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IIUl(;O:NSTIIIJCl'IO:N n:NA:Nm £011POBA.TIO :N A:NB SIJIISIIHAIII BS A.n nual Be.po rt and F"t·n anela l State Dlen ts TH[ I '"'.' ,'.i'.'! flF J.11.~J 11 H'.c tG ·~itizedbyGoogle . Digitized by Google RECONSTRUCTION FINANCE CORPORATION 811 Vermont Avenue Washington 25. D. C. BOARD OF DIRECTORS HARLEY HISE, HENRY T. Chairman BODMAN HENRY HARVEY J. GUNDERSON ,. , A. WILLIAM MULLIGAN E. WILLET!' .. OFFICERS Chairman of the Board LEo H. NIELSON -------------------------------- Acting Secretary WILLIAM C. BECK, Ja. ---------------------------------- Treasurer JAMES L. DOUGHERTY---------------------------- General Counsel JAMES w. CONSIDINE ----------------------------------- Controller HARLEY HISE ----------------------------- SUBSIDIARIES AT JUNE 30, 1948 Federal National Mortgage Association War Damage Corporation (In Liquidation since June 30, 1947) U. S. Commercial Company (In Liquidation since June 30, 1948) Directors and Officers as of December 20, 1948 Digitized by Google RECONSTRUCTION FINANCE CORPORATION LOAN AGENCIES AGEKCY IIAlf.AGEll .ADDRESS Atlanta, Ga. M. E. Everett Birmingham, Ala. FredH.Foy Boston, Mass. John J. Hagerty Charlotte, N. C. James K. Wilson Chicago,lli. Milnor 0. Hoel Cleveland, Ohio J. A. Fraser Dallas, Texas L. B. Glidden Denver, Colo. Ross L. Hudson Detroit, Mich. Henry F. Eckfeld Helena, Mont. Leon E. Choquette Houston, Texas W. I. Phillips Jacksonville, Fla. Fred H. Farwell Kansas City, Mo. David H. Powell Little Rock, Ark. John J. Truemper Los Angeles, Calif. Hector C. Haight Louisville, Ky. J. Fort Abell Minneapolis, Minn. Arthur W. Carlson Nashville, Tenn. Thomas M. Hobbs New Orleans, La. Geor~ W. Robertson New York, N. Y. Percy Gale, Jr. Oklahoma City, Okla. Carl B. Sebring Omaha, Nebr. Joseph V. Johnson Philadelphia, Pa. Bernard J. Kelley Portland, Ore. William Kennedy Richmond, Va. W.B.Cloe St. Louis, Mo. Charles G. Alexander Salt Lake City, Utah Gerald L. Leaver San Antonio, Texas Francis M. Conlon San Fran'Cisco, Calif. John S. McCullough, Jr. Seattle, Wash. Charles R. Johnsone Spokane, Wash. O.M.Green Healey Bldg. Atlanta 3, Ga. Comer Bldg. Birmingham 3, Ala. 10 Post Office Square Boston 9, Mass. 317 South Tryon St. Charlotte 2, N. C. 208 S. LaSalle St. Chicago 4, Ill. Federal Reserve Bank Bldg. Cleveland 1, Ohio Cotton Exchange Bldg. Dallas 1, Texas 618 Railway Exchange Bldg. 17th & Champa Streets Denver 2, Colo. 800 Griswold Bldg. 1214 Griswold St. Detroit 26, Mich. Power Block P. 0. Box 177 Helena, Mont. 601 City National Bank Bldg. Houston 2, Texas Graham Building 24 Laura St. Jacksonville 2, Fla. Federal Reserve Bank Bldg. Kansas City 6, Mo. Pyramid Bl% Little Rock, k. Pacific Mutual Bldg. Los Angeles 14, Calif. Hoffman Building 139 South 4th St. Louisville 2, Ky. Metropolitan Life Bldg. 125 South Third St. Minneapolis 1, Minn. Nashville Trust Bldg. 315 Union Street Nashville 3, Tenn. 348 Baronne St. New Orleans 12, La. 44 Pine Street New York 5, N. Y. 1000 Commerce Exchange Bldg. 130 West Grand Avenue Oklahoma City 2, Okla. Woodmen of the World Bldg. Omaha 2, Nebr. Lincoln-Liberty Bldg. Philadelphia 7, Pa. Pittock Block Portland 5, Ore. Southern State11 Bldg. Seventh & Main Sts. Ri'chmond 19, Va. 407 N. 8th St. Bldg. St. Louis l, Mo. Dooly Bldg. Salt Lake City 1, Utah Transit Tower San Antonio 5, Texas 130 Sutter Street San Francisco 4, Calif. 210 Central Bldg. 810 Third Avenue Seattle 4, Wash. Columbia Bldg. Spokane 8, Wash. Digitized by Google ~ ~ :t ~ .\Ii ~ ' ,1~ 1, ·~ TABL~ OF CONTENTS Page Letter of transmittal: Introductory comments------------------------------------------------------------------------ 5 Comments on financial statements: Balance Sheet----------------------------------------------------------------------------Statement of net income from lending activities ------------------------------------:-------Statements of accountability--------------------------------------------------------------- 5 6 6 Lending Activities: General comments------------------------------------------------------------------------- 7 Direct business loans and participation with banks in business loans -----r------------------ 7 Public agency loans ------------------------------------------------------------------------ 8 Catastrophe loans ------------------------------------------------------------------------- 9 Other loans and purchases of securities_____________________________________________________ 9 Federal National Mortgage Association ----------------------------------------------------- 9 Chart-Unpaid balances of loans, mortgages and securities --------------------------------- 10 Non-Lending activities: General comments-----.------------------------------------------------------------------Production and sale of synthetic rubber_____________________________________________________ Production and sale of tin----------------------------------------------------------------Fiber plantations-------------------------------------------------------------------------Other continuing operations at June 30, 1948_________________________________________________ Purchase and sale of other commodities ---------------------------------------------------Disposal of defense plants and facilities ---------------------------------------------------Loans, advances and receivables, and other assets held for liquidation ---------------------Loans, leases, machinery and equipment transferred from Smaller War Plants Corporation 10 11 12 12 13 13 13 13 14 Personnel------------------------------------------------------------------------------------- 14 Exhibit A-Comparative consolidated balance sheet_ ______________________________________________ l6-17 Exhibit B-Comparative consolidated statement of net income from lending activities _____________ 18 Exhibit C-Statement of accountability to U. S. Treasury for net funds expended in national defense, war and reconversion activities ------------------------------------------------- 19 Exhibit D-Statement of accountability to U. S. Treasury for net assets transferred from Smaller War Plants Corporation ---------------------------.------------------------------------ 20 Schedule 1-Assets, at cost, acquired in connection with national defense, war and reconversion activities for which the Corporation is accountable to the U. S. Treasury _______________ 21 Schedule 2---Statements of Operations of Synthetic rubber program ------------------------------- 22 Schedule 3-Statement of Operations of Tin program -------------------------------------------- · 23 Schedule 4---Results of Operations of Fiber plantations and miscellaneous programs _______________ 24 Notes to financial statements ---------------------- ----------------------------------------------- 24 Appendix A-Cr.eation, purpose and legislative authority ----------------------------------------- 30 Digitized by Google Digitized by Google RECONSTRUCTION FINANCE CORPORATION WASHINGTON To The President of the Senate, and The Speaker of the House of Representatives Pursuant to section 1 (b) of the Reconstruction Finance Corporation Act, as amended (Public Law 132, 80th Congress, as amended by Public Law 548, 80th Congress) and section 10 (e) of the Rubber Act of 1948, approved March 31, 1948 (Public Law 469, 80th Congress) there is submitted herein and in the accompanying statements a report on Reconstruction Finance Corporation's (a) lending activities, (b) activities resulting from the exercise of the functions, powers, duties, and authority of former wartime subsidiaries transferred to the Corporation by Public Law 109, Seventy-ninth Congress, approved June 30, 1945, and (c) operations relating to synthetic rubber. The semi-annual report for the six months ended June 30, 1948, required by section 3 of Joint Resolution approved June 28, 1947, as amended by Act approved June 29, 1948 (Public Law 824, 80th Congress), covering the tin program, has been submitted previously, but pertinent data relating to such program have been included herein. The schedules of individual loans and investments of $100,000 or more required under the provisions of Section 1 (b) of the Reconstruction Finance Corporation Act, as amended, are the subject of a separate report. In February, 1948, the Corporation commenced its seventeenth consecutive year of operations, at which time termination of the Corporation's succession was fixed at June 30, 1948, under the provisions of Public Law 132, 80th Congress, approved June 30, 1947. Public Law 548, 80th Congress, approved May 25, 1948, extended the period of succession of .the Corporation to June 30, 1956, and redefined the specific lending authorities which may be exercised by the Corporation through June 30, 1954. Creation, purpose and legislative authority of the Reconstruction Finance Corporation are cited in Appendix A. The Corporation's activities during the fiscal year ended June 30, 1948, may be divided into two broad categories: (1) the conduct of its lending and financing operation under the provisions of Public Law 132, 80th Congress, and the operation of its wholly owned subsidiary, the Federal National Mortgage Association, under the provisions of the National Housing Act, as amended, the financial results of which operations were, for report purposes, taken into the Corporation's consolidated income account, and (2) the liquidation and operation of national defense, war and reconversion programs which were outstanding on June 30, 1947. The financial results of operations under the second category accrued directly to the U. S. Treasury Department and are reflected in the Corporation's balance sheet as a liability to that Department rather than in the Corporation's consolidated income account. In this connection, under the provisions of Public Law 860, 80th Congress, the Corporation was relieved of liability for funds borrowed from the Treasury and outstanding on June 30, 1947, which represented the Corporation's net expenditures under the national defense, war and reconversion programs. FINANCIAL STATEMENTS The financial statements contained in this report have been prepared from the books and records of the Corporation in accordance with sound accounting principles applicable in the circumstances and are subject to their related notes. Balance Sheet-Exhibit A Total assets to which the Corporation has title and in which it has beneficial interest as of June 30, 1948, after provision for reserves, are shown on the comparative consolidated balance sheet at $1,245,674,074, as compared to $2,146,062,341 as of June 30, 1947. This decrease results primarily from (1) transfer to the Secretary of the Treasury, against cancellation in an equivalent amount of the Corporation's notes payable to the U. S. Treasury, of investments in and loans to other U. S. Government agencies, including accrued interest, in the amount of $551,216,720, and capital stock, ex dividend, in federal home loan banks of $122,672,200; (2) repayment of $175,000,000 of advances to the Secretary of State under foreign aid legislation the funds from which were used to pay notes owing the U. S. Treasury; 5 Digitized by Google and (3) transfer to the United States against cancellation of notes payable to the U.S. Treasury, of office buildings at the seat of government, with a depreciated value of $9,735,562, the transfer of assets being by direction of Congress. Loans and securities held by the Corporation, other than to foreign governments and to other U. S. Government agencies, increased $130,803,939 during the year. The Corporation's