Senator BARKLEY. Do you mean to make the facilities available when you refer to a campaign?

Mr. WALKER. Yes, sir.

Senator BARKLEY. You do not mean to go out on a campaign of high-pressure salesmanship and try to persuade people to come in and take advantage of this plan?

Mr. WALKER. Not only does it not contemplate that, but I think it is contemplated to make the rules quite rigorous, so that the loans will be of a kind and character that are good bankable loans. I think if we were to get out into the field and try to stimulate things by conducting a "buy now" campaign, we would be making a very serious mistake. The thing we are trying to do is to stimulate those who can afford to do it and who have an absolute need for repair and rehabilitation.

Senator BARKLEY. Mr. Walker, you were making a general statement a while ago before being interrupted by members of the committee. I think it would be well now to go ahead with that general statement and let us get into our record the general background of this proposition.

Mr. WALKER. In that matter we have the feeling that this question of repair and modernization is just a sort of bridge which will stimulate both private capital and private industry. It is contemplated that a very distinct effort will be made along that line, and we have found quite a response throughout the country from those in the capital and durable goods industries to cooperate. As a matter of fact, from all parts of the country, and from some of the outstanding concerns, there has been a tendency to impress upon us the importance of this matter as shown by their desire to cooperate insofar as costs are concerned. Building costs have gone up very considerably, and rentals have gone down. I think those engaged in the heavier industries realize that if you are going to stimulate building of this character, you do have to get your costs down; and they seem most desirious of bringing about that result, and seem most anxious to try to do it.

Senator BULKLEY. And how will that be done?

Mr. WALKER. Of course, it can only be done by increasing the volume of business. I feel that we must and should give them every cooperation, with a minimum amount of expenditure on the part of the Government. Then, from that point on, it is quite obvious, I think, from the examination we have made of the survey, that housing conditions generally throughout the country are not what they should be. In other words, I think we have all given some attention to feeding and clothing the American people, and we have given very considerable attention to their transportation. But I think we are quite_backward insofar as general housing conditions are concerned. It is quite manifest in a good many parts of the country that housing conditions are unsanitary, not healthy; and there has been no general tendency to improve or to modernize. It seems to me these important problems have escaped us entirely over the past few years.

Senator STEIWER. Has there been any comprehensive survey made of physical conditions in the matter of housing?

Mr. WALKER. There have been surveys made quite generally throughout the country, and in some 60

Senator STEIWER (interposing). By what agency was your survey made?

Mr. WALKER. There have been various surveys made by private agencies and also by the Civil Works Administration. There are C.W.A. men who have made quite a considerable survey, and reports are coming in, which are being carefully studied, and full and complete reports should be in very shortly and available for our use. Senator CoSTIGAN. Mr. Walker, have you summarized the result of those surveys?

Mr. WALKER. They are not all in as yet, but the earlier reports are indicative of quite a demand for improved housing conditions. They are also indicative of some demand for new construction. I wouldn't say that there was a real demand at this time for new construction in the matter of homes, however.

Senator COSTIGAN. Does this bill contemplate new construction? Mr. WALKER. Yes.

Senator CoSTIGAN. All right.

Mr. WALKER. We feel that there is a need for new housing, and that

Senator BARKLEY (interposing). But that need is spotty throughout the country and not universal, I take it?

Mr. WALKER. I think there is need for worth-while housing, and that there has been a need for it. Whether or not there is a demand, and whether or not there is enough finances to handle that demand, is another matter. But, so far as the need is concerned, I think that housing conditions throughout the country generally are very bad.

Senator WAGNER. Certainly in many municipalities there is a serious need for slum clearance.

Mr. WALKER. Yes; in your city, Senator Wagner, I think it is quite obvious that there has been such need for some time. Senator WAGNER. Yes.

Mr. WALKER. I think 60 years ago they were talking about housing conditions in New York City, and the very same houses are in existence today and being used by people.

Senator BULKLEY. Does this bill have any bearing on slum clearance?

Mr. WALKER. Yes.

Senator BULKLEY. In what way?

