few moments to refute some of the statements made in the past two days before this committee.

There is now an accumulated fund of $700,000,000 for the retirement of adjusted-service certificates. Additional funds are being allotted for that purpose at the rate of $112,000,000 a year. Add to this the probability that from one-fourth to one-third of the holders of adjusted-service certificates would choose to keep them in their present form, and it will be seen that immediate cash payment of them, if optional with the veterans, would not be such a large undertaking. A bond issue sufficient for this purpose and at the same time sufficient to refund all Treasury issues coming due this year could be marketed at a rate of interest not exceeding 22 per cent. That has been verified by more than 11 outstanding bankers of the country.

The interest thereon would amount to $100,000,000 a year-less than the present annual payment into the adjusted service sinking fund. Moreover, the stimulus to business which would result from putting this money into circulation, in the opinion of leading economists, would produce additional revenue for the Treasury which would more than offset the cost of the above mentioned bond issue. Not the least of the benefits would be the improvement in the mental attitude of the country.

It is apparent that so far the opposition testimony to these bills comes either directly or indirectly from banks and bankers. The objection is a selfish one. The testimony already presented, which I believe practically concludes the opposition testimony, has been by men of prominence in the banking world. If this proposed legislation is enacted the past witnesses apparently feel, although they will not openly admit it, that their personal interests might not thrive to the extent that they otherwise would. Moreover, the mistake of the Treasury Department in opposing the payment of the adjusted service certificates is based upon the old-fashioned method of short-term financing which the Treasury Department employs. The larger business units no longer use the short-term financing such as they used before the war, and it is the opinion of many experts in finance, leading bankers, and economists that the Government ought to follow the example of business at least so far as to finance its debts over a period considerably longer than that contemplated by the present Treasury Department policy. There are reasons for thinking that good statesmanship also demand such a change. For instance, under the present debt retirement plan, the public debt of the United States would be entirely liquidated by 1949. Thus the entire enormous war debt of $26,000,000,000 incurred by the United States will be wiped out in the next 18 years.

Europe, on the other hand, to whom we loaned the bulk of the money we borrowed from our citizens, is not required to pay it back to us so rapidly. Our Government has allowed them until 1975 to complete their payments. It is evident that if we waited until our European debtors repaid us we could liquidate our own war debt without doing so out of current taxes. This would leave sufficient balance in the Treasury to pay the adjusted-service certificates and finance public works, etc.

On the other hand, if we pay off all our public debt in the next 18 years, there will remain a period between 1949 and 1975 which

the United States will have no public debt and Europe will still owe us a large part of the money we loaned to them. There will undoubtedly then be an enormous pressure upon the United States to cancel the balance of the debts they owe us. This would simply mean that the American taxpayer would have been jockeyed into the position of paying for the World War.

There is no good reason why the United States must pay off its public debt in such a short time. Our Government should revise its financing operations so that the money which we loaned to Europe will liquidate its debt to our own citizens almost automatically as Europe repays us, and not require our taxpayers to pay the war debt out of their own pockets in the next 18 years while waiting 45 years to be reimbursed by our foreign debtors, and in the meantime running the risk of having to forgive these foreign debtors entirely. The present policy of the Treasury Department is a short-sighted one, which will put this country into a very disadvantageous position in the future.

It is not necessary for the Treasury Department to make such haste. It could issue bonds to mature in from 15 to 30 years, to be partly liquidated and partly refinanced when they become due. There is no more good reason why the Government should remain under the control of bankers than that private industry should do so. Private industry has freed itself from the bankers' control by not using commercial bank loans as they formerly did. For instance, at the peak of the season of activity a manufacturer would formerly go to the bank for a loan for three months. Upon receiving this loan the bankers would sit on the board of directors and exercise control of the business. The business units of magnitude now issue new securities to provide themselves with new capital as it is needed.

Likewise, the Government need not issue short-term bonds through the banks. It can sell long-term bonds direct to the investors and thus be independent. Instead, the Treasury Department is trying to force the country back into the old method of short-term credit, which would give the bankers control not only of the Government but of business.

The advantage to wealthy people of the rapid reduction of the public debt is obvious. It would permit the reduction of the income tax which now acts as a damper upon the liquidation of frozen capital. For instance, a man who possesses extensive wealth in real estate is not readily willing to sell when he must pay a tax of 12 per cent on the income he receives from such sale. He would prefer that the taxes would be small so that he could make selling transactions without sacrificing so much of his profit.