loan to the United Kingdom of Great Britain and Northern Ireland was decreased $32,374,031 by repayments during the year. The greater portion of the increase in Loans and Securities at cost (other than Foreign Government and U.S. Government agencies) resulted from mortgages insured by F. H. A. and acquired by The Federal National Mortgage Association, and mortgages partially guaranteed by the Veterans Administration which were acquired under commitments made prior to June 30, 1947, by The RFC Mortgage Company. Acquisitions by the former were made principally during the last two months of the fiscal year. In view of the previous inactivity in the FHA insured mortgage program, these acquisitions together with commitments for additional mortgages of $234,436,779, outstanding at June 30, 1948, may be attributable to the then imminent termination of the secondary market offered by the Association for such mortgages. Such secondary market on a reduced basis was extended by Congress by Public Law 864 approved July 1, 1948. Liabilities of the Corporation were reduced from $566,508,859 at June 30, 1947 to $339,659,356 at June 30, 1948, a reduction of $226,849,503. Of this amount, $209,827,810 represented payment of the profits of War Damage Corporation to the U.S. Treasury as required under the provisions of Public Law 268, 80th Congress, approved July 30, 1947. Of the total liabilities outstanding at June 30, 1948, $213,543,568 was owing to the U.S. Treasury, and represents cash realizations from the operation of the Tin, Rubber, Fiber Plantations and miscellaneous programs, and the liquidation of (1) assets previously acquired by the Corporation in connection with its defense, war and reconversion activities, (2) assets transferred from Smaller War Plants Corporation and (3) securities purchased from Public Works Administrator, Federal Works Agency. The Corporation will pay into miscellaneous receipts of the Treasury, during the fiscal year 1949, such portion of these amounts as are not required for future expenses and costs or as a reserve against possible future losses in connection with. these programs. A significant change in the balance sheet during the fiscal year 1948 was the cancellation of notes payable to the U. S. Treasury, resulting from legislation set forth in Appendix A. In this connection, it is pointed out that, by direction of the Congress, the Corporation has, since June 30, 1948, retired $225,000,000 of its capital stock, this amount having been paid to the U. S. Treasury as miscellaneous receipts, and the Corporation will on or before December 31, 1948, pay to the Treasury $307,391,555, representing the Corporation's unreserved surplus at June 30, 1948, in excess of $250,000,000, after eliminating the earned surplus of Federal National Mortgage Association in the amount of $1,928,266. Statement of Net Income from Lending Activities-Exhibit B Consolidated net income from lending operations of the Corporation during the fiscal year 1948 amounted to $18,179,941, as compared to $19,836,143 during the previous fiscal year. As will be observed from the "Analysis of Accumulated Net Income," such income from lending activities of the Corporation and Federal National Mortgage Association, from inception to June 30, 1948, before provision for contingency reserves of $15,864,250, amounted to $575,184,071. There was no change in basic interest rates charged by the Corporation during 1948; interest paid the Treasury Department on funds borrowed during the year was at the rate of 1%%, an increase of%% over the rate charged in the previous year. Gross income of the Corporation from lending activities decreased from $54,799,986 in the fiscal year 1947 to $46,506,561 in the fiscal year 1948. This decrease was due primarily to the transfer to the Secretary of the Treasury on July 1, 1948, of interest bearing loans due from, and dividend bearing stocks in, other U. S. Government agencies. This was offset in part by a large increase in income from acquired collateral resulting principally from substantial liquidations effected during the year by Consolidated Realty Corporation, the entire capital stock of which is owned by the RFC. Consolidated Realty Corporation was organized for the purpose of liquidating the collateral acquired by RFC through foreclosure of its loan to The Prudence Company, Inc. It is anticipated that such liquidation will be completed during the present fiscal year. Statements of Accountability-Exhibits C and D Exhibit C and Exhibit D relate to the Corporation's non-lending activities pertaining to the national defense, war and reconversion programs and the liquidation of assets transferred from Smaller War 6 Digitized by Google Plants Corporation, respectively. These exhibits are commented upon in the sections of this report relating to such program. LENDING ACTIVITIES The Corporation's lending activities continued during the fiscal year 1948 in the same general pattern existing theretofore. However, in three particulars, previously existing authorities were rescinded, namely, (1) the authority to provide a secondary market for home mortgages partially guaranteed by the Veterans Administration (terminated on June 30, 1947, and restored on a modified basis in Public Law 864, 80th Congress, approved July 1, 1948); (2) the authority to purchase preferred stock of banks; and (3) the authority to advance funds to other Government agencies (also restored in individual cases, such as advances for foreign aid). Under Section 4(b) of Public Law 548, 80th Congress, approved May 25, 1948, the following restrictions and limitations were placed upon the lending powers of the Corporation, some of which are in accordance with previous legislation or with policies placed in effect by the Corporation prior to such act: 1. No financial assistance may be extended to business enterprises, financial institutions, or public agencies unless the assistance applied for is not otherwise available upon reasonable terms. All such loans and securities must be of such sound value or so secured as reasonably to assure repayment. 2. No loan, except as to public agencies, may be made for a period in excess of ten years unless the loan is made for the construction of industrial facilities, in which case the loan period may be extended by the estimated period of construction. Public agency loans, or securities, may have maturities not to exceed forty years. 3. In deferred participation agreements with banks, the Corporation's participation may not exceed seventy percent in loans of $100,000. or less, and may not exceed sixty percent in loans of more than $100,000. 4. The total amount of investments, loans, purchases, and commitments made subsequent to June 30, 1947, pursuant to Section 4 of the RFC Act, as amended, shall not exceed $2,000,000,000 outstanding at any one time. In addition to legislative restrictions, the Corporation has adhered to the Government's anti-inflationary. policies. Di1'ect Business Loam and Participation With Banks in Business Loam During the fiscal year 1948, the Corporation authorized 2,134 direct loans to business enterprises in amounts aggregating $114,000,000. In addition the Corporation authorized participations with banks, aggregating $110,000,000, in 2,591 loans. Under these participation loans the banks agreed to lend an additional $51,000,000. From the foregoing it may be seen that the Corporation was instrumental in making credit available, particularly to small business enterprises, in the aggregate amount of approximately $275,000,000. Actual disbursements made against all commitments by the Corporation, exclusive of national defense, were $101,000,000 during the year. The experience in the fiscal year 1948 compares with that of the fiscal year 1947 in the following respects: (1) In the prior year direct loan authorizations were made for 2,893 loans in the total amount of $99,634,812; (2) participation loan commitments were in the amount of $294,131,733 involving 7,658 loans; and (3) aggregate disbursements by the Corporation were $91,000,000. The foregoing reflects that the proportion of direct loans to total loans authorized during the fiscal year 1948 showed an increase over that in 1947, while the percentage and number of participation loans showed a marked decrease. Under the Small Loan Participation plan which was instituted during the fiscal year 1947, the number and volume of loans authorized has not reached the proportions of the Blanket Participation Agreement plan which was discontinued during the fiscal year 1947. Total loans to and securities of industrial and commercial enterprises, exclusive of those for national defense, outstanding as of June 30, 1948, were $231,090,336. In addition, loans to railroads were $144,276,602. Of the former, representing a total of 4,395 loans, 81 percent had outstanding balances of less than $25,000, and 96 percent had outstanding balances of less than $100,000. Of the total of 4,718 loans made subsequent to June 30, 1947, including all participation loans other than national defense, 79 percent 7 Digitized by Google had outstanding balances of less than 25,000 and 95 percent had balances of less than $100,000. At June 30, 1948, 25 percent of the total number of business loans and participations purchased under the Corporation's guarantee, exclusive of national defense loans, were delinquent with respect to one or more installments as compared to 21 percent a year earlier. In addition to the business loans reflected on the balance sheet, the Corporation had outstanding authorizations or commitments as at June 30, 1948, of $241 ,000,000 under participation agreements with banks, and $71,000,000 of direct business loan commitments. The following chart shows by fiscal years for the ten-year period, July 1, 1938-June 30, 1948, the amount authorized by the Corporation for loans to business enterprises, and the amounts disbursed, collected and outstanding: RECONSTRUCTION FINANCE CORPORATI ON LOANS T O B USINESS ENTERPRISES EXCLUDING NATIONAL DEFENSE ~bt~f:s ~Jct!~; Fiscal Years 1939-1948 400 ~ - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - ' - - - - - - ~ 400 250 ---------------------------+--------,---~ 250 AUTHORIZED--._ 1939 Public Agency Loans In anticipation of an increased demand for loans and purchases of obligations in connection with the construction of public projects authorized under Federal, state or municipal laws, the Congress increased, in Public Law 548, 80th Congress, (Section 4 (c)), to $200,000,000 the aggregate amount of such investments, loans, purchases and commitments made subsequent to June 30, 1947, which the Corporation may have outstanding at any one time. Under Public Law 256, 80th Congress, approved July 29, 1947, this ceiling had been established at $125,000,000. During the fiscal year 1948, ten authorizations, aggregating $24,500,000, were made for loans for public agency projects. Disbursements on prior and new commitments amounted to $21 ,692,000 during the same period. As of June 30, 1948, applications were under consideration for the financing of various public projects, such as water supply districts, transit systems and toll bridges. In addition, inquiries had been received from many other sources, indicating that this phase of the Corporation's activities is again approaching major significance. Of the total of $790,287,425 of public agency loans and securities heretofore made or acquired by the Corporation, loans and securities aggregating $78,779,241 were held by the Corporation at June 30, 1948. 