stand that the Veterans
of Foreign Wars have taken on this legislation.
I appear to-day representing the Army and Navy Union in the
capacity of chairman of the national legislative committee. The
Army and Navy Union is an organization of veterans of all wars,
comprising a membership of 386,000 veterans throughout the entire
United States. It is a national organization and its influence is not
local or sectional. It was first organized in 1888.
The organization of which I am National Legislative Chairman
also indorses the immediate payment of the adjusted compensation,
certificates at this time. One of the main issues involved in the
present bill is whether or not a reasonable expansion of currency is
justified at this time. There is no question but what an expansion
of currency, if there is sufficient gold reserve to sustain the value of
the American dollar, would be a stimulant to business, and there
is no question but what there is sufficient gold reserve in the Treasury
to justify the issuance of additional currency at this time.
The various witnesses appearing before the committee have clearly
shown that there is more than enough gold reserve to justify the
expansion of our currency to the extent required to pay the outstanding adjusted compensation certificates and still maintain the value of
the American dollar.
In October, 1929, the stock market collapsed and since that time
there has been a constant process of deflation, as a result of which the
value of the dollar has greatly changed. As a result of the collapse
of the stock market there followed a collapse of our credit structure,
which affected business, and which, with other circumstances, have
brought about the present unfortunate depression that we are undergoing. We have reached a time w;hen emergency measures are
necessary. The fact that emergency measures are necessary and that
this feeling is generally entertained is evidenced by the passage of the
emergency legislation passed during this session of the Congress, such
as the Reconstruction Fianance Corporation, the appropriation of
additional money for the Federal farm banks, and other legislation
which is under consideration by committees of the House and Senate
at the present time. Their purpose is to try and put new blood into
the economic life of America, and they all have, in one way or another,
the same purpose that the proponents of the pending measure have,
the elimination of fear from the minds of the American public and
the restoration of confidence therein.





I realize that there are many other witnesses to appear before the
committee. Therefore, I feel constrained to make my remarks as
brief as possible. My organization, and I, personally, favor the
pending legislation. It is our opinion that a resaonable expansion
of the currency is necessary. The Reconstruction Finance Corporation resulted as an expansion of credit, and it has accomplished
great results. However, of itself, that is not sufficient to bring about
the desired results. There must be additional and companion
legislation. A reasonable expansion of the currency, predicated upon
a sufficient gold reserve, which will sustain the value of the American
dollar, is the companion legislation necessary to put new blood into
our economic life.
Recently the Washington Post, one of the leading supporters of
the present administration, in one of its editorials, said: "If President Hoover and the Federal Reserve Board can halt this movement
(downward) and turn prices to an upward trend, they will perform the
greatest service that can be rendered to the American people in this
critical period." In another part of the editorial we find this statement: " I t is rumored that the banks intend to increase their purchase
of Government securities so that they will be in position to expand
the currency and ease the money situation. That is one of the most
encouraging signs in the whole economic spectrum."
And the editorial further says: "There is nothing unsound in
utilizing America's enormous gold supply to restore balance between
money value and commodity prices."
We, therefore, find that the first premise, the reasonable expansion
of currency, is supported by eminent authorities and by the testimony of eminent economists who have appeared before this committee.
The next question is "What is the best way to put this currency
into circulation and bring about the greatest amount of good?" The
expansion of currency is bound to come, and it is perfectly reasonable
and proper and will bring the greatest amount of good if it is utilized
to pay the Government's indebtedness to veterans of the World War.
It is not a gratuity, but the payment of a debt for the benefit of the
country. While this debt is technically payable in 1945, it is actually
payable to-day. If the World War veterans were to receive interest
from the time the debt was actually contracted, when their war service had ceased, the full amount would have been payable to-day.
Instead, the interest started in 1925.
Assuming, however, that you disagree with me and that you feel
the debt is due in 1945, and assuming that you feel that an expansion
of currency is necessary, what better way of putting this currency
into circulation would there be than to call in this debt of the Government at this time. New currency which will be issued in payment
of this debt will go to the rank and file or our citizens. It will go to
approximately 3,500,000 ex-service men in every walk of life, the
greater percentage of whom at the present time need this money
badjy. It will go to the average person and to the consumer. This
money will be used by the ex-service man for the purchase of necessaries of life and for the discharge of debts previously contracted by
them. This statement is completely supported by the investigation
of the Veterans' Bureau as to how the ex-service men used the money
that they received last year as a result of the act of Congress which
permitted loans up to 50 per cent of the value of their certificates.




The investigation shows that approximately 95 per cent of the money
received was used for proper purposes by veterans making the loans.
The veterans of the World War are now arriving at or around the
average age of 40 years. Most of them are married and have families.
This money will be used for purposes which will be for the best
interests of the veterans and of the country. It will go to the small
storekeeper, and, in turn, used by him in his business activities. It
will be used as a basis for additional credit, and credit is upon the
basis of $10 for every dollar of the national currency in existence and
circulation. This will create a feeling of confidence and will affect
millions of other citizens who are enveloped with a feeling of fear at
this time. It will be the stimulant which, with other measures
passed by Congress, will tend to defeat the war of depression that we
are engaged in at this time.
As the veterans of the World War were the means through which
the Government defeated our enemies during the World War and
emerged successfully from that war, so in this great crisis can the
veterans of the World War, by the payment of their adjusted-compensation certificates, be the medium through which we will emerge
victorious from this great conflict of depression that we are engaged
in at this time.
Mr. MCCORMACK. Are you a member of the Y. D. Post of the
American Legion?
Mr. FAHEY. Yes, sir.
Mr. MCCORMACK. I thought

it might interest you to know that
I received a telegram, which I want placed in the record, to the
effect that a meeting was held the night before last, and the post
unanimously went on record favoring the payment of the bonus.
Mr. FAHEY. I am glad to hear that.
The ACTING CHAIRMAN. Without objection, the telegram will be
made a part of the record.
(The telegram above referred to is as follows:)


Hotel Washington:
Very near hundred per cent meeting of Y. D. Post American Legion last
night, and said post went on record favoring payment of bonus. I was instructed
by post members at meeting to inform you of this action and also request that
you notify Congressman Connery and all other members from New England
of this action. Suggest that you wire Commander Robert Duncan of Y. D.
Post of this notification by me and your favorable opinion of same. Very
intense meeting and vote favoring payment of bonus was unanimous. Regards.

The Acting CHAIRMAN. We thank you for your appearance.
Mr. PATMAN. Mr. Chairman, at this time I desire to introduce
Mr. George W. Armstrong, of Fort Worth, Tex. He is the author of
many books on the money question. He owns a large number of
plantations in the South. He is a successful business man. He
organized and is the owner of the Texas Steel Co.



Mr. ARMSTRONG. Mr. Chairman and gentlemen of the committee,
I thank my ^Representative from Texas for introducing me as a
successful business man. I do not think I can quite measure up to
that standard.
It is true that I own a good many plantations in Mississippi, but
they are more of liabilities than assets.
I have, in fact, 23 of them with more than 100 tenants, and they
did not earn enough last year to pay the taxes. I had a loan on them
of $125,000, which I cut down to $30,000 and I can not find the money
to lift that loan. It is past due.
I noticed in the paper a few days ago that 30,000 homes in the
State of Mississippi were sold for taxes.
I am not appearing here as an economist or as a writer, although
I pretend to know something about the subject of political economy
and monetary science, if there is such a thing. But I am appearing
here on behalf of the small business man and the farmer, on behalf of
the debtor, on behalf of the people in this country who need relief
and who must have it, or the balance of them will go broke.
I assume that this committee and this Congress want to pay the
soldiers. No argument should be needed, because they rendered a
great service to the country and to civilization and to all countries,
and they received less compensation for it than anybody else.
You have recognized the debt, and since they need the money I
know you would like to pay it. Every right thinkifrg man would.
The question with you is whether or not you can afford to pay it,
whether or not this Government is in such financial condition that
you can pay that debt at this time.
Now, I want to discuss that subject, I want to discuss it because
when you strip this whole issue of all the camouflage and misrepresentation and subterfuge, it gets down to the one question, whether
or not we shall cheapen the dollar, whether or not we shall increase
prices and wages, and whether it is desirable to do that. It ought
not to be necessary to demonstrate the fact that we can find the
That is the issue.
Gentlemen, I regret that I have not prepared a written speech. I
really came here in a hurry, thinking perhaps that your hearings
would soon be over. So I have not prepared a speech, nor have I
the advantage of knowing what has gone before.
I hope I will be able to present this matter to you from a different
angle than that of any of the previous speakers.
I am sure that this committee, or some of you at least, do not
know how little money there is in circulation. The Treasury statements are not correct. They can not be correct. You probably do
not know how small a foundation there is in money for bank credit.
I am not going to read you the comptroller's report. I have it
here and I will cite it to you. The comptroller's report for the
year ending June 30, 1931, shows $884,000,000 in the vaults of the
22,000 banks in the United States. It shows the deposits of those
banks to be $56,000,000,000.
You have, then, as a basis of those deposits IK per cent of cash.
That represents all the money that is in circulation, except the amount



in the tills and pockets of the people and the amount of the reserve
in excess of the fixed reserve.
The Federal reserve bank statements do not show what that is,
but it is not very much.
There are certain fixed reserves as provided by the Federal reserve
act that the banks must maintain—that they can not check against,
except with the permission of the Federal Reserve Board, and when
they do that they must stop lending; they must practically go out of
business. That is not money in circulation. The money in circulation, it was estimated yesterday by Senator Thomas, is $2,500,000,000.
I can not find that much money. Of course, his guess is as good
as mine. But if you take the less than $1,000,000,000 that is in the
banks, there are perhaps two or three hundred million in the tills and
pockets of the people; perhaps two or three hundred million dollars
or more, or less, excess reserves that are subject to check. But there
can not be more than ten or fifteen dollars per capita in circulation.
His estimate is twenty. The Treasury estimate is $4,800,000,000,
or 38.86 per cent. It is obviously incorrect.
The menace to the banks is that they have not the money that will
justify them in making loans. It is for that reason that I can not
borrow money. I am paying for my manufacturing business to-day
18 per cent for money, because I can not get it from the banks,
because the banks will not let me have it on any security. They are
mere collecting agencies and have been for more than a year. They
are scared and they have a right to be scared. I would be scared and
you would be scared if you were in their shoes. They are not going
to loan until their fears are relieved.
If all the banks to-day were called upon to pay their deposits, they
could only pay one and a half per cent of their deposits. Now, prior
to the Federal reserve act the banks in what was called the central
reserve cities, had to maintain cash on deposit or in approved reserve
banks subject to check, that was the equivalent of cash, of 25 per
cent. The banks in reserve cities had to maintain 15 per cent and
as I recall it, the small country banks had to maintain 10 per cent.
But now the whole batch of them, central reserve, reserve, and so
forth, have only IK per cent.
Now, the only way they can loan money—they have not got it to
loan—is upon credit, by borrowing at the Federal reserve banks; and
they are not going to borrow under these conditions. There is not
any way to relieve the fears of these banks and to get them to loaning,
except by putting money in circulation.
What inflation or expansion or as my friend Mr. Patman calls it,
reflation, this bill will create, I do not know, because tliat will
depend upon the amount of money that is now in circulation. That
is, it will depend upon the percentage that this sum of $2,200,000,000
bears to the amount in circulation.
If it is what the Treasury statement says it is, it will increase it
47 per cent. If it is what Senator Thomas estimates, it will increase
it 100 per cent. If it is according to my estimate, it will increase
prices and wages approximately 300 per cent.
I am going to discuss it on the basis that it will increase prices and
wages approximately 300 per cent, because that is what I think it
will do. But, gentlemen, you have got to have that much increase to
put this countrv in the position in which it was in 1920. That is



practically the price and wage level of 1920. That is practically
the value of the dollar when our bonds were issued, these Government bonds that now amount to $17,000,000,000. It will take more
services, more products now to pay those bonds, almost twice as
much, as it would have required when they were $25,000,000,000.
In other words, we have not paid anything on our bonds. The
debt is heavier now than it was in the beginning.
The man who collects those bonds now gets $1 that is worth approximately three times as much as he paid for the bond. Now, that is not
honest. But if it was fair and honest, the taxpayer can not pay those
bonds, the cities can not pay their bonds, the farmers can not pay
their debts with the present .dollar.
This country is not bankrupt. We have the^same resources that we
had in 1920, the same that we had in 1929, the same banks, with more
gold, a great deal more; the same railroads, the same value inherently.
But our values are less because we have made the dollar more valuable
as measured by dollars in 1920. Measured by that dollar, we had
$500,000,000,000 of aggregate wealth in 1920. That was the aggregate of our wealth as measured in dollars in 1920. In 1929 the estimate was $350,000,000,000. The same wealth, but the dollar had
gone up. At this time, though I have not seen an estimate, it could
not exceed $150,000,000,000 of aggregate wealth, because the dollar
has appreciated since 1929 approximately 50 per cent. So that the
value of property has depreciated accordingly.
I believe that it is estimated that our debts amount to $175,000,000,000. If so, the country is insolvent. The aggregate debts
exceed the value of the property.
Now, there is no way in which you can restore that solvency except
by cheapening the dollar. People can not pay interest on this
enormous indebtedness with 6-cent cotton and 30-cent wheat and
with products at their present value. They can not pay their taxes.
I am here to tell this committee that there is going to be a universal
default, the cities will default in their bonds, the road districts and
the counties, as well as the farmers, because they can not collect
taxes out of bankrupt taxpayers. You can not squeeze blood out of
a turnip. It is not there.
This Congress should declare a moratorium on all indebtedness,
unless you cheapen the dollar. You should cancel all mortgages and
bonded indebtedness and give us all a new start unless you deflate
the dollar and put us in a position where we can pay our debts.
Gentlemen, I do not want to take over my 30 minutes. Is the
chairman keeping time on me?
Mr. RAINEY (presiding). I did not know that your time was limited
to 30 minutes. I have not kept track of it.
Mr. ARMSTRONG. I think I have made plain, gentlemen, the point
that if our debts have trebled in amount, we must cheapen the dollar
accordingly. We can not pay debts that were incurred when the
dollar was cheap with dollars of present value. It is absolutely
I simply want to call your attention to one other thing. I am at
sea about this matter, because in order to present this subject, I
should have more time and I do not know how much time I have.
Mr. RAINEY. GO right ahead. We can give you about 10 minutes
more, at any rate.



Mr. ARMSTRONG. I want to call your attention to a statement of
Mr. Mitchel in this morning's paper. Mr. Mitchel is the president
of the National City Bank. He speaks of the dangers of inflation.
It is not the dangers of inflation that are confronting this country,
gentlemen; it is the dangers of deflation that we have. There is a
great deal more danger in that than Mr. Mitchel perhaps realizes.
You probably know more or less about it, you will hear more or
less about it from home, if you do not know it now. You will find
out about it then. There are dangers of deflation that must be
relieved. This bill is the best method that has been proposed, the
only one that is pending before Congress with any prospect of passage
that will relieve that situation.
But Mr. Mitchel says in his statement this morning that our gold
reserve is now about 70 per cent; that if you place 40 per cent gold
behind these notes it will reduce that reserve to about 48 per cent.
I want to call your attention to that statement, because that represents the point of view of the banker. It represents, in fact, the real
objection to this bill. Now, I have the bank statement published
last Friday
Mr. RAINEY. HOW much did you say—70 per cent?
Mr. ARMSTRONG. Seventy per cent. But that 70 per cent is 70
per cent of the deposits and notes combined. I mean, they carry
the percentage for both notes and deposits. The minimum requirement for notes is 40 per cent. The minimum requirement for deposits
in the Federal reserve banks is 35 per cent. They take the aggregate
of all notes and of all deposits and they say that the gold reserve for
both deposits and notes is 70 per cent.
But the gold reserve for deposits, gentlemen, is not used—in fact,
that is true of both notes and deposits. I had a letter from Governor Harding several years ago when he was governor of the Federal
reserve bank, in which he stated to me that the redemption of Fedreal reserve bank notes in gold was so negligible that no record
was kept of it. The redemption of greenbacks in gold, we have a
record of that, has been one-eighth of 1 per cent. But the 40 per cent
gold reserve is excessive, admittedly so by Senator Aldrich, the chairman of the Monetary Commission in his report to Congress. The
Aldrich bill practically provided for the same reserves. He said that
the high reserves were placed behind notes and deposits, for the
purpose of preventing inflation, as he called it.
It was designed, not for safety, but designed to prevent inflation.
Whatever you may say about the notes—and I am not here to
discuss any theory of money with you—you must admit that 35 per
cent gold for these bank reserves is wholly unnecessary, because the
banks can not check on them. They have got to maintain them.
Why have a 35 per cent gold reserve for deposits that the fellow can
not draw out?
Mr. HILL. In what form are those reserve deposits now, in cash or
in credit?
Mr. ARMSTRONG. They can make them either way. Now, you put
behind that reserve that can not be drawn out 35 per cent of gold.
The reserve is hoarded money, because it is not available, not subject
to check. It can not be used in the channels of trade, except with the
consent of the Federal Reserve Board, and the bank must then stop



Now, gentlemen, we have had 10,000 bank failures in the last 10
years, in round figures. When the bank fails then, of course, this
reserve is used to pay its obligations. There has not been $1 of
gold that has been used to pay a single depositor in a single one of
these failed banks. This 35 per cent gold that is behind those deposits
is dead, inert, and of no use whatever to the country, no protection to
When the bank fails they pay these reserves in Federal reserve
bank notes, and not in gold. The gold is hoarded and is kept there.
So that if you should reduce the reserve to 40 per cent by the use of
this gold for the Patman note or some other form of note, you have
still a reserve—of approximately two for one.
You appointed a committee yesterday to iron out the differences
between the Patman and Thomas bills. It is my understanding that
as a result of that the suggestion has at least been made, and perhaps
an amendment drawn sponsored by Senator Owen, calling for bonds
to secure these notes; 4 per cent bonds to the extent of 60 per cent
and gold to the extent of 40 per cent.
Senator Owen states, and it is true—that the Government will hold
its own bonds as long as these notes are out. Therefore, the rate of
interest makes no difference, because the Government will get its own
interest. It is the holder of the bonds as security for the notes.
He suggested a 4 per cent bond so that there will be no question
about the ability under normal conditions to sell these bonds and this
additional currency will bring about normal conditions.
It will restore confidence in the banks, it will put money throughout the entire land because these soldiers are all over the country.
There is no other way you can get money in general circulation as
quickly and as thoroughly and as completely as you can through this
Gentlemen, I am here to say— I do not want to say it in a way that
tnight prejudice this bill—that you have created in the Federal reserve
system, the greatest hoarding device that has ever been created or
known in history.
We have to-day, according to the Treasury, nine billions of money.
Our stock of money is nine billions. Admittedly, according to that
statement, half or approximately half of it is hoarded either in the
Federal reserve system or in the Treasury. They claim that
$4,800,000,000 is in circulation, but it can not be. You can not find
it. It is not in the banks. The people have not got it in their pockets,
so it is not in circulation. It is absolutely impossible.
That is the situation that ought to be inquired into. You can
find out about it. I can not. You may know where it is, some of
you, but I do not. But I do know it is not in circulation, and I do
know we have not a sufficient foundation for credit by the banks
and that the country is suffering from the lack of money.
You have recognized that. The President has recognized it in his
antihoarding campaign. The irony of it, gentlemen, is, that they
say that they uncovered $201,000,000 and yet during the very same
time the Federal reserve system canceled $195,000,000 of those notes.
So that the net result of the antihoarding campaign is $6,000,000,
with all the hullabaloo that went along with it.
You have done nothing, gentlemen, that will relieve the situation.
The Glass-Steagall bill is a dead letter. No five banks are going to



get together to borrow money. None of them want to borrow it if
they can help themselves, and particularly to loan it to somebody else,
and particularly when people are distrustful. Certainly no five of
them are going to band together to borrow it, because every one of
them thinks he is better than any of the others, and that he can add
more to that paper than anybody else. That is human nature, you
know. No money has been issued as the result of it, and you have
impounded $800,000,000 more of gold; you have hoarded it, gentlemen—I say it respectfully, but it is nevertheless the truth—you have
hoarded $800,000,000 more behind the Glass-Steagall bill, which
ought to be repealed. It never will be used. That money is withdrawn from circulation. But if you will take that $800,000,000 and
put it behind this so-called soldiers' bonus, this $2,200,000,000, you
will have some degree of expansion or reflation. I can not tell you
what it will be, because I do not know; but there will be some. How
long it will take the Federal reserve system to get this money into
its vaults I do not know; but it will start things off. It will be some
help. The less reflation, the less help; the more reflation, the more
If you can restore the prices of 1920 you will bring prosperity to
this country. The bankers, of course, call that inflation, but it is
not. It is justice to the man who borrowed money, who owes it,
and who can not pay it. And, gentlemen, you can only restore
values by restoring the volume of money. No economist will deny
that proposition; that the value of products, all products, the value
of service, the general index of prices, as they call it—the price and
wage level is another term used for it—depends wholly upon the
volume of money in circulation. Because money is the basis of
credit. Values depend more on credit than they do on money. But
you have got to have sufficient money for your credit. When you
undermine the money, you are undermining the very mudsills of
credit, the mudsills of prosperity; and as you contract that base,
you contract the credit accordingly, and you contract values accordingly. It is like an inverted pyramid. Your money is at the bottom;
your credit is on that, and your value is on credit, and when you cut
the bottom a little bit you cut the top a great deal.
I thank you.
Mr. RAINEY. Mr. Armstrong, you are an economist. You have
written some books, have you, on economic subjects?
Mr. ARMSTRONG. I have written several; yes, sir.
Mr. RAINEY. Can you give us the titles of some of them?
Mr. ARMSTRONG. Yes, sir. I have written the Crime of 1920; the
Iniquitous Dawes Scheme, under a nom de plume—and I may say
that that was republished in Germany and France and given wide
circulation. I have written two volumes of Truth; A State Currency
System; To Hell with Wall Street; and the Calamity of 1930, its
Cause and the Remedy. These are very recent books.
I understand the Federal reserve system, I think, and know
something about the money subject.
Mr. RAINEY. Let me ask you some questions. What are the
elements which go to make up national wealth?



Mr. ARMSTRONG. The elements that go to make up national
wealth, of course, are primarily your natural resources, your man
Mr. RAINEY. Your natural resources, such as mines, developed
Mr. ARMSTRONG. And oil.
Mr. RAINEY. And oil.
Mr. ARMSTRONG. And the

wealth of your soil, and the virility and
the earning capacity of your people, plus the equipment for developing, transporting, and marketing your natural resources. Those are
the foundations.
Mr. RAINEY. Those make up a total, now, of how much national
wealth, in your estimation?
Mr. ARMSTRONG. We have the same national wealth as we had in
1920, and more
Mr. RAINEY. National wealth depends upon the use that is made
of these natural resources?
Mr. ARMSTRONG. Absolutely; wholly so.
Mr. RAINEY. Mines are an important part of national wealth?
Mr. RAINEY. And if




you are not using the product of the mines,
then your income from that source of national wealth fails, does it not?
Mr. ARMSTRONG. YOU have got the potential wealth, but you are
not using it.
Mr. RAINEY. If half of the mines are idle, then your income from
that source of wealth has disappeared?
Mr. RAINEY. Why are half of the mines idle?
Mr. ARMSTRONG. Let me make this statement, and it will explain
the whole philosophy of it.
Money is demand. Of course, man and money together are
demand; but one man with $10 in his pocket gives more demand
than a thousand men with $1. You have got to have the dollars
and the men together, and we have not got the demand.
Mr. RAINEY. Let us get back to mines. The reason the mines are
idle is that there is no sale for their coal?
Mr. ARMSTRONG. That is it. You have not got the demand. '
Mr. RAINEY. YOU have not got the demand. Now, what is the
reason farm products are selling so low?
Mr. ARMSTRONG. For the same reason.
Mr. RAINEY. People eat just as much as they did?
Mr. ARMSTRONG. NO, sir; they do not. They are not eating as
much. They would like to eat as much. They are wearing their old
Mr. RAINEY. IS there not a tremendous overproduction of farm
products at the present time and a falling off in foreign markets?
Mr. ARMSTRONG. It is underconsumption and not overproduction.
Mr. RAINEY. If we could export successfully what we have been
exporting heretofore, would not that tend to bring back the value of
farm products?
Mr. ARMSTRONG. Mr. Chairman, that brings up another thing that
I believe you will concede is true. A country with a cheap currency
can produce more cheaply than a country with high or dear money.
Now, let us say that Great Britain's money is worth approximately
two-thirds the value of ours; approximately two-thirds of its former



gold value. When we sell to Great Britain/the British can not buy
our products in British money. They must pay American money
for them. Now, there is a difference of 33}i per cent between American money and British money. Now, if our products were on a
parity with Great Britain, we would receive 33% per cent more for
our product than we do receive. You can not make a tariff wall
that is high enough—scarcely high enough to protect this difference
in currency values.
Mr. RAINEY. SO you think that the tariff walls built up against
our farm products do not cut any figure at all?
Mr. ARMSTRONG. NO, sir; I do not.
Mr. RAINEY. These high tariffs abroad?
Mr. ARMSTRONG. AS a rule we have not

got a high tariff, Mr.
Chairman. I do not know whether you are a Democrat or a Republican. I am a protectionist Democrat, I might say. But you have
not a high tariff except upon a few products.
Mr. RAINEY. I am talking about foreign tariffs which have been
erected against us. Don't you think that they keep our goods out
of European countries?
Mr. ARMSTRONG. TO some extent, I have no doubt they will.
Mr. RAINEY. DO you think we can overcome that by inflating the
Mr. ARMSTRONG. If you put our currency on a parity with that of
the leading commercial countries of the world, you put the American
manufacturer and the American farmer on an equality.
Mr. RAINEY. The difference is 3 per cent, economists figure, on
account of the fact that 16 countries have gone off the gold standard.
A difference of 3 per cent in the tariff would equalize that situation.
Mr. ARMSTRONG. Well, I do not know.
Mr. RAINEY. NOW, foreign tariffs are as high as ours, and ours are
55 per cent. When you take 3 per cent off, you have still got over
50 per cent, probably. Do you think that increasing the money a
little bit more would help us to get over those tariff walls?
Mr. ARMSTRONG. Absolutely.
Mr. RAINEY. YOU think it would?
Mr. ARMSTRONG. Not increasing the value of money, but decreas,ing it; increasing the value of prices and wages.
Mr. Chairman, India is a producer of cotton. I come from a cotton
country. Now, assume that the Indian money is on a parity with
Great Britain; and I am unable to say whether it is or not, but assume
that it is. The cotton farmer of India will receive 33% per cent more
for his product than the cotton farmer of America, because the British
buyer has got to pay that 33 K per cent, or somebody has, to represent
the difference in the values of these two moneys. He has got to
exchange his cheap money into our dear money at a loss of 33){ per
cent that either the producer in America or the consumer in Great
Britain must sustain. Well, he is not going to sustain that if he can
buy those goods from India or buy manufactured goods from some
other country.
Mr. RAINEY. Would you call 1929 a prosperous year?
Mr. ARMSTRONG. Fairly so.
Mr. RAINEY. We had less money in circulation in 1929 than we
have now.




Mr. ARMSTKONG. Mr. Chairman, I have not made any estimate
of that.
Mr. RAINEY. That is true. There is no doubt about that.
Mr. ARMSTRONG. I do not know; I could not say.
Mr. RAINEY. If that is true—and all economists agree that it is
true—how can we restore 1929 prosperity by putting more money
in circulation, when they had less in circulation in 1929 than they
have now?
Mr. ARMSTRONG. Mr. Chairman, if your hypothesis is true, that
conclusion would seem to follow.
Mr. RAINEY. Yes; I think so.
Mr. ARMSTRONG. But I undertake to say that no man can tell
you to-day, with any degree of certainty, the amount of money in
circulation, either now or in 1929. Money is not the whole story.
You have got to have credit. It is money #,nd credit in circulation;
but money is the foundation for credit.
Mr. RAINEY. I think you have reached the point now that I want
to bring out.
Mr. ARMSTRONG. Yes. Money is the basis for credit.
JMr. RAINEY. This $2,000,000,000 inflation that you are talking
about: If that money gets out, it ultimately goes into the banks,
does it not?
Mr. ARMSTRONG. Yes, sir.
Mr. RAINEY. At the present

time the Chicago & North Western
Railway Co. has its storage tracks in Chicago full of cars—5 or 6 miles
of empty freight cars. Now, the fact that the Chicago & North
Western Railway Co., has that many cars on its storage tracks,
unused, indicates that the Chicago & North Western Railway Co., is
not doing much business, does it not?
Mr. ARMSTRONG. Yes, sir.
Mr. RAINEY. NOW, could

you make the Northwestern Road do
more business by furnishing it with more empty cars to put on its

Mr. RAINEY. If you put $2,000,000,000 more money in the banks—
and you say that is where it will go—how do you get it out?
Mr. ARMSTRONG. Mr. Chairman, if you put $2,000,000,000 in the*
banks, the banks will then have enough money to justify them in
extending credit.
Mr. RAINEY. For what reason is credit extended?
Mr. ARMSTRONG. Credit is extended, of course, for a great many
reasons; but commercial credit is extended for the movement of products.
Mr. RAINEY. It is extended for the purpose of building new buildings; for the purpose of building new factories?
Mr. ARMSTRONG. Investment credit is; yes, sir.
Mr. RAINEY. Investment credit. It is extended for the purpose of
starting more factories in operation than are now in operation?


Mr. RAINEY. NOW, no matter how much money there is in the
banks, if there is not a demand for the goods produced by the factories, and there is not a demand for new buildings, nobody is going
to borrow it, is he?



Mr. ARMSTRONG. Mr. Chairman, as you increase the volume of
money in circulation, you increase the demand. You have got to
understand that principle, or you and I can not focus.
Mr. RAINEY. YOU just admitted that we could not help the business
of the Northwestern Road by furnishing it with more empty cars.
Mr. RAINEY. HOW can you restore any prosperity
Mr. ARMSTRONG. But whenever you furnish the

in that way?
farmers of that
section sufficient money, and when you provide a market, when you
furnish the consuming demand, the farmers will meet that demand,
and that increases production; and when you get more production
than this factory can supply, another factory will build up.
Mr. RAINEY. Let us take the question of wheat. At the present
time the Farm Board has stored in elevators nearly as much wheat
as we ever exported before we had these high tariff walls in foreign
countries. We export, when permitted by foreign tariffs, one-fourth
of our production. That keeps down our supply at home. We produce about 800,000,000 bushels and export 200,000,000 bushels.
Now, we have stored up in elevators by the Farm Board nearly one
year's surplus, and another year's surplus of 200,000,000 bushels is
approaching. We will soon have three hundred and fifty or four
hundred million bushels of wheat stored up, with no market abroad
for it. That is what we have been selling abroad. Does not that
hang like the sword of Damocles over the farmer's head?
Mr. ARMSTRONG. It does; and it is going to hang that way.
Mr. RAINEY. It is going to hang that way until we cart export it,
is it not?
Mr. ARMSTRONG. And you are going to have to get your money
on a parity with other countries before you do that.
But, if you will pardon me, these gentlemen have told you that
they have a number of witnesses, and I feel that I have taken too
much time.
Mr. RAINEY. But I do not feel that you have, and I want to ask
you some more questions.
Mr. ARMSTONG. But I feel that I am "fudging" or trespassing on
the time which they have been kind enough to allow me.
Mr. RAINEY. YOU are not "fudging". It is the committee now
that is "fudging". We are trying to get some facts from you, as an
Mr. ARMSTRONG. All right.
Mr. RAINEY. We are going to have three hundred and fifty or four
hundred million bushels of wheat in our storage elevators which
heretofore we have exported. That is two years'. ordinary export
supply. How are we going to bring back the price of wheat unless we
can export it?
Mr. ARMSTRONG. Mr. Chairman, I want to make this statement:
Individual prices of individual products are not wholly dependent
upon the volume of money in circulation. They are dependent upon
supply and demand. But the general index composing some 500
different items of products—the general index of prices—will increase
in proportion to the volume of money in circulation and decrease in
the same proportion. As you increase the supply of money, you
increase credit, and you increase prices and wages. That is fundamental. That is elementary. No reputable economist will deny that



proposition—that, generally speaking, money is expressed by the price
and wage level, and the price and wage level is expressed by the volume
of money in circulation—money and credit.
Mr. KAINEY. We recently distributed to the soldiers, in order to
relieve a depression—that was the argument; and, of course, they
wanted the money, and that was the other argument, and that was
the conclusive argument with us—half of their bonus. We paid
them—those who wanted it—over a billion dollars. Where did that
money go?
Mr. ARMSTRONG. In the first place, you did not create any additional money. You simply used money that you already had. But,
in the second place, Mr. Chairman—and I should have made this
plain in my original statement—it is imperative, in order for this to
be of any permanent advantage to the people, that you make adequate
provision against hoarding this money. It will be collected and
gathered in. If you should go on a silver basis, the silver would
soon be gathered into the vaults of the Federal reserve system.
Mr. RAINEY. The soldiers got that money, did they not—$1,000,000,000.
Mr. ARMSTRONG. Yes, sir.
Mr. RAINEY. What did they do with it?
Mr. ARMSTRONG. I heard the gentleman

state that a great part of
it was used for necessaries, and I am sure it was.
Mr. RAINEY. Yes; I am sure it was, too.
Mr. ARMSTRONG. And it went to the merchants, and the merchants
put it in t&e bank, the bank sent it to the Federal reserve bank, and
the Federal reserve bank hoarded it.
Mr. RAINEY. It ultimately got into the banks, did it not?

Mr. RAINEY. NOW, the banks can get it out of the Federal reserve
bank by simply rediscounting their paper, can they not?
Mr. ARMSTRONG. Well, of course, with the consent of the Federal
Reserve Board. I presume the chairman understands now that these
banks are no longer decentralized. They are under the management
now of the Federal Reserve Board, and the Federal Reserve Board
controls the volume of money in circulation by selling and buying
Mr. RAINEY. Any bank now can take its rediscountable paper, if
there is any demand on it for loans, to the Federal reserve system and
get the money and loan it, can it not?
Mr. ARMSTRONG. If it is eligible paper. Now, when the bank goes
to the Federal reserve system to borrow money—and that is what they
would like to do—it can only borrow it for 15 days' time, and they
must put up as collateral securities that are eligible for discount in the
first place.
Mr. RAINEY. YOU are not opposed to that, are you?
Mr. ARMSTRONG. Oh, I am not opposed to it. For some reason—
I could not tell you why—the banks are not borrowing. I used to be
in the banking business many years ago.
Mr. RAINEY. At any rate, we can start with this premise, which
we can both agree upon. The billion dollars that we paid to the
soldiers two years ago went into the banks?




Mr. RAINEY. NOW, if we pay them two billion more, that will go
into the banks?
Mr. ARMSTRONG. Yes, sir.
Mr. RAINEY. And the billion

that we put into the banks, under
your theory, did not help business any; business has been getting
worse ever since?
Mr. ARMSTRONG. Yes; that is true.
Mr. RAINEY. And the two billion that we put into the banks now,
under your theory, will not circulate any more than the empty cars
on the Chicago & North Western tracks?
Mr. ARMSTRONG. The two billion you put in now will be new
Mr. RAINEY. What is the difference between new money and old
Mr. ARMSTRONG. New money adds to the volume of money, and
old money does not.
Mr. RAINEY. If we had a smaller volume of money in 1929, a
prosperous year, than we have now, and you want to restore the
prices of 1929, how will adding $2,000,000,000 to the deposits in
the banks, and the banks depositing it in the Federal reserve system,
bring back the good times of 1929? I am asking this question because you are an economist, and because I want to help bring those
good times back. How are we going to do it by simply adding more
money to the stock of money in existence, when there is no demand
for the money that we already have, and we have more now than we
had in 1929?
Mr. ARMSTRONG. Mr. Chairman, it is not the demand. The demand is there. I would like to borrow money from the banks, and
everybody would; but the banks will not loan.
Mr. RAINEY. If your Mississippi plantations were paying, then
you could borrow money on those plantations, could you not?
Mr. ARMSTRONG. There is not an insurance company or a loan
agency or a bank in the United States that will make a loan on real
estate now, in my country. I do not know what they will do up
here. But you can not borrow a dollar on real estate now. I have
got approximately 30,000 acres down there.
Mr. RAINEY. If you put more money in the Federal reserve system,
would that make it easier for you to borrow money on your farms?
Mr. ARMSTRONG. Absolutely, Mr. Chairman. Let me illustrate it
in this way. Of course, this is not going to do that, but it will illustrate
what you are talking about.
Suppose you put enough money in circulation now to put in the
vaults of all the banks ten times as much money as they have in their
vaults now. Instead of having $800,000, suppose they had $8,000,000
in their vaults—ten times as much. They would not have to go to
the Federal reserve system to borrow. They would loan, because they
would feel safe in doing it. They do not loan, either because they
have not got the credit or they do not want to use the credit; they
are afraid to use the credit. But I do know that the fact is that they
will not loan, and the banking system has broken down.
Mr. RAINEY. They will not loan because they are afraid they will
not get their money back; is not that it?
Mr. ARMSTRONG. Well, who can pay it back, with dollars as they



Mr. RAINEY. That is it; and until they have, some assurance that
their money will be returned, they will not loan, no matter how much
they have got, will they?
Mr. ARMSTRONG. If this credit situation was relieved in the way
that this will tend ,to relieve it—I do not mean to say that this Patman bill will restore prices and wages to the extent that they should
be restored, or that it will be of permanent benefit, but I do mean to
say that it will produce a certain amount of expansion. I think that
is the chief objection to it. How long it will last depends upon how
long it will be permitted to remain in circulation; and I do know that it
will tend to revive business; it will tend to restore credit; and the
extent of that depends wholly upon, first, how much money now is
in circulation; second, how long this is permitted to remain in circulation.
Mr. RAINEY. Let me call your attention to the experience of other
nations with inflation. If $2,000;000,000 will bring up the prices and
bring about a resumption of business, $4,000,000,000 would help still
more, would it not?
Mr. ARMSTRONG. Absolutely.
Mr. RAINEY. Twice as much?
Mr. ARMSTRONG. Absolutely.
Mr. RAINEY. Then we could multiply that by 2, and, according
to your theory, $8,000,000,000 would do still more?
Mr. ARMSTRONG. Absolutely.
Mr. RAINEY. That is what they did in Germany, until finally a
million dollars in their currency only bought one small loaf of bread.
Mr. ARMSTRONG. Mr. Chairman, I know you are not going to admit that we can not control ourselves; that this Congress can not
peg money at whatever, value it wants to pjeg it. It is in your power.
Of course, this Congress can produce the inflation that they have in
Germany; but I have too much confidence in the good sense of this
Congress and of the people of America to think for a moment that
they want to create that sort of inflation. But the restoration of the
1920 values is not inflation. It is restoring values as of the date
when these enormous debts were created, and it is allowing the debtor
to pay his debt in the dollar that has the same value that it had then.
It is an oppression to the debtor to make that debtor pay his debts
in dollars that have three times the value that they did when the
money was loaned.
Mr. RAINEY. Germany was compelled to repudiate her money
which she had issued in such large quantities.
Mr. ARMSTRONG. It petered out to nothing. They got to issuing
it in trillions.
Mr. RAINEY. Yes; and it came to the point where it was not worth
Mr. ARMSTRONG. But let me call your attention to this: As bad as
that situation was in Germany, it was better than the present situation; because the laborer was employed; they were building factories,
and the country was immensely prosperous, and continued prosperous
until they deflated and established the gold standard under the
Dawes plan.
Mr. RAINEY. NOW we are trying to balance the Budget at the present time. Probably you have heard of that; we have. We have a
deficit next year of over a billion dollars. Would you suggest that



we balance that Budget by printing some more money and circulating it?
Mr. ARMSTRONG. I think you ought to balance it by printing some
more; yes—if you want my candid opinion about it.
Mr. RAINEY. And, in addition to that, issue this two billion?
Mr. ARMSTRONG. Yes. But if you had done that, Mr. Chairman,
that money would have been put in circulation around Washington
and New York, and where your navy yards are, and your army camps.
It would not have gone into the general circulation that the money
that you issue under this bill would; because that reaches every section of the country. It is the only bill that will do that.
Mr. RAINEY. DO you know where over half of our public expenditure goes now?
Mr. ARMSTRONG. For interest and expenses resulting from the war.
Mr. RAINEY. Nearly half of it goes now to the veterans of our
wars, in maintaining our hospitals, and all that sort of thing.
Mr. RAINEY. If we devoted

it all to that purpose, then we would
have more prosperity, would we not, according to your theory?
Mr. ARMSTRONG. Mr. Chairman, if this was a matter of paying
the veterans and levying a tax to pay them, and impoverishing the
country, I would be opposed to it.
Mr. RAINEY. Here are the facts, Mr. Armstrong: One-fourth of it
goes to the veterans, and one-fourth for personal services all over the
country. That makes one-half. We could just double that expenditure on the part of the Government and restore prosperity, could we
not, according to your theory?
Mr. ARMSTRONG. I think that the price and wage level of 1920
ought to be restored.
Mr. RAINEY. YOU have said that a great many times, and that is
what we want to do, if we can. Your theory is to restore it by printing more money, and some of us can not agree with you on that.
Mr. ARMSTRONG. That is the only way to do it. It can not be
done in any other way.
Mr. RAINEY. Let me call your attention to what has happened.
Take Russia. In Russia there is no unemployment at all. Their
factories are all going at the present time. In Russia a few years
ago they had a gold coverage for their rubles of something like 45
per cent, and when that existed Russia did not have to ask for credits.
Her gold rubles were accepted the world over. Then she reduced
her gold base by issuing more rubles, until now she only has a gold
base of 25 per cent, and she is compelled to borrow money at ruinous
rates of interest all over the world in order to buy the things that
she wants from other nations; and she will not permit her rubles to
leave Russia, and will not permit them to go into Russia. That is
the way she maintains her monetary system at the present time.
Now, is not that a sort of example of a nation that is operating now
under new theories, with which we do not agree? She was able
to borrow; she was able to buy anywhere in the world, and pay in
gold, with her gold rubles, and they were in demand everywhere, as
long as she kept a gold reserve which was twice as large as her present
gold reserve. Now she can not use her rubles at all for foreign




Mr. ARMSTRONG. Mr. Chairman, I do not think it would be wise
at all to have our money cheaper than that of other countries. It
would be as unwise, perhaps, as to have it dearer.
Mr. RAINEY. Have you noticed that the dollar is depreciating
now in France—the American dollar, which has been the standard
the world over—in recent weeks, on account of our threatened deficit
and on account of the large demands that are being made for inflation of our money?
Mr. ARMSTRONG. I am not sufficiently informed about that, but I
do know this
Mr. RAINEY (interposing). That is the truth; and that is the
reason the French financiers assign for it.
Mr. ARMSTRONG. I do know this: That France pegged her money
at about one-fifth of its pre-war value, and that France has been the
most prosperous nation since then because of that fact.
Mr. RAINEY. And because she has a gold base of 70 per cent.
Mr. ARMSTRONG. Well, her gold base is like ours. She has
hoarded gold.
Mr. RAINEY. And she has not inflated her currency.
Mr. ARMSTRONG. But she had that prosperity before she had this
70 per cent gold base. That has nothing to do with it. Our four
billion and a half or five billions, whatever it is, of gold, is dead. It is
inert. It has nothing to do with the prosperity of this country. We
are not on the gold standard. Our standard is a man-made standard.
It is the will of the Federal Reserve Board. They decrease and increase money—or, rather, the New York Federal Reserve Bank for the
Federal Reserve Board.
Mr. RAINEY. Then, if the Federal reserve bank can increase and
decrease the supply of money in use in business, why should Congress
print more and increase it?
Mr. ARMSTRONG. I think Congress ought to increase it, and then
prohibit the Federal reserve bank from hoarding it. That is my opinion about it.
Mr. RAINEY. HOW would that be accomplished? How would you
compel the Federal reserve bank to put it in circulation? ,
Mr. ARMSTRONG. I am sure you gentlemen can devise ways and
means for doing that. It is easy to do. I could do that.
Mr. RAINEY. We do not think it is easy. You are an economist,
and we are seeking information.
Mr. ARMSTRONG. I can tell you one way to do it. That is to
abolish the Federal Reserve Board and abolish the advisory council,
and make these banks separate, independent institutions, with local
directorates. That will do it.
Mr. RAINEY. What banks do you mean?
Mr. ARMSTRONG. These Federal reserve banks; instead of having
them controlled from Washington and New York, let them be controlled at home. It was supposed to be a decentralized system, but by
administration and by amendment it has become a centralized system that has assumed the prerogative of regulating prices and wages
in this country.
*Mr. RAINEY. Assuming that they are decentralized and are controlled at home, in the regions where they operate—the 12 reserve
banks—would they let out their money on insufficient security?
Mr. ARMSTRONG. NO, sir; they are not going to do that, of course.



Mr. RAINEY. If they do not do that, how are you going to get it
Mr. ARMSTRONG. AS prices and wages go up, your security appreciates in value. As they go down, it depreciates in value. The depreciation in prices and wages is due solely, Mr. Chairman, to the lack
of money and credit, and as you restore money and credit you restore
values, you restore the buying power of the people, and you restore the
prosperity of the business community.
Mr. Chairman, I hope you will excuse me. I would like to talk to
you for a long time, but these gentlemen here are waiting.
Mr. RAINEY. All right. Thank you.
Mr. CROWTHER. Mr. Chairman, I would like to make one statement before the witness leaves.


Mr. CROWTHER. Mr. Rainey made reference to the fact that one
of the difficulties of the American farmer was in the exportation of his
wheat. A few months ago we had before this committee Colonel
Cooper, a very noted engineer. We had under consideration legislation that looked to an embargo against all Russian projects, and
he was one of the witnesses. He has had a great deal of experience
in Russia, and he is building at this time a great hydroelectric power
plant on the Dnieper River. He told us, standing in the w^U where
you are now, that due to the rapid agricultural development in Russia,
with the acquisition of American machinery, and to the return to
fairly normal agricultural conditions in the other European countries,
that the United States had absolutely lost its foreign market for wheat,
and that if we did not know it, it was time that we did.
I just want that statement to appear in the record.
Mr. RAINEY. Yes; I remember that statement. It was not
exactly that statement, I will say, Doctor. I was also in Russia
this summer, visiting their wheat farms. Ultimately Russia will
take away from us our share in the world wheat market; there is no
question about that. She has not done it yet. Her exports of wheat
are less now than they were in pre-war days. But she will ultimately; and when she does, there will be nothing for the wheat farmer
to do but go out of foreign business, and you can not keep him in
that business by printing more money.
Mr. CROWTHER. He will not have to go out of business, because
we use 600,000,000 bushels ourselves.
Mr. RAINEY. He will have to curtail his production.
Mr. CROWTHER. He will have to curtail his production some.
Mr. RAINEY. And protect his market by tariffs. There is no
question about that, although I am not usually in favor of tariffs.
But Russia is going to take that all away from us, and increasing
the volume of money and reducing the value of money is not going
to prevent it.
Mr. CROWTHER. I do not advance that as a defense of the argument at all. I simply want that fact to be known.
Mr. RAINEY. And putting more money in circulation will not
remedy that situation. Of course we are approaching a crisis in world
affairs which must be met; but printing more money will not be the
vehicle by which it will be adjusted.
Mr- CROWTHER. I agree to that.



Mr. RAINEY. I would like to add that in 25 years from now Russia
will take away from us our share of the world's cotton market, and we
must restrict our production of cotton. Those things are coming,
and we can not prevent them by printing more money.
Mr. PATMAN. Mr. Chairman, may I suggest that it is not our
theory that volume alone will cause better times; but our theory is
that in 1929 there was a certain velocity of money and credits. The
velocity of money and credits has decreased 50 per cent since 1929,
and there is only one way to make up for lack of velocity, and that is
by putting in additional volume.
I just wanted to state our theory of it, which I did not feel was
clearly understood.
At this time we have a former Congressman from Oregon. He is a
resident of New York City, and he desires to be heard in support of
this legislation. Mr. Lafferty.
Mr. LAFFERTY. Mr. Chairman, there are three things Congress
could do to end the depression:
First, it could pass this bill.
Second, it could pass the Borah silver bill, S. 2630.
Third, it could declare a moratorium on the gold standard itself,
for a limited period, as England has done, thereby permitting commodity and security values to return to normal.
In appearing here to-day I rest under no illusions of hope or enthusiasm. I realize full well that we who are favoring this bill have the
laboring oar, because the edict has gone out from Wall Street that the
bill must be killed; and unless your action on this bill shall mark a
change, Wall Street is, in my humble opinion, in absolute charge of
the affairs of this helpless and unhappy Republic.
I realize I may be wrong. I have often been wrong in the past.
But it is surely no time for mincing words.
Mr. Ogden L. Mills will come before you against this bill. Ordinarily the country could lean heavily on the advice and counsel of the
Secretary of the Treasury. But in this case, if you do not know the
antecedents of Mr. Mills before he comes here to fight this bill, you
ought to know them.
Before coming to Washington Mr. Mills was an attorney for J. P.
Morgan & Co. He was a member of the law firm of Stetson, Jennings
& Russell, 15 Broad Street, New York City, which has been counsel
for J. P. Morgan & Co. for over 50 years. Mr. Mills makes no bones
of his connections. He lists his New York office address in the current
issue of Who's Who in America as 15 Broad Street, which is the office
of Stetson, Jennings & Russell—the name now slightly changed, but
still carried on the letterhead. It is Davis, Polk, Wardwell, Gardner
& Reed.
Mr. Mills is a gentleman and a scholar—a patriotic gentleman and
a well-meaning gentleman. But he is not a fair and impartial judge
to tell you what your decision should be on this bill.
Mr. Eugene Meyer, another member of Mr. Hoover's administration, who is listed in Who's Who as a Wall Street banker—by himself;
that is, he wrote his own biography—will come before you to oppose
this bill. He is as completely disqualified to be a fair and impartial
judge as is Mr. Mills.



I read in the morning paper:
President certain of bonus bill doom. Administration statement says the
measure "is no longer a menace to the country." Opposed by C. E. Mitchell.

Now, of course I had already bought my ticket before I read this;
so I thought I would come on down anyway.
Strawn says Nation will stick to gold. Tells bond club that efforts of "some
politicians in Washington" will fail. Attacks soldier bonus.

Now, Mr. Strawn is using his influence as head of the United
States Chamber of Commerce, and he is the legal counsel in Chicago
of the Morgan banking interests.
When I was here a few years ago on a legislative matter, Mr.
Garrard B. Winston was Under Secretary of the Treasury—Mr.
Winston, of the Strawn law firm in Chicago. The Republicans had
the majority in those days, over on this side of the aisle. I see there
have been some changes. But Mr. Winston resigned as Under Secretary of the Treasury and went to Wall Street. His office is now at
55 Wall Street, where he is attorney for this same C. E. Mitchell bank
that has just been referred to. He is opposed, of course, to this
legislation. All of Wall Street is opposed to it. All of the Morgan
interests which are controlling the country are opposed to it, and they
are in the saddle at Washington. Nobody denies it.
'A few years ago, when everybody thought we were prosperous, some
man repeated the old expression that the country was " corrupt and
contented/' Well, it may be corrupt to-day, but it is not contented.
Somebody has thrown an awful monkey wrench into our economic
machinery, and it does not require a college education to realize that
Certain gentlemen who seem to be very cocksure of their superior
knowledge of finance have, in the public prints, derided the plan of
this bill, and have had the assurance to tell you that this plan means
nothing more than the starting of the printing presses upon blank
paper. When a man, in these days, makes a statement as bold as
that, we have a right to pause to ask what he really does know.
Compare the attitude of such a man with the humility of Thomas
A. Edison who said seriously shortly before his death that, in his
opinion, the world does not yet know one-tenth of 1 per cent about
Compare the statement of the men who say this bill means no
more than the starting of the printing presses with the mellow and
chastened wisdom of Champ Clark, who, on being asked what he
thought of the money bills of Lindbergh, senior, replied:
Well, I don't know anything about the morey question, and I don't believe
anybody else does.

Leastwise, Morgan, Mellon, Mills, and Hoover, who have steered
us to our present predicament, have no right to challenge the statement of old Champ Clark. The so-called experts of Wall Street
should feel a blush of shame when they come here to tell us that
this bill is necessarily unsound.
It is interesting to recall, in this connection, that a few years ago,
at the request of Henry Ford, the late Thomas A. Edison himself
worked for months on a money plan to help the farmers. That plan
was presented to the Senate by Senator Capper, and never acted1
upon. Mr. Edison said, with a smile, "The banks were opposed to it/



When I was very young, and thought I knew much more than I do
now, I served four years here in Congress from the great State of
Oregon. After leaving I served as a soldier in the World War, and
after the armistice went to New York City, where I have since worked
like a dog. I learned piloting an airplane and received my license
from the Department of Commerce, and am the oldest man ever to
have flown alone from New York to Washington and return in an
afternoon, or at all. Will Rogers says he has never yet seen a pilot
that was dumb, but he has not seen me, so I can not be sure yet.
I admit I am not a financial expert, but to my mind this bill seems
as sound as the rock of Gibraltar, and I am here to give my reasons,
such as they are. Any man who would be afraid of it would be like
a little scared insect hiding under every cabbage leaf by the side of the
This bill by proper administration can segregate in the Treasury
40 per cent gold reserves against the currency to be issued, a very high
percentage. For the ultimate redemption of the other 60 per cent
it pledges the future revenue of the Uinted States, the best security
in the world, or could do so by administrative order if we had one of
our common citizens in the office of the Secretary of the Treasury,
like Cordell Hull, or Willis Hawley, or some man like that..
It would seem, therefore, that the man who says this bill is merely
one to start the printing presses on a blank piece of paper does not
understand the bill.
The only thing about this bill which does not tally exactly with the
orthodox, or international banker way, if issuing currency is that here
the currency is to be issued direct with the Government as the banker,
and is not to be emitted through the private banks of issue, upon
private IOU's, upon which the banks would draw 6 per cent interest.
In the present bill the IOU which is dropped in to the vault, to make
up the 6 per cent, is the Government IOU, and that IOU will be
easily redeemed when prosperity is restored.
One or two distinguished gentlemen have lightly, and with a brush
of the hand, asked this question: "If this bill is workable, then why
not start the printing presses to balance the Budget?" They seem
to feel that their question is a poser, well calculated to demolish all
argument to the contrary.
The truth is that both England and France have in the past many
times resorted to that very method of temporarily balancing their
budgets. Both England and France have issued in the past what they
call consols, or IOU's of their respective Governments, redeemable in
the future at no certain date, to form the base of currency to balance
their budgets, together with a certain percentage of gold, usually not
over 25 per cent, and these consols are redeemed at a future date when
business is prosperous and income taxes and other revenues are plentiful, and easy for the people to pay.
Therefore, when distinguished gentlemen attempt to break down
this bill by saying that if it is sound then its principle could be used to
aid in balancing the Budget, it would seem that they are stumbling
on to God's simple truth without knowing it. Edison frequently made
his greatest discoveries by accident, but he did not have the infallible
reasoning powers of our opponents, and was many times compelled
to grope in the dark for many sleepless days and nights before he
could give to the world something really worthwhile.



Right here, parenthetically, I want to answer a question that was
raised this morning. It is not a question of the amount of money in
existence, but a question of the price of that money. We are theoretically on the gold standard. It is not actually working. It is in
a state of suspended life, you might say. It is moribund.
But the bankers of New York, who are engaged in a private fight
of their own with the bankers of Paris, are getting back to the literal
construction of the gold standard, that everything is redeemable in
Now, there is only about eleven billions of gold in the world. About
half of it approximately is in New York, and about half in Paris.
The rest of the world can not buy our goods nor France's goods, nor
pay their debts, nor do anything alse, because this gold has drifted
to Paris and to New York.
Those gentlemen are now engaged in a bitter fight as to which
crowd shall have the most of it.
As a result, gold has skyrocketed. It has an artificial value.
Every debt in the United States, every penny of taxes, is payable in
gold. Every check that you take to the bank you have a right to
demand payment in gold. You have the right to demand that every
paper dollar be redeemed in gold. They have gone back to the literal
idea of a single gold standard, when the thing has broken down. It
is as useless as an airplane engine working at 10 per cent of its capacity. It is like a racehorse with three broken legs.
That is the monkey wrench in the machinery.
No legislative progress in favor of the general public was ever
accomplished in America without the sneers and opposition of Wall
Street. Wall Street has a way of flattering Senators and Congressmen by fawningly tapping them on the shoulder and announcing,
"This man is sound, he is of presidential timber." When Wall Street
whispers that seductive statement into the ear of public officials, the
result frequently is that the victim is stricken deaf, dumb, and blind.
Too long already have we crooked the knee before these false
leaders of Wall Street. Their schemes have fallen before our very
eyes like a house of cards. They cry out for more and more help from
the taxpayers, whom they ordinarily regard with contempt. They
regard themselves as the pampered pets of capitalism, entitled to
rule like a spoiled child. They feel that all their blunders should be
forgotten, or saddled onto the taxpayers, on the theory that the king
can do no wrong.
The time has come for a change. Let the glorious day of change
be marked by the passage of this bill, and let us never again return to
the domination and misery and darkness of international banker
The present depression was made by men and it can be unmade by
men. You gentlemen of this great Ways and Means Committee are
the logical power to whom we have a right to appeal for relief in this
appalling crisis. The earth is very small. Washington is its greatest
capital. No more important event is now in progress on the face of
the globe than this hearing before you. Report this bill favorably
and it will become a law. The stricken Union of Washington,
Lincoln, and Wilson will take new hope. A prostrate world will rise
up and behold a new rainbow, and will see intermingled with its
beautiful colors a flag rededicated to human progress—the fluttering
folds of the stars and stripes.



To have won the war, when the perpetuity of civilization depended
upon the same men you are now dealing with, when these same men
were under arms, facing, with bayonets fixed, the most powerful
military foe of all time, ready, every man of them, to sacrifice his life if
necessary, that the rest of the world might have peace, freedom, and
happiness—you would not then have hesitated for a single second to
approve such a bill as this to inject the life-blood of money into the
situation to save the day.
No one claims that the debt due these men can ever be adequately
It is no time to haggle or to quibble. It is no time to hesitate. It
is no time to give ear to the carping criticisms of those whose greed
and selfishness have brought us to where we are to-day.
Consider the outstanding facts: The dollar value of the physical
property of the United States in 1926, a normal year, was over
$400,000,000,000. To-day, because of the depression which this bill
is calculated to correct, those same physical assets are depreciated
over 50 per cent from 1926 values, or over $200,000,000,000, and are
depreciated nearer $300,000,000,000 from 1929 values.
Assuming that this bill will restore the normal prosperity of 1926,
and we have every reason to believe that it will, then while it would
give $2,000,000,000 to the soldiers, it would give to the country as a
whole over $200,000,000,000 by restoring the normal 1926 values of
lands, factories, mines, livestock, and other physical assets of the
United States. It would do far more than that. It would restore
the earning capacity of every factory, farm, mine, business, and
individual. It would put the blush of health into the pallid faces of
half-starved women and children. It would restore hope and happiness in the hearts of 120,000,000 American people.
The great issue of the world depression is bound up squarely in
this bill. Shall we continue to pamper the international bankers of
Wall Street, or shall we reflate the dollar and give back to the people
of America in restored values over $200,000,000,000?
That is the issue bound up in this bill. As compared with this
paramount issue, the incidental granting of only $2,000,000,000 to
the soldiers, as the occasion for turning back from deflation, is but
little more than a gracious gesture.
It would seem that the decision of Congress can not be other than
favorable on this bill. It not only offers a way out of the mire of the
depression, but it offers the only way out that has been brought before
There may be other ways, but they are not before you. This bill is
before you.
That every Congressman feels keenly his personal responsibility
upon this bill goes without saying.
It is no reflection upon Congress, nor is it a departure from the
exact truth, to say that up to now Congress has not done a single thing
to end the depression.
Congress was disappointed, and the country was disappointed, in
the Glass-Steagall law. We were promised reflation by that bill,
but we did not get it, and further cruel deflation has followed its
It is now painfully apparent that the Glass-Steagall law was sought
by the great Wall Street bankers solely to be used in their own defense



in their fight against the French bankers, or rather to be held by
them as a reserve weapon in that fight, and never to be used to help
the Country as a whole.
We are further disillusioned by finding that the Reconstruction
Finance Corporation was promised to the great bankers of Wall
Street last October, at the time those bankers organized their own
credit corporation, and it was agreed that as soon as Congress assembled the Reconstruction Finance Corporation would be formed to
shift the burden of the bankers credit corporation to the weary backs
of the taxpayers of the United States.
The third major bill, the increased tax bill, is also to help the great
bankers of Wall Street in their fight with French bankers. The
bankers told us that unless we balanced the Budget immediately,
France would drain more of their surplus gold. We responded to
their call.
And now, able and responsible London bankers tell us that it was
not at all necessary that we should have balanced our Budget by a
tax bill this year, or for several years. They say that no dire results
would have followed if we had expanded our currency and deferred
the increase in taxes till the country was better able to pay the
increased taxes. That sounds logical. It becomes increasingly
apparent, therefore, that all three of the major bills so far passed,
and on which we set such high hopes, were in reality originated and
pressed by the great bankers of Wall Street to pull their own chestnuts out of the fire in their petty fight with private French bankers.
The absolute necessity for relief by this Congress, and not by a
future Congress, is apparent.
The depression is crushing us, and rapidly reducing us to hopeless
poverty. Immediate relief is imperative.
The depression is a cruel and unnecessary tragedy, and this bill
puts the means at your finger tips to correct it.
At the period of the world's greatest advancement our life's savings
are being swept away as by flood and fire. Millions of people throughout the land who thought they had a competence yesterday are in a
daze and wondering when they will become beggars, if they have not
Bonds of foreign republics and cities, and of domestic railroads and
manufacturing corporations, in which our people invested their life's
savings a few years ago at par, are down to as low as 5 and 6—virtually
wiped out.
Farm lands have depreciated from $125 per acre to less than $25
per acre, and independent banks and insurance companies which
loaned money on those farms have failed by the thousands, leaving
anguish, poverty, desolation, and suicides in their wake.
Bonds secured by first mortgage on large office buildings, which
our people bought at par, are now selling under 20.
Homes and apartment houses are being sold under foreclosure
and not bringing the face of the mortgage.
Buildings in moderate repair are being razed to avoid assessment
of taxes.
One quarter of the private property i n the State of Mississippi is
advertised for sale for taxes, and other States are similarly affected.
Great cities like Chicago and Detroit are unable to pay their
school-teachers and civil employees, because the people can not pay
their taxes.



Kailroads, factories, and mines are struggling for their lives at half
capacity and less.
And what is the cause of all this misery? The answer is easy to
find. The gold dollar, and gold dollar exchange, by reason of the
private fight between Wall Street and France, and the consequent
policy of deflation by Wall Street, has become almost unobtainable
at any price.
By reason of that private, selfish fight, and the scarcity of gold,
which they are fighting over, the gold dollar and gold exchange have
artificially skyrocketed to from four to ten times its normal value,
thereby robbing all lands, factories, mines, farms, and all other property of from 25 per cent to 90 per cent of their normal values.
To get a dollar of gold to-day, or a dollar of gold exchange which
is the same thing, and all our debts and taxes must be paid in that
medium, one must surrender from $4 to $10 worth of lands, labor,
goods, or securities, as measured by normal values. That, and only
that, constitutes the depression.
Any measure that you might pass which would bring gold down to
normal, and, per contra, bring lands, labor, goods, and securities up to
normal, would end the depression, and nothing else will do it.
This bill is calculated to turn the tide of deflation into a tide of
healthy reflation, and the people of America and the world will rise
up and call you blessed if you pass it immediately.
The powerful house of Morgan brought pressure to bear last June
for this country to declare a moratorium on international debts due
our taxpayers, in order to help out the Morgan scheme of glorifying
the tottering gold standard abroad. The result of that moratorium
has broken the backs of American taxpayers, and has been followed
by governmental moratoriums on debts due our private citizens and
insurance companies, which has wrought disaster to our country and
its people.
What course did England take last September? She passed a law
declaring a moratorium on the gold standard itself, until July 1, 1932,
and thereby England has saved her people, balanced her budget, and
improved her business in every way.
If it is a question of declaring a moratorium on the billions of dollars
due our taxpayers and private citizens and insurance companies,
thereby bankrupting most of our people, or declaring a moratorium
for a limited period on the gold standard itself, which would America
prefer? The question answers itself.
If Congress should to-morrow pass an act declaring a moratorium
on the gold standard for one year, promising to return to it at the
end of that period, or as soon as a semblance of normal equilibrium
between dollar value and property value had been restored, this
country and the world would be enjoying genuine prosperity in less
than 30 days.
Why not take our cue from England, if necessary? The London
bankers have been engaged in the international financial exchange
for over 700 years and their wisdom and experience is not to be
So do not fear the cry of Wall Street that we might possibly be
forced to declare a moratorium on the gold standard itself, temporarily. If we do that, surely France will get no more of the precious
little pot of gold held by the bankers of Wall Street. Because of



the fear of Wall Street as to that putrid little pot of gold, which is
never seen by human eye, but which is shuttled back and forth across
the Atlantic under lock and key, they ask you to sacrifice the bloom
upon the cheeks of your wives and daughters, and the spark of life
and hope in the hearts of the people of America and the world.
Why worship the golden calf any longer? It can not be more important than the lifeblood of the twenty hundred millions of people
who inhabit the earth. Yet, in the period of the world's greatest
advancement otherwise, we have been reduced to misery and want
by that cold, inanimate, breathless, lifeless pot of gold.
There are only eleven billions of gold in the world. It would form
a cube only 30 feet square. Less than half of it is in the United States.
Mr. MCCORMACK. The $11,000,000,000 of gold that you refer to
is the hard, clean money of the world. The credit structure of practically the whole world is predicated on that, is it not?
Mr. LAFFERTY. It is, as far as France and the United States are
concerned. Most of the other countries have departed from it.
Mr. MCCORMACK. Even under normal conditions, that is the hard,
clean money.
Mr. LAFFERTY. That is correct.
Mr. MCCORMACK. I take it from your argument that you are of
the opinion that leadership in the business world has simply collapsed.
Mr. LAFFERTY. It has. That is it exactly. They have failed.
Mr. MCCORMACK. And we have tried everything; commissions of
all kinds, engineers, scientists, industrial leaders and the people are
now looking again to their representatives.
Mr. LAFFERTY. That is it, their elected representatives. In the
past these gentlemen up in New York have regarded elected officials
merely as their office boys and lackeys, but the time has come for a
change and we will surely get it in November, if we do not get it
Summed up, the argument of our opponents is that we can not
lift ourselves out of the depression by our bootstraps, that we can
not legislate values into property, and that if we could it would
amount to a redistribution of wealth by legislative fiat, and therefore
be socialistic and communistic.
The answer is that since over $200,000,000,000 in value have been
subtracted from the physical assets of the United States by an artificial human device, to wit, the corner on gold by Paris and New
York, that same $200,000,000,000 in value can be restored to the
physical assets of the United States by another human device, to wit,
an act of Congress to end the corner on gold, and just that is the
major objective of this bill.
To say that a restoration of the status quo of normalcy is socialistic
and communistic is absurd and illogical.
We are not creating values by legislative fiat. We are restoring
values which have been submerged, for the time being, by a dishonest
and tricky cornering of the basis of all credit and money.
Lands, like values, may be submerged for a time during a flood,
but they reappear when the flood recedes.
If the colossal values which have been temporarily submerged by
this man-made depression can not be made to reappear by a legislative correction of the cause of that depression, then those values have
been lost for all time, and the only thing those who have lost could




do would be to go to work and earn their values all over again. And
if that is the effect of one of their so-called
"cyclical depressions,"
it is the same kind of a "cyclical depression that the Jbees experience
when the beekeeper robs the hive. The bees know by instinct that
the only way
they can repair their loss is "by rigid economy and
hard work,77 and that is the very formula Morgan & Co. prescribe
for us to-day. That formula contemplates no emergence from the
losses we have sustained at all, as to the owners of property, but
rather reconciling ourselves to a permanent loss, and going to work
to earn a competence all over again. And that is true as to those
who have already been closed out by Morgan & Co., but as to those
who are still clinging on to all or a part of their lands or goods or
securities the restoration of the status quo of dollar value and property value will afford a Heaven-sent remedy.
This bill proposes just that remedy, for all those who have not
already lost their all, and it should be passed without delaying a
single unnecessary day. Otherwise millions who are still heroically
hanging to a part of their property by their eyebrows will join those
millions of citizens who have already lost their all.
Mr. RAINEY. Thank you for your appearance.
Mr. PATMAN. Mr. Chairman, this morning we were to have before
us Mr. Harris, of Harris & Volts, an economist of New York; also
Mr. Le Blanc, an economist from New York. Senator Thomas called
me a while ago and said that he had just arrived in the city and could
not go on until in the morning, at which time we also expect to have
Prof. Williford I. King, of New York University. The clerk of the
committee has promised these gentlemen certain time and we are
very glad to comply with their request. There are some other witnesses we would like to put on now instead of Mr. Harris or Mr.
Le Blanc.
Mr. RAINEY. That is entirely satisfactory.
Mr. MCCORMACK. Mr. Chairman, will you permit at this time the
insertion of a telegram in the record that I received this morning from
an American Legion post?
Mr. RAINEY. Without objection the telegram will be made a part
of the record.
(The telegram referred to reads as follows:)
BOSTON, MASS., April 12} 1982.
Congressman JOHN W. MCCORMACK,

Washington, D. C:
Members of Michael J. Perkins Post 67, American Legion, South Boston, Mass.,
favor the cash bonus.