However, by beating down the public debt too fast we are putting ourselves at the mercy of European debtors who will be aided and abetted by certain altruist elements of our own population who, with misguided benevolence, will insist that we cancel foreign debts even though our own soldiers, who protected the country during the World War, do not receive payment of the part of the debt which is due them until after many of them have passed

on in 1945.

There is one exception to the bankers I would like to mention at this time, and with the permission of the committee, I would like to read a telegram I received from Col. Fred N. Alger, of Detroit, whose father was formerly Secretary of War and United States Senator:

Hon. CLARENCE J. MCLEOD,

House of Representatives:

DETROIT, MICH., January 27, 1931.

Regret it is utterly impossible for me to get away from Detroit at this time or in immediate future.

The cash payment of the bonus is a grave question, both for our service men and for the country. In view of the sharp emergency, however, I believe such payment is wise and justifiable, provided it can be made effective in the immediate future. From such information as I have at hand I judge that a large part of this money would be spent for necessities of life or for payment of debts already incurred for those necessities or for both. On the whole, in spite of the added burden which this payment will for the time being impose on taxpayers, I think the country at large will benefit through increased trade activity and stability in a sufficient amount to more than compensate for the increased load. Above all, the Government will be doing what it ought to do. F. M. ALGER.

Mr. McLEOD. I might say that Colonel Alger is a director of three different banks in Detroit.

The CHAIRMAN. We thank you for the information you have given the committee.

Mr. FREAR. Did I understand you to say that you had 40,000 names on petitions?

Mr. MCLEOD. Yes, sir.

Mr. FREAR. How were they acquired?

Mr. MCLEOD. The orgnization of the Veterans of Foreign Wars brought in 40,000 this morning; 35 per cent were gathered out in the State, not in Detroit. The total number was 56 per cent, I think, they figured in my office, that were gathered by that organization, and the others were petitions that came in directly indorsing one of the two bills that I have before this committee.

Mr. FREAR. You said 40,000 of those were nonveterans?

Mr. MCLEOD. Yes; that is correct.

Mr. FREAR. What was their interest?

Mr. MCLEOD. As citizens they felt that way.

Mr. CHINDBLOM. The gentleman mentioned two bills. I have before me H. R. 10469, in which you provide for an appropriation of $50,000,000. Was it your idea that $50,000,000 would be sufficient to carry out the purposes of that bill?

Mr. MCLEOD. At the time of the introduction of that bill I thought that might take care of the most needy. That was the purpose of the bill. That was in the last session of the present Congress. Mr. CHINDBLOM. Under date of March 4, 1930?

Mr. MCLEOD. That is correct.

Mr. CHINDBLOM. Some of the petitions relate to that bill?

Mr. MCLEOD. No; I would not think so. Most of the petitions

that I received have come in since I introduced the last bill.

Mr. FREAR. What is the number of your present bill?

The CHAIRMAN. It is 13557.

Mr. TREADWAY. What is the purpose of it?

Mr. MCLEOD. Immediate payment of full face value by distribution of 22 per cent bonds.

The CHAIRMAN. We thank you for the information which you have given the committee.

Mr. MCLEOD. I also wish to take this opportunity to file the statement of Rowland W. Fixel, past commander, the Charles Learned Post, No. 1, of the American Legion, at Detroit, who flew down here yesterday but was compelled to leave this morning.

(The statement referred to is as follows:)

STATEMENT OF ROWLAND W. FIXEL TO THE WAYS AND MEANS COMMITTEE OF THE HOUSE OF REPRESENTATIVES JANUARY 31, 1931

Probably the most vital issue before Congress to-day is the question whether the adjusted-service certificates should be paid in full at once. There are innumerable reasons why this should be done, but first and foremost is the thought that by putting three or more billions of dollars in circulation, there will be an immediate quickening of the pulse of business, with a consequent elimination of the drastic unemployment problem with which we have been confronted the past year. There are other reasons why this debt should be paid now to the service men. The large number who have borrowed on their certificates demonstrates that the men are no longer able to carry these certificates as investments. The carrying burden should therefore be shifted to the shoulders of investors who are better able financially to carry the load. Again, the Government already has a sinking fund of over $700,000,000 to apply on the payment of the certificates. The balance could readily be borrowed through a bond issue at very low rates now, because there are relatively few industrial bond issues now being offered, due to lack of business expansion. But the most cogent reason for immediate payment is that such payment would affect the whole Nation; every hamlet, village, and city would receive its part. Wayne County, Mich., service men alone would receive about $70,000,000. The Legion and other service organizations favor payment. Reason and justice demand it, and Congress should grant payment in full in cash at the earliest possible moment.