8 Digitized by Google Catast1'ophe Loans Under Public Law 548, 80th Congress, the maximum amount of catastrophe loans which the Corporation might have outstanding at any one time was fixed at $25,000,000. In recognition of the potential need for loans resulting from the Pacific Northwest floods, this limitation was increased to $40,000,000 by Public Law 825, 80th Congress, approved June 29, 1948. There were 16 major catastrophes in the United States during the fiscal year 1948 in connection with which the Corporation authorized 346 loans aggregating $1,800,000. The most severe of these were the Florida-Mississippi-Louisiana Gulf Coast hurricane, and the Columbia River floods in the Pacific Northwest. The time of the Pacific Northwest floods was such that the full demand for the Corporation's services in th~t area was not reached until after the end of the fiscal year 1948. Since 1933 the RFC directly or through Disaster Loan Corporation (terminated June 30, 1945) has approved 25,250 disaster or catastrophe loans aggregating $55,900,000. Of the foregoing, $44,841,000 had been disbursed and total charge-offs against such loans amounted to $2,221,000 at June 30, 1948. At that date the RFC held $1,840,000 of such loans. Other Loans and PuTchases of Securities At June 30, 1947, when the Corporation's authority to furnish a secondary market for veterans home loans, made pursuant to the provisions of the Servicemen's Readjustment Act of 1944, as amended, had expired, the Corporation had commitments outstanding to purchase such loans in an amount aggregating $81,200,000. Of these commitments the Corporation purchased $72,628,000 during the fiscal year 1948. Total purchases of veterans home loans aggregated 24,000 in number and $140,309,000 in amount by June 30, 1948, and purchase commitments totalling $1,245,000 were outstanding at that date. Other loans disbursed during the fiscal year 1948 included: loans to manufacturers of prefabricated houses and building materials in connection with Veterans Emergency Housing Program, $11,500,000; purchase of obligations of financial institutions, $2,000,000; loans to railroads, $1,325,000; and advances in connection with foreign aid programs, $1,105,000,000. The last stated amount was fully reimbursed to the Corporation during the year. FEDERAL NATIONAL MORTGAGE ASSOCIATION The Federal National Mortgage Association was organized under the provisions of Title Ill of the National Housing Act, as amended, for the purpose of establishing and maintaining a secondary market for mortgages on homes and rental housing projects insured by the Federal Housing Administration. From 1942 to January 1948, relatively few mortgages were offered to the Association. For the six months period ending June 30, 1948, however, the Association purchased $47,368,600 of insured loans and at June 30, 1948, had outstanding commitments to purchase 27,600 mortgages in the amount of $234,437,000. No mortgages were sold by the Association during the fiscal year 1948. By Public Law 864, 80th Congress, approved July 1, 1948, and Public Law 901, approved August 10, 1948, Title Ill of the National Housing Act was amended to permit the Federal National Mortgage· Asso- ciation "to purchase, service, or sell any mortgages, which are insured after April 30, 1948, under Title ll, or Title VI of this Act, or guaranteed after April 30; 1948, under Section 501, or Section 502, or Section 505 (a) of the Servicemen's Readjustment Act of 1944, as amended," subject to certain limitations. The most significant limitation was that "no mortgage shall be offered to the Association for purchase by any one mortgagee-if the unpaid principal balance thereof, when added to the aggregate amount paid for all mortgages purchased by the Association from such mortgagee pursuant to authority contained herein, exceeds 50 per centum of the original principal amount of all mortgages made by such mortgagee." In anticipation of the demand upon the, Corporation for funds with which the Association could purchase home loans, the Congress by Public Law 864 amended Section 4(c) of the RFC Act to permit the Corporation to have outstanding at any one time investments, loans, purchases, and commitments made subsequent to June 30, 1947, of $2,000,000,000, representing an increase of $500,000,000 in such limitation. For the same reason Title III of the National Housing Act, as amended, was further amended by Public Law 864, to permit the Federal National Mortgage Association to issue and have outstanding at any time notes or other obligations in an aggregate amount not to exceed forty times the amount of its capital and 9 Digitized by Google surplus. The previous limit was twenty times its capital and surplus. Such amendments also permitted the Corporation to increase its subscription to the capital stock of the Association from $10,000,000 to $20,000,000. This increase was effected. in October, 1948. The following chart shows by fiscal years for the ten-year period, July 1, 1938-June 30, 1948, the outstanding unpaid balance of loans, mortgages and securities held by the RFC and its subsidiaries, exclusive of loans and advances to U. S. Government agencies: RECONSTRUCTION FINANCE CORPORATION UNPAID BALANCES OF LOANS, MORTGAGES 8c SECURITIES EXCLUSIVE OF LOANS TO U.S. GOVERNMENT AGENCIES BILLION Fiscal Years 1939-1948 BILLION DOLLARS DOLLARS 2 .5 , - - - - - - - -- - - - - -- - - -- - - - - - -- - - - - - - - - - - - - - . 2!1 OTHER 2.0 1 - - - - - - - -- - - ----1 1.0 "\~ff 0 .5 RAi lllll1 :?: · •· · •· ' COEFE . ;~:::::;;~ J@J;, 1939 1940 1941 1942 :t\HW ::,;..~::,; 1944 1943 1945 1946 1947 1948 NON-LENDING ACTIVITIES Exhibit C reflects the accountability of the Corporation resulting from the cancellation by the Secretary of the Treasury on June 30, 1948, pursuant to the provisions of Public Law 860, 80th Congress, of $9,313,736,531 of the Corporation's notes, representing the amount of unrecovered costs expended. by the Corporation through June 30, 1947, in connection with such activities. Of the above total, $6,719,841,834 represented expenditures accounted for at June 30, 1947, a very substantial portion of which represented. subsidies, and losses equivalent to subsidies, sustained by the Corporation under price stabilization programs at the direction of regulatory government organizations. The remaining balance of $2,593,894,697 represented assets, at cost, that were held by the Corporation at June 30, 1947. It will be observed from Exhibit C that assets in the amount of $1,126,637,924, consisting primarily of defense plants and equipment, were transferred. during the fiscal year 1948 to other U.S. Government agencies without reimbursement, as authorized by law, and that during the same period $188,865,255 of commodities, principally metals, minerals and natural rubber, were transferred to permanent stockpile, also without reimburse10 Digitized by Google ment. After giving effect to operating results during the year the Corporation had a total accountability to the U. S. Treasury at June 30, 1948, of $1,179,450,265, of which $1,008,348,247 represented assets held at that date, and $171,102,018 represented cash realization from operations and liquidation, $100,000,000 of which it is expected will be paid into miscellaneous receipts of the Treasury during the fiscal year 1949. A detailed breakdown of non-lending assets held at June 30, 1948, amounting to $1,008,348,247 is shown in Schedule 1 included in this report. It will be noted that of the total, $601,037,626 represents assets held in connection with the synthetic rubber program, and $126,508,350 are assets held in connection with the tin program, both of which are continuing in operation, as required by law. Other continuing operations at June 30, 1948, namely, abaca and sisal fiber plantations, the production of forgings of light metal, and the North Pacific seafood operations involve the use of assets costing $22,053,761. The contract under which the last mentioned operation is conducted expires at December 31, 1948, and it is not expected that the contract will be renewed. Production and Sale of Synthetic Rubber Under the provisions of the Rubber Act of 1948, approved March 31, 1948, authorizing the continuance of the synthetic rubber program until June 30, 1950, the President by Executive Order 9942, dated April 1, 1948, designated the RFC to exercise his powers, functions, duties and authority with respect to Sections 5 through 9 and Section ll(a) of such act, and all or such portions of the remaining sections of the Act insofar as they pertain to or are necessary and incident to carrying out the provisions of those sections of the Act enumerated. The Corporation produced 360,753 long tons of general purpose and 74,731 long tons of special purpose synthetic rubber during the fiscal year 1948. From April 1, 1948, the date of the Rubber Act of 1948, to June 30, 1948, 104,305 long tons of. general purpose and 16,362 long tons of special purpose rubbers were produced. Of the latter amount 9,430 long tons were of a type suitable for use in pneumatic inner tubes. On an annual basis, the foregoing production represents the following percentages of the minimum production specified in Section 5 of such Act: General purpose synthetic rubber-209% Special purpose synthetic rubber-300% Special purpose synthetic rubber of a type suitable for use in pneumatic inner tubes-252%. Net income from synthetic rubber operations in the fiscal year 1948, amounted to $7,796,894 before deduction of expenses for protection and maintenance of standby plants and facilities. At June 30, 1948, the Corporation had in operation 24 plants, of which the GR-S Copolymer plants had a rated annual capacity of 375,000 long tons of general purpose rubber, and the special purpose type plants had an annual rated capacity of 85,333 long tons. In addition, the Corporation held in standby 14 plants, of which the GR-S Copolymer plants had a rated capacity of 270,000 long tons of general purpose rubber, and the special purpose plants had a rated capacity of 42,667 long tons. The foregoing rated capacities for the GR-S Copolymer plants, including the facilities in operation and in standby, total 107% of the requirements of the Act, while 197% represents a comparable figure for the special purpose plants. Of the total rated capacity of special purpose rubber plants, 68,000 long tons represents capacity in operation or in standby for the production of synthetic rubber suitable for use in pneumatic inner tubes, or 151 % of the minimum requirements of the Act. The Corporation had 22 contracts or agreements at June 30, 1948, with the University of Akron, Akron, Ohio, the Bureau of Standards, and various colleges and rubber companies, under which research is being conducted in rubber and allied fields, as authorized by law. As a result of such research conducted in connection with the Synthetic Rubber Program a process of low temperature polymerization of GR-S has been developed which produces a general purpose rubber substantially superior to the former GR-S and which is presently equal or superior to natural rubber for use as tread stock in the transportation field. The following chart reflects production of synthetic rubber for the fiscal years 1944-1948, classified as between general purpose rubber and special purpose rubber. Of the special purpose rubber the GR-I is suitable for use in pneumatic inner tubes. 