Mr. PATMAN. Mr. Fraser, department commander of the American
Legion, Department of the District of Columbia, has a short statement to make to the committee.
Mr. RAINEY. We shall be glad to hear him.
Mr. FRASER. Mr. Chairman, I have been instructed by the executive committee of the American Legion of the District of Columbia
to present this statement to you:





Chairman Ways and Means Committee
House of Representatives, Washington, D. C.

SIR: At a meeting of the department executive committee of the Department
of the District of Columbia the American Legion (representing 26 posts of this
department) on April 11, 1932, the following action was taken with regard to
the payment of the adjusted service certificates for World War veterans:
"The national executive committeeman of the Department of the District of
Columbia will take up at the regular meeting of the national executive committee on May 5, 1932, the question of immediate payment in full of adjusted
service certificates and will vote for such immediate payment. If this motion
does not carry, the national executive committeman is instructed to move the
immediate poll by the national executive committee of all post members of the
American Legion by post card. The chairman of the Ways and Means Committee of the House of Representatives and the commander of the Department
of Oklahoma will be informed of this action. The report of action will be presented to the chairman of the House Ways and Means Committee by the
department commander personally.
"Very respectfully,
" F . G. FRASER, Department Commander.11

Mr. PATMAN. Mr. Chairman, at this time I desire to present
Congressman Rankin, of Mississippi.

Mr. RANKIN. Mr. Chairman and gentlemen of the committee, in
the beginning, I desire to say that I am for the passage of this bill,
not only for the benefit that it will bring to the ex-service men of the
country, but for the greater benefit that it will bring to all the American people.
At the outset, I wish to answer the argument that has been made
that these certificates are not due and to confess that that comes
nearer to being an answer to any of our arguments than any that have
been made.
If these certificates had been issued in 1919, however, when this
money was due, and had borne the same rate of interest that has been
paid to the war contractors and to others to whom the United States
was indebted at that time, they would have matured more than a
year ago.
If this were a matter merely of paying off these adjusted-service
certificates, if it meant wringing from the overburdened taxpayer of
the United States, $2,200,000,000, with which to pay these certificates, I would oppose its passage. But I would let those who are
attacking the ex-service men of this country understand that while
they are opposing this measure, that would bring this much-needed
relief to the ex-service men, they are also opposing the only measure
that has been offered at this session of Congress that promises the
slightest relief to the American farmer, to the American wage earner
and to the American people generally.
I also want to answer, before I forget it, the question that was
asked, if this is sound, why we did not resort to it to balance the
Budget. My answer to that is, we could have done so. Of all
things, for Congress to attempt to pass a tax bill now with the
country in this deplorable condition, I think was one of the greatest
mistakes we could have made.
This measure could have been passed, or a measure of this kind
could have been passed and the currency of the country expanded



to a sufficient extent to have balanced the Budget without depreciating the value of the American dollar or without, in any way, impairing
our gold reserve. We have not balanced the Budget yet. Lay no
unction to your souls on that. The bills that we have passed are not
going to balance the Budget, and unless there is an expansion of the
currency, it is only possible to balance the Budget in one way and
that is by an abnormal increase in the inheritance taxes in the higher
I took the market report the night before last and here is what
I found: The reason I am bringing this to your attention is that we
are at war. You talk about the war of 1917! We are at war to-day.
We are at war with depression, with poverty, with hunger, with
bankruptcy, with suicide and with all the horrors that trail in the
wake of this unprecedented panic.
If you would take all the cotton grown in the United States last
year and were to sell every single pound of it at the peak of the market
yesterday or the day before, if you would take every grain of wheat
grown in the United States, and not leave one grain for anybody to eat,
and sell it at the peak of the market yesterday or the day before, if
you would take every single grain of corn grown in the United States
last year and sell it at the peak of the market yesterday or the day
before, and pile all that money together, it would lack $2,400,000,000,
amounting to as much as the annual appropriations of the Federal
Government alone. Here is a great agricultural country, with the
three greatest agricultural crops of America all put together, bringing
less than one-half as much as the appropriations of the Federal Government alone.
Now, any man who thinks he can balance the Budget with that
continuing condition needs not only to study economics, but he needs
to study history. All the wheat, all the corn and all the cotton grown
in the United States sold on yesterday would have brought $1,901,000,
000, while the appropriation amounted to more than $4,300,000,000.
If that same wheat, corn, and cotton had been sold on the same day
four years ago, they would have brought $5,487,000,000. In other
words, the farmer's dollar has shrunk to one-third in four years.
I had a letter yesterday from one of the ablest physicians in my
State, and he made this statement. He said:
I own a farm that three years ago was valued at $75,000. I own my home. I
own additional business houses in my home town and other towns. I do not owe
a dollar on them, yet my home is advertised for sale for its taxes and I can not
borrow a dollar to pay them.

The life blood of the Nation is dried up.
We thought we were undertaking to remedy this. In the first
place we passed what is called the Federal land-bank bill. We thought
that was going to relieve the farmers of this country who owed the
Federal land banks. Just as soon as we made these banks secure
from failure, they proceeded to foreclose the very farmer we were
trying to assist.
This paper I have before me does not come from my district. It
comes from Prentiss, Miss. Here is an entire page of advertisements of farms for sale by the Federal land bank. That is going on
all over the agricultural belt. I make that statement to let you
know that conditions are growing worse. We must do something.
Something must be done. You created a great Reconstruction



Finance Corporation. It did just exactly what I told you on the floor
of the House it would do. May I have permission to insert at this
point a speech I made on the floor of the House on January 14, 1932?
Mr. RAINEY. YOU have that permission.
(The speech referred to is as follows:)



[The House in Committee of the Whole House on the state of the Union had under consideration the bill
H. R. 7360, the Reconstruction Finance Corporation bill]

Mr. RANKIN. Mr. Chairman, I would not ask for this time but for the fact
that I have not had an opportunity to speak on this measure. In my opinion
this bill does not even begin to reach our trouble.
Mr. Chairman, we are in the midst of a great panic. As was once said with
reference to the World War, the present depression might well be characterized
as a major phenomenon in the life of the American Republic.
It is a money panic—the worst this country has ever seen. In my opinion
conditions will not grow materially better until we innate the currency and put
more money into circulation. The quicker Congress does this the better it will
be for all concerned.
We read in history, Mr. Chairman, of what has been called the Dark Ages,
and many of us have been led to believe that it was a period of religious and
intellectual relapse. But the truth is that what we know as the Dark Ages was
a money panic, an economic depression, lasting over a lapse of centuries.
For hundreds of years after the fall of the Roman Empire gold was the money
of the world. It was the coin of kings, the coin of the realm of every country
in Europe. The amount in existence was insufficient to meet the requirements
of the civilized world at that time, and the supply was gradually diminishing.
As a result values fell, trade became stagnant, commerce became paralyzed, and
the world lapsed into an economic lethargy that lasted for approximately a
thousand years.
In 1453, when Constantinople fell into the hands of the Turks, Europe was
forced to seek a westward passage to the Orient. This resulted in the discovery
of America, and with it vast, and apparently unlimited, supplies of gold.
There was an immediate reawakening. The world took on new life. Values
began to rise; trade was revitalized; commerce was increased; the world awoke
from it lethargy of centuries and moved forward into a new era of prosperity.
This new discovery of additional supplies of the circulating medium of the world
not only inflated prices and revived trade and commerce but it stirred the souls
and fired the imaginations of men and ushered in the most glorious period the
world had ever seen.
Under this invigorating impulse even the genius of mankind seemed to be
stimulated. The succeeding decades produced men like Shakespeare, whose
writings did more to shape the course of our western civilization than those of any
other man who ever lived " in the tides of time." It gave to the world Cervantes,
author of Don Quixote, who by his ingenious pen swept away the fallacies of
centuries and struck from the minds of men the shackles placed upon them by
the caste systems of ancient institutions. It gave to the world Galileo, before
whose matchless genius the old heavens folded away and a new universe swung
into view. In fact, this period gave to the world more men of genius than any
other age in the world's history.
Under the restless impulse of this stimulus men began to venture across the
Atlantic to carve their homes from the unbroken wildernesses of America and
in a few decades brought forth upon this continent the greatest government
ever devised by the mind of man.
Gold was still available in indefinite supplies, and for more than a century
the question of lack of circulating medium never reached the intesified proportion
that it.has to-day.
But those conditions have changed. We now find ourselves in the same
position the people of Europe were in at the beginning of the Dark Ages. The
amount of gold in existence is insufficient to meet the monetary requirements of
our intensified, complex civilization, and the supply is rapidly diminishing.
There is no hope for the discovery of an El Dorado with unlimited supplies of



the precious metal, for the simple reason that all territories have been prospected and all the known fields have been exploited. We must find some other
method of increasing the circulating medium in order that prices may rise, business
be stimulated, and this panic broken. This can be done in two ways only, and
they are by remonetizing silver or inflating the currency.
Twelve years ago to-day there were $53 per capita in circulation in this country.
Cotton was 30 cents a pound. Wheat was $2.25 a bushel. Corn was $1.60 a
bushel. At that time we were enjoying prosperity throughout the length and
breadth of the land.
On the basis of that inflated currency, we contracted our debts; we floated
bonds which virtually fixed our tax rates. On that basis we established our
standard of living and our wage scale and our salaries.
The currency has now been contracted until to-day there is only about $40
per capita in circulation.
A good deal of our money is in hiding, and a large portion of it has been lost or
destroyed. Our circulating medium is wholly and hopelessly insufficient to meet
the demands of the present time.
To-day we find that cotton is 6 cents a pound instead of 30 cents, wheat is 50
cents a bushel or less instead of $2.25, and corn is 35 cents or less instead of $1.60.
In other words, a dollar has more than five times the buying power in raw materials, such as wheat, corn, and cotton, that it had in January, 1920.
With this cheap wheat, cheap cotton, and cheap corn, with the price of cattle,
hogs, sheep, and other agricultural commodities accordingly depressed in value,
it is simply impossible for our farmers, the backbone of the Nation, to pay their
taxes and earn a decent living. Our merchants are going bankrupt, our banks are
failing, and business generally has become paralyzed.
What is the remedy? It is to remonetize silver throughout the world or inflate
the currency back to what it was in 1920, and thereby stimulate commodity
prices and revive business generally. I shall have something to say on the
silver question later.
The bill now before the House does not do this.
The thing I fear about this'bill is that this $2,000,000,000 will be absorbed in
these old watered stocks and worthless bonds, which are clogging up the banks
of the country, and will not reach the great mass of the American people, and
therefore will not raise the price level of commodities one penny. Why go out
and in an indirect method pour $2,000,000,000 into a sink hole instead of distributing it to give relief to the suffering American people? [Applause.]
Practically every Member of Congress who discusses this matter in the cloak
room or on the streets or in his office agrees that the remedy for this situation is
inflation. They practically all agree that the currency should be inflated, but
they are at a loss to know how this can be done.
I will tell you how it can be done. In the first place, we have in the Treasury
more than $4,000,000,000 worth of gold. Some men tell us that we must have a
dollar's worth of gold in the Treasury as a reserve against every dollar of gold
•certificate. That is not necessary. Forty cents in gold is an ample reserve for
a dollar gold certificate. Therefore, we could issue $1,800,000,000 in gold certificates to-morrow by an act of Congress, put that money into circulation, and
break this panic overnight, without in any way impairing our gold reserve. If
you fear a raid on the Treasury, make them legal tender and redeemable in five
years. If you do not want to issue gold certificates, then we might do as Abraham
Lincoln did during the Civil War—issue United States notes and make them legal
tender. I know that some gentlemen who are suffering from a gold complex will
throw up their hands in horror and call that "fiat" money. But I call your
Attention to the fact that there are $346,681,016 in United States notes out to-day.
They are not gold certificates, they are not silver certificates, they are not Federal
reserve notes, but simply United States notes. Take the circulation statement
of United States money sent to you once a month from the Treasury Department,
and you will find that this statement is correct. You will also find it states that
these "United States notes are secured by a gold reserve of $156,039,088 held in
the Treasury."
If this $156,000,000 in gold is sufficient reserve against $346,000,000 in United
States notes then we have enough gold in the Treasury to issue more than $5,000,000,000 in Treasury notes, if we so desired, without impairing the gold reserve.
But those who grew rich out of the war, and who now hold Government bonds
that, as I have shown, have five times the buying power of the basic raw materials of the country that they had when they were issued, do not want any inflation. Those who have hoarded money and escaped taxes do not want any inflation. They prefer to exact the last pound of flesh from the suffering masses of



America as a result of this depression and the consequent increased buying power
of the bonds or the money they now hold.
But some men have asked how we could put this money into circulation.
That would be the easiest matter on earth. We could pay it on some of the debts
owed by this Government, and wipe that amount off the statute books. For
instance, we could pay off the World War veterans' adjusted-service certificates,
and in that way serve a threefold purpose. [Applause.] It would pay the
veterans what we owe them and at the same time remove that debt from the
statute books of the Republic. But, above all, it would do more than that; it
would cause the values of wheat and corn and cotton and other raw materials to
rise overnight. It would enhance the value of agricultural and industrial commodities. Land values would return to normal, business would be revived, our
commerce would take on new life, and the dark cloud of this unprecedented panic
would melt away like mist before the sun. It would usher in a new day of
happiness and prosperity for the American people. [Applause.]

Mr. KANKIN. I said:
You are taking $500,000,000 of the American people's money and creating a
$2,000,000,000 corporation that will absorb these resources in an attempt to
revive watered stocks and possibly defunct foreign bonds that are clogging these
institutions and none of it will get down to the American people.

We now find that this money is being relayed—I am quoting what
was said on the floor of the Senate—and passed on, and paid into the
coffers of J. P. Morgan & Co., the greatest international banking
house in the world. While that goes on, we have the onward march
of the tax gatherer, invading the homes of the farmers of this country;
while that goes on, our breadlines are lengthening and the crimson
wave of suicide continues. We are at war.
I want to say to you, Mr. Chairman, that every other man in this
House can do as he pleases. This legislation is sound, and if possible
we are going to put it through.
Now, let us see why they tell us it is unsound; but before I get to
that, let me show you who is opposing it. These international
bankers are bending every effort to defeat it. WTiy? You hear more
about the effect on the American dollar in foreign countries around
this Capitol than you do of the effect on the American farmer and the
American wage earner at home, and if any of you doubt that, just take
your pencil and go to the cloakrooms and listen in and make notes of
what is being said.
There are $16,000,000,000 at this time loaned in foreign countries
by American financiers. Let us see what this means. They do not
want an expansion .of currency, because every one of those dollars
will buy three times as much of American commodities, and especially
American agricultural commodities, as it would have bought in 1928.
The majority of these bonds were floated as far back as 1919. These
bonds would buy as much of American goods, in fact four times as
much of American commodities now, and especially agricultural
commodities, as they would have bought in 1919. In other words,
their $16,000,000,000 will buy $48,000,000,000 or $50,000,000,000 of
commodities compared with the prices of 1928, and $65,000,000,000
or $75,000,000,000 compared with the valties of 1919.
In that period of inflation we floated bonds. Every State, practically every county, every municipality, every road district, every
school district, every drainage district, every irrigation district, every
light district, every water district, and in some States armory districts, floated bonds on those inflated values. They now have those
bonds to pay when those bonds will buy four times as much of the




products of their land as they would have bought the day that they
were issued.
At that time the United States Government issued these Government bonds that are held by the opponents of this legislation. Those
bonds will buy four times as much now of agricultural commodities
as they would have bought then. No wonder they are opposing this
legislation and venting their spleen on the ex-service man simply
because it happens to be a debt to him that we are attempting to
pay off here in order that we may bring back prosperity to the
American people.
I want to take up the money question, Mr. Chairman. I am not
a banker. I am not a financier. But I do know that this money
can be issued and put into circulation without impairing the Government's credit, and without increasing the taxes of the American people
by one dollar, and without endangering in any way the gold standard
or impairing the gold reserve behind every dollar of American money.
I have listened to this cross fire in this committee room on the money
question. Let me say to you that we have about $1,600,000,000
more gold in the Treasury than we had in 1919 when we had more
than $1,000,000,000 more currency in circulation than we have now.
We are the only country on earth that maintains a hundred per cent
gold reserve against a gold certificate. We are not patterning after
France. It is true that France has run her gold reserve up to 80 per
cent now. But that is a new thing with France. Great Britain, outside
of the United States, is perhaps the leading nation of the earth, aftd
the one after whom we have patterned in the building of our institutions more than any other country on earth—I doubt if she has ever
had 100 per cent in gold as a reserve behind her currency. I heard a
good deal the other day about England's currency and I took the
pains to call up the Library and have this matter run down. I found
that for 100 years Great Britain had less than 15 per cent gold reserve
behind her currency and at that time we were literally bowing financially to the Bank of England. I found that before Great Britain
went off the gold standard she only had 33 cents of gold reserve
behind every dollar of her currency.
Now, if 33 cents is sufficient to maintain a gold certificate of England, why should we quibble about a 40 per cent gold reserve behind
United States notes?
We have in the Treasury to-day, as shown here, $4,416,914,085.
That is according to the statement of the circulation of United States
money issued by the United States Treasury on January 31, 1932.
Of that amount $1,674,580,839 is gold reserve, dollar for dollar,
behind that amount of gold certificates.
I just want to take the month before. I might say to you that I
have discussed this with some financiers whose names I will not call,
but for whose opinions you gentlemen have a great deal of respect.
A month before that, December 31, 1931, we had $1,751,456,019
of gold certificates out, with a hundred cents in gold against each one
of them. That fell $100,000,000. A hundred million dollars of gold
was released there in one month. That $100,000,000 would sustain
$250,000,000 of Federal reserve notes. Now, it has been suggested
by some, whom I consider financial wizards in this country, that
those gold reserve notes be called in, and that this gold, if necessary,
be shifted and used for the issuance of Federal reserve notes. If it



can be used for the issuance of Federal reserve notes, it can be used
for the issuance of United States notes.
During the Civil War this same trouble arose.
Mr. RAINEY. May I ask you a question there?
Mr. RANKIN. I shall be glad to answer it if I can, Mr. Rainey.
Mr. RAINEY. HOW can we call these certificates in without paying
them off in gold?
Mr. RANKIN. They are not asking for them to be paid off in gold.
Nobody who presents one of these certificates at the Treasury Department ever calls for gold. I will tell you this: The gold standard,
Mr. Rainey, sometimes reminds me of the North Pole. We always
use it to point to, but none of us attempts to capture it.
For instance, we have now $346,381,016 in United States notes out;
and I am told that they have been out since the Civil War. Behind
that $346,000,000 in United States notes there is $156,000,000 in gold
in the Treasury. It has been there for years. This amount of money
has been out for years. Nobody has ever called for this gold. That
is one item that is legal tender for all purposes except to pay imports
and the interest on the public debt. Nobody ever presents one of
these notes and calls for the gold. I can take, and invariably do take,
a $10 bill, which is a gold certificate, and exchange it for them. There
is only about 40 per cent, or a little more than 40 per cent, of gold
behind that money. Nobody has ever questioned it. That is exactly
what we are attempting to do here. It is to take this surplus gold,
or $800,000,000 of it, or a billion, if necessary, and on a basis of 40
per cent reserve, issue the two billion, or two billion two hundred
millions of dollars necessary to pay these certificates off, and put this
money into circulation.
Mr. HILL. AS I understand it, this gold that you spoke about a
while ago is back of the gold certificates 100 per cent. What would
be necessary in the way of legislation, or in connection with this bill,
in order to so release that gold that you could effectuate the purpose
which you suggest here?
Mr. RANKIN. That is being done gradually, I will say to the gentleman from Washington. It is being done gradually without any
legislation; and in my opinion, if this keeps on—and this is not an
original opinion with me; I got this, as I said, from a financier for whose
opinion I have a great deal of respect—in my opinion, those gold
notes will practically all disappear in the course of a few years.
Mr. HILL. What will become of them?
Mr. RANKIN. Those gold notes will be exchanged for Federal
reserve notes.
Mr. HILL. And canceled?
Mr. RANKIN. Oh, yes; canceled and exchanged for Federal reserve
notes. And that releases a dollar of gold that can be used as a.
reserve against two dollars and a half of Federal reserve notes.
Mr. HILL. Does that process operate in the ordinary course—I
will not say of redemption, but if these notes are sent in for reissue,
for instance, when they wear out or become soiled?
Mr. RANKIN. I think also when they are paid for taxes, and so
forth, and drift into the Treasury. I think they are retiring them in
that way. But I know they are retiring them, and they retire approximately a hundred million, or the difference between $1,751,-



456,019 on December 31, 1931, and $1,674,580,839 on January 1,
Mr. RAINEY. Which was still enough to meet the outstanding
Mr. RANKIN. Oh, yes; there is still enough there to meet the outstanding certificates.
Mr. RAINEY. Never have we reduced that gold reserve so low as
not to leave enough to pay these certificates?
Mr. RANKIN. Oh, no. I am not assuming that the gold reserve
behind the gold certificates has ever been reduced below 100 per cent,
although I am thoroughly convinced that if it were reduced to 40
per cent it would not affect the value of those certificates.
Mr. RAINEY. May I call your attention to this: We have many
obligations in the United States that are payable only in gold.
Bonds issued by railroads, and mortgages taken by insurance companies, all demand that they should be paid in gold of a certain
standard of weight and fineness.
Mr. RANKIN. And none of them have ever been paid in it.
Mr. RAINEY. N O ; but they all can be.
Mr. RANKIN. I understand.
Mr. RAINEY. And the theory is that they all will be. Now, if
you remove the possibility of paying those certificates—I do not
think you can do it under the Constitution—by eliminating this
gold reserve, what effect would that have upon these outstanding
obligations, admitting that under the Constitution it could be done?
Mr. RANKIN. It would not have the slightest effect on earth.
Mr. RAINEY. They could not get gold for it.
Mr. RANKIN. They never have asked for gold and never will ask
for gold.
Mr. RAINEY. IS not the reason why they do not ask for it because
they know they can get it?
Mr. RANKIN. The reason they do not ask for it is because they do
not want it. They want the American dollar.
Let me say to the gentleman from Illinois that when these bonds
were issued there was eight or ten dollars per capita more money in
circulation than there is now. In 1920 there was $53.21 per capita
in circulation and to-day there is $45.34. But in 1919,1 am told—I
have not the figures here—that there was $55 per capita in circulation.
All right. Now, that was when we had 40-cent cotton, $2.25 wheat,
and when everybody was employed and wages were high. That was
the standard on which these bonds were floated. They floated those
bonds; they were payable in United States money—I do not care
whether the word "gold" is written in or not—and they have no right
to ask us to pay them and demand that we pay them with deflated
money, and they will not demand it.
Mr. MCCORMACK. I do not like to interrupt
Mr. RANKIN. I am glad to answer any questions, Mr. McCormack,
Mr. MCCORMACK. On February 29, 1932, we had over $5,363,000,000 of currency in circulation. We have in gold coin $4,353,000,000, and in the Treasury $3,442,000,000, or something like that,
showing considerably less in gold. In addition, we have all these
private obligations outstanding, payable in gold. The thought
enters my mind: Suppose every one of those holding currency, and
everybody who is owed money for private obligations, should to-



morrow say, " I want this paid in gold." How are we going to get
Mr. RANKIN. YOU could not get it at all; and your question, Mr.
McCormack, is a complete answer to the argument of the gentleman
from Illinois.
Take the bonds outstanding that have this gold clause written
into them. There is not enough gold in the world to pay the bonds
that are outstanding in the United States with that alleged gold
Mr. MCCORMACK. That is put in there for practical purposes?
Mr. RANKIN. Of course. It means sound money—American
dollars. That is what it means.
Mr. MCCORMACK. Theoretically?
Mr. RANKIN. That is right. But it really means in the coin of the
realm—the money of the United States Government.
Now, I am not an advocate of going off of the gold standard. I
see that the papers have quoted me as saying that I am in favor of
going off the gold standard. That is not what I am arguing. The
passage of this bill will save the gold standard. The passage of this
bill and the issuance of these notes will not only pay off the adjustedservice certificates; it will not only raise the values of wheat and corn
and cotton and industrial commodities; it will not only melt our
bread lines and put our people back to work and start the trains to
hauling real commodities instead of empty cars, but it will save the
gold standard. It will not disturb it in the least.
Now, suppose we were in England. Suppose that England had
the amount of gold that is shown here, as of January 31, a total of
$4,415,914,085. We will just say four billions in round numbers.
Suppose England had four billions. Do you know how much currency that would maintain at her present rate of reserve? Twelve
billion dollars.
Suppose you called in all these gold certificates and issued United
States notes against this amount, on the same basis that this $5 bill
that I showed you is issued, with the same amount of reserve behind
it. You would have a sufficient gold reserve to issue ten billions of
dollars or thereabouts. Suppose you took this gold and turned it
over to the Federal Reserve, and issued Federal reserve notes on the
basis of 40 per cent. You would have a sufficient amount of gold to
issue ten billions of dollars of Federal reserve notes.
I want to call the attention of the gentleman from Illinois to this
statement; and of all people who are sold on the other side of this
question, it is the National City Bank of New York—purely, or almost
wholly, international bankers, who have their money loaned in foreign
countries; whose dollars, as I say, will buy about three times as much
of American commodities, raw materials, as they would in 1928, and
about four times as much as they would in 1919. It was intimated in
the press the other day that if this bill were passed it would bring
our gold reserve down to about 6 per cent. Here is the verdict of the
high priest, Hon. Charles E. Mitchell, chairman of the board of the
National City Bank of New York. Here is what he says about it:
According to your statement—
He is writing to Senator Thomas of Oklahoma—
the bill proposes to increase the amount of money in circulation by $2,400,000,000.
Should this aim be realized, and the circulation so increased, the effect would be



to reduce the reserve ratio from its present figure of 71 to 46, or close to the legal
40 per cent maximum, while the free gold reduced from $1,500,000,000
to a little over $500,000,000.

What does he mean by "free gold"? You know, when you get
to chasing these "gold bugs" they are like lightning bugs. When I
was a boy we had free silver, and they used to talk to me about
"gold bugs," and I would go out and see the landscape literally alive,
at night, with fireflies, and I thought they were the gold bugs. I
tried to catch some of them, and they were just about as elusive as
these gold bugs who are opposing this expansion. You get to talking
to them about this gold and they will talk to you about its being for
one purpose and another purpose; but the truth of the business is,
as he says there, that we have $1,500,000,000 of free gold, or gold
that could be used for this purpose. Are we going to continue to
crucify the American people on a "cross of gold," as Mr. Bryan said?
I would give my seat in Congress to have William J. Bryan in the
House to-day, or a man with the power that Bryan had, and who
had the interest of the American people at heart, to help us to put
this proposition over, to break this panic and rescue the American
people from the most terrible condition that ever existed on this
continent in times of peace.
Another thing: One of these bankers, whose name I will not call,
admitted to me that conditions were growing worse; that no man
could see the end, and that there was an extreme danger—mark this,
gentlemen—there was an extreme danger, if this continued, and we
did not relieve the situation through this or some such measure, that
there might be in this country a wholesale repudiation of public
debts—a condition even more terrible than what we have to-day.
Something must be done.
But take this $1,500,000,000 in gold and issue these United States
notes against it. How much will it issue in notes? Take a billion
dollars of it, and you can issue two and a half billion dollars in
United States notes against it, and any one of them may be exchanged
at any time for a gold certificate or for a Federal reserve note or for a
United States note. What will be the result? You will increase the
volume of money.
Listen: If you want to make the water run through the pipes, yon
have to raise the level of the water. If the water in the vessel is too
low to circulate through the pipes, you can stir it until you wear
yourself out, as these Wall Street bankers advise us to do in this
instance, and not a drop of it will go through those pipes. You must
pour additional water into it. You must expand the volume.
I wonder why it is that those who deflated the currency now oppose
expanding it.
Let me call your attention to this: I want to show you how we
gradually got into this state of economic paralysis, when the lifeblood
of the Nation is dried up, when we are begging Congress to give the
country a blood transfusion, if you please, to keep the patient from
They talk about expansion being uneconomic, unbusinesslike, and
unsound. I wonder if deflation is sound. I showed you that in 1920
we had $53.01 per capita in circulation. Like a clap of thunder from
a clear sky, the Federal reserve deflated that currency, raised the
rediscount rate and called loans, and brought this amount down to



$35 only four or five years ago. I have not the figures in this statement, but I have them in my office, and I will be glad to insert them
They deflated the currency $20 per capita, with all our debts, and
at a time when we were being bled white and our homes were gradually being sold or mortgaged to the hilt. Yet, when we come and
ask that this currency be reexpanded to meet the present-day conditions, and to relieve this country of the greatest panic in its history,
they throw up their hands in holy horror and yell, "Fiat money!"
Now, not a dollar of this money is fiat.
And let me call your attention to another thing: I think one of the
ablest men on this continent is a man by the name of McCauley—
T. B. McCauley. I have never met him. He is president of the Sun
Life Insurance Co. of Canada, and I have read a good deal of his
writings. Mr. McCauley said a year or two ago that what we needed
at that time in this country was an expansion of the currency by at
least a half billion dollars, which he said should go through the
Federal reserve system.
Now, I have no particular objection to doing this through the
Federal reserve system, provided we make it mandatory and make
them do it. In the Glass-Steagall bill we provided for an expansion
through the Federal reserve system. Unfortunately we limited it
to one year, which in my opinion killed it. Whether that is the
cause or not, I do know that it has not been used effectively. This
is the only chance we have, through the passage of legislation of this
kind, to bring about this expansion, restore commodity prices, and
restore normal conditions throughout the country.
Mr. McCauley said that formerly London was the money market
of the world and'gold was the standard. To-day, he said—this was
a year or two ago—New York is the money market and the American
dollar is the standard. We are not on a gold standard, technically
speaking. We are on an American dollar standard, and so is the rest
of the world.
Now, then, by increasing the number of American dollars in circulation we broaden that base, raise the level, if you please, in the
circulating medium, and start it to moving through the veins of our
economic body, and bring the patient back to a healthy condition.
Somebody said the other day that the reserve system was having
its troubles in finding just how to put the money into circulation if
they did expand. We have the most complete answer to that question of any question that has been asked. Our plan puts it in circulation by paying it to these service men in every nook and corner
of the United States, and they will put it into circulation overnight.
If you desire to adjourn, Mr. Chairman, I would like to continue
my argument in the morning.
Mr. RAINEY. There will be no objection to that. You have a few
minutes left.
Mr. PATMAN. Mr. Chairman, Mr. Harry Knable is here and wants
five minutes. We have promised him that time, and I understand
that he can not be here at any other time. If you would like to continue in the morning, why not give Mr. Knable the remaining time
Mr. RANKIN. That will be all right with me.



Mr. PATMAN. To-morrow morning we have three economists whom
we have promised time. We are really under obligations to give them
time first. I wish the committee would take that into consideration.
Mr. RANKIN. I will be glad to finish my remarks after they finish
if it is all right with the committee and with Mr. Patman.
Mr. RAINEY. Mr. Patman is controlling the time absolutely.
Mr. PATMAN. Since we are here, I think we can convenience the
people from the outside.
Mr. HAWLEY. Mr. Rankin can finish his argument and let it be
added to his remarks of this morning, in the hearing.
Mr. RANKIN. Yes; if these economists or people from out of town
want to go on first, I will follow them and let my remarks connect
at the same point in the hearing.
I thank the committee for this opportunity.
Mr. PATMAN. A few days ago the Ways and Means Committee
promised a gentleman from Philadelphia five minutes' time to-day,
and I would be glad if the committee would hear him now.
Mr. RAINEY. He will have to conclude in five minutes.
Mr. PATMAN. Yes; he will conclude in five minutes. Mr. Knable,
of Philadelphia.
Mr. KNABLE. Mr. Chairman and members of the Ways and Means
Committee, I do not come here to represent any organizations, either
political organizations or service men's organizations. I come here
to represent my five brothers who served in the World War—each
and every one of them wounded.
We ourselves ask you to give us nothing. I have our war-risk
insurance bonds here, and I assure you that we would give these
back to the United States Government if we thought that the passage
of this bonus act at this time would hurt the Treasury in any way.
If you could travel throughout these United States and see the
miseries of my fellow buddies, you would not hesitate to pass this
bill. I look around this room and I see my buddies who fought with
me in those six battles on the other side, and who were wounded.
They are not asking you for any compensation or for any pay for
what they did. Far be it from me to ask for this compensation for
myself. We want you to help us and to help yourselves.
I assure you that if you give this money to these service men, they
will not have it over two weeks. They will take it out and spend it.
They will pay for their homes; they will pay off those mortgages
and the other debts that they have acquired since they came home
from the service.
I remember when we left here in 1917, with tke bands playing and
the trumpets sounding; and when we returned and came up the
Hudson, with General Pershing—the last division that came home—
how they applauded us. But where are those people to-day to
applaud us? They do not stand at the corner with those trumpets
in their mouths and say, "Boys, we have a job for you."
These boys do not want charity, gentlemen. They do not want
you to give them anything. They want mercy; they want food.
It is in your hands to give these to them.



I am not going to stand here and burden you with a lot of argument.
I am not going to cite figures to you. I am going to plead to you for
these service men. Please put this bill out on the floor. You have
this piece of legislation in your hands. It is a sound piece of legislation. There is nothing radical in it. We want nothing radical.
Every service man who fought for his country in 1917 is still ready
to-day to fight for his country; and if war should be declared tomorrow you would have 14 Knable boys ready to go across to fight for
our country.
We love our flag and we would do anything to help our country.
We ask you to help these service men that are down.
With reference to my friend Stevens, the 90-day wonder, I want to
say to you that he does not know what hunger means. He has
never experienced it. He has never seen these boys go out. I just
spoke to a boy here who said, "Can you let me have .25 cents to eat
with?" He is a service man. Why should he ask for something to
eat? This country owes him a living. He is willing to work. He is
sound. He is fit.
I am asking you to pass this legislation out of your committee and
put it on the floor, and if the President vetoes it, pass it over his veto.
I thank you.
Mr. RAINEY. The committee will stand adjourned until 10 o'clock
to-morrow morning.
(Thereupon the committee adjourned until to-morrow, Thursday,
April 14, 1932, at 10 o'clock, a. m.)



Washington, D. C.
The committee met at 10 o'clock, a. m., Hon. Charles R. Crisp
(acting chairman) presiding.
The ACTING CHAIRMAN. The committee will please come to order.
Mr. PATMAN. Mr. Chairman, before introducing the witnesses
this morning I would like to invite the committee's attention to
several thousand telegrams that I have received since yesterday
morning from every section of the Nation, expecially from small
business men, small merchants all over the country. It is true that
we have doctors, lawyers, and people in every kind of business asking
for the passage of this legislation. For instance, here is one from
Muncie, Ind., that has several thousand names on it, signed by not
only veterans but practically every merchant in town. Here is one
from Fort Lyon, Colo., the same way; Pittsburgh, Pa., with many
thousands of names; Columbia, S. C , and others.
I have received, the last few days, hundreds of telegrams; not only
from citizens, firms, and organizations of the State of Texas, but from
American Legion posts and others throughout the Nation, indorsing
the bill to pay the remainder due on the adjusted-service certificates,
and I would like to have the privilege of inserting in the record at this
point the names and addresses of the signers of these telegrams, or
merely give the names of the places from which many of the telegrams
were received.
The ACTING CHAIRMAN. Without objection, that may be done.
The list referred to follows:

Chas. M. Coken.
M. C. Lain.
Troy White.
C. F. Ward.
J. C. Carpenter.
D. T. Davidson.
N. H. Croner.
Jess M. Cashen.
Dr. W. N Manning.
J. A. Stephens.
S. B. Wilhite.
Masters & Thomas.
O. A. Threasher.
H. L. Graham.
John M Ellis:
C. C. Mason.
C M Green.

E. H. Millhowre.
R. S. Smith.
J. M. Steel.
Tom Gates.
G. A. Crow.
A. P. Johnson.
Ike Coker.
Green Dickson.
Jack Cross, district clerk.
Dewitt Huckebee.
Robt. Thacker.
C. L. Duncan.
J. A. Glass.
Chas Grisson.
C. E. Smith.
P. E. Wallace, superintendent of



B. T. Smith.
Sam Murray.
Auby Redfearn.
John Merritt.
Wallace McClung.
Bill Byrd.
Slim May.
Fraak Dubose.
Green H. Riddle.
J. D. McClung.
Bill Haggard.
John Willis.
Marshall Hartliae.
O. R. Huddleston.
J. G. McClintock.
Bob Whitaker.
John Leftwish.
J. Daniel.
C. M. Rogers, 222 service station.
G. W. Cross, Mount Pleasant Times.
Brock's service station.

Mount Pleasant laundry.
Homer Hamilton.
James grocery.
Hon. MurmanMilbanks, county judge.
Grant's store.
Kirk barber shop.
Strother paint shop.
W. H. Madden blacksmith shop.
Ned Austin Cafe*.
Wilkes Grain Co.
Mack McCarty service station.
Bullington drug store.
Barrett & Neugent restaurant.
Lides cash store.
J. A. Engram & Co.
T. O. Johnson grocery store.
E. L. Riddle Furniture Co.
Presley Grain Co.
Morgan & Jaggers market.
Jack Jessup Post, No. 210.
Hays Bros.


H. V. Jaynes.
Joe H. Walston.
Sam Wolover.
Geo. R. Herrin.
Dr. A. C. Calvert.
J. A. Carson.
G. W. Yarbrough.
R. A. Corley.
Lee Roy Barrow.
Ed Cohagan.
Waller Upchurch.
Ernest Brocher.
Leland M. Johnson.
Pride & Ward.
L. D. Parks, Safeway Stores.
Ward Brothers.
R. W. Walker.
Roy Wimberly, Doctor Pepper Bottling Co.
S. T. Hall.
Roy E. Clonts.
R. O. Phillip.
J. W. Horton.
E. J. Roberts, Texas-Louisiana Power
W. Alrimley.
J. D. Stovole & Sons.
Carson Eddum.
Aubrey D. Lynch.
Russell Shires.
S. R. Green.

M, L. Morton.
H. Devand.
Lester Merrett Graner.
J. H. Walston.
W. D. Bateman, Ford sales service.
G. E. Cantrell.
R. E. Sparkman.
L. W. Rienzi.
John Samuel Hill.
R. T. Hickman.
R. M. Carmichael.
Fred Harvey.
D. W. Yarbrough.
Joe Monpzshy.
W. R. Wallace.
D. L. Milburn.
J. T. Price.
Walter O. Sill.
W. T. Ford.
W. P. Garrett.
W. G. Taylor.
Italy News Herald.
W. H. Demo way.
E. C. Still.
Willis Leington.
J. K. Price.
Roger Harris.
J. G. Willis, superintendent of schools;
Jim Ward.
Gus Jarratt.
O. O. Hanly.


Tri-County Lumber Co.
Spur Produce Co.
Hargrove hatchery.
Webber Williams.
Spur creamery.
G. C. Williams.
D. S. Granberry, secretary, Spur
J. E. Berry.
Retail Merchants Association.
M. C. Briley.
Boyd M. Williams Post, American
Spur Motor Co.
Spur Laundry Co.
W. B. Linz, Spur Chamber of Commerce.




L. H. Morrison.
E. E. Bryant.
Chas. Balleu.
James Fred Cook.
Ben Landreth.
C. R. Martin.
C. H. Joyce.
E. W. Camp.
E. B. Burns.
J. L. Alford.
J. L. Smith.
R. W. Potter.
A. M. Wolf.
W. F. Skillman.
Dr. J. R. Dill.
C. W. Marsh.
A. Myrick.
C. F. Hill.
Will Owens.
William A. Riden.
L. B. Bishop.
Rev. G. F. Mickey.
W. H. Ware.
E. Sprayberry.
C. A. Chastain.
L. I. Cox.
A. C. Wolf.
Clarence R. Martin.
Oscar White.
Thomas Evans.
Jim Beard.
Guy R. Brougdon.
Wesley Carroll.
J. G. Sims.
John F. Millwee.
Rev. Chas. B. Diltz.
Jesse F. Guynes.
L. C. Cash.
M. S. Duncan.
Rev. R. Neal Greer.
A. E. Gollman.
W. A. Ayers.
M. E. Crossley.
Chas. L. Smith.
John H. Martin.
Bert Kent.
C. A. Barber.
F. B. Hughes.
C. F. Thomas.
Dr. R. W. Crawford.
Cecil Shults.

Oscar Starkey.
Jay Koonce.
Dr. F. C. Payne.
C. G. Shultz.
W. S. Carter.
Joe B. Me Adams.
J. O. Arnold.
Sam L. Clark.
R. R. Knott.
Doss Alexander.
Bob Teston.
B. A. Downs.
C. L. Embry.
Dr. T. B. Busbee.
Heck Higginbotham.
Hubert Jones.
J. H. Nunnally.
Alvah B. Gattis.
J. W. Smith.
Cyrus T. Goss.
M. S. SeUers.
J. R. Bucy.
E. C. Parker.
G. E. McDonald.
S. D. Johnson.
Leslie Boase.
P. 0. Boase.
Thimas B. Shipman.
Pates Variety Store.
Wm. A. Donica and Bailey A. Donica.
Star Trading Co.
City Drug Store.
Higginbotham Bros. & Co.
Marshall Homer Crossnoe.
H. S. Childress.
Cecil L. Courtright.
A. N. Snearly, county commissioner.
W. E. Roark, manager Texas-Louisiana
Power Co.
J. F. Robertson, secretary chamber of
Dick Brown Post Commander.
Montgomery Co. (Inc.), C. E. Joyce.
Continental State Bank.
uick Service Cafe".
. B. Harris, Star Produce Co.
Bussbee & Falls, Sinclair service.
E. F. Agnew & Son.
Alt Shults.
Tom Butler, Butler's Battery Station.
Tom Proctor, Wood Chevrolet Co.



J. D. Browning.
Joe Franklin.
E. G. Brown.
Walter A. Guy.
David Peel.
U. Q. Ashley.
Wm. M. Bluntzer.
Dr. N. D. Carter.
Dr. J. V. Blair.
Arthur Brown.
Ben A. Ligon.
J. L. Farren.

Sam Braslau.
H. F. DeSpain.
Bruce Collins.
L. L. Payne.
James Bagnall.
R. C. Nolte.
Dr. Geo. T. Lusk.
H. F. Nolte.
Dr. M. J. Perkins.
Will W. Walker.
T. R. Joseph.
E. W. Walberg.



John Nicols.
Doctors Heaney and Nast.
M. McCrorey.
Eidson Dry Goods Co.
M. Munifei.
Nueces Shoe Repairing Co.
D. H. Hollmark.
Rex-Mex. Newstand, C. M. Rodriguez.
Arthur R. Wier.
Leo Bluntzer Grain Co.
R. F. Forstner.
Edward Ball Harney.
E. M. Richardson.
H. E. Woodruff Construction Co.
John P. Pichinson.
Gulf Hudson Essex Co.
Clifford F. Kenney.
Harry Archer Auto Co.
Noble B. Dougherty.
T. V. Cobb, South End Drug Co.
Joseph Francis McCagty.
Winerich Motor Co.
Robt. L. Fenner and Chas. L. Rankin.

Herbert Helms.
Homer Abbott.
A. N. Hodges.
G. V. Koons.
Ed E. Wehba.
H. Doolen.
John W. Cooper.
Wm. Perry.
Jim Jo Cobb.
E. J. Lander.
Isaac B. Jones.
Elmo L. Phillips.

F. E. Stewart.
F. J. Turner.
S. H. Jones.
L. P. Pope.
Milton W. Banta.
James M. Allen.
Ralph A. Caldwell.
T. A. Landers, The McLean News.
Marcus Keep Landers.
Meadows Cafe.
Palace Cafe, Bill Buttley.

John Grey.
Roy L. Snodgrass.
Walter G. Collins.
L. G. Mathews.
Felton Collins Grocery Co.

J. A. Adans, Arwin Drug Co.
Robt. A. Tossett, commander American
Legion post, American Legion Post,
No. 118.

Dewey Merce.
Bub Wright.
Frank M. Yers.
Ferrell Dean.
E. D. McCarty.
R. L. Griffith.
J. D. Wood.
C. A. Johnson.
Wa. C. Thomas.
Homer Stimson.
J. W. Houser.
C. J. Atts.
J. W. Terrell.
Bill Sellers.
D. H. Knowell.
Frank Honan.
J. N. Banks.
R. Conine.
Jones Adams.
W. Rold.
A. W. Wood.
Bill Jenkins.
Jack Nelson.
P. D. Terrell.
Oscar Wester.
Tom Paulk.
Bob Ebbs.
Roy Loring.
Roy Rodgers.
C. E. Seely.
E. L. Amis.

E. A. Howell.
J. W. Pool.
R. M. Dunn.
Hester Lewis.
B. N. Fishberg.
J. Roy Smith.
G. G. Smith.
C. W. Lane.
W. M. Staggs.
E. L. Smith.
Melvin Moore.
E. M. Cline.
Walter Westen.
C. C. Edwards.
J. D. Lloyd.
R. S. Douglas.
M. R. Tumlinson.
Carl G. Miller.
Eldred Sherrill.
Robert W. Langloe.
Dr. T. N. Roach.
R. P. McCasland.
Maurice Houser.
Malcolm Young.
E. W. Gilliland.
Scott McCarter.
George J. Nixon.
R. R. bcott, jr.
H. G. Tumlinson.
Arlan Sherrill.
L. E. Johnson.


J. W. Calhoun.
N. B. Watkins.
J. D. Gilliland.
W. C. Winner.
M. E. Travis.
Clarence Noel.
T. H. Lamison.
A. Fritzerbach.


Rothwell Gunter.
Goebel Templet on.
N. Burton, Burton Motor Co.
J. M. Cookston, Cookston Hotel.
C. H. Burton, Burton Motor Co.
A. N. Neil Produce Co.
Royce City Funeral Home.
E. L. Switzer, Royce City News-Timesj

Otto Glass.
Joseph Dack.
Ben Davis.
Robt. W. Meier.
Bell Gieseck.
W. M. Falkner.
Hugo Chollett.
E. 0. Hensel.
Emil Meier.
W. T. Knox.
H. L. Gist.
W. R. Irby.
Maxie A. Mayer.
M. C. Pittman.
Neal McKinnon.
Otto Sipperlin.
Fred Beckhansen.
Charlie H. Arnold.
Alber A. Kasner, jr.

A. A. Balhorn.
Walter Hargrove.
Louise F. Moeller.
Chas. Devall, jr.
Ennis Tittle, sheriff.
Hon. R. T. Wilkerson.
Bolger Motor Co.
Rutherford's Drug Store.
Hightower Inman Co.
St. Clair's grocery.
J. Mai Moore, cashier First National
City Cafe.
Clinton's market and grocery.
Lowry Furniture Co.
Burns & Shurtleff.
Hester Chevrolet Co.
Covington stores.

G. L. Polk.
Jack Ramsey.
A. W. Price.
A. H. Bakke.
Homer Porter.
M. J. Hoff.
O. E. Hoff.
Floyd Moffatt
R. H. Rogstah.
O. G. Olson.
Fied D. Ragsdale.

E. R. Stanford.
H. B. Dahl.
Andrew Dahl.
Anton Amundsor.
John Dodoger.
C. A. Oebeck.
G. S. Amonson.
Oscar Gangshie.
Albert C. Johnson.
Belvin Pederson.

H. L. Payne.
Ed Payne.
D. M. Walker.
J. E. Black.
E. B. Autry.
A. D. Wood.
E. O. Wasson.
Dr. W. B. Seale.
Clenton Caldwell.
G. M. Lauier.
B. M. Syfrett.
P. W. Barkley.

R. D. Barkley.
R. P. Carrington.
C. O. St. John.
Clark Newsome.
Dr. D. C. Carrington.
Jones Motor Co.
Autrey and Walton.
Watton Caf6.
O. K. Pruitt and J. D. Martin.
T. B. Lynch, post adjutant.
Cundiff & Evans.

W. M. Gourley.
Rutledge Bros.
E. L. Grimes.
Touchstone Motor Co.
The Bank of Chillicothe.

V. B. Hill, commander American Legion Post No. 320.
C. E. Carlock, Chillicothe Cotton Oil



L. E. Collin.
Mike Shea.
J. B. Colcote.
J. E. Risner.
E. L. Bells.
E. S. Remmer.
H. E. Wicker.
E. G. Wood.
W. R. McGraw.
Jno. H. Reynolds.

M. W. Williams.
Edison Sorensen.
W. B. Traylor.
J. H. Knudson.
John S. Techions.
Fred Underwood.
Carroll McClennen.
Norwood McPherson.

w Archie


Frank Antilley.
T. C. Campbell.
Mayfield Garage.
Royal Candy Kitchen.
Nelson Davenport Agency.
Olympia Confectionery.

Doyle's Cafe.
Rogers grocery.
D. & W. Tire Co.
Linton Drug Co.
S. & Q. Clothiers. W. T. Wilson Transfer Co.

Jay Mason, Chevrolet.
B. A. Cumbie, tax assessor.
World War Veterans of Kent County,

First National Bank, by Thos. Fowler,
Bryant Link Co., by Jno. Smith.


Wm. C. Ratliff.
J. W. Winn.
Edd P. Appling.
A. E. Mullin.
Edd Justice.
Field's drug store.
Bubrey Wilson.

Watson Cafe and Meat Market.
Stuart Shurley.
Forreston State Bank.
Forreston Cotton Yard.
Godfrey's service station.
F. E. Vass.

B. L. Dahl.
A. A. Miller.
W. W. Windhome.
Lenois Komegay.
A. L. Bronstad.
D. C. Caraway.
Joe Wise.
E. E. Shaw.
W. K. Golden.
D. J. Thomas, jr.
E. C. Ringner.
S. M. Ringness.
P. 0. Olson.
E. H. Schow.
F. E. Lynch.
J. W. Caraway.
Jno. H. Neel.
O. L. Stuart.

J. T. Hill.
Dr. C. O. Brown.
Jack P. Carter.
Alex S. Anderson.
Dr. T. C. Coston.
F. K. Mixon.
N. M. Colwick.
D. C. Holverson.
Hardy Youree.
Robt. L. Baldridge.
Oscar J. Rea.
G. E. McColeb.
J. W. Denton.
E. R. Cottle, Cottle Produce Co.
J. S. Standefer, Standefer Chevrolet Co.
J. G. Lane, manager A. & P. stores.
Clifton Mercantile Co.

Thad Anderson.
Frank Chaney.
Ivan McNatt.
Homer Prim.
Ira Lewis.
Charles Stem.

Bill Mayes.
Leon Hess.
Frank Hobbs.
Bruce Williams, commander American
Legion Post No. 1.

Ruby Levy.
C. A. Meisch.
Dave Levy.

Ray E. Brackett.
City Hall Cafe.
Texas Furniture Co.




Way man Stacy.
H. W. Sewell, Sewell's garage.
A. E. Hassler.

Old Corner Drug Store.
Miles Wasson Weir Riche Post No. 89,
American Legion, by M. E. Agee.

H. O. Whitt.
McNeil Wylie.
T. H. Rogge.
B. P. Williams.

Bronte Welfare Association.
Geo. Scott Post, No. 394, American

John T. Canpe.
John Debose.
R. S. Crowder.
Ed Baca.
R. L. Jonan.
R. E. Scott.
D. P. Slay.
Dan Asbury.
J. F. Robertson.

Grover Stubbs.
J. F. Voltino.
C. J. Grommeck.
John W. Montford.
Tony Beinhauser.
Howard Bornhill, post commander,
American Legion.
Paul G. Klawritter.
Howard Barnhill.

C. C. McClure.
K. L. Canning.
C. H. Schatt.
H. M. Mason.
D. E. Cox.
Dr. P. C. Anders.
W. R. Logan.
G. D. Allen.
W. R. Childers.
S. G. Miller.
O. C. Bailey.
Watt Griffith.
Geo. W. Newman.

Jerry Mudgett.
R. C. McGilvery.
Verdal Webster.
Clyde Applewhite.
Taylor Grocery.
Piggly-Wiggly Grocery.
L. D. Harris Insurance Co.
Shick filling station.
Greer Drug Co.
Lockney Drug Co.
Lockney Implement Co.
Patterson Thornton Gin.

T. T. Walker.
W. B. Ashby.
A. B. Pucket.
A. L. Taylor.
C. M. Hibler.
G. W. Horton.
J. S. Ballew.
C. B. Williams.
John Haltmar.
J. E. House.
Geo. Griffin.
S. S. Allen.

Burel Park.
G. M. Oliver.
R. L. McConnell.
C. M. Oliver.
W. T. Vqgl.
J. P. McConnell.
Eddie L. Ragsdale.
W. T. Terry, county tax assessor.
Hon. R. E. Gray, county judge.
Hugh W. Henry.
W. G. Kirkpatrick.
City Drug Store.

Otto Jones.
J. T. Street.
Van Clark.
T. S. Sales.
W. D. Shelton.
J. B. Green.
C. C. Clements.

S. L. Myrick.
Louis F. Bell.
Dr. J. D. Simpson.
Herbert J. Proud.
James H. Powers.
J. Wade Potter.



Frank Barta.
L. D. Hill.
M. C. Cooke.
Ed Thompson.
L. C. Salm.
Chas. Bartos.
E. G. Ford.
J. J. Jousan.
T. B. Sullivan.
H. G. Blackman.

A. B. Smith.
Lad J. Jubala.
E. J. Huiska.
Frank Cervenka.
John H. Jameek.
Joe J. Jubla.
Ray Engvall.
G. M. Gilstrap.
G. E. Holmstrom.

G. F. Vlha.
E. R. Cannan.
Harry Sharpe.
G. Y. Loggins.
W. V. Martin.
T. S. Crews.
W. G. Curson.
Burt Burridge.
Fred J. Burridge.
Hon. A. E. Masterson.
Hon. E. E. Cayton Evans.
G. C. Davis, county clerk.

E. P. Middleton, city market.
- W. S. Sproles, jr., tax assessor.
G. B. Harris, The Angleton Times.
R. G. Bunhart.
J. B. Jackson.
Neal Giesecke, county commissioner.
J. G. Jackson, tax collector.
F. T. Waylos, county auditor.
M. Glasscock, county school superintendent.
E. L. Boston.

E. J. Kaiser.
I. J. Elmore.
H. O. Odler.
C. E. Nickels.
E. Q. Tynes.
E. G. Fortune.
C. C. Lee.
H. A. Palmie.
Ernest Horney.
W. C. Wiggins.
Walter Hazen.

W. E. Kenny more.
Fred Zoeller.
H. W. Mclver.
H. C. Ramdtree.
H. A. Paine, jr.
D. Dewitt Hogue.
Dr. E. W. Christinson.
C. C. Lee, adjutant, American Legion
Post, No. 228.
McDonald Chevrolet Co., by L. McDonald.

Tom Foster.
L. L. Smith.
J. P. Fry.
J. C. Gross.
M. F. Shaw.
Tom Collins.
D. S. Perkins.
H. E. Payne.
F. M. Frick.
Luther Amason.
John C. McLoughlin.
J. W. Addington.
F. C. Puckwood.
J. Elmer Dillig.

A. J. Denman.
H. F. Morsman.
J. T. McEnteggart.
E. V. McLaughlin.
Talmage E. Andrews.
Newton James Baxter.
Bishop Drug Co.
The Emporium, A. B. Brown.
Changle Market..
City Garage.
Panhandle Cleaners, R. L. Neely.
Horn Allen Co.
G. H. Davis, Spot Cash Store.

R. J. Thomas.
T. P. Reeder.
J. E. Eddy.
C. C. Ribble.
O. W. Orr.
John Rasor.
J. N. Johnson.
Vernon Pyle.
J. C. Perry.

T. L. Dorris.
James Payne.
Inez Gray.
W. E. Revis.
W. Allen.
Z. W. Smith.
D. C. Greer.
Dr. J. M. Hill.
E. C. Martin.

O. R. Boman.
Claud W. Lyon.
John C. Morrow.
Otis Ross.
A. W. Lilly.
E. E. Smith.
S. E. Crosnoe.
Paul Shirley.
S. D. Simpson.
James Darroh.
A. J. Manner.
R. W. Mattheny.
S. A. McDonalds
W. G. Griffin.
A. Y. Beverly.
A. Y. Beverly.
C. T. Schlugal.
Dr. R. L. Kincaid.

W. B. Tysinger.
W. B. Franklin.
Hines Clarke Market.
Fergeson Bros.
Self Motor Co.
M. Store Grocery.
John E. Long, adjutant American Legion Post, No. 130.
S. Moor, president Taxpayers League.
The Lanier Hardware Co.
Allen R. Sanders.
Nuway Cafe.
W. S. Young & Co.
Fex Bros. Grocery.
Farmers Cooperative Gin Co., by H. E.
Davis, treasurer; S. Moore, president; J. T. Kinney, director; E. P.
Sandifer, director.

R. F. Bluhm.
J. F. Hair.
G. C. Potts.
J. L. Webb.
C. W. Deats.
R. L. Nail.
O. S. Jones.
Roy Carter.
V. L. Skeen.
W. W. Davis.
D. C. Willis.
R. W. Brown.
C. L. Bryant.
H. W. Croft.
W. M. Bonner.
V. E. Jones.
J. P. Warren.
R. L. Wolf.
G. C. Dunham.
Jess Slaughter.
H. C. Jenkins.
R. H. McNew.
B. W. Welch.
M. C. Stulting.

John B. Colin.
R. C. Pyeatt.
A. B. Sisson.
W. D. Corneilson.
Frank Hefley.
R. A. Millsop.
E. W. Anderson.
W. R. Douglass.
C. S. Blomshield.
James T. Brooks.
W. W. Brockett.
C. B. Sullivan.
Jim Recknabel.
Chas. C. Carter.
H. L. Bohanon.
L. D. Davenport.
Frank W. Jones.
Andrew Merick.
Thomas A. Slaughter.
J..E. Payne.
W. R. King.
C. L. Wasson.
Robert Winn.

B. J. Leedy.
H. A. Smith.
D. V. Smith.
S. R. Ramsey.
T. J. Bovell.
R. P. Lee.
Roy Nettles.
Sam Park.
M. C. Finch.
Happy Smith.
K. C. Holmes.
W. E. Price.
H. M. Larkin.
J. O. Johnson.
Claude Conway.
W. S. Taylor.
A. M. Cade.
T. J. Bovell.
Jake Wilonsky.
Emmitt Fleming.


J. O. Patterson.
Sam Holland.
R. R. Luttrell.
Frank McGlaun.
Leonard L. Craft.
J. B. McPherson/
Jeff Connally.
J. C. Hannah.
A. N. Lehman.
W. N. Thornhill.
Earl Randall Quinsey.
C. E. Woodworth.
J. S. Wells & Sons.
Thomas Battery Co.
Frank G. West.
T. A. Nabors.
S. P. Alexander.
J. S. Huddleston.
S. E. Tabor.
R. Q. Carroll.



M. Q. O'Neal.
Geo. Willard.
W. R. Shelby.
Dr. Wm. M. Stykes.

W. A. Gray.
W. E. Garroutt.
W. M. Douglas.
W. L. Farmer.

W. H. Brecheen.
J. A. Brewer.
Pat Malone.
H. 0. Himmel.
Jim Conlan.
C. A. Scott.
J. M. Wade.
R. U. Counts.
Dan Spencer.
Joe Bass.
J. C. Taylor.
Travis Rattan.
E. B. Gregg.
Mayor Eugene Logan.
John O. Colquett.
R. S. Jacques.
J. W. Pigman.
F. R. Thomas Hardware Co.
Ben N. Richards.
Keith Synder.

Dr. J. H. Croft.
J. R. Gussenhaven.
Dr. J. P. Powell.
Judge F. McKeil.
W. L. Hamilton.
Caldwell Bakery.
Bamberger Store.
Western Tire Co.
DeSoto Drug Co.
Schuart Grain Co.
Good Eats Bakery.
Ed Bishop, secretary chamber of cornmerce.
Coleman Jewelry Co.
Beall Sweet Shop.
M System Store.
DeSoto Hotel.
Me Gee Drug Store.
First National Bank.HAPPY, TEX.

W. L. Frost.
E. J. Bauer.
S. F. Sharpe.
Tom Cope.
Fred Holt.
J. M. Evans.
Ed Jones.
R. C. Roberts.
F. O. Goen.
F. H. Bauer.
C. A. Miller.
A. L. Sims.
E. E. Cowan.
H. R. Stone.
Tom Bondy.
M. C. CoUett.
W. M. Laxson.
J. G. Ponder.
J. H. Stephenson.
Charles Morgan.
Aldan C. Mann.
Clifford Bellas.

G. Tillman Webb.
Mathew J. Sims.
Thomas O. Evans.
John L. Hammond.
D. K. McDonall.
Geo. Schaffer.
H. F. Walters.
Andy J. Greenfield.
H. F. Ratjen.
Leslie E. Tolbert.
Service Barber Shop.
The Happy Mill.
Burgess Hardware Co.
Happy Motor Co.
City Drug Store, by Jack Rogers.
Conner Drug Store.
Vernon Guimarin Implement Co.
H. D. Hagood.
L. H. Turner.
R. L. Walters, manager Farmers Grain?
& Elevator Co.

Johnnie Brown.
R. P. McClellan.
A. G. Wartman.
J. A. Robinson.
W. L. Leroy.
G. G. Perry.
R. E. Shaw.
John Fink.
H. P. Carey.
Nick Lanza.
Ted Lyons.
C. B. Hamlet.
M. E. Weaver.
J. M. McCue.

Arthur Rogers.
B. T. Benson.
V. E. Luttrell.
John D. Coffman.
Mrs. C. D. Langley.
Lee A. Davis.
R. W. Walker.
J. E. Warren.
John C. Blair.
Edward Day.
Royall R. Watkins.
Verge Lester.
Horace T. Scott.
C. L. Harrell.

Geo. Theophilako.
W. H. Marshall.
H. B. Livingston.
H. W. Schnittker.
Mrs. J. R. Tidwell.
Day Night Pawn Shop.

Uncle Jake Public Pawn Shop.
Klar & Wmterman.
Savage Washing Machine.
The Sports Center.
Victor Palos Colman Baking Co.

R. T. Tarver.
Dock Havens.
Ralph Vorden.
J. J. Watts.
J. J. Burns.
Walter L. Taylon.
A. S. Purnell.
E. L. Hurst.
J. L. York.
W. M. Blackwood.
F. L. Scott.
R. L. Hill.
A. C. Hooper.
D. L. Wood.
J. C. Montgomery.
C. F. Winder.
R. C. Strickland.
G. N. Newman.
E. A. Harrison.
Joe Weaks.
W. F. Brown.
W. F. Hester.
A. G. Davis.
Turner Collins.
J. L. Brown.
A. L. Cox.
T. W. Moore.
J. J. Wallace.
W. L. Miller.
J. J. Jones.
Willie McCullock.
Floyd Rowland.
Jack Henderson.
Carrol Carr.
W. A. Strickland.
P. B. Hollis.
W. A. Woods.

John L. Scott.
A. J. Beedy.
G. A. Graham.
Guy Mathews.
Grady Pruitt.
J. M. Kinyon,
C. H. Hickman.
Wesley Lackey.
A. C. Ward.
C. W. Denny.
S. H. Hudson.
Alton Burleson.
Mark Jones.
Johnie Patton.
C. L. Taylor.
Loyd Kennedy.
C. R. Edward.
J. P. Morrow.
C. S. Crone.
B. R. Deaver.
S. L. Mcllroy.
E. V. Gill.
R. E. Rose.
J. E. Alexander.
S. L. Pierce.
H. J. Knox.
Tom Standefer.
D. T. Smith.
Gordon F. Morrow.
J. A. Monroe.
F. G. York.
W. A. Crosser.
J. P. Taylor.
Charlie Crone.
J. L. Mullinax.
Henry Cod.

Finlay & Baldridge.
J. R. Hocott.
R. H. Freen.
Haney & Catlett, produce.
W. W. Quick.
John L. Box.
Oscar Backland, feed and seed.
G. L. Sawards.
Lyford Grocery Co.
R. C. Morris Baking Co.
C. E. Horighton, service station.
E. W. Archer.

Robert & Blake, lumber.
Bowne Gin.
S. P. Heilson.
C. A. Jackson, grocery.
Louis Wood.
J. M. Oake.
Cleve Anserson.
I. C. Stalling.
Esalinas Grocery.
R. H. Haney.
L. E. Clement, grocery.

W. V. Mabry.

C. C. Kent.

A. B. Worsham, commander The Johnson Sowell Post.




Ernest L. Hunt.

Aubyn E. Clark, American Legioii Post,
No. 126.

Joe T. Morris.

Paul Walther, adjutant American Legion Post, No. 451.

J. R. Hopkins, commander American Legion Post, No. 90.

.M. Johnson, adjutant American Legion Post, No. 56.

J. W. Thigpen, commander American
Legion Post, No. 49.

Manis Moore,* adjutant American Legion Post, No. 49.


L. B. Cummings.

M. S. Patton, adjutant Fleming Post, No. 337.

W. M. Rutherford, commander Thorndale American Legion Post, No. 131.

Harry J. Leonard.

Arlington, Tex.
Terrell, Tex.
Lyford, Tex.
Memphis, Tex.
Lampasas, Tex.
Refugio, Tex.
Lometa, Tex.
George West, Tex.
Plainview, Tex.
Waxahachie, Tex.
Coleman, Tex.
Navasota, Tex.
San Antonio, Tex.
Deleon, Tex.
Thurber, Tex.
Harlingen, Tex.
West, Tex.
Honey Grove, Tex.
Kingsville, Tex.
Gonzales, Tex.
Wichita Falls, Tex.
Sunray, Tex.
Glenrose, Tex.
Liberty, Tex.
Schulenburg, Tex.
Electra, Tex.
Bife Springs, Tex.
Houston, Tex.
Spearman, Tex.
McCamey, Tex.

Fort Meade, Fla.
Tampa, Fla.
Wauchula, Fla.
North Miami, Fla.
Bushton, Kans.
Wamego, Kans.
Arkansas City, Kans.
Sheyenne, N. Dak.
Page, N. Dak.
Minot, N. Dak.
Hot Springs, S. Dak.
Peever, S. Dak.
Montrose, S. Dak.
Kennett, Mo.
Hannibal, Mo.
Caruthersville, Mo.
Paris, Mo.
Campbell, Mo.
St. Louis, Mo.
Zalma, Mo.
Smithville, Mo.
St. Clair, Mo.
Green City, Mo.
Pierce City, Mo.
Carthage, Mo.
Unionville, Mo.
Richmond, Ind.
Wooster, Ohio.
Versailles, Ohio.
Niles, Ohio.

Montrose, Colo.
Walsenburg, Colo.
New Castle, Colo.
Robinson, 111.
Coulterville, 111.
Urbana, 111.
Chicago, 111.
Atwater, Minn.
Frostburg, Md.
Belair, Md.
Reserve, La.
New Orleans, La.
Cranston, R. I.
Hot Springs, Va.
Superior, Wis.
Beaver, Dam., Wis.
Davis, Okla.
Ringgold, Ga.
Sylvester, Ga.
Augusta, Ga.
Bordentown, N. J.
Camden, N. J.
Moorestown, N. J.
Paterson, N. J.
S. Boston, Mass.
E. Boston, Mass.
Grass Lake, Mich.
Augusta, Mich.
Detroit, Mich.
St. Joseph, Mich.
Escanaba. Mich.
Wheeling, W. Va.
Welch, W. Va.
Bristow, Nebr.
Lyman, Nebr.
Castle Point, N. Y.
Rochester, N. Y.
Los Angeles, Calif.
Atwater, Calif.
Corono, Calif.
Ventura, Calif.
Ogden, Utah.
Sandy, Utah.
Elba, Ala.
Moulton, Ala.
Heflin, Ala.
Fort Payne, Ala.
Brantley, Ala.
Foley, Ala.

Russellville, Ky.
Pineville, Ky.
Helena, Ark.
Okean, Ark.
Gastonia, N. C.
Franklinton, N. C.
Hendersonville, N. C.
Hamlet, N. C.
Spring Hope, N. C.
Rural Hall, N. C.
Louisburg, N. C.
Durham, N. C.
Toecane, N. C.
Wilmington, N. C.
Morganton, N. C.
Concord, N. C.
Reidsville, N. C.
Asheboro, N. C.
Lincolnton, N. C.
Columbia, S. C.
Charleston, S. C.
Bennettsville, S. C.
Crossville, Tenn.
Fayetteville, Tenn.
Cookeville, Tenn.
Loudon, Tenn.
Brownsville, Tenn.
Waverly, Tenn.
Camden, Tenn.
Kingston, Tenn.
Chattanooga, Tenn.
Lexington, Tenn.
Paris, Tenn.
Clarksville, Tenn.
Union City, Tenn.
Pittsburgh, Pa.
Trafford, Pa.
Philadelphia, Pa.
Pit cairn, Pa.
Carbondale, Pa.
Shenandoah, Pa.
Shamokin, Pa.
Wilkes-Barre, Pa.
Milton, Pa.
Chester, Pa.
Albion Station, Pa.
Portage, Pa.
Lititz, Pa.


Robt. E. Reagan, Dallas, Tex.
A. L. Clifton, Dallas, Tex.
B. T. George, Beaumont, Tex.
L. A. Eberle, Sweetwater, Tex.
Sam Kockos, Dallas, Tex.
J. W. Monk, Donna, Tex.
Ashley Guy, Mineral Wells, Tex.
Harry P. Savage, Waco, Tex.
F. B. Birdsong, Plain view, Tex.
J. F. Bozka, Hallettsville, Tex.
Sam Devall, Hallettsville, Tex.
J. C. Roby, Graham, Tex.
James F. Elliott, San Antonio, Tex.
L. W. Crow, San Antonio, Tex.
H. H. Hunt, Sinton, Tex.
Joseph Johnson, Jefferson, Tex.




