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SEC. 7. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the remainder of this Act, and the application of such provision to other persons or circumstances, shall not be affected thereby.
SEC. 8. This Act may be cited as the “Conservator in Bankruptcy Act.” STATEMENT OF HON. ADOLPH J. SABATH, REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. SABATH. Mr. Chairman, I believe, in view of the fact that we have presented before you an explanation of the bill at the last session, upon which your committee reported the bill, I believe it will be unnecessary again to go over the same ground and put in the same evidence, because conditions have not improved. If anything, they are just as bad, nearly as bad, as they were then, and the need is just as great as it was then.
Consequently, the chairman of the subcommittee, with whom I have been in touch very often, even oftener than with you, sir, made that statement to me, that he did not see any reason why we should go all over it again.
The CHAIRMAN. That is Mr. Chandler ?
Mr. SABATH. Yes; that is Mr. Chandler. And for that reason, I feel that I will not take up the time of your committee, knowing that you are familiar with these matters and realize the conditions. So I thought that I would save the time of the committee by placing before you the evidence taken at the last session of Congress—Ì mean, that we would not do that, because of the duplication. But we have some of the judges that are writing in and ready to come and will explain a few of the changes in the bill.
The CHAIRMAN. Some of the district judges?
Mr. SABATH. Well, they did not quite know whether they would be reached, but I have some letters from some of them approving of the bill. Here is a letter from the chief justice of the United States circuit court of appeals, in which he says:
I have read with a great deal of interest Congressman Sabath's bill, H. R. 9. It is well considered, and I am certain that, if it be enacted, it would be very beneficial to the administration of the assets in financial difficulties. Hoping it will become the law, and with kind personal regards, I remain, Sincerely yours,
MARTIN MANTON. Now, I have other letters of the same kind.
The CHAIRMAN. Judge, before you begin introducing your testimony, how long will it require, if you have any judgment in that matter?
Mr. SABATH. Well, again, Mr. Chairman, I am trying to be considerate, and I felt that I would not ask these judges to come down,
if they sent a letter, or they thought it would be just as well; but
you desire to hear them, of course, we can have them hereat least, I hope so.
I have another letter here from Judge Howe, of the United States District Court of Vermont, addressed to me, in which he says:
I am with you very emphatically every word you say in your speech on January 13, a copy of which has just come to me. You and your coinmittee are right, and you could well include receiverships with the protective committees. I hope the proposed legislation will pass without delay. I have been obliged to assert myself vigorously and viligantly to prevent receiverships being a "racket.” It is the bench and the bar that are responsible whenever receivership is turned into a “racket."
If there is a sufficient supply, I would like half a dozen more copies of your speech.
Now, Judge Clark of New Jersey, has written me several times that he is ready to come down here. Judge Moskovitz, of New York, also; and, in fact, there are quite a few letters from judges favoring the bill, and feeling that it should be enacted as speedily as possible, because, when we passed section 77B there was no provision made to give any aid or assistance to judges in this wise; they have no way of investigating and checking up any of these disputes, or any of these reorganizations, whether they are right, fair, and just and equitable, or not. They are obliged to rely on lawyers, and most of these lawyers, as I may have pointed out—I do not say most, but the majority, however, who are in that line of business—where there is collusion, and the only thing they are interested in is how much fee they can obtain, and how the assets could be dissipated and how much will be allowed the receivers and the trustees and appraisers and administrators, and so on.
So, if you will go over the evidence which we have given you, you will find that, in a great many of those cases, these committees, receivers, and trustees have been in possession and control for 5 or 6 or 7 years, of valuable properties that brought in revenues of hundreds of thousands of dollars, and not one penny has been turned over to the bondholders; and, in many instances, for 6 years no taxes have been paid. I have many of those cases that I could cite, but I do not desire to take up your time just now.
The CHAIRMAN. May I ask you this question, before you proceed, Judge Sabath?