11 • Digitized by Google RECONSTRUCTION FINANCE CORPORATION SYNTHETIC RUBBER PRODUCTION THOUSAND Fiscal Years 1944-1948 LONG TONS 900 THOUSAND LONG TONS , - - - - - - - - - - - - - - -- - - - - - - - - - - - - -- - - - - ~ eoo 100 :::::::::::::::::::::::::::::::: ................ ················ 300 500 GR-S 0 1944 1945 0 1947 1946 GENERAL PURPOSE Production and Sale of Tin By act of Congress approved June 29, 1948, the ~orporation was authorized and directed to continue the domestic tin-smelting industry, including the purchase and sale of tin, until June 30, 1951. Special reports on the tin program are made semi-annually as required by law. The operating problems at the smelter, particularly with respect to the assurance of a suitable ore supply, were discussed in the semiannual report of June 30, 1948, and are not commented upon herein. During the fiscal year 1948 the Corporation purchased $153,952,416 of tin, tin ores and concentrates. Sales of tin amounted to $118,577,508. Of the total of 40,253 long tons of refined tin held in inventory at June 30, 1948, 20,000 long tons have since been transferred, without reimbursement to the Corporation, to the Bureau of Federal Supply for national stockpile purposes. Net income from tin operations amounted to $10,272,913 for fiscal year 1948 (Schedule 3) after deducting interest on the Government's investment in the assets utilized in the smelter operations. Tin sales prices increased substantially during 1948 and the profit for this period is largely attributable to the time lag between the purchase of tin and tin ore and the sale of refined tin on a rising market. Fiber Plantations During the fiscal year 1948 there were produced, on the government owned plantations located in Costa Rica, Guatemala, Panama, Honduras and Haiti, 43,086,347 pounds of abaca at a cost of $5,714,455, or 12 Digitized by Google 13.3 cents per pound, and 6,282,835 pounds of sisal at a cost of $558,755, or 8.9 cents per pound. Sales during the same period amounted to $8,544,866, consisting of 39,601,565 pounds of abaca at an average sales price of 18.9 cents per pound and 6,511,008 pounds of sisal at an average sales price of 16 cents per pound. Net income from operations amounted to $2,611,061. The agreements under which these plantations are operated expire in December 1948, and while the Corporation is attempting to dispose of them on a basis which will assure their continued operation, this may not be possible. The National Security Resources Board and the Army and Navy Munitions Board have expressed their desire that the operation of the plantations be continued Other Continuing Operations at June 30, 1948 The Corporation had two additional continuing operations, at the end of the fiscal year 1948, namely, the financing of the Wyman-Gordon Products Corporation under a contract for the experimental manufacture of light metal forgings, and the Pacific Exploration Company, Inc. in the exploration of fishing grounds in the Bering Sea and Pacific Ocean, primarily in search for crabs, bottom fish and tuna. Incident to such exploration the Company engaged in the catching and packing of seafoods. The Wyman-Gordon Products Corporation under contract with the RFC has, since May 1946, been engaged in experimental manufacture of forgings of light metal. Operations during the fiscal year 1948 resulted in a net loss, before depreciation of $38,532. The National Security Resources Board and the Army and Navy Munitions Board have expressed their desire that this operation be continued. Incident to the exploratory value of operations under the Corporation's contract with the Pacific Exploration Co., Inc., there has been marketed since August 1947, the date the operation began, $67,575 of canned and frozen seafood products, and the Company as of the date of its latest report had an inventory of such products of $450,000 at current market values. Operations in the fiscal year 1948 resulted in a net loss of $370,173. The contract under which this program has been operated expires December 31, 1948. Purchase and Sale of Other Commodities Under contracts outstanding at June 30, 1947, the Corporation purchased other strategic materials and supplies during the fiscal year 1948 amounting to approximately $48,000,000. These materials and supplies consisted primarily of alcohol, molasses, natural rubber, copper, zinc and tungsten. Sales of strategic commodities other than. tin and synthetic rubber, metal forgings and seafood, amounted to $85,612,928 during the year, and transfers to the Bureau of Federal Supply for permanent stockpile, without reimbursement to the RFC, amounted to $188,865,255. Of this latter total $128,501,443 represented the cost of 252,716 long tons of natural rubber. With the exception of a small amount of quinidine to be received during the first half of the fiscal year 1949, all purchases and sales programs involved in the foregoing have been discontinued, but there remained at June 30, 1948, inventories of $27,093,891 to be sold or transferred to permanent stockpile. Through June 30, 1948, the Corporation had transferred strategic and critical materials costing $439,960,419 to the national stockpile. Disposal of Defense Plants and Facilities At June 30, 1948, the Corporation held defense plants and equipment costing $121,072,072, other than plants and equipment held in continuing operations, the major portion of which was under long-term leases that are not subject to termination except with the consent of the lessees. The Corporation will dispose of these plants and equipment as rapidly as such action is possible. Rental income during the fiscal year 1948 on defense plants under lease amounted to $22,741,633, and plants and equipment costing $1,275,630,538 were disposed of by the Corporation during the year, the principal portion of which were transferred to other U.S. Government agencies without reimbursement to the RFC. Through June 30, 1948, the Corporation had transferred to other government departments, plants, equipment and miscellaneous commodities costing $5,810,872,279. Loans, Advances and Receivables, and Other Assets Held for Liquidation Loans, advances and receivables aggregating $85,299,608 and other assets of $31,335,295, all of which relate to the national defense, war and reconversion programs were held by the Corporation at June 30, 1948. Collection and liquidation of these items are being effected as expeditiously as circumstances permit. 13 Digitized by Google Loans, Leases, Machinery and Equipment TransfeTTed From Smaller War Plants Corporation In connection with assets acquired from Smaller War Plants Corporation for liquidation by Executive Order dated December 27, 1947, the RFC is accountable to the U.S. Treasury in a manner similar to its accountability in the liquidation of assets acquired in connection with the national defense, war and reconversion activities discussed above. During the fiscal years 1947 and 1948, $135,600,000 and $10,000,000, respectively, were paid by the Corporation to the Treasury, representing proceeds from liquidation of SWPC assets, leaving $7,238,130 remaining as a liability to" the Treasury. These funds, plus further proceeds to be collected, will be paid to the Treasury Department after deduction of liquidating costs and expenses and amounts required to meet oustanding commitments under the SWPC program. There remained as of June 30, 1948, assets of $13,751,533, at cost to SWPC, to be liquidated. As directed by Congress in Public Law 132, 80th Congress, the RFC is continuing to liquidate the loans, leases, plants and equipment of Smaller War Plants Corporation. These assets amounted to approximately $163,000,000 (including cash of $132,000,000) at the date of transfer and had been reduced to $23,253,234 at June 30, 1947. Further liquidation in the amount of $9,501,701 was achieved in the fiscal year 1948. PERSONNEL The following chart indicates the number of RFC employees as of the end of each fiscal year over the period 1938-1948: R.F.C. EMPLOYEES Fiscal Years 1939•1948 NO. OF EMPLOYEES NO.OF EMPLOYEES 15poo 15,000 ~000~----------------· ~ = ~: ..:.:-:-:-~-:.:-:.:-:.: ,--......- ::;:;:;:::;:;:;:::::: 1-------16,000 ::::::::::::=::::::::;:. ............·.-:.:.•; 3,000 1938 As of June 30, 1948, the Corporation had 5,337 employees, of which approximately 2,170 were engaged in non-lending activities, leaving 3,167 engaged primarily in work incident to the lending function of the Corporation. Ten years earlier, or at June 30, 1938, the Corporation had 3,277 employees, all of which were engaged in work incident to the Corporation's lending function. At that time a substantial portion of the work relating to lending, which is presently being performed by the Corporation's personnel, was being done by employees of the Federal Reserve Banks the numbers of which are not included in the foregoing. Respectfully submitted, HARLEY HISE, Chairman of the Board. December 20, 1948 14 Digitized by Google -.:. Digitized by Google RECONSTRUCTION FINANC0 EXIIIBIT A-atMP.UU: Assets June 30, 1947 June 30, 1948 CASH $ 129,263,020 $ 265,621,685 LOJUfS, A1'J> UCVRITIES AT COST (othn tbaa fonl8D . - - mema 1111d U. a . ~ apllCIH):-Jl'ola C Industrial and commercial enterprises _____________ _ $ 303,417,539 144,276,602 137,449,216 134,632,893 $ 268,244,234 146,886,898 163,407,332 120,031,975 Other loans--------------------------------------Accrued interest and dividends ___________________ _ 133,633,751 52,035,260 1,888,172 14,638,158 67,076,941 6,807,060 859,511 17,853,701 Less estimated losses in collection _________________ _ 921,971,591 85,036,886 836,934, 705 791,167,652 86,677,103 704,490,549 155,162,000 60,003,288 215,165,288 187,536,031 60,003,288 247,539,319 41,339,248 43,041,944 849,402,825 892,444,789 Railroads----------------------------------------Financial institutions -----------------------------Political subdivisions of states and territories ______ _ Mortgages partially guaranteed by Veterans Administration ---------------------------------------Mortgages insured by F.H.A. _____________________ _ LOAJl'S TO 'FOIIEIQJI' GOVElUOIEIITB, lnd11dbltr accnaecl bdenst: United Kingdom of Great Britain and Northern Ireland (less prepayments of $9,362,384 in 1948 and $9,857,451 in 1947) -----------------------------Republic of the Philippines -----------------------LOJUfS TO A1'J> SECURITJEII OF U. a. QOVE111U1E1ff AQEJl'CIEB, lndl1dlng accnaecl bdenst 1111d dh1dada:-ll'ote J> 41,339,248 Defense Homes Corporation ----------------------Other agencies-----------------------------------OTHER Aaam, Properties and securities acquired in liquidation of loans and interest, less estimated losses of $16,381,944 in 1948 and $9,243,329 in 1947-Note E ________ Miscellaneous accounts and notes receivable, less estimated losses of $822,660 in 1948 and $570,670 in 1947 Furniture and fixtures, less accumulated depreciation of $1,295,160 in 1948 and $1,633,239 in 1947 ________ Land, office buildings and other properties, less accumutated depreciation of $1,109,832 in 1947 ________ 14,346,421 11,638,205 7,404,724 13,354,720 1,220,668 1,401,377 22,971,813 9,571,717 $1,245,674,074 16 Digitized by Google 35,966,019 $2,146,062,341 )RPORATION AND SUBSIDIARIES NSOLIDATBB BALANCE SHEET Liabilities - - - - - - - - - - - - - June 30, 1948 June 30, 1947 LIJUIILITIES TO TBB PVBUC: Accounts payable--------------------------------- $ Trust and deposit liabilities ______________________ _ 73,195,831 30,978,473 Liabilities arising from war damage insurance program ------------------------------------------- $ 143,509,699 50,316,914 756,297 $ 104,930,601 20,653,460 $ 214,480,073 LIJUIILITIES TO 17. S. GOVERlOIElff AQElfCIES: 19,990,704 1,110,950 83,533 Accounts payable--------------------------------Trust and deposit liabilities -----------------------Unexpended balances of appropriation allocations __ _ Liability to U. S. Treasury for net prO'Ceeds from liquidation and/or operation of: National defense, war and reconversion activitie&-Exhibit C ----------------------------Assets transferred from Smaller War Plants Corporation-Exhibit D ------------------------Securities purchased from Public Works Administrator, Federal Works Agency-Note C ____ _ War damage insurance program ______________ _ 171,102,018 7,238,130 234,728,755 ZIIPJ.OYEES' ACCB17ED JUUl17AL LEAVE _ _ _ _ _ __ U ■ UED STATES 9,958,845 35,203,420 Total (of which $279,102,726 in 1948 and $490,470,992 in 1947 arose from ·national defense, war and reconversion activities)-Note F __ IIIVEIITIIElff OF TBE KotN Q and B 74,057,933 11,290,341 1,174,522 45,719,335 209,827,810 352,028,786 339,659,356 566,508,859 5,830,647 6,683,548 QOVE!llOIEIIT:- Notes payable to U. S. Treasury, including accrued interest----------------------------------------Less net expenditures for national defense, war and reconversion activities -------------------------- 10,009,704,982 9,313,736,531 695,968,451 Capital stock held by U. S. Treasury ______________ _ Accumulated net income from lending activities-Exhibit B: Reserved for contingencies ___________________ _ Unreserved---------------------------------- 325,000,000 15,864,250 559,319,821 325,000,000 900,184,071 551,901,483 $1,245,674,074 This exhibit is subject to the accompanying "Note■ to Financial Statements". 