Hub Lemmon, Jefferson, Tex.
Mrs. Mary B. Johnson, Paris, Tex.
Conleys Cleaners, Dyers & Hatters, Sweet water, Tex.
Safeway Store No. 18, Sweetwater, Tex.
Alamo American Legion Post, San Antonio, Tex.
H. M. Mason, Lockney, Tex.
American Legion Auxiliary, Mount Pleasant, Tex.
Eugene Williams, executive committeeman first district, Dept. of Texas, the
American Legion, Sulphur Springs, Tex.
Ex-service men of Milam County, Rockdale, Tex.
T. H. Chilton, commander United Spanish War Veterans, Sweetwater, Texas.
Jas. C. Thompson, commander Disabled American Veterans Chapter, Tyler, Tex.
W. G. Streckert, Brownwood, Te.x.
G. L. Keene and 113 other citizens of Goose Creek, Baytown and Pelly, Tex.
W. I. Witherspoon and 75 other veterans and citizens of McAllen, Tex.
A. W. Scheller and 13 other World War Veterans of Bonus, Tex.
Bill Moss and 20 other citizens of Sinton, Tex.
J. C. Jackson and 13 other citizens of Fort Worth, Tex.
Emerson Wells and nine other citizens of Dallas, Tex.
T. H. Kerr and three other ex-service men of San Antonio, Tex.
L. A. Fonville and four other citizens of Dallas, Tex.
Howard R. Rogers and 23 other ex-service men, of Colorado, Tex.
L. Kinghorn and 22 other ex-service men and citizens of Odem, Tex.
J. H. Weet and 26 other ex-service men and citizens of New Waverly, Tex.
Jerry Clark and 99 other veterans and business men of Van Horn, Tex.
E. H. Krohn, commander Disabled American Veterans Chapter No. 10, El Paso,
Geo. D. Dicken, executive committeeman, first district department of Texas,
the American Legion, Pittsburg, Tex.
B. L. Lambeth, McNeil, Ark.
G. F. Baldwin and G. R. Robinson, Texarkana, Ark.
B. M. Shelton, Texarkana, Ark.
Carl Miller, treasurer, and Bryan Westerfield, adjutant, Disabled American
Veterans Chapter, Texarkana, Ark.
Irvin E. Fischer, Reading, Pa.
Chas. B. McNally, Philadelphia, Pa.
Geo. J. Churchill, Pittsburgh, Pa.
Charles A. Fischer, Philadelphia, Pa.
One hundred and thirty-four business men of Philadelphia, Pa.
Elwood N. Hagerling, Pittsburgh, Pa.
John S. Slattery, New York, N. Y.
Ladies Auxiliary of the Veterans of Foreign Wars Post, No. 1895, New York,
N. Y.
Royal R. Neira, New York, N. Y.
J. A. Brady, Buffalo, N. Y.
Harry L. King and eight other World War veterans of New York, N. Y.
Davis L. Strain, Greensboro, N. C.
H. C. Renegar and Dan B. King, Sanford, N. C.
A. B. Weathersbee, State commander, Disabled American Veterans, Belton, S. C.
L. A. Walker, Charleston, S. C.
M. T. O'Neal and six other citizens of Anderson, S. C.
Oscar Ladwig, Lakota, N. Dak.
L. G. Block, Montrose, S. Dak.
Ex-service men of Ethan, S. Dak.
Robert A. Shiflett, Bristol, Tenn.
J. B. Cross and 33 other legionnaires of Harriman, Tenn.
Joe N. Cline, Indianapolis, Ind.
L. C. Bishop, Los Angeles, Calif.
L. Stupka, Baltimore, Md.
Otto Thaxton, Pembroke, Va.
Sam R. Tatum, Jacksonville, Fla.
W. C. Godwin, adjutant John F. Tuggle Post, No. 48, the American Legion,
Chipley, Fla.
J. C. Mclntosh and four other citizens of Jacksonville, Fla.
Rudolph Baer, El Reno, Okla.
Dr. O. A. Kirby, Oklahoma City, Okla.
Lewis J. Reynolds, Pauls Valley, Okla.



E. B. Brattstrom, Seattle, Wash.
Dr. C. F. Montgomery, Dragon, Utah.
Floyd V. Patterson, Washington, D. C.
Sam Spahr, Shelton, Nebr.
Ed Smith and 18 other citizens of Chugwater, Wyo.
Jesse Ashby and 16 other World War veterans of Drakesboro, Ky.
Wayne Modin, Emmett, Idaho.
Capt. D. Sullivan, commander Allied War Veterans, National Park, N. J.
Veterans of the Ambulance Company 127, Racine, Wis.
Chas. A. McCarthy, secretary, Hamilton County unit of the American Veterans
Association, Cincinnati, Ohio.
Floyd R. Kies, Summit County Veterans Association, Akron, Ohio.
M. A. Feinberg, president and John Kays, Secretary, Third Marne Regular
Army Division Society of Ohio, Bellaire, Ohio.
G. F. Jones, Wooster, Ohio.
William Norton, Toledo, Ohio.
Tom Wooderson, adjutant, Disabled American Veterans, Chapter No. 10,
Jackson, Mich.
John T. Gleason, E. Boston, Mass.
Lawrence J. Fenlon, president United Democratic Service Men, Chicago, 111.
S. Waterfall, Hines, 111.
Veterans at Edward Hines, jr., Hospital, Hines, 111.
Veterans at United States Veterans' Hospital, Dwight, 111.
Veterans of Cass County, Backus, Minn.
Chas. Hackmeyer, Mobile, Ala.
John C. Littlefield, post service officer the American Legion, Ogden, Utah.
D. M. Mahoney, first district committee department of Missouri, the American
Legion, Hannibal, Mo.
Mrs. Guy Riddle, president American Legion Auxiliary Unit No. 55, Hannibal,
E. G. Weathers, Millen, Ga.
Carl R. Hodes, Columbus, Ga.
Edward F. Sargent and four other Legionnaires of Phoenix, Ariz.
Wade Phillips and four other World War veterans of Greensboro, N. C.
Joseph A. Seymour and five other World War veterans of Midland, Tex.
Commanders of Veterans of Foreign Wars Post, Disabled American Veterans of
the World War Chapter, United States War Veterans Camp and Service
Officer, The American Legion, Enid, Okla.
L. C. Stalle and 50 other veterans of all wars and their auxiliaries of Hot Springs,
S. Dak.
Jack Phillips and 79 other citizens of Pecan Gap, Tex.
Leslie Johnson, chairman, executive committee Disabled American Veterans of
the World War, Greenville, S. C.
M. P. Malloy and Frank W. Baker, Johnson City, Tenn.
Scott P. Aquyres and 251 other veterans of Oklahoma City, Okla.
Walter J. McDonald, commander American Legion; Fred Dowell, commander
Veterans of Foreign Wars; Homer Hickle, commander Disabled American
Veterans of the World War; and a number of patients, employees, and personnel
of the veterans' hospital and citizens of Fort Lyon, Colo.
Jacob Talmadge Baxley and 376 other veterans of Columbia, S. C.
Members of Veterans of Foreign Wars Post No. 651, and over a thousand citizens
of Muncie, Ind.,
E. R. Clements, commander Veterans of Foreign Wars Post No. 2399; V. V.
Pernoud, commander American Legion Post No. 205; and about 500 citizens of
Harlingen, Tex.
Mr. PATMAN. I would like also to invite the committee's attention
to a resolution passed night before last by the executive committee
of the Department of Pennsylvania of the American Legion. It was
said that only seven American Legion posts in Pennsylvania were for
this proposal; but the executive committee which really controls the
Legion in Pennsylvania met and unanimously passed a resolution
night before last indorsing this proposal to pay the adjusted-service
certificates, and we would like to insert that resolution in the record.
The ACTING CHAIRMAN. Without objection, the resolution may go
in the record.



(The resolution referred to is as follows:)

Whereas duly elected and accredited delegates representing the Department of
Pennsylvania to the thirteenth national convention of the American Legion held
at Detroit, Mich., expressed by recorded vote the sentiment of Pennsylvania
Legionnaires as in favor of the immediate payment in cash of the adjusted-compensation certificates, and
Whereas at the last regular meeting of the executive committee Department of
Pennsylvania, held at Philadelphia, November 7, 1931, the Congress had not
convened; and
Whereas the consideration of this payment is at the present time before the
Congress of the United States, now in session; and
Whereas the executive committee of the Department of Pennsylvania, sitting
in regular executive session at Pittsburgh, Pa., desires to express the sentiment
of Pennsylvania Legionaires as it now exists relating to this immediate payment
by the Congress; Now, therefore, be it
Resolved, That the executive committee, Department of Pennsylvania, in
regular stated meeting at Pittsburgh, Pa., April 9, 1932, reaffirms the expression
of its delegates to the Detroit convention favoring the immediate payment in
cash of the adjusted-compensation certificates.
JAS. J. DEIGHAN, Department Adjutant.

Mr. PATMAN. At this time we are favored with the presence of Dr.
Willford I. King, of New York University. He is an economist, not
only of national reputation but international reputation. Doctor
King recently appeared before the Banking and Currency Committee
of the House, at the request of that committee. We believe that he
can give the committee some information that they have not had
before this time.
I now take pleasure in introducing Dr. Willford I. King, of New
York University.
The Acting CHAIRMAN. Doctor King, the committee will be glad to
hear you.

Doctor KTNG. Mr. Chairman and gentlemen, I understand that the
bill which is now under discussion is advocated primarily as a means
of remedying the economic situation in the country, and that the
other phases of it are incidental. I was asked to come here to speak
on the economic phases of the situation.
I presume the best way is, therefore, to begin at the beginning,
stating how we got into the difficulty with which we are troubled at
the present time.
Some people say that it is all due to the money question. I do not
think that it is all due to the money question. I think that it is due
primarily to other difficulties. But I will show in a few moments how
money enters into it.
The national income—that is, the income of all of the people taken
together—might be thought of as perhaps $90,000,000,000, normally.
That is made up of your income, my income, and every one else's
income added together. Now, each of us has the privilege of spending
his income during the year, or something more or something less than
his income. The reason that he can do that is that each person has
a certain amount of credit available. Some of us have $10 credit
and others have $10,000,000 credit. That applies not only to the



individual but also to the business firm. Now, whenever people
spend more than their income, they go into debt, and when they
spend less than their income they get out of debt. When they go
into debt, a considerable proportion of this indebtedness will appear
as loans from banks. When loans expand at the banks, interest
rates tend to rise, and the evidence is that people are going into debt
more. When the loans at the banks contract in volume, and interest
rates fall, that is usually an evidence that the people are paying off
their debts.
Now, obviously, people can not go into debt indefinitely. There
is a limit. The credit limit always stops each individual and each
firm and each corporation. They can not go beyond that.
When people are optimistic is the time that they tend, in general,
to go into debt. During the period 1927-1929 we found that the
people were very optimistic. Everything was going to come out
fine with all their investments and their undertakings. The result
was that people bought things Qn time. They bought land; they
bought automobiles; they bought radios; and, above all, they bought
stocks; and they went into debt for those. Stocks were bought
largely upon margin, as you all know.
That greatly increased the amount of bank credit. If you will
look at the statistics of the banks of the United States, you will
find that they were expanding the volume of their loans; and they
were also expanding the volume of their deposits, because the people
were going into debt.
When the people went into debt, they could spend more than
their incomes, and they did; and the result was that the orders for
goods at the factories were strong, and the factories employed all the
people that they could get conveniently to turn out these goods that
the people wanted; and the prices of those goods rose moderately,
but moderately only. You do not find in 1929 any large inflation
of commodity prices; but you find a tremendous increase in the
velocity of circulation of bank deposits.
Now, what significance has that?
You all know that in the United States we do some of our work—
our money work—with cash; with Federal reserve notes and with
silver certificates. But we do more of the money work of the Nation
with bank deposits. That is, we buy things with checks when we
buy considerable amounts of goods, and we buy things with cash
only when we make small payments.
The circulating medium, then—the material we use to buy
goods—consists primarily of these deposits subject to check—bank
deposits—and, incidentally, of currency, gold, and silver. Very little
gold, of course, is used; some silver, and more Federal reserve notes,
silver certificates, and that sort of thing.
The result was then that during the height of the boom we had
people buying more goods than they would normally, and going in
debt. But about 1929 something began to happen. Part of these
people began to run out of credit; not all of them, but one by one
they began to run out of credit. They could not expand any further.
What was the result? Their expenditures began to drop from something above the national income down toward the national income;
and as they began to drop, that naturally meant a curtailment in the
amount of goods that they could buy at the old price level. They



could have bought more goods if the goods were cheaper, but they
could not buy all of these goods at the old price level.
Producers tried to maintain prices, however. They do not cut prices
immediately when the demand falls. So the manufacturers, the railways, the public utilities, every one maintained the prices of their
goods temporarily. Then,because of the slackening in the total demand
for goods, which was now less, we will say, than the ninety billions, it
was impossible to buy all of these goods at the old prices. The result
was that employers began to lay off help; and when they began to lay
off help, that tended to reduce the national income, so that it was no
longer ninety billions of dollars, but a smaller amount.
That tended to curtail the purchasing ability of the people still
By and by the profits of the concerns began to fall, and when profits
began to fall they began to stop paying dividends; and as dividends
shrank in total amount, obviously the owners of the stocks could not
buy the goods that they could before, and that curtailed the purchasing power of the country still more.
Well, you have seen that going on for the last two or three years,
and it is a vicious spiral. You see, as you curtail the purchasing
power, people are laid off, dividends are cut, and you go down and
down and down; and we have been going down into the depths.
It seems to me that in 1929 it was inevitable that we must have
some reaction. That is, stock prices were absurdly high. The relationship of those stock prices to earnings was far beyond normal.
But that did not mean that we needed to have anything of the drastic
nature that we have at present in the way of a depression. In 1924
we had a correction from a boom; in 1927 we had another one.
Those were what I would call normal corrections. But this has been
a very abnormal correction, as I am sure you will all agree. It has
gone down far below any amount necessary to correct this overoptimism that was prevalent at the time.
We hear everywhere that the trouble was caused by overproduction. I think that is one of the commonest and yet most complete
fallacies that are being put before the people at the present time. If
you will look at the statistics of production, as carefully worked out
by Carl Snyder, of the Federal Reserve Bank of New York, you
mil find that there was nothing abnormal about production. We
were not rushing far up into levels above anything before known.
The production of 1929 was not particularly abnormal, and with the
income that the people had then they were taking the supply off the
market. There were no great stocks of goods accumulated except
in a very few lines. There was overproduction in a few lines, we will
agree. Wheat, yes; but there had been overproduction in wheat for
several years past, and it had not caused any particular trouble up to
that time. There was overproduction of rubber; yes. There had
been for a number of years. That, of course, as Mr. Snyder has
well pointed out, is a good thing for the American people. We do
not have rubber to sell; we have rubber to buy. The cheaper it is,
the better from our standpoint. There had been overproduction of
sugar for several years. That is another thing that we buy, and from
the standpoint of the United States it was a fine thing.
It follows, therefore, that the present situation can not under any
circumstances be ascribed to overproduction.



There is an unlimited demand, at a price, for all the goods that can
be produced; and when more goods are produced, that tends to cause
more demand.
Now, what we are suffering from at the present time, I would say,
is distinctly underproduction. We have a great reduction in production in the organized industries, such as manufacturing, transportation, and the like. If you will look at the American Telephone
& Telegraph index of production or the Federal Reserve index of
production, you will find that it has fallen off in those industries
nearly half.
Now, with the production off nearly a half, is it surprising that there
are fewer goods for the people to use?
You can not divide products that are not turned out. It is utterly
impossible. When you have a shrinkage in production you have a
shrinkage in national income, and it makes the people poor. If
limiting production, as some people advocate, would remedy the
situation, we all ought to be tremendously prosperous at the present
moment, because production has been limited in many fields by
nearly a half. Yet most of us do not like the kind of prosperity that
it has brought us.
We were told that if we limited production these accumulated
stocks would disappear; but if you will look at the statistics you
will find that the stocks are just as great as when we limited production. We are not getting anywhere in that line.
The next point that I would like to make is this:
As I said, we needed some correction. We needed a correction
in the stock market in 1929, and we got it.
Mr. MCCORMACK. Might I interrupt you there?
Doctor KING. I shall be very glad to answer any questions that
I can.
Mr. MCCORMACK. What is the cause of underproduction? I want
your opinion. I have my own opinion, but I want your opinion, as
an expert, for the record.
Doctor KING. The cause of underproduction is this vicious spiral
in the curtailment of the purchasing power of the people that began
when they ran out of credit, and has been continued by some other
forces that I will describe right now, if you will allow me.
That answers the question temporarily, does it?

Doctor KING. In 1924, as I stated a moment ago, we had a normal
correction; that is, commodity prices get inflated a trifle during a
boom, and they were inflated no more in 1929, in terms of commodities, than they were in 1927. We had another normal correction in 1927.
Now my contention would be that in April, 1930, when President
Hoover called his conference here at Washington to consider ways
and means of improving the situation, and when the business men
gathered and told President Hoover that business was fundamentally
sound—that there was nothing wrong with business; that the difficulty in the stock market had been corrected and that everything in
the business world was sound, and there was no reason why we should
not go ahead—I believe that they told him the exact truth. I
think there was nothing wrong particularly with business at that
time, any more than there was in the year before, or in the average



year. The difficulty had been corrected. But there was another
force at work which had not been corrected, and which was not taken
into account by the business men or the economists who attended
that conference; and that other force, the one that has been causing
trouble ever since, was a shortage in the world's gold supply.
The gold supply of the world for the last decade or more has not
been keeping pace with the increase in the volume of production and
business in the world. Not only that but there has been an excessive
demand for gold as compared to what there was before, because a
number of different countries which had been on a paper basis tried
to reestablish a gold basis, and when they tried to reestablish a gold
basis they demanded gold for reserves. That strengthened, therefore,
the demand for gold, but the supply was not keeping pace.
In the United States this difficulty was masked very nicely by the
great inflation in bank deposits; and, as I said awhile ago, bank deposits are used as money just as much as any other kind of money.
So we had this large inflation of bank deposits, and also a great
increase in the velocity of turnover of these deposits. People were
checking them out rapidly at the banks, and that masked this shortage
of gold that had been developing.
You will find that Professors Warren and Pearson, of Cornell University, in the February issue of Farm Economics, have pictured very
clearly this gold shortage that has been developing.
Now, when panic seized the country in 1929, the people began to
pay off their loans at the banks; not so much because they wanted
to, but because the brokers said they must. As prices fell, the brokers
called for more margin. The people could not put up more margin,
and the result was that they were compelled to sell securities. That
diminished the loans at the banks, and that caused prices to fall
further, and the speculators had to put up more margin. They had
to sell more securities. That process has been going on ever since.
We eliminated then all this excessive amount of bank credit which
had been used for money, and we discovered the fact that there was
a shortage of gold. That means that we have had a declining trend
of prices—a very sharp downward trend of prices. Now, this downward trend of prices has made it impossible for business to prosper.
There may have been periods in the world's history when business
has prospered during a period of declining prices, but if there have
been such periods, they certainly have been rare. I think that it is
obvious to most of you who have engaged in business that profits
are not made at such times. The manufacturer buys his labor and
his raw materials on a higher price level; when he goes to sell his
finished products he is down on a lower level, and he nets a loss in
place of a gain.
We have had that process going on now for the last three years—
continually falling prices, going down, down, down into the depths—
a process not yet stopped. Under those circumstances it is not at
all surprising that we find most of the corporations of the country
in the red, and that we have probably the largest volume of umemployment that has visited the Nation yet.
I would say, therefore, that the reason that we did not recover
normally in the latter part of 1930 and during 1931, but that we went
down into the depths, was this gold shortage which produced falling
prices in the United States.



Now, most people feel that that was unfortunate, but that there
was nothing that could be done about it, it was just like a tornado or
a flood, or something like that, and we would have to make the best
of it. My feeling would be that such is not the case; that prices are
determined by the standard, of value, and the standard of value is
purely a man-made institution. The result is that we can do anything that we wish with the price level. It is purely at the option
of Congress. You can set the price level any place that you wish
to put it. You can make it high or you can make it low. *But that
means that it is necessary to modify some of the traditions of the
country if you are going to govern the price level to suit your taste.
In the United States we have as the standard of value the gold
dollar; and the gold dollar is fixed in weight. It is the same yesterday, to-day, and forever. Although, the particular weight that is
chosen, of course, is an accidental affair, people generally believed that
we have a very stable standard of value. As a matter of fact, gold is
not a stable standard of value, but it is an unstable standard of value.
We have seen the value of the gold dollar, as measured in purchasing
power of commodities, halved and doubled, all within the period since
1914. When a standard can halve in value or double in value, it
certainly is not stable. We consider it a joke when we read that in
the olden days they took as a foot the length of the king's foot, and
used that as a measure of length; or the yard, which was the king's
girth, and that, of course, varied according to the king, whether he
was slim or whether he was fat. That seems absurd; but such a
standard of value would not vary to anything like the extent that
our standard of money has varied—this fixed weight of gold. Congress has power, I believe, under the Constitution, to regulate all
kinds of weights and measures. They have long ago exercised thi&
power, except in the case of regulating the value of money, and the
value of money has not been regulated.
I think we might picture the present situation by an illustration
something like this:
Suppose that we are all on a dirigible crossing the Atlantic, and
there is a slow leak in the gas bags, and the dirigible has been coming
down; it is night time, and we can hear the waves lapping along
beneath our feet, and we know that if the dirigible comes down into
the waves, it will be the end. Now, on board the dirigible there are
a large number of tanks of compressed gas that can be used to fill
the gas bags. They are available; there is nothing to hinder putting
them into the bag, and if they are put into the bag it will rise to any
height that is desired. But everyone says, "No; let us wait; in the
morning the sun may come out, and if the sun comes out we may be
able to tide over another day, because that will expand the gas.
Of course we have the gas in these tanks, but7 why put it in the bags"?
And the question arises, "Well, why not?' They say, "We know
that it is too dangerous."
Mr. LEWIS. Doctor King, may I interrupt you there?
Doctor KING. Certainly.
The ACTING CHAIRMAN. Let me say, Doctor, that if you desire to
yield to the members you may do so; if you do not, you may complete
your statement and subsequently yield for questions. You have
yielded to Mr. Lewis.
Mr. LEWIS. I am quite willing to defer it, if you wish.



Doctor KING. Perhaps I had better complete this picture, and then
I will be glad to answer.
The question would arise, why not empty some of these numerous
tanks of gas into the bag and lift the balloon up to the desired level?
But some one will point out that in the past the tendency has been, in
cases of this type, for people to get panic-stricken, and if one man turns
loose a tank of gas into the bag, everybody else rushes in to do the
same, and the result is that the gas bag goes up and up, and they say,
" I t is all fine; everything is going splendidly/' and they put more and
more gas into the bag, and finally it bursts, and that is the end of it
in the other direction.
Now, I am willing to admit, and I believe that every one should
recognize the fact, that if gas is to be put into this bag in an unregulated amount, it is certain to bring destruction. It can not have any
other end. And that is what inflation does, if we propose to inflate
this bag by a rather hit-or-miss, random method. -That is the way
it has been done in most countries of the world.
When it comes to a choice between inflation and deflation, we had
better take our chances with deflation, because there is always a
chance that the sun will come out. By the sun coming out I mean
that we are likely to have a revival in the velocity of circulation.
People are likely to regain confidence and put some money back into
the banks, and we may get a rise. It is better to risk deflation than
inflation. The only question is, why do we need to leave matters to
chance? Throughout the history of our country, and throughout the
history of other countries, the matter has been left largely to chance.
We have in the United States an organization known as the Federal
Reserve Board, which has said that it has the control of the money
system, and does not want anyone else interfering. They have made
that very clear; that they want to be in control. They have been
taking charge of this balloon recently, and they have been pumping
gas into the bags with a small bicycle pump, and they have succeeded
in pumping gas in at something like a half to a third the rate at which
it has been running out, and the balloon has been going on down.
Now, they say, "Just let us keep on pumping into the bags and it
will be all right." If they are going to do that, they will have to get
a bigger pump, because they have been pumping for more than two
years and they have not pumped enough yet to keep it from going
down, although they doubtless have helped somewhat.
Notice what has happened. They say, "You do not need more
money in circulation; we have more money out now by far than we
had in 1929." And that is true. We have about a billion dollars
more in currency in circulation now than we had in 1929. They say
that answers the question. Yes; but if you should happen to look
at the statistics in the Survey of Current Business or the Federal
Reserve Bulletin, showing what has happened to the major part of
our money supply, the deposits subject to check, the demand deposits
of the banks, you will find that during the last year those have fallen
off by two and a half billions of dollars. And that is only in the
member banks. I suppose, if you take all the banks, they have fallen
off by three billions.
Now, suppose you put one billion more money into circulation and
take three billions out. What is the net result? I think it is obvious.
And the price level has gone on down because we have not put money
into circulation as fast as we have taken it out.



My feeling would be that it is time to stop this whole hit-and-miss
method of running our currency system, thus leaving the whole thing
to chance. True that policy that has been practiced for thousands of
years. We rode in oxcarts, as a race, for thousands of years; but now
we use automobiles and airplanes. Why not get out of the oxcart
age and substitute a scientifically controlled system of money? In
connection with this gas bag, or this balloon, why not put a competent
committee in charge of inflating the balloon, and say, "Now, we want
to stay at an altitude of 2,000 feet. We will put this committee in
charge and say to them, 'You stay on the job; you put in gas until
we get to 2,000 feet; if we go above 2,000 feet, pump the gas back
into the tanks; if we go below 2,000 feet, put some more gas into the
balloon, but don't let everybody in the balloon that happens to have
access to a gas-tank go and throw some into the balloon, and don't
depend upon chance.'"
That seems to me to be the only way that we can prevent, in the
future, the recurrence of periods of intense depression such as come
whenever we have a sharp deflation in the currency. You know
what happened in 1920 and 1921 when prices fell. You know what
is happening now. If we want to prevent trouble, we must have a
stable price level.
I am not saying that a stable price level will cure all of the ills of
humanity. Obviously it will not; but if we can cure one of the most
obvious ills, it seems to me that we should do it.
I believe that it is not at all exaggerating to say that the instability
of the price level, the failure to provide a scientific control of our
currency, has resulted during the past two years in a loss of more than
a billion dollars a month in production; a dead net loss to the people
of the United States of more than a billion dollars a month.
That is a very considerable sum of money. If I were inclined
to exaggerate, I would say that it is probably nearer two billions than
one; but we will leave it at one billion. If we are having a net loss in
production of a billion dollars a month—all because we do not have
a scientifically controlled price level—it is something that is well
worth considering.
Now, if we put more money into circulation and raise the prices to
the level that prevailed, we will, say, in 1926—we had a fairly stable
price level between the years 1923 and 1929, with only small fluctuations—if we boost the prices up to that level and keep them there,
what will be probable result? I understand, of course, that it is
impossible to predict anything with certainty. It is only a question
of probability. The probabilities are that if the prices are restored
you will eliminate most of the difficulties from which our banks are
now suffering. We have all witnessed the tremendous number of
bank failures that have occurred in the United States during the last
two or three years, and we have been told that it was because our
bankers were not expert bankers. I think that the bankers are not
to be blamed for nine-tenths of those failures, in one iota. They were
good bankers; they were banking on sound principles; but because of
the difficulty with the value of gold—something over which they had
no control—the value of the collateral behind their loans melted away,
and the banks failed, causing disaster not only to the depositors but
to the bankers themselves.




Why blame the bankers for something for which they were in no
sense responsible? If you restore the value of the collateral, you
restore the safety of the banks. You restore the safety of the
savings banks as well as the commercial banks; you restore the safety
of the life insurance companies, which is, of course, seriously endangered by this falling price level; you make it possible for manufacturers to make profits, and when manufacturers begin to make profits
they will want to employ more labor, and when they employ more
labor you will increase the national income, and you will certainly
add to the happiness of every one concerned.
Most of the difficulty with deflation has been that it has brought a
net loss to almost everyone. It has not been taking money out of
the pockets of one class of people and putting it into the other. It
has done that to some extent, but primarily it has slowed up production and brought a net loss to almost the entire body politic. Very
few have escaped. If you endeavor to look for the man who has
made money by deflation, you will find that he is an extremely rare
Next the question comes with regard to this bill that is before the
committee, to pay money out to the soldiers as a bonus.
What does that accomplish? It would undoubtedly, if paid in the
form of new currency, mean that the purchasing power of the public
would be increased, and that would tend to stimulate business and
tend to bring about these results that I have mentioned. You will
notice that we had a shrinkage of very much more in the volume of
the circulating medium than the amount which it is proposed by this,
bill to put into circulation. Probably two or three times as much,
so that the amount of money which is proposed to be put into circulation by this bill would probably just start us back nicely on the way.
I feel that it might be well to picture what you do when you put
money into circulation, as compared to bonds. Some time ago the
soldiers were paid a considerable amount of money, but it was taken
by borrowing or taking it out of tax money. When you borrow
money by issuing bonds, or when you levy taxes, you take the money
away from one class of people and give it to another class of people.
That does not affect the price level one way or the other. It does,
not have any tendency whatever to restore business.
It is merely taking it out of one pocket and putting it into another,,
so far as the Nation is concerned.
When you put money into circulation, you tend to raise the price
level and that does affect the total purchasing power. You are making new purchasing power.
Now, what I think we need to have done is to substitute more circulating debt for the noncirculating debt which the Government has at
present. That is, we owe large sums of money, from eighteen to
twenty billions of dollars and this amount that we owe in terms of
bonds does not affect the price level at all, because these bonds do not,
If we wish the price level to go up to any particular point, all that
we have to do, is to substitute circulating debt for noncirculating debt.
If we want the price level to go down, why, pull in the circulating
debt and put out the noncirculating debt.
That is, if you want to double the price level, you could do it without any difficulty in a very short time by issuing money to buy bonds;



buy in the bonds and put out the money and you could put the price
level to any place you wished.
If you wanted to put the price level down, you would sell the bonds,
bring in the money and retire the bonds. That would put the price
level down. So7 that regulating the price level is a very simple process.
This soldiers bonus payment, as I understand, is intended not to
add to the total expenditures, but to pay off the debt that has already
been contracted by Congress. In so far as that is true, it would be
carrying out this proviso of substituting circulating debt for noncirculating debt, and would tend to raise the price level and would
not affect the indebtedness of the Government.
There is another thing, however, that seems to me to be important.
I understand—I have not read this bill in detail, but I understand
that it is proposed to pay the soldiers the amount that is due to
them in 1945. Perhaps I am in error about that.
Obviously, the present worth of payments due in 1945 at a normal
rate of interest would only be about half as much as the payments
would be worth in 1945. That is, a dollar in 1945 is only worth
about 50 cents at the present time.
I should think that with the Government in financial difficulties,
it would not be wise to incur any additional expenses. It seems to
me that the Government should not go into debt more, and that it
should not pay more than the present worth of any of these certificates.
That would seem to me to be a perfectly sound procedure, to substitute circulating medium for noncirculating medium to the extent of
what the indebtedness is at the present time, but not to the extent of
what the indebtedness would be in 1945.
Now, I think that if we stopped by merely putting out money to
cover this bonus, that would not be the proper action at all. What
we need is a scientific control of the currency. You ought not want
to go just part way. That is the old method. It is very likely to
lead everybody else to say, "We also want a grab at the Treasury/'
and you will likely bring a disaster much worse than the present.
If you are not going to couple this measure with a scientific control of
the currency such as, for example, is provided in the Goldsborough
bill now before the House, then I would say that it is a dangerous
thing to embark upon; because I can see immediately somebody else
will want $5,000,000,000 for roads and somebody else will want
$10,000,000,000 for unemployment and there will be no end to the
demands to put out money.
The easy-money method is a very bad method, but if you are going
to make this merely one step in the scientific program of regulating
the price level, so that hereafter prices will remain at this level and
not go up and down, and up and down, I think that in that case this
might be a satisfactory beginning. But I think it is imperative that
it be coupled with thorough control so that there will be no chance
whatever of running into a period of inflation, because inflation is
decidedly worse than deflation. Somebody has coined the word
recently "reflation." That seems to be a very good picture of what
is wanted. We want to bring the prices up to the level prevailing
two or three years ago and keep them there.
I believe that summarizes the main ideas that I wish to present.
Mr. LEWIS. Your view, Doctor King, accepts to the degree of 100
per cent the quantitative theory of money and prices, does it not?



Doctor KING. I fully indorse the modern quantitative theory, not
the old fashioned quantitative theory; the modern theory, yes.
Mr. LEWIS. In your statement, you present the view that prices
and the quantity of money are reciprocal.
Doctor KING. That is roughly true.
Mr. LEWIS. SO much so that you can use the pressure of the
atmosphere and the volume of the vessel that is to float in it, as you
would in physics?
Doctor KING. Very much the same principle; yes.
Mr. LEWIS. DO economists generally accept that view, Doctor
Doctor KING. About 80 or 90 per cent do.
Mr. LEWIS. They do?
Doctor KING. Yes. There are a few economists in the United
States who do not, but they are rather rare.
Mr. LEWIS. I have no purpose of presenting an argument in taking
up this phase of the matter, but I want your views on the subject.
Suppose it were to happen that the cost of production of a large proportion of commodities should fall by reason, not of a change in the
quantity of money in circulation, but by reason of a change in the
mechanization of industry by invention, by engineering efficiency.
There would be a fall of prices there without regard to the amount of
currency in circulation, would there not?
Doctor KING. There would be a fall in prices of those particular
commodities, but a rise in the prices of other commodities. If the
cost of production of a given group of commodities falls, that means
that the purchasers of those commodities need to spend a smaller
proportion of their income than they did formerly to buy those commodities. That is, if I had an income of $2,000 a year, and had
been buying these commodities for $1,000, and their cost of production
falls, I would then pay, say, $800 for those commodities and have
$1,200 to buy other things. That will immediately stimulate the
demand for the other things, because I will want to buy $1,200 of
something, and the tendency will be for the other things to rise in
Professor Fisher has used this illustration which I think is very
appropriate. He says that we can think of the general price level
as being the level of a lake that is controlled by locks at the entrance
and the exit. We can think of the individual prices in the lake as
being the waves on the surface of the lake. Now, if you have a
heavy windstorm, you may pile up one area of the lake on one side,
but you will reduce it by an exactly equal amount on the other side.
You will have high waves, that represent high prices of some commodities, but they will be balanced by an exactly equal diminution
So that you can not affect the average level of the lake by any
degree of wind on the lake, or by any unevenness of the cost of production of various things. But if you change the lock gate, that
means the amount of money that you are putting in in proportion
to the needs of business, then you will affect the level of the lake
and all the prices tend to rise or fall, not that they all will rise and
fall in the same proportion.
Mr. LEWIS. That assumes, however, that all the income of society,
wages, profits, and so on, will be spent each year either on consumable



goods or in capital investment or capital construction. Is that a
fair assumption at all?
Doctor KING. I think that is a reasonably fair assumption; yes. Of
course, it is not true of any particular year, but it will be true on the
average over a period of two or three years. The money we say we
save we spend for capital improvement. That is, if we put it in the
bank, the bank loans the money to some one else who proceeds to
improve his business, and so we invest it, without our knowing it,
perhaps, in capital improvements. If we think we are spending it,
then we are spending it usually for consumption goods.
Mr. LEWIS. Was it not supposed to be true even in 1929 that not
more than 75 per cent of the production agencies in this country were
employed? In other words, 75 per cent only of the floor capacity was
active, even in that alleged prosperous year. If you already have such
an excess of industrial machinery, where are these savings to go that
are not expended on consumable goods?
Doctor KING. My feeling about that would be that it is true that
there was a considerable excess of capacity in 1929 and there always
has been and always will be under a competitive system. I can
think of no way of remedying that except to adopt a socialistic
system. That has other difficulties, as you well know, that tend to
offset the benefits. But under a competitive capitalistic system,
every man is always trying to take advantage of the market at the
expense of his competitor. Unless he has a complete monopoly in
the feld he says, "Why, I am going to get this business," and when
he has a good year, he builds more plants than he needs. When the
other fellow happens to have a good year, he builds more, and so
there is always a tendency to overbuild. That situation is impossible
to remedy under a competitive system. You are bound to have
always an excess of plant. You have just about enough in every
particular line so that all are busy at the peak of the boom. Each
employer will build up to that point in his own particular line. I can
not see how he can avoid it.
Mr. HAWLEY. Doctor, I have been giving very close attention to
your statement. This committee has recently reported legislation
for an increase in taxation to balance the Budget.
Doctor KING. Yes.
Mr. HAWLEY. DO I infer correctly from your argument that it
would have been better if the Government had issued some form of
paper currency to balance the Budget in 1933 rather than try to
collect taxes for that purpose?
Doctor KING. I think that I would answer that with a yes and a no.
It would have been better for the public welfare to have issued paper
currency, except for the very dangerous precedent that it would set,
and that precedent is so dangerous that I am dubious about the
whole idea. It has been tried in so many countries and it has worked
very disastrously. I would think it was a very dangerous thing to do.
I think that the more scientific method is for the Government,
when it wants to put more currency in circulation, to buy with the
currency something that it can have to sell again when the occasion
arises. So that if the price level rises too high it will always have
something to sell to get the money back. That is, I do not think it is
wise to issue paper money to pay current expenses. I think it permissible to issue new currency either in the form of paper money or credit



as a substitute for other indebtedness, but I doubt that it is ever
advisable to issue it for current expenses.
Mr. MCCORMACK. In other words, Doctor, so far as I understand,
it is your opinion, or am I to infer from what you say that it is your
opinion, that in the event of the expansion of the currency as contemplated by the discharge of this obligation to the veterans, it would be
better for the Government to issue bonds and then buy the bonds
themselves; if the Government had these bonds and later the price
level had increased too greatly, it could sell sufficient of the bonds to
the general public to maintain the price level at a point where it is for
the best interests of American society?
Doctor KING. I should think that would probably be the more
scientific way of attacking the problem.
Mr. MCCORMACK. Rather than issue currency to discharge these
adjusted-compensation certificates, which, of course, could not be
Doctor KING. Yes. I should think that would be a more scientific
method; yes, sir.
Mr. MCCORMACK. May I ask you to state for the record your background and experience as an economist? It might be important. Of
course, we all know of your standing as an economist. I am not intending to cross-examine you on your qualifications, but some one
reading the record in future years may want to know. The record
stands long after we do.
Doctor KING. Yes. I began teaching economics in the University
of Wisconsin in the spring of 1910. I have been engaged in teaching
economics or studying, economics since that date.- I taught in the
University of Wisconsin in the economics department, economics and
statistics until 1917. Then I was statistician in the United States
Public Health Service, studying the economics of pellagra down in
South Carolina until 1920. From 1920 until 1928 I was economist
for the National Bureau of Economic Research at New York, studying questions relating to the income of the people of the United States,
most of the time. That was my prime job and also incidentally
I studied questions of employment and earnings of labor, and several
other things of minor importance in that connection.
Since 1927—there was a lap-over there because I had both positions
for a while—since 1927 I have been in charge of the work in statistics
at the School of Commerce at New York University and I have been
continuing on the side investigations into money and that sort of
thing, while I have been there. I have been interested in the money
question ever since I can remember. But I have been studying it
rather seriously since about 1911.
Mr. MCCORMACK. Have you an opinion as to whether or not a
reasonable expansion of the currency under existing circumstances
is necessary for the purpose of reflation?
Doctor KING. I should think It was highly important to have a
reasonable expansion of the circulating medium, either currency or
bank deposits. It seems to me that there is nothing that is more
important at the present time than that. That would be my opinion.
Mr. MCCORMACK. In answering that question, you have the general
interests of the people throughout the country, all elements, all
classes, in mind. I assume that is the object, to serve the best
interests of American society in general. You have that in mind?



Doctor KING. Yes. I think that it would benefit 90 per cent of
the people of the United States, to put it mildly, and probably more
that 90 per cent.
Mr. MCCORMACK. Your discussion to-day was on the fundamental
question of a reasonable expansion of currency for the purposes of
Doctor KING. Yes; you understand, I have no interest whatever
in the particular legislation, except in so far as I am a citizen of the
United States, and we are all interested in it from that point of view.
The ACTING CHAIRMAN. Doctor, I would like to ask you one question. You stated, and I think correctly, that a dollar in 1945 is not
worth as much as a dollar in the hand to-day?
Doctor KING. Yes.
The ACTING CHAIRMAN. And you place the present cash value of
the dollar due in 1945, but payable to-day, at about 50 cents?
Doctor KING. It would depend on the interest rate; something
like that.
The ACTING CHAIRMAN. Of course, it depends on the discount rate?
Doctor KING. Yes.
The ACTING CHAIRMAN. I was taking your figures. You said it
would be about 50 cents on the dollar?
Doctor KING. Yes.
The ACTING CHAIRMAN. A large majority of the veterans have
borrowed 50 cents on the dollar, on the face value of their certificates
due in 1945. What is your idea about this? If there should be an
inflation to the extent of 50 per cent of the face value of the policies
due in 1945, what relief under this bill would be granted to those
veterans who have already borrowed 50 cents on the dollar on the
face value of their certificates, and what do you think Congress should
do, if anything, for those veterans?
Doctor KING. I have not gone into the actuarial side of this in
detail, but it seems to me that it should be figured out on a purely
banking basis, that if a man has borrowed, the loan should be
deducted from the amount that would be paid to him, unless you want
to legislate to increase the bonus to the veterans. I see no reason
why the amount should not be deducted, on a perfectly square
banking basis.
The ACTING CHAIRMAN. Then where a veteran has received 50 cents
on the dollar, of the face value of his certificate in 1945, if that is the
amount at a reasonable rate of interest, he should not be given any
additional relief at this time?
Doctor KING. It would seem to me that he had already received
the value of his payment in 1945. If it was worth about 50 cents and
he had received 50 cents, I should think that he was paid off, to all
intents and purposes.
Mr. SANDERS. YOU stated to Mr. McCormick, Doctor, that you
thought a reasonable expansion of the currency at this time would
be a good thing?
Doctor KING. Yes.
Mr. SANDERS. I want to ask you, what do you call a reasonable
expansion? Do you think $2,200,000,000 that is called for in this
bill would be reasonable?
Doctor KING. I would suppose that it would probably take considerably more than that to put prices back to the 1926 level.



The scientific idea would be to put prices back to the place that
represented the weighted average of all our outstanding obligations
at the present time.
I am not sure just where that would be. I would guess it would
be very close to the 1926 level. The contraction in the volume of
banking currency since that time has been very much more than
$2,000,000,000. I would suppose that it would take more than
that to put the price level back; I do not know how much it would
take, because—and this would bear on Mr. Lewis's question—
experience in different countries shows that the amount that the price
level moves in proportion to a given issue of currency differs. That
is, you can not say that if you increase the currency of a country 10
per cent prices will rise 10 per cent. They may rise 7 per cent or
they may rise 12 per cent or 14 per cent. There are a great many
variables. True, you can always say that if you increase the circulating medium of the country prices will rise, if you increase it rapidly.
But how much they will rise for a given amount of increase is a
question that I think you could not answer in advance.
Mr. MCCORMACK. Doctor, Mr. Crisp asked you a very pertinent
question and the question and your answer brings another thought
to my mind. The present law which provided for the adjustedservice compensation certificate payable in 1945 was passed, as I
remember, in 1924, and went into effect in 1925 and each, veteran
was to get a dollar a day for domestic service and a dollar and twentyfive cents a day for service overseas, with a certain maximum number
of days which, with the interest compounded to 1945 brought the
total amount of the certificates on the average to approximately
$1,000 each. The interest started to run from 1925.
The war was over November 11, 1918. The veterans, of course,
get no consideration for interest from November, 1918, to 1925.
What would be your opinion as to whether he is entitled to interest in the interim? Should we withhold from him that interest, or
might the committee as a matter of equity and justice properly
consider that or include it in determining our course of action?
Mr. HAWLEY. Will my colleague yield?
Mr. HAWLEY. There was

added to the amount computed on the
service at home and abroad an additional 25 per cent to determine a
base on which to issue the adjusted-service certificates to take care
of that interim.
Mr. HILL. Mr. Chairman, as I understand it, the bill now before
the committee eliminates that 25 per cent provision.
The ACTING CHAIRMAN. Doctor King has not as yet had an opportunity to answer Mr. McCormack's question.
Mr. MCCORMACK. My question was as to that seven years of
interest, from 1918 to 1925, when interest under the law commenced
to run on this 20-year period.
Doctor KING. I am afraid when it comes to asking a question of
what is just to the soldier I am in no better position than any other
person in expressing an opinion, because I am in no better position
than any one else to answer that query. Justice is in this case a
matter of feeling. Perhaps they should have had ten times as much
as was given to them. I have no argument one way or the other. I
was viewing it merely from the standpoint of the fiscal policy of the
Government and not at all from the standpoint of justice.



Mr. MCCORMACK. If it is a debt, the obligation occurred on November 11, 1918, when the war ceased, or at least when the period
of service which was taking care of it in the adjusted-compensation
certificates ceased.
Doctor KING. Of course, we may have been morally indebted to
the soldiers ten times as much as we have paid them. But the
Government did not recognize the debt until a later date. That
was merely a new contract.
Mr. WATSON. Doctor, you made the statement that a year or
two ago our incomes amounted to about $90,000,000,000. But they
have all now been decreased. For example, let us say they have
decreased $10,000,000,000. What has become of the $10,000,000,000
that has been taken from our incomes?
Doctor KING. The income of the people is made up of the stream
of goods and services that is turned out. Now, what has become of
it is that it has not been turned out. Our factories have been idle.
Mr. WATSON. Where is the cash? Where is the money? That
is what I want to know. What has happened to the money that
was taken from your income and from mine? Where is it?
Doctor KING. The money value of the goods has decreased primarily because of the curtailment of the volume of purchasing power,
a curtailment due to the paying off of the indebtedness at the banks.
Mr. WATSON. But there is just as much money in circulation now,
is there not?
Doctor KING. NO, not when you count bank money. There are
several billion dollars less, probably four or five billion dollars less in
Mr. WATSON. It is in existence somewhere, is it not?
Doctor KING. NO. Most of our work is done with these bank
deposits subject to check and those are created as new debts are
incurred and new deposits grow up, and as the debts are paid off,
they disappear.
Mr. WATSON. What has become of the money that has been issued
by the Government?
Doctor KING. The money that has been issued by the Government has increased in amount, so that we have more Government
money in circulation than we had before. That does a relatively
small part of the work of the country, but there is more of that kind
of money than there was before.
Mr. WATSON. Your philosophy is to get that money back into
circulation, is it not?
Doctor KING. That would be my philosophy; yes, sir.
Mr. WATSON. AS our incomes have been decreasing, our taxes
must be increased in the next year or two, 1933 and 1934, to meet
this $2,000,000,000 payment, if we make it to the soldiers, because
that money must be paid within the next few months?
Doctor KING. Yes.
Mr. WATSON. DO you believe that our taxes should be increased
to pay the soldiers, although our incomes have decreased? If you
followed that out, where would we land?
Doctor KING. We have already agreed to pay certain debts.
Mr. WATSON. But they are not due. If I agree to pay a debt in
1945, they can not collect it from me to-day.
Doctor KING. NO. If we substitute one kind of a debt for another,
we are neither better nor worse off than we were before. I would




say that is about all that I think we should do, to substitute one kind
of a debt for another. I do not believe it would be advisable to raise
taxes at the present time. It seems to me that what we want to do
is to raise the incomes of the people so that it will be easier to collect
the ordinary amount of taxes rather than to increase taxes.
Mr. WATSON. That has been the effort of the people since the world
commenced, to increase our incomes.
Doctor KING. Yes.
Mr. WATSON. If you are able to point out how to do that, I think
you have done a great service to the country.
Mr. CROWTHER. I do not know that you made the statement, but
the statement has been made of the return of industrial activity
resulting from the distribution of this $2,400,000,000 of currency.
How permanent do you think th^t return will be, or would it be only
a temporary matter, a flash in the pan? How long do you think that
business renewal would last? For instance, we had a distribution of
a billion dollars and some last year.
Doctor KING. Yes.
Mr. CROWTHER. That was calculated to do that. Do you think
it had any appreciable effect upon the revival of business in the
Doctor KING. I think it had practically no effect, because it was
merely money taken away from one class of people and given to
I can not answer your question with any degree of certainty, but I
feel that we are down in the dumps now very largely because of the
pessimism prevailing and in times of pessimism everybody expects
things to get worse, because they have been getting worse. I believe
it is highly probable that if you can turn the price level up, that the
people who have been waiting to buy until the time when prices are
lower, will want to buy now and that that will increase the volume of
orders; that that will tend to make the people more optimistic, and
any procedure which tends to turn this downward trend of prices
upward is likely to mark the end of the present cyclical depression
and probably would give us prosperity for the next two or three years.
That would be my guess, but you can not speak with precision on
any of those things.
Mr. CROWTHER. Just one more question. You spoke about the
depression of industry in this country, and of course, we have got
factories of all types and kinds closed; no pay roll.
Doctor KING. Yes.
Mr. CROWTHER. We are increasing certain imports at our ports of
entry. I have letters on my desk regarding pottery, crockery, rugs,
glassware, gloves and textiles, toys, oil, and copper. Our imports
have fallen off to a marked degree, but not anywhere near the percentage that our domestic production has fallen off, according to the
records. Do you think there is a tendency during periods like this,
and more especially with a depreciated form of currency, to increase
those imports into the country because the demand of our people in
hard times is for the attractive low-price materials that come into
the country? It appears to me that on the store counters everywhere
I go there has been a lowering of the grade of materials and there is
a lot of trashy stuff priced attractively at low prices, and with all of
that material at low prices, the people who are manufacturing in this



country complain that they can not possibly compete under present
Doctor KING. I do not know about the facts in that particular
case. My feeling is that in general the changes in the value of currency abroad have practically no effect upon the volume of trade. I
studied several years ago the effect of inflation and deflation on the
trade of Germany and France, and I could not see that the change
from, one price level to another had any consistent effect. Sometimes
it seemed to increase the volume of foreign trade and sometimes it
diminished it. I do not think you could tell what was going to happen
in advance by the change in the volume of currency.
Mr. CROWTHER. IS it not a much more attractive proposition, if a
45 per cent ad valorem duty against England has been reduced to a
30 per cent ad valorem duty on the invoice, to bring that merchandise
in under those circumstances?
Doctor KING. Yes. A reduction in the duty would, of course,
make it more attractive to bring the goods in.
Mr. CROWTHER. The ad valorem duty is affected. Specific duties
are only affected by volume or lack of volume.
Doctor KING. Yes.
Mr. CROWTHER. That is where we lost at the customhouse. But
if the ad valorem duty that averages 45 per cent against Great Britain
is only equal now to about 30 per cent at the customhouse, we lose at
the spigot at the customhouse and we lose at the bunghole by bringing the stuff in here to displace materials that our people ought to be
Let me give you an example. A great hotel in New York a few
months ago put out bids for glassware for that hotel, tumblers, pressed
glass, vases, decorative work, running into the several hundreds of
thousands of dollars. Two or three American concerns bid on it at
a margin of profit just above overhead, in order to keep their men
working. They were outbid by firms in Czechoslovakia and Belgium,
15 per cent, including transportation and tariff. They gave the
order to the two foreign concerns for that glassware. Our glassworkers are working two days a week in this country.
Doctor KING. I would be glad to go into a discussion of the tariff
with you, but I feel that that would take me another hour or so.
Mr. CROWTHER. I just wanted your viewpoint on that. I want to
ask you another question. Senator Thomas the other day in discussing the Patman bill said that if the Patman bill passes—and you are
acquainted with the Patman bill; it provides for the issuance of
$2,400,000,000 worth of Treasury notes?
Doctor KING. Yes.
Mr. CROWTHER. If the Patman bill passes, Treasury notes comparable to greenbacks to the extent of $2,400,000,000 would be issued
and they would drive out of circulation Federal reserve notes.
Further on he says, if you put into circulation a different kind of
money from the Federal reserve money that money will drive out of
existence the Federal reserve money.
What have you to say about that?
Doctor KING. I think that it might drive out of circulation the
Federal reserve notes, but I believe that it would at the same time
increase the volume of deposits subject to check. That is the relationship between the volume of hand-to-hand money and bank deposits




seems to be determined by the needs of trade, and I believe that you
would increase the bank deposits while you diminished the supply of
notes, in all probability.
Mr. CROWTHER. Let me understand you. I have listened very
carefully to your testimony and enjoyed it, because you have covered
the field very clearly. I think you are going to leave the witness
stand leaving a lot of us up in the air as to whether or not you are
for this proposition or against it. Do you think that this is a wise
thing to do at this time—this issuance of $2,400,000,000 worth of
Treasury notes? Do you think it is a wise thing to do? Do you
think it is a safe thing to do, or are you only objecting to it for fear
that the precedent might be extended into other fields? Do you think
we could just adopt this plan and be safe so far as the issuance of
fiat money is concerned, and I call it fiat money in spite of the suggestions that are constantly made that it is not fiat money?
Doctor KING. AS I stated before, I think it would be highly inadvisable to adopt this bill without tying it up with a definite stabilization measure such as the Goldsborough bill. I would not be in
favor of doing it unless you tied it up with that. If that were done,
I do not see that it would be a dangerous thing to adopt.
Mr. CROWTHER. DO you think that the method suggested in the
Goldsborough bill could be followed without international conferences? Could the United States undertaks to stabilize the value of
the gold dollar as against commodity prices in 1926 alone? Could
we undertake that without disturbing American values in other parts
of the world?
Doctor KING. I think it is highly uncertain as to whether the
United States alone can stabilize the value of the gold dollar of present
weight and fineness. Perhaps it can and perhaps it can not. It is a
moot question, which nobody can answer in advance.
The Goldsborough bill provides, among other things—and it is
one of its most important provisions—that the American Federal
reserve banks shall be empowered in case of necessity to change the
price of gold, or to change the weight of the gold dollar. In that way
they could protect their reserves, and would be perfectly safe.
Without that proviso, there is no telling what would happen, whether
you could carry stabilization through without the aid of other
countries or with the aid of other countries.
I think we could do it alone just as well as with the aid of other
countries, but I am not at all sure that you could stabilize prices and
maintain the weight of the gold dollar.
Mr. CROWTHER. Thank you.
The ACTING CHAIRMAN. Gentlemen, I want to call your attention
to the fact that this witness has been on the stand an hour and a half.
Mr. LEWIS. Mr. Chairman, I desire to ask a question which I hope
can be answered briefly.
What are the reasons for supposing that this currency issue would
drive out of circulation the Federal reserve notes? If your reasons
are brief, answer the question, but if they have to be extended, I
will not ask you to enter into the discussion.
Doctor KING. They will be very brief. Experience seems to indicate that the people like to utilize about a certain proportion of
paper money and a certain proportion of bank deposits in their
word. That tends to be a rather constant ratio. When you get



too much money in your pocket, you take it down to the bank and
convert it into bank deposits. So that such conversion would occur
if there were an excess of paper money. You would not carry around
only a certain amount of money, in your pocket.
Mr. HILL. Doctor, as I understood you, the falling prices that we
are now experiencing were due primarily to a gold shortage?
Doctor KING. I should think, primarily; yes.
Mr. HILL. IS that a world shortage of gold or a shortage of gold in
the United States?
Doctor KING. A world shortage.
Mr. HILL. The shortage of gold in the United States did not
influence it?
Doctor KING. We have plenty of gold in the United States. It is
a fall in the world price level, as you have observed; not only in the
United States price level.
Mr. HILL. I understood you further that we have now $1,000,000,000 more currency in circulation than we had in 1929?
Doctor KING. Something like that, I believe.
Mr. HILL. I thought I understood you to say that while there was
a billion dollars more currency issued by the Federal Treasury, there
was actually a shrinkage or a recession or a withdrawal of currency
to the extent probably of two or three billions of dollars in other
quarters; that is, Federal reserve notes and I take it Federal reserve
bank notes; is that right?
Doctor KING. NO; I mean in bank deposits subject to check.
You and I and all of the people that we know pay most of our important obligations with checks on the bank. That bank money
does most of the money work of the country. Probably 80 per cent
of it is done with these bank deposits subject to check. This volume
of bank deposits with which we do most of our money work has been
shrinking two or three times as fast as the volume of actual money
has been increasing in amount.
Mr. HILL. Why has that been shrinking, if we have more currency
in circulation? Why would that shrinkage occur.
Doctor KING. Because of the fact that people have by compulsion
or otherwise paid off their indebtedness to the banks. Bank deposits
are created by borrowing money at the banks. The people have
been paying off these loans. The bankers have been afraid to loan
on anything except the most gilt-edge security, for fear that they
will never get their money back.
Mr. HILL. In other words, the banks have the money, but not as
Doctor KING. The cash is in existence in the banks and in circulation partly because of the fact that people have been afraid of the
banks and have carried more cash than usual. That is one of the
main reasons why the currency has expanded $1,000,000,000.
Mr. HILL. I would like to ask you just one more question. There
have been two plans presented here for the payment of this bonus and
through the increase in the currency without the issuance of bonds?
Doctor KING. Yes.
Mr. HILL. Mr. Patman's bill provides for the issuance of Federal
Treasury notes based upon the gold reserve now in the Federal Treasury. Senator Thomas's bill proposes, as I understand, to pay this
money to the soldiers through the issuance by the Federal Treasury



of what he calls consols, to be deposited with the Federal reserve system on the basis of which Federal reserve bank notes shall be issued
for circulation. Which of the two plans, in your judgment, would
be the more wholesome for the country?
Doctor KING. I should think that whichever plan would tend best
to prevent other issues of money for current purposes would be the
best one, and probably that the plan of issuing some kind of bonds
would make it more apparent that we were going into debt rather
than issuing the money. That would be the only difference that I
see. It is a question of which will make it more apparent that we
are going in debt.
Mr. ALDRICH. There is really not a very great difference in the
practical effect of the two plans, is there, as far as affecting our
currency is concerned?
Doctor KING. I do not think so.
The ACTING CHAIRMAN. Doctor King, we thank you for your
Doctor KING. Thank you for your attention, gentlemen.
Mr. STEMBER. Mr. Chairman^ there is a delegation here that was
supposed to go on to-day. I believe I did ask Mr. Patman to introduce that delegation of the Workers' Ex-Seryice Men's League.
The ACTING CHAIRMAN. The gentleman is out of order. I am
going to try to give you a hearing if you behave yourself decently.
Otherwise you will not get a hearing at all.
Mr. STEMBER. We are sticking strictly to the program
The ACTING CHAIRMAN. YOU will be in order or I will take steps
to see that you are put in order.
Mr. STEMBER. Wlien will we get the floor?
The ACTING CHAIRMAN. If you behave yourselves you will get the
floor, and if you do not, you will not. I will instruct the clerk to send
for a policeman. I am going to have order in this room or know the
reason why.
Mr. PATMAN. I desire at this time to introduce Mr. Robert Harriss,
a resident of New York City, although a native Texan. Mr. Harriss
is in the commodity commission business, the largest business of its
kind in the world. He is also a cotton merchant, has large investments in farm and ranch lands in the South and Southwest. He is
a man who has a good international reputation as an economist.
I take pleasure in introducing Mr. Harriss.
The ACTING CHAIRMAN. We shall be glad to hear him.
Mr. HARRISS. Mr. Chairman and gentlemen, you can not pay
a dollar debt with 30 cents. That is exactly what the American
people are trying to do in this year of 1932. The approximate
$150,000,000,000 debt to which a§ a Nation and as individuals we
are committed was piled up when the dollar would buy about onethird of what it will to-day. To-day, at the present valuation of
our money, this $150,000,000,000 now totals, to all practical purposes,
In the final analysis, gentlemen, it is not gold or currency that pays
debts. We have not lost our intellectual equilibrium to the extent
that we refuse to recognize that gold and currency is merely the



ambassador of wealth. Real wealth is identified with labor and with
what comes out of the ground.
Now, when most of the obligations, represented by the $150,000,000,000 to which I have referred, were acquired—cotton, wheat, corn,
oats, cattle, poultry and eggs, lumber, copper, silver, and so forth—
these commodities were selling for two, three, and four times what
they are bringing to-day.
When I first heard of the proposed bill to make immediate payment of the $2,400,000,000 worth of adjusted-compensation certificates, I must frankly admit that I was opposed to it. At first glance
it occurred to me that although this was an existing Government
obligation to be met in 1945, nevertheless this was not the proper
time to pay it. This conclusion was arrived at because I thought
it would increase our taxes and place an unbalanced burden upon the
weakened structure of our National Treasury.
However, after having given this matter deeper study, after having
discussed it with the many business men whose opinions I value
highly, I arrived at the conclusion that it is most advisable that this
$2,400,000,000 balance of the so-called soldiers' bonus be paid immediately. Among those men whose opinion I value highly is Mr. George
LaBlanc, retired banker of New York. I understand Mr. LaBlanc
will later testify in connection with this bill and I know he is better
qualified to explain its advantages from a broad economic banking
point of view.
Gentlemen, I make this statement not only to assist the ex-soldiers
of our Nation, but rather do I make it because primarily and fundamentally the immediate payment of this so-called bonus will redound
to the benefit of every American citizen.
Following are the chief advantages which I see in making the
immediate payment of this so-called bonus:
First. It will not only bring to a halt this devastating and ruinous
deflation, but it will create a rise or enhancement in values of all
kinds. Cotton now selling at 5 cents per pound; wheat at 40 cents
per bushel; corn at 30 cents; oats at 15 cents; as well as cattle, lumber,
oil, copper, silver, real estate, sound stocks will all rise rapidly in
Second. There will later follow an equitable and fair revaluation of
the dollar that is bound to follow sane legislation which will put
$2,400,000,000 in circulation.
Third. This increase in circulation will tend to bring out of hoard
the hundreds of millions of dollars which people have hidden away
because they are afraid either to spend or to invest. Naturally when
these people see values stop declining and start rising, they will
quickly avail themselves of the opportunity to buy and to invest.
Fourth. It is the only way, in my opinion, that our National, State,
city, and county governments can balance their budgets, as properly controlled inflation will not only reduce their external obligations bat will also reduce our taxes. In this connection it is well to
bear in mind that in 1914 our national debt was $1,018,000,000 and
the national Budget approximately $1,000,000,000. Even in those
days, when commodity values were far higher than those existing
to-day, we had no easy time paying taxes, and this year, 1932, our
national debt is approximately $17,000,000,000, or approximately
seventeen times greater than it was in 1914. Our National Budget



to-day is approximately $4,000,000,000; or approximately four times
what it was in 1914. Gentlemen, this, in simple figures, tells the
story why we must come to some form of inflation or revaluation of
the dollar to meet these stupendous debts.
Fifth. It will probably promptly lead to an embargo against the
exportation of gold and to the temporary suspension of gold payments..
During the past seven months we have permitted foreign nations
to take out of our country actual gold totaling approximately
$800,000,000 while at the same time these same nations are not
meeting their obligations to us, and are even discussing the total
cancellation of their debts to us.
Sixth. This embargo against the export of gold will be of the greatest
assistance in enabling our foreign debtors to pay us. With the revaluation of our own dollar so that it will be on a more equitable
basis with foreign money it will be possible for France, Germany,
Italy, and England, and every foreign debtor to pay us what they owe.
These countries did not borrow actual gold from us, but they borrowed
raw materials and products at prices, two, three, and four times as
much as those existing to-day. Therefore, we are actually trying to
force them to pay approximately $90,000,000,000 against the $30,000,000,000 in values that they borrowed.
Seventh. In its final analysis the immediate payment of the so-called
soldiers' bonus will lead to a more equitable distribution of the wealth
of our country in an orderly and legal manner. It is apparent, and
as statistics show, the wealth of our country has become concentrated
in the hands of too few people.
Gentlemen, for the past five weeks we have witnessed the constant
decline in the prices of stocks on our market. Let us not be led astray
on some futile "bear hunt" as being the cause of the most serious
situation existing to-day. Mr. Whitney appeared before officers of
this Government to be questioned whether or not this decline was
being manipulated by dishonest men. His evidence was to the contrary. According to him the decline was not created by bear raids,
but due to the fact that the American people, having lost confidence
in American values, preferred to dump their stocks. This is most
disquieting news. In yesterday's New York Times, Mr. Charles
Schwab is reported as stating before the meeting of the stockholders
of the Bethlehem Steel Corporation, " I have attended these meetings,
for 27 years. Never in that time have things looked as depressing
or as unpromising as at the present time."
I read with a great deal of interest Mr. C. E. Mitchell's letter to
Senator7 Elmer Thomas in connection with the proposed paying of the
soldiers bonus. I believe that under normal conditions Mr. Mitchell's
letter contains some sound advice. If our country in the past had
held to such economic principles, it is unlikely the situation would be
so serious to-day. However, existing conditions are far from normal;
are most critical, and I believe we must quickly adopt or come to some
form of properly controlled inflation or credit expansion.
The principal objections which I find offered against the paying of
the adjusted compensation certificates are:
(a) Opponents state that the bonus will lead to inflation. It is
conceded that our Representatives have made many earnest efforts
to stem the tide of this depression. The reconstruction fund and other
measures seem to have accomplished no lasting good. The temporary



suspension of gold payments would be a blessing in disguise for our
Nation. Incidentally, the soldiers' bonus, which is due in 1945, if
paid now would not only alleviate their great need and suffering but
would bring about recovery and put money into circulation; give
impetus to trade, both national and foreign, and overcome the isolation and stagnation in which we find ourselves.
(6) Opponents argue that the payment of these existing adjustedcompensation certificates now will throw us off the gold standard.
This I dispute. However, I agree that it will probably promptly
lead to an embargo against the exportation of gold and temporarily
suspend gold payments, which I think most advisable and necessary
for reasons previously mentioned.
(c) Opponents argue that credit expansion, inflation, or revaluation
will not be fair to those who own billions of dollars of Government
tax-exempt bonds and other bonded securities. Gentlemen, I can
not agree with this viewpoint, because, when most of these billions
of dollars of bonds were bought, the interest returned would only
purchase about one-half or one-third of what it will to-day. In
other words, the interest on these billions of dollars of still remaining
prime bonds will purchase to-day two or three times what it would
when most of these bonds were purchased. This does not seem
equitable, and in the final analysis it is not possible. Already
default and repudiation have set in on some of these securities that a
year or two ago were considered prime. This default or repudiation
is not growing less but continues to increase. In the final analysis it
is in the interest of holders of all securities that some equitable
inflation, credit expansion, or revaluation be brought about.
I would be strongly opposed to the paying of these adjusted compensation certificates by simply letting the Treasury print this
amount of money. Such a procedure would be not only most dangerous, but might lead to serious financial difficulties. However, I
heartily endorse paying these adjusted compensation certificates now
that are due in twelve years and for which we are now being taxed,
through the substitution of consol certificates payable in 40 or 50
years along similar lines as proposed by Senator Elmer Thomas.
In other words, this will still maintain the Government obligation;
will bring about desired credit expansion, and simply means the
postponing of the meeting of this obligation for another generation
or two when it can be paid off much easier with the revaluated
dollar that will have equitable ratio to commodity and ather values.
Gentlemen, I am an owner and trustee for some of the finest farm
and ranch lands in our country located in Beckham County, Okla.;
Wilbarger County, Tex.; La Salle County, Tex.; Concordia Parish,
in Louisiana. There is not one cent owed against these farms.
Long ago I found that I could not profitably operate these farms, and
for some years have been farming them on a tenant basis; that is,
where we receive one-third or one-fourth of the crops that are raised.
The past season God favored us with unusually abundant crops.
However, it may interest you to know that I did not receive enough
return from these farms to pay the taxes. I understand that my
situation is not local, and that it is almost country wide. Therefore,
what is going to happen to the poor farmer who can not meet his
taxes or pay the interest on the mortgage he has against his farm?
The answer is self-evident. It means no taxes and no interest can





be paid. This will be the beginning of default and repudiation which
is now taking place. I also understand that the return on the best
city real estate is not enough to meet the tax and interest obligations.
With our farms, city real estate, railroads, industries, etc., under
these conditions and steadily growing worse, it is self-evident that something must be done and done mighty quickly. It is primarily because
of this situation that I am in favor of paying the balance of the soldiersbonus obligation in order to immediately bring about a properly
controlled inflation or credit expansion, unless you gentlemen can
evolve a more effective plan for this critical emergency.
History shows that under conditions like this there is but one correct
answer and that is a revaluation of the dollar. Otherwise something
far more serious will happen; communism or its kind will be resorted
to. Properly controlled inflation through the revaluation of the dollar,
therefore, is absolutely necessary unless we wish to stand idly by and
face complete financial collapse and ruin. However, this is Hot the
cure for all our troubles, for we must still face the facts and throw off
our other crushing shackles. Wasteful and unnecessary National,
State, city, and county expenses must be eliminated. Our uneconomic
tariff barriers must be removed. The prohibition law, which is the
cause of much economic and moral havoc, must be returned to the
States where it properly belongs, so as to permit the reduction in our
excessive taxation.
Gentlemen, our policy is heading us toward communism. Unless
some drastic measures are quickly adopted, our Government will soon
find it will own the banks, the insurance companies, the railroads,
farms, etc.
We have wandered far from the just principles on which our Government was founded, and let us make haste and retrace our steps before
it is too late.
The ACTING CHAIRMAN. Are there any questions?
Mr. STEMBER. Mr. Chairman
Mr. FAHEY (interposing). May I suggest this, Mr. Chairman, as to
this workers' organization, I would like to have it known, as the
national legislative chairman of the Army and Navy Union, that we
protest against them as an unpatriotic body, interfering and mingling
with veterans' legislation. I would like to ask the gentleman a
The ACTING CHAIRMAN. Gentlemen, this hearing is a public
hearing and must be conducted in order and decorously. This committee agreed that the Members of the House who are sponsoring
the legislation could agree among themselves as to some gentleman
to present their witnesses, and the proponents selected Mr. Patman.
The Chair is carrying out the instructions of the committee in recognizing Mr. Patman to present his witnesses. Of course, if there are
witnesses here who desire to be respectfully heard by the committee
in support of this legislation, and Mr. Patman does not see fit to put
them on, the committee desires to give them the privilege of a reasonable time to present their case.
Of course this committee does not know the connection of the
witnesses. I would not be candid if I did not say that I knew of the
presence of the two witnesses who addressed the chair a few moments
ago. They talked to me day before yesterday, and I explained the
situation to them and told them that in time they would be heard.



