The CHAIRMAN. Have most of them been successful? Mr. LINCOLN. Those that I have had actual management of or that I myself, under a board of directors, had had actual management of. The CHAIRMAN. Any further questions? Mr. COLE. Mr. Chairman, I have a question. The CHAIRMAN. Mr. Cole. Mr. COLE. Mr. Lincoln, I notice that you have a very interesting statement in connection with the low cost of construction of houses, and on page 8 of your statement you say that you are quite sure that cooperative or nonprofit housing can be built at a cost substantially below the present prices, which I think is a good thing. I think if cooperatives can do it, it is a wonderful thing and they should be encouraged. Certainly, I do not believe cooperatives are socialistic. Mr. LINCOLN. Thank you. I am glad somebody else does not. Mr. COLE. I am concerned, however, about whether or not it is necessary for the Government to give them, in this bill, additional privileges in connection with the interest rate. If they can build at substantially lower than private industry, would it not be proper for us to consider a bill which would help cooperatives, which would further the movement which would thus bring more houses and more homes to the people at a lower cost, and yet consider that we do not give them a privilege of a lower rate of interest? In other words, suppose we set it up on an FHA principle of assisting them on the same rate that other people in industry could obtain? Mr. LINCOLN. I think you are doing this for people, Mr. Cole, and you are not trying to protect some particular interest in the field. I do not see why you should not do this directly for people, because tax money comes from people. Mr. COLE. I understand. Mr. LINCOLN. And what is the matter with giving it to the people themselves so that they can get some of the advantage of this tax money that they pay in? Mr. COLE. I understand that. Of course, you are giving people an advantage in the cooperative situation which private industry is not able to acquire. Mr. LINCOLN. Why do you say that? Mr. COLE. Sir? Mr. LINCOLN. Why do you say that? Mr. COLE. Because in this bill we are giving the people who enter into the cooperative housing an advantage over the veteran, who cannot get the same privilege when he buys his house through the VA. Mr. LINCOLN. Maybe there is something the matter with that legislation. Mr. COLE. That is what I am getting at. The question was asked a while ago: If we do this in this particular instance, perhaps we should do it in all instances. Here is a veteran-and this question was raised by one of the gentlemen on the other side-here is a veteran; he is of the people, certainly. Mr. LINCOLN. Yes. Mr. COLE. You talk about the people who build. I am talking now about the people who buy. Here is a veteran who has bought a house under the VA. He pays 42 percent. Are we not, to a certain extent, discriminating against that veteran if we give other people a greater advantage? That is for the people, is it not? Mr. LINCOLN. What you mean is that you have loaned to some individual veteran and he now has a house and has to pay 412 percent? Mr. COLE. That is right. Mr. LINCOLN. Why don't you reduce it? Mr. COLE. Do you think we should? Mr. LINCOLN. I would. I think the idea of offering a veteran the opportunity of a house is a major consideration. It is one of the least things you can do for him. Of course, I do not want to get into it, but I think this FHA has led us into some strange places; and I think, in my opinion, now-and I am not an expert on this thing-that that is a device that is being used by finance and business to get Government guaranties and yet at the same time let them make all the profits they want in the building of a house. Mr. COLE. Mr. Lincoln, of course, you approach the point on the basis of your own problem, and you say you are attempting to help the people. That is what we are after. Mr. LINCOLN. Yes. Mr. COLE. But we must consider the fact that the people are those who purchase houses as well as those who build houses. The people who purchase houses under the present Government program are, as I understand it, paying a greater rate of interest than we are providing for in this bill. They are the ones who are being discriminated against. Mr. LINCOLN. I do not know the complete answer to that, but I think if you get this started you will find that many of those folks perhaps will come in and take advantage of this. You cannot correct all the troubles. You cannot correct all of the things that have gone in the past. For instance, I am buying a farm and paying 4 percent on it. Like that-I do not think you can correct all the problems. But I think this is an over-all problem that I think this will materially help to develop. We will take care of that veteran afterward. Let him sell that house and get into a cooperative. Mr. COLE. I think he will