17 Digitized by Google 1,572,869,934 $2,146,062,341 RECONSTRUCTION FINANCE CORPORATION AND SUBSIDIARIES EXHIBIT B--COMP.ABATIVE CORSOLmATED STATEMENT OF MET IRCOME FROM LERDIRG ACTIVITIES Fiscal Year ended June 30, 1948 Fiscal Year ended June 30, 1947 IIJCOIIZ: Interest and dividends earned on loans to, and securities of: Commercial enterprises, financial institutions, political subdivisions of states and territories and home owners -------------------------------------Foreign governments--------------------------------------------------0. S. Government agencies ---------------------------------------------- $ Premiums on sale of securities ---------------------------------------------Fees on loan participation agreements --------------------------------------Income from acquired collateral-net-Note E ------------------------------Other income-------------------------------------------------------------- 6,575,072 1,214,277 30,068,590 6,604,207 13,563,797 38,214,802 50,236,594 77,535 2,155,208 1,584,584 30,425,453 $ 1,589,092 6,505,298 119,834 718,099 105,501 54,799,986 46,506,561 llffEIIZST JUU> OTIIEll DPEIUES: Interest on: Funds borrowed from U. S. Treasury -----------------------------------Funds held for U. S. Treasury and others -------------------------------Administrative expenses---------------------------------------------------Fees for servicing mortgages-----------------------------------------------Other expenses ------------------------------------------------------------ 2,853,379 NET INCOME BEFORE PROVISIONS FOR LOSSES ------------------------PROVJSIOD FOR LOSIID-lf«»M I NET INCOME-------------------------------------------------------- $ 5,504,393 14,398,949 657,938 89,37~ 14,342,716 130,854 2,823 20,650,655 20,899,782 25,855,906 33,900,204 7,675,965 14,064,061 18,179,941 3,570,010 $ 19,836,143 ANALYSIS OF ACCUMULATED MET IRCOME Accumulated net income, June 30, 1947 -----------------------------------------Adjustments applicable to prior fiscal years -------------------------------------Income for fiscal year ended June 30, 1948, as above ------------------------------ $ 551,901,483 Accumulated net income, June 30, 1948 _______________________________ :__ _________ _ Less amount reserved for contingencies-Exhibit A ------------------------------ 575,184,071 15,864,250 Accumulated net income-unreserved, June 30, 1948-Exhibit A _________________ _ $ 559,319,821 5,102,647 18,179,941 This exhibit is subject to the accompanying "Notes to Financial Statements". 18 Digitized by Google RECONSTRUCTION FINANCE CORPORATION AND SUBSIDIARIES EXHIBIT C-STATEMEHT OF ACCOUNTABILITY TO U.S. TREASURY FOB NET FUNDS EXPENDED IN RATIONAL DEFENSE, WAR ARD BECOHVEBSIOH ACTIVITIES ACCO'Ulff.ABILITY AT .JU1'E IO, IN7: Unrecovered costs and net expenses as of June 30, 1947, for which notes payable to U. S. Treasury were cancelled pursuant to Public Law 860, 80th Congress, approved June 30, 1948 --------------------------------------------------Less net expenditures accounted for at June 30, 1947-Note K _______________ _ $9,313,736,531 6,719,841,834 BALANCE REPRESENTING ASSETS ON HAND AT .JUNE 30, 1947, AT COST- SCHEDULE 1------------------------------------------------------- 2,593,894,697 FISCAL YEAJl INI RESVLTI or UQUU>ATIOK or DUICUNnNOED PIIOGRAMII: Cost of assets transferred to other U. S. Government agencies without reimbursement: Property, plant, and equipment declared surplus ________________________ _ Commodities tr~erred to national stockpile ---------------------------- $1,126,637,924 188,865,255 1,315,503,179 Losses on sale and retirement of property, plant and equipment _____________ _ Administrative expenses exclusive of $1,799,382 allocated to synthetic rubber and tin programs------------------------------------------------ ------------Veterans emergency housing subsidy----~------------ ----------------------Losses on veterans emergency housing market-guarantee agreements ________ _ Excess of costs over proceeds from sale of commodities (sales $85,612,928) ____ _ Other losses and costs __________________ '__________________________________ _ 147,925,132 17,014,968 4,262,160 2,483,256 3,404,920 3,088,705 1,493,682,320 1,100,212,377 l"UCAL YEAJl INI IIUVLTI or OPEJULTIOKS or PBOGIUllU CuNIDIOlaG AT .JU1'E ... lNli Profits from synthetic rubber program-Schedule 2 -------------------------Profits from tin program-Schedule 3 --------------------------------------Profits from fiber plantations and miscellaneous operations-Schedule 4 ______ _ Gr088 rental income on defense plants and related facilities _________________ _ 1,536,016 10,272,913 2,202,356 22,741,633 36,752,918 Add: Charges to rubber and tin operations not involving cash outlays (depreciation and interest)------------------------------------------------- ----IIITEIIBST ALLOWED •ot. r 37,631,970 o• •oK-LEJmllfQ nnm• UTILIZED DI RFC LEIIDDIQ AC'HVITl&S- 74,384,888 4,853,000 .ACCO'Ulff.ABILITY AT .JU1'E IO, INI: $1,179,450,265 REPRESERTED BY: Net proceeds realized during fiscal year 1948, payable to U. S. Treasury (including $4,853,000 interest allowed)-Exhibit A -------------------------------Assets, at cost, remaining for disposal at June 30, 1948-Schedule 1 __________ _ $ 171,102,018 1,008,348,247 $1,179,450,265 This exhibit is subject to the accompanying ''Notes to Financial Statements". 19 Digitized by Google RECONSTRO'CTION FINANCE CORPORATION AND SO'BSIDI.ARIES EXHIBIT D-STATEMERT OF ACCOURTABILITY TO U.S. TBEASUBY FOB NET ASSETS Tll.AIISFERRED FROM SMALLER WAR PLJlllfTS COBPOBATIOH ACCOVJITABLE AT JU1'E 30, 1M'7: Net proceeds realized, payable to U. S. Treasury (less $135,600,000 previously remitted)-Exhibit A -----------------------------Assets remaining for disposal: $ $ Loans ----------------------------------------------------Notes and accounts receivable-----------------------------Machinery and equipment---------------------------------Other assets 15,469,485 2,447,730 4,349,716 986,303 9,958,845 23,253,234 33,212,079 TRAKUCTIOJfB DVIU1'Q nae.AL YEAR EllDBD .JU1'E 30, INI: Losses on sales and retirements of machinery and equipment (net) Loans charged off---------------------------------------------Administrative expenses---------------------------------------Other expenses------------------------------------------------- $ 1,577,736 899,209 546,199 46,404 3,069,548 Less income from interest on loans and rental of machinery and equipment --------------------------------------------------- 1,103,504 Cost of assets transferred to other Government agencies without reimbursement----------------------------------------------- 1,966,044 2,508,418 542,372 30,703,663 Interest allowed on non-lending funds used in lending activities-Note F ------------------------------------------------------- 286,000 Proceeds remitted to U. S. Treasury in fiscal year 1948 ___________ _ 30,989,663 10,000,000 ACCOVJITABILITY AT .JU1'E 30, IMI------------------------------------- $ 20,989,863 $ 7,238,130 BEPREBE1'TED BY: Net proceeds realized, payable to U. S. Treasury ________________ _ . Assets remaining for disposal at June 30, 1948: Loans ----------------------------------------------------Notes and accounts receivable ------------------------------Machinery and equipment---------------------------------Other assets------------------------------------------------ 9,673,569 1,949,722 1,407,291 720,951 13,751,533 $ This exhibit is subject to the accompanying ''Notes to Financial Statements". 20 Digitized by Google 20,989,663 RECONSTRUCTION FINANCE CORPORATION AND SUBSIDIARIES SCHEDULE I-ASSETS. AT COST. ACQUIRED IR CORNECTIOR W1TH RATIONAL DEFENSE. WAR ARD RECORVERSIOR ACTIVITIES FOR WHICH THE CORPORATIOR IS ACCOUNTABLE TO THE U.S. TREASURY June 30, 1948 June 30, 1947 aYniBEiiC Jl'UBBEB PJI.OGRAJI Accounts receivable----------------------------------Advances under procurement contracts ________________ _ Inventories: Synthetic rubber --------------------------------- $ Raw materials, chemicals and processed stock ______ _ Supplies, spare parts and tools ____________________ _ $ 1,698,290 $ 828,027 11,669,473 18,000,996 9,723,723 1,732,833 $ 39,394,192 2,649,800 14,661,600 23,122,878 10,226,177 48,010,655 Property, plant and equipment, including $211,524,175 at June 30, 1948 and $97,565,762 at June 30, 1947 in standby status------------------------------------------Prepaid taxes. insurance and other deferred charges ___ _ 557,787,473 1,329,644 575,124,603 2,715,560 Total assets-Synthetic rubber program ___ _ 601,037,626 630,233,451 1,461,495 2,697,444 Tm PllOGRAJI Accounts receivable----------------------------------Inventories: Refined tin--------------------------------------Tin ore------------------------------------------Operating and other supplies _____________________ _ 73,955,656 41,769,789 650,938 Property, plant and equipment -----------------------Prepaid taxes, insurance and other deferred charges ___ _ Total assets-Tin program _________ 116,376,383 23,223,613 35,906,609 550,886 59,681,108 8,636,732 33,740 8,180,962 104,407 126,508,350 70,663,921 .ALL OTHBB PllOGBAIU Loans, advances and receivables: U. S. Government agencies -----------------------Other -------------------------------------------- 14,160,354 71,139,254 Inventories of strategic materials held for disposal or transfer to national stockpile: Metals and minerals-----------------------------Natural rubber----------------------------------Other strategic materials----------------------~--~ 15,908,709 71,769 11,113,413 Property, plants, equipment and related facilities: Defense plants and equipment ____________________ _ Plantations operated' for the production of abaca, agave fibers and cinchona bark located in Central and South American countries ------------------- 85,299,608 49,831,321 141,624,375 . 