Evening star., 1932-02-14

sources comes directly from the tax
payers joint hoard In the Treasury.
The bonds, notes and other forms Of
obligations are to be sold TO the public.
While the Reconstruction Finance Cor
poration is to be partially financed by
the general public. in the manner of
private business. its bonds will have
special advantages. 1t is expressly pro-
vided that they are guaranteed uncon-
ditionally, as to interest and principal,
by the United States. Moreover, the
income from these bonds has been
given the advantage of exemption from
the income tax. except Surtaxes. estate,
inheritance and gift taxes. These lat
ter exceptions from the tax exemption
will prevent very rich persons from
buying up large blocks OF the oonos
and enjoying huge tax-free incomes;
The smaller purchaser OF the general
public may enjoy an income up 10 tne
Surtax brackets without paying tax on
such part of his income as springs from
these securities.
Cares for Frozen Assets.
The head office Of the Reconstruction
Finance Corporation Is established at
Washington and the board Of directors
is planning to open branch ofices In
key cities.
The whole purpose is to make money
available to business enterprises which.
although fundamentally sound and SOL
vent. have been handcuffed by the de-
preston and the decline in prices. One
Of the principal uses Of the vast reser-
voir of money will be in relieving banks
which have been strained to the point
of closing their doors or near it. Many
of these banks hold paper which IS
good but which has some time to run
before it is due or has, for imperative
reasons, been renewed and EXTENDED.
The value is there, but Is not lmne-
diately available to meet demands for
deposits or to provide new credlt 10
, stimulate business activity. The big
bank, in better position TO wait bit
for its money Is designed TO take over
this paper and advance real ready
money against it. AS money due the
distressed banks is paid to them they
will pay back the sums advanced by
the corporation. But 1t Is provided
that no more than 5000, 100000 may be
used at time in this bank relief.
Industries. farmers. great variety
of enterprises may be assisted by loans
from the corporation But the lending
life of the body is limited to one year.
This provision Is an indication OF how
confident the sponsors are that the ex-
pertinent will be successful. The cor-
poration will lend for year and then
spend four years in collecting. The
lending period may be extended II the
President thinks proper
The security behind the bonds TO be
, issued will be the actual security be-
hind the paper taken over from the
businesses aided, plus the general under
! lying guarantee of the United States.
The rates at which advances will be
made will be subject to change from
time to time at the election OF the
board Of directors
The liveliest safeguards are provided
against misuse of the S2000.000 900
| fund. Salaries of corporation employees
| are held down to a minimum and spe-
| cial provisions are made for the punish
ment of any fraud sought to be perpe-
| trated to get money unfairly. The
counterfeiting of the corporations
bonds is declared expressly punishable
and embeZzlement is guarded against.
| The act even goes the length Of for
| bidding any other business, under pen
atty, from using the name "Reconstru-
ton Finance Corporation" The Con-
gress has shown a determination that
no part of this $4,000 0000 900 shall be
! subjected TO any sort Of racket