Various plans for relief of unemployment have been suggested, including a program of public-works buildings, highways, and power projects. The President, in his annual message, urged the expenditure of $150,000,000 for rivers and harbors as a means of relieving unemployment. He hoped that by employing the public funds in this channel consumer power would be restored, that business stagnation to a certain extent would cease, and that goods would flow from the producer to the consumer and as a result the unemployed would find work.

Experience has demonstrated that large public works can not be initiated, planned, commenced, and carried forward in haste without great waste and unnecessary loss, resulting from excessive rise in price due to the urgent demand for basic materials needed in the project.

A glaring example of this is found in the result of the construction of training camps during the World War and the futile expenditure of over a half billion dollars in aircraft production without material success.

If unemployment is to be relieved by the expenditure of public funds, the most logical method of accomplishing the result is by securing as quick a distribution of the money as possible. If the service certificates are not redeemed in whole or immediately it is doubtful whether a partial redemption or an extended redemption by means of partial payments would result in any beneficial effect.

The payment of the war-veterans' certificates is a major national issue and merits thorough study and a speedy decision.

Payment could be accomplished by the floating of a bond issue. The fact that short-term certificates of the Treasury Department have been readily absorbed at low rates and, in fact, have been many times oversubscribed when offered, provides ample proof that banking interests have ample funds with which to purchase a large bond issue. In fact, one of the largest banks in the country, with total assets upward of $700,000,000, is now in such a liquid position that on January 1, 1931, it owed the Federal reserve bank absolutely nothing. I refer to the Guardian Union Group of Detroit, Mich.

Probably other large banks are in the same position. They have used the period of depression and the drop in the stock market to liquidate their own debts and are in a position to invest in Government securities at this time, being deprived of good commercial paper and other investments which they usually make with their funds.

The fear that a large bond issue, if placed on the market at this time, would materially depress the price of outstanding Government securities is unfounded. If this were to be true, it presupposes an inability on the part of the investors of the United States to absorb the issue. The very fact that Government securities are selling at present greatly in excess of par amply demonstrates the ability and the willingness of investors not only to buy Government securities but pay a premium for them. Whatever loss might be sustained through a decline in the price of the present outstanding securities would be negligible and in a short period of time should be recovered for the reason that the immediate distribution of $3,500,000,000 would so restore business that the increased revenue to the Government from such increased business, through taxation, would result in sufficiently large surpluses for the retirement of outstanding Government issues so as to once more make the remaining securities extremely attractive to investors.

When it is considered that the public debt has been reduced at the rate of approximately $1,000,000,000 a year it is readily seen that the entire outstanding certificate issue could be paid out of a sinking fund in a period of three and one-half years.

In examining the advisability of paying the veterans' certificates, the human element must be considered as well as the technical financial angles of the matter. It is doubtful whether it is possible to accurately determine the exact result of payment of these certificates, either in its relations to the present price of Government securities or general business conditions. But it stands to reason that with the bank deposits about 10 per cent higher than they were a year ago that there is sufficient capital in the country to absorb the bond issue without dislocating other Government financial operations and at the same time we would have to close our eyes to the elementary principles of political economy if we assert that the payment of this large sum of money to the veterans would not greatly stimulate every phase of the country's industry in every section of the country and in every phase of business.

The foregoing sentiments are not only those of the writer but are also concurred in by thousands of legionnaires in the city of Detroit and Wayne County, Mich., in which resolutions have been passed by Legion organizations endorsing immediate cash payment in full and also they are concurred in by Mayor Murphy, of Detroit, a legionnaire whose sentiments in the matter are herewith transmitted as a part of this statement in accordance with his request. ROWLAND W. FIXEL,

Past Commander the Charles Learned Post, No. 1,
The American Legion.

The CHAIRMAN. Mr. Timberlake is granted permission to insert in the record the telegram to him signed M. L. Lyckholm, Colorado department adjutant.

(The telegram referred to is as follows:)