I was advised this morning that they were going to try to run over
this committee, and nobody can do that while I am here, if I have
power to stop it.
Mr. STEMBER. Thank you, sir.
Mr. PATMAN. Mr. Chairman, Senator Thomas had invited another
gentleman here this norning in addition to Mr. Harriss. He wants
only about five minutes time; and at that time I understand the committee had promised some time to others.
The ACTING CHAIRMAN. Mr. Patman, these two witnesses communicated with the clerk asking to be heard, and the clerk advised
them that they would be heard. That was before the committee
agreed for you to present witnesses.
Mr. PATMAN. Yes,


The ACTING CHAIRMAN. Personally, in view of the fact that the
clerk had promised them a hearing, I would like for them to be heard,
and I would like for them to be heard to-day. I understood that
they had been here since Monday. However, I am going to adhere
to the instructions of the committee and permit you to present your
witnesses. If you get through by 12 o'clock, then I will try to hear
those others up to the adjournment hour, 12.30.
Mr. PATMAN. After we introduce this gentleman, who will take
only about five minutes, General Coxey is here, and I understand he
has a telegram or letter from the committee stating that he had been
promised a hearing to-day. I presume the committee will want to
hear him.
So I take pleasure in introducing at this time Mr. George LeBlanc,
retired banker. He is a former president of two Wall Street banks.
He is interested in the banking business, and he is interested in this
legislation. He has an international reputation as an economist.
The ACTING CHAIRMAN. Mr. LeBlanc, the committee will be glad
to hear you.

Mr. LEBLANC. Mr. Chairman, gentlemen, to be frank with you, I
was not interested in the bonus bill until it took the form of an inflation. I had been of the opinion, for the past year and a half, that we
were bound to deflate, and that it would only stop through an inflation of currency or credit.
I am interested in the bonus bill because it involves an important
fundamental of our economic existence in which I have spent my life
in a practical way.
Unfortunately, we are just now suffering from a continual deflation which started from dizzy heights and may reach unknown depths.
The present economic situation is deplorable, and without visible
hope, which makes it worse.
Inasmuch as we all agree that deflation has reached the border line,
is it not time for us to stop it?
Let us grasp the problem from the top.
From a financial standpoint we have enormously inflated debts
created on a gold basis. On the other side, we have deflated values
to offset it, which we are trying to adjust with our present mechanism,
meaning the Federal Reserve.




I do not believe that it can be done; and I believe that the longer
we keep this ijp, we will find more suits, more judgments, more bankruptcies, more unemployment, less foreign trade, and, finally, no rent
and no taxes.
Therefore, if we apparently can not raise the prices and values of
our commodities, naturally the dollar must be revaluated to stop the
present deflation of our values; because any other program to correct
the former can not be put through in time to save our delicate situation; and by that I mean before we can reduce our crops to meet
the situation.
While we may not like the color of the vehicle proposed by the
bonus bill to reach the necessary inflatory measure, I accept it as the
only hope to avoid the present tendency to a paralysis of our gold
I realize and appreciate that we would prefer to settle this difficult
problem with the present financial mechanism at our disposal. Unfortunately, we do not believe it can be done. Remembering that
the usual means have failed to stop the bulge at the top, there is no
reason to believe that comparatively the same means will stop the
bulge at the bottom.
Therefore, it is evident that a more radical program is imperative
to stop further disastrous deflations of our values.
Gentlemen, let us not forget that those inflated debts were begun
during the war; and let me repeat what the late Lord Northcliffe
told me in 1916. He said:
They are socializing the country. They are handing money right and left.
But how will they reverse themselves and continue to live? I can not see thesolution.

And that is what we are going through right now.
We in America have gone further than this, gentlemen. Our effort
beginning in 1924 to raise the standard of living throughout the world,
as well as our own, with our American gold dollar and credit, has.
failed, and in consequence we have eliminated the possibility of adjustment with our present mechanism. It was evident that we could not
raise the standard of three to four hundred million people with the
surplus from 120,000,000 people.
We have committed sins. Let us acknowledge them, rectify them,
and start afresh with courage. Not until then can we see the
psychology of our people change from " hopeless on, hopeless ever,"
to "hope on, hope ever."
Now, if there are any questions on this point of the inflation as*
brought out by the bonus bill, I should like to answer them.
Mr. ALDRICH. Mr. LeBlanc, what two banks were you president of,
in New York?
Mr. LEBLANC. I was president of the Interstate Trust, president,
of the Equitable Eastern Banking Corporation, and senior vice
president of the Equitable Trust.
Mr. ALDRICH. Then you are familiar with international banking
Mr. LEBLANC. Yes; not securities, though.
Mr. ALDRICH. N O ; I mean relations.
Mr. LEBLANC. Banking, finance, exports and imports.
Mr. ALDRICH. Don't you think that if we depreciate our currency
by inflation there will be a tendency for the foreign governments to



withdraw their gold and their reserves? Would not that be the
natural tendency?
Mr. LEBLANC. YOU are quite correct; and it would be a blessing in
disguise, sir.
Mr. ALDRICH. Would you develop that a little further?
Mr. LEBLANC. We are the only country left that went to war that
has not revaluated its currency. They have all had to come to it,
one after the other. I spent quite a little time in France and England;
in France, particularly, when they were going through the process;
and in view of our enormous debts on the gold basis, we will never be
able to balance them with our values until we revaluate our dollar.
I said that a year and a half ago. London has gone through it, and
eventually we will have to go through it. It is a question whether
we do it now or later on.
Mr. ALDRICH. In other words, it would be an indirect way of
reducing the debts of foreign governments to us?
Mr. LEBLANC. Frankly—I am retired from the bank, and I want
to speak to you frankly, gentlemen—it will probably come to that
point; and it explains this gentleman's statement when he says that
the other countries with the revaluated currency can sell their goods
and we can not.
Mr. ALDRICH. And you do not fear that it would cause, through
the psychological effect, withdrawals of money from our banks in
the United States?
Mr. LEBLANC. NO. If we want to keep on the gold basis, we can,
just as I believe that England could have done. But in order to
settle their domestic problems they decided to go off the gold basis.
Just imagine a country with $35,000,000,000 dollars of national
debt. How could they ever collect taxes sufficient to balance their
budget? Ours is a similar case. We are going to make a book balance of our Budget. Are you going to actually balance it? That is
another question, gentlemen. I tell you truthfully, I do not believe
the Budget can be balanced on a gold basis.
Mr. CROWTHER. Mr. LeBlanc, following that line of thought,
your suggestion is somewhat like the suggestion made by Mr. Harriss
a, few minutes ago regarding the revaluation or the deflation of the

if you think that would be advantageous,
do you think that we ought to go the whole route, and go off the
gold standard?
Mr. LEBLANC. I firmly believe that it will be our only salvation in
the end. And that is what made me interested in this bonus; because
it has inflationary virtues to save our present situation.
Mr. MCCORMACK. Mr. LeBlanc, you have stated what your banking experience has been. How many years did that cover?
Mr. LEBLANC. A period of 20 years.
Mr. MCCORMACK. Have you ever acted in an advisory capacity
to any American financial institution?
Mr. LEBLANC. I probably handled one of the largest foreign businesses in this country—exports and imports; not the security end of it.
Mr. MCCORMACK. In what manner did you handle that, Mr.




Mr. LEBLANC. For instance, I had banking and business connections with every country in the world. Our exports of cotton, our
exports of oil and grain, and imports into this country caused us to
have general banking relations with the great banks of the world.
Mr. MCCORMACK. Have you ever occupied an advisory position
to any foreign banks or governments?
Mr. LEBLANC. When I visited the foreign banks I spent some of
my time with the governors of the large foreign banks abroad.
Mr. MCCORMACK. Have you any opinion as to whether there is
anything unsound in utilizing America's enormous gold supply to
restore a reasonable balance between money value and commodity
Mr. LEBLANC. Not at all. I take it it is imperative that we do it.
Mr. MCCORMACK. Not only the farmers; but does that go into city
property, home owners?
Mr. LEBLANC. Real estate is always the last thing. It comes in
at the tail end. First your commodities, then commerce and industries, and then your real estate comes in last, because if you bring
up the others, real estate takes care of itself. You can not take it
Mr. CROWTHER. Would you agree that we are at a very material
disadvantage in this country as regards the reduction of industrial
activity, due to the fact that the other principal countries are off the
gold standard?
Mr. LEBLANC. Absolutely. England saved herself, but
Mr. CROWTHER. I want to get this clear in my mind, that you
think it would be a material advantage to us to go off the gold
Mr. LEBLANC. Absolutely.
The ACTING CHAIRMAN. Thank you, Mr. LeBlanc.
Gentlemen of the committee, I would like to have your attention
and advice. Under date of April 11, the Ways and Means Committee
received a letter signed by the Workers' Ex-Seryice Men's League,
by E. Levin, chairman, asking that that organization be given a hearing on this proposed legislation, and stating that they had selected
as a committee to represent this organization, J. W. Ford and S. J*
Stember. The clerk of the committee replied, stating that they
would be given a hearing. They have been in attendance since last
In view of the fact that they are non-residents and have been here
since Monday, and the further fact that the clerk wrote them that
they would be given a hearing, and as they are ex-service men, I
think they ought to be hoard. I should be glad if the committee
will agree, for them now each tb be heard for ten minutes.
The committee has also, so the clerk advises me, allotted time for
General Coxey to be heard. Mr. Patman desires General Coxey to
be the next witness. The committee has decided that they would
not have hearings in the afternoon, but I would like to ask the committee if they would be willing to make an exception and have a
hearing this afternoon at 2.30, to hear General Coxey, and to hear
each of these other two witnesses now for 10 minutes.
Mr. ESLICK. Why not go forward with the hearing now, because
there are some matters in the House this afternoon under a special



Mr. CROWTHER. I move that we sit until 1 o'clock and hear these
witnesses whom you have named.
(The motion was agreed to.)
The ACTING CHAIRMAN. " The next witness is J. W. Ford, who will
be heard for 10 minutes.

Mr. FORD. Fifteen years after the World War the war veteran is
again on the front pages of all the newspapers. This occurred regularly since the first time the masses of war veterans demanded the cash
payment of the bonus. Each time we are either attacked as making a
"raid on the Treasury " or there are groups of Members of Congress,
because of our pressure, come forward as favoring the payment of the
bonus, but we have found in each case that although we receive a
little relief we have to pay dearly for it. We saw in turn the " tombstone bonus" and then the last amendment permitting us to borrow
50 per cent of our o\^n money at 4% per cent compound interest.
To-day we see the same maneuvers of Members of Congress
making it appear that they are favoring us and again we see the same
attacks being made against us. We recognize these as smoke screens
and camouflage colors of our enemies behind which the bankers, the
owners of big industry, the railroads, are receiving billions of dollars
to protect their profits, while there is no money for relief of the workers
as a whole or for the war veterans. We want to point out here that
it took just a few minutes to pass the Reconstruction Finance Corporation bill which turned over $2,000,000,000 to the banks.
We will not be deceived by the maneuvering in Congress by those
who are claiming to support us, nor will we be intimidated by the
attacks of those who are opposing us.
The Workers Ex-Service Men's League will continue to mobilize
the war veteran so that we can again force the Members of Congress
to yield to our demands.
To-day, when there are 12,000,000 or more workers in the United
States unemployed, many uncounted millions working only part
time, and when at this time wage cuts are asking place in practically
all industries, the question of the immediate needs and welfare of
these millions must be of first consideration.
Among these millions are over 4,000,000 war veterans whose
average in age is 39; 234,300 of these were wounded during the
World War. Many others, subsequent to the World War have
become physically disabled as a result of their participation in that
war. Thousands of widows, orphans, and dependents of war veterans
need immediate relief.
About 1,000,000 of the war veterans are unable to find work and
have no means of supporting their dependents. They are practically
at the age, even if there were employment they would be the last
ones to be taken. The age of 40 is a dead line at which any worker
can obtain employment to-day. A war record for a veteran is a
detriment for employment. Employers do not want to pick those
who might still carry the defects, shell shock, gas, and other ailments
arising from the war.



The war veteran at present is even in a worse condition than the
other workers due to his advancing age, due to the fact that as a result
of the war his whole former life was disjoined and destroyed. He
had to build up a new life.
The welfare and the needs of the war veterans and their dependents
are not special problems but are part of the needs and welfare of
the masses of the people.
At the present time the Negro ex-servicemen are especially hard
pressed, then greatly unemployed, discriminated against on jobs,
without any relief. He is constantly being pushed out of what jobs
he has.
We, the war veterans, however, have an unpaid claim of wages
against the Government. Through the mass pressure of the returned
soldiers Congress was forced to recognize that our wages during the
war had not been properly paid. Under this pressure, in 1924,
Congress passed the adjusted service compensation bill recognizing
the fact that the war veteran should have his pay adjusted. This
amounted to an average of $1,000 due each war veteran.
The betrayal of the American Legion, the opposition of the bankers,
big industry and their political parties, Republican and Democratic
Parties, jointly with the opposition of the liberals and the Socialist
Party helped to defeat the immediate payment in cash of what is
commonly known as the bonus. Instead of paying this recognized
claim, the money due was adjusted on a basis of a life-insurance
policy, maturing in 1945. This w a s commonly nicknamed the
"tombstone bonus." We were permitted to borrow a small amount
and paying on it compound interest rates varying from 6 per cent
to 8 per cent.
Again in 1930, the mass pressure of the war veterans forced Congress
to permit the veteran to borrow 50 per cent of the money (averaging
about $500) still due us, but again we must pay 4}£ per cent compound
interest for borrowing on our own money. By 1945 the balance of
$500 due would be eaten up by the interest, leaving only a balance of
about $30. For all these years the Government has refused to pay
this $1,000 and the interest extorted from the war veteran.
In many States where the married war veterans who were getting
a little relief, this is now being discontinued—New York State and
others. Single war veterans are refused relief entirely. For 15 years
we have lived upon the good will of our friends and our relativesMany of us who had no relatives were thrown on the human junk pile,
discarded, filling the breadlines, many of us forced into avenues of
crime, with the result that large numbers of us are now in prisons due
to conditions over which we have no control.
These facts become even more grim and real when we see the
arrogance and brutality of the present representatives of the bankers
and financiers sitting in the millionaire Congress of to-day, where no
workers' representatives can be heard. Congress, to meet this emergency, this crisis, this starvation of not only the war veterans but of
the millions of unemployed, has carried out a very fruitful program of
spending and of loaning millions to the bankers.
In this period of 15 years since the World War those who were
engaged in manufacturing the necessities of war were not forgotten.
When the house of Morgan, Schiff, and the other bankers decided
that the United States forces be sent to support the Allies in order



to be better able to collect the billions loaned to the Allies during the
war, spread their influence and control of foreign markets, the^y were
sure that they would profit by that transaction. Seven thousand war
contractors received more than $2,000,000,000. Former Secretary
Mellon profited more than any one else. Railroad owners were paid
adjusted compensation of one and one-half billions. War industries
were given billions in refund and income tax because they did not
make proper deductions on their property during the war in 1917 and
1919. Those were paid, with interest, between 1922 and 1929. On
one refund to the United States Steel Corporation, amounting to almost
$16,000,000, the interest paid on this was more than $10,000,000.
The representatives of the Workers Ex-Servicemen7s League point
out, not only to the Ways and Means Committee and to the Members
of Congress, but particularly to the great masses of the war veterans,
their working-class section, and the rest of the workers and farmers,
that the war veteran must be paid now and in cash the adjustedservice compensation and all interest deducted on loans already made.
In order that the demands for the immediate cash payment of the
bonus will be made clear and that we can be organized to carry on a
successful fight for the bonus, we will expose both the actions of those
who claim to be the friends of the war veterans as well as those who
openly oppose the immediate payment of the bonus. We will organize the masses of the war veterans and our support in the various
workers organizations in order to finally force Congress to give the
relief to the war veterans that is due us.
We have seen that the present session of Congress has utterly disregarded the demands of the workers for unemployment relief.
Fifteen hundred delegates who appeared in Washington in the historic
hunger march represent part of the mass pressure which has been
carrying on a struggle for a number of years to obtain relief. In this
delegation the Workers Ex-Servicemen's League had over 300 war
veterans from 49 different cities. Congress has so far refused to pay
any attention to these demands for relief, for unemployment insurance
and also our demand which was included within it, the cash payment
of the bonus. Even the fake relief measures presented by a committee
of insurgent Members of the House of Representatives, were voted
down and the Democratic Party accepted the Hoover program of
starvation for the masses.
The sham attack of the insurgents to fight against the sales tax bill
was clearly exposed when Mr. Garner, Speaker of the House, brought
his party, the Democratic Party, into full support of the administration program, and taxes in various forms will now be levied on the
masses of the people. These point out clearly that the policy and
the determination of the Hoover government, representing the
Republican Party, and the policy of the Democrats are one, namely,
millions for big business, millions for war, and starvation for the
masses of the people.
This same Congress has already voted $2,000,000,000 for a reconstruction fund so that the bankers can borrow additional money and
become further entrenched in the control of the resources of the
country. Millions have been voted for immediate war purposes, and
not a cent has been voted for relief. It is under such an atmosphere
in Congress, in the press, on the eve of the presidential election, that
the demands for the bonus are now being brought forward in Congress
and throughout the United States.



We, the war veterans, must guard ourselves against our pseudo
friends as well as against our outspoken enemies. The House of
Representatives bill No. 1 providing for the cash payment of the
bonus was introduced by Mr. Patman of Texas (Democrat) and
sponsored by the Veterans of Foreign Wars. Although it demands
the immediate cash payment of the bonus, it does not demand the
return of interest paid by the war veterans on his own money, does
not remove the restriction clause "war veterans must wait two
years after applying for their compensation/'
Not a word is said of the long waiting of the money, inconvenience,
and degration suffered by the war veterans during this period. Full
hope is laid in the maneuvering in Congress of the congressional committees and insinuation and threat of the voting power of millions of
war veterans.
These gestures of the Democratic Representatives, supported by
the officers of the Veterans of Foreign Wars, are advisedly carried out
during this preelection campaign period to fool us and to try to gain
our vote against the Republican Party.
The war veteran must clearly understand these maneuvers.
We therefore must not depend upon Congress passing the bill
unless they are forced by mass demands, and there is no liklihood of
both Houses overriding Mr. Hoover's veto without carrying on an
intensive mobilization of the masses of workers and the war veterans
The subterfuge and demagogic statements of Mr. Patman that the
payment of the bonus will not unsettle the Budget and the proposal
of some other means of raising of the money is a sign of capitulation
to the administration and the Democratic Party. The suggestions
for the printing of additional money at best is another form of deflating the value of the money to be returned to the war veteran. His
statements that this money will help tide over the crisis and alleviate
unemployment are demagogic and have no foundation in sound
The question of relief to the war veterans and the payment of the
bonus must be faced on its merits. It is only a partial relief for a
small section of the millions of workers, a small section of whom this
money is due, for making it possible for the bosses, the big industrialists to become millionaires and billionaires as a result of the World
But, we will not be deceived by this trickery. We know that the
bosses' and bankers' representatives use all kinds of phrases and
sweet words to break down the militancy and protest of the masses of
war veterans by giving them an unfounded hope that the bill will be
passed without independent mass struggle of the war veterans themselves, in this way demobilize and weaken the protest of the war
veterans and therefore be unable to force Congress to pay us now, in
cash, and in full, all that is due us.
WMle at the last convention of the Veterans of Foreign Wars the
mass pressure of the demands of the war veterans for the bonus forced
the convention to pass a resolution favoring the immediate cash payment and carried on a quiet campaign, in which millions of signatures
were secured, we must guard ourselves again from being fooled and
confident in the fact that these signatures themselves will make
Congress pass the bonus bills.



The leaders of the Veterans of Foreign Wars in giving full support
to Mr. Patman and the Democrats in Congress are assisting the
Democratic Party in breaking down the militancy and the pressure
needed to force Congress to concede to our demands.
Mr. MCCORMACK. You say that a large number of veterans are in
prison. I am a veteran myself Do you mean to say that there is a
larger percentage of veterans in prison in proportion to the total
number of the population than in any other group of our citizens?
Mr. FORD. I am only speaking here in the interests of war veterans.
We have facts to indicate that there are a number of war veterans in
prison. I do not know the exact number.
Mr. MCCORMACK. But there is not a larger percentage of war
veterans who violate the law than any other group of our citizens?
Mr. FORD. Perhaps.
Mr. MCCORMACK. YOU do not want yourself to go on record
saying that a larger percentage of war veterans are in prison?
Mr. FORD. I should think there is a large number of veterans in
Mr. MCCORMACK. I wanted the record clear. You do not think
there is a larger percentage of veterans in proportion to the total
population, in prison, than any other group of our citizens, do you?
Mr. FORD. I do not know exactly, but probably.
Mr. MCCORMACK. Well, I know that there is not and I challenge
any such opinion expressed by anyone.
The ACTING CHAIRMAN. The next witness is S. J. Stember, representing the Workers Ex-Service Men's League, New York City.
Mr. STEMBER. Mr. Chairman and gentlemen, to-day Henry L.
Stevens, newly elected national commander of the American Legion,
carrying out the full program of the American Legion and its original
objectives giving full support to Mr. Hoover, and claims that members
of the American Legion do not want the passage of the bonus. He
strays from the truth when he states that the majority of the men do
not want it.
We dare and challenge Mr. Stevens to permit the rank and file,
under their own control, under their own committee, to carry out a
referendum among the membership, without interference from the
adjutants and will prove that the great majority of the membership
of the American Legion want the bonus.
The American Legion, claiming a million membership of those who
participated in the World War, is the most outspoken and bitter
enemy, fighting the demands of the war veterans.
Mr. H. McNider, now the United States representative in Canada,
former national commander of the American Legion, when the agitation was strong for the bonus in 1919-20, made many pious wishes
lauding the herosims of the war veterans, making it appear that he
was in favor of the demands of the war veterans. But through this
means betrayed the ex-soldier and converted this demand into the
"tombstone bonus."
In 1930 the American Legion, instead of fighting for the immediate
cash payment of the bonus, again betrayed the demands of the war
veterans and assisted in putting over the bonus "steal," that is, in



giving 50 per cent of the balance due on the bonus, while at the same
time robbing the war veteran of the other 50 per cent through the
4K per cent compound interest that was charged.
At the convention of the American Legion in Detroit (September,
1931), Mr. McNider and Colonel Roosevelt, who is given the credit
for organizing the American Legion, were active against the payment of the bonus. Delegates instructed by their posts to vote for
the bonus, voted against it. The working-class rank and file of the
Legion were again betrayed. But this was not easily done. Mr.
Hoover was forced to attend the convention even though he had previously refused to do so. Messrs. Stimson, Lamont, and Mellon
forced Mr. Hoover to attend that convention to use his influence
against any demand favoring the cash payment of the bonus.
The American Legion was organized basicly for the purpose of
stopping the masses of the war veterans from fighting for their demands. It was organized purposely to use the war veterans at home
after armistice against the other workers. This is seen clearly in
the participation of many legionnaires on strike duty against the
workers, as in Kentucky, and the recent strikes in the coal fields.
The proof of our statement can be read on page 14 of the History of
the American Legion, by Marquis James.
During the period of the armistice all of the soldiers were stirring
with unrest. They were disillusioned. They realized that they
were sent across, that it was a war for profits, for the division of the
world markets.
The unrest of the men in the trenches is part of the some unrest
of the men and women in the shops and factories immediately after
the World War. It is part of that unrest which terminated in a
successful change in the form of government in old Russia, former
ally of the United States. It was this unrest as was shown by the
Michigan regiment which was transported from the trench—as in
France, after armistice day, to Archangel and there mutinied and
refused to join the other allied armies in their attack against Soviet
Russia. This unrest and discontent arising from the disillusion of
fighting in a "war to end all wars," fighting for "democracy," had
to be quelled and because of this a group of officers, headed by
Colonel Roosevelt, now the Governor General in the Philippine
Islands, organized the first caucus in Paris. Congress gave this
organization its official sanction and chartered it in 1919.
These four million of men have been controlled almost under the
same military discipline as they were actually in time of battle.
Their every demand has been betrayed. They have been subjected
to all kinds of chicanery, dressing them up, selling poppies on the
street, selling the history of George Washington at the bicentennial,
selling toothpicks, shoe-laces, nail-files on the subways, but always
opposing the demands of the war veterans for relief.
Brigadier General Hines, head of the War Veterans Bureau, only
recently pointed out that other sources were available for the bonus,
but now comes forward with a statement that the needs of the war
veterans are less than they were before. He states unemployment
amongst the war veterans is decreasing. Undoubtedly, he uses the
figures of a notorious campaign to get jobs by the American Legion.
We need no statistics or profound figuring. The only way jobs are
created to-day is by depriving others who are now employed. The



slogan of give a job, is only for the purpose of diverting the attention
of the war veteran from his demand and struggles for the immediate
cash payment of the bonus.
The bosses' press, owned and controlled by the different political
parties and the big bankers, are opposed to the cash payment of the
bonus, bitter, sarcastic and unrelenting. They forget the praise and
phrases of honor they showered on us when we had our first big parade
and then when we demobilized after Armistice Day.
The liberal press, too, in the United States, such as the Nation,
the New Republic, which at times comes forward with statements
of fair play, honesty, fairness, and so forth, exposed their treachery in
their support of the bosses by siding with the American Legion and
Mr. Hoover. They also characterize our demands as a "raid on the
The Socialist Party, claiming to speak for workers, further shows
the side that it supports in their attitude toward the cash bonus.
Norman Thomas is opposed to it. In his editorial in the New Leader,
February 7, 1931, he states as follows:
It is probable that so great a bond issue and tax program as this sum would
require would create certain financial and perhaps slow up business recovery.
What we ought to be working for is a bond issue to begin a great program of
public works.

They want roads to be built and national parks, monuments, fine
gateways to national parks, but let the war veteran starve. Let the
unemployed freeze.
The leadership in the A. F. of L. has definitely shown that it
supports the American Legion in its entirety. At its conventions
and at the convention of the American Legion, speakers of both
organizations greeted each other and pledged their support. It was
so in Boston and so in Detroit.
The great rank and file of the membership of the A. F. of L., however, support .the demands of the workers for relief, supported the
demands of the war veterans for their bonus.
We must here say a few words on behalf of the disabled war veterans who are not included in this, except that it relates to his adjusted service compensation.
In view of the statements of Brigadier General Hines, head of the
Veterans' Administration Bureau against the bonus and against
additional hospitalization, the representatives of the Workers ExServicemen's League must answer the misleading statements and
expose his actions against the interests of the war veterans.
Mr. Hines's statement to the press that he believed veterans as a
group were in a more favorable economic condition and that requests
for hospitalization had decreased except in the larger cities, on the
face of it, without any need of presenting further evidence, are false.
The head of the Veterans' Bureau, Mr. Hines, is in full agreement
with the policy of the Hoover administration.
The physical condition of the war veteran is becoming worse.
Those who are disabled are getting less hospitalization than they
did before.
The administration of the Veterans' Bureau is not only known for
its excessive overhead expenses but for the existence of graft from its
very inception. War veterans on discharge from and while in the
hospital as a stay in the "butcher shop."



Under the retired officers act are included the figures of relief for
the veterans. Many of these are receiving additional pay in the
administration office of the Veterans' Bureau itself. Hundreds of
thousands of dollars in padded
accounts for construction purposes
are all included in veterans7 relief.
Placing the disabled war veteran under the control of the Veterans'
Bureau immediately precludes any fair treatment for disability compensation.
The only way to give the disabled war veteran disability relief is
for the right to choose his own physician at Government expense.
The question of cutting down and restricting bonuses, pension, and
relief for the war veterans is not a problem that concerns only the
Government of the United States but is part of the basic problems
in all the allied and central power governments except what is now
the U. S. S. R. formerly czarist Russia, an allied power. It is just
as international in character as are all the problems arising from the
international crisis and depression.
After the World War these returning soldiers, who were longer in
the trenches than we were, came home disillusioned just as we did.
They all recognized that they bled, that they butchered, that they
were gassed and they in turn gassed so that they could help their bankers and industrialists pile up profits, protect their industries and divide
up the world market among themselves. These returning soldiers
reacted immediately after the World War and forced relief and bonuses,
from their respective governments.
As a result of the constant agitation, the French Government in
some form or other had to give relief to its war veterans. The
Canadian Government paid in cash from $600 to $4,500 to its war
veterans. The English paid from $280 to $4,750. Yes, even the
German Government was forced to give relief. These foreign powers,
also built up organizations of war veterans, supervised them and
used them to offset the demands of the returning soldiers. Just as.
now in this Congress every effort is being made to cut down the
relief of the war veterans.
This is now taking place in France. This is taking place in Germany. The war vetrean is answering these attempts to stop our
relief by united action. The war veterans recognize their common,
enemies. The answer of the world war veterans in the United
States and in other countries against these, is organization of theworking class elements of .the war veterans to a powerful and international organization to study more carefully the best means of
opposing the constant restructions of relief to the disabled, to the
orphans, to the widows, the constant cutting down of the pensions,
and bonuses and working out the best means of gaining their ends.
The above analysis of the attempt to stop the giving of the bonus,
to the war veterans and the camouflage moves of those who are
supporting it, proves to us conclusively that unless the world war
veterans themselves organize their forces we will not be able to gain
our demands.
We are mobilizing the war veterans around the following concrete*
demands and program:
1. The immediate payment of the balance of the adjusted service
compensation commonly known as the bonus, to be paid in cash and
in full, plus all interest that had been deducted from the war veterans
who had already made loans.



2. The immediate removal of the 2-year restriction clause.
3. Payment of this money to be in such form and in such way that
the full value of the money will be received and that in no way will
the war veteran be forced in any position to discount his payment,
either at banks, loan associations, and so forth.
4. Disabled war veterans to be permitted to choose their own
physicians at the expense of the Government.
We call upon the masses of war veterans to carry out the following
1. Organize bonus committees in every shop and factory to send
resolutions to Congress demanding the immediate cash payment of
the bonus.
2. The rank and file of the American Legion to institute a national
referendum to be carried out by themselves, not their officers, in
every post.
3. War veterans, not affiliated with any veteran organization, to
form committees for the cash payment of the bonus, to pass resolution
to Congress.
4. Additional posts of the Workers Ex-Servicemen's League to be
5. United committees representing these various groups of war
veterans to form committees of action for the support of the program
outlined above and to carry on a fight for the interest of the war
6. Provisional committee to be set up in New York City of these
various groups and immediately lay out a program for a march of
delegates of war veterans on Congress before it adjourns its Seventy-,
second session.
We can see from the front page articles of the boss press and of
"big business" that a determined fight is being made against us—array of forces at these hearings who are fighting against the bonus
directly and indirectly, gives us new determination to carry out our
fight for the immediate cash payment of the bonus.
No mention is made of the billions of profit made in the last war*
when $18,000,000,000 went to make millionaires.
No mention is made now of the millions being spent in the feverish
preparations for another world war where again thousands will be
slaughtered for the interests.of profit.
No mention is made of the billions in tax exemptions, or of the
present plans of Congress placing the burden of taxation further on,
the masses of the people. The war veteran is being looked upon as a
"racketeer." In our first parade when we marched down the main
streets of every city in the United States on our way to the front,,
again when we came up the Broadways of the important cities of the
United States returning from making the world "safe for democracy",
we were not blackguards, we were not racketeers. We were heroes.
We have since learned, just as all the other workers have learned,
that was a bosses' war. (Even President Wilson stated that the last
war was a commercial war.)
Not only does the American Legion fight the bonus, but now in this
period of depression is sending many on their famous "get a job"
campaign into the various shops, on strike jobs and at lower wages,
than the prevailing rates.



We see this same Ways and Means Committee holding hearings on
legislation which will restrict the foreign-born war veterans as well as
the other workers. We have already sent our representatives to
these hearings against the foreign-born workers, protesting against
these attacks on the workers.
The negro war veteran is being discriminated against, has more
difficulties in obtaining relief and the bonus than the white workers.
We see again, as we saw 15 years ago, increased lynching of the
negro people. When the negro war veteran returned from the war
the bosses threw him and the white workers into race riots. Negro
war veterans in uniform were lynched. To-day, again we see the
increased lynching of the negroes—discrimination on jobs, being
taken off by force. We now see also the legal form of lynching as in
the case of the frame-up of the nine Scottsboro boys. These are all
part of the struggles of the workers as a whole. Negro and white
worker together, to-day, are fighting against wage cuts, fighting together for the bonus, fighting together against unemployment.
The fight for the bonus is not a fight on our part for special privileges.
It is wages due. Our fight is part of the general struggles of the masses
of the people against starvation.
The present proposals in Congress are insufficient as we have
pointed out, and furthermore, the means by which they are proposing
to raise the funds will not in any way add to the relief of the war
veteran or of the masses of the people.
We propose that the money be raised by—
1. Using the money voted for immediate war preparations.
2. By taxing inheritance.
3. Removing the tax exemptions on securities.
4. Imposing a surtax on industries.
In conclusion, we are calling on all war veterans, particularly on
the members of the Veterans of Foreign Wars, not to put their confidence in the actions of the Democratic or some of the Republican
Representatives who may vote or speak for the bonus. It will be
only our mass pressure that will force Congress to heed to our demands.
We call upon the rank and file members of the American Legion
to demand a referendum of the membership to call upon all war
veterans not affiliated in veteran organizations, to form bonus committees.
We call upon the veterans in shops and factories to form bonus
committees in their shops.
We call upon the workers to form their own Workers Ex-Servicemen's Leagues and unitedly carry on monster demonstrations in every
community, winning over to our support the masses of the war veterans and the workers in general. Through this united action we will
carry on an insistent campaign and elect mass action will we be able
to force Congress to pay us now and in cash the balance due us on the
adjusted-service certificates.
Mr. RAINEY. I would like to ask a few questions. Are you a
member of the American Legion?
Mr. STEMBER. I am a member of the Workers Ex-Servicemen's
League. We have many members of the American Legion who have
joined us, and many are joining. We can not take them in fast
Mr. RAINEY. Are you a member of the American Legion?

Mr. RAINEY. Yes.
Mr. RAINEY. What is your business?
Mr. STEMBER. I am a textile worker.
Mr. RAINEY. Were you a soldier in the World
Mr. STEMBER. I was a sailor.
Mr. RAINEY. On what ship?
Mr. STEMBER. On the U. S. S. Birmingham.



I was stationed in
Mediterranean waters, Gibraltar, base 9.
Mr. RAINEY. Where were you born?
Mr. STEMBER. I was born in Latvia.
Mr. RAINEY. That was a part of Russia?
Mr. STEMBER. It was a part of the Russian Empire, of czarist
Mr. RAINEY. It is not now?
Mr. STEMBER. It is not


Mr. RAINEY. It is an independent State?


Mr. RAINEY. HOW many ex-service men belong to the Workers
Ex-Servicemen's League? What is your membership?
Mr. STEMBER. The ex-service men are going into the Workers
Ex-Service Men's League at a very fast pace. We have not enough
organizers to take care of them, so that while we have been here during the last four days there may have been tens of thousands of others
who have gotten into the organization.
Mr. RAINEY. What is the membership of the Workers Ex-Service
Men's League?
Mr. STEMBER. It would be approximately 50,000.
Mr. RAINEY. Where are they located?
Mr. STEMBER. They are located in every part of the United States.
Mr. RAINEY. DO you advocate the overthrow of the Government
by force? Does your organization advocate the overthrow of the
Government by force?
Mr. STEMBER. We are advocating the immediate cash payment of
the bonus.
Mr. RAINEY. I am asking you, does your organization advocate
the overthrow of this Government by force?
Mr. STEMBER. We do not. I will read you the demands of the
Workers Ex-Service Men's League. I have it right here in my
pocket. Do you wish to hear it?
Mr. RAINEY. NO. Are you an officer in that organization?
Mr. STEMBER. I am.
Mr. RAINEY. DO you

receive a salary?
receive a salary? No. There is not one
single solitary worker in the Workers' Ex-Service Men's League who
receives a salary. I have been given fare by the veterans who chipped
together with nickels and dimes. That is how the delegation was
sent here; and that is why, gentlemen, we wanted to get the floor, so
that we could get away and not incur any expenses for the Workers'
Ex-Service Men.
Mr. RAINEY. YOU have a paper representing your organization?
Mr. STEMBER. Yes; I handed that to the chairman. I believe the
chairman has it.




Mr. RAINEY. What is the name of that paper?
Mr. STEMBER. Oh, you mean a newspaper?
Mr. RAINEY. If it is a newspaper.
Mr. STEMBER. We have a bulletin—the Workers7 Exservice men's
League Bulletin.
Mr. RAINEY. How often is it issued?
Mr. STEMBER. It is issued weekly.
Mr. RAINEY. Does that advocate the overthrow of the Government
by force?
Mr. STEMBER. Not at all. We are advocating the bonus; the
immediate cash payment of the bonus. That is what we advocate.
We advocate better hospitalization and better treatment for the
disabled veterans.
Mr. RAINEY. Are those the only propositions that your organization stands for?
Mr. STEMBER. I will read them to you if you want me to,
Mr. RAINEY. I am just asking you: Are those the only propositions
that your organization stands for?
Mr. STEMBER. We have also: "Unity with the working class in its
struggles for a better living."
Mr. RAINEY. That is what you advocate?
Mr. STEMBER. We advocate "No jimcrowing
of any kind, or dis-i
crimination against 77
the Negro war veterans.77 "Fight against another imperialist war.
That is one of our demands. We are actively
engaged in teaching the workers and the youth of the United States
that another imperialist war benefits the capitalist class only, and
does not benefit the working class.
Mr. RAINEY. DO you advocate the principle that your members
ought not to join in defense of the country in the event of war?
Mr. STEMBER. We do not advocate that. We are not pacificists.
We do not believe in the pacifism that the pacifists advocate.
Mr. RAINEY. Your organization is ready to enter into any defense
of our present system of government if an emergency arises?
Mr. STEMBER. Under the present system of government it does
not go to any length on that. We are primarily organized for our
immediate needs, because we know that at the present time, with
12,000,000 workers unemployed in this country, the veteran has no
more chance of getting employment than the rest of the workers.
Mr. RAINEY. Are you affiliated with the Communist Party?
Mr. STEMBER. I am not. Our organization is composed of
Democrats, Republicans, socialists, communists^ and those who do
not belong to any party.
Mr. RAINEY. That is all.
Mr. STEMBER. We are united on the questioa of the bonus, and
we are also demanding unemployment insurance; because if we receive
the bonus it will only last a very short while under the present conditions of unemployment. Why? Because you are looking at one
who lives on charity, because his sister and his relatives support him,
He has no job; and we have thousands of them. If I get my bonus>
I will just have to hand it over to my relatives and friends who have
supported me, the same as the other workers who are ex-service men
and unemployed.
Therefore our demand is for unemployment insurance as relief that
would tide over the ex-service men as well as the workers.



Mr. RAINEY. That is all.
The ACTING CHAIRMAN. Are there any other questions?
Mr. MULLEN. Mr. Chairman
The ACTING CHAIRMAN. Who are you, please?
Mr. MULLEN. Mr. Mullen. I would like to question the gentleman.
The ACTING CHAIRMAN. NO; the committee does not allow that.
Mr. Patman, present your next witness.
Mr. PATMAN. General Coxey is here and wishes to be heard.
The ACTING CHAIRMAN. General Coxey, the committee will be
glad to hear you.

General COXEY. Mr. Chairman, gentlemen of the committee,
I want to thank you for this opportunity of presenting my ideas on
this so-called bonus bill.
You, as the Committee on Ways and Means, must raise means irt
accordance with the Constitution of the United States; and I want
to call your attention to the most important provision in that Constitution, which is the fifth clause of the eighth section of the first
article, which provides:
The Congress shall have power to coin money, regulate the value thereof, and
of foreign coin, and fix the standard of weights and measures.

The Congress comprises 435 Members of the House and 96 United
States Senators. They are all elected by the people. Therefore my
contention is that the Congress is the people, and should coin all the
money for the people, at cost to the people, instead of at cost to the
banks exclusively.
I want to show you how you have handled that provision of the
Constitution by making an exhibit of the kind of money that the
Congress has provided for the exchanging of the products of the
people and the employment of the people.
First I want to exhibit a gold certificate. That gold certificate is
in the denomination of $10. That gold certificate is legal tender for
all debts, public and private. It is based upon a $10 gold piece that
is deposited in the Treasury Department in your city.
Then I want to call your attention to a legal-tender note issued by
Abraham Lincoln for $5. On the face of this note it says:
This note is a legal tender for all debts, public and private, except for duties
on imports and interest on the public debt.

The first $60,000,000 issued under Lincoln's administration in 1862
was full legal tender for all debts, public and private, legal tender for
imports, and legal tender for the payment of interest on the debt.
When they needed more money they made this issue in 1863. That
was when the act was passed authorizing the Secretary of the Treasury
to print these notes. They called it coining.
When that act was under consideration by the Ways and Means
Committee at that time, the bankers of New York, of Boston, of
Philadelphia and of Chicago came and flooded the committee room,
demanding that they put on an exception clause. That exception
clause was put on here for the sole purpose of allowing the gamblers of
New York to corner the gold, so that when a man came to pay his




import duties on goods, as Stuart did—one of the greatest importers
and one of the largest business men in the city of New York—he
needed $100,000 in gold to pay duties on imports. He had sold his
goods for this kind of money. That had the exception clause on it;
and the bankers of New York cornered the gold so as to compel him
to give up $285,000 of legal tender except for duties on imports and
the interest on the public debt.
Now, that is not the kind of money that is proposed to be issued for
the payment of these soldiers under this bonus bill. That is to be a
full legal tender, exempt from all taxes.
(General Coxey submitted the following statement for the record:)

United States notes (issued under three acts):
Feb. 25, 1862
$150, 000, 000
July 11, 1862
150, 000, 000
Mar. 3, 1863
Largest amount outstanding at any one time (Jan. 3, 1864)
149, 448, 902
Old demand notes: Issued under acts of July 17, 1861, August 5, 1861, and
February 12, 1862. Amount issued under that particular class was $60,030,000.
This includes reissues.
Fractional currency: Issued under the acts of July 6, 1862, March 3, 1863,
and June 30, 1864. Total amount issued under this class, $368,724,079.45.
Amount includes reissues. Largest amount outstanding was $49,102,660.27 on
March 31, 1874.
Compound interest notes: Issued under acts of March 3, 1863, June 30, 1864.
Amount issued under these acts was $266,599,440.
One and two year notes of 1863: Amount issued under this particular class,
Seven-thirty notes: Issued under acts of July 17, 1861, June 30, 1864, January
28, 1865, March 3, 1865. Amount issued under these acts, $969,992,250.
Treasury notes of 1861: Notes redeemable 60 days or 2 years after date of
issue. Issued under act March 2, 1861, $35,364,450.

General COXEY. On February 4,1931,1 was before your committee,
and I wanted this committee at that time to issue $3,400,000,000 of
that kind of money. They did not see fit to do it; but if they had
done it, it would have been in circulation to-day, and it would have
been the foundation for 34,000,000,000 of bank loans—bank credits.
I want to call your attention to the fact that we do not do business
in this country on money. We do it on credit—3 per cent of money
and 97 per cent represented by checks, taking the place of money,
answering the purpose of money, canceling debts, checking against
notes that have been discounted in the banks, creating a credit which
becomes demand deposits subject to check.
That would have relieved the money stringency if that had been
done in February, 1931. You did not see fit to do it. It is necessary,
my friends, that you do it now.
But I want to continue with this exhibit.
We have another note here, a 5-dollar note. That is a national
bank note. What is back of that note? A Government bond, bearing interest; and the Government has taxed the people of this country
$723,980,000 from 1873 to 1929, inclusive, to pay interest on bonds
that they might issue an equal amount of national bank notes against
those bonds, and another interest must be obtained upon that note
before it gets into circulation.
A bond is deposited, upon which the Government taxes the people
to^pay the bondholder interest; to pay the banker interest. Then



they issue the face of the bond in national bank notes, which he loans
out again to the manufacturers and others at 6 to 8 per cent. There
are two interests on that kind of a note before the note can get into
Now, what are all of these notes? They are simply a legal instrument to cancel a debt. That is all that that money is. Congress
can give to money but one function, and that is the power to cancel a
debt. That is what that provision of the Constitution means.
The Congress shall have power to coin money—

That is, to print money—
Regulate the value thereof.

What does that mean? Congress, by the act, gives that money
the power to cancel a debt, according to the denomination of that
And of foreign coin.

That means of any foreign money coming into this country.
Congress, under that provision, has the same authority over that
foreign money and its debt-paying power, as over the money that it
has authorized to be coined.
I will explain another means that you have, as the Ways and
Means Committee, of obtaining money to pay this bonus, to overcome the deficit, and to pay the bankers that hold $6,400,000,000 of
our Government bonds.
Here is a Federal reserve note. How does that get into circulation?
The Government prints that note in our own print shop. It costs
the Government 7 mills to print that note. It matters not whether
it is a dollar note, a five dollar note, a ten, fifty, one hundred, five
hundred or ten thousand dollar note. It costs the Government only
7 mills to print the note. Then what does the Government do with
it? It turns its own money, the money that belongs to the 122,000,000
of people, over to 12 privately owned Federal reserve banks, at cost
of printing and a franchise tax. And they did not pay any franchise
tax last year. I was at the Treasury Department this morning, and
I asked the question, and they gave me that information.
Now, my friends, how does the Government get any of this money
to pay for what it needs? It issues a bond bearing interest. It sells it
to these banks. It borrows its own money; then it taxes the people
to pay the banks interest for the use of the Government's own money.
Now, if you can get a more ridiculous system than we have here, my
friends, I can not imagine how you could do it. It is a crazy-quilt
Here is another note. This is a silver certificate. That is based
upon a silver dollar held by our Government in the Treasury Department.
All this paper that I have exhibited here, including this gold, has
been issued in accordance with that provision of the Constitution of
the United States bhat I cited to you before.
Now, all you will have to do, my friends, under this provision of the
Constitution, and under this bill, is to print the money. It will cost
you 7 mills for every bill printed. Pay it to the soldiers, and make it
full legal tender, in accordance with this bill, for all debts, public and



private, exempt from all taxes; and, my friends, you will have a
circulating medium here and get off of the collapsed credit system
that we are suffering from to-day.
It is well for us now, at this stage, to inquire what we are doing
business with, or what we did do business with in 1929. That was
the peak. We did a business of $726,000,000,000, in dollars. We
did it with $276,000,000,000 in checks that cleared through the clearing
houses of the country, and those checks were checking against notes
that had been discounted by the banking institutions, with the
inflated collateral, stocks and other securities placed as collateral to
these loans. They were demand deposits then, subject to check,
and they used $276,000,000,000 of checks in transacting that commerce in 1929, with only $600,000,000 of gold used in alfthose transactions, and less than five billions of currency in circulation.
Now that great volume of checks and credit has collapsed. Business
men can not go to the banks to-day and get their notes discounted.
Therefore we are in this condition. You can not use any checks
because you can not get any credit. We are trying to do business
now on 3 per cent of money, and the 97 per cent has collapsed, and
you find the condition as described by these three witnesses that preceded me to be the actual case.
In my home town—and I happen to be mayor of it at the present
time—we have men at the incinerator plant that are waiting for the
garbage trucks to come, so as to take the garbage that they can live
on. In the city of Cleveland they are even going to the swill and
taking it out of the swill. Is that the high standard of American
living that President Hoover brags so much about?
My friends, what you have got to do is to change this system;
get off of this credit system and on to a money system. And when
you do that, we need at least 25 to 30 billions of money to get onto
the money system; and when you make a loan and you make a check
against the loan, there will be money to transfer from one account to
the other instead of credit.
I have another method, and this method is under that provision
"and of foreign coin"—regulating the value of foreign coin. My
suggestion to this committee is that they ask President Hoover to
suggest to Germany that Germany print eleven and a half billions
of ful] legal tender German money, making it full legal tender for all
debts, public and private. When they do that, then they obligate
themselves to take it in payment of import duties; they obligate
themselves to accept it in payment of all taxes; they bind their
citizens to take it in payment of all contracts, for all goods manufactured and sold.
Then I suggest that Germany tender four billions to France, four
billions to England, and three billion and a half to the other nations
that were engaged with us in the World War, and that then France
pass a law to make it full legal tender in France, both public and
private, which will then bind France to accept it in payment of import duties, to accept it in payment of taxes, to accept it in payment
of everything due and owing France. It obligates her citizens—and
likewise in the other countries, in the same way—to accept it in
payment of all contracts and for all goods manufactured and sold.
Then tender that four billions of France to the United States; England, four billions to the United States; and the other countries, the



three billion and a half; and then that you gentlemen recommend a
bill to the Congress to make it full legal tender here. Place it in
our Treasury; and when you have done that, you have obligated
yourselves to take it in payment of your salaries, to take it in payment of import duties, of taxes due the Government, and, for all of
our citizens, in payment of all contracts and in payment for the goods
that they manufacture,
When you do that, my friends, you will be in the position to overcome the deficit of two billion in the Treasury. You could then pay
the two billion four hundred million out of that money to the World
War veterans. You could then take up the six billion four hundred
million that the banks hold of our Government bonds, which would
give the banks money to loan. You would have money in place of
the collapsed credit. The business men of the country could take
their notes into the banks and have them discounted. They could
commence to employ labor. You would bring prosperity here; and
after we had consumed all of our American goods that we needed, and
when we purchased any German goods, any French goods, any English
goods, or goods from the other countries, we would pay them with
their own money. We would have an international currency. We
would have three nations on that currency—Germany putting its
stamp upon the face of it, paying its reparations; France putting its
stamp on one-half of the other side, paying its debt due the United
States; the United States putting its stamp here; all three nations
making it full tender for all debts, public and private. It would pay
off the World War veterans, and give us money to do business with.
Then you would reduce our taxes. This will be a taxless and a costless payment from Germany. Its citizens will not be taxed 1 cent, but
it will bring prosperity not only to this country but to every country
that was engaged with us in the World War.
Now, there are two methods by which you may obtain the money
to pay the soldiers' bonus, to overcome the deficit in the Treasury,
and to reduce our taxes instead of raising our taxes. I would not be
in favor of this bill if it provided for an issue of interest-bearing bonds.
My friends, we have arrived at the point in the history of this civilization where interest must be abolished, just the same as chattel slavery
was abolished by Abraham Lincoln during the Civil War. What was
the condition of the people under the slaveholders at that time?
The slaveholders were compelled to feed, to clothe, to house, and to
doctor those slaves, because, if they should lose one of them, they
would lose a thousand to fifteen hundred dollars. Here we have today 12,000,000 of unemployed people on the verge of starvation,
and many of them starving. They are in a worse condition than the
chattel slaves were under the slaveholding system prior to the Civil
War, because if they have paid three-fourths on their homes and have
failed to pay the balance of the mortgage because they are out of work,
and have failed to pay the interest upon their mortgages, their property
is sold away from them. Six thousand farms sold away from the farmers in Mississippi in one day. In the city of Philadelphia, 25,000
with their homes going away from them. They are turned out on the
highway, and they are not fed, clothed, housed, and doctored.
That is the system of interest-bearing bond slavery. We have got
to abolish interest. This is the first step during my 50 years of effort
along this line. For 50 years I have been battling; I have been



spending all the money that I could obtain to print literature appealing to the intelligence of the American people; but I find that the
only way the American people think is through their bellies. Their
bellies have got to become empty; the business man has got to have
an empty pocketbook; he has got to have the sheriff on his doorstep
before he will listen.
Therefore, my friends, I think that this depression is going to bring
the people together. As the saying is, "God moves in a mysterious
way his wonders to perform."
This condition has been brought on, not by God, but by the gold
gamblers of New York. This conspiracy that was hatched and
pulled off in 1929 was the greatest changing of the property and the
money from the hands of the many to the hands of the few that ever
happened in the history of the world; and I am sorry that my time
has expired, because I would like to explain to you how that conspiracy
was brought about. It was brought about first by expanding the
currency, and then getting the mergers started, and through the
financing of the mergers by the Wall Street banks they got the savings
of 20,000,000 of people up on margin, and from three billions and a
half of brokers' loans on call they took it up to $8,549,000,000, with
less than five billions of money in circulation. This was margin
money, with liquid stocks up as collateral. They have gone to the
very banks that did the underwriting, and put these stocks up as
collateral, at 75 per cent of the ticker value of these stocks.
Then in the spring of 1929 the bankers of New York met. They
made this agreement: That they would not accept any deposits to
be loaned on call loans short of a hundred thousand dollars or multiples
thereof. What was that for? It was to skin the bankers after they
had skinned the people.
Now, my friends, in September and October, 1929, after they had
gotten the savings of 20,000,000 of people up on margin, the New
York bankers broadcasted all over this country that they would pay
18 to 20 per cent interest for call loans with liquid stocks up as collateral. The banks fell for it. They commenced to ship the money,
at no less than a hundred thousand at a crack, and from that up to
millions, in to the Wall Street banks to be loaned at 18 to 20 per cent
interest for call loans with liquid stocks as collateral. They ignored
the fact that a bank is a public utility and should serve the community
where it is located. They refused to furnish men that wanted to
employ labor with money at 6 to 8 per cent, but sent it down there.
They created
the system of unemployment; and after they had got
the banks7 money there, and knew they could not obtain money
anywhere to protect their stocks, then they called the loans. They
broke the market. They kept the money and the choicest of the
manufacturing stocks, and since that time they have named the
directors of the choicest of the manufacturing plants in this country,
and now own and operate them at the speed at which they are being
operated at the present time.
Now, when these banks got their call money back, what did they
find? They found that there were millions of people out of work.
They could not buy the products that were stored on the merchants'
shelves, and the banks held the notes of the merchants representing
those goods, and they were not selling goods enough to pay the interest
on the notes. There was frozen credit. They had frozen assets in



the shape of depreciated stocks, depreciated bonds, and they had a
bank credit collpase; and since that time, my friends, the banks have
refused to discount. Banks have closed by the hundreds; and we
have in my home town two banks less than we had three years ago.
Now, this is the condition: The banks have refused to discount.
The banks have closed by the hundreds. We have them in my own
town, two banks less than we had three years ago. This is the
condition. A lady came into my office about two weeks ago and
said, "We do not want charity but I do need to get some money out
of the bank that I have on deposit." She said, " I need shoes for
my children so that they can go to school. I have three children and
need shoes for them." I said, "How much money have you there?"
"Two hundred and fifty dollars." "Is it in your name?" "No, it
is a joint account of my husband and I." I said, " I will call up the
president of the bank." I called him up and I said, "King, there is a
lady here who says she has $250 on deposit and she can not get any
money out." This is a building and loan association. He says, "Who
is she?" I gave him the name and he looked it up and said, "Yes; send
her down." I told her to go to the bank and in a week she came back
and had a little card about that long and it was printed on that card
that she could get $2. I called Mr. King up again and said, "Mr. King,
that lady is back here and shows me a card that the board has decided
that she could have $2. That will not buy the nails in the shoes
for the children." He says, " I do not know anything about it;
I will turn it over to the man that does, one of the employees in the
bank." I asked him about it and he said the board had decided
that was all she could get. I said, "Can not she get more than
that?" "No; that is the decision of the board." I said, "Turn
Mr. King over to me again." I said, "Mr. King, that man says the
board decided that is all she could have. That will not do. You
have got to try to give her some money so that she can get shoes for
her children." He said, "Send her up again."
A couple of days later another complaint came from an old lady
77 years of age who had $300 in the same bank and could not get any
money out on which to live. She went over to the charity association and they told her she would have to go to the poorhouse. I
called Mr. King up again and told him this situation. He said,
"Send her up and I will see what I can do for her."
I have only cited a few of the things that are going on that I came
in contact with there as Mayor of Massillon. My door is open.
Rich and poor walk in there whenever they choose. I try to serve
the people. I was elected as mayor of Massilon by over a thousand
majority over the other candidates in spite of the fact that the public
utilities paid $25,000 to defeat me. I had the only newspaper in the
town, the daily newspaper in the town against me. I had the banks
against me. I had the chamber of corruption against me. And I
had the bootleggers and the gamblers against me, but I had the people
with me. ^ Now, my friends, I thank you for this and I am subject to
questions if you want to ask me any.
Mr. ESLICK. You mentioned the fact of bank deposits in the
Treasury as bank notes are issued. Is there any deposit of gold to
guarantee these?
General COXEY. NO, they are redeemable in gold. The bank
note is not money. It is only receivable for debt. It is not legal
tender, a silver certificate.



Mr. ESLICK. But it is redeemable in gold.
General COXEY. Redeemable in gold. That is what they state on
the face of them.
The ACTING CHAIRMAN. We thank you for your attendance.
(General Coxey submitted the following correspondence for the
[Printed in the CONGRESSIONAL RECORD of February 21, 1931, by request of Hon. J. THOMAS HEFUN, of


Mr. HEFLIN. Mr. President, I ask unanimous consent to have printed in the
Appendix of the RECORD an open letter from General Coxey to the President, and
some other correspondence regarding the money question.
There being no objection, the matter referred to was ordered to be printed in
the record, as follows:

MASSILLON, OHIO, March 4, 1980.
President of the United States, Washington, D. C.
DEAR MR. PRESIDENT: One year ago to-day you took

a solemn oath to support
the Constitution of the United States. The fifth clause of section 8 of Article I
of such Constitution provides:
"The Congress shall have power to coin money, regulate the value thereof,
and of foreign coin, andfixthe standard of weights and measures."
Definition and serious consideration of such provision, in view of the widespread unemployment situation caused by the withdrawal of money from the
arteries of trade into the channels of speculation and destruction of bank credit,
resulting in slackening of production and distribution, is what the writer wants to
impress upon your mind.

The Congress, comprising 1 Congressman from each of the 435 congressional
districts and 2 United States Senators from each of the 48 States, all elected
by the people.

Means the 13 States when they ratified such constitutional provision commanded the Congress and authorized through such delegation of a soverign right
from all such States to the Congress.

Means to print money for the use of the Nation, States, counties, townships,
cities, towns, villages, school districts, and for the people at cost of printing and
of service.

Means the Congress gives by an act authority and debt-paying power to
money, a legal instrument to pay and cancel debts.

Means the Congress have power to give authority and debt-paying power to
foreign coin (money) coming into the United States, the same as what it authorizes to be coined or printed.

Means the Congress, by an act,fixesthe weight of the ounce, number of ounces
to the pound, and number of pounds to the ton; size of the quart, peck, and
bushel measure; length of the inch, number of inches to the foot, and yard measure.
Money is a representative and not a measure of value.
It is just as essential to have enough money to represent value as it is to have
enough weights and measures to weigh and measure values.



On March 5, 1929, the writer addressed an open letter to your Excellency, a
piinted copy find inclosed, which please give further consideration.
Yours truly,


Washington, March 7, 19S0.
For the Secretary of the Treasury, receipt is acknowledged of your
letter of March 4, 1930, with inclosure, addressed to President Hoover, which
has been referred to this department for consideration.
Very truly yours,


Assistant Secretary of the Treasury,

Massillon, Ohio.

Washington, D. C, or Massillon, Ohio, March 5, 1929.


White House, Washington, D. C.
DEAR MR. PRESIDENT: I her^ submit the following for your serious consideration:
A BILL To provide for the nationalization of legal-tender money without interest, secured by community
non-interest-bearing, 25-year bonds for public improvements, market roads, employment of unemployed,
and for community needs of the United States

All of the States, counties, townships, cities, towns, villages, and school districts may issue $2,000,000,000 of 25-year non-interest-bearing bonds for public
improvements and needs of such communities during the first year, after a vote
of the people has been taken, such communities authorizing the issuance of such
non-interest-bearing 25-year bond issue.

Such $2,000,000,000 of non-interest-bearing 25-year bonds having been deposited with the Treasury Department at Washington, D. C, as security, there
will be an equal amount of legal-tender money printed by the Government, 1 per
cent, or $20,000,000, will be retained to pay for printing and caring for the Treasury Department handling that department during the 25-year period.

All the communities depositing such bonds and receiving from the Treasury
Department $1,980,000,000 of legal-tender money pay such money into circulation to the now unemployed and others for service rendered and material furnished.

When the people receive such moneys for services rendered and material furnished they will pay their debts to the merchants, landloards, taxes, and then it
is deposited in the banks to the extent of $1,980,000,000 the first year.

Thus it will substitute gradually a legal tender money system to take the place
of a bank-credit system, represented by checks, circulating and transferring a
credit in a bank, instead of checks circulating and transferring real money when
deposited in a bank.

Under this system the banks will be divorced from the further dealing in States
and subdivision tax-exempt interest-bearing bonds. Such banks will then confine their loans for commercial, producing, and agricultural purposes at a more



reasonable interest rate and allow the banks to stop the further payment of
interest on deposits.

No sudden contraction of the currency can occur, as only 4 per cent of the total
amount issued, $80,000,000 annually, would be retired through taxation, cancellation, and redemption.

The further issues of $2,000,000,000 annually would overcome the contraction
of 4 per cent, or $80,000,000. redemption the second year, and an increase of 4
per cent on the amount issued thereafter, would be redeemed, retired, and canceled through taxation each year:
The amount of money in circulation is less than $5,000,000,000, and $40,000,000,000 of loans, bank credit, represented by checks circulating which are a substitute for money and when deposited transfering credit in a bank, which allow
the people (with the present system) to produce, transport, exchange, and consume one hundred and twenty-five to one hundred and fifty billion dollars of
products annually.
A careful study of the foregoing will convince anyone that it is constitutional,
sound, practical, and will provide money for the development of the resources of
the States and subdivisions, solve unemployment, diminish (if not abolish)
poverty by providing work for the unemployed that will work, and not feeding
those that will not work, and make continuous prosperity to all, as well as a tax
saving of 20 per cent of your taxes annually.
Yours respectfully,




Washington, March 8, 1929.

Massillon, Ohio.
SIR: Receipt is acknowledged by reference from the White House of your open
letter to the President dated March 5, 1929, in which you submit for consideration a bill to provide for the nationalization of legal-tender money without interest secured by community noninterest-bearing 25-year bonds for public improvements, etc.

Assistant Secretary of the Treasury.




President of the United States, Washington, D. C.
DEAR MR. PRESIDENT: If you will recommend to the Congress the following
measures, when such are enacted into law it will bring about immediate and
continuous prosperity:
First. A bill to provide for the nationalization of legal-tender money without
interest secured by community noninterest-bearing 25-year bonds for public
improvements, market roads, employment of unemployed, and for community
needs of the United States.
Second. A bill to authorize the Secretary of the Treasury to have engraved and
printed a sufficient amount of legal-tender Treasury notes to care for any deficiency that is or may occur in the Treasury Department and to pay interest on
the public debt as it becomes due, as well as the debt as it matures, and prohibit
such Secretary from the further issuance of interest-bearing bonds for any purpose
or purposes whatsoever.
Third. A bill to authorize the Secretary of the Treasury to have engraved and
printed a sufficient amount of legal-tender Treasury notes to redeem all outstanding national-bank currency and cancel all interest-bearing bonds now held
by such Treasury as security for such national-bank currency and return to such
national banks such Treasury notes now held by such Treasury as a redemption
fund for such bank currency.



Fourth. A bill to authorize the Secretary of the Treasury to have engraved
and printed a sufficient amount of legal tender Treasury notes, to loan to all
utilities under the jurisdiction of the Interstate Commerce Commission, upon
the approval of such commission authorizing such utilities to issue and deposit
noninterest bearing 20-year bonds for all equipment and needs of such utilities.
Respectfully submitted.

Following also submitted:

Washington, March 6, 1980*


Massillon, Ohio.
SIR: Under date of February 3, 1930, you requested of the Comptroller of the
Currency a statement of the amount of interest that has been paid to national
banks since 1863, on bonds deposited by them as security for their circulating
You are advised that records are not maintained by this department to furnish such information. However, as nearly as can be computed from 1873 to*
1929, inclusive, the Treasury paid to national banks the sum of $723,985,342.90.
G. 0. BARNES, Assistant Treasurer.
(No record prior to 1873.)

T h e United States Treasury paid to national b a n k s t h e sum of $723,985,342.90,
in interest on bonds securing national b a n k currency.
Such bonds of t h e United States, issued and held b y such Treasury, as security
for such national b a n k currency, h a v e t h e taxing power of t h e Congress (elected
b y t h e people) t o t a x t h e p r o p e r t y of t h e people to p a y such sum of interest.
Such national-bank currency is (not money) receivable for debt, a n d when
demanded, m u s t be exchanged for legal tender Treasury notes, in order t o p a y
a n d cancel a debt.
Five per cent of national b a n k currency outstanding (about t h e sum of
$700,000,000) a m o u n t i n g to a b o u t $35,000,000, of legal tender T r e a s u r y notes>
a r e held b y such Treasury as a redemption fund for such national b a n k currency.
If a n interest-bearing bond (under t h e national b a n k act) m u s t be issued a n d
sold b y such T r e a s u r y to a national b a n k a n d t h e n deposited by such b a n k w i t h
such T r e a s u r y issuing a n d selling it, as security for national-bank currency r
issued by such Treasury to such bank, why n o t issue legal-tender Treasury note&
(instead of national-bank currency) to t a k e u p t h e $700,000,000 of bonds bearing
2 per cent interest a n d redeem such national-bank currency with such T r e a s u r y
Would n o t such redemption of $700,000,000 of 2 per cent interest-bearing bonds
save $14,000,000 per year?
Would n o t such redemption of $700,000,000 national-bank currency (which is
only receivable for debt) be replaced b y a n equal a m o u n t of legal-tender (which
would p a y all debts) money?
Would t h e release of $35,000,000 of legal-tender T r e a s u r y notes, held b y such
T r e a s u r y now as a redemption fund for such national-bank currency, h a r m such
national b a n k s if r e t u r n e d to such b a n k s by such Treasury?
Would n o t such national b a n k s t h a t h a v e $100,000 of bonds deposited receive
$100,000 of legal-tender Treasury notes for such bonds?
Would n o t such b a n k s t h a t h a v e $5,000 (Treasury notes) deposited as a r e d e m p tion fund h a v e such $5,000 r e t u r n e d to such b a n k s b y such Treasury?
Would n o t such b a n k s h a v e a $5,000 (when returned) foundation upon which
could be built, by such banks, $45,000 of credit loans?
Would n o t such credit loans be represented by checks of borrowers taking t h e
place of money, y e t answering every purpose of money?
W h y does n o t Congress (elected by t h e people) give a u t h o r i t y to t h e Secretary
of t h e T r e a s u r y a n d c o m m a n d such Secretary to issue legal-tender Treasury
notes instead of 3J4 per cent Treasury certificates in t h e s u m of $450,000,000 t o
relieve t h e stringency of t h e Treasury a t this time?
Clause 5, section 8 of Article I of t h e Constitution provides:
" T h e Congress shall h a v e power to coin money, regulate t h e value thereof, a n d
of foreign coin."



Would not such $450,000,000, of legal tenders, if issued and paid out by such
Treasury, help to relieve the money stringency and give the people money to do
business with?
Would the banks then have the excuse to raise interest rates, as they are doing
How are the people going to pay for their homes, merchants to pay their notes,
and manufacturers to obtain money to do business with if we do not commence
to get money at cost to the people, instead of to the banks exclusively?
Why not such Congress give authority to such Secretary at all times, when an
emergency arises, to issue legal-tender Treasury notes, instead of interest-bearing
bonds, or certificates of indebtedness bearing interest (which latter power such
Secretary now possesses), or sold at a discount to meet a Treasury deficit, or to
pay interest on the public debt and the debt as it matures?
As the national debt matures issue legal-tender Treasury notes to pay it, and
stop the further refunding of such debt into an interest-bearing debt.
As the interest becomes due, amounting to about $700,000,000 for 1930 on the
public debt of $16,500,000,000, issue legal-tender Treasury notes to pay it.
If such Treasury expects to reduce such public debt $1,000,000,000 annually,
and the interest on such debt is $700,000,000, and legal-tender Treasury notes
are issued and paid into circulation for both (principal and interest) in the sum of
$1,700,000,000, would not the income-tax cut be of an equal amount?
How would such tax cut of $1,700,000,000 compare with the mucb-heralded
tax cut of $160,000,000?
Would not such increase of legal-tender money gradually take the place of
bark credit to the extent of many billions of dollars that has been destroyed on
account of the savings of the people in money being withdrawn from the country
banks (causing destruction of such bank credit), invested in stock speculation in
Wall Street on margin, and now such Wall Street banks have both the savings
(money) of the people as well as stocks held as collateral, leaving such country
banks without money or bank credit to loan?
Would such country banks then have the excuse to raise interests rates as they
are doing now?
Building and loan companies calling in the people owing them, compelling such
people to sign up for an increase of one-half of 1 per cent (interest) on loans that
still have years to run, commercial banks raising interest rates from one-half of
1 to 2 per cent.
How are the people going to pay for their homes, merchants to pay their notes
to the banks, when the people are unemployed and unable to buy and pay for
goods and manufacturers obtain money to do business with if we do not commence
to get money to the people at cost instead of to the banks exclusively?


