will assure the safety and the development of our country and its free institutions.

The moderate income group, which the bill before you is designed to help, wants no subsidy. It wants to pay its own way but in this group are millions of families which cannot achieve their desire for a modest, decent home without the financing program and the other aids to cooperatives which this bill provides.

It would be merely repetitious for me to review the features of the bill. I firmly believe that the financing program proposed for nonprofit cooperative ownership housing corporations restricted to the members and for private nonprofit corporations described in H. R. 6618 is sound. It is in line with what the Congress has done time and again.

The Jewish War Veterans wish to commend especially the provisions in the bill for veterans' preferences as provided in section 204 (a) (2) (B). We would like to see section 201 (b) rewritten so as to make sure that the employment preferences for veterans in the civil service under our present laws, be maintained in the National Mortgage Corporation for Housing Cooperatives.

We also would urge upon you that all the activities called for in the bill be carried out by an independent constituent agency with its own commissioner within the organization of the Housing and Home Finance Agency to be on a par with the Federal Housing Administration and the Public Housing Administration. We believe that the aid intended for cooperatives can be more fully realized if such a constituent agency handles the entire activities. These activities require, in our estimation, a special zeal, which is most likely to be called forth in an organizational set-up with a constitutent agency whose sole task it will be to make a success in its particular field-to facilitate the organization and functioning of these housing cooperatives. We respectfully urge that you report H. R. 6618 favorably and use your persuasive powers for its speedy enactment.

In connection with that point, Mr. Chairman, I would like to relate a matter that has come under my personal observation in connection with a great many big manufacturing corporations in this country, who have decided to go direct to the consumer with some of their products and who set up chain retail stores around the country to do that job.

Uniformly, that effort was a flat failure as long as that chain-store operation was made a sort of a dependent function in the regular sales department of the corporation. When they found that was the case they stepped out into the chain-store field and hired competent chainstore executives whose whole experience, lifetime interest, had been in chain-store merchandising, brought those men into their companies, set up a separate corporation for the chain-store phase of their business, instead of keeping it as a mere appendage of their regular sales department. Since that time I understand that practically all of those chain-store operations have been a success. I think we have had exactly the same sort of a picture here. These have been cooperative features in some of the legislation that you have passed, but it has been put in the hands of the FHA where their experience, their thinking, the whole tenor of their operations was geared to a different kind of an operation and they have not been able to adjust themselves

to doing the job which was necessary if cooperatives were to succeed. All you have to do is to look at the record and see how few cooperatives have managed to get under way through the legislation that you now have on the books.

Thank you for this opportunity to appear before you again on this most important legislation.

The CHAIRMAN. Thank you for your views. Are there any questions?

Mr. TALLE. I have one.

What do you consider the principal advantage of the cooperative with reference to housing?

Mr. WEITZER. There are a great many advantages. Of course, this bill, in itself, provides one of the very great advantages in reducing cost, because it has set up an entirely different type of financing than the usual mortgage financing. The normal mortgage financing is a pretty expensive operation, as you know. I happened to notice in the testimony that was given before the Senate some costs of handling ordinary mortgage financing by the insurance companies. I notice that they have, for example, a cost for a service fee of fifty-five onehundredths of 1 percent, that means to get the business. They have another charge of an operating commission of forty-three onehundredths of 1 percent. There you have practically 1 percent which is almost entirely eliminated under the proposal of this bill, because you wouldn't have any business getting cost and you wouldn't have very much of this operating cost, because you will be dealing largely with big units. Of course, that won't represent anywheres near the cost that you have here.

In other words, the man getting a $5,000 or $6,000 or $8,000 mortgage doesn't ordinarily approach the lender directly. Some agent, some broker sees him and of course he has to be paid for the work that he does in finding the business and then with that $5,000 mortgage or $8,000 mortgage you have just as much cost in collecting the monthly payments and in keeping the accounts for them and everything else that you would have in the very large mortgages which, comparatively speaking, you would have under this cooperative program.