191,455,696 27,093,891 90,360,176 131,813,803 32,742,331 254,916,310 121,072,072 16,001,405 Other assets: Experimental plywood flying boat ________________ _ Inventories of platinum and silver _________________ _ Prefabricated houses and housing materials ________ _ Miscellaneous assets -----------------------------Total assets-Other programs _____________ _ 17,2lb,Oll 5,645,337 2,443,718 6,030,229 TOT~EXHIBlT C---------------------- 1,396,702,610 137,073,477 16,395,874 1,413,098,484 15,413,057 6,779,418 31,335,295 11,334,360 33,526,835 280,802,271 1,892,997,325 $1,008,348,247 $2,593,894,697 This schedule is subject to the accompanying "Notes to Financial Statements". 21 Digitized by Google RECONSTRUCTION FINANCE CORPORATION AND SUBSIDIARIES SCHEDULE 2-STATEMERT OF OPERATIONS OF SYNTHETIC RUBBER PBOGIUlM Fiscal Year Ended June 30, 1948 DICOIIE: Sales of synthetic rubber-------------------------------------------------------------------Rental income-----------------------------------------------------------------------------Revenue from tank car operations ----------------------------------------------------------Profit from sale of chemicals ---------------------------------------------------------------Other income------------------------------------------------------------------------------ $199,026,057 835,602 231,023 230,585 197,439 200,320,706 OPEIULTIJIQ coan AlfD EZPEJIIES: Cost of goods sold (including $31,703,155 provision for depreciation of operating plants and facilities) --------------------------------------------------------------------Research and development-----------------------------------------------------------------Excess of sales freight expense over freight charged to customers -----------------------------Storage and handling of finished goods----------------------------------------------------Administrative expense _____________________________________________________________________ _ 180,281,875 3,054,324 1,325,182 545,162 1,463,277 546,171 Loss on property disposals-----------------------------------------------------------------Contract termination expense--------------------------------------------------------------Other expenses----------------------------------------------------------------------------- 575,866 192,119 187,983,976 INCOME FROM OPERATIONS BEFORE DEDUCTION OF INTEREST ON INVESTMENT 12,336,730 DITEIIEIIT 01' V. B. QOVERJIIIEIIT FUJIDB DIVESTED DI KET OPEIULTDIQ AIIBETS ----------------------- 4,539,836 NET INCOME FROM OPERATIONS---------------------------------------------- 7,796,894 EZPEJIBEB FOR IIADITEJIAJICE AlfD PROTECTIOK OF BTAIIDBY PLAKTB AlfD FACII.ITIEB _______________ _ 6,260,878 NET INCOME-EXHIBIT C-NOTB L ' 1,536,016 This schedule is subject to the accompanying "Notes to Financial Statements". 22 Digitized by Google RECONSTRUCTION FINANCE CORPORATION AND SUBSIDIARIES SCHEDULE ~TATEMENT OF OPEBATIOHS OF TIM PROGRAM Fiscal Year Ended June 30, 1948 Smelter operations, Texas City, Texas BALES OF REFDIEI> TDr ---------------------------------------------- $ Trading operations, imported tin 45,398,147 $ Total 73,179,361 $ 118,577,508 COST OF Tl1' SOLD: 9,307,898 Inventory, July 1, 1947 -----------------------------------------Invoice cost of refined tin purchased, net _______________________ _ 13,915,715 23,223,613 93,096,398 93,096,398 Cost of Ore Processed: 35,906,609 60,856,018 1,975,827 Inventory, July 1, 1947 ------------------------------------Invoice cost of ore purchased -------------------------------Incoming transportation, customs fees, and other expenses ___ _ 98,738,454 Less inventory, June 30, 1948 ------------------------------- 41,769,789 Cost of ore processed--------------------------------------- 56,968,665 56,968,665 Processing costs, including $600,613 provision for depreciation of smelter and facilities----------------------------------------Handling, storage, transportation and other expenses ____________ _ 5,233,187 5,233,187 501,253 2,044,220 2,545,473 72,011,003 109,056,333 181,067,336 Less inventory, June 30, 1948 ----------------------------------- 32,619,010 41,336,646 73,955,656 Cost of tin sold --------------------------------------------- 39,391,993 67,719,687 107,111,680 5,459,674 11,465,828 GROSS PROFIT --------------------------------------- $ 6,006,154 $ 404,549 SELLDIO Alfl> .ADMDfISTRATIVE EXPEIISEB----------------------------NET INCOME, BEFORE DEDUCTION OF INTEREST ON INVESTMENT----------------------------------------Dn'EREST OK u. a. OOVERlOIE!fT'S nnms 11,061,279 IJIVESTED 1K THE Tl1' PROGRAM (uneUu opnal1om only)---------------------------------------------- 788,366 NET INCOME-EXHIBIT C-NOTE L--------------------- $ 10,272,913 This schedule is subject to the accompanying "Notes to Financial Statements". 23 Digitized by Google RECONSTRUCTION FINANCE CORPORATION AND SUBSIDIARIES SCHEDULE 4-RESULTS OF OPERATIONS OF FmEB PLAlffATIOHS AND MISCELLANEOUS PROGRAMS Fiscal Year Ended June 30, 1948 Cost or Facilities Programs and Agent Operators Net Operating Profit (or Loss•) Before Depreciation PLAJITATIOlf11 OPERATED FOR TBE PRODUCTIOK OF ABACA AKD AGAVE FIBERS: United Fruit Company-Guatemala, Costa Rica, Panama and Honduras __ Haitian Agricultural Corporation-Haiti ------------------------------- $ 11,689,899 1,291,872 $ 12,981,771 2,132,263 478,798 2,611,061 ALVIIDIUN AKD NAGDIIIVII FORQIIIQS: Wyman-Gordon Products Corporation-Worchester, Massachusetts _____ _ 4,151,440 FJSBDl'Q VEISELll-lfOTE II: Pacific Exploration Company, Inc.-Seattle, Washington _______________ _ 4,920,550 370,173• $ NET OPERATING PROl'IT-EXBIBlT C ------------------------- 2,202,356 This schedule is subject to the accompanying "Notes to Financial Statements". NOTES TO FINANCIAL STATEMENTS A The accompanying consolidated balance sheet and related statements of net income set forth the financial position at June 30, 1947, and June 30, 1948, of the Reconstruction Finance Corporation and its subsidiary, the Federal National Mortgage Association, and the consolidated results of their operations for the years ended on such dates. For the purpose of uniformity and to facilitate comparison, the June 30, 1947 balance sheet, published in the Corporation's report as at that date, has been adjusted to reflect minor reclassifications, and to eliminate unliquidated assets relating to programs for national defense, war and reconversion, and assets transferred from Smaller War Plants Corporation. The net proceeds from the liquidation of these assets are to be paid into miscellaneous receipts of the U. S. Treasury and are shown on an accountability basis in Exhibits C and D. Assets shown on the balance sheet for both years represent, therefore, those to which the Corporation has both title and beneficial interest, and represent only those pertaining to its lending activities. B War Damage Corporation, a wholly owned subsidiary, expired on June 30, 1947, and is presently in liquidation. Its entire cumulative net income of $209,827,810, at June 30, 1947, was paid into the U. S. Treasury in August 1947. A further payment to the Treasury was made on June 30, 1948, in the amount of $81,056, representing the balance of funds held at that date in excess of liabilities of $756,097. 24 Digitized by Google NOTES TO FINANCIAL STATEMENTS-Continued U.S. Commercial Company, a wholly owned subsidiary, expired on June 30, 1948, and is presently in liquidation. RFC's net investment in such subsidiary was returned to the Corporation through the cancellation of notes payable to the Treasury in connection with the national defense, war and reconversion activities. USCC's remaining assets are included in the attached accountability statements relating to such activities. C:: Loans to industrial and commercial enterprises include $72,308,888 as of June 30, 1948 and $68,690,001 as of June 30, 1947, made pursuant to Section 5d (2) of the Reconstruction Finance Corporation Act, approved June 22, 1932, as amended. The authority contained in this section to make so-called "National Defense" loans was rescinded in Public Law 132, 80th Congress. Loans and securities at June 30, 1948, include the cost of the following securities purchased by the Corporation, partially at par and partially at two-thirds of par value, from the Public Works Administrator, Federal Works Agency: Cost to RFC Par Value Railroads ----------------------------------- $ 3,034,692 Political subdivisions of states and territories__ 55,853,651 $ 3,034,692 61,512,427 Total ______________________________ $58,888,343 $64,547,119 In the event the foregoing items are disposed of for amounts exceeding the cost to RFC, the excess will be credited to the Corporation's liability to the U. S. Treasury; similarly, disposals for less than cost will decrease such liability. During the fiscal year 1948 securities costing $1,844,646 were disposed of for $2,499,389. The balance of $35,203,420 due the Treasury at June 30, 1948, represents the accumulative net proceeds in excess of cost of securities disposed of less prior payments to PWA of $5,650,000, and $10,000,000 remitted to the Treasury in 1948. D Pursuant to Public Law 860, 80th Congress, approved June 30, 1948, all assets and liabilities of Defense Homes Corporation were to be transferred, not later than July 30, 1948, to the Reconstruction Finance Corporation, without reimbursement or other consideration, for the purpose of liquidation. Under this legislation it is anticipated that all liabilities, including the indebtedness of Defense Homes Corporation to the Reconstruction Finance Corporation (shown in Exhibit A as $41,339,248 as of June 30, 1948), will be settled from realization of the assets of the former, and any net proceeds, remaining after the payment of all obligations of Defense Homes Corporation and liquidation costs, will be covered into the Treasury as miscellaneous receipts. This transfer was made in July 1948. E During the fiscal year 1948, the Corporation revisedJts basis for recording (1) the carrying value of properties and securities acquired in liquidation of loans and interest, and (2) the profit or loss from disposition. Prior to the fiscal year 1948, profit or loss on the disposition of acquired collateral was not reflected in the income statement until disposition had been made of all collateral acquired in connection with a particular primary loan. Consequently, the value of acquired collateral is included in the balance sheet of June 30, 1947, at acquisition cost less collections from partial dispositions to that date. At June 30, 1948, the acquired collateral was valued at the lower of acquisition cost or appraised value. Under the revised procedure adopted, effective with the fiscal year 1948, profit or loss is recognized at the time disposition is made of individual items of collateral. This revision in procedures accounts for the major portion of the increase in income from acquired collateral of $6,505,298 for the fiscal year 1948, as compared to income from this source of $718,900 _for the fiscal year 1947. In addition, accumulated net income has been increased $8,025,590, representing profits determined to have been applicable to 1947 and prior years. The above mentioned increases arose principally through the liquidation of property held for RFC by the Consolidated Realty Corporatiori referred to elsewhere in this report. Such property was originally acquired by RFC through foreclosure of its loan to the Prudence Company, Inc. The portion of the property remaining at June 30, 1948, held by Consolidated Realty Corporation for liquidation for RFC's account is included in this report at $2,127,831, however it is anticipated that the liquidating proceeds may exceed such amount by $5,200,000. 