Washington, March 18, 1930.
DEAR SIR: For the Secretary of tne Treasury, receipt is acknowledged of your
letter of March 12, 1930, with inclosures, addressed to President Hoover, which
have been referred to this department for consideration.
Your recommendation for legislation to provide for the nationalization of
legal-tender money without interest, etc., have been noted.
Very truly yours,

Assistant Secretary of the Treasury^

To Mr. JACOB S. COXEY, Sr., Massillon, Ohio:
The Government charged the Federal reserve banks about $1.10 per $1,000
(printing and franchise tax) for over 10,000,000,000 of Federal reserve notes
{money) during the past five years, then borrowed it back and pays 334 per cent
(interest) for the use of its own money. Why should not the Government print
it at the same price to tne States, counties, townships, cities, towns, villages,
and school districts? To-day, March 25, being the thirty-sixth anniversary of
the first march of the unemployed to Washington under Cleveland's (Democrat)
administration and 16 years since the second march, under Wilson's (Democratic)
administration, now comes Hoover's (Republican) administration outdoing both
Democratic administrations in unemployment and depression in business, should



be enough to convince the dumb bells that there is no difiference between Democratic and Republican administrations.
Massillorij Ohio.

[From the Akron Beacon-Journal, March 22,1930]

The Federal Reserve Board will boost the money in circulation by a round
$3,500,000,000. This is getting pretty near General Coxey's prescription of
money at cost.
The ACTING CHAIRMAN. It is beyond the hour. The committee
stands adjourned until 10 o'clock to-morrow morning.
(Thereupon, at 1.07 o'cock p. m., the committee adjourned to
meet again at 10 o'clock a. m., Friday, April 15, 1932.)


FRIDAY, APRIL 15, 1932.

Washington^ D. C.
The committee met at 10 o'clock a. m., Hon. Heartsill Ragon,
Mr. RAGON. The committee will be in order. The chair recognizes
Mr. Patman.
Mr. PATMAN. Mr. Chairman, I would like to read two letters that
I have here from economists. They are at Cornell University, New
York. I wired Mr. F. A. Pearson, who is a noted economist, and
asked him what he thought about the issuance of $2,000,000,000 in
currency to pay off the adjusted compensation certificates, on the
theory that it would provide expansion of the currency and increase
commodity prices and thereby promote the general welfare. He
replied to me as follows:

Ithaca, N. Y., April 12, 1932.

House of Representatives, Washington, D. C.
DEAR SIR: I received your telegram of April 8 concerning the bonus and
commodity prices.
The present collapse in prices is the most serious this country has ever experienced. It was much worse than in 1921. At that time the high-price level had
not continued long enough for society to become adjusted to it. The present
deflation follows a period of stability from 1923 to 1929, with prices about 50
per cent above pre-war. During this period transportation, wages, salaries,
taxes, debts, and all other social relationships were adjusted to that price level.
There is now a great maladjustment in our social structure; prices are low,
wages have been reduced somewhat, unemployment is widespread, taxes are
high, and the ratio of debts to the value of property is very high.
In 1929, the public and private debts of the United States are largely based on
commodity prices, and if prices continue to decline, the value of the property on
which the secuiity rests is reduced until the debts are approximately equal to the
liquidated value of the property. No building or other types of property is in
general worth more than the cost of replacing it. Therefore, a continued decline
in commodity prices means more equities are swept away and more properties
must be taken over by creditors who do not want them.
Deflation has continued so far and proceeded at such a rapid pace that the
welfare of the nation hangs in a balance. If deflation continues, we may expect
unparalleled bankruptcies, and increase in bank failures, and an unprecedented
transfer of wealth.
It is to the best interests of general welfare that prices be stabilized at the level
at which taxes, debts, wages, and all other human relationships were adjusted.
Very truly yours,





The next letter is from Doctor Warren, of Cornell University, an
economist. I am sure you gentlemen have heard of Doctor Warren.
He answered my telegram in this way:

Ithaca, N. Y., April 13, 1932.


House of Representatives, Washington, D. C.
Mr. PATMAN: If a material increase in made in the currency, prices will
rise. The increase would have to be sufficient to take care of the high cash reserves which the panic conditions require.
Every reduction in wages or other cut in costs, while it may be desirable from
the standpoint of the individual concerned, undermines the security for debts
previously incurred. For example, a house is not worth more than the cost of
building a new house. If a new one can be built for 30 per cent less than the old
one cost, the old one shrinks in value by 30 per cent. This wipes out the equities
of many owneis, throws bankrupt properties on the market to be sold not at a
reduction of 30 per cent, but at almost any price which the buyer will offer.
Such a panic situation stops building and other industries and causes unemployment. We must expect these conditions to continue until debts are liquidated,
which will require a number of years if we follow out the deflation program.
The more we cut wages and other costs, the more we destroy values of property
and commodities previously produced and the more we undermine the credit
Very truly yours,


Mr. PATMAN. I am advised by Mr. Condon of Rhode Island, who
is tlie author of a similar bill to pay the adjusted compensation
certificates, that he must go to the Committee on the Judiciary very
shortly. Therefore I would like to introduce Mr. Condon, of Rhode
Island, at this time.
Mr. RAINEY (presiding). We shall be glad to hear Mr. Condon.
Mr. CONDON. Mr. Chairman and gentlemen, the series of bills
which you have before you, providing for the payment of the adjustedservice certificates in cash, present for your consideration one of the
most serious problems confronting the Congress. On one hand we
have millions of veterans of the World War and their friends demanding that this legislation be passed without delay and, on the other
hand come protests from bankers and big business against such
legislation. Many of these protests, couched in vigorous terms and
accompanied with the most alarming predictions, are grossly exaggerated and are made largely for the purpose of scaring Members of
Congress rather than assisting them to arrive at a fair and proper
solution of the problem. The objectors from whom I have heard
personally, show by their letters and telegrams that they have given
little if any thought to the ultimate effects of any of the proposed
bills, but have contented themselves with merely parrotting the
familiar statements continually repeated in the daily press.
I appear in support of the general proposition of the payment of
these certificates at this time because I sincerely believe that such
payment in addition to helping the veteran will be generally beneficial
to the country at large. My own bill (H. R. 5461), provides that such
payment be made in four equal payments and does not provide any
method by which the funds shall be obtained by the Treasury for this



purpose. The Patman bill (H. R. 1) provides for the payment in full
and does set out a method by which the Treasury can obtain the funds.
For this reason I prefer to support the Patman bill rather than my
own. I also favor H. R. 1 because I have received several hundred
letters from veterans requesting the passage of this bill and because it
has been indorsed by the Veterans of Foreign Wars, Department of
Rhode Island; the Disabled American Veterans of the World War,
department of Rhode Island; and many thousand citizens of the
State who have signed petitions which are before the committee.
In addition to these requests the American Legion of Rhode Island
has forwarded to me a copy of the resolution adopted at its State
convention at Narragansett Pier in September 1931, requesting the
members of Congress from Rhode Island to favor the immediate cash
redemption of these certificates; also the Disabled American Veterans
of the World War, of Rhode Island, have made a like request in their
resolutions passed December 30, 1931. Since these actions were
taken by the veterans' organizations the Senate and House of Representatives of the Rhode Island General Assembly unanimously
passed a resolution, which was approved by the Governor on April 7,
1932, requesting the Senators and Representatives of Rhode Island
in the Congress of the United States to support legislation providing
for the payment of adjusted service certificates at their face value.
As opposed to this expressed sentiment of my State I have received
a half dozen personal letters from employees of brokers' offices in
Providence and four additional letters from executives of manufacturing plants protesting against the bills. In the light of this evidence I feel that I am justified in stating to this committee that the
sentiment of the State of Rhode Island is overwhelmingly in favor of
the general proposition of paying these certificates in cash at this time.
You gentlemen will probably answer for yourselves three main
questions in arriving at a decision whether or not to report favorably
this legislation. You will probably ask yourselves first: Do the veterans of the World War at present need the money represented by
their certificates? May I say that I think the answer to this question
is not a subject of controversy? Undoubtedly a very large majority
of the veterans are in dire need of this money. The most tragic picture in America to-day is the million or more veterans in the grand
army of the unemployed, mendicants for relief for themselves and
for their families, notwithstanding that their Government still owes
them adjusted compensation for war service. If this legislation
would do nothing else to assist these men than take them out of the
class of public paupers I would gladly vote for it.
The second question is: Do the veterans themselves want it? It
would be ridiculous to pose this question were it not for the fact that
it has been sought to persuade the country that the American Legion
is opposed to the payment of these certificates. I assert that the
Legion has not so spoken on this question, in fact a majority report of
the legislative committee at the Detroit convention distinctly dodged
the issue and presented an innocuous resolution for adoption by the
convention. Not only that, but many delegates violated their instructions and voted opposite to the wishes of the department which they
were supposed to represent. In the Rhode Island delegation, out of a
total of nine delegates, two so violated their instructions. But, regardless of the vote of the delegates at Detroit, it is my conviction that



the rank and file of the Legion throughout the country are as strongly
in favor of this resolution as the legionnaires of my own State of
Rhode Island.
And daily we are getting evidences of that fact, and that the high
ranking national officers of the American Legion are not speaking
the wishes and the minds of the rank and file of the Legion.
Gentlemen, the veterans want this legislation and if the national
officers of the Legion think otherwise let them poll their own membership and they will learn something.
The third question is: Can the United States Government afford
to make this payment? The answer that you will make will be determined very largely by the way in which you view the present monetary
situation. If you believe that commodities ought to stay cheap and
money dear and that any expansion of the currency will be harmful,
then, of course, you will be driven to the conclusion that the Government can not pay at this time. On the other hand, if you believe
that the major cause of much of our economic distress to-day is an
extravagant and wholly unjustified contraction of the currency produced by panic and extreme fear and that what is needed is something
to readjust the balance, then you will say that the Government not
only can pay these certificates now, but a providential opportunity
is offered to it by so doing to improve the economic condition of the
country and promote the general welfare of all classes, while at the
same time performing an act of justice toward the veterans.
Frankly, this legislation can not be made effective without some
expansion of the currency, but a reasonable degree of expansion i&
greatly needed at this time. The important thing to be concerned
about is that any such expansion shall not get out of bounds. To
safeguard against such a possibility it would be well for the committee
to study this phase of the problem, if it finally decides to report the
And I believe you gentlemen are doing that and are receiving the
advice of economists who have appeared and others who I understand,
will appear later.
This last question is so extremely important that you gentlemen
will be justified in seeking the best expert advice of fiscal economists
who have given special thought and study to our monetary problems.
Some such experts will appear before you at these hearings with concrete recommendations. I am not a student of that subject and,
therefore, refrain from taking any more of your valuable time in
advancing my ideas. I am before you personally to make known to
you the sentiment of my State and particularly the sentiment of the
organized and unorganized veterans within the State in favor of
this legislation, and also my own personal support of it. I believe
that notwithstanding the widespread propaganda against this measure you can find ample arguments supported by reason and sound
principle to justify a favorable report to the House of Representatives.
I am confident that each of you will give this problem his most serious
and earnest consideration and that your final decision, whatever it
may be, will be actuated by a sympathetic sense of justice toward
the veterans and a wise solicitude for the general welfare of our
common country. In my own behalf and on behalf of the thousands
of veterans of Rhode Island for whom I undertake to speak, I thank.
you for this opportunity to express my views and to convey to you;
their desire for this legislation.



Mr. RAINEY. Thank you for your presentation, Mr. Condon.
Mr. PATMAN. Mr. Chairman, the Members of Congress are not
going to take up very much time. They have requested that I
announce that their time will be very limited. Mr. Cochran is a
member of the Economy Committee and is supposed to be at that
committee now. I asked him if he preferred to wait over and take
a longer time, or take just a few minutes now. He prefers to be
heard now in regard to his own bill to pay the adjusted-service
Mr. RAINEY. We shall be glad to hear Mr. Cochran.

Mr. COCHRAN. Mr. Chairman and gentlemen, I want to call the
committee's attention to my bill, H. R. 11117, and if permitted will
put a statement in the record in reference to that bill.
Mr. RAINEY. YOU have that permission.
Mr. COCHRAN. I come here this morning at the request of not less
than a dozen American Legion posts in St. Louis and other parts of
Missouri who have asked me to tell the committee that the commander
of the American Legion does not voice their views in reference to
this legislation.
Mr. Chairman, we have heard a great deal from people who say
that we are liable to wreck the national credit of this country if we
issue bonds. I am not very well versed to speak upon that subject,
so I am going to quote from a man who is well versed to speak upon
that subject. I refer to the present Secretary of the Treasury, Mr.
Mills. On December 13, Mr. Mills delivered an address in New
York, and on December 14, the gentleman from Oregon, Mr. Hawley,
placed that address in the Congressional Record. I read a paragraph
from that address.
I do not mean to suggest that the addition of three billions or even four billions
to our national debt could conceivably impair the national credit. That debt
stood at $25,000,000,000 a decade ago and the national credit was unimpaired.

Mr. Chairman, my bill is the real solution for this problem that
now confronts you. I am confident in my own mind that there is
not a member of this committee that would not like to see the veterans
receive their adjusted-service certificates paid in full, if you could
be convinced that it could be done and at the same time not upset
or disturb the finances of the country.
We are suffering from the greatest panic that this country has ever
known. Its present-day name is depression, but call it what you
will, conditions to-day in this country warrant every thinking American to lend his or her thoughts toward reaching a conclusion that
will bring us back to normal.
People out of employment, naturally, are not happy. There is a
feeling that the Government should do something for the unemployed.
We have taken care of industry and agriculture, but what have we
done for the masses in the cities out of work, dependent upon charity?
Here is an opportunity to invoke the golden rule and do something
for the people who are now in want, but who in the days of plenty
paid the bill for Uncle Sam. My bill seeks not only to pay the
adjusted-service certificates but also to place thousands of people to




work, and it affords a way to benefit the farmer. I ask you to vote
to pay the certificates by issuing bonds, the bonds to be retired by
placing a 3-cents-a-bottle tax upon 3 per cent beer. This tax will
bring in about $400,000,000 a year and in six or seven years enough
money will have been collected to redeem the securities. I have
read the statement of the present Secretary of the Treasury who says
our credit will not be impaired if bonds are issued up to even
$4,000,000,000. Only half this amount will be needed.
You will reestablish the brewing industry. , You will place several
hundred thousand people to work and by so doing you will provide a
market for 110,000,000 bushels of grain, if not more.
No State that does not by its own laws provide for the manufacture and sale of beer will be disturbed because my bill provides that
the beer can not be shipped into that State. Therefore the States
that legalize the sale of this cereal beverage, nonintoxicating, and
not in conflict with the eighteenth amendment will be required to
pay any of the money that will redeem the bonds.
I plead with you to give your most earnest consideration to thi&
proposal—sound in every way. I know of no suggestion that will
do more to assist to bring us out of this depression than the proposition I have placed before you.
I thank the committee for this opportunity to appear.
Mr. RAINEY. Thank you, Mr. Cochran.
Mr. PATMAN. Mr. Chairman, we have invited here this morning
Mr. John Simpson, who is President of the Farmers' Union of America, an organization composed of between two and three hundred
thousand members in practically every State in the Union.

Mr. SIMPSON. Mr. Chairman and gentlemen of the committee, I
believe that there is but one solution for the present very unfavorable
condition in which this country finds itself and that is reduction of
the value of the dollar. You can not pay the debts of private individuals, of divisions of government, from school districts up to the
National Government, with a dollar that has reached the place where
it buys 16 dozen of eggs, 6 pounds of butterfat, 20 pounds of cotton,
and 2 bushels of wheat.
We can not pay the debts and the taxes with that kind of a dollar.
I believe that if you were to call every recognized economist in the
United States to testify before this committee, you would find that
every one of them would tell you that the quantity of money is a
large factor in measuring the price of commodities.
For that reason Congress is never going to solve the problem they
have been trying to solve now for four months until you increase the
volume of money in the country. You have to get a bigger crop of
This bill provides for one of the best crops of money that has been
issued in a half centruy, and I claim it is of a better quality and the
best crop of money that you could possibly produce, for the reason
that no banker or group of bankers would have control of it.
Every crop of money produced in this country in the last 50 years
has been under the control of a few bankers. They could withdraw



that crop of money from the use of the people whenever they so
It is my understanding that under this bill, whatever money will be
issued will be money issued by the Government. No bank will have
control of it. No group of bankers can retire that money.
For that reason we are for this bill. It puts into circulation a needed
volume of money to bring up the price of commodities so that people
can pay their taxes and their debts. It brings into circulation a kind
of money that can not be withdrawn from public circulation.
The Farmer's Union took it from the lips of a United States
Senator in 1920 that during the war those who remained here at home
made money, lots of it; that during the period of the war, 20,000
new millionaires were created in the United States. In other words,
the folks that were here at home coined money out of the services
of the 4,000,000 boys who were enlisted in the Army.
I do not care—even though it takes taxes to get some of that
money from the folks who stayed here and made money to give it
back to these boys who served their country.
Last night I was at a meeting in Pennsylvania where a fellow said—
and I resented it bitterly—that if you gave $2,000,000,000 to these
boys, the bootleggers would have it in six weeks. I say to this committee that when these 4,000,000 young men were taken into the
Army, we all acknowledged them the flower of the youth of our
country. They are now approaching middle age. They are still the
flower of our country. As they go on down to old age, where many
of us are, they will remain the flower of our country, and if paid this
$2,000,000,000, just as small a percentage of it will reach places that
are not legitimate as would be the case if paid to any other group.
I thank you, Mr. Chairman.
Mr. PATMAN. Mr. Chairman, Mr. Swank, of Oklahoma, has a
committee meeting and can not remain very much longer. He only
wants about five minutes of your time. Mr. Swank is the author of a
bill to pay the adjusted-compensation certificates and desires to speak
on his proposal.

Mr. SWANK. Mr. Chairman and gentlemen of the committee,
there are quite a number of bills that have been introduced having
for their object the same purpose as the Patman bill. I wish to say
to the committee that personally I am in favor of Mr. Patman's
bill and hope that that will be the bill the committee will report out,
if the committee reports out any bill, as I hope it will.
There is a mistaken belief in some sections, or at least some of the
opponents of this bill would have the people believe that nobody is
for this bill except the soldiers. I say to you that there are plenty of
business men for this bill.
In the district that I have the honor to represent here eight chambers of commerce among the leading towns in the district have
indorsed this legislation, because they understand and see the need
of something being done and believe that the way to do it is to put
more money in circulation. That is what everybody says who talks
about relieving the conditions that now confront us.



I do not believe that anything new can be said on this legislation.
I believe you gentlemen have heard about all that can be said on it
from men who know about all that there is to know about legislation
of this sort.
Mr. Patman has furnished you with the opinions of many of the
leading economists of the country. Of course, they differ, as other
men differ. Some papers, I have noticed, have sounded the call of
patriotism again to these boys. That is unnecessary. As Mr. Simpson has just said to you, I resent that. The boys who defended this
country during the World War are not going to do anything that
would injure this country now; neither is the Congress of the United
I want to say that I hope Mr. Patman's bill will be reported out.
He has a plan to finance this payment that I think is workable and
fair. I hope that this committee will give the House of Representatives an opportunity to express their view and cast their vote
on the bill on the floor of the House where we have a right to decide
these measures.
I appreciate the courtesy the committee has extended to me.
The ACTING CHAIRMAN. Thank you very much, Mr. Swank.
Ladies and gentlemen the committee feels honored that you who
are in the audience are here and we appreciate your interest in this
legislation. But the rules of the House apply to hearings before the
committee. The rules of the House forbid applause from the galleries or by visitors. Therefore, I respectfully ask those present to
observe those rules and refrain from applauding.
Mr. PATMAN. At this time I desire to introduce Mr. L. S. Ray,
who is the legislative representative for the Veterans of Foreign Wars
of America.


Mr. RAY. Mr. Chairman and gentlemen of the committee:
The Veterans of Foreign Wars of the United States have steadfastly maintained that this payment should be made in cash and each
National Encampment has urged that the face value of these certificates be paid. Our thirty-second national encampment at Kansas
City, Mo., September 3, 1931, went on record unanimously as
favoring immediate payment. This last resolution was passed
after thorough discussion and study, both in committee and on the
I would like to read the resolution.
The ACTING CHAIRMAN. YOU have that permission.
Mr. RAY (reading):




Whereas the Veterans of Foreign Wars of the United States did in its thirtyfirst national encampment in Baltimoie, Md., in 1930 go on record as favoring
the immediate payment of the face value of the adjusted-compensation certificates
in cash; and
Whereas the last session of Congress amended the act so as to inciease the
loan value from 22}^ per cent to 50 per cent and did reduce the interest rate to
4^ per cent; and
Whereas it is the consensus of opinion of this encampment that we reaffirm
the action taken at the thirty-first national encampment: Therefore be it
Resolved, That the thirty-second national encampment of the Veterans' of
Foreign Wars of the United States, does and hereby goes on record in favor of
the immediate payment of the face value of said adjusted-compensation certificates, in cash, and the refunding of all interest thereon charged on such certificates upon which loans have been made.
Approved by the national encampment, Veterans' of Foreign Wars of the
United States, at Kansas City, Mo., September 3, 1931.

It has been claimed by opponents of this measure that the veterans
do not need the money at this time. This statement is undoubtedly
made without any study of the needs of the veterans or the actual
facts. We have received thousands of letters from veterans from
every State in the Union, from posts, county councils, and departments, showing that thousands of these men are out of employment
and without funds to provide the necessities of life for themselves and
families. Thousands of them owe their grocers, doctors, landlords,
clothiers, and others, and can not pay. Many cases have been brought
to my attention where veterans have been dispossessed of their homes.
Many have written us who are living on farms that if some money
is not forthcoming during the next few weeks they will not be able to
plant crops or feed their livestock.
If this legislation is enacted into law it is certain that a large percentage of the money will be placed in circulation by the purchase of
necessities, paying of debts to retail merchants and others who, in
turn, will pass it on to the wholesale dealers, which will stimulate
manufacture of all kinds and thereby give employment to many and
a market to the producers of raw materials.
I would like to read into the record a few typical letters from
veterans holding these adjusted-service certificates.
The ACTING CHAIRMAN. YOU have that permission.
Mr. RAY. We have many thousands of letters, but I will not take
up the committee's time except to read just a few excerpts.
Here is a letter from Wallingford, Wash.
It would help me a lot to get the cash now, as I am a farmer and can not raise
another crop without help from some source.

Another from Baltimore, Md.:
I have only worked three months since last June and before that time only
part time for a year and a half. If I don't get some money or employment
within the next two or three months I will lose what money I have invested in
my home. At present I have a small grocery account which will soon be put
off. When my credit is stopped I do not know what I will do to feed my family.
I have a balance of about $100 I owe on a $500 furniture bill. I have not been
able to make a payment for over four months now and I am liable to lose what
I have invested in it.




Another from Philmont, N. Y.:
I am a man with a wife and four children from 7 to 2 years of age. I have
-had no work since the first part of October, and I am very deep in debt. Also,
-I am five months behind in my rent.

I am in dire need of money as I have four small children and I have not had
scarcely any work for two years. I hope they will pass this bonus. I feel confident you will do all you can toward it.

I need money bad. Three months behind in rent. Are going to be put out
No money, nowhere to go, no job. Money is needed bad and my wife is sick so
-do what you can for us.

We have received many thousands of letters, Mr. Chairman, along
this line, from every section of the United States and it is very
unfair that the statement be made, and it has been made, that
these veterans do not need the money and that they would waste it.
These men holding these certificates can not understand why
they and their families should suffer and be forced to go to charitable
organizations for food and clothing while holding this Government
obligation on which nothing can be realized at this time.
Opponents of this legislation claim the veterans themselves are
not in favpr of the immediate payment in cash of these certificates.
Several hundred thousand veterans were in the service less than 110
days and their adjusted-service pay was less than $50. These, of
course, were paid in cash. Some of these men might oppose the
passage of this legislation, but it is my opinion that most of them are
in favor of this measure that would benefit their comrades who had
a longer term of service.
We have had many thousands of letters from veterans from every
part of the United States, a large percentage of them not members
of the Veterans of Foreign Wars, and of these I do not recall one that
has written in opposition to this legislation.
A ballot to be signed by World War veterans was inserted in 162
metropolitan dailies and in a few papers in the smaller towns, asking
for a vote on the immediate payment of the adjusted-service certificates. These ballots were carefully checked and tabulated. Two
hundred and fifty-four thousand nine hundred and twenty were
received; 26,000 additional were thrown out because they did not
show the organization of the signer. Of the number tabulated,
254,324 were in favor of the immediate cash payment and 59 were
opposed, which is a percentage of less than 1 per cent.
I have a list made up by States of this ballot, Mr. Chairman, which
I would like to insert in the record.
The ACTING CHAIRMAN. YOU have that permission.
Mr. RAY. It will be noted in some States the vote is very small.
That is by reason of the fact that in some States the metropolitan
dailies and very few of the small papers ran these ballots.



(The tabulation above referred to is as follows:)
Ballot tabulation of Veterans of Foreign Wars1 nation-wide newspaper poll of World
War veterans on immediate cash payment of adjusted-service certificates as of
March 19, 1982
District of Columbia.
New Hampshire
New Jersey
New Mexico
New York...
North Carolina
North Dakota

23,810 I
11,940 |
2,360 J
9,261 i
757 !
19, 744


South Carolina
South Dakota
Rhode Island
West Virginia
Canal Zone
Philippine Islands
Porto Rico
West Indies
Virgin Islands
Spanish Honduras
United States Navy ships








Incomplete ballot returns as of Mar. 19 (lacking in service uni designation, incomplete addresses,
women voters, etc.), 26,838.

These veterans who served their country so well in time of war
are now accused of being unpatriotic by some. This is a most unfair
statement and is hardly worthy of comment. Thousands of these
men who are now asking Congress to pay their adjusted-service
certificates were decorated for valor in action by this Government
and foreign countries. I have before me a telegram that I would
like to read from the outstanding hero of the World War, Sergt.
Alvin C. York, whose patriotism no one can question. His telegram is as follows:
JAMESTOWN, TENN., April 6, 1932.

L. S. RAY:
Message ieceived. Regret impossible to accept your kind invitation. Closed
contract j^esterday to speak in Louisville, Ky., Monday night, April 11. My
stand on the bonus is well known. I favor its immediate payment now.




I might say that Sergeant York expected to appear before this
committee on Thursday, but missed some connections. He was
making speeches in Kentucky and Tennessee and was unable to get
here, but plans to be in Washington some time during the following
The ACTING CHAIRMAN. I am sure the committee will be glad to
hear him.
Mr. RAY. We do not attempt to say how Congress shall pay these
certificates. Several methods have been suggested to this committee.
I would like to say in conclusion, Mr. Chairman, the Veterans of
Foreign Wars of the United States have made the best study possible
of this question taking into consideration the absolute needs of the
beneficiaries, and from that study we believe it will be a real benefit
to the country if this amount of money is placed in circulation. We
sincerely hope this committee will favorably report this bill to the
House and that it will be enacted into law.
Thank you, Mr. Chairman.
The ACTING CHAIRMAN. We thank you for your appearance.
Mr. PATMAN. The Veterans of Foreign Wars is an organization
restricted solely to men who have seen service overseas. There is
another organization known as the Disabled American Veterans who
are restricted in membership to those who have service-connected
disabilities by reason of their service in the World War. I now take
pleasure in introducing to the committee Mr. Thomas Kirby, legislative representative of the Disabled American Veterans of the
World War.
Mr. KIRBY. Mr. Chairman.
Due to the considerable number of witnesses who are to appear
before your committee and, in order to lessen duplication it is intended
in this statement, to concentrate largely upon the viewpoint of the
disabled in this legislation. Of course, we are not unmindful of the
needs of all former service men, but feel that in view of the fact that
the Disabled American Veterans is the only national organization of
any wars' disabled ever recognized by congressional enactment, our
interest is manifestly greater for those who constitute our membership as a result of their eligibility established through service-connected ailments.
The D. A. V. earnestly urges upon this committee three distinct
amendments to the World War adjusted compensation act. As
matters stand to-day, a veteran who has applied, or will apply, for
his certificate may have any loan value. Our recommendation is
that this committee approve the general principles of the Barkley
bill from the Senate allowing loans without delay. Secondly, we
feel there should be a decided decrease in interest charges which are
now cutting so heavily into the certificates of those who have already
borrowed. Much of the money which the government borrowed a
year ago to pay 50 per cent of the face value was obtained at a rate
of less than two per cent still, for this same money, the veteran is
compelled to now pay at least 4% per cent, with the probability, as



explained by the Administrator of Veterans' Affairs the other day,
that those who made their loans direct from banks may even exceed
this figure. While it may be that two per cent might be too low,
nevertheless, it is felt that a substantial plan may be worked out
whereby these charges may be reduced to two and a fraction or not
more than 3 per cent, thereby removing a distinct hardship upon
those who have been forced to borrow in their hour of need. The
third proposal of the D. A. V. is for the immediate cashing of these
There are, under the law, three World War organizations recognized
on exact parity before Congress—Veterans of Foreign Wars, American
Legion, and the Disabled American Veterans. You have heard from
the representatives of the V. F. W. and this statement is intended
to put squarely on record the D. A. V. in favor of the principles
of the Patman bill.
Last fall, at Detroit, the American Legion voted against the
immediate redemption of the adjusted service certificates for the
able-bodied. However, the very resolution that opposed the so-called
bonus payment for the able-bodied contained the following declaration: "The unqualified, generous, and unstinted relief of our disabled
comrades has always been, and ever will be, the task to which the
American Legion is chiefly dedicated, and is the surest path for service
to God and country." While it is not intended to attempt to interpret
the desires of any organization that has a spokesman present, it is
believed this language is so unequivocal that there is justice for
stating that while there may be some question as to how all organizations stand on the payment of these certificates to all classes of veterans
the testimony here to-day plus the Detroit declaration shows plainly
that the three organizations should stand unanimously for the immediate redemption of these papers for all who are disabled as a
result of their world war service.
Those who declared a vote for the "unqualified, generous and
unstinted relief of our disabled comrades" surely can not contend
that the most direct form of relief to this class is the most direct form
of relief that could be granted, particularly in this hour of general
At its inception the D. A. V. strongly advocated the cash adjustment of pay of the soldier on the theory that this money should be
made immediately available to assist the former service man in
speeding the day when he could rehabilitate himself in civilian pursuit. As compromise after compromise was entered into the organized disabled divorced themselves from the move, so we had little
or no part in the final stages of the campaign leading up to the act
now under consideration. However, once this law became a part of
the law of the land, we have actively participated in supporting what
we have felt to be equitable amendments and reasonable interpretations. It is in that spirit that we appear before this committee to-day
urging immediate cashing of the remainder of these certificates.
With the three organizations committed in favor of the legislation
for the disabled, attention is invited to the fact that from the original
introduction of the so-called bonus idea more than a decade ago
there have been two stock arguments against the whole principle of
adjusted compensation by those forces that have always been represented in past hearings and who will probably attend these hearings
in an effort to prevent action.



The first of these has been that if this great cross section of Americans whose interest in the country was amply demonstrated in time
of stress, who have now reached an average age of approximately
40 years, and with the solemn obligations in the way of dependents,
should be granted this money, there would be a wholesale dissipation.
Of course, the former service men resented any such blanket indictment but it was repeated and repeated until a few months ago when
its absurdity was demonstrated, not by any group of irresponsible
agencies, but by the United States Government. The Administrator
of Veterans' Affairs, speaking for the Government, sent to every
station a questionnaire to be answered by the ranking officials as to
what dispositions the veterans made of their money when they borrowed 50 per cent of the value of the certificates. The actual official
returns from these questionnaires represented the most profound
compliment ever paid to any group of Americans so far as the use of
funds suddenly placed in their hands. The returns, based on the
statements of the United States officials, showed that 65 per cent of
the money was spent for the comforts and necessities of life; 20 per
cent for investment purposes, including payments on homes; 8 per
cent for automobiles; and 7 per cent only, in any way that resulted in
no practical benefits to the veteran.
It is sincerely hoped that this demonstration of common sense
of these men who once wore the uniform will end the dissipation
prattle. The second stock argument that has been constantly used
not only during the time of financial crisis but at all times, has been
that the country could not stand the financial strain, some going to
the direful predictions that the payment of this obligation would
mean the collapse of the Federal financial structure. These predictions have no more come true than did the predictions about
dissipation, still, it is assumed that most of the time of the present
hearings will be devoted to this angle of the matter.
Experts for and experts against the cashing of these certificates,
have appeared, or will appear, before this committee and, rather than
entering upon elaborate duplication of the testimopy, it is desired
to state that the Disabled American Veterans feels that the Patman
plan will not only afford the funds to meet these payments but will
result in a reasonable inflation that in turn will mean greater circulation and by that method result in speeding the conclusion of
the depression that is being felt in common by veterans with all
other classes of citizens.
Regardless of any preconceived ideas on this whole plan, no one
could have listened to former Senator Owen in his masterful presentation the other day without being impressed with the sincerity of his.
purpose and the thoroughness of his knowledge when he appeared
voluntarily to state that based upon his long experience he felt that the
redemption of these certificates at this time would not only be justice
to the veteran but would be a godsend to America.
In these days of acute suffering there have been all sorts of radical
guesses as to the extent of unemployment. Realizing the disabled
were severe sufferers through the shortage of jobs this organization
did not calculate, estimate, or guess but attacked the whole situation
in a definite and systematic manner. First, to get a real picture of the
condition and, secondly, to apply the remedy, nine months ago the
Disabled American Veterans presented a substantial plan to the



Government. In collaboration with the United States Veterans'
Administration and the United States Department of Labor, the
Disabled American Veterans took an employment census of every
man on the compensation rolls. There was nothing unofficial nor
any guesswork involved. From the Veterans' Administration there
went forth individually to the home address of each compensable
man a brief questionnaire on his employment status. As soon as the
returns were received they were classified, a tabulation was made and,
for the first time, we had an accurate survey.
At that time, last July, there were approximately 300,000 men on
the compensation rolls and the replies showed that 77,000, by name
and address, were employable but unemployed. In brief this meant
that more than one out of every four of the disabled men, who were
capable of working in spite of their handicap, whose average compensation was about $30 per month and of whom about 89 per cent
were married and had families, were utterly jobless and, consequently,
destitute, in spite of their desire to enter gainful occupation. In
order to clarify this matter it should be understood that this canvass
did not include all the disabled men who were not working, for we
excluded all hospitalized men, as well as those whose ratings by the
Veterans' Administration, indicated that they were not physically
or mentally able to perform regular duties. Having gotten a definite
picture of the problem months before the winter season made the
situation even worse, we had arrangements whereby the United
States Employment Director in every State in the Union was to coordinate all existing Federal, State, county, municipal, and civic agencies
dealing with employment in practically every city, town, and village
in America, to give highest priority to the disabled men in their
respective localities, who were identified through the D. A. V. United
States census.
Having in mind the desire of this committee for reasonable brevity
the foregoing is submitted as the general viewpoint of the disabled
veterans of the country. As stated at the outset, there is no desire on
the part of the disabled to be forgetful of the able-bodied whose plea,
is being presented by others but we do feel that in the midst of the
economic crisis with more than one out of each four disabled men
capable of holding some sort of a job, absolutely out of employment,
Congress should be sufficiently impressed by the plight of these men to
make available at once the cash on the remainder of these certificates
which is more needed and infinitely more valuable now than it might
be in some years to come.
Mr. ALDRICH. I just want to ask you one question, Mr. Kirby.
How many members are there in your organization?
Mr. KIRBY. Sixty-three thousand, four hundred.
Mr. ALDRICH. DO you know how many veterans there are of the
World War wtio have service-connected disabilities?
Mr. KIRBY. Approximately 322,000.
Mr. ALDRICH. I notice that you gave the figure 322,000 and then
you said that that did not include the men who were in hospitals;
did I understand you correctly?
Mr. KIRBY. NO. What I said was that in the compilation of answers from the questionnaire, we threw out of all consideration the
hospitalized men or the mentally disabled men who were not employable.



Mr. ALDRICH. But they were included in the figure of 322,000?
Mr. KIRBY. Yes; which makes the ratio of employable to unemployed much worse.
Mr. VINSON. Mr. Kirby, you say there are more than 322,000
veterans who have service-connected disabilities?
Mr. KIRBY. Yes, sir. My last figures were 322,000. I think it is
a little more than that. I would say that it is over the 322,000
mark. I am speaking of men whose disabilities are of war origin.
Mr. VINSON. Service connected?


Mr. VINSON. What is the number on the rolls receiving disability
Mr. KIRBY. In the first week in January of this year, the disability allowance number passed the compensable men. My last
figure is 354,000 on disability allowance rolls.
Mr. ESWCK. It has been stated here that approximately 1,000,000
World War veterans are out of employment. How is that figure
obtained? How is the data accumulated so as to give a figure of
substantial accuracy?
, Mr. KIRBY. I could not say how they arrived at it. There have
been all sorts of guesses about unemployment. You have heard
mentioned here that the figure was from six to twelve million. I do
not know of any other group of Americans who have undertaken a
systematic count down to the individual man. There was a canvass
inspired by us. These letters did not go to a group of men but went
literally to the homes of every disabled man.
Mr. ESLICK. Has the Government gathered any statistics on the
unemployment of World War Veterans?
Mr. KIRBY. There is a dispute going on now among Government
officials to-day, as I understand, about it. There is a friendly discussion between the Veterans Administration and the Department of
Labor, but I think at best they must necessarily be guesses.
The ACTING CHAIRMAN. If there are no further questions, we
thank you for your presentation, Mr. Kirby.
Mr. KIRBY. Thank you, Mr. Crisp.
Mr. PATMAN. Mr. Chairman, Congressman W. W. Hastings, of
Oklahoma, introduced H. R. 6584, providing for the full immediate
cash payment of the adjusted service compensation certificates and
desires to be heard at this time.
The ACTING CHAIRMAN. We shall be glad to hear Mr. Hastings.
Mr. HASTINGS. Mr. Chairman and gentlemen of the committee, I
favor any one of the bills pending before the committee which will
result in the payment of the balance due on the adjusted-service
certificates. Some of these bills provide for payment by Treasury
certificates, some in cash and others by the exchange of bonds. They
all serve the same purpose.
Congressman Patman stated to the committee that I have introduced a bill, which is H. R. 6584. I introduced it as an alternative
measure. First let me say that I favor the Patman bill but fearing
that the committee might have differences of opinion on the subject,



with reference to the method of making the payment of the balance
due, I introduced this bill which I will talk about in a minute.
Let me say that I favor the payment of the balance due for two
reasons. First, I think it is only fair and just to the ex-seryice men
of this Nation. Second, it is my firm and honest and candid belief
that the payment of the balance due on the adjusted-service certificates will do more to relieve the depression than all of the legislation
that Congress is considering or will enact at the present session of
There are four arguments advanced against the payment of the
balance due on these adjusted-service certificates, and I want to discuss them for a moment.
The first is that Congress has already made generous appropriations
for the benefit of the ex-service men. In support of that argument I
am sure that the Veterans' Administrator will be called to give a long
array of figures as to the amount Congress has appropriated for the
various benefits of the soldiers since the close of the World War.
That will include hospitalization, disability compensation, pensions
and other benefits.
Let me remind the committee that about 5,000,000 of the finest
boys that ever followed the flag to victory enlisted after we passed
our declaration of war. Now, there are thousands, if not millions of
these ex-service men who are receiving no benefits from these appropriations and that will be pressed upon your attention during these
Let me speak for the ex-service man who is receiving none of these
benefits. What did he receive? The private soldier received $33
a month for his services, at Chateau-Thierry where the enemy was
stopped, between July 15 and 18; for following under the command of
General Pershing at the St. Mihiel offensive September 12, 1918;
for being transferred and fighting over in the Argonne, crashing
through barbed-wire entanglements and capturing machine guns,
sleeping in trenches and going over the top. For all of that they
received $33 per month.
Out of this they were compelled to make an allotment for dependents at home, of $15 a month. That left $18. That is 60 cents a
day. Out of that further they were induced— and they should have
and did—to take out insurance policies. That cost them approximately $7 per month each. Deducting that from your $18, leaves
you $11. Then, they received, after you make these deductions,
approximately 40 cents a day.
When we enacted this legislation in 1924 to adjust the compensation
of these veterans, we provided that they should be given $1.25 a day
for overseas service and $1 a day for domestic service, payable in
1945. If you add $1.25 a day to 40 cents a day, which is thebalance
of their pay that they had left, as I have calculated it, for bringing
back the flag to victory, the veteran got $1.65. Gentlemen, we pay
the charwomen who clean up this House Office Building more money
than that.
The civilians who stayed at home received from $4 to $8 and $10
and $12 a day, didn't they? What are we doing for these ex-service
men? We are not giving them anything except this: We are advancing
them the interest on the balance due on their adjusted service certificates between now and 1945; that is all. It is due them. It is




an obligation against the Government. The Government will pay it.
But we are making that concession to these boys who joined the
colors. Do you think that is much of a concession?
The second argument that is made is that it will be too great a
strain on the Treasury.
Mr. MCCORMACK. Will the gentleman yield?
The ACTING CHAIRMAN. I will inform the gentleman from Oklahoma that he does not have to yield.
Mr. HASTINGS. I am happy to yield to the gentleman as long as.
I do not trespass too much upon the time of the committee.
Mr. MCCORMACK. In connection with that, there are some groups,
who got bonuses which were paid them sometime ago.
Mr. HASTINGS. That is true. I did not have the time to go into
that and I had hoped that other witnesses who testify before the
committee would press that upon the attention of the committee.
The second argument, as I have said, is that it would be too great,
a strain upon the Treasury. This is the richest and the greatest
Government on earth. General Hines estimates that the balance
due on adjusted service certificates as of October 1, 1931, is.
I do not care to enter into a financial discussion. But I do not
believe there is a member of this committee, or a man whose judgment
is worthy of the earnest consideration of the committee, who believes,
that the issuance of $2,000,000,000 would be too great a strain upon
the Treasury. However, if the committee entertains the opinion
that the Government would have difficulty in financing this proposal, I have had prepared and introduced a bill to which I invite
your attention, H. E-. 6584, which would provide for the issuance of
tax-exempt bonds due in 1945, to be exchanged for these certificates.
It provides that they should be issued in denominations of $50,
$100, and $500, all payable June 30, 1945, the year in which all of
these adjusted service certificates are due and payable. They would
bear such an interest rate as would insure their being sold and absorbed
at par. The fractional parts would be paid in cash. Together with
this cash, the Government would issue similar bonds due and payable June 30, 1945, sell them with which to get the money both to
pay the fractional part and to pay the interest on the bonds. So
that none of these bonds would be due until 1945 when practically all
of these adjusted service certificates are due and payable.
Mr. RAGON. IS it your idea to take over the certificates and just
deliver the bonds to the veterans?
Mr. HASTINGS. This bill is very carefully prepared and the Treasury
Department and the Veterans' Administration cooperate, so that the
Treasury Department issues these bonds and turns them over to the
Veterans7 Administration for exchange at par for the balance due on
these certificates, paying them in denominations of $50, $100, and
$500, and the fractional amount, whatever it may be, in cash.
Mr. RAGON. Exchange with whom, the veteran?
Mr. HASTINGS. With the veteran.
Mr. RAGON. In other words, the veteran would take these bonds in
place of the certificate?
Mr. HASTINGS. In place of the balance due on his certificate.
Mr. RAGON. And the fractional parts
Mr. HASTINGS. Would be paid in cash.



Mr. RAGON. Would be paid in cash?
Mr. HASTINGS. Exactly. That is a question of detail, but in the
bill I propose that the bonds bear an interest rate of 4% per cent.
That bill was prepared some time ago and if the committee thinks
that bonds of 4% per cent would be absorbed at par, that is a matter
of detail and the bill is subject to amendment. But I do not know
of a bank throughout the country that would not readily absorb these
bonds. I think it would bring all of the money out of hiding, so that
there would not be any hoarding and to that extent it would increase
the money that is in actual circulation.
In my judgment there is no act that Congress could pass that would
do more to relieve the depression, relieve the unemployment situation, help the small business man, give ttie man something with which
to purchase necessities, pay taxes, house rent, than the enactment of
this legislation.
Mr. RAGON. Will the gentleman yield?
Mr. HASTINGS. Gladly.
Mr. RAGON. HOW would you prevent the veteran from having to
take a substantial discount on those bonds?
Mr. HASTINGS. Of course, every day those bonds will be quoted,
just as bonds are now in the bond market. Take the market to-day.
You can see what a four and a quarter per cent bond is worth.
Mr. RAGON. But you know that a great many of these boys are
country boys. They do not know anything about the market.
Mr. HASTINGS. I think these boys have had a sufficient experience
in the service of their country and in the borrowing of money to make
inquiry of the local banker, and I think the local banker would be fair
enough with them to tell them what the market value is. I would
have the rate high enough to insure that these bonds be absorbed at
Mr. RAINEY. YOU understand that the Government now can not
sell bonds carrying four and a quarter per cent at par.
Mr. HASTINGS. If you will notice, your four and a quarter per cent
bonds are worth more than par at this moment.
Mr. RAINEY. The Government keeps them at par by buying bonds
itself. The officials of the Treasury Department advise me and I
think have advised others that they could not float a long term issue
at four and a quarter per cent at par.
Mr. HASTINGS. I do not think there is a county in the United
States that would not absorb or whose banks would not absorb the
bonds that would be issued to the ex-service man; certainly if you
made it 4% per cent payable in 1945.
Mr. RAINEY. Your theory is that the veterans would dispose of the
bonds to the banks at once.
Mr. HASTINGS. The local banks largely. I think it would be the
best investment that the local banks could make.
Mr. RAINEY. Then according to your theory there would be a new
issue of $2,400,000,000 of bonds thrown on the market?
Mr. HASTINGS. $2,185,705,921.17; yes.
Mr. RAINEY. What effect would that have upon our other bonds
and upon all our bonds?
Mr. HASTINGS. The reason why I inserted a provision in my bUi
for the rate to be 0i per cent was to insure their not being sold below
par, so that they would be able to float them at par.



Mr. VINSON. I want to inquire of Mr. Hastings or Mr. Rainey
what was the interest rate on the last Treasury issue of bonds?
Mr. RAINEY. Three and three-eighths, I think.
Mr. VINSON. At what price were they taken?
Mr. RAINEY. That was not a bond, Mr. Vinson.
Mr. VINSON. What was it, a certificate?
Mr. RAINEY. That was a certificate.
Mr. VINSON. What is the difference?
Mr. RAINEY. The difference is this. Certificates are due in less than
a year. Notes are due in less than two years. Bonds are made
payable after two years.
Mr. VINSON. Which are the more valuable, which will bring the
higher price on the market, the long-term or the short-term security?
Mr. RAINEY. The short-term security brings the highest price on
the market because investors know that they will get their money
quickly and the short-term securities are available for disposing of their
money in an absolutely safe security, which they know will be paid in
seven months or in a year by the Government. It provides them with
a place to put their money, to tide over a period after which they hope
to make a better investment.
Mr. VINSON. What was the amount of that issue?
Mr. RAINEY. I think it was $700,000,000.
Mr. VINSON. What price did it bring?
Mr. RAINEY. Par.

Chairman and gentlemen. The third argument
that is made is that the money received by the payment of the balance
due on these certificates will not be used to a good purpose.
I have seen an authoritative statement made by General Hines to
the effect that of the amount of money borrowed on these certificates
not more than 6 per cent was improvidently expended. I am glad to
have that statement confirmed by a statement that was made here
this morning.
The fourth argument that is made is that the veterans do not want
this legislation. I want to say that I do not believe that the expression at the Detroit convention correctly reflects the views of the exservice men throughout the Nation. I want to speak for Oklahoma.
The Legion convention at Enid passed resolutions requesting the
payment of the balance due. I think every Legion post, so far as I
am advised in the State of Oklahoma, has by an overwhelming vote
passed resolutions urging the payment of the balance due.
I thank the committee for its courtesy.
The ACTING CHAIRMAN. We thank you for your presence, Mr.
Mr. PATMAN. Mr. Chairman, I promised several members time
this morning and I just have to do the very best I can under the circumstances. I will have to go out of order again. Mr. Jed Johnson
is on the Military Affairs Committee and they are going to consider
a very important matter this morning. They are in session at this
time. He has introduced H. R. 10096 asking for the full payment of
the adjusted-service certificates. He only wants a few minutes of your
The ACTING CHAIRMAN. We shall be glad to hear him.



Mr. JOHNSON. Mr. Chairman and gentlemen of the committee,
because of my desire to speed up the hearings, and also because
several of my colleagues desire to appear before your distinguished
committee, I shall not take as much time as I had contemplated using.
I have attended practically all of the hearings, and have also listened
on the floor of the House to arguments made against this bill since
these hearings began. I have also read a great many editorials in
newspapers arguing against the passage of this bonus legislation, and
I find that the great burden of the argument against the payment of
the veterans adjusted certificates in full seems to be, first, that this
is not a debt due the veterans, but a gift an outright dole or donation
that Congress is called upon to make. Some say that if it is a debt,
that the debt is not now due. We are constantly reminded that the
adjusted-service certificates will not become due under the law until
I do not share the views of the opposition who say that this is not
a debt; neither do I admit for a moment that, it is not due.
I listened with surprise to one of the witnesses for the bonus the
other day who said, " We admit that it is not due/' I make no such
admission. I do not hesitate to say to this committee that it is all
past due, and it is a rank insult to every man who wore the uniform
to refer to this legislation as a proposed donation to the World War
All of you will doubtless remember that hardly had the bark of the
cannon died away and the smoke cleared up from the battlefields in
the Argonne Forest when the railroads, the shipbuilders, and some
of the ammunition factories, as well as several thousand civilian
employees, came to Congress demanding a bonus for their " patriotic
war-time services." They did not ask for promissory notes. The
railroads did not ask for notes due in 1945. The shipbuilders did
not ask for promises, but they wanted the cash on the barrel head.
I am ashamed to say that Congress very soon after the war gave the
shipbuilders their bonus, and gave it to them in cold cash. They gave
the civilian employees, the shipbuilders, the railroads, and the ammunition makers, some of whom had profiteered to the tune of 500 per
cent, their bonus in cash. Then, after the railroads had gotten
their bonus, someone thought that probably the boys who had faced
the machine guns at a dollar and a quarter a day should have their
pay adjusted—not a bonus mind you; Congress never gave the veterans a bonus, but merely proposed to adjust their pay.
Some have said that the veterans are now breaking faith with
Congress, that they had agreed to take these promissory notes,
this sort of long-time insurance, and therefore that the veterans had
broken faith with Congress. I want to remind the members of this
committee that no outstanding veteran or veterans organization, like
the American Legion, Veterans of Foreign Wars, or disabled veteran
organizations, ever asked for this thing they got. But they had to
accept the 20-year adjusted-service certificates or nothing.
In the fall of 1919 the first American Legion convention was held
in Minneapolis. At that convention a resolution was adopted calling attention of the Congress in a general way to the fact that "our



Government has an obligation to all service men and women to relieve the financial disadvantages incident to their military service, an
obligation second only to that of caring for the disabled and the widows and orphans of those who sacrificed their lives, and one already
acknowledged by our allies."
In February, 1920, Congress having failed to give any relief in the
matter of adjusting the pay of our former service men, the American
Legion executive committee met in Indianapolis and passed a resolution again calling the attention of the Congress that in the opinion
of the Legion all service men and women were entitled to adjusted
compensation "in the form and for the amount of a $50 bond for
each month's service rendered during the period of this War."
Congress failed and refused to pass the legislation requested by
any service men's organization or any outstanding veteran, but
Members of Congress contented themselves, up until 1924, by delivering many speeches in both Houses, eulogizing the boys for their heroism rather than giving them substantial relief. Toward the latter
part of 1920 the American Legion presented what was termed its
fourfold plan and the same was introduced by the chairman of the
Ways and Means Committee where this committee added a fifth
plan—a sort of 20-year paid-up insurance to the veteran. I call
your attention to the fact that the fifth plan of insurance instead
of cash was nat the brainchild of the American Legion, the Veterans
of Foreign Wars, the disabled veterans, or any other former service
men's organization, but it had its inception in this powerful committee
as a sort of sop to the soldiers and yet permitted the Government
to escape and evade the payment of the adjusted pay in cash, as the
veterans and veterans' organizations were at that time demanding.
The plan to adjust the pay of the veterans, in cash, was bitterly
opposed and defeated by the international bankers, bond brokers,
and Wall Street in general. In fact, many of the same gentlemen
who will appear before this committee in the next few days in opposition to legislation to pay the bonus in full now, stated the same, or
similar, reasons for opposing any kind of a bonus bill ten or a dozen
years ago. It is not worth while for me to go further into the history
of this legislation. Some of the distinguished members of this committee recall how a multimillionaire secretary of the Treasury appeared before this committee time and again between the years 1920 and
1924 in opposition to any kind of a soldier-bonus bill and especially
in opposition to the bill veterans were sponsoring to adjust their
pay in cash. When the bill was finally passed to hand the veterans
a promissory note instead of adjusting their pay Wall Street and the
other international bankers and bond brokers with foreign securities,
opejily boasted that they had won a great victory.
I said a while ago that the railroads, munition makers, shipbuilders,
civilian employees, and others received their adjusted pay in the year
1919 immediately after the ending of the war. They not only
received their pay but they also received the interest rate they
demanded from the beginning of the war. I submit in all fairness
that if those with less hazardous jobs were entitled to pay from the
beginning of the war, with interest, the war veterans who faced
machine guns and the shrapnel that American profiteers sold to this
Government at 500 per cent profit, are entitled to interest from the
date of their enlistment. If that be true and the war veteran had



teen paid his interest at the same rate the railroads received at the
hands of this Government, the adjusted service certificates would have
iallen due in the year 1931. So, I have no apologies to look members
of this committee in the face and say it is a just debt; it is an acknowledged obligation by the Government; it is long past due and this
Congress can not longer sidestep nor evade the issue.
So, I repeat, if the veterans had received their interest at the same
rate that the railroads, the shipbuilders, and the civilian employees
and others who profited off of war, received theirs, every penny of it
would be due now.
Mr. RAINEY. May I interrupt?
Mr. JOHNSON. Yes. You may ask me a question.
Mr. RAINEY. What do you mean by bonus to the railroads?
Mr. JOHNSON. I mean that they asked and received their bonus in
cold cash with added interests from the very moment they were taken
Mr. RAINEY. Was that not a payment for the Government operation of the railroads during the war?
Mr. JOHNSON. Oh, yes, Congress called it a payment. I say that
in fact it was a gift—in cold cash. Congress has proved itself to be
a big Santa Claus to the railroads.
Mr. RAINEY. That was a reimbursement to the stockholders of
the railroads.
Mr. JOHNSON. Reimbursement is the term Congress applied, but
may I remind the distinguished gentlemen that considering the
watered stock, it proved to be a donation or a dole rather than a
bona fide reimbursement.
Mr. VINSON. Will the gentleman yield?
Mr. JOHNSON. I will yield, although I must not consume too much
Mr. VINSON. I just want to make the observation that in turning
the railroads back to private ownership they certainly got section
15 (a) of the Transportation act, which carried the recapture clause.
Mr. JOHNSON. Absolutely. The railroads ought to believe in Santa
Mr. VINSON. And if I read the signs of the times, there is going
to be several hundred million dollars turned back to them by virtue
of legislation which will probably be enacted at this Congress.
Mr. JOHNSON. Yes; by legislation already enacted. Congress was induced to pass the $2,000,000,000 Reconstruction Finance Corporation
act in order, we were told, to end the depression, and Congress dished
out another dole to the railroads. Now, all of us realize that it was
a farce and a fake. We now have the sorry spectacle of seeing
defunct railroads "borrowing" millions of dollars from the Government with their bonds worth 12 cents on the dollar.
Mr. VINSON. AS I understand it, the amount involved under this
recapture clause is something like $500,000,000.
Mr. JOHNSON. I think that is about right. I am sure the distinguished gentleman knows.
Mr. HILL. That is money that the railroads have earned.
Mr. VINSON. Yes; but earned under the mandate of section 15 (a),
which provided that the Interstate Commerce Commission should fixthe rates at such a figure that they would earn the 5}i per cent plus
the 1 per cent for rehabilitation, and one-half of the 1 per cent for



rehabilitation was under the recapture clause to go in the Treasury
of the United States. Very few dollars have yet found their way
into the Treasury of the United States, and the $500,000,000 or more
will be forgiven the railroads.
Mr. JOHNSON. The gentleman's statement is unquestionably true,
and in that connection, since the question of the railroads earning
their bonus has been raised, I want to say, not as a general who pulled
down a big salary during the war, but as a very humble private in the
rear ranks, but with front line service, that I know war veterans more
than earned every dollar Congress has admitted it owed them.
The opposition to this legislation has greatly stressed the fact that
the American Legion organization in its last national convention failed
to pass a resolution indorsing the bonus. Also, that Commander
Stevens, of that great organization, has recently gone on record as
violently opposed to it.
I do not care to go into that discussion further than to say that
neither the action of the National Convention nor that of the wealthy
young commander who doesn't need his bonus certificate, represents
the sentiment of the rank and file of the legionnaires of Oklahoma.
For the national commander to say that only 23 posts of the country
had indorsed the bonus at the time of his statement was absurd on
the face of it. Practically every American Legion post in the State
of Oklahoma indorsed full payment months ago. What applies to
Oklahoma applies in a general way to a majority of the States of
the Union. I am told that national committeemen of that great
organization will soon meet at Indianapolis and at that time will
give Commander Stevens some inside information and probably
a just reprimand for his unwarranted action in opposing this just
When the array of big business men, great financiers, near-financiers,
economists and would-be economists appear before this committee
next week in opposition to this legislation, I assume that the burden
of their arguments will be that this bill, if and when passed, will
destroy the financial structure of the Government. No doubt the
committee will be warned against the passage of this legislation and
will be repeatedly told that the 50 per cent loans made to the veterans
by the last Congress did not revive business. Let me say in reply
to the charge that the 50 per cent loans did not stimulate business,
I personally know that in many sections the veterans' loan not only
revived but was a tremendous stimulation to business in general
in spite of the fact that not one dollar of actual money was issued.
What the veterans received was credit. Not one new dollar was
placed in circulation and that, gentlemen, was not a gift. What Congress actually did was to lend the veteran 50 per cent of his own
money. It must also be remembered that a great majority of the
veterans who have borrowed at all on their certificates had previously
borrowed 20 to 25 per cent before the passage of the 50 per cent act.
So, the loans, in fact, only amounted to 25 to 30 per cent instead of
50 per cent, as one unfamiliar with this legislation might think.
The inference has also gone out that the veterans' loans have caused
the deficit in the Treasury; that the money came from the pockets of
the taxpayers of the country.
Even Members of Congress have made such erroneous statements.
The fact is that aside from a small amount appropriated by Congress



to administer the fund this money, or practically all of it, came from
the veterans themselves; from premiums paid by the veterans on
their insurance during their wartime service. That fund made up of
premiums on this insurance amounted to $881,000,000, and yet
Congressmen, and others, boast that they gave the veterans the
money. What Congress did was to lend 50 per cent on these certificates and then had the nerve to charge the veteran 4% per cent compound interest on his own money. At the same time this Government can go out in the market and get money for less than 2 per cent.
The veterans know they did not get a square deal on that loan, and it
is a sad fact unless the 4K per cent compound interest is canceled
many veterans will actually owe the Government on the last half of
the bonus in 1945.
Answering the charge that payment of the bonus in full will hurt
business I will say to this committee that I do not pose as an economist
or a financier. If the great Champ Clark, after studying the money
question for a lifetime would admit that he knew nothing about the
money question and doubted seriously if anybody else did, I would
not have the temerity to tell this committee that I pose as an authority on the subject. If I thought that the payment of the last half of
the bonus would impair the financial structure of the Government or
hurt business to any extent whatsoever I would not, under any circumstances, support this legislation. On the other hand, after talking
to many economists and financiers in high authority, I am fully
convinced that the currency must be expanded or re-expanded as
Senator Owen and other authorities on the subject, have said, and
it occurs to me that either the Patman bill or the Thomas-Johnson
bill (H. R. 10096), introduced by me and now pending before this
committee, would be a practical way of expanding the currency. In
my judgment it is imperative that some action be taken by Congress
and that immediately, to give the country cheaper money.
I think it is generally admitted that money has become entirely
too high and commodities too unreasonably low, and something must
be done and done quickly to bring up the price of commodities and
cheapen the dollar. The fact significant that after these hearings
began officials of the Federal Reserve Board all over the United States
were called to Washington to discuss ways and means to expand the
currency is evidence that there is merit in this legislation. Of course,
all of us understand that this hurried action on the part of the Federal
Reserve Board at this time is primarily for the purpose of defeating
this legislation, but even if that be true the veterans have won a
moral victory, and yet the average American citizen will ask himself
if the Federal Reserve Board can, without any authority of law, go
into the open markets and buy a billion dollars' worth of securities
why did it not do so six months ago—why did it not do so a jrear
ago—or two years ago—and save the country from the most terrible
money panic America has had in the past quarter of a century?
The announcement of the Federal Reserve Board that it will increase
the currency within the next few weeks is a terrible condemnation of
its policies in its failure and refusal to do so in the past.
Mr. MCCORMACK. In other words, you do not think that the
recent action of the Federal Reserve Board completely supports the
theory of the opponents of this legislation?
Mr. JOHNSON. That is quite true. On the other hand it demonstrates that the Federal Reserve Board admits the soundness of the



plans here being considered. It is not a question of what Congress
would like to do, but I am fully convinced that the expansion or reexpansion of the currency must be done, and that it must be done
Mr. RAGON. If I understood Senator Thomas when he was here
the other day, he felt that the terms of the Patman bill might greatly
injure the Federal reserve system,
Mr. JOHNSON. Yes, I heard the statement of our distinguished
Senator from Oklahoma. I do not share his view altogether. There
is no question but what some of the money under the Patman bill
would come in competition with the Federal reserve, but it would
not be any appreciable amount, and not enough to kill the Federal
reserve or seriously cripple it. But frankly, I measure my words
when I say the Federal Reserve Board ought to function as originally intended in the interest of the people, or else Congress ought to
abolish it.
I desire to make it plain, Mr. Chairman and members of the committee, that I am not wedded to any plan. I have no pride of authorship of the bill I have introduced in Congress in keeping with the ideas
suggested by Senator Thomas and quite similar to the views expressed
by Senator Owen. The Thomas-Johnson bill would go through the
Federal reserve and make that a functioning organization operating
in the interest of the people instead of by and for Wall Street and the
international bankers.
It is needless for me to picture to you the conditions and the need for
relief for our war veterans and their families. You have heard that
over and over again, but let me say in closing that if $2,000,000,000
of additional currency were sent out into every nook and corner of
America in my judgment it would revive business immediately. It
is a practical way of increasing or expanding the currency. It would
have the effect of raising commodity prices. It would save the homes
of thousands of war veterans where foreclosures have already been
started. It would melt the long bread lines, stop suicides, and relieve
suffering in every town and hamlet. It would not only fill thousands
of empty box cars but fill millions of empty stomachs, and replace
misery and suffering with a ray of sunshine and hope, and at the
same time pay a just and acknowledged debt due the war veterans
by the Government of the United States.
Mr. CRISP. We thank you very much for your presence.
Mr. PATMAN. Mr. Chairman, I desire to introduce Mr. Maurice P.
McGrath, who is representing the Twenty-ninth Division Association.

Mr. MCGRATH. Mr. Chairman and gentlemen, I appear here as
legislative representative of the Twenty-ninth Division Association,
the Twenty-ninth Division being known during the war as The Blue
and the Grey. They come from the great geographical section of the
country composed of Virginia, Maryland, New Jersey, and the
District of Columbia.



In convention last August at Asbury Park, N. J., they passed a resolution favoring the full payment of the adjusted-compensation
certificates—not part payment, but full payment. They feel that,
as the the gentleman who just preceded me said, the railroads and the
shipbuilders were paid, and as this certificate represents a form of
adjustment for the difference between what they received as soldiers
during the World War and what was received by the civilians on the
outside, the laborer is worthy of his hire, and that he should not be
made to wait 20 years to get what is coming to him.
I just want to say a word relative to the action of the American
Legion in convention at Detroit last fall. I, as a legionnaire, do not
believe that the national officers who will appear before you gentlemen represent the true sentiment of the American Legion. I really
believe and feel that the rank and file of the American Legion are 95
per cent for the full payment of this bonus. They were addressed by
a gentleman who appealed to their patriotism. I considered that,
gentlemen, an insult. They had proved their patriotism, and I hope
and pray that the day will come, when an outsider addresses a convention of the American Legion, that any question of controversy
that has come before the body will not be allowed to be spoken on by
the person addressing that convention.
A great many of our men of the Twenty-ninth Division, who were
in the front-line trenches during that terrible strife in Europe, are now
in the bread line—many, many of them. They feel that they should
get this adjusted compensation at this time. I think that that is the
opinion of the great majority of ex-service men. The men who are
opposed to it are the men who can afford to do without it.
You gentlemen probably will get telegrams, as I read in the paper
not long ago, from the Willard Straight Post in New York City.
They are opposed to the payment of the bonus. I would ask you
gentlemen to scan closely the list of men who compose the Willard
Straight Post of New York City. They are men who do not need the
bonus, and I would suggest that those gentlemen who are opposing
the payment of this bonus, those that do not want it, return it to the
Government as a conscience fund.
The Twenty-ninth Division Association has not approved any one
particular bill, but the executive committee will meet in Newark,
N. J., tomorrow night, which meeting I hope to have the pleasure of
attending, and I am going to try strongly to get them to indorse some
bill before this House.
Mr. Chairman, I thank you.
Mr. CRISP. We thank you for your presence.
Mr. PATMAN. Mr. Chairman, I desire to introduce at this time
Mr. Paul C. Wolman, of Baltimore, Md., who is well informed on
this subject, not only from the standpoint of Maryland but from the
standpoint of the Nation, and not only among the veterans but among
the civilians as well.