But that is only one of the savings, because you have the actual saving in the fact that this group organizes itself with the intent of doing some of the things which normally have to be done for pay, just exactly as I indicated. Every cooperative gets together and by virtue of the cooperative instinct that gets them together, they are ready to do things for themselves that would normally have to be paid for. That would mean savings in maintenance. It would mean some savings in construction. It would mean the elimination of the speculative risk that every builder or every real estate man or every developer has to face when he undertakes to put any sizable project over or, for that matter, it applies to the individual house. That would be the saving that would come in buying wholesale as against buying retail, because the ordinary builder, unless he happens to be a very large one, has to pay bigger costs than the large contractors who would engage in the building of these cooperative enterprises, so you would have savings along that line.

Of course, ultimately, it is conceivable that if this thing should develop, as I believe it will, there will be cooperative contracting

corporations that would build for these cooperative home owners. I understand that a record has been cited from the State of Ohio where a savings of 20 percent below contractor's bids was made on the cost of construction through the cooperative method, so that in addition to the financing savings, which I think are obvious to everybody, you have a situation where money can be saved all along the line.

Of course, there is another thing involved here. The mortgage market, as it is commonly known, is pretty largely a restricted market. The mortgage system in my opinion, at any rate, is a pretty antiquated affair and anybody who has bought a home and has to go through all of the rigamarole of preparing these documents, getting them recorded and everything, recognizes that he has to pay for that. Of course, you are not getting away from that on this one big mortgage. That, I assume, will have to be handled in the same way, but you see you are reaching out here for a source of funds to go into building operations which has not been touched within recent years.

They did something like that in the twenties. I suppose all of you remember S. W. Strauss & Co., and other corporations of that type, which placed mortgages of all sizes and types and then sold bonds to the public. Of course, during the thirties, many of those things went a glimmering, but that was largely because of the fact that when they were going there was such a terrific bidding to make the profit on selling these 6-percent safe bonds to the general public they went to the most fantastic lengths in order to get mortgages against which they could sell bonds. Of course, that isn't going to be the case here. This is going to be a case of financing a cooperative which will secure the maximum economies in its building and there are not going to be any of these big commissions paid to get loans.

Of course, it was common knowledge in the twenties that loans were being made for 15, 20, and in many cases 30 and 40 percent higher than the real valuation and a good deal of that extra went back to some of the people connected with the corporations and the people that were around them as a bonus for getting the loans from the borrowers.

Consequently, of course, that market was killed, but here you are going to reach out to men and women who might not buy a mortgage but who will buy the debentures of this National Mortgage Corporation and you will tap a source of money that is not now available to go into the ordinary mortgage. You know that you or I can't go out and buy an FHA-insured mortgage, which I think in most cases certainly ought to be a pretty good buy. It has to be bought by a licensed lender or somebody, I understand, who is accredited. I know that by personal experience because I advised the person who came to me for advice on investment that that would be a good investment. She went to her banker-I didn't realize that until that happened-and he said, "Oh, no, you can't buy this mortgage. That is only for accredited people to purchase, so she bought Government bonds and paid $101 or $101.50 for them. I think they are selling now at $104.50, but she has to be satisfied with an income of about 2 percent, whereas if mortgage debentures were available-I don't mean under this particular act but under mortgage corporations which I think ought to be set up-it would be possible for many people of small means to buy a piece of a mortgage and have a satisfactory investment which would make more money available for building.

I think this is a step in the right direction. ·

Mr. TALLE. Looking at the word "cooperation" from the point of view of its Latin origin, it means working together, doesn't it?

Mr. WEITZER. That is right. I remember enough Latin for that. Mr. TALLE. That is a beautiful thought. I think all of us wish that that word might prevail in international affairs as well as national. Unfortunately, in the popular mind the word "cooperative" raises a question as to taxation. I am reminded of that almost every day in the mail I get.

Would you like to state for the record the attitude of your organization on, say, the payment of property taxes?

Mr. WEITZER. I can't speak on behalf of the organization because we didn't take a definite stand on it, but it was discussed and we agreed that we ought not to seek tax exemption for the cooperatives. I am talking now about real-estate taxes and things of that sort.

Mr. TALLE. That answers the question.