probably do that in many instances. Mr. LINCOLN. Either that, or why do you not reduce the interest rate? Mr. COLE. He has been paying a monthly installment on his house, and when this bill is enacted, if it is, then he will see that he can, by reason of the lower rate of interest, buy a cooperative apartment at a lower rate. So, not having any investment in the house which he has been paying upon under the veterans' guaranty, he will then move out of the house, not having any substantial equity in it. He will move out of it and go into the project which you are proposing and let the Government hold the bag, will he not? Mr. LINCOLN. I do not think so. Unless the housing situation is very much different than I view it to be, somebody else will move into that house. And is there any reason why you could not reduce the interest on FHA and the like? Mr. COLE. I am not sure. If we reduced the interest in FHA and VA, we should reduce it then for all segments of our economy, for all purchasers of houses, should we not? Have you ever thought what that might cost the Government? Mr. LINCOLN. It is not going to cost the Government anything. Mr. LINCOLN. I think eventually this will not cost the Government anything, any more than the REA did. Mr. COLE. My question was: What would it cost the Government if we reduced the interest on the loans to every home buyer in the country to 3 percent? Do you not think that that would cost the Government something? Mr. LINCOLN. I do not see why. Mr. MULTER. Do you mean by loss in taxes, Mr. Cole? Mr. COLE. I am talking about whether it would cost the Government anything in any way. Mr. LINCOLN. I do not see how it would cost the Government anything. This is just lending the people's money back to them. I do not think it would cost the Government a cent. I think it would make enough business so that the material you buy from the cement man, the plumber, and everything else would be such that he would pay more income taxes because it would create more business. Mr. COLE. If we would do that, then why do we not loan money directly through the Government to every person who wants to buy or build a house at 1 percent? Why do we say anything about interest at all? Mr. LINCOLN. I am saying that this provides one-half of a percent to the rate that apparently the Government feels it must pay in order to get the money. Mr. COLE. You do not believe that there is any question about whether or not the Government should enter into competition with private enterprise in the finance field at all? Mr. LINCOLN. I think that is a little bit farfetched. that have a relationship to this particular problem? Mr. COLE. That is what this bill provides for, sir. How does Do you not believe that this bill provides for competition with private enterprise in the money-lending field? Mr. LINCOLN. Congressman, where does money come from? Mr. COLE. It comes from you and me and from the people who work. It comes from work and not from the Government. Mr. LINCOLN. That is right. And where does the Government get its money? It gets it from people. Mr. COLE. Yes. Mr. LINCOLN. Well, then, why shouldn't the Government turn right around and make it available to some of the people rather than putting it through banks and all these other things? Mr. COLE. Because, Mr. Lincoln, the people who work want to buy things, and they want to save money in order that they might buy things, and if you take it all away from them they will not be in a position to buy anything, and then the Government will take over all their activities. Mr. LINCOLN. We are not proposing that you take anything away from them. Mr. COLE. I see. That is all. Mr. WOLCOTT. Mr. Chairman, I understand that Mr. Lincoln proposes that we undertake to tax people whereby loans from government might be made at low interest rates. Mr. LINCOLN. I did not get the first part of that, Mr. Wolcott. Mr. WOLCOTT. I understood from this discussion that Mr. Cole said that the Government merely invested the funds of the people. Mr. LINCOLN. I said that tax money to the Government comes from the people. That is No. 1. Mr. WOLCOTT. That is what I predicated my question on. You favor taxing the people to create funds which the Government might loan for this purpose? Mr. LINCOLN. Well, you are. You are doing it in agriculture. You are doing it in RFC. What I say, Congressman, is that if you get this thing started then you are going to find the private lending agencies coming in and helping to do the same thing, just as we had in the farm cooperatives. Mr. WOLCOTT. They are not doing it in RFC. Mr. LINCOLN. What do you mean? Mr. WOLCOTT. Tax money is not used in RFC. Mr. LINCOLN. Is it not Government money? Did the Government not put the original capital in the RFC? Mr. WOLCOTT. Yes. Mr. LINCOLN. Did that not come from tax money? Mr. WOLCOTT. Yes. But we are talking about loans; we are not talking