Mr. WOLMAN. Mr. Chairman and gentlemen of the committee,
I appear before you as the immediate past commander in chief of
the Veterans of Foreign wars of the United States and chairman of
a committee appointed by Darold D. De Coe, the present commander



in chief, to ascertain the views of the people of this country upon
the question of immediately paying the balance of the adjustedservice certificates.
During the past 18 months I have had the opportunity to visit
every State in the Union with the exception of about four in my
capacity as national commander of the Veterans of Foreign Wars
and chairman of the adjusted-compensation or so-called bonus committee. My visits have afforded me the oportunity to associate
with and observe thousands of people throughout the country in the
same manner as you have in your respective districts. As a result,
I think I am in a fair position to give you a rather true picture of
the thoughts in the minds of our World War service men and the
members of their families, who may be regarded as a cross section
of the American people.
I believe I am in an even better position to make some observations
of these men and their families than most of you gentlemen; for when
you are in their midst or appear before them, they are upon their
dignity, so to speak, and fearful of being characterized as impolite
or rude if they express their true views. They are prone to be silent
and listen for words of widsom from their legislators and the holders
of their destinies in many cases.
And so I have addressed their mass meetings, their post, county
council and department gatherings, and I have visited their homes
and more than 50 hospitals housing veterans. These men have found
it easy to pour out their troubles to me because they have regarded
me as one who speaks and understands their language. Gentlemen
of the committee, if you have not been taken into the confidence of
these men, if you have not visited their homes, if you have not gone
to their rescue when they have been evicted, with their wives and
families, for nonpayment of rent, or seen them after their homes,
their farms, and their household furniture were being sold under foreclosure proceedings or by the sheriff for taxes, you have no conception
of what goes through their minds when they are in need. The statement of John Arthur Shaw, director of veterans' employment service,
Department of Labor, that there are 750,000 able-bodied World War
veterans unemployed, 75,000 veterans with disabilities unemployed,
and 800,000 who are working part time from one to four days a week,
injmost cases at greatly reduced wages, certainly can leave no doubt
imthe mind of one that a great number of World War veterans are
p* Due to the comment expressed by some veterans that the rank and
file of the World War veterans do not believe that the balance of the
face value of the adjusted-service certificates should be paid in cash
at this time, the Veterans of Foreign Wars desired to get an honest
expression of opinion from them. As a result thereof, a poll was
sponsored and financed by our organization and a ballot was printed
in 162 metropolitan newspapers for one day, these ballots to be
filled out by World War service men only, each of whom was to give
his full name, address and service unit and state whether he was in
favor or opposed to immediate payment. This poll brought in
281,758 ballots, upon which 281,162 voted in favor of immediate payment and 596 opposed. In addition to securing the sentiment of the
service men on this question, our organization circulated petitions
throughout the country and on April 8 there was presented to the



gentleman from Illinois, Mr. Henry T. Rainey, petitions signed by
1,958,272 citizens from every State in the Union as well as the 281,758
ballots referred to. All of these, I might say, are in addition to some
two and one-half million signers upon petitions, resolutions and
memorials sent directly to the various members of the two Houses of
Appreciating how busy the members of this committee are in following the hearings upon this important question, I have endeavored
to summarize some of the statistics contained in the Congressional
Record during this session of Congress as of April 5, 1932, in so far
as the same pertains to the question of immediate payment of the
adjusted-service certificates. I think that some of this information
may serve to enlighten the committee as to the scope of interest
exemplified upon this question and if it is not considered an imposition, I would like to state some of the facts revealed in the Record.
The Congressional Record shows that resolutions, petitions, and
memorials, calling upon Congress to pay the balance <3f the face value
of the adjusted-service certificates in cash, have been adopted by the
State assemblies or legislatures of the States of Arizona, Illinois,
Rhode Island, South Carolina, and Wisconsin, as well as by the city
councils or boards of aldermen of Joliet, 111.; Baltimore, Md.; Boston,
Chelsea, Revere, and Lynn, Mass.; Detroit and Hamtramck, Mich.;
Minneapolis, Minn.; Oswego and Yonkers, N. Y.; Providence, R. I.;
Llano and Winters, Tex.; and Seattle and Tacoma, Wash.; and likewise by the chambers of commerce of several cities. Miscellaneous
nonveteran organizations such as individual branches of the Rotary,
Kiwanis, and Lions Clubs, parent-teacher associations, Operative
Plasterer's Local, Brotherhood of Locomotive Firemen and Engineermen, Woman's Christian Temperance Union, Merchants' Association,
Sheet Metal Workers' International Association, literary and service
clubs, and good government clubs have also voiced their approval.
There have likewise been 476 petitions, memorials and resolutions
appearing in the Congressional Record of citizens, voters, taxpayers,
residents, etc., from practically every State in the Union.
In so far as the veteran organizations, other than the Veterans of
Foreign Wars of the United States, are concerned, it is worthy of
note that 609 resolutions, petitions, and memorials appear in the
Congressional Record from individual posts of the American Legion,
29 from chapters of the Disabled American Veterans of the World
War, many from the United Spanish War Veterans as well as from
numerous small veteran organizations, divisional, regimental and miscellaneous veteran societies, and each day's Record discloses many
additional resolutions, petitions, and memorials favorable to immediate payment.
Although the information contained in the Congressional Record
gives some indication of the thought on the parts of the people through
out the country; nevertheless, one can only realize the magnitude
of this question from the thousands upon thousands of letters and
telegrams that have been written to the members of Congress by the
men who served in the World War, their families and friends, calling
upon their respective Senators and Congressmen to do whatever they
can to alleviate their suffering and distress, and to help them help
Since I have undertaken to act as chairman of this committee for
the Veterans of Foreign Wars of the United States, literally thou



sands of letters have poured into my office; some well written,
others poorly constructed, but all voicing the same opinion; namely,
that the writers are in distress, that they have pieces of paper in the
form of receipts for their adjusted-service certificates issued by the
United States Government, upon which they have borrowed to the
full extent of the present law.
They can not understand why they must seek charitable aid and
pauperize themselves when the Government has confessed a debt
which it promises to pay them for services rendered in the World War.
They can not understand why their pleas for a cash adjustment of
their service pay went unheeded in 1920, as in 1922; and in 1924,
when the clamor became too great, they were given a nonnegotiable
paper which always appeared strange and complicated to them,
and which to-day, when they need money so badly, proves to be a
queerly frozen asset thawing only in the direction of the United
States Treasury in the form of compound interest now being deducted
upon their loans at the rate of 4}i per cent and 6 per cent, and formerly
up to 8 per cent. They can not help recall having read in the papers,
while many of them were still in France, of the passage of a bill in
January of 1919, providing for adjusted pay to the war contractors;
of another in February of 1920, providing for the return of the railroads with a guaranty for the six months from March 1, 1920, to
September 1, 1920, which cost the Government $536,000,000, to
be followed by the liberal revaluation under the provision of the
Esch-Cummins law; of the bill in 1923 which cost the Government
some $300,000,000 to adjust the pay of Government employees who
drew^ $2,500 per year or less. They read of the Reconstruction
Finance Corporation calling for a total of $2,000,000,000 and the
moratorium bill, and now the suggestion of Mr. Shepard Morgan,
vice president of the Chase National Bank made at the semiannual
gathering before the Academy of Political Science at the Hotel
Astor in New York on Wednesday, April 13, that we should cancel
war debts entirely.
All of these things seem to be rushing through the minds of these
men, confusing and haunting them, and their countenances are becoming more solemn and drawn each day. This depression is getting
the best of them. They seem almost licked—their spirit broken,
self-respect vanishing, even faith in their own Government and
friends shaken, about ready to give up. Their peace of mind and
future rest in your hands, gentlemen. I am sure you will fulfill
your duties by devising ways and means of paying the adjustedservice certificates in cash.
Mr. CRISP. Are there any questions?
If not, we thank you for your presence.
Mr. PATMAN. I desire to introduce at this time a Member of Congress, the Hon. Gardner R. Withrow, a Representative from Wisconsin.

Mr. WITHROW. Mr. Chairman and members of the committee, I
do not want to duplicate anything that has been said, and I wonder
if I may have the privilege of filing a statement with the committee.
Mr. CRISP. YOU may have that permission, yes, sir.



Mr. WITHROW. You have heard testimony concerning the " bonus "
which was paid to the railroads by virtue of their war-time service
to the Government. I would like to point out just a few of the
wasteful practices which were deliberately encouraged by railroad
officials and the cost of which was charged to the Government.
During the period of the World War I was employed on the railroad
and my employment was not on a branch line; I was in freight service
on a main line; it was in this service in which the conditions I am about
to refer to existed. Oil barrels were willfully loaded into refrigerator
cars, upon the order of executives who were fully aware that those
refrigerators would never be good for the shipping of perishable
freight after the time that the oil had been bottled up in the air-tight
car. At the time this loading took place there was an adequate
number of rough boxcars at the point of loading which could have
been used just as well. In addition to that, coal was loaded into
first class grain box cars—wilfully, gentlemen, and under orders
although the executives knew that those cars could never be used for
the shipping of grain thereafter and although at the very same time
there were rough box cars and empty coal cars stored on the tracks
at Savanna, 111., during the process of this loading.
The distance from Galena Junction, 111., to Savanna, 111., is 26 miles.
It is double, high-speed track. Freight trains can make the run
from Galena Junction to Savanna in 45 minutes. Stock trains can
make the same run in 35 minutes. Notwithstanding that fact, in
the dead of winter we constantly received messages to stop and take
water at Galena Junction and that we were not due into Savanna
until several hours later. So, under orders we stopped. There our
trains would freeze up so that all of the traffic in the yards would
have to be stopped in order that we might have sufficient engines to
start our trains and when we finally drifted down to Savanna, 111.,
we would find that the tracks had been cleared and waiting for the
past 8 or 10 hours.
Later at the proving grounds near Wheaton, 111., and I understand
that that operation was carried on a cost-plus basis. That is, the
contractors were given a percentage of profit based on the cost of the
work done. On that job, notwithstanding the fact that there was
only about seven or eight hours of work per day for work trains in
the proving grounds, the men were actually kept on the job for 15
hours and 55 minutes a day. You understand that had we been
required to work a full 16 hours a day under the law we would have
been entitled to 10 hours rest, so that we actually put in 15 hours and
55 minutes notwithstanding the fact that there was no work to do.
There was not a thing that railroad men could do there for most of
that time.
The cash bonus which was paid to the railroads gave to the railroads a reasonable return on their operating expenses and a reasonable
return on their own valuation of their property. The Government
has paid the railroads for the deliberate criminal destruction of
property which was carried on under the direction of railroad executives. If we can pay the railroads for rendering that kind of service,
then we should not quibble about compensating the veteran for the
great service he has rendered by granting the payment of this adjusted
compensation in cash.
Mr. CRISP. May I ask you a question?





Mr. CRISP. Of course, your testimony has naturally aroused my
interest. At that time were not the railroads under Government
Mr. WITHROW. Yes; they were under Government operation, but
the same railroad officials continued to give us orders.
Mr. CRISP. I wanted to follow that up, and I wanted to get that
correctly. Of course, I know that the Government did take over
the railroads during the war, but you stated that it was willfully
Mr. WITHROW. Yes, sir.
Mr. CRISP. And that you

had orders. Who was the one that
gave those orders, and what was the object of that willful misconduct?
Mr. WITHROW. Railroad employees received their orders from the
same sources no matter if the railroads were under private or Government control.
Mr. CRISP. YOU made the statement that while the Government
was operating the railroads during the war this misconduct was
willfully done, and I thought you should specify and go more into
detail as to who was guilty of that treason, for I call it treason.
Mr. WITHROW. This is exactly what happened: I was a representative of the railroad brotherhoods. I was called into the office just
as soon as the railroads went back under private control and the
assistant superintendent of the Chicago, Burlington & Quincy Railroad, Mr. S. O. Wilkinson, said to me, " Withrow,
we are back to
normal. The things that were done while w e were under Government control do not go now. I want you to inform your men."
That is exactly what he said, and in this connection I would like
to say that I said to Mr. Wilkinson, " I think that the proper thing
to do is place a notice on the bulletin boards. Have the men sign for
the bulletin which signifies they had read it." However, Mr. Wilkinson did not do that.
Mr. RAINEY. I remember all of those things myself, and you are
making an absolutely correct statement. The only thing that the
Government did when it took over the railroads was to attempt to
relieve the congestion in freights, to get freights to move.
Mr. WITHROW. Congestion can not be relieved by allowing trains
to freeze up and stop yard operations when they could just as well
get in on a clear track.
Mr. RAINEY. I agree with you. It was done because of orders
given by the railroad officials themselves.
Mr. WITHROW. Yes, absolutely.
Mr. RAINEY. And we had occasion, those of us who were here in
responsible positions during the war, to call attention to the sabotage
practiced by the officers of railroads, and practiced for the purpose
of discrediting Government ownership because they were afraid
that some day the Government might take over the railroads. The
Government was not responsible for it, but your own officers, and I
so stated on the floor of the House.
Mr. WITHROW. Yes, and I could go on and give you innumerable
examples of the same practices.
Mr. RAINEY. I can give you still more, because the record shows



Mr. VINSON. What was the position of Mr. Wilkinson, to whom
you referred?
Mr. WITHROW. Assistant superintendent of the Chicago, Burlington & Quincy for the La Crosse division, which operates from St.
Paul, Minn., all the way through Wisconsin and down into Savanna,
Mr. VINSON. Did he hold that same position during the war?
Mr. WITHROW. Yes, sir—no, I will take that back. For a portion
of the war I understand he was in Russia, but his health would not
permit of his remaining there, and he came back and was our
assistant superintendent.
I do not mean to give you the impression that I am bitter toward
these gentlemen; personally I am not. I had nothing but the kindliest
relations with my employers, and they have not criticized me in
any way. I have never been "on the carpet."
I would like to briefly summarize my position on this bill which
provides for the immediate cash payment of the adjusted compensation to veterans of the World War. Our present economic situation is not caused because we have failed to balance the Budget.
It has not been caused because of lack of optimism on the part of
our people. Our basic trouble, gentlemen, is that over a period of
years the purchasing power of our people has been reduced to such
an extent that thousands upon thousands of them are no longer able
to purchase even the barest necessities of life. We must take measures
to restore this purchasing power and there is no better way than to
pay to the veterans of this country the just debt which the Government owes them.
The passage of this bill will not in any way impair the credit of the
United States; on the other hand, it will do an enormous amount of
good, not only to the veteran, but also to the farmer and workingman
in the fact that there will be a resultant rise in commodity prices.
The Government has decreased the amount of money in circulation
per capita from $55 in 1920 to $44 at the present date. Treasury
reports show that the United States Treasury actually holds gold
coins and bullion enough to warrant the issuance of $10,000,000,000
in currency, but that there is only five and a half billion dollars worth
of money actually printed and in circulation to-day. The Federal
reserve banks alone, on the basis of their excess reserves as reported
in March of this year, could issue three and a half billion dollars in
currency which will have the entire gold backing required by law.
It is ridiculous to speak of impairing our Nation's credit. Our
national indebtedness amounts to only 4 per cent of our national
wealth, while during the Civil War our national indebtedness was
10K per cent, and at the present date the indebtedness of England is
40 per cent and the debt of France is 20 per cent. Any business
which has debts of only 4 per cent is considered to be in wonderful
The cash payment of the adjusted compensation will put money
directly into the hands of the veterans, these men need the money
badly to pay debts and to purchase the necessities of life. The
money will go into direct circulation, it will be used to pay the grocer,
butcher, and landlord. It will be distributed equitably all over the




Deflation is the cause of most of the present trouble, inflation is
just as bad, but a controlled "reflation" such as is provided for by
this measure will effect a cure. The best means to start on the road
to recovery will be to pay the $2,000,000 to this group of citizens who
have the consuming power but who do not have the purchasing
This bill will not increase taxes one cent. This debt will have to
be paid anyway in 1945 and sums of money have been set aside each
year for that purpose; this will continue in the future just as it has
in the past and the debt will be wiped out automatically in 1945, the
only change will be that the money will be put in circulation right
now when it is needed so badly.
Debts have been contracted during the period when the dollar
bought less and now that the value of the dollar has increased people
are unable to pay their debts. If this bill is passed, it will help to
enable people to pay off their debts in the same terms in which they
were contracted.
The people of this country are looking to us as Members of the
Congress of the United States and to you members of the committee
for relief. In this plan for the payment of the adjusted compensation
we have a sound and practical and just means by which direct and
badly needed relief can be given to the people of this country. I wish
to stress with every means at my command the imperative need for
favorable action on this bill.
I thank you.
Mr. CRISP. We thank you very much for your presence before the
Mr. PATMAN. We are doing our very best to finish by 12.30. It is
possible that we will have one or two short witnesses Monday, if the
committee will indulge us.
Mr. CRISP. The committee will indulge you. We do not expect to
have any meeting to-morrow.
Mr. PATMAN. I understood that there would be no meeting tomorrow, and two Members of Congress have already yielded their
time, the Hon. Ross A. Collins, who is the author of H. It. 4539, who
said that in view of the fact that so many wanted to be heard he will
just file a statement, and the Hon. M. C. Garber, a Representative
from Oklahoma, who is the author of H. R. 9593 and H. R. 10367,
who has stated that on account of the fact that we are rushed for time,
he will file a statement in lieu of making a personal appearance.
Mr. CRISP. They will both have the privilege of filing statements.
Mr. COLLINS. With the avowed purpose of this bill to give expression of the Nation's gratitude to those who served in the World War,
I am in accord. I believe that we should go the limit of generosity
in our treatment of those who took part in that struggle and I will
cooperate earnestly in the passage of this legislation.
Briefly stated are some of the reasons that have convinced me that
this so-called bonus bill should be passed:
First of all, I object to this bill being called a bonus bill. It is in
no sense a bonus, but an adjusted-service certificate. It represents



un honest debt that Congress has admitted, and acknowledged, as
due for services rendered. It is therefore in this light that we must
discuss the present bill. It is decidedly not an attempt to extract
something for nothing, but a request that we pay that which is due.
It is an obligation the same as any otJtier. It is then our plain duty to
pay this compensation.
It would not be necessary to dwell on this phase of the bill if it were
compensation due a few powerful individuals. But the fact that it is
owing to a large number of ordinary citizens, makes it difficult to
secure payment. If the amount had been due to those who did not
need it, the payment might possibly be slightly different. But those
who are opposing the payment of this compensation have not had any
difficulty within the past few years in securing the refund of taxes by
the Government. Since 1917, the period during which the compensation due the ex-service men could not be paid, the Treasury has
returned in refunds and abatements the sum of $3,876,164,016.18.
Almost $4,000,000,000 has been granted to the wealthy few who already
have plenty, and during the period that we found it necessary to
refund this four billion largely to these privileged individuals, we could
not pay the honest debt we owe to the people who actually need
the money.
We should also view this compensation as a financial problem. It
must be paid sometime. Since the day the armistice was signed,
the ex-service people have been promised some suitable compensation. It cost billions to reimburse war contractors; the war mineral
relief bill carried forty millions; a bill for the relief of Shipping Board
contractors carried fifty millions, and it cost billions to reimburse
special groups of people for alleged losses sustained during the war.
If all this could be done, not in promises but in actual cash, why not
cease our promising the ex-service men and pay them off. It would
be not only the more honorable but the cheaper method of handling
the situation. The longer we owe it the larger it will be. Therefore, in the interest of economy, let us pay it immediately.
It is indeed adjusted compensation. These men with our consent
went into this struggle. In fact, " consent" is not sufficiently strong.
They went into a struggle created by us. The scene was set by
ourselves. We urged them to become part of the institution of war.
We cheered them as they marched away, some of them to their
death, some to return to hospitals, and some to return to civil life
with inadequate preparation for the tasks of peace. Nor has he had
the opportunities for larger gains which those who remained at
home actually received. I feel that as long as men are invited to
become pawns of war for their country, as long as the national policy
of the country makes it imperative that men shall find it necessary
to pass through the experiences undergone by these ex-service men,
as long as we permit the hideous monster of war to engulf our youths,
I am not only in favor, but I will fight by every means in my power,
to pay these men, who have suffered so much because of our stupid
policies, the fullest compensation possible.



Mr. GARBBR. Mr. Chairman, gentlemen of the committee, "Lest
we forget", what do the adjusted compensation certificates represent? In the first instance, they represent a confession that the
Government, as then administered, unjustly discriminated in favor
of civilian employees at home and against the veterans in its military
service. This discrimination was in the glaring inequality of compensation. The Government drafted the young men of our country,
jammed them into military service, into crowded training camps,
across submarine infested seas, into training camps overseas, into
trenches, into warfare indescribable.
The Government had the power likewise to draft its civilian population for service in the manufacture of munitions, construction of
camps, of ships and in fact in all the various lines essential to support
its military objectives. And yet, with this power, the administration
paid its civilian employees from $6 to $15 for eight hours per day
and its soldiers in the military service but $1 per day at home and
$1.10 per day overseas. With the power to regulate and prevent, it
permitted civilian employees to exact exorbitant wages. It paid
racketeers huge profits for supplies, munitions and on Government
contracts and penalized our boys in the military service of our
It took over the railroads during the war at a fixed rental price
which produced one of the largest incomes the roads had ever made
up to that time and after the war was over, when the roads plead
that their profits had been diminished by governmental operation, it
paid them in readjustments of such claims sums aggregating about
$2,000,000,000. Princely sums were also paid to contractors as
readjustment on account of uncompleted contracts suddenly made
unnecessary by the cessation of the war, and to its civilian employees.
And these adjustments were all made in cash.
But what did it do with our boys to whom it entrusted the fate of
the world? It took them over at $30 a month for home service and
$33 for overseas service. It carried insurance on its ships, its munitions, its supplies—but none on the precious flesh and blood which we
sent into foreign battle fields. No, it practically compelled them to
take out their own insurance, which, with allotments from their pay
for dependents at home, reduced the paltry monthly sum by about
As this great, grievous wrong and discrimination gradually developed and dawned on the people, the demand for adjustment of
such glaring discrimination became nation-wide and finally resulted
in the proposal of adjustment legislation. Selfishness, greed, ingratitude, immediately reared their ugly heads in vociferous protest.
What class was it that utilized every possible means to defeat it?
Was it the farmers who profited less than any one from the war and
whose contribution in foodstuffs for the Nation and its defenders was
second in value only to that of the boys themselves? Was it labor
which always pays its part of the expenses of government? No.
The vicious opposition came from the financial interests of the country. They resorted to misrepresentation and poisonous propaganda
of every description. Nothing was too low and sordid and selfish for



them to use to poison the clear streams of public opinion. They
poisoned the wells of public opinion and finally wrested a compromise
of the noble purposes of the people which resulted in the issuance of
the adjusted compensation certificates.
"Lest we forget/' just what do they represent in the way of adjustment? Briefly, they represent the amount due the veteran for each
day of active service, in excess of 60 days, on a basis of $1 per day for
home service and $1.25 a day for that overseas, plus 25 per cent on
account of deferred payment and interest at 4 per cent from January
1, 1925, the total amount payable at death or on January 1, 1945.
If the amount is not more than $50, then it is payable in cash and the
amount of the credit of a veteran who performed no oversea service
is limited to $500 and for the veteran who had some oversea service,
to $625.
What do these figures show in the way of adjustment with the
•actual pay? The actual compensation while in the service plus the
compensation provided by the certificate is $2 per day for home
service and $2.35 for oversea service, plus 25 per cent of the adjusted
compensation credit and interest at 4 per cent as explained, as compared to the average wage of the civilian or the Government employee
upon war contracts in the amount of from $6 to $15 per day. And
if they have held their certificates for two years, then they are now
entitled to borrow up to 50 per cent of the face value, but they must
pay interest on such loans in excess of the 4 per cent interest computed in the value of the certificates.
The Government settled with the railroads, with the war contractors, with its civilian employees—and settled with them in cash.
Only with the veteran did it sidestep the issue and hedge it about
with conditions. Only with this class did it acknowledge an obligation and postpone its payment for 20 years.
The railroads did not win the war; neither did the contractors, the
war profiteers nor the civilian employees. In their complacent
security at home they contributed for exorbitant cash considerations.
The main contributing cause winning the war was the service of the
veterans. Let us not forget that. Why are they not entitled to the
same consideration shown the civilian employees, the contractors,
the war racketeers?
They are in need now as never before of a little ready cash to pay
their debts, to bring a few additional comforts to a home, to tide
them over in this emergency. Payment of the certificates now, will
provide relief for our veterans and their dependents, and indirectly,
through increasing the money in circulation, for the farmers, the
stockmen, the laborers, the producers generally and the banks
located in the producing sections of the country as well. It will
save millions in administrative expense.
We have extended aid to big business, to commerce. We have subscribed through legislation to a policy of assisting the banks in thawing
out their frozen assets. Payment of the adjusted compensation
certificates will thaw out frozen assets in the amount of more than
$2,000,000,000, will directly benefit approximately 3,512,896 exservice men and will increase the actual cash in circulation to an
amount almost double that in circulation to-day.
And it is money in actual circulation that this country must have
to-day. There is no substitute. The reconstruction act authorizing



loans to railroads and various financial agencies checked the 6losingof the banks and the roads from going into receiverships. It halted
our descent into what might have been a complete collapse and ruinous
panic but it has not started restoration. The loans must be repaid.
The liberalization of credit to be extended by the Federal reserve
banks has not been utilized. The big financial institutions still
hoard and refuse to lend.
The $125,000,000 additional capital to the Federal land banks has.
benefited but has not halted the relentless foreclosure of farm mortgages with the prices of farm products below the cost of production.
Farmers in every section are unable to pay their taxes, interest, and
coming-due obligations. They are being dispossessed of their homes
and their children deprived of their educational opportunities. Unless we restore the purchasing power of farm products to its normal
economic level, there can be no recovery from this depression. Agriculture is the basic industry. Our efforts should be centered upon its .
The dollar has become too dear. It takes three bushels of wheat to
buy a dollar to-day where formerly it took but one, with cotton and
other farm products in like proportion and the farmer must have the
dollar with which to pay his interest and taxes. Increase the dollars
in circulation and you increase the price of farm products. The
remedy for restoration therefore lies in the increase of dollars in
Even the Washington Post, representing the conservative financial
interests of the country, in its issue of April 11, finally concedes that all
chance of recovery hinges upon a turn in commodity prices, that so
long as existing prices prevail, business will continue to be paralyzed.
Heroic emergency measures that will arrest the fall of prices seem to
be in order. "Some powerful agency must be thrown into the
breach to restore the value of goods and services against the exaggerated value of money." We incorporate the editorial in full as a graphic
description of existing conditions and suggestive of emergency measures to restore the purchasing power of goods and services.
(The editorial referred to is as follows:)
[Washington Post, Monday, April 11, 1932.],'

A fresh wave of deflation swept over the country last week, leaving the people in
a confused and uneasy state of mind. For a time the forces of depression were
checked by the new blood poured into the veins of commerce by the Reconstruction Finance Corporation and other constructive measure. But these factorswere not sufficient to turn the forces of deflation into a positive movement toward
recovery. It is well for the public to face the fact that heroic measures are
necessary to turn the tide of depression.
A few weeks ago attention was concentrated on the extension of credit. The
banks were the center of the crisis. Banks were failing at a rate of about 400 per
month. Emergency measures initiated at the White House mobilized the resources of the Nation behind bank credit. The epidemic of failures was quickly
cured, and the banks are in a much stronger position than before. Now they
have ample money and credit reserve, but the benefits of that improved position
are not flowing out to the people.
There are two chief reasons for this condition. First, the banks are reluctant
to lend money because of fear that their own safety may be jeopardized. Second,
even if the people can borrow, they hesitate to do so because of the uncertainty
of business and because falling prices and security values make the repayment of
loans an extreme hardship.



The banks are not taking full advantage of the liberal credit allowances given
them in the Glass-Steagall Act. Additional credit can be used only when other
resources have been exhausted, and no bank wishes to admit that it is forced to
resort to extraordinary measures. To this extent the working of the new regulations, which were expected to be a potent force in the restoration of normal conditions, are a disappointment. Congress did not reckon with the selfishness of
some bankers who are concerned only with stabilizing their own establishments.
No elasticity of credit, however, could overcome the tendency of business to
lie dormant while there is no hope of operation without fresh losses. All chance
of recovery seems to hinge upon a turn in commodity prices. On April 1 a group
of 110 representative commodities were selling for 17}4 per cent less than they
brought a year ago. This is superimposed upon a decline of 20 per cent in the
previous year. So long as this condition remains unchanged business will be
paralyzed. All the credit in the world can not induce business to go deeper
into the red.
Value in the United States is being slowly concentrated into money. The
dollar increases in value every day, while everything else loses some of its relative
worth. In spite of the antihoarding campaign and the liberalizing of credit,
this situation encourages the liquidation of all other forms of wealth. The
value of the dollar has reached such a high point that the people are tempted to
convert all their holdings into dollars to avert further shrinkage.
Unless this vicious movement is checked it will result in panic. The extension
of credit will not be sufficient. Heroic emergency measures that will arrest the
fall of prices seem to be in order. How that can be done without unwarranted
inflation of the currency is not clear, but every fresh wave of deflation makes more
urgent the necessity of restoring some measure of balance between money and
commodity prices.
The best brains of the country ought to be concentrated on this problem.
This economic malady has reached a point where it can not be expected to cure
itself without leaving horrible scars. Palliatives will not yield the desired effect.
Business can not turn toward stability unless the whole tendency toward lower
price levels is reversed. Some powerful agency must be thrown into the breach
to restore the value of goods and services against the exaggerated value of money.
The people would not countenance the manufacture of fiat money to make
prices rise. But some method of currency expansion on a sound gold basis might
be necessary. Emergencies of this kind call for drastic action which goes to the
heart of the problem. All the benefits which have accrued through bank stabilization will be lost unless the forces of deflation are arrested. It is time for the
leaders in Government and financial circles to focus their minds upon a realignment of values.
Mr. GARBER. "Currency expansion on a sound gold basis," which
the Post says is essential to recovery, will be effected by the payment
of the compensation certificates. The cancellation of the indebtedness will afford an adequate consideration and the veterans an agency
through which the currency can be expanded more than $2,000,000,000
directly into the channels of trade, reaching every section of the
country. The money thus paid will not only cancel a just obligation
but will be put in immediate circulation. It will not be hoarded but
expended for the family necessaries of life, benefiting all classes in
every community.
The following table shows the distribution in each State:

Residence of veterans


Colorado ._
District of Columbia



Per capita
due payment
holders cer- Remainder
to each



33, 265
42, 765

136, 500, 005
21, 514,464
3,918, 525
18,198, 685



Residence of veterans


New Hampshire..
New Jersey
New Mexico
New York
North Carolina...
North Dakota....
Rhode Island
South Carolina...
South Dakota
West Virginia....




Per capita
due payment
holders cer- Remainder
to each


59,254, 650
9,738, 745



Column 1. Residence by States of all veterans holding adjusted-service certificates.
Column 2. Number of veterans in each State holding certificates.
Column 3. After deducting all prior loans, the amount remaining due veterans of each State if fullpayment bill is passed by Congress.
Column 4. Full payment will average per person, or for every man, woman, and child, in the State
according to the 1930 census. The approximate amount of money that will be put into circulation in any
city, county, or locality may be arrived at by multiplying the population by the per capita payment for
that State.
The information for columns 1, 2, and 3 of this table was compiled from information furnished by the
Veterans' Administration. The other information was obtained from the statistical division of the Bureau
of Internal Revenue and other governmental sources.

Federal reserve notes issue.d in direct payment upon Government
bonds bearing 4 per cent interest will finance the payments upon a
gold basis. This will afford immediate relief to the country. It will
double the amount of money in actual circulation. It will raise the
price levels of all products. It will increase the purchasing power
and consuming capacity, give employment ot our unemployed, and
start the mills and factories again.
It will initiate the resumption of business, gradually restore confidence, and lure the hidden money into investments, gathering within
its current accretions essential to a restoration of normal business
Mr. PATMAN. At this time I would like to introduce Hon. J. V.
McClintic, who is the author of H. R. 9929.




Mr. MCCLINTIC. Mr. Chairman and members of the committee,
I take it from the number of members of the Oklahoma delegation
that have appeared in behalf of this bil^that you no doubt are aware
of the fact that there are a great m&ny Legionnaires and other citizens
in Oklahoma that are favorable to this legislation.
Mr. RAINEY. IS there any Member from Oklahoma who has not
introduced a bill on this subject?
Mr. MCCLINTIC. I am rather inclined to think they have all been
I want to say in the beginning that I appreciate very much the
opportunity of appearing before this very distinguished committee.
I have introduced a bill which seeks to pay off what is commonly
known as the adjusted compensation or soldiers' bonus. My bill
was introduced at a time when we did not know exactly what the
monetary situation would be when this legislation could be considered. Therefore, I prepared a section which proposed that this
money should be provided by a bond issue.
Since that time my attention has been called to the bill introduced
by Mr. Patman. Every friend of the ex-service men is working for
the same result. His bill provides for the issuance of separate currency and, according to those who are posted, the statement is made
that it will work out in a way that will accomplish the result, pay
off the soldiers without destroying the efficiency of our monetary
system; and, that being true, I am willing in the interest of efficiency
and promptness to lay aside the bill I have introduced and support
the Patman measure.
Now, what is the situation in this country? You have had economists to testify on both sides of the question. You have had experts
who claim to know all about such things, that relate to the monetary
system. You have had very little testimony that comes from what I
would term the cornfield economists, the individuals who live down
home and know the exact conditions.
In appearing before this committee I want to say that not only are
the ex-service men and the American Legion posts interested in this
legislation, but the Rotary clubs, the Kiwanis clubs, the commercial
clubs, the churches, the farmers' unions, the cooperators, and
practically everybody in the section of Oklahoma where I live is
favorable to this legislation. I say without fear of contradiction
that 95 per cent of all the people in my section of Oklahoma are
favoring this legislation, and when I say 95 per cent I want to further
add that I have only received one letter that opposed this bill.
Now, as I view it, the distribution of $2,400,000,000 will do more to
rehabilitate industry than any other measure that could be enacted
into law at the present time. I feel that the ex-service man is certainly
entitled to this consideration; and I further add that in paying him
this consideration we stimulate and revive not only industry but we
encourage every person who resides in the Nation because this money
will go into every nook and corner of the Nation.
Mr. HILL. In that connection, what do you say as to the proposal
to reduce the salaries of Federal employees?



Mr. MCCLINTIC. I am in favor of reducing salaries above a certain
amount; and I also have a bill pending to bring about certain consolidations in order to do away with duplication and waste.
Mr. HILL. When you espouse cutting these Federal employees'
salaries do you not argue counter to your proposal here that the currency of this bonus money will stimulate commerce?
Mr. MCCLINTIC I do not think so, because in our Government we
have, as you know, much duplication and waste, and by bringing
about certain kinds of consolidations and reduciag certain salaries in
the higher brackets we can accomplish the savings necessary.
Mr. HILL. I am not talking about the consolidations, but I mean
where the service is necessary, upon
what theory would you argue
for the cutting of the employees7 salaries arid still advocate paying
out this bonus money in order to stimulate the channels of commerce?
Mr. MCCLINTIC. On the grounds that we are confronted with a
^situation in which everyone that is patriotic ought to be willing to do
his part and I think that is a fair statement.
Mr. HILL. There is no argument on the question of patriotism.
It is a question of whether paying out this money will stimulate
Mr. MCCLINTIC. All right. Let us look at it from this viewpoint.
I voted for the Reconstruction Finance Corporation. We were told
by the economists that the increase of currency would bring about
a stimulation of industry and probably start this country on an
upward trend. What happened? It is true that bank failures have
stopped; and many of our farmers have obtained loans that was
beneficial. It is true that certain big industries were bolstered up;
but as far as currency going into circulation there was nothing much
that took place except what we sometimes call check-kiting, a transfer
of balances back and forth; and the banks that were able to collect
their money have been "panic stricken" to the extent that they
will not make any new loans.
Mr. MCCORMACK. The Finance Corporation was created for the
purpose of expanding credit, as I understood it, and not of currency.
There is a clear distinction between those two things.
Mr. MCCLINTIC. They are allied.
Mr. MCCORMACK. I know; but there is a difference between the
expansion of currency and the expansion of credit.
Mr. MCCLINTIC. That is true; but the fact remains that when
there was a corporation that owed an obligation and it was helped
to pay such obligation, the institution receiving such pay was able
to build up its balance; then that institution was in a position to make
loans but did not do so.
Mr. MCCORMACK. My thought was that the issue here is whether
or not we have a sufficient gold reserve to justify the expansion of
currency and we do not want to confuse that question with the other
issue which is expansion of credit. There is a very clear distinction
between this bill and the reconstruction finance bill.
Mr. MCCLINTIC. The reason I mentioned the Reconstruction
Finance Corporation was because there is an idea in the minds of
most people that we did something for big business and nothing for
the small business interests.
Mr. RAINEY. In order to clear up the Finance Corporation proposition which has been frequently referred to in this committee, it is



.argued that because we have appropriated $2,000,000,000 for the
banks and the railroads that therefore we ought to appropriate
$2,400,000,000 for the soldiers. That is the argument, and they frequently use it. I do not remember that when the Reconstruction
Finance Corporation legislation was presented on the floor by members
of this committee that any of them said it would bring about an expansion of the currency. I do not recall that. I understood you to
say a while ago it would do that.
Mr. MCCLINTIC. That was the information generally understood
by many Members of Congress when they voted for the legislation.
I want to disabuse the gentleman's mind of me making any statement
that reflects on any member of this committee, but that was the
understanding of many Members of the House who voted for this
legislation, that it would be generally beneficial, and that it would
bring about a restoration of confidence which would have a tendency
to start business on an upward trend.
Mr. RAINEY. The idea was that it would save solvent banks from
failing and solvent railroads from going into the hands of receivers.
We have not given any money to banks and railroads, have we? We
have just loaned it upon what is believed to be ample security. The
Government bought $500,000,000 worth of stock of the Finance Corporation; that is a fact, is it not? And the Government holds that
stock. The Reconstruction Finance Corporation is not giving any
money in any possible direction. That is a money-making proposition, and is being conducted now at a profit to the Government of
$25,000,000 a year. That statement was made to me yesterday by
Mr. Dawes, its president.
Mr. MCCLINTIC. But the fact remains that conditions throughout
the Nation instead of improving have been gradually growing worse.
Mr. RAINEY. Yes; but they would have been still worse if we had
not saved some of the banks and some railroads through that corporation.
Mr. MCCLINTIC. I believe that the Reconstruction Finance Corporation act has performed a great service to certain institutions.
Mr. RAINEY. And is yielding a good profit to the Government.
Mr. MCCLINTIC. Yes. But what I am interested in at this time
is a general distribution of currency that will reach into every section
of the country with the thought in mind it will help build up confidence, restore that which has been lost and directly and indirectly
be beneficial to everyone.
The fair plan that has been offered here by Mr. Patman was at
first severely criticized over the radio and by other methods, and yet
we see the statement published in the papers that the Federal Reserve
Board realized that we could inflate the currency by purchasing bonds,
and if I am correct in what I heard this morning one issue of bonds
rose 10 points yesterday which means that those who are fortunate
enough to own bonds, by this kind of policy will be the beneficiaries.
I will venture to say, and I would be willing to wager my congressional seat against a ham sandwich that there are not ten farmers
in the district I represent that have a single Government bond.
Consequently, that kind of policy enables those most fortunate in
life to be benefited, and it does not reach throughout the nation and
help those sections that are really in need.



Mr. ESLICK. Whether you call it money or credit, the Reconstruction Finance Corporation does not put a single new dollar in circulation does it?

Mr. ESLICK. The bill under consideration seeks to put $2,400,000,000
new money into actual circulation?
Mr. MCCLINTIC. It does.
Mr. ESLICK. That is the distinction?
Mr. MCCLINTIC. That is the distinction.
Mr. RAINEY. The bond which went up yesterday and which you
mentioned was the 3% per cent Government bond, and when it went
up it did not go up that much. It went up from about 92 to 95.
It was on the market at $5 lower than our nationals paid for it when
they bought it at par.
Mr. MCCLINTIC. Well, the gentleman knows that those who own
bonds will profit by the rise in price.
Mr. RAINEY. Not if they paid par for it.
Mr. MCCLINTIC. I do not want to take too much of the committee's
time. I want to say this: That the most pitiful situation that I have
ever witnessed during the 30 years I have lived in Oklahoma, now
exists among our people.
There exists in the minds of many a panicky fear, and something
ought to be done to expand the currency to the extent that better
conditions can be restored at the earliest date possible.
As I view this legislation, the most beneficial part it will play is the
rehabilitation of the Nation, because every person really directly or
indirectly will benefit.
Mr. VINSON. In regard to inflation does not the Glass-Steagall bill
liberalize the rediscounting of negotiable paper?


Mr. VINSON. Was it not said by the sponsors of that measure that
that would bring about reasonable inflation?
Mr. MCCLINTIC. Yes, sir; but we witnessed the result and nothing
up to the present time has been accomplished. A great deal of testimoney has been given before this committee relative to the effect the
passage of such a bill will have on our financial system. I take the
position that in view of the fact that our gold reserve at present
amounts to over $4,000,000,000 that it is sufficiently large to take
care of either a new issue of currency or to support a bond issue to
make this payment. Anyhow, in view of the fact that 40 cents in
gold is the amount of reserve that is behind $1 in our money, on this
basis it would be possible to increase our currency to the sum of
$10,000,000,000, without going off the gold standard. In my opinion,
nothing could be more helpful at the present time than to put more
currency in circulation. Anyhow, a sufficient amount to restore
normal conditions. The distribution of $2,400,000,000 to the exservice men means that every section of the United States would
receive a proportionate share of this sum; also, it would cause actual
money to go into the channels of commerce.
Mr. RAINEY. Your theory is that if we inflate the currency the
prices of things that the people buy will increase?
Mr. MCCLINTIC. Whenever you furnish people money which
enables them to go into the market for any commodity that[is what
always stimulates the industries.



Mr. RAINEY. NOW, if you stimulate the circulation of the dollar,
increase its numbers, at the same time you increase the price of commodities, does it not wash itself out?
Mr. MCCLINTIC. I do not think so.
The veterans of the World War performed a service for this country
that can not be measured in dollars and cents. During the time
that they were in uniform the currency of this Nation was inflated to
a very high degree, which resulted in the price of commodities reaching a sufficiently high figure as to cause everyone to be paid a profit.
The business interests of this Nation flourished as never before, and
the accumulation of profits were higher than in any other period of
our history. Our ex-service men were paid $1.25 a day for foreign
service. Some of them did not return. Others were crippled and
maimed for life. This is a generous Government and splendid provisions have been made to take care of those who were incapacitated
to the extent they can not make a livelihood. In view of the promise
made by this Government to pay the bonus, coupled with the fact
that the Nation is now suffering as never before, this payment, in
my opinion, would do more to restore normalcy and at the same time
check the spirit of fear that is uppermost in the minds of all the
I have listened to speeches broadcast over the radio, impugning
the motives of those who are sponsoring this legislation. I have
heard some say that nothing could be more detrimental to the interest
of the Nation than the passage of such a bill. I realize that this opposition largely comes from those who do not till the soil for a livelihood, and from those whose status in life from a financial standpoint
is far better than the rank and file of our citizenship. Many who
will oppose this legislation are the ones that profited because of the
World War. They occupy the position of the "dog in the manger/'
being afraid that if this amount of money is distributed it will have
the effect of cheapening their holdings of certain kinds of securities.
I have no patience with the class of citizens that are not willing to
sympathize with those who are commonly referred to as the "under
dog," and I honestly believe that they are standing in their own light
when offering opposition to this legislation, as in my opinion the
distribution of this money will check the depression, stabilize commodities, and restore the kind of confidence that is necessary for
everyone's good.
I want to call this committee's attention to the fact that our entire
educational system is severely threatened at the present time because
the people are unable to pay local taxes sufficient to maintain schools.
In some States where school warrants are eligible to be used for the
purpose of paying taxes, it has been necessary to discontinue the
practice. In other States school warrants are now being issued to
pay teachers with the understanding that there is no way for the
same to be paid. In some sections schools have already been abandoned, and unless conditions can be improved in the near future,
many innocent children will be deprived of receiving a proper education. When any situation is allowed to exist which seriously menaces
the welfare of our coming generation, it is liable to breed the kind of
discontent that can result in such a serious situation as to have a
bearing upon our Government activities, and as I view it, unless this
Congress brings about a new departure from existing practices, the
whole country has rough sledding ahead.




In every mail I am advised that our citizens have become desperate,
as they have nothing ahead of them in the way of encouragement.
Surplus farm products have become a nightmare as the larger the
yield the greater the loss on the total amount produced. The small
business man has either gone on the rocks or is fast approaching a
state of insolvency, and surely no one will argue that if by the payment of the soldiers' bonus we can head off the payment of a dole that
such a policy will not be beneficial.
At present we have high-salaried so-called supermen at the head
of our various financial institutions. As I view their policies, it
seems that they favor beginning at the top and working down, instead of beginning at the bottom and working up. When the Federal
reserve banking system was created, the legislation was intended to
allow expansion and contraction of the currency whenever necessary,
and for the reason this has not been done, there is much criticism of
those who are administering its affairs. I feel that somewhere there
exists a misconception of what is actually taking place in the rural
sections of the Nation, and that unless the policies of the various
Federal activities are changed our people can not much longer endure.
There are several methods offered as a means of providing this
money. Personally I favored the issuing of bonds, having in mind
that during the World War we successfully floated over $25,000,000,000 in bonds and that the same was taken care of without complaint coming from any source. It is true that a large portion of this
sum is still outstanding; however, if we could collect that which is
owed to us by the foreign nations, no difficulty would be encountered
in balancing the Budget. My chief interest lies in getting the payment authorized. Therefore, I am willing to support the Patman
measure which provides for a new issue of currency. This measure
will produce the desired results and provisions can be made for its
retirement whenever advisable. As I view it this payment will be a
blood transfusion to the arteries of commerce. It will restore confidence in our home institutions, thereby bringing money out of hiding.
It will be a tonic to agriculture, and will do more to inspire confidence
in the Government than anything else that could be done at this time.
It will bring about a restoration of trade sufficient to cause many who
are now despondent to gain a new lease on commercial life, thereby
making it possible for individuals to balance their budgets.
Mr. PATMAN. I desire to introduce at this time Mr. Paul Kvale, a
Representative from Minnesota, who appears in support of thi&

Mr. KVALE. Mr. Chairman, I hesitate to give any extended expression of my thoughts for the reason that I have been unable because
of other committee work to attend the complete sessions and very
likely my particular views have been repeated and repeated again
before this committee. I am going to pass over the tabulation of
the figures cited to show that the claim the veterans advance at this
time is justified. I am going to pass that by because it has been
gone over time and time again. I will say that I feel it is a just
claim, whether it is computed on the basis of an obligation as ac-



knowledged at the close of the war or whether it is computed upon
the 1925 basis, at the time the original legislation was enacted.
Naturally, we have all given a great deal of thought to this. The
main thought I want to bring to the committee is: I have talked this
over, and I have been privileged to sit as a representative of those interested in the legislation, in consultation with men in high official
and financial circles whose opinions must be respected. We have been
surprised at the sympathy and willingness with which they have entered into these discussions. They have been fair and they have
been frank. The hostility that might have been expected has not
evinced itself; and we have marched through the various stages of
arguments regarding the practicability of this thing, regarding the
desirability of expansion of currency at this time, regarding the
mechanics of the Federal reserve system and the demands upon the
Treasury, and we have come together in complete unison up to one
point. That one point was a difference of opinion but not a difference
of fact. That difference of opinion is as to the ultimate result of this
expansion coming about through the redemption of these service
These financial experts express the abiding fear that this expansion
in this way will not restore confidence; will not build up credit and
will not start business and industry moving again. In the light of
their original statements, I fail to find a consistent reason for their
On the contrary, I feel that we have only to expect good to come
of this. We do not say permanent good. I for one am willing to
admit that perhaps it may be only a "shot in the arm," to use the
common expression. It may be only a stimulus—temporary in
nature; but I do believe it is or will prove to be an impetus to better
conditions, and better times. I do believe it is going to start us
out of this despond—this depression. I believe it is going to have a
wholesome effect. I believe the stimulus will be planted in every
grass root and in every crossroads of the country, and in every
industry it is going to have a wholesome effect. Then it is up to us
to adopt other measures in other respects to keep the wheels of
industry rolling.
I have respect for the benefit of the experience and higher knowledge of these men, but I am so convinced in my own mind that I
have the true picture and that their fears are unwarranted, that I am
going to stake my little political future or whatever it is, upon my
Again, these people do not question the practicability of it; they
do not say that the expansion of currency is not needed. They only
differ with us when it comes to the point of view as to whether it will
have a beneficial effect, as to whether it will restore confidence, or
whether there will be a fear regarding quick money—all these superstitions that becloud our judgment at all times.
I would like the privilege of adding to my statement the names of
some of the veterans7 organizations and others that have indorsed
this legislation. I have been in committee and have not had time
to organize a formal statement.
Mr. KAINEY. Certainly. These are tontine insurance certificates
we issued to the soldiers, and I will say in this connection I opposed it
and favored at that time the payment of these claims in full.



Mr. KVALE. I recall that.
Mr. RAINEY. I introduced a bill which would have had that result,
and Congressman Royal Johnson introduced a similar bill, and it was
called the Rainey-Johnson bill. At that time we tried to make the
profiteers pay it, but the administration was against us and we could
not do it. Now, we make an appropriation every year for this fund
and w;e invest that money. That is, the Government acts in its
relation to these certificates as a life insurance company; and the
money we appropriate each year is invested in securities which yield a
revenue, and that revenue is applied to the amortization of these certificates, and the theory is that without costing the soldier one penny
the Government pays his premiums, which the individual would pay
if he buys a tontine insurance policy and pays the premiums himself.
But the Government pays these premiums from the appropriations
we make, and the Government immediately invests that money thus
appropriated, and the theory is that these investments are yielding
a profit, being invested in high-grade securities. Of course, we can
not sell them now, but in 1945 we should be able to pay off these
tontine certificates without any excessive taxes or strain on the
Treasury. Now, if we should pay them now, $2,400,000,000 that
makes a charge which the taxpayer must ultimately pay.
Mr. KVALE. I beg the gentleman's pardon. I differ with him
entirely on that.
Mr. RAINEY. What will happen?
Mr. KVALE. The gentleman does not want to infer that these
payments are made sincerely out of the Treasury from moneys
raised through taxation.
Mr. RAINEY. I am talking about the payments ultimately to be
made after these tontine certificates mature. Then they will be met
with a minimum charge on the taxpayers. If we could float bonds
now and pay these off, ultimately the taxpayer would have to pay
every dollar of this $2,400,000,000, and we are trying to relieve the
taxpayer of the country from payment of taxes, by all sorts of economies and still in spite of it all that would still impose this burdensome tax.
Mr. KVALE. I do not understand the gentleman's reference to
tax in this instance. On the contrary, this calls for expanding currency, expanding the buying power of the people.
Mr. RAINEY. We would simply print more money and turn it
out. That does not make a burden on the taxpayer which he has
to pay in taxes; but it does depreciate every dollar of property in the
United States to a lower degree than its present deflated price, as
well as it increases the currency circulation.
Mr. KVALE. It strikes me that this movement has gained tremendous force by reason of the fact that it is visualized that it will
bring back the purchasing power, not a wild inflation, but bring
back the dollar to its purchasing power in 1926.
Mr. RAINEY. Your theory then is that if we issue $2,400,000,000 in
new money it will increase the buying power of these soldiers and the
buying power of other people?
Mr. KVALE. Inevitably.
Mr. RAINEY. And therefore will stimulate business. Do you know
what our turnover of manufactured products is in the United States?
In 1929 (that is the last year we have figures available for), the total



amount of our own manufactured products which we turned out and
sold to the people of the United States was $68,453,486,000. Now,
our total imports which the people over the country absorbed and
bought, was $4,400,126,000, making a total of $72,853,618,000.
Now, that is the amount of manufactured goods which were purchased by the people of the United States in 1929. Of course that
has fallen off now and nobody knows what it is.
Mr. KVALE. It has fallen off by a third.
Mr. RAINEY. Yes; it has fallen off at least a fourth and probably a
third; and if it has fallen off a fourth our trade turnover this year
is $50,000,000,000, according to your estimate, and I think you are
absolutely correct about it.
Now, if we print new money for the purpose of stimulating trade
and turn it out into the United States, these soldiers are going to
pay a lot of it in debts they owe. They all say they are in debt and
they are.
Mr. KVALE. And I have no doubt about it; I have good reason to
Mr. RAINEY. Probably at least a billion of it will go to pay debts.
The rest of it they can use for purposes of buying manufactured
Mr. KVALE. But the creditors that receive the money are not just
going to hold it; they will do things with it, pay debts, make purchases, and start a long series of transactions with this money, resulting in increased manufactures.
Mr. RAINEY. Well, we will assume that the other will be used for
the purpose of buying manufactured products, and if so, that would
be less than 4 per cent of the entire manufactured products turnover
the country would absorb this year.
Mr. KVALE. I stated to the gentleman that it might just be a
stimulus, that it alone might not go far.
Mr. RAINEY. It would just be 4 per cent, not more than that.
That is an extravagant estimate of the entire turnover of manufactured
products for this year, including the imported products. Do you
think that would have the effect of raising the level of price of manufactured products to any appreciable degree?
Mr. KVALE. I can not think you are disregarding the effect of the
expansion of the currency upon the expansion of credit,variously
estimated at from three to one to ten to one.
Mr. VINSON. The premise upon which Mr. Rainey draws his
conclusion is that this $2,400,000,000 is only used one time.
Mr. KVALE. Yes.

This $68,000,000,000 or $72,000,000,000 which
you referred to in 1929
Mr. RAINEY. It is not that much now.
Mr. MCCORMICK:. That was transacted by and through the currency we then had outstanding. In July, 1930, we had four billion
four hundred and twenty six million and odd dollars in currency,
and that $72,000,000,000 business had to be conducted upon that
currency alone.
Mr. RAINEY. Yes.

that when you say this $2,400,000,000 is only
4 per cent of the $72,000,000,000 the only currency we had outstanding
was $4,426,000,000, and that is only about 8 per cent of currency to





carry on $72,000,000,000 of business. The rest was done on a credit
Mr. RAINEY. The ultimate result would be just negligible.
Mr. KVALE. Instead of being negligible, I will say that the financiers say it may be too much, and they are putting some safeguarding
provisions there which I think are very important.
Mr. ESLICK. Do you know the capital investment in railroads and
the assets of railroads and insurance companies in comparison to the
$2,000,000,000 authorization by Congress?
Mr. KVALE. I have a rough idea in my mind.
Mr. ESLICK. What is that?
Mr. KVALE. My idea is approximately $60,000,000,000.
Mr. ESLICK. If you can possibly get it, put in the figures, will you?
Mr. KVALE. I have so much urgent work now that I admit I would
like to dodge the task.
Mr. KVALE. Mr. Chairman, under leave kindly granted me, I
want to add a partial list of organizations which have submitted
written indorsements of this legislation to me. I believe that all of
them have been previously referred to your committee by the
Speaker. The list follows:
American Legion Post, No. 420, Raymond, Minn.
American Legion Post, No. 227, Danube, Minn.Adwell-Ashley Post, No. 180, RenviUe, Minn.
Minneota Post, No. 199, Minneota, Minn.
Russell Johnson Post, No. 72, American Legion, Appleton, Minn.
West Douglas County Post, No. 188, Evansville, Minn.
Ogmas Post, No. 268, Farwell, Minn.
United Veterans, Swift County Unit, Benson, Minn.
Frank Patzwald Post, No. 178, Morton, Minn.
Veterans of Foreign Wars Post, No. 871, Tracy, Minn.
American Legion Post, No. 87, Alexandria, Minn.
Austin F. Hanscom Post, No. 167, Willmar, Minn.
Lac qui Parle Post, No. 158, Madison, Minn.
American Legion Post, No. 364, Dassel, Minn.
Minnewaska Post, No. 724, Veterans of Foreign Wars, Glenwood, Minn.
American Legion Post, No. 375, Atwater, Minn.
Chaplin Post, No. 934, Veterans of Foreign Wars, Grove City, Minn.
Johnson Post, No. 460, Russell, Minn.
American Legion Post, No. 441, Bellingham, Minn.
A-B Post, No. 127, American Legion, Hanley Falls, Minn.
American Legion Post, No. 113, Marshall, Minn.
American Legion Post, Franklin, Minn.
United Veterans, Swift County Unit, Benson, Minn.
The Northwest Pay Bonus Now Organization of Hibbing, Hibbing, Minn.
American Legion Post, Morris, Minn.
Oscar I. Mongeau Post, No. 742, Marshall, Minn.
Operative Plasterer's Local 65, 601 Fourth Avenue South, Minneapolis, Minn.
Hennepin County Council, Minneapolis, Minn.
Northwest Pay Bonus Now Organization, Taconite, Minn.
Minnesota Amputation Post, Veterans of Foreign Wars, Hopkins, Minn.
Wm. T. McCoy Post, No. 92, American Legion, Rochester, Minn.
Hibbing Chapter, No. 3, Disabled American Veterans, World War, Hibbing,
Benson Chamber of Commerce, Benson, Minn.
Jackson Liberty Post, No. 130, Jackson, Minn.
Samuelson-Healey Post, No. 1845, Veterans of Foreign Wars, Minneapolis, Minn.
Commission of the City of Glenwood, Glenwood, Minn.
Village Council, Hibbing, Minn.
Kiwanis Club of Glenwood, Glenwood, Minn.
Venier Post, No. 452, American Legion, Keewatin, Minn.
Four posts in Mille Lacs County, Milaca, Minn.
The Appleton Association, Appleton, Minn.

North Side Post No. 230, Minneapolis, Minn.
B. F. L. & E., Release Lodge No. 579. Montevideo, Minn.
Mr. PATMAN. Mr. Chairman, we have 11 other


witnesses- here.
I think they would all be satisfied with permission to file a statement
in the record, in view of the circumstances. Those who are not, I
would suggest that they see me right after we adjourn. I will get
their names.
Mr. CRISP. The committee will be glad to hear all of the 11 of
them Monday or Tuesday if they want to take the time. We can not
remain here longer to-day, as we should be on the floor of the House
now; and the committee will not be able to meet to-morrow.
Mr. PATMAN. We appreciate the situation, Mr. Chairman, and we
shall be glad to wait until Monday.
(Thereupon, at 12.25 o'clock p. m., the committee adjourned until
Monday, April 18, 1932, at 10 o'clock a. m.)


MONDAY, APRIL 18, 1932

Washington, D. C.
The committee met at 10 o'clock a. m., Hon. Charles R. Crisp
(the acting chairman) presiding.
The ACTING CHAIRMAN. The committee will be in order. Mr.
Mr. ESLICK. Mr. Chairman, may I present for the record two telegrams that I have selected from a large number received by me.
One of them is from my home town, Pulaski, Tenn,. This post has
had the largest increase in membership in the last year of any post
in middle Tennessee. The other is from the L. O. Crane Post of
Lawrenceburg, which has a membership of between 500 and 600, the
largest membership of any town of its size in America.
The ACTING CHAIRMAN. Without objection, they may be made a
part of the record.
(Mr. Eslick read the telegrams above referred to, which are as
PULASKI, TENN., April 12, 1982.

Congressman E. E. ESLICK:
Pulaski Post No. 60 American Legion at its regular meeting April 11 passed
resolutions urging Congress to support bill to make full payment of adjusted
service certificate and passage of bill in behalf of widows and orphans of exsoldiers. We ask your support this meesure.

LAWRENCEBURG, TENN., April 18, 1982,

Congressman E. E. ESLICK,
The L. O. Crane Post No. 63 American Legion at Lawrenceburg, Tenn., at
its regular meeting April 12, 1932, urge immediate ppyment of the remainder
of the adjusted compensation and the passage of the widows and orphans bill
with the pauper's oath excluded.


Mr. PATMAN. Mr. Chairman, at this time I would like to introduce
Mr. David V. Addy, of Detroit, Mich. He is the representative of
the Wayne County Council, American Legion, Detroit, Mich., representing 52 posts.
The ACTING CHAIRMAN. We shall be glad to hear him.





Mr. ADDY. Mr. Chairman and gentlemen of the Ways and Means
Committee, I am appearing before your committee at the behest of
the Wayne County Council of the American Legion, in Detroit, Mich.,
of which I have the honor to be commander. Accompanying me on
this mission is Jack R. C. Cann, executive secretary of the council.
The organization we are appearing for is composed of 52 posts of
the American Legion located in Detroit and adjacent towns within
Wayne County, Mich. There are 9,607 paid-up members in the
American Legion posts comprising the council, and there are 3,200
other members who are in arrears because their poverty, due to unemployment, makes it impossible for them to pay their annual dues of
$4, but they do attend and have part in our deliberations, and we
appear for them also.
Gentlemen, it is not our purpose, in appearing before your honorable body, to engage in any demagogic oratory or argument whatsoever, but rather to present to you some facts that we trust may have
some influence in your consideration of proposed measures for the
relief of the World War veterans.
Detroit, which is the center of the area represented by the membership in the Wayne County Council of the American Legion, has
probably suffered greater injury from the bad business and industrial
conditions that have stricken our country than any other district.
We propose, however, to treat particularly of the condition in which
World War veterans and their families find themselves to-day.
During the prosperous years following the war, there came to
Detroit from every point of the compass, and from every corner of this
Nation, men who were the constituents of the Congressmen from
almost every district in the land. Many of these men are still in
Detroit, unable to return to their home communities because of
inability to pay their fare, or to move their household goods, or
because their financial condition would not be bettered by such a move.
During the past three years Detroit has spent $25,000,000 from
public funds in welfare relief; this not including the tremendous
amounts spent by charitable organizations or from private sources.
A year ago there were 46,000 families on the public welfare rolls. This
tremendous welfare expense has almost bankrupt the city, with the
result that many municipal activities have had to cease and all have
been curtailed, and 10,000 men have been released from their positions
with the city. These men had been employed in the various municipal departments, and had some right to believe that, so long as they
performed satisfactory service, they would be retained; but instead
have been let out. The factories which have had to shut their doors
or close departments, have added to the roster of unemployed until
the idle roll of workers in the city reaches 150,000. With their families
and dependents close to 600,000, people are suffering from this unemployment. It is apparent that they have no hope of early reemployment, and are now looking desperately to every source for just enough
food, lodging, and clothing so that they may survive until better times.
Of the 10,000 municipal employes who have been laid off, or will be
out of work before the fiscal year of the city ends on June 30, fully 25
per cent are World War veterans.



At the present time, with the city's welfare roll reduced because of
the municipality's inability to take care of these needy people, there
are 1,900 families of World War veterans receiving city relief. These
are all men with families and children.
Since last November the American Legion in Detroit, with the aid
of other veterans' posts associated with them, have provided 27,100
meals to needy veterans who would have been unable to survive had
it not been for this service. A like service was rendered by the same
organizations in the winter of 1930-31. Since only one meal per
day is served, you can readily figure the number of men who have
been taken care of. Instead of improving, the load is increasing until
the supporting organizations are being hard pressed to maintain this
service. More than 200 meals are being served daily to that many
men right now.
The Fisher Lodge in Detroit, which is a factory building in which
cots have been placed for the accommodation of homeless men, most
of whom had come to Detroit from other States to seek work, has
housed 1,500 men nightly. Many of these men are veterans of the
World War.
The American Legion in Detroit has spent a large sum of money
in trying to find even the most temporary jobs for these idle men.
On February 27 the department appropriated $1,800 for this work,
and on April 4 the American Legion Council appropriated an additional $600 for the same purpose. While the reports show that
10,352 such jobs have been secured, many of these jobs are for an
hour or so only, and leave the worker little for his effort after he has
paid his street-car fare to and from the place of employment. The
finest spirit, however, has been shown by these men. Many who
formerly held fine positions have not been above taking an afternoon's
work cleaning out a basement in order to earn a few dimes to provide
food for their families. Much of the money expended in Detroit in
this campaign has been the employment of idle veterans at $1.25 a
day to solicit householders for work for themselves or for their comrades. Out of this $1.25 a day they must pay their transportation
expense and buy their lunch while on the job. In addition, several
of the individual posts have spent additional sums in this same sort
of effort.
Many of the posts have been purchasing bread and milk for the
families of members with children, so that they might not starve
during the winter. The number of families that have been given
more substantial aid over a continued period of time by the posts
exceeds 520, and clothing has been provided for a much greater
number of veterans, their wives, and children.
Records in the Wayne County Council office of the American
Legion at Detroit show that hundreds of men have been out of work
for two years, and many have been unemployed for a greater period of
time. Theii homes, which they had purchased on time, have been
lost through foreclosures. Their furniture has gone to the loan
broker and the secondhand dealers. Their cars have been taken by
the finance companies. Their borrowing sources are closed, and
many of them now owe more money than they can repay in a long
period of time, even if they should be given steady work immediately.
Under the circumstances, these men look desperately for relief to
what they regard as their last resource—the adjusted compensation



certificate, which has become a frozen asset, already borrowed upon
to the limit allowed by law, and in fact gone from them forever under
the present regulations, for but a very small percentage will ever be
able to redeem their certificates from the Government. This is true
because they will be unable to support their families, pay their debts,
and return the principal and interest on their certificates to the
Government from a workman's wage.
The sentiment for payment of the adjusted compensation certificates
immediately has increased greatly in Michigan since last September,
when the national American Legion convention was held in Detroit.
At that convention the Michigan delegates vote was 22 in favor of
immediate payment and 15 votes opposed to asking immediate payment. Many of the 15 opposing immediate payment so voted, despite
the fact that the State convention of the American Legion of Michigan
favored payment without a dissenting vote, because they thought that
the spring of 1932 would surely see a rejuvenation of industry. On
February 27, 1932, at a meeting of the 17 members of the department executive committee, one from each congressional district, a
vote was taken on a question tantamount to a test on whether the
American Legion in Michigan favored payment, and a vote of 16 to 1
indicated that they do so favor immediate payment.
The State senate of Michigan, as recently as April 12, passed a
resolution by a vote of 29 to 1, asking that Congress find some way
to meet this obligation now, instead of waiting until 1945. Tabulated "Yes" and " N o " votes taken by various American Legion
posts in Michigan, which have been reported to the American Legion
Council office, show that the veterans also feel that this relief is a
present necessity. Instances of such votes are shown by two Detroit
posts. Hawkes post voted 305 in favor of immediate pyament and
9 for delayed payment. Faust post was conducting a secret ballot
by mail when we left Detroit, and the count on Thursday noon,
April 14, was 481 in favor of immediate payment and 7 for delay
in payment. Other posts voting are recorded in like ratio.
These men are not radicals. They are good citizens, but they are
desperately groping for some way to carry on, to buy food for their
families, and shoes for their children that they may continue to
attend school. These men fought for the Nation once, and they would
do so again if necessary. They are not found among the reds who
make demonstrations and who defy the police. They are not found
among the agitators who can see no good in this Nation or its institutions. They are not rioters. They are family men, who see their
children wanting for the very necessities of life. They are home
owners who see their homes taken from them and the savings of years
defaulted thereby. They want a chance to be the good citizens they
have always been. They want work first and above all, so that they
may stand upon their own feet, but pending the time when work
may be obtained, the possibility of getting the money represented
by their one remaining, but frozen asset, the adjusted compensation
certificate, is the only ray of light they see. They are fighting for
that which is dearer than life to them—and who can blame them.
We ask of you to see if some way can not be found to pay the
certificates now, without doing irreparable damage to the Nation that
all of them love. We do not suggest the way or the method, for your
body is wiser than are we in this matter. We only know that thous-



sands of the veterans are hungry, are ragged, are in many cases homeless, and this through no fault of their own, for they would work
if they could find jobs.
There are two lesser matters that we would also recommend. One
is that the privilege of borrowing upon the certificate be made available to those who have obtained them within the past two years.
Many of these men—and there are 240,000 veterans in this predicament—failed to apply for their certificates through pure love of
country, though they might not call it by so sentimental a phrase.
They were working. They felt that as long as they were able to
take care of themselves, they would not ask the Nation even for that
which Congress had said was their due. Then came disaster and in
desperation to care for their families, they made application for the
certificates, hoping to be able to borrow on them as had their fellows
who had not been so fortunate previously, or, perhaps, had been less
unselfish, if you want to put it that way. Now they find their gesture
was an idle one. They have the certificates, but can not borrow upon
them for two years, and what may become of their families in that
time is something they hate to think about. If possible, make these
loans available to all, alike.
Another matter is that of the interest being charged upon the loans
already made. This interest charge, compounding periodically, will
eat up the certificate so that, instead of getting what it represents, t i e
veterans who borrowed will net what they received to date, and
nothing more. Many of them have already given up any thought of
ever redeeming the certificates, because they know they must first
take care of the other obligations they are being pressed to meet, by
the grocer, the butcher, the milkman, the clothing merchant and the
tax collector.
We hope you gentlemen will consider this appeal in the same spirit
in which it is made—that of a desire to do whatever can be done,
without permanent hurt to the Nation, toward paying the certificates,
making loans available to all alike, and to cure the interest evil
connected with loans already made.
Thank you.
The ACTING CHAIRMAN. I would like to ask you one question,
Mr. Addy. I may preface it by saying that I have the sincerest
sympathy for the ex-service men out of employment and also for
other citizens of the United States out of employment. What percentage of the unemployed in Detroit are ex-service men, in your
Mr. ADDY. AS far as we are able to estimate, the percentage runs
abound 15 to 20.
Mr. CANFIELD. What did you say the vote was in your area among
the ex-service men for the bonus?
Mr. ADDY. The department itself voted at a meeting just a month
ago, 16 to 1. Those were the district committeemen made up from
the various congressional districts.
Mr. CANFIELD. From the whole State of Michigan?
Mr. ADDY. Yes,


Mr. CANFIELD. Sixteen to one?
Mr. ADDY. Yes, sir. Thank you, Mr. Chairman and gentlemen.
The ACTING CHAIRMAN. We thank you for your presence.
Mr. PATMAN. Mr. Chairman, Mr. W. D. Jackson, representing the
Brotherhood of Railway Trainmen desires just a few minutes' time.





Mr. JACKSON. Mr. Chairman and members of the Ways and Means
I am deputy president of the Brotherhood of Railroad Trainmen
representing some 180,000 members. More than 15,000 saw service
in the World War, and our organization paid from our general fund
over $199,900 for death, disabilities, dues, and assessments for our
ex-service men while in the service of our country. Now, gentlemen,
the fact that we paid out over $199,900 in cash shows very plainly
that we were for the service man in war times and the legislative
representatives of the Brotherhood of Railroad Trainmen, from the
several States of the United States at their meeting held in Washington, December 1 to 6, 1930, shows by a resolution that we have not
forgotten their heroic work in defense of our Nation, and that we are
still for them in peace times; and Mr. Chairman, with your permission I want to read that resolution.
Whereas the records indicate that war contractors were paid the sum of
$2,000,000,000 immediately after the war as a result of loss of profits from curtailment of contracts; that the railroads were paid by the Government about
$1,650,000,0,00 for losses sustained in operations, and that in the last few years our
Government has given about $10,000,000,000 to foreign governments; and
Whereas Congress provided the adjusted-compensation certificates for exservice men to be paid in the year 1945, thereby making a difference in its treatment of our ex-service men and the corporate interests of the country; and
Whereas the Government of the United States is seeking a means of relieving
the presentfinancialdepression and need throughout the country: Therefore be it
Resolved, That the ex-service men who risked their lives and gave their all for
our country should receive as much consideration as was shown to the war
contractors, railroads, and to foreign governments; and be it further
Resolved, That the legislative representatives of the several States of the
United States, in convention assembled, petition Congress to pass the necessary
legislation providing for the Government to immediately pay the adjustedcompensation certificates, aggregating approximately $3,000,000,000 in order to
relieve the present economic situation.