25 Digitized by Google NOTES TO FINANCIAL STATEMENTS-Continued P Of the total liabilities of $339,659,356 at June 30, 1948, $279,102,726 represents liabilities arising from national defense, war and reconversion activities, including liquidation of SWPC assets. Funds for the payment of these liabilities were made available to the Corporation through the cancellation of notes by the Treasury and from liquidation proceeds. Pending actual settlement of such liabilities, the Corporation utilizes such funds in the administration of its lending functions and accordingly there has been credited to the U.S. Treasury in 1948, $5,139,000, of which $286,000 was applicable to SWPC, representing 1%% per annum (the current interest rate paid the Treasury by the Corporation on its notes payable) on the average monthly balance of such outstanding liabilities; the offsetting charge is included as interest in Exhibit B, and the Corporation's accountability to the Treasury as reflected in Exhibits C and D was increased accordingly. G Notes to the U.S. Treasury have been paid in full as of June 30, 1948, principally as the result of a series of note cancellations directed by the Congress and made effective during the fiscal year 1948. Notes were cancelled for the following: 1. Unrecovered costs and net expenses under national defense, war and reconversion activities in the amount of $9,313,736,531, cancelled pursuant to Public Law 860, 80th Congress (Exhibit C). In this connection additional notes in the amount of $46,005,553, covering interest paid by the Corporation in January 1948 on the above notes, were also cancelled. 2. Loans to and investments in other U.S. Government agencies, plus accrued interest, transferred to the Secretary of the Treasury, in the amount of $673,888,920. 3. Land and office buildings located in the District of Columbia transferred to the United States at depreciated value of $9,735,562, pursuant to Public Law 268, 80th Congress. 4. Stockpile expense for the account of Bureau of Federal Supply in the amount of $5,564,733, pursuant to Public Law 860, 80th Congress. B The Corporation is required by Public Law 864, 80th Congress, to retire, by payment to the Treasury, all of its capital stock in excess of $100,000,000. In addition the Act requires the payment, on or before December 31 of each year, of a dividend in the amount by which the accumulated net income of the Corporation exceeds $250,000,000. The capital stock retirement payment ($225,000,000) was made on July 23, 1948, and a dividend payment is to be made on or before December 31, 1948. The following summary indicates the effect of these requirements on the Corporation's capital structure: As shown on Exhibit A Capital Stock ______________________ _________ $325,000,000 Accumulated net income: Federal National Mortgage Association ____ $ 1,928,266 Reconstruction Finance CorporationReserved for contingencies __________ 15,864,250 Unreserved ------------------------ 557,391,555 Total -------------------------- $575,184,071 After giving effect to dividend and capital stock retirement $100,000,000 $ 1,928,266 15,864,250 250,000,000 $267,792,516 The Corporation is authorized to borrow from the U. S. Treasury through the issuance of interest bearing notes (current rate 1% percent per annum) and the funds necessary to make the foregoing payments have been or will be obtained from this source. Accordingly the reduction of the amount of interest free capital invested in or made available to the Corporation by the Government will increase the interest cost of its lending operations. The Corporation had outstanding commitments with respect to lending activities at June 30, 1948, as follows: (1) to participate, if called upon, under agreements with banks to the extent of $241,000,000 in loans made by those institutions, (2) to make direct loans aggregating $134,000,000, and (3) to purchase home mortgages of $234,450,000 (through Federal National Mortgage Association). 26 Digitized by Google NOTES TO FINANCIAL STATEMENTS-Continued The Corporation has reserved $15,864,250 of its accumulated net income for specific contingencies consisting of possible losses on: (1) bank participation loan agreements under which the Corporation may be required to purchase loans made by banks ($8,680,000) ; (2) direct loan commitments not yet disbursed ($6,300,000) ; and (3) other miscellaneous contingencies, principally claims and cases in litigation ($884,250) . I Provisions for losses of $7,675,965 are based on individual loan appraisals at May 31, 1948, and are in addition to the provision for losses on acquired collateral in the amount of $6,031,301 which has been deducted from income from such collateral in Exhibit B. Loans, investments and receivables charged off during the fiscal year 1948 amounted to $7,931,877. I The Corporation is a party defendant in legal proceedings, relating to the national defense, war and reconversion activities, involving contingent liabilities of approximately $17,256,000. In addition, claims not approved by the Corporation involving contingent liabilities of approximately $817,000 have been received from contractors, operators and others. The Corporation has outstanding commitments relating to the procurement of strategic materials (mainly tin) not delivered at June 30, 1948, and to operations of wartime facilities, in amounts aggregating approximately $96,000,000. Any future expenditures on account of contingent liabilities, for which no provision has been made in the Corporation's statements, will be charged against the retained portion of the net proceeds from liquidation shown in Exhibit A as a liability to the U. S. Treasury. K The total of $6,719,841,834 reflected on Exhibit C as that portion of the net expenditures for national defense, war and reconversion activities accounted for at June 30, 1947, consists of the following: Nature of Item Amount Property, plant and equipment declared surplus ______________________ _ $4,600,034,011 Inventories of strategic materials declared surplus ____________________ _ 84,200,344 Strategic materials transferred to national stockpile ____________________ _ 251,095,164 Direct subsidies to producers and others ··------------------------------ 3,089,434,043 Excess of cost over proceeds from sales and other disposals of plant and 360,339,945 equipment ---------------------------------------------------- ·__ Expenses, principally for servicing and administering leases, standby, plant clearance, protection and maintenance _______ ~---------------154,540,038 Cost of preclusive procurement and related operations abroad, including activities conducted jointly with United Kingdom Commercial Cor117,540,613 poration --------------------------------------------------------Interest expenses (including $352,820,230 on funds borrowed from U. S. 354,134,288 Treasury) ------------------------------------------------------108,802,885 Administrative expense ---------------------------------------------9,120,121,331 Less: Payments received from other U. S. Government agencies under agreements providing for contingent reimbursement of costs of wartime capital facilities ___________ _ $1,379,877,783 Rentals and other income on defense plants and related 816,702,310 facilities ------------------------------------------Excess of income (including appropriated funds of $16,302,375 received from other U. S. Government agencies) over costs in handling, processing and manufac90,962,019 turing strategic materials -------------------------Net proceeds of renegotiation settlements _____________ _ 83,936,935 Other income and losses--net ________________________ _ 28,800,450 Net expenditures accounted for at June 30, 1947 2,400,279,497 $6,719,841,834 27 Digitized by Google NOTES TO FINANCIAL STATEMEHTS-ConHnued L The statements of operations relating to the synthetic rubber and tin programs (Schedules 2 and 3 respectively) include as operating costs interest on the Government's investment in the net operating assets of these programs. This item has been included for the purpose of reflecting more accurately the net results to the Government of these operations. Tin sales prices increased substantially during 1948 and the profit for this period is largely attributable to the time lag between the purchase of tin and tin ore and the sale of refined tin on a rising market. At present the processing of tin ore at the smelter on an ore replacement cost basis will result in little, if any profit to the Government. N Losses reflected in Schedule 4 for operations under contract with the Pacific Exploration Company, Inc., do not include losses which relate to voyages that were under way at June 30, 1948, all of which were completed in July 1948. An audit made by the Corporation as of August 31, 1948, shows that a cumulative loss of approximately $820,000 was incurred in operations to that date. The major portion of the net loss may therefore be considered as pertaining to the cumulative period from August 23, 1947, the date of beginning of operation, to June 30, 1948. An inventory of approximately $450,000 was also shown to be on hand at August 31, 1948. Also, the Corporation is carrying as advances under procurement contracts approximately $650,000, representing funds advanced to the original lessee of the vessels, against which final settlements are to be applied. Based on the best information available, approximately $550,000 of this amount will not be recovered by the Corporation and will, therefore, represent additional cost of this project. N The Corporation's balance sheet and statement of income and expense from lending activities (Exhibits A and B) are on a consolidated basis and include its wholly owned subsidiary the Federal National Mortgage Association, the condensed statements of which are shown below: FEDERAL RATIORAL MORTGAGE ASSOCIATIOR COIIDEXSED COIIPAllATffE BJU.AXCE BIDET June 30, 1948 Assets June 30, 1947 Cash on deposit--------------------------------------- $ 711,512 FHA insured mortgages------------------------------- 51,090,284 174,834 Accrued interest receivable ---------------------------Miscellaneous accounts receivable and other assets _____ _ 153,206 $ 8,785,534 4,961,981 27,367 29,088 $52,129,836 $13,803,970 Liabilities Notes payable to RFC ---------------------------------- $36,141,484 Deposits for taxes, insurance, etc. _______________________ 711,512 Other liabilities --------------------------------------2,348,574 $ 142,160 53,086 39,201,570 195,246 Capital and Surplus Capital stock and paid in surplus _______________________ 11,000,000 Earned surplus ----------------------------------------- 1,928,266 11,000,000 2,608,724 12,928,266 13,608,724 $52,129,836 $13,803,970 28 Digitized by Google NOTES TO FINANCIAL STATEMENTS-Continued Condensed Comparative Statement of Income and Expenae Fiscal Year Ended June 30, 1948 Income: Fiscal Year Ended June 30, 1941 Interest earned------------------------------------------$ 459,674 Commitment fees and other income______________________ 1,539 $282,042 490 · 461,213 282,532 Interest expense---------------------------------------Administrative expense --------------------------------Fees for servicing mortgages ---------------------------Other expenses and losses ------------------------------- 60,715 988,801 62,396 11,678 263,219 38,757 Total expenses and losses _______________________ _ 1,123,590 301,976 Total income ----------------------------------Expenses and losses: Net income (or loss•) --------------------------- $ 662,377• $ 19,444• During the first nine months of