Mr. WALKER. It is going to provide money for slum clearance under the mortgage feature of the bill. Mr. Riefler will go into that quite fully.

Senator BULKLEY. Under the mortgage section of the bill?

Mr. WALKER. Yes. That contemplates slum clearance and lowcost housing.

Senator WAGNER. Mr. Walker, may I ask you this question, for I have not noticed an answer if you have discussed it: How did you happen to reach the 20-percent proportion that the Government was to insure? Is that based upon some statistical knowledge?

Mr. WALKER. Senator Wagner, we had before us surveys of those who have been engaged in that field. We selected those whom we thought were best equipped and who had had the most experience,

and they felt that although the loss was only 5 percent-that is, that experience showed a loss in loans of this character of from 2 to 5 percent yet they felt that in order to stimulate the average commercial banker-and I think we are going to need some assistance from them, because we have plenty of money lying in our banks. As I say, they felt that most bankers would go along the line of least resistance and follow the custom of banking in the old fashion, with 90-day paper, and that we would not be able to get them to go along with paper of 3 to 5 years, that is amortized with monthly payments, and therefore that something must be done. We felt, however, that if we did give them an encouragement of this kind we might get them to cooperate and loan out their money.

Senator WAGNER. So this guaranty goes beyond what the experience has been in the matter of loss in loans of this character?

Mr. WALKER. Yes. And, of course, we have no definite basis for arriving at a conclusion in the matter of loans of this particular type. The only thing we have is the experience of concerns who have gone along with loans of from 1 to 3 years.

Senator WAGNER. Yes; I see.

Mr. WALKER. And we have examined those loans closely. You see, in loans of this kind the service is quite high, and that is an added feature that makes it rather difficult. And the average commercial institution, commercial banker, does not look upon a loan of this kind any too favorably. He figures that short-term 90-day paper would be much better. But losses based upon a close approach to actual experience, and the expert advice of those who have been engaged in a field somewhat comparable with this, are 5 percent. And none of the men seemed to feel that there will be a real hazard approaching 20 percent at all, that there is no danger of reaching any such figure. Of course, they are going to provide rules and regulations with reference to the paper, so that the loan shall be of a type of a good bankable loan.

Senator BULKLEY. Mr. Walker, did you say we would have a witness who has had first-hand experience with loans of this character?

Mr. WALKER. Yes, sir.

Senator BULKLEY. And who is that?

Mr. WALKER. That is Mr. Deane, associated with General Motors. Senator COUZENS. What evidence have you that you will be able to interest commercial bankers in these loans?

Mr. WALKER. We have had quite a few bankers down here. And I might say in that connection that we have met with the heads of savings banks, insurance companies, trust and commercial bankers and we have had some 30 or 40 conferences with them, I mean with various types of people who would or should be interested in a plan of this character. And there is not a unanimity of opinion at all with reference to commercial bankers throughout the country going along on this. But

Senator COUZENS (interposing). That was why I was surprised to hear you include commercial bankers in the group, because I had understood they were not very much interested in this sort of loan. Mr. WALKER. I think they should be interested, however.

Senator WALCOTT. Isn't it in direct competition with commercial bankers?

Senator BARKLEY. Only theoretically so, I would say.

Mr. WALKER. In a large number of our situations the commercial banker is the one who will have to do it for us, or is the one who should do it for us. In other words, we guarantee to him the loan. Senator WAGNER. Then if he does not make these loans how will they be made?

Mr. WALKER. There will be a number of private financial agencies engaged in this kind of business who will do it. In a large number of situations, especially in the smaller communities, I think we will have to rely upon commercial institutions.

Senator WALCOTT. Do you mean to make the loans?

Mr. WALKER. Yes; to make the loans directly.

Senator WALCOTT. Then in turn they will borrow of this corporation?

Mr. WALKER. No; we guarantee the loan up to 20 percent; not the specific loan but guarantee them against loss up to 20 percent. That is, a bank's loss will be guaranteed up to 20 percent.

Senator BARKLEY. What effect would that have upon liquidating a bank's deposits and assets, insofar as the ability to loan up to a period of 5 years is concerned?

Mr. WALKER. We have set up a discount feature in this, so that the bank could discount the paper.