about capital. Now we are providing it in all of these agencies that have been set up for the retirement of capital, so that the Government will be out from under. My point is whether you are in favor of taxing people to create funds with which the Government makes loans. Mr. LINCOLN. I say it has already gone on. Mr. WOLCOTT. Are you in favor of it? Mr. LINCOLN. And how much more, I think, is the question. Mr. LINCOLN. I do not see any reason against it, because they are already doing it. But the point is this will get it started, as I see it, and, after establishing some precedents, then I think you will find private capital coming in and helping. That has happened in all of our agricultural developments. Mr. TALLE. Mr. Chairman. The CHAIRMAN. Mr. Talle. Mr. TALLE. Mr. Lincoln, let us assume that there are three Government agencies all lending money for housing purposes. The first one lends at one rate, the second lends at another, and the third lends at yet another rate. Do you not think that all of them should lend at the same rate if the basic factors on which the loans rest are comparable? Mr. LINCOLN. That may be more involved than I am equipped to answer right today, Mr. Congresman, but I have my serious doubts about what is going on in FHA, where banks and insurance companies take money from people at 1 or 2 percent and then turn around and lend on an FHA-guaranteed mortgage at 414 or 42 percent. I think there is a very serious question in there if you want to dig into it. I think that is just a subsidy to private financial agencies, and I have always had some question about it. Now, to the extent that it has done a good think, O. K. Mr. TALLE. There are, of course, various rates of interest in the broad lending field, and there are good reasons why they differ. 61731-50--25 Mr. LINCOLN. I think so. Mr. TALLE. Because the rate is always related to the risk involved. Mr. LINCOLN. The risk; that is right, sir. Mr. TALLE. But, if the purpose is to provide housing, at least the purpose would be a single one; and do you not think that in that case there should be a standard rate and not a lot of different rates? Mr. LINCOLN. Do not forget this, too, Congressman. In a typical cooperative venture there is a collective security there of the amount of money and equity of all the group that protects each one that you just do not get in the private financing or you do not get in the private FHA. That is a very important thing in a cooperative venture. The group backs up the individual, and I think for that reason the collective security is better than the same security on the same number just individually. We had the same principle Mr. MITCHELL. Will you yield there? Mr. TALLE. I will yield first to Mr. Wolcott and then to Mr. Mitchell. Mr. WOLCOTT. That provokes a discussion of something that has been concerning me a little bit in this bill. Maybe we will be able to clear it up. These cooperatives loans-if a goodly number of them were in default, could the Government or any other mortgagee get a deficiency judgment against the cooperative for the difference between the sale price of the property on the forced sale and the amount of the mortgage? Mr. LINCOLN. That is a legal question. But I do not see any reason why they shouldn't. I don't know, Mr. Congressman. I could see no reason why not, but I am not clear on it. I think a lawyer would have to answer that question, and it would depend on how you set up the cooperative. I know in our own cooperative, if we give a mortgage and we default, they walk in and take over. Mr. WOLCOTT. It does not depend on local laws but on a contractual obligation in accordance with the contract which you enter into for these homes. Mr. MULTER. New York State law limits a deficiency judgment on a foreclosure. Mr. LINCOLN. That is a legal question that I am not prepared to answer. Mr. WOLCOTT. Of course, that limitation applies to individuals as well as corporations. What I am trying to get at here are the suggestions made by not only Mr. Lincoln but several others, because this is a cooperative undertaking that we have and we would have better security than we would have if it were a single loan. The question that is going through my mind in that respect is that, unless we can get a deficiency judgment against the cooperative against which all the assets of the cooperative would be pledged and made available, then, of course, there is not much truth to the contention that a loan to a cooperative is safer than a loan to an individual. Mr. LINCOLN. All I know, Mr. Congressman, is that when we set up the REA cooperative the Government loaned us the money, including everything. Mr. WOLCOTT. Let us get away from that. We set that up before this committee. We are somewhat familiar with that. That has to do with a contract. There is a lot of difference between REA cooperatives and this sort of cooperative. |