Mr. SABATH. Yes; Mr. Chairman.
The CHAIRMAN. Did you consider whether or not the judges have facilities to make these investigations?
Mr. SABATH. I have tried. We have given this matter a great deal of study, and we came to the conclusion that the only way that we can remedy the abuses that are now prevalent in the courts is by legislation and taking away from the judges the appointment of receivers and attorneys, appraisers, and all that.
Now, we thought it would be helpful to place them in a position whereby they could be relieved of the necessity of making these appointments. Most of the judges say, themselves, they are not in that line of business and most of the judges have appointed their friends and their hangers-on in court, and professional receivers, and so on, in whom you and I know people could not possibly have any confidence; and I am afraid, if it is left that way, the same thing would be again practiced.
Now, Judge, and gentlemen, may I say this: This matter has been investigated
The CHAIRMAN. We are investigating it this morning, too.
Mr. SABATH. Well, I just want to bring this home to you, if you will pardon me. This matter has been investigated about 5 years ago by Colonel Donnovan, upon the recommendation of the bar. He made a report on it after a thorough investigation. Then, later on, upon the urgent order of Attorney General Mitchell, the matter was investigated by Mr. Garrison and Mr. Thatcher, who was the Solicitor of the Department and a former judge of the Supreme Court. The matter has been investigated by your subcommittee about 2 years. The matter has been investigated by the legislatures of the States of New York, New Jersey, Michigan; and in each and every instance, as our reports of the investigation disclose, there has been legislation similar to this enacted; and I have the bill that has been introduced in the Senate by Senator Hastings upon the investigation that has been made by Thatcher and Garrison, and it is nearly the same as our bill. We have made some changes, trying to improve it and simplify it.
So I say that it is not only our recommendation, Mr. Chairman, but this recommendation is the general recommendation made by the independent bar, by all of the judges who have not been interested in these receiverships, by all people who have given it any study whatsoever.
Mr. MILLER. Judge Sabath, in view of the fact that the hearings were held by the subcommittee last session and were not printed, and in view of the further fact that there is some agitation about this matter—we might as well just look at it squarely because there is considerable agitation-
The CHAIRMAN. Wait just a minute.
Mr. MILLER. Do you not think, in order to obtain proper consideration of a measure of this type and of these far-reaching consequences, that probably the proponents could possibly save time by agreeing that the data be submitted—by getting their data and effects in shape and making out their case, presenting their case, because I imagine there will be some opposition to the bill—I do not know-but in order to give the committee and Congress the benefit of the printed record.
Now, we are all more or less familiar with the things about which you have talked, and your committee has done a good work, but I believe, for one, that we ought to have the record made up here systematically, and we ought to take some time to get your data in shape and present it systematically.
Mr. SABATH. If you will pardon me, the hearings have been printed last year, if I am not mistaken.
Mr. MILLER. No; I do not think so, Mr. Chairman.
Mr. MILLER. No; they were not; I am quite sure they were not printed. You remember we reported this bill rather hurriedly right in the last days of the session.
Mr. SABATH. In view of what you say, sir, let me say—
Mr. MILLER. I am just making that suggestion.
Mr. SABATH. That is all right; that is satisfactory; but I honestly believe that I have familiarized every member of the committee, that I have familiarized the Members of the House with it. I have sat hours, and it has taken me a great deal of time, and many nights, to prepare a résumé of the bill.
Mr. MILLER. The point I am trying to get at is this: True, the individual members may know, or think they know, something about this bill, but we want a record' here. We might take some action on this bill, or the committee might
Mr. SABATH. Might?
Mr. MILLER. Yes. I do not know what we may do, and nobody else does. Whatever we do, whatever action we taken, we ought to have a record made.
Mr. SABATH. Before you came in, sir, I made this statement-
Mr. SABATH. Upon the statement of the chairman of the subcommittee?
Mr. MILLER. Yes.