Senator BULKLEY. Is it guaranteed up to 20 percent of the loss? Mr. WALKER. Of the institution's loss on this particular type of loan; yes.

Senator BULKLEY. On each group of loans?

Mr. WALKER. Yes, sir.

Senator BULKLEY. So that if one loan was a complete loss the banker might be reimbursed so long as he had four other good loans?

Mr. WALKER. Yes. It is not on each individual loan.
Senator BULKLEY. It is a blanket group of loans?

Mr. WALKER. Yes, sir.

Senator BULKLEY. Up to 20 percent of his whole loss?
Mr. WALKER. Of his aggregate loss, or his group loss.

Senator BULKLEY. Within 1 year or what other period? Or is it 20 percent of the amount

Mr. WALKER. These loans run from 1 to 5 years. And the guarantee would be for 20 percent of his loss over the entire period. Senator BULKLEY. Twenty percent of the total amount that he has loaned?

Mr. WALKER. Yes; of his total loss, or I mean of his total loan.
The CHAIRMAN. Twenty percent of the total amount loaned?
Mr. WALKER. Yes, sir.

Senator BARKLEY. If that should be lost?

Mr. WALKER. Yes, sir. Suppose his loss is only 10 percent, then it would cover that.

Senator WALCOTT. Mr. Walker, can you turn to that section of the bill and show it to us?

Mr. WALKER. I might make the suggestion that you hear Mr. Deane on that. He is much more familiar with this feature of the bill, and I think you could get more enlightenment from him. And I had hoped that he would give you his view of the whole plan.

Senator BARKLEY. Well, inasmuch as Mr. Deane is going to give us that information, suppose we wait until he comes before us. Mr. WALKER. All right.

The CHAIRMAN. I do not understand that the paper which is given to a commercial bank is insured as against loss under this bill and is made eligible for rediscount by the bank with the Federal Reserve. If it is not, how would you be able to consider it as liquid?

Mr. WALKER. I think we contemplate that, Senator Fletcher.

Senator WALCOTT. I do not think this bill does that. I cannot see where it provides that such paper is rediscountable with the Federal Reserve bank.

Senator BULKLEY. It certainly ought not to be rediscountable there unless it is clearly covered.

Mr. WALKER. I think we have an amendment to offer authorizing that.

Senator WALCOTT. That is very important. You haven't got it here in the bill, but you contemplate it.

Mr. WALKER. Yes. Mr. Deane can go over that entire feature of the bill for you.

Senator WALCOTT. All right. I will not take up your time with that.

The CHAIRMAN. You may proceed with your statement, Mr. Walker.

Mr. WALKER. If it is agreeable to you gentlemen of the committee, and I think it would be the most orderly way to proceed, we have approached this proposition from three angles: First, there is the question of repair. Then there is the question of mortgage insurance and mortgage associations, and then there is the question of building and loan accounts. Mr. Deane is quite familiar with the first feature, Mr. Riefler with the second, and Mr. Russell, who is attorney for the Home Owners' Loan Corporation, with the third. And if it is agreeable to you gentlemen of the committee, I think we will get along much better if we take Mr. Deane now and follow with Mr. Riefler, and then let Mr. Russell close.

The CHAIRMAN. Very well; I think that would be a good way to proceed. Mr. Deane, will you come forward to the committee table and take a seat there by Mr. Walker? Give your name, address, and occupation.

STATEMENT OF ALBERT L. DEANE, SPECIAL ASSISTANT TO MR. HARRIMAN OF THE NATIONAL RECOVERY ADMINISTRATION, WASHINGTON, D.C.

Mr. DEANE. Mr. Chairman, my name is Albert L. Deane. I am president of General Motors Holding Corporation and formerly vice president of General Motors Acceptance Corporation, handling this kind of paper, being temporarily identified as special assistant to Mr. Harriman, of the N.R.A.

The CHAIRMAN. What particular feature of the bill have you had to do with? Just tell us about it.

66

Mr. DEANE. I have assisted in developing the payment feature or the receivable feature of the so-called short-time need." That is, 59284-34- -3