We are of the same opinion now as we were in 1930, that the bonus
should be paid immediately.
The railroads, banks, and other industries of the country, appealed
to our Government for financial relief and it was promptly granted
to them, and I think that Congress had in mind when this relief was
extended to the railroads, banks, and other industries, that it would
relieve, to some extent, the serious financial condition of our country,
but gentlemen, the money and credit extended to them for relief, by
the Government has not, in my opinion, done very much if anything,
toward reviving business and relieving the unemployment conditions
of the country. Records show that the unemployment situation is
growing more serious daily, therefore, the relief thus far extended,
has not benefited many people of our Nation.
Now getting right down to the ex-service man and the man this
bill will really help, the records show that there are 750,000 ablebodied men out of work. Seventy-five thousand are partially disabled veterans but are unable to obtain any kind of employment, and
800,000 only working from one to three days each week, making a
total of 1,625,000 out of work entirely or working for a mere existence.
And, Mr. Chairman, we feel that if the bonus is paid as is outlined in
the Patman bill, it will go directly to those 1,625,000 and will benefit,



help, and assist hundreds of thousands of farmers who are losing their
homes and farms because they can not pay their taxes, mortgages,
and other obligations, thereby adding thousands more to the unemployment situation.
It will relieve those who are in destitute circumstances now, and
give them a new and brighter outlook on life, thereby creating a more
kindly feeling toward our Government. I tell you, gentlemen, when
a man's family is hungry, his children cold, and he is unable to find
any employment, it makes him feel pretty blue, when he reads in the
daily press, the billions of credit and relief that has been extended to
the big interests of our country, and you have been told and it has not
been denied, that there is to-day some $31,000,000,000, of public and
private funds now owing to us by foreign countries, and so little has
been done to relieve the deplorable condition of our own people.
1 understand there are some of the ex-service men who are opposed
to the passage of this bill and there are (of course) many ex-servicemen who are wealthy or who have large incomes from good positions
that can easily do without their bonus money until 1945, but gentlemen, I know you will give consideration in your final deliberations to
the petitions now on file of over 5,000,000, names not only signed by
veterans but by representatives of almost every vocation and from
over the entire United States asking, pleading, and urging you to pay
the bonus now.
It's my prediction that many of those who are apparently so bitterly
opposing having to take their money now will be like some of the railroad men down in the State of Arkansas when we had a bill pending
passage in the legislature requiring two pay days a month instead of
one. Just a few of the men opposed its passage but the bill passed
and when the law went into effect the fellows who were opposed to
getting their money twice a month were the first to the pay car every
two weeks, and put up the loudest yell when it was a day late, so,
gentlemen, you pass this bill and just watch them take their money as
quickly as they can get it, and file a complaint if it doesn't arrive when
they think it should.
Gentlemen, if you will pay this bonus, and just do only in part as
much as you have done for the railroads, banks, and other industries,
and foreign countries, you will be making a long stride in the right
direction, and you will not only be assisting the ex-service man, but
you will be helping the farmer, the merchant, the doctor, and, in fact,
most everyone in every community in this country, because a new^
purchasing power will be created, and when you have done this you
have done the greatest act of any Congress in the past or any one in
years to come toward relieving many hundreds of thousands of our
most worthy citizens from their present deplorable condition and
The ACTING CHAIRMAN. We thank you for your presence, Mr.
Mr. PATMAN. I would like to introduce at this time Congressman
Sweeney of Ohio.
The ACTING CHAIRMAN. We shall be glad to hear him.



Mr. SWEENEY. Mr. Chairman and gentlemen of the Ways and
Means Committee, I am here because of the tremendous number of
appeals I am receiving from my constituents who are in favor of the
Patman bill. Ohio has 88 counties, and my State will benefit, if
this bill passes, to the extent of $117,845,937.81. This sum will go
a long way toward relieving a distressful situation.
Being close to the seat of the Government I am in a position to
return to my district at certain intervals. On each occasion when
I returned home I have been deluged with scores of personal appeals
from ex-soldiers of the World War, who are actually suffering, in
many cases, for want of the necessities of life, and who look forward
to the passage of this bilj as a means of bringing substantial relief.
You have had presented to you, undoubtedly, in the testimony
you have received, the picture of the distressful conditions existing
throughout the Nation. In common with my colleagues of the
House of Representatives I am receiving a tremendous volume of
correspondence on this very important question representing both
sides of the controversy. I am receiving appeals written on embossed
stationery, and coming from certain legion members who are absolutely opposed to the passage of this bill. For every appeal of this
kind, Mr. Chairman, I am receiving scores and scores of appeals
written on scratch paper, on wrapping paper, and on paper from
school children's tablets, that gives me a picture of conditions as
they actually exist better than I can visualize from the correspondence of the gentlemen who write to me on embossed stationery,
and who are opposing relief for their former buddies.
It is my opinion that this committee should favorably consider
this bill for passage. I am satisfied it will ease the unemployment
situation considerably. We all know the country is in a mighty bad
shape at the present time, and I am satisfied that we recognize that
there is a universal demand for this legislation.
I am a new Member in this Congress, but I think you older Members will agree with me when I say that there never has been so much
evidence of a spirit of revolt in any Congress of the United States as
has been experienced in this present assembly. Why? Because of
the widespread distress, because of conditions as they exist throughout the land to-day; people starving, sickness and distress of all kinds,
the added burden of local communities in dispensing charity in caring
for the unemployed. This measure will to a degree relieve some of
these conditions.
I am not concerned with the cry that the passage of this bill may
unbalance the Budget. I say to you frankly, better an unbalanced
Budget than revolution. I have heard members of this Congress on
the floor of the House discuss the subject of revolution. Men do not
speak of this subject on their OWTI initiative. They are reflecting, in
my opinion, the spirit of revolution and the sentiments of their constituents in their respective communities.
This measure before you gentlemen is not a dole in any sense. It
is an attempt to complete a contract to which the Government is a
party. It is simply predating the due date of payment of these claims.
There are some who object to the passage of this bill fearful lest it



would be necessary to inflate the currency. A great many economists
of the nation, and students of the question, believe that an inflation
of currency is necessary to secure readjustment and increase commodity prices. The gentleman from Mississippi, Mr. Rankin, and the
author of this bill, Mr. Patman, believe that an inflation of currency
can be had without disturbing to any degree the gold standard or
impairing our national credit. I am in accord with the belief of these
distinguished gentlemen.
A few years back the Nation was engaged in a World War. These
soldiers bared their breasts to the onslaught of that war and saved the
Republic. These same men are again at war. They are at war with
unemployment, sickness, starvation, and they are asking the Nation
now to come to their rescue and save them and their families.
Gentlemen, I am here to-day reflecting the sentiments of my constituents. I know that this very patient committee is desirous of
securing a cross section of the opinion of the Nation on this important
subject, and I am pleased in this brief time allotted to register my
approval and urge the support of the bill now under consideration
by your distinguished body.
In conclusion I wish to record my appreciation of the courtesy
and attention given to my brief statement to-day.
The ACTING CHAIRMAN. We thank you for your presence.
Mr. PATMAN. Mr. Chairman, Congressman Patterson of Alabama
desires a few momfents to make known his wishes. Mr. Patterson
is the author of a bill, H. R. 9648, which has for its purpose the
payment of the adjusted-service certificates.
The ACTING CHAIRMAN. We shall be glad to hear Mr. Patterson.
Mr. PATTERSON. Mr. Chairman and gentlemen of the committee:
I shall not take the time of the committee to make an argument,
because I do not feel I would have anything new to present after what
has already been presented to you.
I am appearing in the interest of my constituents to say that I
believe that my constituents, those who are veterans and those who
are not veterans, by a very large majority are in favor of the payment
of the adjusted-compensation certificates at this time for the reasons
that have been set forth to the committee.
Mr. Chariman, I ask unanimous consent of the committee to file a
brief setting forth my views on this question.
The ACTING CHAIRMAN. YOU have that permission.
Mr. PATTERSON. Thank you, Mr. Chairman.
(The brief submitted by Mr. Patterson is as follows:)

I wish to give the following reasons for the full payment of the soldiers' adjusted
service certificates:
As I see the obligation we have to the soldiers in. the adjusted service certificates
and the basis for the issuance for this was the fact that after a careful survey and
extended study it was found that the soldier's wages and income, to say nothing of
the danger and risk which he underwent during the period of the World War, was
to make up in a small degree this difference in income. It is known that wages
were considerably higher among our civilian people during the World War than
among the soldiers and this, when we come to look at another side of it, even then



the wages of our people were very small compared with the income of the tens of
thousands of our citizens who got Government contracts and did business with the
Government. In fact, one of our bases for contention in this matter is that the
many thousands of people who made billions of dollars in all, and many of them
made millions to their own individual interest is that these parties who made
millions our of the Government while our soldiers were undergoing the risk and
doing the fighting should be called upon to make some readjustment with the
soldiers. That, as I see it, is the purpose of the adjusted service certificates. Our
request for it at this time is based on the fact that it is due at any time when the
payment will not be a disadvantage to the Government and the people, to pay this
money for it is known many stood for paying in cash at the time, when those
certificates were first issued. Once and for all and I maintain that although the
original certificate as issued is not due until 1945, that it is an obligation due at
any time on the basis of the merits of the soldier's claim.
Again we are asking at this time on account of the great need of the soldiers.
Literally thousands of these soldiers have bought homes and they are facing
default and the probability of losing these homes. Thousands of them do not
own homes and are out of work and need this money to live on. Thousands need
the money to make crops so that they can sustain their families. In fact the
economic situation and the condition of the soldiers who lost his best opportunity during the World War during that time of inflation, is greater than at any
period in his history, and too he has not had an opportunity to get on his feet
since returning from the war.
Too, another argument which arises is the conditions of the Treasury stands
to pay these certificates at this time. I believe I can speak for the soldiers of
our country, those heroic patriots who gave their all and who, since returning
have stood for the best interest of our country, would be the last to demand
anything that would disrupt or undermine their beloved Government, but we
maintain that the basis on which we ask this payment is such that it will not be
an undue strain on the Treasury at this time for we all recognize that*in this
country we have got to have inflation and a rise in commodity prices in order to
save the faimers, the home owners, and the other debt-owing classes of people.
The distribution of this amount of money to the soldier will do more to bring
this about than any single move we have before the Congress at this time. We
maintain that the Treasury on the gold basis through our Federal reserve can
arrange to pay these certificates without issuing the so-called fiat money.
We would soon see an increase in business all along the line in my judgment,
for this $2,400,000,000 would go immediately into the channel of trade and
increase the purchasing power of our people and help in relieving labor, business,
and our farmers. So, then, it occurs to us that it is justifiable from the standpoint of the Treasury.
I think most of the people of this country realize that we have not broken the
backbone of depression, and it can not be broken until the great masses of our
people are able to renew their purchasing power. This, to me, is fundamental
and is one of our strongest arguments in favor of the soldiers' adjusted-service
certificates at this time. I belong to that school who believes we can never
solve this condition by appropriating billions of dollars out of the taxpayers'
pockets to boost up big business and any fair-minded person it seems to me will
have to admit that very little of this has gone to help the great mass of people,
so we feel this bill is a step in the direction of making a better distribution of the
wealth and income of our Nation. Surely if there has ever been a class of people
who deserved this consideration, it is our soldiers in view of what took place during the World War and following that period of gigantic concentration of wealth
and power in the hands of a few. I sincerely hope that this committee will take
all bills that have been introduced by several of us and their own ideas and give
the House a bill which will be in the interest of the soldiers and in the interest of
the country and pay him at this time the remainder due him on the adjustedservice certificates.

Mr. PATMAN. At this time, Mr. Chairman, I desire to introduce
Hon. Miles C. Allgood, a Representative from the State of Alabama.
Mr. ALLGOOD. Mr. Chairman a,nd gentlemen of the Ways and
Means Committee, I am glad of this opportunity of appearing before



you to congratulate this great committee for its decision to hold
hearings on proposed legislation for the full cash payment of the bonus
of the ex-service men.
We realize that the economic condition of the masses of this country
is almost total depletion. Since the convening of Congress last
December strong efforts have been put forth in a nonpartisan manner—I am happy to state—to bring better conditions among our
people. We voted $2,000,000,000 for the Reconstruction Finance
Corporation to help in restoring confidence, to stop bank failures, to
aid in reducing unemployment, to extend seed and crop loans to
needy farmers and to stop further deflation of farm and commodity
prices. I voted for this measure. The results show that the passage
of this bill has been beneficial. More than 500 farmers in Etowah
County, Ala., have borrowed from the Reconstruction Finance Corporation this year to make their crops. These men could not borrow
a dollar from the local banks of their county, and they and their
families would have been on sufferance and not able to grow the
necessities of life this year had not this Congress enacted this law.
I am informed that we can pass legislation for the full cash payment
of the bonus without increasing taxation at this time and without
appropriating a single dollar from the Treasury. By the enactment
of the Patman bill this can be done. Its enactment will place more
than $2,000,000,000 of new money in circulation which will double
the amount of money in actual circulation. This amount of new
money will inflate values, pay debts, pay taxes, promote business,
revive industry, restore buying power thereby increasing consumption, and give employment to the unemployed thereby relieving distress throughout the entire nation. One new dollar put into circulation now would within a short period of time pass through the hands
of at least 10 people, therefore, this $2,000,000,000 of new money
would transact $20,000,000,000 worth of business in one year's time.
It has been indicated by some of the opponents of this bill that
$2,000,000,000 is an insufficient amount to restore business, however
the $2,000,000,000 deficit in the Treasury has been a nightmare to
this committee and the entire Congress.
The approximate cost of the World War was $200,000,000,000.
The war was fought on a credit. The various government used every
agency at their command in securing this credit, which resulted in
excessive inflation of prices of all commodities. Now 14 years after
the close of this war with these enormous debts upon us and drastically deflated commodity prices, the people of the world can not now
pay these debts and it is unjust for this generation to have to suffer
all these evil consequencies. Inasmuch as our Government used its
agencies to secure credit to win the war, I think it should at this time
through this Congress use its agencies to defer a part of this war debt
until a later date. The war debt of the United States has already been
reduced by $10,000,000,000 which is three and one-half billion dollars
more than was anticipated by the Treasury officials to be paid to this
date, and there would not be a deficit in the Federal Treasury if the
millionaires of the nation, many of whom made their huge fortunes out
of war contracts had not been refunded in taxes more than $2,000,000,000 since the war closed.
President Hoover has already indicated that he will veto the bill
for the payment of the bonus. In passing on public questions I have



adopted the policy of as near as I can placing myself in the other
fellow's shoes. If Mr. Hoover were one of the ex-service men of
the average station in life instead of being President of the United
States I feel confident that he would favor the cash payment of the
adjusted-service certificate. As to the needs of the ex-service men
and their families I will state that I have personally talked to many
of them in my district and there are but few exceptions indeed,
where it is not sorely needed.
Mr. Chairman and gentlemen of the committee, we can not get
away from the fact that this is a debt of honor this Nation owes its
soldiers who so valiantly served in the World War.
I favor this Congress fighting this out and paying it if we have to
stay in session the entire summer.
(Mr. Patman called the names of several witnesses who were
scheduled to appear and who did not respond.)
Mr. PATMAN. These gentlemen requested time, Mr. Chairman,
and I put their names on the calendar.
The ACTING CHAIRMAN. They will have permission to extend their
remarks, if they wish.
Mr. PATMAN. I shall notify them of that.
I will now call Capt. Samuel M. Lunine, Reading, Pa., representing
the Disabled American Veterans.
Mr. LUNINE. Mr. Chairman and gentlemen of the committee,
I am here as the State commander of the Department^ Pennsylvania
Disabled American Veterans of the World War. I have come to plead
before you in behalf of my comrades from my State who are in great
need. I see daily their suffering and know that many children of
our unemployed comrades are underfed.
I have listened very attentively to the arguments presented here
by certain members of this committee touching the question, "What
effect will $2,400,000,000 of new currency have on the securities held
by the people of our Nation? "
I am here to plead with you gentlemen to look at this question from
a different angle, "What relief will it give to these unemployed veterans
and what good will it do for the 10,000,000 or so of our American children who, proud of their father who served, are now half starved?"
The veteran asks very plainly, "Who is holding the securities that
we are so fearful will be affected by inflation?" The veterans have
no securities. The 6,000,000 unemployed and their dependents
numbering from 10,000,000 to 12,000,000 have no securities. The
millions of our farmers who had no crops in 1930 and who are now
selling their corn and wheat at 50 cents a bushel and potatoes at 25
cents have no money. The 8,000,000 or so partially employed in our
Nation, with some 15,000,000 dependents, are destitute. Our
American merchants, the so-called middle man, is on the verge of
bankruptcy. The professional man lost all his savings in the stock
crash of 1929. These two represent millions of America's dependents.
Why, then, are we so fearful? There should be only one question—
"How much good it will do to the majority; not how much harm, if
any, it will do to the few.



No question was asked of the mother who gave her son to the service, as to whether her heart was too weak to stand the strain if her son
were killed. Because we stand squarely on the proposition that in a
national emergency, Congress has the right to declare war and that
it is the duty of every able bodied American to step forward in defense
of his Nation, and because he has given this outstanding service to
his Nation, the veteran must be considered a preferred creditor and
laws must be passed to give him proper assistance. We contend that
the veteran is facing a serious emergency. We contend that a million
unemployed, former service men, without means of self support and
without food for their children, constitutes a National emergency, and
some means must be found to give them immediate relief.
Some days ago the question was raised, "What good will $2,400000,000 currency do and what effect will it have on the $58,000,000,000
of dollars worth of business that our Nation does?" It was claimed
that it would have no beneficial effect. This we contend is a misleading comparison. If, with $4,000,000,000 of actual money now in
circulation we can do $58,000,000,000 worth of business in one year,
which represents and includes all speculations which is nothing more
than an exchange of credit with no money, therefore, $2,400,000,000
additional cash put into circulation should normally increase our
nation's business 50 per cent and bring it up to over $80,000,000,000,
a greater turnover than at any time in the history of our Nation.
Although I am not in the service, I was prompted to come here in
my uniform because the newspapers are reporting that the administration has certain high ranking aces to present to you in opposition to
the payment of the so-called bonus, in full, as proposed in the Patman
bill, now before your honorable committee. I question these "aces"
as to whom they represent. Certainly not the veteran and his family
who have no food. They do not represent the partially disabled
veteran who is receiving from $8 to $40 a month, and can not get
employment when thousands of able-bodied men are in the ranks of
the unemployed. Of course, they have a right to speak for themselves and for themselves only, for they do not, and can not, represent the sentiments of the veteran.
In the State of Pennsylvania there are 44 chapters in my organization and they all voted unanimously for the full payment. In the city
of Heading, the American Legion Post, on a poll taken recently among
its members, out of 590, 568 were in favor of the full payment; 16
signified that they can get along without it but would like to see the
other get it; and only 6 or 7 were opposed to the bonus. The Reading
City Council passed a resolution favoring the full payment now.
They all feel that the money placed in the hands of the veterans at
this time, will not only alleviate their own condition, but help our
Nation's commerce and industry.
Gentlemen, we must consider these men and consider them seriously. We must take their need into consideration and not how
much harm it might do these securities. Securities are not secure
when people are grumbling and discontented. The millions of veterans
showed their patriotism. They are the backbone of our Nation. Do
not weaken it, for a hungry man can not be patriotic.
I am not an economist; I am a service man. I came here at my
own expense, and I feel I have the right to question the sincerity of
these so-called patriot—these well-paid economists, who are to be here




in opposition to this measure, coming here in behalf of and paid by
these very few who have and hold nearly all of these securities and
nearly all of the money of our country. The men who are pleading
for the bonus are the real patriots of our Nation, and it is the spirit
that prompted me to join at the outbreak of the war as a private, and
my service with these men, that comradeship that grew amidst suffering and hardships, privation and danger, brings me here to plead
for them.
I can probably get along without the bonus for some time to come
but I have visited the homes of many of my comrades in the different
parts of my State and know their suffering. I have seen them without
beds, lying on mattresses on the floor, with just an old Army blanket
to cover them. I have seen their children pale and haggard for lack
of nourishment. I have seen them on the charity benches waiting to
get their dollar per head allowance for groceries to live on for a week.
It is these men and children for whom I am pleading. You, gentlemen, have got to find some means of helping them. It is a duty that
you owe them. It is not a gift but even if it were a gift you should
find some means of alleviating their suffering. They were the flower
of our youth, the heroes of yesterday, who are standing before you
and pleading for help, and I ask you, not only to support this bill, but
to bring it out of your committee with the unanimous approval to
encourage and strengthen these men. Give them hope that they may
continue with the spirit of patriotism and love for their country, so
they may remain loyal; as loyal in the future as they were in the past.
I thank you for this privilege.
The ACTING CHAIRMAN. We thank you, Captain, for your presence
Mr. PATMAN. Mr. Chairman, Mr. McConnell has been here several
days and desires only a few minutes to be heard. I understand he
was General Pershing's chauffeur during the war. I told him if he
were here to-day I would do the very best I could to allow him some
The ACTING CHAIRMAN. We shall be glad to hear him at this time.
Mr. MCCONNELL. Mr. Chairman and gentlemen of the committee,
as a former General Staff chauffeur of the United States Army, and
afterwards assigned as chauffeur to Herbert Hoover at 19 Rue Lubeck,
Paris, I thought perhaps my individual case would be of interest to
you, a little more so than statements through letters and newspapers.
While in Washington, I attempted to secure a position through my
old associations, and found that it was futile. I got a suggestion from
Lawrence Richey, who is private secretary to the President, to take a
civil-service examination. I did and passed it 97 per cent as chauffeurmechanic.
My family and I have been in dire destitution, have been hungry,
and have been taken care of by charity institutions.
Mr. PATMAN. DO you want the committee to see these pictures
that you have here?
Mr. MCCONNELL. Yes. There is a letter there from General
Pershing to me. There is a picture autographed by him to my young
son. There is a letter from Lawrence Richey.



I have here an article from a newspaper and I will read just a part
of it to give you an idea of the circumstances I have been in after
having been a private chauffeur in New York for 28 years. [Reading]:
A woman with a 15 months' old baby in her arms who told Y. M. C. A. officials
that she and her family had not eaten in two days led to the discovery of the fact
that the man who drove General "Black Jack" Pershing (and there were six; I
was one of the men) over the war-torn highways of France is now a member of
Washington's army of unemployed. The husband and father is Edward C.
McConnell who replaced the famous Eddie Rickenbacker as the general's chauffeur when Rickenbacker was transferred to the aviation service. Later Mr.
McConnell was placed in charge of general headquarters garage at Chaumont,
France; subsequently assigned to Herbert Hoover as chauffeur. Mr. Hoover
was directing Belgian food relief. Mr. McConnell was Hoover's chauffeur for a
period of approximately a year in France. After the war he drove for a number
of prominent civilians in New York, including William Fox, the motion picture
magnate from whom he bears a letter of recommendation.

I believe that that covers what I wanted to point out, gentlemen.
Now, at the present time it is generally known that after a man's
services are no longer required, he is through. That was the statement made to me by an official in Washington. When I interviewed
General Pershing, his secretary emphasized the fact that I should
. not ask the general for work and annoy him with my troubles and
I lived up to my promise.
Now, I believe that the bonus should be paid to the American
soldier. Conditions in New York prove that the man who has been
a soldier has no means of relief unless he belongs to an organization
such as the Veterans of Foreign Wars or the Legion. I do not belong
to either. I believe that the only way of helping the country in its
present condition is to pay the bonus and let it flow through the
average layman's business. In other words, it will keep on revolving
until everybody has a chance to receive some benefit from it.
I have here two tickets which a Connecticut Senator bought me
to go back to New York, but I dare say when I go back there I will
have no more of a home than I have in Washington. I will be back
on the department of charities in New York
At one time I was supervisor of ambulances when Doctor Copeland
was commissioner of the department of health in New York.
Here are these tickets and there is my family. I go back to New
York and I have to apply to the department of charities for help. It
is an endless chain. I believe that the money that is coming to the
soldier to-day would pull him out of the mud, even if it is only a few
hundred dollars. And it would stop these political campaigns by
organizations. They would not then annoy the President, they would
not annoy Congressmen and Senators and the general public with their
demands. When you pay them off, you are through. I believe you
will find that is the truth.
I believe that one very discouraging factor to-day is that when one
of these soldiers becomes the leader of an organization, he begins
climbing for the pot of gold. I believe that politics should be set aside.
I thank you, gentlemen.
The ACTING CHAIRMAN. Thank you, Mr. McConnell.
Mr. PATMAN. Mr. Chairman, I desire at this time to introduce
Congressman Glover, of Arkansas.



Mr. GLOVER. Mr. Chairman and gentlemen of the committee, I
did not come to the committee this morning with the expectation of
testifying as a witness. I came here because I wanted to hear from
other sections. I am hearing daily from my own. I represent a
constituency of 300,000 people. Some of the largest posts in my
State are in my district. Instead of having a divided body with
reference to this question, I have never had a single man, either a
soldier or a business man, write me in protest of the payment of the
soldier bonus.
I know that we have some men who are opposing it. They are
men who do not have to have help. Some of them draw salaries in
positions like our own. We have had some protests from them.
But the soldier of this country is not thus fixed. When our great
Government was called into this world conflict, we issued a call for the
physically fit young men pf this Nation to come in, in defense of their
country. They came voluntarily and made the supreme sacrifice,
many of them, or offered their lives in defense of this country.
I know of cases that have come under my personal observation
where two boys from the same parentage were examined for the
service. One was taken, because he was physically fit, was able to
withstand the hardships of that life. Hte went into the service as a
buck private at $30 a month.
The other man who was physically unfit was not permitted to go
into the service was given employment at from $4 to $10 a day.
When the war was ended and when this service had been performed by these men, the Government thought that they had not
been sufficiently paid—and they had not—and they agreed to make
this adjustment. They agreed to give them an additional $1 a day
for service in this country and $1.25 a day for service overseas.
Well, that is a pittance. That is small.
Here is one thing to look at, gentlemen. Many of these soldiers
to-day are out of employment, are hungry and in want. I am looking
forward to the future defense of this Nation. Suppose we have another
conflict such as the one we had.
By our actions in Congress we have taken care of the corporations,
the business interests of the country. They did not make the showing
that these men have made. We have gone to their rescue, but we
turn down these men who have fought the battles of this country.
Now, I am wondering what the effect will be on the future citizenship
of this country if the security of our country is again at stake.
I do not believe there is a man on this committee that does not
have the same feeling about the payment for the soldiers' services
that I have. I presume you are thinking through this question just
as I have thought it through. You are thinking, how can we do it?
I think Mr. Patman made a frank statement when he said on the
floor of the Congress that if he could not show that this payment
could be made without increasing the burden of taxation then he
was not entitled to win in this contest.
I have made a careful study of that question to see if he was right
in his contention. I do not believe there is an economist in the land
who can take the present conditions and the amount of gold reserve



in the Treasury under our single gold standard and show that this
money can not be issued and put into circulation in the payment of
this just debt of the Government without preserving the credit and
the honor of our great Nation. You can issue three and a half
billion dollars now and leave a 40 per cent gold reserve in the Treasury.
It was my contention all the time that that ought to have been
done instead of passing a tax bill to raise a billion dollars.
We owe this money. Nobody doubts that. Nobody questions
that it ought to be paid. But the manner in which it is proposed to
pay is unjust to the soldier. By 1945, these soldiers who have
borrowed one-half on their certificates will find the interest has eaten
up the balance of the principal. If the soldier does not get it now,
he will get nothing at all in 1945.
Are we to say to these men that they have borrowed all that is
coming to them and can not get any more? I say, let us not treat
him that way.
I believe that you ought to pass this bill, possibly with some amendment. I believe this committee ought to report this bill out favorably and let us thresh it out on the floor of the House. We ought not
to be afraid of putting it in the light where everybody can see it.
Let the hearings be had there. Let every man have his expression
of what he thinks is right. Let the country know what is going on.
You do not want to turn the soldiers down, I am sure. And you
will not do it, if you can find any way of avoiding it, if you can do it
and at the same time protect the Government.
I think that is the only question in the minds of the committee,
whether or not you can do it and at the same time preserve the standing and credit of our Nation. We ought to preserve that. We all
agree on that.
We know what we ought to do. At least I think we do. I know
what I think we ought to do. We ought to get off the gold standard
and get on a bimetallic standard and fix things so that we can not
inflate currency but enlarge currency.
Here we are with 60 per cent of the money hid, and 40 per cent of
it in circulation, under a gold standard, with not sufficient money to
meet credit requirements.
You can not borrow money now from any source. Gold is centralized, is held in the great centers. We have got to break that up
and we ought to do it by legislation in this Congress.
I notice that our Federal reserve system has sort of loosened its
tension a little. And by reason of what? The Patman bill. And
you know it. Every one knows it.
They should have relieved this condition before the Patman bill was
introduced, before this panic started. The fault lies there. It does
not lie in existing law. They have got the power, the authority, to
expand our currency, if they would do it.
I say to you that it is time the great interests in New York get their
finger off the business of Congress. Let us say that we are going, not
to inflate currency—that is a bad word—but that we are going to expand it, we are going to enlarge it, we are going to have a currency that
is large enough to carry on the business of this Nation.
The Constitution of the United States says that Congress has the
right to coin money and to regulate the value thereof. Congress has




authorized the coining of money, but you have never gone to the extent
of your constitutional right, to regulate the value thereof.
Here we are with $500,000,000 of silver down in the Treasury and
here is this Nation with $5,000,000,000 worth of gold, with only
$11,000,000,000 of gold in the world, and France has four and a half
billions of the balance of it, with only a billion and a half outside of
these two countries with which to try to do the business of the world.
Gentlemen, what we ought to do is face the issue squarely. Let us
enlarge the currency of this country.
If we do not do it under a gold standard, let us go to a bimetallic
standard of money and put out money that can not be hid. That is
what is being done now. Gold is a coward and always has been.
You have not seen—any one of you—a gold coin in 30 days. How
many of you here have seen one in that time?
I see that three men have raised their hands. I guess you went
down to the Treasury and saw it there. It is not in circulation.
Mr. HAWLEY. Let me say that General Coxey appeared before the
committee with a ten dollar gold piece.
Mr. GLOVER. Well, he went down here and got it to show to you..
That was the reason for his having it. It is not in circulation,
You can not take us out of the dilemma we are in until you do just
that. We might just as well go to the fountainhead of the trouble.
You can not pour in your wealth at the top. It is not going to leak out
at the bottom.
Thank you, Mr. Chairman and gentlemen.
Mr. HILL. Will the gentleman yield for a question?
Mr. GLOVER. Yes, sir.
Mr. HILL. YOU have studied

these plans. There are two plans that
have been advanced for the payment of this bonus, both of which
involve the increase of the currency rather than simply the increase
of credit. I would like to ask you which plan in your opinion is
acceptable from the standpoint of the welfare of the whole country?
Mr. GLOVER. If the gentlemen will just report out that bill to the
House and let me offer an amendment, I will show you exactly how to
do it.
Mr. HILL. That is what we are trying to get at, what amendment
you would like to offer to it.
Mr. GLOVER. I will tell you frankly what I think you ought to do.
I think this Government ought to issue bonds to the amount of say
$3,500,000,000, take them over here to the Federal reserve—they will
draw 2 or 3 per cent interest—leave those bonds there; they are
Government property. The Government will not collect interest on
them unless it sells them. Leave them there as security and let the
Federal reserve issue that money. They can do it. That is what we
ought to do.
Mr. HILL. That is largely the plan offered in the Thomas-Johnson
Mr. GLOVER. I do not know whose bill it is. I do not wear any
man's collar, except my own. I just do my own thinking.
I think it would be safe to do it that way. If you are afraid of the
Patman bill—I am not afraid of the Patman plan
Mr. HILL. We are not afraid of anything, but we would like to
know what your reaction is to these plans.



Mr. GLOVER. NO; you have a Government here that is too big to
be able to say that a little enlargement of the currency will impair its
credit. That is silly.
Mr. HILL. The Patman plan is to issue $2,400,000,000 of currency,
Treasury notes, on the basis of the gold reserve now in the Treasury.
Mr. GLOVER. Yes, sir. And it will not reduce the reserve below
that which the law requires.
Mr. HILL. Are you favorable to that plan or to the other plan?
Mr. GLOVER. Either one of them. I want some money in circulation. Why, we have not got enough to buy bread out in the country;
we have not enough to pay taxes. Nobody has got any money.
It is all hoarded.
We have got to get it back in circulation. Two billion four
hundred million dollars, gentlemen, given to the soldiers will come
nearer scattering it out all over the country and getting it to where
it will go into business than any plan I know of and at the same
time pay this debt that the Government ought to pay.
The Acting CHAIRMAN. We thank you, Mr. Glover.
Mr. PATMAN. Mr. Chairman, I desire to introduce Mr. Christgau,
of Minnesota.

Mr. CHRISTGAU. Mr. Chairman and members of the committee:
I merely wish to reaffirm what I stated a year ago when I appeared
before this committee and urged full payment of the adjusted-compensation certificates.
I am in favor of the Patman bill with an amendment providing for
the Owen plan of payment.
The measure provides for a substantial increase in the amount of
currency in. this country. I believe that action along that line is
necessary in connection with any effort to improve economic conditions. The measure can also be amended to provide safeguards
against any possible uncontrolled inflation.
The farm organizations of the country have been advocating a
policy which, if enacted, would require the Federal Reserve Board to
use its powers to stabilize the general commodity price level at approximately what it was in 1926. I believe the Patman bill could be
amended to include that feature.
It is not necessary for me to point out the economic conditions prevailing in prctically every section of this country. I know of no
better way of distributing purchasing power in eyeiy nook and corner
of the United States than by paying off the adjusted-compensation
certificates. If that is then followed by a policy of stabilizing the
price level, I am certain in my own mind that economic conditions
will be greatly improved.
Most of the ex-service men's organizations in my district have
urged the immediate payment of the adjusted-compensation certificates. Veterans' organizations from various communities throughout the State of Minnesota have urged unanimous support of this
legislation. I have received resolutions and petitions in favor of
the immediate cash payment of the adjusted-compensation certificates
from the following organizations in my district in Minnesota:






No. 384, Dodge Center.
No. 190, St. Charles.
No. 9, Winona.
No. 295, West Concord.
No. 50, Wabasha.
No. 249, Spring Grove.
No. 423, Houston.
No. 161, Le Roy.
No. 404, Alden.
No. 92, Rochester.

Post No. 352, Preston.
Post No. 317, Emmons.
Post No. 369, Wykoff.
Post No. 197, Chatfield.
Post No. 228, Waseca.
Post No. 333, Kasson.
Post No. 281, Janesville.
Post No. 94, Rushford.
Post No. 119, Byron.


Post No. 1757, Caledonia.
Post No. 447, Albert Lea.
Post No. 1642, Waseca.

Post No. 1215, Rochester.
Post No. 1216, Austin.
Wabasha County Post, Wabasha.

I hope this committee, which has the power to accomplish a twofold
purpose—assist the ex-service men and improve economic conditions
in this country—will report favorably upon this legislation.
I thank you.
The ACTING CHAIRMAN. We thank you for your presence, Mr.
Mr. PATMAN. Mr. Chairman, I had expected to recognize the
gentleman from Alabama at this time, but Mr. J. A. Lazar, representing United American Labor, has been here for several days. I
told him that if he would be back this morning we would give him a
few minutes of time.
Mr. LAZAR. Mr. Chairman and gentlemen of the Ways and Means
I am sorry my time is limited. My little talk may run to 10 or
15 minutes. Mr. Patman has requested that I cut it short and I
shall do my best to cut it short, although I am long-winded, sometimes.
Mr. CRISP. That is a matter between you and Mr. Patman. The
committee is not restraining you in any way.
Mr. LAZAR. I hope Mr. Patman will see his way clear to let me
get through.
Having visited all of the large cities of the East, and having made
a special study of unemployment conditions, I believe I am sufficiently
familiar with the plight now confronting the World War veterans in
order to make this appeal to you.
When the American Legion posts, the Veterans of Foreign Wars,
and other representative groups made that splendid and peaceful
demonstration before you at the Capitol Building, a reporter of the
Washington Evening Star, with whom I am personally acquainted,
approached me and wanted my views on the pending adjusted compensation legislation. I represent a small organization here in town,
a new organization about a year old, called United American Labor.
He said to me, "What are your views on this bonus question?"
I turned to him, and I do not like to mention his name because the
man is working for a living, and said what appeared in the Star, and


I will read it to you.


It appeared on Friday, April 8, and this is the

During the parade, officials of the United Veterans of America released for
publication a statement warning that 1,200,000 unemployed World War veterans
would be instructed to come to Washington and remain here until the bonus payments are forthcoming.

Through an error, the name "United Veterans of America" was
used in place of "United American Labor."
This organization was founded, as I said, about a year ago. When
we call for the veterans to come to Washington and make this place
their home until this debt is paid, we do not consider it a warning nor
a threat; rather do we consider that an accomplishment to be attained.
Taking the capital cities of other nations, the populations run into
millions, such as London, Tokyo, Berlin, Paris, and other big capitals,
and there is no reason in the world why we should not have two or
three million population here. I believe the people of Washington
would like to have a condition like that, and the veterans are the
people to boost a city. They are good boosters as well as good
You gentlemen of the Ways and Means Committee, we believe,
hold a high respect for your colleagues, Mr. Patman, Senator Thomas,
Senator Brookhart and, I believe, Mr. Rankin, who all believe that
the bonus is a legal debt, and if Congress agrees with these gentlemen
whom I just named, they can not help but pay this debt. It is legal,
and, these gentlemen being lawmakers, my Heavens, you have to
abide by their decision. I know you respect them the same as
they respect you. It is not a question of getting it out of the committee and putting it on the floor. I hope Congress will see that
these boys have it coming to them. They only received one-tenth
of what the bomb-proof workers received during the war. Since
it is a debt, and I have for authority on that such distinguished men
as Mr. Patman, Senator Thomas, Senator Brookhart and Mr. Rankin,
it should be paid.
Mr. Patman, can you grant me a few extra minutes?
Mr. PATMAN. I would have to take it away from somebody else.
I will ask you to put your statement in the record.
Mr. LAZAR. I have one paragraph that I wanted to use in answering Mr. Rainey.
Mr. PATMAN. GO ahead with the one paragraph.
Mr. LAZAR. The other day, on Friday, I believe, the distinguished
Mr. Rainey from Illinois, asked a witness, Mr. Kvale, a question
as to whether the payment of the bonus would overburden the taxpayer. The poor, as you all know, have been paying everything; they
have lived patriotism. They did not speak it; they did not wave the
flag, but they lived patriotism, and after the war they have been
paying and paying and paying, until they have come to the point
where they are broke. They have not got it, and the rich should,
and of course they will be called on to, pay this thing. They should,
for once, using sporting language, "take it on the chin." They
should pay; it is their duty, for they have got it, and only those,
Mr. Rainey, who have it can pay the taxes and they certainly should
not object to parting with a little of their earnings, at this time or
any other time. A man who objects to paying taxes is indeed unpatriotic and not worthy of being called an American.




Mr. CRISP. We thank you.
(The remainder of Mr. Lazar's statement is as follows:)
In a letter to President Hoover, United American Labor said in part, I quote,
We have heard it said that our lawmakers are well aware of the hardships caused
by the depression but that they lack the collective intelligence as to the remedy.
Let us devote a little more time to our economic question and sacrifice politics
for at least a while." This ends the quotation. Everyone seems to be aware of
the economic ailment, but few offer the remedy. All appear to be cognizant of
the depression, but only a scattered number offer relief. Two things must
happen before prosperity can be restored and made permanent. Immediate
payment on the adjusted-compensation certificates and the institution of the
universal 30-hour-week in place of the 48 hours as we now work. Congress can,
if it makes up its mind, establish both in short order. The true patriot labors
ceaselessly in the cause of his country and for the happiness and well-being of
its citizenry. Men may differ as to party paths. Nevertheless, all public officeholders, we believe, aim at bettering conditions for their fellow men. We therefore appeal to your patriotism, rattier than to your partyism. Long enough have
we suffered from the economic, cancerous growth, underconsumption. Capital as
well as labor, must realize that when the commodities produced remain unconsumed, a depression as now exists, is bound to result. Obviously, outside markets
are becoming scarcer. The day is approaching, due to scientific advancement
and industrial development, when every modern nation will become self-sustaining.
All lands seem to grow and manufacture their necessary commodities. America,
visualizing independence from foreign markets, will be forced to become selfsupporting by consuming more of the commodities it produces. Our States and
Territories can carry on progressively, prosperously and independently without
the heretofore wild scramble for foreign trade.
No one advocates the total suspension of foreign trade, and by the same token
no one should be opposed to a wider and greater internal trade. As the industrial
machine advances, so must we reduce the hours of work in industry and on the
farm. United American Labor advocates the 30-hour week in place of the present universal 48-hour week. It is indeed unjust to keep seven or eight million
men and women out of employment entirely, while the remaining 40,000,000
labor 48 hours per week. This injustice affects labor as well as capital. Our
business and bank failures came as a consequence. The bread and soup lines,
and the organized begging, is the result of keeping part of the populace employed,
while a great many workers produce nothing. The life and health of a nation
depend upon thorough circulation of wealth. The same as the life and well-being
of the human body depend upon thorough blood circulation. Who but a fool
would hinder the blood circulation of his body? And who but a numbskull
Avould be opposed to the thorough circulation of wealth within the nation.
Mr. Chairman, gentlemen, we ask in the name of American prosperity, economic
stability, and social tranquility, pay the World War veterans now, and regulate
the productive time of labor, by adopting the universal 30-hour week. When the
hours of labor are shortened labor becomes scarce, wages thus naturally rise,
when wages rise everybody prospers. The demand for commodities becomes
intensified. Economic health of a nation depends upon steady and constant
productivity by labor. American labor and the veteran do not want charity in
the form of a dole or unemployment insurance. We demand immediate payment on the adjusted-compensation certificates and employment for all the
able-bodied. The depression is more than two years old. The compensation due
the veterans was made a law in 1924. We say that the present session of Congress
must act favorably on these questions, or meet the wrath of the thinking citizens.
Hungry men are thinking, and, that gentlemen, is a sign that America is awakening. Penniless men, starving men, are thinking hard how conditions may be
bettered. Yes, gentlemen, American labor and the veteran will use the one and
only weapon with which to register it's serious thinking. That weapon is the
ballot. Peacefully, determinedly, with respect for all and fear for none; we say,
"Unless we now receive a square deal from Congress, we shall do all within our
power to remove those men from public Ufe who stand stubbornly opposed to
America's progress and well-being." A very able columnist, Carlisle Bargerons
a political commentator of the Washington Herald, thought the other day, that
the reason the bonus money due the veteran is being held back is because a movement for regular pensions may follow. United American labor wishes to go on
record as the first organization to demand pensions for every man and woman
who fought and served during the World War. Is there a man in Congress who
would say that the World War veteran is not entitled to a pension? Labor and



-the veteran stand firmly united for a greater America. The battles of bombs
and bullets ended November 11, 1918, but the battle of ballots against the
billionaire is on. Pay the bonus. Adopt the 30-hour work week for all American labor. Enough of dickering and hairsplitting. You gentlemen of the Ways
and Means Committee are in a position to start the ball rolling.
On Friday last, Mr. Rainey, the distinguished gentleman from Illinois, asked
a witness, the honorable Mr. Paul J. Kvale, as to whether or not the enactment
of the Patman bill would overburden the taxpayer. Permit me at this time to
state to Mr. Rainey, that most of the poor people have been paying on everything, almost, until now. The time is here, when the poor are not in a position
to pay taxes. The wealthy citizen will have to show his patriotism, his duty
and his sportsmanship, by paying taxes. Those who have the funds should
certainly not complain about paying taxes. No person earning money should
object to part with a small and fair percentage of his earnings in order to maintain our Government and its institutions. Has it ever dawned upon the minds
of the members of Congress, that America at the present time, possesses an overabundance of wealth? Not money alone, but real wealth; the commodities
necessary to life and happiness. Also, our national lawmakers must know that
there is not sufficient currency issued against the produced and unproduced
wealth. If we were to issue money sufficient to represent the wealth of to-day
and that which is to be produced within the next 10 years the amount to estimate, would be staggering in figures. Congress and President Hoover must
demonstrate their farsightedness and courage at this time. Be as confident in
America's future as were the pioneers of America.
Pay the bonus with new currency, establish the 30-hour week and the depression is over. We sincerely hope that the Members of Congress, and President
Hoover, now opposed to this legislation, will have a change of heart. Gentlemen, our economic structure is tottering, it lies within your power to prevent a
most horrible National catastrophe. The American people can not bear the
suffering of the last two years any longer. Railroad industries have been aided.
Banking institutions have been helped with huge sums of money. Those earning
a livelihood and those with funds are comparatively satisfied and contented, but
9,000,000 families are in want. A million and two hundred thousand war veterans—men who lived patriotism-—are in need of food, clothing, and shelter. This
present session must act. It is duty bound to adopt immediate legislation in
order to relieve the unbearable pressure.
Mr. PATMAN. I desire to introduce at this time Mr. Almon of
Alabama, who desires to make a statement relating to this proposal.
Mr. ALMON. Mr. Chairman and gentlemen of the committee: I
do not believe there is anything new that I can submit on this question. You gentlemen have been considering this question of the
payment of the adjusted-compensation certificates for a number of
years. I appear before you as the Representative of the eighth
Alabama district to make known to you the views of the ex-service
men I represent.
You hear talk about the American Legion being opposed to the
payment of the soldier's bonus. I do not believe there is a word of
truth in it. I know that the national organization, under the spell
of the speech of President Hoover at Detroit, recommended against
it, but I know that practically all the ex-service men in my district,
and all over the country, as far as I can gather from reading, are in
favor of the payment of the balance due on the adjusted-service
We are here as the representatives of the people of the United
States. Conditions are terrible. Unemployment is bad, and getting
worse every day, it seems to me, and we ought to do something, do
everything we can to relieve the unemployment.



I have heard people say that if the soldiers received this money
it would be wasted in dissipation. There is no foundation for such a
statement. There may be a few, but the great majority of the men
will take care of this money to pay their debts, and it will go from
hand to hand and relieve conditions in the country as much as any
amount of money of that kind can.
I am not going to discuss the financial features and how the money
is to be raised, but from my observation I believe that the Patman
bill, with such amendments as you may see proper to make, can be
successfully put through. I do not know what will be the expression
of the Congress of the United States, but the new rules of the House,
the liberal rules of the House enacted at this session of Congress, gives
us a right to be heard, and let us, as representatives of the great of
the country, be given a vote on this question, and if we pass it, and
the Senate passes it and it goes to the White House and it is there
approved, that ends it. If the President vetoes it, as he may, then
let it come back and give an opportunity to pass it over the veto.
I do not believe that the ex-service men will ever need this money
worse than now and that will do them as much good as now, so I urge
the committee to report the Patman bill.
Mr. PATMAN. Mr. Chairman, Mr. McGeough, of the Fleet Reserve
Association, has yielded his time in view of the fact that we are
crowded for time, and desires to file a statement.
Mr. CRISP. He will have that privilege.
Mr. PATMAN. And Mr. Bert Davis, of Barberville, Ohio, representing the Summit Veterans' Association, desires to set forth the
views of that organization.
Mr. DAVIS. Mr. Chairman and gentlemen of the committee, recalling a remark made the other day by one of your members, with
respect to the members from Oklahoma, I think I may say that no
member from Ohio has introduced a bill with reference to the payment
of the ad justed-service certificates.
In the brief moments that I have, I know of nothing that I can
say that would not be cumulative except perhaps to give you a little
different point of view, and the point of view of the soldier is the one
that I have taken in this matter. I first started to think about it on
the 4th day of November, 1917, when the long arm of the law reached
down and converted Bert Davis into Serial No. 1962429. Woodrow
Wilson is gone; Newton D. Baker, the next in command, remains, and
I received a letter from him this morning. I have discussed this
subject with him frequently. I may sajr, in opposition to the brass
hatter, so-called, of the American Legion, that I represent, and
undertake to represent, the "buck privates" of the war; and if you
gentlemen recall the composition of an infantry company, you will
recall that two hundred and forty-five-two hundred and fiftieths, or
98 per cent, of it were buck privates and noncommissioned officers.
It is that element that has not received any consideration or any
representation through the American Legion, and particularly at its
"Battle of Detroit," and you will recall Representative Connery
making the remark the other day that he feared perhaps you gentle-



men in Congress do not know what is going on in the minds of those
Gentlemen, I have lived with them; I soldiered with them; I ate
with them, drank with them, and suffered with them seven months in
France, and the Davis family gave two sons to that war. They
drafted me, and another son gave his life. My mother is a Gold Star
mother, and the gold standard has not got me hypnotized for one
As a practicing attorney, I have brought many of their cases, and
have represented them and do at the present time in those cases from
northeastern Ohio, and I think that I represent here the entire State
of Ohio, evidence and confirmation of which is given by the fact that
the Hon. Robert J. Bulkley, junior Senator from my State, will
publicly debate the soldiers' bonus question with me as the representative of the soldiers at the Akron Armory on the 8th of May.
I think I speak their thoughts. I represent the Hon. C. Nelson
Sparks, the manager of the city of Akron, in this matter, the Summit
County commissioners, and the Summit County Veterans' Association, an organization of soldiers entirely, wholly, and solely political,
and our draft act of 1932 is taking the form of the registration of
Now, gentlemen, the passage of this bill means to Summit County,
Ohio, my own county, something like $6,000,000. Unless some relief
is given them, they can not pay their taxes. The only man who sold
any real estate in Summit County last year was the sheriff of Summit
County, and the real estate men back there are gravely in need of this.
I might also say that I represent the grand army of unaffiliated
buck privates, their wives, their kiddies, and their creditors, and I
say to you that in the minds of those soldiers there is this thought,
that there are two rules of law, one rule of law for the soldiers and
one rule of law for the banks, that if a soldier disables himself, he can
not recover from the Government, but that if a bank disables itself,
you pass a reconstruction finance corporation act to relieve it.
Gentlemen, I do not think that that is a fair statement; I do not
think it is accurate; I do not think it is truthful, and I have not
encouraged it, but it is what those soldiers and their friends are saying.
I am just as anxious as anyone is to correct that impression, and am
trying to do so in public speeches, in newspaper articles and otherwise; and you can help us greatly in correcting that impression and
in making better citizens out of those soldiers, and you can also
bring milk and bread to their babies by immediately passing this
so-called bonus bill and getting it out of the way, getting it out of
politics. It was a mistake to put it in the first place. I opposed it.
You have before you a labor claim. Take my own case. I was
conscripted; I was drafted. I tried to volunteer, and they would
not take me. My brother volunteered, who did not have to go, and
gave his life. You drafted me, you conscripted me, on November 4,
1917, and you forced me at the point of a gun to either go or go to
Leavenworth and render you service. I could have been making
$15 a day back in Akron and Cleveland, working at my trade in the
composing room of a printing office, and I say to you that when you
did that, when you drafted me, and when I come here representing
those men, I have a labor claim which under the Federal laws is
entitled to preference and which should come ahead of banks, and you



have taken care of the banks. If you refuse to make this payment,,
or fail to or neglect it, you have discriminated against us, and you
have committed or done an act which in fact will be construed in the
minds of the soldiers as a preference.
I hesitate to address you in this manner, but it is done merely for
the purpose of getting before you, if I may, the point of view of the
soldiers, who do not understand things. My trip to Washington and
visit here for three months has been an eye-opener to me, and my
heart goes out to you gentlemen of the committee and to the Members
of Congress because of the great mass of work which you have to
contend with and because of the two fires you find yourselves between.
You are somewhat like we were in France, by a curious coincidence.
Fourteen years ago we had the choice of being shot from in front, or
shot from behind. You gentlemen are in somewhat the same position [laughter], and I can sympathize with you, and it is in the endeavor and in the hope that I could be helpful and constructive that
I have made these statements.
If there is anything further that any gentleman desires to know
with reference to this matter, I would be glad to discuss it privately,,
for I will be here for a few days.
Mr. CRISP. We appreciate your having come here.
Mr. PATMAN. Mr. J. H. Hoeppal, from California, desires to make
a statement at this time.
Mr. HOEPPAL. Mr. Chairman and gentlemen, I am a commander
in the American Legion to-day, and a past commander of our vet-7
erans organization known as the D. A. V. I publish two veterans
periodicals, and I think I understand the viewpoint of. the veteran,
and I wish to let this honorable committee know the viewpoint of
the veteran in California.
At the last convention of the American Legion in California, I sat
throughout the deliberations of the resolutions committee. In this
committee, composed of approximately 13 men, there were judges of
the superior court, district attorneys, United States assistant district attorneys, and a great number of other highbrows, all of them
holding public positions of distinction in the community. The question of the bonus came up at that convention, and only one member
of the resolutions committee voted for the payment of the bonus.
All of these highbrows voted unanimously against it. Then the question came up on the floor of the convention, and at that time there
were 3,000 members present, and a minority report was brought in
requesting that the bonus be paid in full, and the question was put
on the minority report and the minority report went through unanimously.
I mention this to you to show the real attitude of the American
Legion, to show that 99 per cent of them are in favor of the payment
of the bonus now.
The question was later brought up on the floor of the meeting of
the county council of Los Angeles, comprising 170 odd posts, and
it was again unanimously indorsed.
Only last night I read an article in the official periodical of the
American Legion, published at San Franscico, whereby the American



Legion is seeking to intimidate its membership from taking any
part whatever in the furtherance of the bonus legislation. I am a
publisher of a periodical, and had received the permission of the
American Legion officials in California to use the American Legion
insignia on that periodical, but since I arrived here the national!
judge advocate of the American Legion has sought to intimidate me>
to keep me from using that insignia, because he knows I am in favor
of the payment of the bonus.
I am from California, and I stopped over a number of places en
route to Washington, and, gentlemen, the distress in our Nation is
terrific. You have got to go into the sidelines to meet the different
people, as I have, to know it, and I am more convinced than ever
that the payment of the bonus now is a thing which will help America
more than anything that could possibly be done. I am representing
men that served in two wars, three wars, and some of my men are 77
years of age, having served as officers in both the Spanish American
and the World War; and they are asking for the payment of the bonus
now, because, in 1945, how many of those men wiil be alive?
The most significant point, as it appeals to me, is this, that if you
pay the bonus now you will probably put it in the pockets of probably 3,500,000 veterans, and, gentlemen, you will be putting it in
the hands of every member of each veteran's family. I know, in my
own case, for instance, with relatives of mine in Indiana, that if you
pay the bonus it will go into three or four different families at once.
I am sure of that.
That is the situation that is confronting us. It is not the veteran
alone who is involved. It is the fact that you are putting money
into circulation, into the hands of people who are obligated, who are
in debt to the business men of the country, of people who can not
pay their taxes, and it will give them a start; it will be filtering upward; it will pervade every avenue of American life.
I am not going to take much time, but I would like to conclude
with this, that in 1917, as a previous speaker said, the veterans went
to war at your behest, many of them voluntarily, but, nevertheless,
they turned their cheek to you in loyalty and devotion in order to
follow your mandate. Now they are turning their other cheek to you
in their distress. Are you going to give them relief, or are you going
to strike them down?
That is all.
Mr. CRISP. We thank you for your testimony.
Mr. PATMAN. I desire to introduce at this time Congressman
Boileau, of Wisconsin.

Mr. BOILEAU. Mr. Chairman and gentlemen of the committee, I
want to say only a few words in behalf of the payment of the bonus.
I have been active in ex-service men's organizations in Wisconsin,
and I believe I know the sentiment of the ex-service men in my
State. I do not think there is any question but what the large
percentage of the ex-service men are in favor of the bonus. I say that
only because we hear now and then persons saying that the Legion has
gone on record as opposed to the payment of the bonus. I want to



say that it is my firm conviction that it is only some of the leaders of
the Legion who are opposed to the payment of the bonus, and that the
rank and file are in favor of it. But I do not believe that this fact,
the mere fact that the ex-service men want it, should prompt this
committee to report the bill favorably if it were a matter of so doing
being harmful to the country. When I came here last fall to serve my
first term in Congress, I came here with the same desire that I have
now, to be of service to my country, and I felt at that time that the
payment of the bonus would be an unwise thing, that it would be
harmful to our country. I did not conceive—I will be frank to say
that I did not know—that the country was in a condition where more
currency was desirable. I felt that the payment of the bonus would
necessarily come out of the National Treasury, and I felt that that
would be a hardship and a burden upon the Treasury that would not
be warranted even though the payment of the bonus would be a just
thing. So far as ex-service matters are concerned, I think that justice
is on the side of the war veteran, but I did not want to vote for a
proposition that would take the money out of the Treasury.
However, after having made some study of the matter in my
own humble way, and after having heard men in whom I have a great
deal of confidence express the opinion that an expansion of the
currency is necessary, I feel that there is no better way to do this than
through the enactment of this bill, the Patman bill, or some other
bill along that line, that would expand the currency to the extent of
about $2,000,000,000, which in my opinion would be the most helpful
thing that we could do now.
We have passed legislation which I felt it my duty to support with
some misgivings. I voted for the Reconstruction Finance Corporation
bill, for the Giass-Steagall bill, for those bills that I thought would
help stabilize business and the banking institutions of our country,
but I do want to say that I believe the passage of this bonus would
be far more helpful than anything we have done so far, and I consider
it to be the most important thing that we could do at this session of
In conclusion I want to say that I am whole-heartedly in favor of
the passage of this bill or some bill along this line at this session of
Mr. CRISP. We want to thank you for your attendance.
Mr. PATMAN. The next speaker is Mr. Fred Beard, representing
the Veterans of Foreign Wars.


Mr. Chairman and gentlemen of the committee, I had the privilege
of testifying before your committee one year ago, at which time the
50 per cent loan was made available on adjusted-service certificates.
It has been said that this loan did little or no good toward relieving
conditions. I believe that this is untrue, because in my investigations and in interceding in the public welfare in behalf of veterans I
have yet to find one case where the veteran has used his loan for
other than justified expenditures and in a great number of cases the
loan has been the means of a readjustment whereby the veteran has
become self-supporting.



In appearing before your committee last year, I made the statement
that the veteran believed that the face value of his adjusted-service
certificates was due and payable and that he had made up his mind
to collect. This is doubly true to-day. A year ago the veteran
knew of the bonus to the railroads, the contractors and civilian employees. In the short year he has learned of the moratorium and the
reconstruction loan. He has been promised employment by Government agencies. He has read in the newspapers daily of the thousands
of jobs being secured for the unemployed. He has lined up day after
day for one of these jobs, and if he has been fortunate enough to
secure one, he has spent 12 cents car fare, an hour each way to and
from the job, a couple of hours carrying out ashes and cleaning a
basement, and received the magnificent sum of 75 cents or an average
wage of less than 20 cents an hour in a city where 75 cents will not
produce a meal for a family of five.
Mr. Chairman and gentlemen, these unemployed veterans I am
telling you about are disabled to a greater degree than our gunshotwound cases. Their disability is hysteria. True, it is temporary,
but unless something is done, and quickly done, one can not predict
where this hysteria will lead.
I am a resident of Dearborn, Mich., and saw the results of the
recent trouble there. I was a member of the Illinois National Guard
at East St. Louis, and was in Houston, Tex., during the mutiny, and
riot there, and am afraid if some solution is not found immediately,
-we will be having similar trouble in a great many of our cities.
I sincerely believe that if the balance of the adjusted-service
certificate is paid at this time, that the veteran who has only been
able to eke out a mere existence for the past two years will use his
money to readjust himself, and in a great percentage of cases this
readjustment will be permanent and make him self-supporting.
Thank you.
Mr. CKISP. We thank you for your testimony.
Mr. PATMAN. Mr. Chairman, I desire to insert in the record at
this time one paragraph from the Federal Reserve Bulletin. It is of
date March, 1932, issued by the Federal Reserve Board at Washington. I shall insert the entire paragraph, but this particular sentence
I desire to invite to the attention of the gentleman from New York
who raised the question a few days ago. The Federal Reserve
Board, in discussing excess reserves, makes this statement:
On the basis of these excess reserves, the Federal reserve banks could issue
$3,500,000,000 of credit, if the demand were for currency, and $4,000,000,000 if
it were for deposits at the reserve banks.

Mr. CRISP. Without objection, it will go in the record. (The
paragraph from the Federal Reserve Bulletin referred to is as follows:)
Under the terms of the Federal reserve act the Federal reserve banks must
maintain a 35 per cent reserve in gold or lawful money against their deposit
liabilities and a reserve of 40 per cent in gold against their notes. On February
24, for instance, the reserves of the Federal reserve banks were $3,140,000,000;
Federal reserve notes in actual circulation were $2,643,000,000, and deposits
$1,973,000,000. The 35 per cent reserve against deposits would be $691,000,000
which would absorb all of the $202,000,000 of reserves other than gold and in



addition $489,000,000 of gold, and the 40 per cent reserve against Federal reserve
notes would be $1,057,000,000, so that the total reserve requirements would be
$1,392,000,000. This figure represents the total amount of gold on which the
Federal reserve system could base additional credit. On the basis of these
excess reserves, the Federal reserve banks could issue $3,500,000,000 of credit, if
the demand were for currency, and $4,000,000,000 if it were for deposits at the
reserve banks. There is nothing in the new legislation that in any way changes
these maximum amounts. It does, however, have an important bearing on the
manner in which the extension of credit can be accomplished under the law.

Mr. PATMAN. The newspapers have, I think, pictured up just a
little disorder in a way that has been just a little bit unfavorable to
our cause, and I do not feel that we had anything to do with it. I
noticed that my home papers, and papers from different sections of
the United States, referred to the fact that uniformed policemen are
in this committee room at all times for the purpose of maintaining
I believe that the chairman of this committee would truthfully say
that the only disorder we had did not come from the proponents of
this proposition. The only disorder we had was from the two men
from New York who spoke here and complained because I had not
given them time, and I had not given them time because I did not
know whether they were for the proponents or against the proponents, and I merely asked them to let me, or some member of the
committee whom I selected, see their statement—and they had it
written out—not for the purpose of censoring their remarks, but for
the purpose of seeing if we considered it favorable to our cause, in
order that we might determine whether or not we wanted to put them
on, which they refused to do, and we decided that we would just
wait until we had more time to look into it further.
That is the only disorder that I know of happening before the committee.
Mr. CRISP. May I make a statement?
I will take this opportunity to make this statement: I have been
present at all of the hearings on this bill, except one morning when
I had to excuse myself about half past 10 to meet some ladies from
Georgia who had to see the Georgia delegation and to appear before
the Committee on Rivers and Harbors in support of a waterway
project in my own district.
I have been on this committee, I think, 17 years, and I have nevei
known of a more courteous, quite, orderly proceeding of the committee than has happened during this hearing. I know that I have
tried to be courteous, and I know the witnesses and the persons in
attendance have been courteous, and we are all giving the matter
the serious consideration which it deserves.
The two witnesses to whom you refer came to me privately, and
I explained the order of procedure and that they would be heard.
They stated that you, Mr. Patman, would not put them on. I told
them that when you got through I would try to hear them. I will not
repeat what happened in the room here. I was advised
that morning
that they had said that they were going to "raise hell7' in here, and I
was determined that they should not "raise hell" in here, and when
that matter started I then told the clerk, in open hearings, to send out
and get some police, and those are the only police that I have known
to be in here and they were brought in here especially to quell any
attempt to "raise hell" in here by those two witnesses.



Mr. PATMAN. I want to thank the chairman for that fair statement
of what actually occurred.
Mr. MCCORMACK. May I suggest for the record that these two
witnesses were heard upon the permission of the committee itself,
and that they were not offered by the proponents of this legislation?
Mr. CRISP. They were heard, and their testimony is in the record.
Mr. MCCORMACK. And the evidence clearly indicates that they
believe in communism.
Mr. CRISP. And the evidence indicates that the cause would have
been better off if we had paid no attention to them, but I do not think
we will pay any attention to their testimony.
Mr. PATMAN. At this time I desire to insert a copy of the act of
March 14, 1900.
The currency that will be issued to pay the certificates will be on a
parity with gold. This is required under the law. Section 314 of
Title 31 of the United States Code provides:
The dollar consisting of twenty-five and eight-tenths grains of gold nine-tenths
fine shall be the standard of unit of value, and all forms of money issued or coined
by the United States shall be maintained at a parity of value with this standard,
and it shall be the duty of the Secretary of the Treasury to maintain such parity.
(Act of March 14, 1900.)

I also ask permission to insert, at the request of more than one
member of the committee, a statement of the war profits that were
made by different concerns during the war, and showing the adjustment of those contracts shortly after the war. I shall prepare the
statement myself.
Mr. CRISP. It will notfbe voluminous, will it?
Mr. PATMAN. NO, sir. ""
Mr. CRISP. Without objection,

that may be done.
(The statement referred to is as follows:)

Let the following letter answer the question:


House of Representatives, Washington, D. C.
M Y DEAR MR. PATMAN: I have your letter of October 3, 1931, asking for certain
information resulting from the study you understand the Veterans' Administration
to have made concerning the direction in which the veterans spent money obtained
from loans on their adjusted-service certificates.
You are advised that a general study on this matter has been made, which permits the following broad conclusions in answer to your questions:
(1) The average per cent of veterans obtaining loans for personal and family
needs was 65 per cent.
(2) The per cent of veterans who used funds secured for investment purposes
was 20 per cent.
(3) The per cent of veterans who used funds secured for the purchase of
automobiles, purpose undetermined, was 8 per cent.
(4) The per cent of veterans who utilized funds in such a way as to receive no
practical benefits therefrom was 7 per cent.
You will realize, of course, that these average percentages are estimates based
upon such data as might be secured and upon such impressions as may have been
gained by our managers and by those with whom our field managers came in
contact. The final figures were secured by average field returns. Generally
speaking, it is felt that of the 2,000,000 loans made, the data fairly represents the
direction in which the money was expended.
I might add that endeavor was made to determine the degree of employment
among those securing loans, and from the available data secured it appears that
32 per cent of the veterans obtaining loans were unemployed and in need and



utilised funds secured by borrowing on their adjusted-service certificates to meet
that need.
The foregoing represents the only data which are thus far available as a result
of this study.
Very sincerely yours,
FRANK T. HINES, Administrator.
The money used for investment purposes included payments on homes;
Many of the veterans are paying 10 per cent interest on installment loans on
their homes.
According to this report, about 750,000 of the veterans borrowing were unemployed. The number has not decreased since that time. These men are very
much in need of the additional money due them to provide necessities of life for
themselves and families.

At the last session of Congress the opposition to paying adjusted-service certificates in cash contended that the Government would have to pay as much as
4}£ or 5 per cent interest for as much as $1,000,000,000 or more; they also predicted that Liberty bonds would go below par by reason of that amount of bonds
being sold.
Neither prediction came true. Since that time the Government has obtained
money from less than one-half of 1 per cent annual interest to 2 per cent interest.
The Liberty bond market was not unduly disturbed.
Foreign countries are obligated to pay us more than $10,000,000,000; they are
required under the agreements to pay us a substantial sum each year. They
reserved the right, however, to make payments in our own bonds at par and
accrued interest. Liberty bonds went slightly below par before England made
her first payment in 1924. She paid us on thefirstpayment $27.44 in cash and the
remainder of $69,000,000 in our own bonds at par and accrued interest. It was
good policy for England to pursue in paying this debt. United States Government bonds did not go below par any more. If they had, either of the foreign
nations owing us would have quickly bought them to use in paying the debt.
But Mr. Mellon made a trip to Europe last summer. Since that time European
debtors of the United States have not been in the market for any more of our
Liberty bonds; they have gone much below par since that time. Are we justified
in saying that Mr. Mellon promised our European debtors that the war debts
will be canceled? Such a conclusion is certainly logical. The French have lots
of gold; they like to save money; if they thought France would have to resume
payments in 1 year or 10 years on the war debt, don't you think they would
buy our bonds at 90, whichthey can use for 100 cents on the dollar?

It is the mandatory duty of Congress under the Constitution of the United
States to coin money and regulate the value thereof. Congress is not performing
that duty. Mr. Mellon, as chairman of the Federal Reserve Board, has complete
charge of our mor<vy system. He coins the money and regulates the value of it.
Congress should not longer tolerate this condition.

When our Nation owed $10,000,000,000 more than it owes to-day, or $26,000,000,000, the railroad owners, war contractors, and Federal employees were paid
billions of dollars in adjusted compensation in cash. Foreign nations were also
given billions of dollars; and they used our money to pay their veterans adjusted
•compensation in cash. Those who are opposing the payment of the adjustedservice certificates did not claim we could not pay these debts in cash, or that it
would disrupt Government finances to give foreign countries billions of dollars.
These certificates can easily be paid in cash. They do not want them paid and
will not try to find a way to pay them. They are so biased in favor of their own
financial interests and Wall Street bankers and so prejudiced against the veterans
and the plain people their opinions and predictions can not be accepted, but must
be ignored.
This debt should be liquidated like all other Government obligations are
liquidated. No special favors are asked, only the payment of an honest debt
that Congress has heretofore confessed is due to the veterans of the World War for
services rendered.




The railroads, property rights, were drafted into service December 26, 1917,
effective January 1, 1918. Congress immediately passed what was known as
the Federal control act; the first section of that act contained this language:
"The President is authorized to agree and guarantee to each carrier that
during the period of such Federal control it shall receive as just compensation
an annual sum, payable from time to time in reasonable installments, for each
year and pro rata for any fractional year of such Federal control, not exceeding
a sum equivalent as nearly as may be to its average annual railway operating
income for the three years ended June 30, 1917." (Passed February 28, 1918,
p. 2835, Congressional Record.)
The three years just before June 30, 1917, were the most prosperous years in
the history of railroading in the United States. This act guaranteed to the railroads over a billion dollars a year actual profit.
When the war was over the railroad owners wanted a guarantee from the
Government that they would make a big profit after the roads were turned back
to the owners. This guarantee was given by Congress for six months, or from
March 1, 1920, to September 1, 1920, which cost the Government $536,000,000,
in addition to the billion dollars a year profit during Federal control. In all
the railroad owners were paid adjusted compensation amounting to $1,500,000,000.
The ex-service men, when mustered out, and without employment, did not
receive any such guaranty.
Railroad owners received in cash from the Government as much as one-third
the value of the entire railroad as adjusted compensation in their settlements,
after the war.

