The below are notes, taken by Charles D. Mahaffie, Sr. Interstate Commerce Commissioner on February 10, 1932 after a meeting at the White House with President Herbert Hoover. Charles Mahaffie and his colleague Commissioner Balthasar H. Meyer attended the meeting with Hoover.
Feb. 10, 1932
This afternoon about 3 o’clock while I was in Com. Meyer’s office a message by phone came from the President’s secretary that the President wanted to see Div. 4 at once.
Eastman had just left us. Meyer went to his office to see him. On coming back he told me E. was due to take a train for Syracuse N. Y. at 4 and could not go with us to the White House.
So the two of us went at once. After a very short wait in Sec. Jocelyn’s room we were shown in to the office of President Hoover. The President after greeting us said: that he was concerned about the work of the Reconstruction Finance Corp. related to Railroads. He read about the portion of the act creating it i.e. the portion of Sec 5 relating to loans to railroads. He stated that the I.C.C. ought not to have been brought into the matter in any way. But that Senator Conyers [?] had done that. that there was danger with a divided responsibility the purposes of the bill as to railroads would fail.
He told us of his conversation with the leaders of the banking committees of the House and Senate earlier in the day. Went over, I gathered, a good deal of the ground he had gone over with them as to the very delicate financial and credit situation the country is now in.
The appalling magnitude of bank failures, the drain of gold now going on, the restriction of credit by the efforts of the leading banks to attain liquidity, instancing in that regard the vast shrinkage of credits to correspondents of N.Y. banks within the past year and stated bluntly that the country is on the verge of a complete credit collapse, the closing of a multitude of interior [?] banks and being forced off the gold standard. He stated that both courage and patriotism were scarce in the higher banking circles and that the effort was to maintain liquidity at no matter what cost to the country. He said one large bank in N.Y. now had over 80% of its assets in cash or instantly cashable items. He did not name the bank.
He then stated that he was willing to assume the responsibility for whatever might be necessary to save the situation, and that he thought the failure of any class I railroad to [?????] charges and consequent receivership would be disastrous. That such an event should be avoided at all costs.
That the R.F.C. might well lose 4 or $500,000,000 and still be a most excellent investment for the country. As to his responsibility he cited the fact that, as I reminded him, at his direction the comptroller is now allowing banks to carry their bonds at cost irrespective of the market.
He stressed the fact that R.R. bonds are among the large items in banks and investment co. lists and that any assurance that could be given as to them would be most helpful.
He developed that at some length. And also the depressing effect even on present prices and present market the failure of a class I carrier would have in these critical times.
He said he was interested in solvency and in seeing that the carriers could meet their maturities [?] and interest. Was not at present interested in the provision of funds to allow construction work to go forward.
Com. Meyer discussed very briefly the present status of our work on applications for loans.
The President said he would like to be in a position to make a public announcement that no class I railroad will have to go into receivership for lack of funds to meet its maturities or interest.
He seemed to have in mind that this could be done for about $100,000,000.
Com. Meyer told him he would see what could be done in the way of a survey of the necessities that will probably have to be met to prevent any receiverships.
Whereupon the President rose and we left.
On the way back Com. Meyer indicated he would have Dr. Lorenz make a study along the lines indicated.
CDM