fiscal year 1948 contracts for the acquisition of mortgages were negligible. In April, May and June the Association approved contracts for mortgages aggregating $229,059,960, while the acquisition of only approximately $47,000,000 of such mortgages was accomplished in fiscal year 1948. Substantially all of the remainder of the contracts has been or will be acquired in fiscal year 1949. The administrative expenses of handling such a large volume of contracts, which resulted in income producing mortgages after the close of the fiscal year, caused the loss shown. Pursuant to the provisions of Public Law 864, 80th Congress approved July 1, 1948, the capital stock held by the RFC and reflected in the above statement has been increased by $10,000,000; the Association may have outstanding at any one time borrowed funds equal to forty (40) times the amount of its capital and surplus. The Federal Housing Administrator may terminate the existence of the Association at such time as, in his judgment, the need therefor no longer exists. O In addition to the assets set forth in Schedule 1, the Corporation held at the end of the fiscal year 324,812,919 fine troy ounces of silver loaned by the Treasury Department, for use in manufacturing processes in the national defense, war and related operations, which the Corporation is obligated to return. P The accompanying financial statements, and the underlying records of the Corporation, are subject to audit by the Corporation Audits Division of the General Accounting Office under the provisions of the Government Corporation Control Act (Public Law 248-79th Congress). This audit which has not been completed for the period ended June 30, 1948 may disclose the necessity for adjustments or revisions in the accounting treatment of certain of the Corporation's financial transactions. It is felt, however, that any such revisions or adjustments will not result in significant changes in the financial 'position, operating results or accountability of the Corporation as set forth in the accompanying financial statements. 29 Digitized by Google RECONSTRUCTION FINANCE CORPORATION APPENDIX A-CREATION PURPOSE AND LEGISLATIVE AUTHORITY The Reconstruction Finance Corporation was organized and began operations February 2, 1932, following its creation by Act of Congress approved January 22, 1932. The Corporation was created primarily for the purpose of establishing in government a source of credit which could be used to assist in strengthening the Nation's economic system and credit structure which had suffered severely as a result of the depression that began in 1929. In its early years the Corporation's major functions comprised the extension of credit to agriculture, commerce and industry through loans to banks and other financial institutions, insurance companies, agricultural credit agencies and railroads. From time to time as economic conditions shifted and there was indicated a need for expansion of government credit, the authority of the Corporation was broadened by amendatory and supplemental legislation to include the purchase of capital stock of banks, insurance companies, agricultural credit corporations, and national mortgage associations, purchase of insured or guaranteed home and rental housing mortgages, loans to business enterprises, mining interests, agricultural improvement districts, and loans to assist in the financing of public works and self-liquidating projects. During the national defense and war periods Congress further augmented the Corporation's functions to enable it to assist in carrying out various programs essential to the national defense and war effort, such as the financing of plant conversion and construction, providing war production facilities, acquiring critical and strategic materials, paying subsidies determined necessary by other governmental agencies, and other diversified undertakings. The Corporation originally had succession for a period of ten years, later extended to fifteen years, and by Public Law 132, 80th Congress, extended for one year to June 30, 1948; at present the succession of the Corporation terminates on June 30, 1956, pursuant to Public Law 548, 80th Congress. Under the provisions of these Acts the Corporation's lending powers were substantially curtailed and its wartime functions terminated except with respect to the production and acquisition of tin and the production of synthetic rubber. The Corporation was authorized, however, to carry out all programs, contracts and commitments outstanding as of June 30, 1947. The succession of U.S. Commercial Company, a wartime subsidiary, was also extended through June 30, 1948, and all of the assets and liabilities of The RFC Mortgage Company, an RFC subsidiary organized under the laws of the State of Maryland, were transferred to the Corporation. Both of the subsidiaries named are in the process of final dissolution. Authority to purchase surplus property for resale to small business was also rescinded. •The Corporation's lending powers were further curtailed by Public Law 266, 80th Congress, approved July 30, 1947, wherein the Corporation's authority to advance funds to the Rural Electrification Administration and to the Secretary of Agriculture was terminated and all rights, interests and obligations of the Corporation in any such loan or advance outstanding at June 30, 1947, were vested in the Secretary of the Treasury. Public Law 268, 80th Congress, approved July 30, 1947, transferred to the United States title to all office buildings at the seat of the government which were owned by wholly owned government corporations. The Corporation was reimbursed for its investment in these loans, advances, and real estate through the cancellation of its notes payable to the U. S. Treasury. Public Law 548, 80th Congress, approved May 25, 1948, constitutes the basic legislation under which the Corporation is presently exercising its lending powers. This legislation reduced the Corporation's capital structure to $350,000,000, of which $100,000,000 represents capital stock, and provides that it maintain as a maximum this reduced capital structure by payment each year of a dividend on its capital stock to the Secretary of the Treasury in the amount by which the Corporation's accumulated income exceeds $250,000,000. The following statement of the purposes for which the Corporation was continued is quoted from Public Law 548, 80th Congress: "To aid in financing agriculture, commerce, and industry, to encourage small business, to help in maintaining the economic stability of the country and to assist in promoting maximum employment and production." 30 Digitized by Google The amount of loans and investments which the. Corporation may have outstanding at any one time, to accomplish the above stated purposes, is limited to $2,000,000,000, but only with respect to commitments made subsequent to June 30, 1947. To achieve the foregoing purposes the Corporation was authorized, within specified limitations to: (1) Purchase the obligations of and make loans to business enterprises, including railroads and air carriers; (2) Make loans to financial institutions and under certain conditions subscribe for or make loans upon non-assessable preferred stock in insurance companies, or purchase capital notes or debentures of such insurance companies; (3) Purchase the securities and obligations of, or make loans to public bodies and agencies and instrumentalities of public bodies, for the purpose of financing specific public projects; and (4) Make such loans as the Corporation may determine to be necessary or appropriate because of floods or other catastrophes. Public Law 901, 80th Congress, approved August 10, 1948 also authorizes the Corporation to make loans to or purchase the obligations of businesses engaged in the prefabricated housing industry, and in large scale modernized site construction of housing, within the limit of $50,000,000 outstanding at any one time. In addition the Federal National Mortgage Association, a wholly owned subsidiary of Reconstruction Finance Corporation, may purchase under Title III of the National Housing Act, as amended by Public Law 864, 80th Congress, approved July 1, 1948, and Public Law 901, 80th Congress, mortgages on homes and rental housing projects insured by the Federal Housing Administration or partially guai:anteed by the Veterans Administration. Also, under Public Law 860, 80th Congress approved June 30, 1948, the capital stock, assets, liabilities and records of the Defense Homes Corporation were transferred to the RFC for liquidation. (Since this transfer was effected in July 1948 it is not reflected in the financial statements presented herein.) Public Law 860, 80th Congress, approved June 30, 1948 directed the Secretary of the Treasury to cancel $9,313,736,531 of the notes of the Reconstruction Finance Corporation representing the total unrecovered costs of the Corporation at June 30, 1947, expended in its national defense, war and reconversion activities, and provided that any amounts recovered by the Corporation with respect to these activities subsequent to June 30, 1947, shall, after deduction of related expenses, be deposited in the Treasury as miscellaneous receipts. On June 30, 1948, the Corporation's notes in amounts aggregating $9,313,736,531 plus interest accrued after June 30, 1947, were cancelled. These amounts included the cost of assets used by the Corporation in the Tin, Rubber and Fiber Plantations programs, the financial results of which accrue directly to the U. S. Treasury. Public Law 125, 80th Congress, approved June 28, 1947, as amended by Public Law 824, 80th Congress, approved June 29, 1948, authorized and directed the Corporation to continue, until June 30, 1951, to (1) operate the government-owned Texas City Tin Smelter; (2) to buy, sell and transport tin, tin ores and concentrates; and (3) to finance research in tin smelting and processing. The Rubber Act of 1948, approved March 31, 1948 (Public Law 469, 80th Congress), declared "It is the policy of the United States that there shall be maintained at all times in the interest of the national security and common defense a technologically advanced and rapidly expandible rubber-producing industry in the United States of sufficient productive capacity to assure the availability in time of national emergency of adequate supplies of synthetic rubber to meet the essential civilian, military, and naval needs of the country". Under authority contained in Section 7 (a) of the Act, the President, by Executive Order 9942, dated April 1, 1948, designated the Reconstruction Finance Corporation to exercise his powers, functions, duties and authority with respect to the production and sale of synthetic rubber, the maintenance of the minimum required rubber-producing facilities, and the continuous research and development in rubber and allied fields. Pursuant to Act of Congress approved June 30, 1948 (Public Law 862, 80th Congress), the War Assets Administration shall cease to exist effective February 28, 1949. All power, authority, functions and responsibilities of the War Assets Administrator and of the War Assets Administration pertaining to surplus real property, and all right, title, and interest in notes, mortgages and contracts of sale or lease in connection with surplus real property shall be transferred to the Reconstruction Finance Corporation, to be held and disposed of by the Corporation in accordance with the terms of the Surplus Property Act of 1944, as amended. 31 Digitized by Google
@FedFRASER