Mr. SABATH. I was under the inpression that, in view of the evidence that has been presented in the last session of Congress
Mr. MILLER. I was just making the suggestion. You do as you please about it.
Mr. SABATH. I will do anything that the gentlemen of this committee desire me to do, if it is humanly possible. I feel tremendously interested in this matter and in presenting the evidence in such a inanner that there can be no question in the minds of any members that will bring about the relief that is required.
Now, the chairman of the subcommittee, and I think you other gentlemen, will bear me out when I say that I have left nothing undone to try to bring about this legislation.
The CHAIRMAN. Judge Sabath, will you permit me to make a suggestion?
Mr. SABATH. Yes, Mr. Chairman.
Mr. SABATH. While we originally embodied in the bill that the Comptroller of the Currency should be the Conservator, that was on the theory that, during the years 1931, 1932, 1933, and 1934, they had similar duties to perform with all of the national banks that had millions and millions of dollars of similar assets, bonds, and other securities, in closed banks, and they have administered the assets of these banks in a manner which I believe protects the depositors and creditors, as they never have been protected before, because the cost of administration was so small, and the prices which they have obtained for the assets in those banks were so large, in proportion to what other receivers have obtained, that I thought, in view of the small cost and the ability and experience that office had, they could handle that matter as economically, as fast, and as justly as could be expected from anyone. That was the
I still believe, Mr. Chairman, that in Canada and in England they have worked out a very efficient system and we do not hear about
these rackets in those countries; we do not have these receivers having possession and control of railroads and street cars and various other companies for 6, 7, 8, or 9 years, and where they allow receivers fees of $25,000, $50,000, and $100,000, and we do not hear of them having three receivers and three trustees and, notwithstanding that, frequently, that there is any need for more than one person, but still additional receivers are appointed to eat up the assets. That is the reason. That is our belief and it is the belief of every member of the committee, who for nearly 21/2 years have studied the matter.
Now, I am going to give way, because my colleague is desirous of addressing the committee. All I desire to say, Mr. Chairman, is this: I am thankful to you for your statement which you have made as to my aims. I was charged last Thursday on the door that, since March 26, 1936, if I am not mistaken, that I have not done a blessed thing, and during the entire time that I have not done a blessed thing did I obtain the legislation that I was interested in, but that I was only interested in having the investigation extended. Now, I am calling upon you as witnesses, gentlemen, whether I have or not.
The CHAIRMAN. Wait a minute, now.
The CHAIRMAN. No; that is just the point. I know just how you feel about that, but I propose that you do that over on the floor of the House. Here we want the facts bearing on the necessity for this legislation.
Mr. SABATH. I am trying to give them to you and I am anxious to get the facts, because of that very unfair charge.
The CHAIRMAN. That cannot influence this committee.
Mr. SABATH. I am not going to say a word about it. You have said it for me. But I will repeat that I think we have left nothing undone to get legislation. I was even ashamed of myself, how often I have pleaded with the many members, and even the chairman of the subcommittee
The CHAIRMAN. You are taking up our time now and we will have to charge this to you in a minute.
Mr. CHANDLER. Mr. Chairman, let me make this suggestion: The subcommittee heard the members of the Sabath special committee last year at great length, and those remarks were written up and are in stenographic form. If the committee takes action on this bill, why would it not be advisable to let those statements go in as the statements of the members of the select committee by way of historic background and explanation of the need for the legislation, and let this committee this morning go immediately into the bill itself, paragraph by paragraph, so as to explain the aims, the actual purposes, rather than to go again over the same ground that we went over last year over a period of several days. If that could be done and the remarks made by the members of the select committee could be considered as a part of this hearing, that would expedite the work and help us to move along very rapidly.
Mr. WALTER. Do you not think it would expedite this matter if you would point out to us the difference between this bill and the bill we had under consideration last year!
Mr. CHANDLER. I think it would unquestionably.