In addition to all this, the act known as the Esch-Cummins law, which returned
the roads to their owners, provided that the Interstate Commerce Commission
was directed to ascertain the value of the railroads according to certain rules
therein and to set rates that would give the carriers a fair return upon the valuation. This law increased the valuation of the railroads more than $7,000,000,000.
If 3,500,000 war veterans who are now holders of adjusted-service certificates
had received an adjusted-service credit equal to what the railroad owners received
in cash and other benefits, each veteran who now holds a certificate for $1,000
would instead have a certificate for $5,000, and the veteran who holds a certificate
for $1,575 would instead have a certificate for $7,875.

After the war 7,000 war contractors came to the door of Congress and demanded
that their pay be adjusted because the war had stopped and they were therefore
not making the money they should make.
Congress passed a law adjusting the pay of these 7,000 contractors invoking
the same principle that was invoked for the soldiers of adjusted pay. The
Secretary of War was authorized to adjust the pay of these contractors without
even a commission's investigation. In fact, many of them were paid upon
reports made by dollar-a-year men who were directly interested in the industries.
These industries have been paid more than $2,000,000,000 of adjusted pay by the
Government. Were they asked to take a due bill or a post-dated check payable
in 20 years? No; they were paid in cash, and no one suggested that the Government was not able to pay the bill, although its burden at that time was in excess
by billions of dollars to what the burdens of the Government are at tjiis time.
Secretary Mellon, who represents most of the opposition to the payment of the
adjusted-service certificates, probably profited more by reason of these settlements than any other individual in the United States. Read about what an
investigating committee of Congress said about some of his companies profiteering
during the war.

During the war the Canadian enlisted men were paid $33 a month, the enlisted
men of New Zealand $37.50, and in Australia $45 a month.
Alien slackers and alien enemies in America made more money during the war
helping to build ships and military camps than they had ever made before, and
financially they were treated much better than our soldiers. One negro made
$70 per day in the shipyards and also escaped military service.



The railroads were drafted into the service during the World War, but the
owners were guaranteed the largest profit they had ever made in the history of
railroading in America.
Property being guaranteed a handsome return, and the ship workers having
received such enormous wages and escaped military service, the men who bared
their breasts to enemy bullets and brought victory to our country should likewise
receive a fair return for their services. Out of the $30 or $33 our soldiers received,
they were compelled to pay out of this sum $6 to $10 a month for insurance for the
risk incident to his services in protecting the flag and conserving the wealth of his
country. Soldiers were also compelled to make allotments of their pay to dependent relatives, and, in addition to this, were compelled to pay for altering and
mending their own clothing and shoes and for laundry work and other incidentals.
The average soldier drew $7.50 per month, after making all these payments, and
with that he was required to buy Liberty bonds or be called a slacker.
Every country allied with the United States during the war paid their soldiers a
liberal bonus. Canada paid her soldiers from $600 to $4,500. England borrowed
money from the United States and paid her own soldiers a bonus of from $280 to
$4,758 each. France paid her soldiers a large bonus. The United States paid
$60 to each soldier as a bonus, but required them to pay it back in arriving at the
amount of adjusted-service certificates.
The whole cost of war to the United States was $36,000,000,000 and eighteen
billions went to make millionaires; 23,000 millionaires were made during the war
and from settlements with the Government in and immediately after the war.
Thousands of men made enough money from the Government on war contracts
to permit them and their families for the next five generations to live in peace and
comfort and enjoy all the luxuries of this world without so much effort as the turn
of the hand, while soldiers who fought in the trenches for $1.10 a day will have to
work and help pay the bill.

The Bureau of Internal Revenue is under the control of the Secretary of the
Treasury. In 1924-25 a committee composed of three Republicans—Senator
Couzens, of Michigan, chairman; Senator Watson, of Indiana; Senator Ernst,
of Kentucky—and two Democrats—Senator Jones, of New Mexico, and Senator
King, of Utah—made an investigation of the Bureau of Internal Revenue. The
following represents some of the disclosures of that committee:

Amortization of war facilities, which were allowed by Mr. Mellon to April 30,
1925, $596,934,813.26. Claims pending, $75,171,169.87, or a total of $672,105,983.13. (Pp. 4 and 132, report Couzens committee.) These companies claimed
they did not deduct a sufficient amount for depreciation during the war. This
was in addition to hundreds of millions of dollars received by these war contractors in adjusted pay under the bill passed in 1919.

"All amortization allowances exceeding $500,000 have been reviewed by the
committee's staff and improper allowances in this class alone appear to amount
to $21O,665,36P.4O." (P. 4, report.)

A very substantial portion of the amortization allowances have been upon
facilities contracted for in 1916 but not completed and paid for until after April
6, 1917. Such facilities, having been contracted for prior to April 6, 1917, were
acquired for the purpose of participating in the profits incident to the sale of
materials by the Allies, and were not acquired for the purposes contemplated
by this act. (P. 135, report.)

(Page 137 of report)
Among refunds granted Mellon companies prior to June 1, 1921, about two
million to Standard Steel and four million to Gulf Oil. (Page 195, report.) (He
has granted large refunds to himself and his companies since that time.)




This company is practically owned and controlled by A. W. Mellon and his
"The cost of producing aluminum can be roughly calculated with sufficient
accuracy for all practical purposes to show why the Aluminum Co. of America
in the past 10 years has never made less than $10,000,000 per annum on a
capital stock of about $18,000,000, and why the equity value of that stock
is in excess of $110,000,000, all of this on an original investment of $20,000. It
should be stated parenthetically that there is nothing reprehensible per se in
running a $20,000 shoestring to over $110,000,000, but a company capable of
this financial success is certainly not in need of protection from competition."
(P. 3760, Congressional Record, February 17, 1930, quoting from record of
February 23, 1926.)
This company not only enjoys tariff protection but operated in violation of a
consent decree issued against it for violating the Sherman antitrust law. (P.
3758, Congressional Record, February 17, 1930.)
The company received a large settlement for adjusted compensation on its war
contracts. In addition, Mr. Mellon has granted it the following settlement since
he became Secretary of the Treasury:

The Aluminum Co. of America submitted its original claim for amortization,
1919, for $6,852,697.36. First supplemental claim filed December, 1921, for
$18,124,339.28, and next supplemental or final claim filed April, 1923, for
$18,268,435.82. (Pp. 1847 and 1848, Couzens committee hearings.) Granted
on claim, $15,589,614.39.
It will be noticed that the company raised its claim after Mr. Mellon became
Secretary of the Treasury, March 4, 1921.

Graham committee, being a select committee, on expenditures in the War
Department, House of Representatives, 1919, was composed of 10 Republicans
and 5 Democrats.
A part of the committee's report will be commented upon:
[Excerpt from Committee's report]

"A by-product coke-oven program put on by one of Mr. Mellon's companies,
the Koppers Co., during the war cost the Government $28,641,932.18, of which
$16,737,932.18 was expended and will not be repaid. (Graham committee report,
p. 63, No. 1400.) The Government received no products from any of these
plants, either for war or salvage purposes."
The Koppers Co. was the owner of the patent on by-product coke ovens. A
German owned 20 per cent of the stock in this company. The Alien Property
Custodian seized it during the war, and it was sold to Mr. Mellon and his associates September 13, 1918, during the St. Mihiel drive in France, for $300,000,
when it was reasonably worth several times that amount. It was a closed
corporation and only the purchasers were in a position to know its value at the
time of sale.
Mr. Mellon was a director of this company during its war activities. (Directory of Directors, Pittsburgh, Pa., 1917-18 and 1919.)

This company has a contract in Russia at this time to construct steel mills
and by-product ovens of the value of $200,000,000. The contract was made
the latter part of 1930, and the company commenced immediately to send its
American engineers to Russia to carry out the contract. It is known that Mr.
Mellon still owns his interest in the Koppers Co.
A part of this company's activities during the war is told by the Graham
investigating committee in the Jones & Laughlin Steel Co. case. Notice that
the company began early to have a controlling influence in the ordnance department and about its own employees getting positions in this department; they



drew two salaries, one from the Government and one from the Koppers Co.
Notice, too, that prospective and possible profits were allowed war contractors
in their settlements with the Government after the war. A part of the report
is as follows:

"This company had a contract, made in August, 1918, with the Government
to erect 300 by-product coke ove^ns on the lands of the company at Pittsburgh,
which were to take the place of old beehive ovens that the company had been
using in its business of making steel. The Government was to take the toluol
and ammonium sulphate for two years produced by these ovens and was to pay
$1.50 a gallon for the toluol and $90 a ton for the ammonium sulphate. , The
contract estimated the production of toluol at 810,000 gallons a year and the
ammonium sulphate at 24,000 tons a year. Nothing was produced, the ovens
being about one-half completed when the armistice was signed.
"The production of toluol was in the hands of a bureau in the Ordnance
Department. The making of these contracts was opposed by experts from the
Bureau of Standards and elsewhere, in the Ordnance Department, as unnecessary and improvident. However, they were made. The H. Koppers Co., a
company making and building a by-product coke oven, began to have a controlling influence in this department. About the time the contract was made the
following persons were employed in the department: Capt. Horace, C. Porter,
in charge of toluene production and distribution. He was, from 1915 to the time
he entered the War Department, chemical engineer of the H. Koppers Co., and
during at least part of the time he was an officer drawing a salary from the
Koppers Co.
"Lieut. Arthur It. Gray was the officer in charge of distribution; he, from
1915 to 1918, was purchasing engineer for the Koppers Co. Mr. H. P. Zellar,
who had charge of investigations and efficiency studies of coke ovens, was, at
the time of his entrance, superintendent of a by-product coke-oven company,
and left the department in January, 1919, to accept a position with the Donner
Union Coke Corporation, at $12,000 a year. Mr. C. J. Ramsberg was a technical
expert in the toluene department; he was also vice president of the Koppers Co.
He worked two days a week for the Government and four days for the Koppers
people and drew a salary from both. Mr. H. B. Kirkpatrick was also a technical
expert. He was an employee of the Koppers Co. and drew a salary from both
the Government and the company. There was another technical expert named
Engleman; he left the department to take a good position with the Birmingham
Coke & By-Products Co. Of course, the Koppers ovens were used by Jones &
Laughlin, and in most of the Government work.
"When the contract of Jones & Laughlin was suspended they filed their claim.
Early in January some claims-board men, and by-product coke-oven people
met in New York. They fixed a value on toluol at 17% cents a gallon and on
ammonium sulphate at $60 a ton; why, nobody knows.
"At this time, on account of the armistice, the market was greatly depressed.
Acting at the time of greatest depression these prices were fixed. Almost as
soon as settlements were made with the producers of toluol and ammonium
sulphate at these figures the prices reacted and rose. Then they settled with
Jones & Laughlin, estimated their full production for two years, and gave them
the difference between 17% cents and $1.50 a gallon and $90 and $60 a ton.
"In the judgment of this subcommittee, this settlement was fraudulent per se.
Further reference to this general subject will be made in another report of this
committee on by-product coke ovens."
(Only excerpts from committee report have been copied.)

Probably more scandal was connected with the Standard Steel Car Co. in its
dealings with the Government during the World War than any other warprofiteering company. Mr. Andrew W. Mellon, Secretary of the Treasury, was
a director of that company. (Directory of Directors, Pittsburgh, Pa., 1917,
1918, and 1919). In addition to his own interest in the company a large part
of the stock of the Standard Steel Car Co. was owned by the Mellon National
Bank, and the Mellon-Stewart Construction Co. Mr. Andrew W. Mellon was
president of the Mellon National Bank and a director of the Mellon-Stewart
Construction Co.



The Graham investigating committee in its report on expenditures on the
Ordnance Department stated the following:
"As has been said, this company contracted to build nine hundred and sixtyfour 9.5-inch howitzer carriages. Although the Government prepared several
contracts, the company would never enter into one. The Government did not
receive a single carriage that we could use prior to the Armistice. The War
Department spent in this venture $18,582,428.88. After the Armistice the
Ordnance Department had them finish 200 of these carriages. The company
placed in the record a statement that the cost of production was about $23,000
each. At this rate the total cost of production was about $4,600,000. The
balance of this vast sum, or about $14,000,000, was used in overhead, and in building an immense plant, filled with costly machinery, all of which the contractor
now has. The company was permitted to take buildings and machinery that cost
$2,987,200 for $600,000, and materials that cost approximately $5,558,000 for
$300,000. There was a bid for this latter material of about $700,000 from another
reliable firm, which Col. E. S. Hughes, negotiating officer, concealed from his
associates. The arsenals of the United States were clamoring for this raw material
and machinery, but they were handed over to the contractor. There was fraud
and bribery admitted by the Government agents in some of the subcontracts,
but all such accounts were allowed in full.
" A member of the War Claims Board at Washington wired to know if the claim
had been audited. He received an answer from a member of the Chicago board
to the effect that it had. The answer was false. All this time the Government
accountants were protesting against the allowance of it. The company stole a
carload of small tools from this plant and removed them clandestinely to their
own plant. The wonderful machines which they took from the Government as
junk they have since sent to their subsidiary factories for use.
'' Three million dollars was allowed on this claim, without an audit, by a negotiated settlement, only $800,000 of which was profit on manufactured goods,
according to the contract, and the balance was for various items—"carrying
charges, unabsorbed administration expenses," etc. (1678).
"The subcommittee is of the opinion that the settlement of this claim constitutes a palpable fraud upon the Government and that Col. E. S. Hughes, an
officer of the Regular Army, willfully violated the military code in what he did."
The Standard Steel Car Co. built a three or four story hotel, costing more than
$100,000, near its steel plant at Hammond, Ind., during the war. Officers of the
Government who were supervising the war contracts with this company were
given free accommodations at this hotel along with the Standard Steel Car Co.
officials. It was known as a club. The officers received their per diem expenses
from the Government and accepted hotel accommodations free from the company.
(Graham committee, series 6, vol. 2, pp. 1970—1971.)

"The Standard Steel Car Co. had a number of contracts; they had this contract
for the 240-millimeter carriage, and also a shell contract, and they had at the
Worcester plant a contract for 155-millimeter carriages, and at the "Butler plant,
outside of Pittsburgh, I do not know just what they had there. They also had
contracts from the Railroad Administration making cars; they had a great many
contracts, they were making both passenger and freight cars." (Mr. Russell
before Graham committee, 6-2, p. 1755.)

Excerpt from testimony of Mr. Lewis J. Blakey, formerly assistant supervisor,
Ordnance District Claims Board, Chicago, 111., before Graham committee, 1919,
series 6, volume 2, page 1693:
"Mr. JEFFERIS. Who are the leading men of this Standard Steel Car Co.?
"Mr. BLAKEY. Mr. John M. Hansen is president, and, as I understand, it is
backed by the Mellons, the bankers in Pittsburgh, and the Mellon-Stewart
Construction Co. is interested.
"Mr. JEFFERIS. Who was this man Cory that you say went back to Washington?
"Mr. BLAKEY. All I know about Cory is that he was employed all during the
war and had an office here in Washington, and we called him their 'political
representative' here in Washington."



Further testimony disclosed that Cory and Hughes were together a great deal
and had many conferences in connection with the claim of the Standard Steel
Car Co. Cory is assistant to the president of the Standard Steel Car Co.

During the war all the companies producing copper formed a trust. One of
these companies was the American Metal Co. (Graham committee ser. 6-1,
p. 276). Mr. Andrew W. Mellon was at that time a director of that company.
(Directory of Directors, Pittsburgh, Pa., 1917, 1918, and 1919.) The Graham
investigating committee, which filed a report of expenditures in the Ordnance
Department, March 2, 1921, had this to say about the Copper Trust:
"The companies who thus united in the combination that authorized the United
Metals Selling Co. to act as their agent were the Anaconda Copper Mining Co.
and 26 other companies.
"It is in testimony that the United Metals Selling Co. under this arrangement
represented practically all the copper producers in the United States.
"As soon as the arrangement was made with the Government by the cooperating copper companies through the common agent, the United Metals Selling Co.,
four things were accompanished; first, all competition was eliminated; second,
all expense of selling and finding a market was eliminated; third, the possibility
of all loss from bad accounts was eliminated; fourth, the market was absolutely
under the control of the American producers of copper.
"Mr. Baruch, a member of the War Industries Board, appointed one Eugene
Meyer, jr., as his representative, and who in turn requested all copper producers
to arrange for a copper producers' committee. Mr. Meyer, at that time, had
large copper investments and was heavily interested in the business.
"To illustrate the profits made during this period by some of the copper
companies, four instances are cited:
"The Utah Copper Co. in 1917 made a profit of $32,000,000, which was 200
per cent of its capital stock, and in 1918 a profit of $24,750,000, which was 150
per cent of its capital stock. The Calumet & Hecla Mining Co. in 1917 made a
profit of $9,500,000, or 800 per cent of its captal stock, and in 1918, $3,500,000,
or 300 per cent of its capital stock. The Inspiration Consolidated Copper Co.
in 1917 made a profit of $12,260,000, or 55 per cent of its capital stock, and in
1918, $9,250,000, or 40 per cent of its capital stock. The Kennecott Copper Co.
in 1917 made a profit of $11,826,000, or 70 per cent of its capial stock, and in
1918, $9,390,135.90, or 60 per cent of its capital stock. It is probable that other
companies in the list made similar profits, but the exact information is not
available without a careful and detailed audit of the books of those various
"The profits given here are net."

The Graham committee was so shocked at the way the war profiteers robbed
the Government during the war that it recommended on page 148 of its report
No. 816, filed April 10, 1920, that the Constitution of the United States be so
amended as to make such unconscionable taking of the Nation's resources in
time of war be made treason. That part of the report is as follows:
"Your committee respectfully recommends that an amendment to the Constitution be drawn and submitted to make profiteering in war times treason.
"Article 3, section 3, of the Constitution of the United States provides that—
" 'Treason against the United States shall consist only in levying war against
them, or in adhering to their enemies, giving them aid and comfort.'
"Modern war has been called 'technical war/ and we now know what such
technical war means in the straining to the utmost of the resources of the Nation.
What can then be more dangerous or give more ' aid and comfort' to the enemy
than that which seriously strikes at and impairs such resources? All profiteering does this. It is common knowledge that the profiteering during this war
has been great, but what proportion of the $22,000,000,000 expended falls under
the head of profiteering will probably never be known.
"While hindering the Nation's war program by impairing its resources through
profiteering is, to that extent, giving aid and comfort to the enemy, still it is
clear that it may not be, and probably is not, coupled with such personal adherence to the enemy as is necessary to bring such conduct within the constitutional definition of treason. Your committee appreciates fully the serious-



ness of enlarging the constitutional definition of treason. However, it assumes
to be a certainty that in every future war a strict censorship will be in force,
thus practically suppressing criticism, whether honest or unwarranted. That
being so, it would seem additionally necessary, as far as possible, to provide
against the recurrence of those things which should be criticized. And it is the
deliberate judgment of your committee that effective legislation to prevent
profiteering is one such much-needed step.
"Realizing, as it believes fully, the seriousness of its recommendation because
of the seriousness of the need, your committee respectfully recommends that a
constitutional amendment be prepared and submitted for ratification, so amending the constitutional definition of treason as to include thatr form of unconscionable taking of the Nation's resources in time of war, w hich is commonly
known as profiteering.
"It suggests the following language for consideration:
"That Article III, section 3, of the Constitution of the United States, be
amended by inserting a comma in lieu of the period at the end of the first sentence
thereof, and adding the following: 'or in giving them aid and comfort by injury to the military, physical, or financial resources of the United States.'

" Whoever is convicted of treason shall suffer death; or, at the discretion of the
court, shall be imprisoned not less than five years and fined not less than $10,00(1
* * *." (T. 18, pt. 1, sec. 2, Criminal Code and Criminal Procedure.)

During the past few years international bankers in New York City hare
loaned to Germany more than $3,000,000,000. Many of these loans bear a
high rate of interest. They were also purchased from Germany in many instances at a big discount.
England and France owe the United States many billions of dollars. This
money was loaned to these countries during the World War, except about two and
a half billion dollars, which was loaned after the signing of the armistice.
Under the agreements between the United States and these latter countries
they are supposed to pay our Government more than a quarter of a billion a year.
They are not asking that this amount be reduced. They are not objecting to
making the payments.
However, Germany has been telling the international bankers and Wall Street
that she can not pay France and England and also her obligations due to them.
Therefore, some of our so-called great statesmen devised a plan for our Government that will permit England and France to fail to pay our Government the
quarter billion dollars each year, with the understanding that England and France
will forego the collection of a like sum from Germany, and with the further
understanding that Germany will pay the Wall Street bankers.
This is nothing more nor less than the Government of the United States paying
Wall Street bankers more than $3,000,000,000.
The Government of the United States owes 3,500,000 veterans of the World
War a remainder of about $2,000,000,000 on their adjusted-service certificates.
This is an honest debt that has been publicly confessed by the Congress of the
United States for services rendered.
If France and England are required to continue to make their payments to
the United States, the debt to the soldiers can be paid without the least embarrassment to the Treasury of the United States. The question occurs, Which will
promote the general welfare to the greatest extent—paying Wall Street bankers
a bonus of $3,000,000,000 or the veterans an honest debt of $2,000,000,000?
Three hundred million dollars paid Government employees who drew $2,500
or less in adjusted compensation. This was paid during and after the war.
Extra pay amounted to $20 a month, or $240 a year. (P. 4882, C. R. 2/28/23.)

I want to call your attention to a proposition that is on all fours with this.
When the war was over and the agricultural and the post office bills before the
House there was a rider attached in the Senate providing that all veterans of the
World War, during a certain period, who worked on the public roads in the United
States should receive adjusted pay equal to the difference between what the
Government paid them as privates or corporals or sergeants and the amount a



civilian would have received under the same circumstances rendering identical
f-%Here is just one illustration: Barney Allen, of Tennessee, whose military title
was a corporal, received pay of $1.66^ a day, while the civilian working by his
side received $8 a day—the difference being $6.33. Barney Allen received
$158.23 for that month's work in adjusted pay in addition to his regular pay of
He worked side by side with a civilian, and this Congress said that that man
is entitled to adjusted pay equal to the difference he received and what he would
have received as a civilian. The amount was $6.33 a day, or $158.25 for the
month. He was paid this and he did not have to* wait until 1945.
I submit to you, my friends, then, when you allow the veterans for home service
$1 a day and the overseas man $1.25 a day it ought to be paid as of 1918, when the
services were rendered.
Total debts canceled by United States owing by foreign countries
[Congressional Record, p. 10513, June 2, 1926]
Date of agreement


Great Britain



—_ May
- Nov.


Total canceled
on 4H per cent
interest basis
$463, 221,500.00
2, 505,365.00
10,705,618,006. 90

Mr. PATMAN. In regard to the issuance of the money, I just merely
want to make this statement. I presume the committee realizes that
we are about to close this case, and I just wanted to mention some
of the things that have happened.
The money that would be issued under the plan I have proposed
would be like this money that is known as United States notes. There
would be no way to distinguish that money from any other money,
and it would be backed by the same amount of gold that United
States notes are backed by. There would be no reason on earth why
it should depreciate in value and other money would not depreciate
in value. It would be convertible into gold the same as United
States notes are convertible into gold under that 1891 act.
Mr. RAGON. May I ask the gentleman some questions when you get
Mr. PATMAN. May I finish this one comment, if the gentleman will


Mr. PATMAN. NOW, there are three plans that I think this committee will probably seriously consider, and I know that all the members of the committee have been very nice and considerate, and for
myself and for those who are interested in this cause, we desire now
to thank you, each and all of you, for the careful and courteous consideration that you have given to this cause. We know that you are
just as anxious to do what is right as we are. You have the interest
of the people just as much at heart as we have. We do not question



your motives or intentions now, neither will we question your motives
or intentions if you were to decide against us in this case.
But, in concluding, I want to mention the three plans. First there
is the plan that I have suggested, about the issuance of this currency,
which would be backed by gold, and a sinking fund for its retirement
if you should desire to retire it, but I do not believe that you will ever
desire to retire it once it is put into circulation, because it will be money
that the people can use upon which no one will be paying interest.
Other people say that we should get it from the Federal reserve system.
On that money, interest must be paid.
In order to build up this sinking fund for the purpose of retiring this
money, we would use the same sinking fund that is now being built
up to retire the certificates in 1945, and I suggest for the consideration
of the committee that the payments that are due on the war debts be
considered as one way of building up this reserve. That is about twice
as large each year as is necessary to build up this reserve to retire these
certificates in 1945, and, of course, the money, if it is issued now, would
not be fiat money, no more fiat money than any other paper money
that you have. No person has a right to call that fiat money unless
he calls all paper money fiat money. I know it is a term that carries
a great deal of force and prejudice along with it, but it is not fiat
The second plan is the Owen plan, of Senator Owen, of Oklahoma,
and the other day he conferred with a large group of Members of
Congress—I presume that there were about 30 Members there, those
that we could assemble quickly who were interested in this cause, and
Senator Owen suggested that although he is favorable to my plan and
that, as he said, it would be a godsend to the Nation, yet, if those who
are the most conservative ones object to it because it is a direct issue
from the Treasury of the United States, he had a plan to suggest for
the consideration of the committee.
Now, let me state that I think that because this money is issued
directly by the Treasury, is another reason, an added reason, why it
should be done that way. If it is issued that way, it can not be taken
out quickly. The Federal reserve banks, if they issue this money,
can take it out just as quickly as they issued it.
Mr. HILL. YOU mean that they can draw it in, and cancel it?
Mr. PATMAN. Absolutely; they can withdraw it and cancel it,
and now they have their expanding in order to meet the argument
we are making. They have confessed that they have been wrong for
many months because they have failed to expand the currency when
it was within their power to expand it, but who knows that as soon
as this Congress adjourns or as soon as the election is over that
they will not withdraw that currency and destroy it as rapdily as
they put it out into the country?
Under my plan they could not do it; it would be outside of the
scope of their authority to do it.
The Owen plan is that bonds shall be issued, say 3% or 4 per cent
bonds, and that these bonds are not to be interest-bearing immediately. The Government would not pay any interest on them,
but they would take these bonds and place them in the Federal
reserve banks to the credit of the Federal reserve agents of those
banks. The Federal reserve agents, as agents of the United States
Government, would hold these bonds as security for the currency



issued through the Federal reserve system to pay off these adjustedservice certificates, holding the bonds in lieu of the certificates, and
then Senator Owen said that if you desired to put stabilization in
this bill, to make sure that the prices do not go too high—and I do
not think it is necessary, but if you want to consider it, you can put
a clause in there that in the event commodity prices rise above the
level, say, of 1926, using 1926 as 100, and you desire to retire some of
that currency, you can permit the Federal reserve agent to sell off
enough of these bonds and withdraw a sufficient amount of currency
in order to stabilize the price level; and until the price level gets
to the level of 1926, you would not have to pay one penny of interest
on those bonds, and I believe that all of you gentlemen will admit
that you would be mighty glad to pay interest on several times the
amount of the bonds if you could only restore this country to the
1926 price level.
Now, the Thomas plan is next.
Mr. HILL. Before you get to that, who owns these bonds when
they are placed with the Federal reserve agents?
Mr. PATMAN. They will be the property of the United States
Government, placed in the hands of the Federal reserve agents to
hold, to secure the issuance of these Federal reserve notes.
Mr. HILL. And they will not be interest-bearing so long as they
are so held?
Mr. PATMAN. They will not be interest-bearing so long as they are
so held, except as a matter of bookkeeping, until they are sold, and
they will not be sold until the price level goes back over a certain
Mr. HILL. And the only purpose of placing them on sale would be
to reduce the circulating currency by the amount of the bonds sold?
Mr. PATMAN. Yes, sir.
Mr. HILL. And, after they are sold
Mr. PATMAN. They would become interest

bearing, but not before;
but I think all of us will admit that we would be mighty glad to pay
interest on those bonds.
Mr. HILL. What rate of interest have you in mind?
Mr. PATMAN. Senator Owen suggested 3K per cent or 4 per cent.
I do not make that statement. I know that even those connected
with the Federal reserve system will tell you that VA per cent would
be a reasonable rate to put there.
Now, the next plan is the Thomas plan. Senator Thomas's plan
is just to issue the bonds and to turn them over to the Federal reserve
system and let the Federal reserve system issue immediately that
amount of Federal reserve notes which will circulate as currency to
pay off the adjusted-service certificates. Under his plan, there would
be an interest charge immediately, and it would continue. Of course,
he says that only 2 per cent interest would be charged, but I do
not know whether that would be agreed upon or not. But there is
some doubt as to the constitutionality of that. Of course, I want
the committee to pass upon it and give it careful consideration, and
with that thought in view, I invited Senator Thomas to come over
here, and we gave him all the time he wanted and we also gave his
witnesses all the time he wanted.
But I believe that the plan suggested either by myself, which is not
original with me—others have advanced it for years and years as far



back as 50 or 100 years ago—and I desire no credit for it and am not
asking for any credit, but I believe that that plan or the Owen plan
would be preferable to the Thomas plan.
Mr. CRISP. Are there any questions?
Mr. EAGON. The information I wanted I suppose I can better get
from General Hines. He will be called later.
Mr. VINSON. In regard to the sinking fund, what use would you
make of it?
Mr. PATMAN. Well, there is no disposition made of the sinking
fund under my bill, and the sinking fund would continue as in the
past and then this money could be used each year, $112,000,000,
or set aside; you could either leave it there, or build up the sinking
fund as now, or you could use that money, but under my bill the
sinking fund would be continued as it is now.
Mr. VINSON. Does your bill provide the use to which the sinking
fund would be put?
Mr. PATMAN. NO; it does not, because it is a good many years
until 1945, and I believe that by that time this money will be a part
of our permanent circulating medium and you will use that three
and a half billion dollars for something else.
Mr. VINSON. Does your bill deal with the sinking fund?
Mr. PATMAN. NO, sir; it does not.
Mr. CRISP. I am under the impression that the principal and
interest collected under the Owen bill is pledged or impounded
under the law to go to the retirement of the national debt of the
United States, and the interest on the money loaned to the foreign
governments at the time the loans were made, when we were in the
war. Am I correct in that?
Mr. PATMAN. I am not sure. I am not informed.
Mr. CRISP. I think that is correct. I won't make it as positive
Mr. PATMAN. Anyway, that could easily be changed, and I think
it would be more incentive for those countries to pay that up.
Mr. CRISP. But if we had pledged that before the bonds were sold,
could Congress change that? Would that be keeping faith with the
present holders?
Mr. PATMAN. AS much as granting a moratorium without the consent of the bondholders.
Mr. CRISP. I think, as to the moratorium, that if we had not
granted it, we could not have collected.
Mr. MCCORMACK. I do not think it is part of any contract we made
with the people of the United States when we sold the Liberty bonds,
because the agreements with respect to the payments were not made
until several years thereafter.
Mr. CRISP. I will say to my friend from Massachusetts that, unless
I am mistaken, some of those original bonds have been called in and
new bonds issued to take their place after the war.
Mr. HAWLEY. My memory is that the law provided that when we
made the loans to the foreign countries we should take their securities
under the same terms and conditions as those we issued to the people
to obtain the funds with which to make the loans.
Mr. CRISP. Same interest and same maturities. We were simply
to loan them the benefit of our credit for the purpose of financing them,
to keep their armies in the field and to keep from sending more American soldiers abroad.



Mr. PATMAN. The debt funding commission, however, and I believe
the chairman will agree with me, changed that contract, and Congress
ratified the change.
Mr. CRISP. I do not know that that has any bearing here, but I was
a member of the debt funding commission, which was confronted with
the proposition of trying to salvage as much of the money already
loaned as possible. They would not pay it, and there are only two
ways to collect an international payment, by voluntary payment or by
war, and we were trying to save as much of that as had already been
loaned during the war to keep their armies in the field.
Mr. PATMAN. I was merely suggesting, in answer to the question
by the chairman, that we have a right to issue this money for that
purpose. If we had a right to make a novation of the contract at
one time, I presume that we would have a right to change it.
Mr. CRISP. Of course, the change we made was as to how much
the foreign governments were to pay us. The question of any obligation to our people who bought the bonds to furnish the money
was not, in my view, involved in that case.
Mr. PATMAN. Mr. Chairman, Sergeant York was to be here last
week. He is on a speaking tour, and Mr. Ray, the legislative representative of the Veterans of Foreign Wars, received a letter expressing regret that he could not be here, but he wants to be here at the
earliest possible date, and Mr. Ray tells me this morning that Sergeant York said that he can get here by Thursday if we still want him
to come, and we would like to have him come for a short statement
and we would like to reserve the right to use him between witnesses
at that time, if the chairman will give us permission.
Mr. CRISP. I will try to see that he is given an opportunity.
Mr. HILL. May I ask you one more question before you conclude?
Mr. PATMAN. Yes, sir.
Mr. HILL. Assuming that

the plan offered by Senator Owen should
be adopted for the payment of the balance of the bonus money, in
what way would the Federal reserve system be compensated for
handling the transaction?
Mr. PATMAN. Well, the Federal reserve system would not receive
any compensation, and I do not think it is in a position to ask too
much from the Government in the way of compensation on this,
since the Government is helping out the Federal reserve system so
much in other ways. You know that the credit of the Nation is
behind all the notes issued by the Federal reserve system, and since
the Federal reserve system has been permitted to borrow on the
credit of this nation for so many years, and now even the banks have
borrowed on that credit, I think the banks certainly would not
object to reciprocating.
Mr. HILL. I just wanted to find out whether there was to be any
compensation. Ordinarily we understand that these banking institutions do not contribute their services.
Mr. PATMAN. NO, but this is a semi-Government institution, I
would think, and although the Government does not own a dime of
the stock in the Federal reserve banks, as I understand the law the
Government can take over those banks any time at all and issue
stock to the people who have investments in them if it is necessary
to take over the banks to accomplish good results and to promote
the general welfare, if they refuse to expand the currency when it



should be expanded, or when they contract it when it should not be
contracted. I do not think it would be out of place for the committee to consider that.
Mr. VINSON: Referring again to the sinking fund, some reference
has been made to the general sinking fund. As I understood your
remarks, you suggested that you could take that portion of the
sinking fund relating to adjusted-service certificates between now
and 1945, to back up the issue of this money.
Mr. PATMAN. That is right, and it will be backed by better than
any paper currency in existence to-day except the gold certificates,
because the entire paper money is backed up by a sinking fund.
If no other member of the committee desires to ask me any questions, I again want to thank the chairman and each and every member
of the committee for the careful consideration which you have given
this matter, and we desire to close our case at this time, with the
understanding, of course, that we will be allowed time in rebuttal
after the other side has been presented.
Mr. CRISP. We thank you and your witnesses for the information
given us and for your opinions, and, as I told you, you will be given
an opportunity to put on witnesses in rebuttal if you desire to do so.
Mr. Clerk, if you have not already done so, please notify Congressman Royal Johnson, Congressman LaGuardia, and Congressman Lea
that we will be probably able to hear them to-morrow.
The committee will stand adjourned until 10 o'clock to-morrow
(Thereupon, at 12.05 o'clock p. m., an adjournment was taken
until Tuesday morning, April 19, 1932, at 10 o'clock.)



As the judge advocate general of the Kings County World War Veterans'
Association (Inc.), I have been asked to give to your committee the attitude of
the members of the association with reference to liquidating the so-called bonus
certificates. This association is, at present, composed of about 3,000 veterans,
located in Kings County, State of New York.
The Congress's decision should be motivated by several factors. These are:
1. Are the veterans entitled to the legislation proposed?
2. Do the veterans at present need it?
3. Can the country afford it?
The first factor, that is, whether or not the veterans are entitled to it is not
open to question. By the enactment of the bill in 1925, Congress placed itself
on record as being in favor of adjusted compensation for the veterans.
The second factor, that is, whether the veterans need the same at present, is
also not open to question. The misery, the unemployment, and other hardships
brought about by the present economic conditions throughout the country are too
obvious to admit of any doubt.
The third factor, that is, can the country afford the proposed legislation, is
also not open to question. Orly very recently there was proposed in Congress
that the Government organize and finance a reconstruction finance corporation
to the extent of $2,000,000,000. Very little opposition, if any, was offered
against said proposed legislation, despite the fact that the money was to go, rot
to the people to whom the Government had previously acknowledged an obligation, but to railroads and bankers to whom the Government owed nothing.
No question was raised as to whether or not the Government could afford it.
It having been suggested that it would be a good thing for the country, the
legislation was accordingly enacted.
It is with ill grace that the opponents to Congressman Patman's bill now come
forward and state that, whereas the country was able to afford to give $2,000,000,000
to the bankers and railroads, the country can not afford to give a similar amount
to the veterans.
The statement of Mr. Stevens, national commander of the American Legion,
that only 23 posts out of 10,400 favor the cash liquidation of their adjustedcompensation certificates is, unwittingly, the best argument in favor of such
Assuming that the 23 posts and the others that make up the 10,400 are average
in size, he estimates that only 0.002 of the legionnaires are in favor of Patman's bill.
The legislation will not compel any veteran to accept cash liquidation. The
latter will have the option to retain the insurance certificate instead. If all the
certificates were now cashed, it would cost the Government about $2,600,000,000.
Carrying Stevens's estimate that only 0.002 veterans want the cash at present to
its logical extreme, the Government will not have to pay the two and a half
billion mentioned, but will have to pay but 0.002 thereof, or only $5,000,000 and
not the alleged figure of five hundred times that amount.
Even the Budget wrestlers and all those now opposed to the legislation will
concede that the payment of $5,000,000 will be a mere drop in the bucket.
The fact of the matter, however, is that Stevens' statements must be based oil
estimates furnished to him by post commanders who did not first consult their
membership. I am a member of the American Legion, in good standing, and
I know that the rank and file (not the titular leaders) are decidedly in favor of
the legislation.
At the Detroit convention, the leaders induced the delegates to vote against
the said legislation as a trade for so-called beer legislation. What has been the
result? No beer, and now, perhaps, no cash.



Let us assume that every veteran will casn his certificate as soon as the legislation is enacted. The question is can the country afford at present to pay out
over $2,000,000,000 on such liquidation? It is said by economists and political
economy and Government experts that a country that has a 40 per cent gold
reserve for the paper money issued is on a safe basis. I understand that we
have in the Treasury to-day over $4,000,000,000. To keep the country on a
40 per cent gold basis, we can, therefore, safely issue $10,000,000,000 in paper
money. There is at present in circulation about five and one-half billion dollars
in paper money and if we add to that sum two and one-half billion dollars more
for the cashing of the veterans' service certificates, we will have in circulation
only $8,000,000,000 in paper, so that our gold reserve will be 50 per cent and
the country remain on a safe gold reserve -basis.
On behalf of the several thousand veterans of the Kings County World War
Veteran Association, and numerous other veterans who have written to me,
and others whom I meet daily and who are unanimously in favor of the legislation,
I urge the immediate adoption of Congressman Patman's bill. .
To defeat the bill when the veterans are in such dire need, and when the circulation of this money will help the entire country, and when the country certainly
can afford to pay the certificates, would be saying to the world that the United
States Government is more interested in the welfare of European countries than
in our own, because of our cancellation of certain war debts and the moratoriums
I respectfully urge upon the Ways and Means Committee to bethink itself
about this very serious and important legislation and to report unanimously in
favor thereof to the House of Representatives.

Judge Advocate General of the Kings County World War Veterans Association.



Washington, D. C.
The committee met at 10 o'clock a. m., Hon. Charles R. Crisp
(acting chairman) presiding.
The ACTING CHAIRMAN. The committee will be in order. The
first witness to-day will be Congressman LaGuardia.
Mr. LAGUARDIA. Mr. Chairman, at the outset I want to say that it
is a rather novel situation for me to be opposing a bill sponsored by
my best and closest legislative friends. I consider our colleague from
Texas,. Mr. Patman, one of the most promising of the younger statesmen. We have worked together on a great many important issues.
I do not believe there is any one to whom I have been closer legislatively than my good friend from Mississippi, Mr. Rankin. It is
typical of the so-called independent or progressive to do his own
thinking. If we were ready to go along, we would not be, perhaps, in
a class by ourselves; and because we are that, we have become callous
to abuse and being misunderstood and we just keep on going along
according to the dictates of our best judgment and our conscience.
Mr. Chairman, there are two propositions involved in this question of the cash payment of the bonus. One is whether or not the
American people through Congress have properly provided and
cared for the veterans of the World War; and I fear that in the
course of the discussion of this bill, in the heat of debate and argument throughout the country, there may be in certain quarters a
misapprehension that the people of this country have been unappreciative or have to a degree neglected the care of the veterans.
I do not think that is fair. I believe Congress in this instance has
provided most generously for the care of the veterans. Of course,
in dealing with four million or more men, it is quite possible that
there are individual cases that perhaps have received too generous
treatment and individual cases here and there that might have been
neglected, or not properly cared for. But, on the whole, I believe
Congress has responded since 1919 to every demand, to every suggestion, to every request made by the veterans of the World War
through their organizations.
The last bill that I voted for before leaving the House in 1917,
was the War risk insurance bill. We thought at the time that the




establishment of this insurance system would take care of the casualties, disabilities, and that we would embark upon such a system rather
than to repeat the mistakes of the treatment accorded veterans of
the Revolutionary War, the War of 1812, the Civil War and the
Spanish-American War.
Grave mistakes were made in the treatment of veterans in the past.
After the World War, there was a demand for vocational rehabilitation. I believe this committee had jurisdiction of the bills providing
for that. In the enthusiasm, in the desire to properly care for and
rehabilitate these young heroes, we spent over $600,000,000. The
law was administered very generously. The benefit of the doubt was
given to every applicant and it continued for a period of three or
four years.
After that we sought to develop a system of hospitalization, which
was followed by the first compensation act. I will not bore the
committee with figures, but suffice it to say that over 313,700 veterans
are, in various degrees, of course, now the beneficiaries of the existing
law—from a slight degree of disability up to total.
In addition to that, last year we passed a new act allowing as much
as $40 for disabilities not incurred in line of duty, not service connected. That was not a novel departure, by any means. It was
novel as to the time, the short time, after the war provision for nonservice disabilities were made. If we take 1918, the end of 1918, as
the end of the war, it followed 12 years after the war. While the
first nonservice-connected allowance made for veterans of the War of
1812 was enacted on February 14, 1871, 57 years after that war.
The first act granting compensation to disabled veterans of the
Mexican War> not service connected, was 38 years after that war; as
to the Civil War, 25 years, and the Spanish War, 31 years. They
were included in the same act which granted compensation for nonservice connected disabilities to veterans of the World War.
It is true that in the construction of the various acts applicable to
the Civil War veterans, they were very broad in their interpretations.
But as far as Congress is concerned this great lapse of time to which
I have referred existed before compensation was allowed for nonservice-connected disabilities.
The question of pensions has been a very disturbing element in
our legislative history from the days of the Revolution. In 1818 we
had a situation very similar to this one in the case of the veterans of
the Revolutionary War.
In 1789 by act of Congress the Federal Government assumed the
payment of such Revolutionary war pensions as had been granted
by the States, and this provision was continued by subsequent legislation. Later on, pensions were granted to widows of revolutionary
soldiers, and in 1861 the pension rolls contained the names of 63 survivors of that war and 2,728 widows. Total paid $70,000,000.
The 1818 pension law provided that every person who served in
the revolutionary army through its close or for nine months during
any part of the war and was "in need " should be pensioned. District
judges heard applications and transmitted recommendations to the
Secretary of War. By the middle of September the rush of applicants
was so great that the War Department could not take care of them
all. Flagrant abuses came to light and were the subject of severe



newspaper comment. Expenditures increased from $200,000-$300,000 per year to $2,000,000 to $3,000,000. In 1819 there was a
Government deficit and that made the situation more acute. When
Congress met in December, 1819, the abuses of the service pension
were properly brought to its attention. Secretary of War Calhoun
admitted that in spite of every precaution his department had been
imposed upon to a great extent. Congress ordered a roll of all
pensioners to be published and set a committee to work investigating
the situation in the spring of 1820. The most damning charge was
that the rich took advantage of the act to cheat the Government out
of money and that "many in the community less able to bear the
burdens of Government are compelled to pay heavy taxes to support
their more opulent neighbors." So on May 1, 1820, Congress passed
supplemental legislation requiring the filing of sworn schedules of
property and a more certain showing of "need" in order to secure
the pension. Thousands were stricken from the roll under this act.
Many more failed to reply and many were rejected.
The fact that there had been much fraud and imposition at the expense of the
Government was clearly established.

It is interesting to note that the relief of veterans ran a little
over $100,000 in Washington's administration; it varied from about
$75,000 to $100,000 until we come to this period; and it was during
Monroe's administration that it jumped right up to $3,000,000.
Then, after the investigation to which I have just called attention,
and the scandal which ensued, it came down to a normal of about
$300,000 and then adjusted itself.
Now we come to the period 1829 to 1836, when there was added
to that column the veterans of the W a r °f 1812.
Mr. RAGON. YOU have been speaking here about the revolutionary
Mr. LAGUARDIA. Yes; the veterans of the War of 1812 were added
later to the pension rolls.
Mr. LEWIS. YOU did not include there the soldiers of 1812?
Mr. LAGUARDIA. Not in that period.
The ACTING CHAIRMAN. May I say to the gentleman from New
York that it is not necessary to yield until the gentleman has concluded his statement?
Mr. LAGUARDIA. I would prefer to continue uninterrupted, if I
may, and then I shall be glad to answer questions.
The ACTING CHAIRMAN. The rules of the House apply to these
Mr. LAGUARDIA. February 14, 1871, was the first pension legislation concerning veterans of this war. Congress then granted a
pension of $8 per month to the survivors of the War of 1812 who
rendered a service of 60 days, and to their widows provided they
were married to such soldiers or sailors prior to the treaty of peace.
The act of March 9, 1879, reduced the period of service to 14 days
and made no limitation as to date of marriage in case of widows. By
subsequent legislation the pension to widows was increased to $12
per month. Ten widows were still on the rolls on June 30, 1930.
Total paid, $46,194,000.



The first act touching specially this war passed January 29, 1887,
when Congress granted a pension of $8 per month to the surviving
soldiers and sailors of this war provided they had served 60 days and
were honorably discharged. By act of March 3, 1903, the compensation was increased to $12 per month. To be eligible survivors were
required to be 62 years of age or over or else disabled from causes not
connected with rebellion against the United States. Widows were
entitled to pension on same terms. On June 30, 1930, there were
still 630 widows of this war on the rolls and the total expenditure
had been $59,470,000.
There are two distinct systems of pension connected with this
war. Under the acts of July 14, 1862, and March 3, 1873, any
soldier or sailor disabled by reason of wound or injury received or
disease contracted in the service of the United States and in the line
of duty, may be pensioned for such disability during its continuance.
In case of his death from causes originating as above set forth, his
widow of his child or children under 16 became entitled to pension.
The other class of pensions, not related to disability, first became
a serious issue in 1886 when President Cleveland vetoed a bill to
provide such. On June 27, 1890, however, such a bill became law
and any soldier or sailor who had served 90 days or more during the
Civil War and was honorably discharged became eligible for a pension of $6 to $12 per month if he was suffering from a permanent
disability not the result of his own vicious habits such as to prevent
him from earning his own support. Widows and children of such
veterans were provided for under similar terms. On June 30, 1930,
there were 48,991 veterans and 167,674 widows and minor children
and to that date the total sum paid to pensioners of the Civil War
was $7,370,462,000. The original 1890 bill was liberalized somewhat
by an act of May 9, 1900, and May 11, 1912; 69,254 cases were dealt
with, also, by special acts to June 30, 1927. The high point was
1913, 48 years after the close of the war, when the total sum paid
was $174,171,000 for a single year. The highest number of pensioners
was in 1905, 998,441.
The provisions of the Civil War pension acts of 1862 and 1873, etc.,
regarding total and complete disability contracted in the service and
the supplementary provision regarding widows and orphans apply
also to the widows and orphans resulting from this war.
In 1922 and by subsequent legislation the treatment of these
veterans has been liberalized. As far as I am able to determine
there was no provision before 1930 which awarded compensation to
Spanish War veterans for disabilities not contracted in the service,
though the administration of the existing law was very liberal and
in case of doubt as to whether a disability was contracted in or out of
the service the petitioner was awarded relief. The absence of special
legislation for the benefit of these veterans can be attributed to the
fact that the Civil War pension system applied to these veterans from
the first. The first provision for soldiers in this war compensating
them for nonservice connected disabilities was on June 2,1930. (This
act included the veterans of the World War of 1917-18.)



Thank you. Now, gentlemen, if this were a question only of the
bonus and the finances of the country permitted, I do not believe this
committee would be holding extended hearings.
We were asked to adjust the compensation of all veterans of the
World War and many plans of bonuses and adjustments were submitted. Finally various organizations agreed upon a plan which
resulted in the adjusted compensation act and the issuance of certificates payable in and around 1945.
The fact that we had 4,400,000 or more veterans in the service, of
course, meant that every time any question of bonus or adjustment
was raised, we were faced with the question of finding the money.
Any cash settlement involved a total staggering in its amount.
The reasons that the provisions of the adjusted compensation act
were found satisfactory were first, they were capable of being financed
on a sinking fund basis by setting aside an amount every year to build
up the fund necessary to pay the certificates at maturity.
The act also contemplated a larger amount payable to each individual veteran than would otherwise have been possible and gave
them the benefit of 20 years' amortization.
It also took into consideration the fact that the certificate would
become payable at the very age when a tidy little sum would be helpful
to the average American family. Every one seemed satisfied at the
time. We passed that act over the veto of the President. Then we
were confronted with the necessity of permitting loans up to 50 per
cent to be made upon these certificates. We were told then, and the
estimates were given to us of the number of men who might take
advantage of that loan, how much would be borrowed. The number
who took advantage of the loan provision far surpassed any estimate
that was made.
The members of the committee and my colleagues who are here
to-day will recall that the estimates made by the proponents of the
cash bonus at the time of the consideration of the bill were that from
$300,000,000 to $500,000,000 would be required. The estimate
made by General Hines of the Veterans' Administration was
$1,000,000,000. I am sure my colleagues will all remember that that
estimate was ridiculed as being excessively high and not justified.
Now we know that since February 27, 1931, no less than 2,554,400
loans have been made and that $963,759,953 have been paid out on
these loans. It is interesting to note that of the 3,662,374 certificates
issued, 2,554,400 have taken advantage of the loans.
We were told then that the additional amount of money placed in
circulation would serve as a stimulant to business and that that in
and of itself would be sufficient to pull us out of the depression we
were then in. Some voted in accordance with that belief. Others
of us voted from purely sentimental reasons.
Now we find that a large percentage of the veterans have taken
advantage of that act and have borrowed 50 per cent of the face
value of their certificates, and unless the law is changed, at the time
of maturity there will be very little, if anything, coming to them.
As I read the history of the treatment of veterans by the United
States Congress, and as I know the feeling of the Members of the
present Congress, I am just as certain as I am standing here this



moment that eventually legislation will be passed refunding the
interest charges, so that the veterans who were compelled to borrow
will not be wiped out entirely.
Now we come to the proposition that is before you and that is urged
for two reasons. The proponents have been very fair and frank in
their attitude. They state that primarily the purpose of this legislation is to inflate currency, and the question of paying the bonus to
the veterans at this time is purely incidental or secondary.
Now, gentlemen, if that is all, I submit it is hardly fair to use the
veterans for this purpose. If the real purpose is to inflate the currency
then, of course, that contemplates an increase in commodity prices.
It decreases the value of the dollar. If the purpose is to inflate the
currency so as to decrease the value of the dollar and increase commodity prices—and that is conceded—then I say that we promised
these boys good, wholesome, American dollars and we ought to pay
them in good, wholesome American dollars. It is not fair to take it
out of the veterans. We will be confronted with that after the first
impulse of the cash payment has passed away.
The second reason for selecting the veterans is the critical condition of unemployment and destitution existing among the veterans.
That is a subject to which I have been giving a great deal of time and
study. I believe that in my repeated statements on the floor of the
House on that subject of unemployment direct relief and stabilization
of industries I have made myself perhaps something of a nuisance in
the House. But, gentlemen, we are not only in the midst of an
economic depression, but we are in the midst of an economic readjustment and a change in our whole economic system. Not all the
platitudes nor all the presidential proclamations, nor all the corner
turning is going to get us out of this depression. The whole financial
structure is collapsing and the method suggested here is by no means
a cure, a permanent cure.
It may cause a flurry for a short time, but it will redound to the
disadvantage of these very veterans we are trying to help and the
wage earners in general. Mr. Chairman, if only the veterans were
unemployed, we could deal with this question very quickly. But I
can not see how we are going to solve the problem of unemployment,
if we take only the smallest percentage of any group of the army of
the unemployed to-day. When I say the smallest percentage, I
want to submit some figures to this committee. Let us take the
youngster who was from 5 to 13 years of age in 1917 and 1918. He is
to-day 20 to 28 years of age.
Those youngsters were not in the Army. They could not have
been, by the nature of things. The census of unemployed as taken
by the United States Bureau of the Census shows that in class A—
that is, persons out of a job, able to work and looking for a job—in
1930 there were 2,420,062 total. I have criticized that figure. It
was too low. But that is by reason of the classification of the Census
Bureau and perhaps because of its limited means and time to get
the figures. The census of unemployed does furnish us a basis for
accurate computation for our purpose here.
But we can take that as a basis to figure our groups according to
ages, and if the figure is 50 per cent too low, as it was at the time^I think it was about 55 or 60 per cent too low—our proportions still
remain the same.



Of the 2,420,000 unemployed in 1930 according to the Bureau of
Census, 361,262 were women. In this computation we have disregarded entirely the children of 10 to 14 years in class A, because
some of them were not even born when war was declared; in fact,
none of them were born. We then eliminated the group from 15 to
19 years, for obvious reasons, because the oldest was 4 years of age
when war was declared. We excluded the group from 20 to 24, and
the group from 25 to 29 years for the reason that the oldest of this
groups was not of military age in 1917.
Then we took a proper percentage of the group from 30 to 34 years,
granting that every boy of 18 years of age at the time was in the Army,
which, of course, is a most violent assumption. But conceding all
that, we then got the percentage of the men over 35 years of age who
were in the service. There were 113,190 over 35 years of age. I was
one of them.
We took that percentage of the total number and applied it to the
group 55 to 59 years of age and then excluded all the rest from 59
to 70 years of age, because owing to their age they could not have
been in the service because they were too old at the time. And I
say, we allowed every young man over 18 years of age to be counted
as having been in the service and I repeat that is a most wild assumption. Taking all of those, there can be to-day only about 13 per cent
of the unemployed who are veterans.
Now, can we single out 13 per cent in dealing constructively with
the question of unemployment, regardless of our feeling for the
veteran, regardless of our desire to help him? Can we take the boy
who was 18 years of age in 1917 and hand him a lump sum because
of the unemployment situation and leave his neighbor or his brother
who, through no fault of his own, was only a youngster 15 years of
age at that time, but who is also unemployed now, without help?
Can we take the man who was 40 years of age, who was too old to
enter the Army, who is now 55 years of age and, gentlemen, who is
unemployed, and perhaps permanently unemployed, and do nothing
for him?
Can we disregard the need, the necessity of doing something constructive to aid the superannuated worker, and go to the extent of
putting our printing presses to work and issuing $2,000,000,000 of
relief money to take care of 13 per cent of the unemployed, absolutely
ignoring the superannuated worker and the other mass of workers
who were too young to enter the service?
In other words, under the cash bonus bill, in dealing with the subject of necessary relief based on destitution brought about by unemployment, we would care for only 12 or 13 per cent of the total,
ignoring 68 or 67 per cent, giving this 68 or 67 per cent no consideration at all, and in order to take care of the 13 per cent we would
have to give a cash bonus to over 2,700,000 men who do not need a
cash bonus. That surely is not only an unscientific but a manifestly
unfair way to approach the subject of unemployment.
Will that solve our unemployment problem? If we are to do something, if we are to go to the extent of printing money or issuing
bonds to the extent of $2,000,000,000, let us do something so that
the veteran will get the full benefit of it, but also the entire country
will get some benefit of it; do something that will prevent a recurrence of the depression we are in now, a recurrence of a prolonged
period of unemployment in the future.




If 13 per cent of the unemployed constitute the body of veterans,
how many of the veterans are there who fortunately are employed
and cared for and who would be in no need of a bonus? Have you
considered that?
Why, gentlemen, we have in the Government service alone—the
Federal Government—152,562 veterans. They are on the pay roll.
Surely, they should not be handed a bonus when an equal number of
their fellow citizens have no employment, want to work and are
unable, through no fault of theirs, to find employment, but were
either too young or too old to be veterans, are not provided for.
I have endeavored to obtain an estimate of the number of veterans
in the State, county, and municipal services, but it is extremely
difficult to get those figures, because some of our States have no
statistics on the subject.
Have you been able to get any, Mr. Bacharach?
Mr. BACHARACH. NO, I was going to ask you that question.
Mr. LAGUARDIA. NOW, New Mexico reports there are 1,000,
approximately, in the State, municipal, and county services.
Massachusetts reports there are 37,726 in the permanent employ
of the State and municipalities who are under civil service. They
report that it is impossible to obtain the number who are not under
civil service.
Pennsylvania has 1,075 World War veterans employed by the
State (this does not include county and municipal service).
Texas reports that they estimate 3,000 out of approximately
150,000 ex-service men are in municipal or governmental service in
the State of Texas, either State, county or municipal.
Virginia reports that 15 per cent of the personnel in State, county,
and municipal services are veterans of the World War.
Arizona—and Arizona seems to have the most complete and accurate figures—report 302.
Perhaps by taking the States from which we have reports and the
percentage of population together with their civil-service rolls that
we might strike an average. I might say that my own State, New
York, has no accurate figures on that subject. But I simply want to
point out to you gentlemen that since the war every possible consideration has been given our veterans in civil-service preference both
in the Federal Government and in State, county, and municipal
Relief is being accorded all over the country to veterans. Time
did not permit a canvass of all the States but responses received from
12 cities, I believe, reflect the attitude all over the country toward
veterans' relief.
Newark, N. J.: Jerome T. Congleton, mayor: Of 7,500 families receiving aid
60 per cent are veterans. Money appropriated by the city. City has always
cared for needy veterans but numbers are much greater now, due to present
conditions. Aid will be continued until the need does not exist.
Boston, Mass.: John J. Lydon, soldiers' relief commission: Approximately
$200,000 expended on veterans since January 1, 1932. Anticipate spending
$800,000 in 1932; 1,625 families and veterans aided in March, making a total of
5,644 individuals. One hundred and three Spanish War veterans aided in March,
209 individuals benefiting; 179 Civil War cases aided in March, 180 individuals
benefiting. Money received by taxation. Forwarding annual report of department for 1930.
Detroit, Mich.: John F. Ballenger, general superintendent, department of
public welfare: 1,750 families of veterans received aid in March from public



welfare. Average cost per family per month, $33 permanent. City department
financed through taxation. Community fund spent $873 for veterans' families
in March. Funds derived from solicitation community fund considered permanent organization; spends average of $12,000 per year for veterans.
'Philadelphia, Pa.: J. Hampton Moore: City makes no direct appropriation
for veterans' relief. Veterans in distress may have received assistance from an
independent committee to which city transferred $3,000,000 last year but that
city fund expired December 31.
New York, N. Y.: Frank J. Taylor: 15,000 veterans and families receiving aid.
New York City funds appropriated by city government. Been going on for
many years according to State law. Four million dollars spent 1931; $6,000,000
estimated 1932. All expenses borne by taxpayers New York City.
San Francisco, Calif.: 600 to 1,000 World War veterans receiving relief from
community chest, the San Francisco municipal employees' relief fund, and
veterans' organizations. Figures approximate because no distinction made as
to recipients of relief. Organized relief started in fall of 1930. Will cease in
May to reopen in fall if conditions necessitate.
Milwaukee, Wis.: Daniel W. Hoan, mayor: Since 1929, Milwaukee County
spent over $360,000, raised by direct property tax, to take care of veterans. In
February the total number on relief lists was 2,283. This work handled by
soldiers' relief commission created in 1888 and will continue indefinitely. Amount
spent in 1931 was $65,000 greater than in 1930.
Minneapolis, Minn.: Relative veterans receiving aid from city would estimate
300 single men and 1,000 families. Funds from taxation. Difficult to say just
how long this has been going on and will continue. Abovefiguresdo not include
private agencies.
Cincinnati, Ohio: Fred K. Hoehler, commissioner of welfare—700 families on
soldiers' relief granted by Hamilton County; approximately 600 individuals
aided by transient service bureau; 1,000 additional families ex-service men helped
by family welfare agencies.
Buffalo, N. Y.: Chas. E. Roesch, mayor-—veterans receiving aid from 1925 to
1931: World War veterans, 8,084; G. A. R. and Spanish War, 2,117. World
War veterans' relief has had 4,787 applications for home relief since July 1. In
March, 1932, there were 3,226 active cases. Funds provided by local taxation.
In 1920 legislature authorized aid for World War veterans. Has heard of no
suggestion tJjiat the State laws relative to veterans' relief be changed.
Cleveland, Ohio: B. S. Pyke, welfare division, city of Cleveland—no veterans
on city. City subsidizes private agencies; 2,000 families active cases on soldiers
and sailors' relief, county supported; 3,000 families on waiting list; 125 on Red
Cross. Figures obtained from soldiers and sailors' relief.
Pittsburgh, Pa.: Local Red Cross reports 618 disabled yeferans and 483 able
veterans on their relief; Veterans of Foreign Wars have 75 men on relief; Legion
gives no relief. Unable to get figures from their auxilaries. Disabled Veterans
report 25. City hospital nas 70, both disabled and psychopathic; Allegheny
County, similar institution, has 44; total of 1,315 that are known. Further investigation might disclose more.
Of course, if 13 per cent, which is a very fair and generous estimate
of the present unemployed who are veterans—and it is easy to compute
that a large percentage of the veterans certainly are not now unemployed—represent the proportion of veterans to the total of unemployed, in dealing with the question at this time as it is presented,
one of relief and of necessary, immediate relief, I would take all of
the unemployed and consider them as a group, and not pick first the
small percentage of veterans who are unemployed and at the same
time include the larger percentage of veterans who are employed and
not in need of a cash bonus at this time; at a time when a large number—I estimate that number easily between six and seven million—
of American workers are unemployed.
What is going to be the feeling of the veterans' neighbors in their
home towns, if Congress says, "We have solved the unemployment
situation by paying a cash bonus to the veteran/' and the veteran
goes to his bank and cashes his check, and his fellow citizens who are



unemployed can not even get a job. What will they think of Congress
in solving this serious problem that is not only confronting our
country, but is confronting the whole world?
When I say the whole world is confronted with this problem, it is.
First there are the changed methods of production by machine, displacing men. That would have happened had we no World War
and we in this country would have been the first to feel it. We would
have unemployment, gentlemen, in this country even if we had no
financial crisis or depression, by reason of our modern, progressive,
efficient methods of production.
So that is a question which we will have to solve by legislation
affecting the hours of labor, the number of days of labor in the week
and caring for superannuated workers. That must keep pace with
the machine age.
The same problem arose in other countries after the World War.
England was facing an unemployment situation before the World
War and I do not believe that we can afford to sit idly by and take a
laissez faire attitude and say that this question is going to adjust
itself. It is not.
I want to make a prediction right now, gentlemen, that before long
some of the people who are now opposing the cash bonus are going to
come out for it, for selfish, sordid, unpatriotic reasons.
The poor veteran has been used and misused. When I was at the
City Hall in New York in 1920, my colleagues on the committee
from New York will remember that we had pending a readjustment
in wages and salaries; there were labor troubles, and one time we
were threatened with a longshoremen's strike. Selfish people, seeking to take advantage of the situation, endeavored to set up the
patriotic organizations of veterans, to break the strike of the longshoremen. I called them into my office at the City Hall, the representatives of the veterans' organizations, representatives of the workers
who themselves were veterans, but we adjusted their dispute in 15
minutes. The boys saw the light. They saw that they were being
misused for many occasions the veterans are sought for exploitations.
The friends, the real friends of the veteran, will keep them but will
not permit them to be used for selfish interests, for potitical advantage or be exploited in any way.
We are confronted with an economic readjustment in this country
and we have to face the situation. We have to take into consideration the machine age in which we are, we have to provide shorter
hours and a shorter work week and unemployment insurance, old
age pensions, in order to bring up the level, and then you are going
to see, gentlemen, a dash made by selfish people to use these same
veterans to offset social legislation of that kind. The veterans
I know will not lend themselves to any such purpose.
I do not want to see my comrades improperly used for any such
purpose. I am sure that if we could explain the mathematics of our
economics to the veterans, they would be the first to say, " Don't
turn over $2,000,000,000 to us at this time. We will get that eventually. But do something for all Americans who are unemployed."
Now, this committee has jurisdiction. You are now considering
H. R. 1. I ask this committee to give consideration to H. R. 2. I
introduced that bill the first day of the session, after many, many
months of study and consideration. I will concede it is crude, it is



imperfect. At least it will give us a starting point, give us the basis
of applying some thought to this economic readjustment.
My bill provides for a national system of unemployment insurance.
Call it a dole, gentlemen, you are not going to scare me. No one is
going to be scared by a name. We have had some experience with
dole-giving in this session of Congress. Call it a dole. It is going to
retard its acceptance, perhaps, somewhat, but if I understand conditions, American people will simply refuse to go hungry while they
are in the richest country in the world. We will have to provide some
system of insurance to take care of such depressions, periods of unemployment. It will shorten these so-called economic cycles, because it
does not entirely destroy the purchasing power which falls immediately
upon any period of unemployment.
If we are to use money for the purposes of inflation, if we are to
start the Bureau of Engraving working nights and overtime for that
purpose, may I submit that we could start by furnishing the initial
fund necessary to put a national system of unemployment insurance
into effect? That will immediately create purchasing power, a
demand for the necessaries of life, and that will have a permanent
effect on our economic system.
It will be said, "Well, England has a system of unemployment
insurance. It has ruined England." It has done no such thing. It
has saved England. There would be no England to-day had they
not had the foresight away back in 1910 to pass the first unemployment insurance law, which was perfected in 1912. Then the war
came along.
But the mistake in the English system was this, that they excluded
all industries where employment was permanent, such as state railways, civil service; all industries where employment was permanent
were excluded from the original unemployment insurance act of
Profiting by that experience, of course, we would not repeat what
they did, because we have learned in this depression that even those
industries where employment is permanent, are affected. We have
seen that in oiir railroads and we are seeing it right now in our Government service. So that any national system of unemployment
insurance which we would adopt would necessarily benefit by the
experience of England and Germany and some of the smaller countries that have adopted a system of unemployment insurance.
Gentlemen, we can not avoid it. As optimistic as we may be, we
are not going to get out of the situation and get to the point where
we will have no unemployed, for a long time. We must take care of
the superannuated employees who can not keep pace with the
machine age.
Leave it to the States, you say? We can not leave it to the States.
We are one economic unity, regardless of how we may feel about
State rights and our State pride. We find that unemployment in
Alabama affects New York; unemployment in New York affects
Nebraska and North Dakota. We have experienced that in our factory laws and in our child labor laws. Some of the States have
enacted proper, protective laws preventing the employment of children of tender years in factories. What was the result? We open
our daily papers and we find full page advertisements of chambers of
commerce of other States who say, "Come down to our State and



establish your factory there, where7 labor of all ages is plentiful and
where we have no restrictive laws. '
And they do. We found that out in our income tax and inheritance
tax system. States will go along while other States will refuse and
advertise the fact and then there is migration to those States. That
was the case in the inheritance tax provisions until we hit upon the
policy of the 80-20 system of inheritance taxation and several States
changed their constitutions to take advantage of it.
So we will have to adjust ourselves in this matter of unemployment
to make it uniform, so that the progressive, advanced State, will not
be put to a disadvantage in good times by a State which refuses to
keep abreast, and in times of unemployment the State with the insurance system would inherit all of the unemployed from the other
States. I say, we must make this a national system.
Now, I understand, gentlemen, the tremendous pressure that is
being brought to bear upon you. I know that some of my colleagues
and friends will say, "Why, LaGuardia, you know you have not got
a chance to have H. R. 2 considered at this time." But we are accustomed to that. We know that we are leading the way for welfare and
social legislation. We know that it is coming.
Gentlemen, 10 years ago I sat and talked with Governor Shallenberger of Nebraska. We talked of a system of guaranteed bank
deposits. I talked about that for the last 10 years, and I was laughed
at. I was howled down many times on the floor of the House. But
within not very many weeks from now we are going to pass a law
guaranteeing deposits in banks. Senator Owen who sits here likewise was one of the pioneers in that movement. We did not lose
courage, but it took us all of this time to get the action we wanted.
We worked for 15 years before we could convince Congress of the
necessity of remedying the condition of the abuse of Federal courts
in labor disputes and a few weeks ago, thanks to the kindly interest
of the gentleman from Illinois, Mr. Rainey, and the Speaker, we passed
that bill.
So, I am not discouraged at all. I know that I am going to be
misunderstood by many of my comrades in my attitude to-day, but
I follow that school of politics that believes in thinking out loud, that
believes in taking a position. And I want to say this, without criticism of the slightest of my colleagues, that if a secret vote were taken
on this bill in the House of Representatives, it would not get 30 votes.
I say that after cloak-room conversation with my colleagues. That
being so, it seems to me I am justified in coming here before this
committee and making this statement.
Now, are we to admit that representative government is a failure
because of organized demands for legislation? We have organized
demands. Sometimes we succumb and sometimes Congress does not.