Mr. WEITZER. I say we did not make a definite resolution, but discussing it, we felt that we ought not to ask for tax exemption, although I understand that in some States tax exemption has been proposed for cooperatives. We wouldn't oppose it, but we didn't feel that we should ask for it, because we think that this thing can stand on its own bottom, just exactly as the farm cooperatives have. You probably read the other day a representative from Texas got up and was very pround to say that all the PCA's in his State were now owned directly by the farmers who originally had been borrowers and who were cooperating in this Production Credit Administration operation in the State of Texas and somebody from Rhode Island claimed they were first. I called the Department of Agriculture and they told me that 105 of these Production Credit Administration organizations are now entirely privately owned. That is, they are owned by the farmers who originally were helped by the Federal Government in setting them up, financially and by advice. Of course, the Federal Land banks, I understand, have become privately owned, and that is true of the Home Owners Loan Corporation which is, as well, practically entirely privately owned now.

Mr. TALLE. I gather, then, that insofar as you know, the attitude of your organization is that no tax exemption will be asked with reference to property taxes?

Mr. WEITZER. No, sir. As I say, we discussed it briefly, but nobody had any idea of asking for it, and I am pretty sure that they would not expect that as a part of the legislation. Of course, I don't assume that the Federal Government could do anything about that because the States and municipalities would determine their own tax policy on that score. I mean, I don't know whether the Congress could say anything either way that would affect the policy of the States, except as a matter of advice.

Mr. TALLE. Am I right in believeing this: That the attitude you have expressed would apply, also, to income taxation? That would be Federal, of course?

Mr. WEITZER. That is right. That is right. In other words, these bonds, as they are defined in the bill, would not be exempt from Federal taxation any more than any other Federal Government bonds are

today, except those that were issued before they stopped issuing Federal tax-exempt bonds.

Mr. TALLE. Thank you.

Mr. MULTER. Mr. Weitzer, is your organization also of the opinion that this bill can be applied to single family units in small communities as well as large metropolitan areas?

Mr. WEITZER. Certainly. There is nothing in the bill that would prevent that. As a matter of fact, I believe this would take hold better in the smaller communities than it would even in the larger ones, because the people know each other better and, as a matter of fact, they are closer to the farms and they have seen the farmers benefit from these cooperatives and I think they would be even quicker to take it up in many cases than in the larger cities. You might have labor unions in the larger cities who would, I think, tend to promote it, but even in smaller communities where there might be a manufacturing plant, I think you would probably find that the local labor union group would be probably quicker to take hold of it there than they are in the larger cities.

Mr. MULTER. There has been considerable talk here about a possible 3 percent interest rate on these ventures as against 4 and 412 percent on others and it will mean that there will be complaints from veterans because this new venture will give certain people an advantage. Have you heard complaints that it will be unfair to the veterans because of the lower interest rate?

Mr. WEITZER. No; that subject didn't come up at all in the discussion. I am surprised to find that it came up here because I think obviously there are bound to be differences in rates. Of course, all that the Federal Government is doing in this case is what it has done in other cases; that is to say under the FHA for a half percent premium you can get a mortgage insured by the FHA.

All that they do is to set a top rate for the interest. You can go out and get the lowest rate that you can possibly find in the market. Of course, in practice it has always been the top rate generally that was the best that you could find. We have the veterans' loans under the GI bill. They fix a top rate of 4 percent and then it is up to the veteran to find a place where he can get it at less if he can. He hasn't been able to get it. As a matter of fact, last year there was practically a strike on this thing and it was difficult for the veterans to get any loans at all because the top rate was 4 percent. That came largely from the west coast where it is common to get a little higher interest rate-I shouldn't say "a little," it is substantially higher than you get in the East-but the businessmen out there pay a higher rate. I know businessmen on the west coast borrowing money in the hundreds of thousands and paying 5 percent on loans, but equally good men in the Eastern States are getting money from their bank at 3 and 311⁄2 percent. Of course, the insurance companies that can't find enough places to put their money are reaching into that commercial loan market and lending money at 3 percent or a little more and occasionally a little less.

I think with this bill you will have the kind of a piece of paper that will be a very popular purchase, and it will serve to bring more money into the building market than you are able to get under the