Lapas attēli
PDF
ePub

Mayor ALIOTO. There is not any doubt about that.

Mr. BLACKBURN. All right. Well, isn't there something false in that kind of logic?

Mayor ALIOTO. I don't believe it is false.

Mr. BLACKBURN. I have not further questions.

Mayor ALIOTO. I don't think it is false to recognize the fact that the fellow with $12,000 cannot buy a home in America today, and I think we need to do something about that immediately.

Now, if you are talking about relief to that person, that relief would come in the recognition of the fact that the property owner in this country ought not to be paying the kind of taxes he is paying, that there ought to be more taxes coming from those areas where there is actually special privilege. In other words, I don't think that we have the kind of tax reform yet in the country where it can be said that our tax structure is equitable, and we ought to operate in that area. Mr. BLACKBURN. Who pays the taxes? If we are going to double the taxes on corporations, don't you think that the taxes are ultimately going to be passed on to the consumer? Don't you recognize it is the little man on the street who pays all the bills anyway and you are not going to be able to change his standard of living by any bills we are able to pass up here?

Mayor ALIOTO. All I am suggesting, Mr. Congressman, is that there are some of us who are convinced that we do not have total tax reform yet. There are special privileges being enjoyed, particularly by the petroleum industry, the banking industry, and the insurance industry, among others.

Mr. BLACKBURN. Well, I appreciate your analysis and your recommendations, and maybe we can take it up before the Ways and Means Committee.

Mayor ALIOTO. Thank you, Mr. Congressman.

Mrs. SULLIVAN. Mr. Brown.

Mr. BROWN. Thank you, Madam Chairman.

Mr. Mayor, I appreciate very much having the opportunity to say hello to you again.

Mayor ALIOTO. Good to see you again.

Mr. BROWN. I visited San Francisco with the "Visit to the Cities" group, and you were most hospitable. Our visit was not limited to the matter of housing, but in the course of it we went to Hunters Point and visited many of your housing projects. I want to commend you on the job San Francisco is doing. I think San Francisco had the problems of the disadvantaged, the minority groups and all, long before many of the other cities did, or in a different proportion, at

least.

I have only had a quick chance to examine your statement. In view of the fact that the Chairman has urged us to move along, I will not ask you further questions at this time. But again, I wish to welcome you to Washington and say thanks for treating us so nicely in San Francisco.

Mayor ALIOTO. It is good to be here.

Come back and see us again, Mr. Congressman.

Mrs. SULLIVAN. Thank you, Mr. Brown.

Mrs. Heckler, do you have any questions?

Mrs. HECKLER. No questions.

Mrs. SULLIVAN. Thank you very much, Mayor Alioto.

Mayor ALIOTO. Thank you very much. Thank you for inviting me. And may I invite all of you to San Francisco.

Mrs. SULLIVAN. Thank you.

Will Mr. John Krout, senior vice president of the Philadelphia Saving Fund Society and chairman of the Committee on Mortgage Investments, come to the table. Also, Mr. Charles P. Landt of Raleigh, N.C., chairman of the Subcommittee on Mortgage Finance, Realtors' Washington Committee of the National Association of Real Estate Boards, and Mr. Joe Swire of the IUE. Is Mr. Swire here?

Mr. SWIRE. Yes, I am here.

Mrs. SULLIVAN. Fine. Mr. Swire is the director, collective bargaining services, IUE-AFL-CIO-CLC.

Mr. SWIRE. This is John Callahan, who is our legislative director of the IUE.

Mrs. SULLIVAN. Fine. Now, if I may ask each of you gentlemen-I think you were told when you were invited to appear that you may submit full statements in as much detail as you like, but in order for us to have time to question the witnesses, we would like you to summarize your statements as concisely as possible. We must leave here at 5 minutes of 12:00, and that gives us just a little more than a half hour.

So if you could each summarize, we will put your statements in the record as though you gave the entire testimony. We will appreciate your cooperation in that respect.

Mr. Krout, will you begin?

STATEMENT OF JOHN E. KROUT, SENIOR VICE PRESIDENT, PHILADELPHIA SAVING FUND SOCIETY

Mr. KROUT. Thank you very much, Madam Chairman. I intended to summarize, and I will do so even more.

As you stated in your introductory remarks, I am appearing here representing the Nation's Mutual Savings Banks. I was to be accompanied by Dr. Klaman, our vice president and chief economist, but, unfortunately, he has fallen a victim of the flu.

Savings banks, as you may know, are the primary mortgage lenders in the United States. They hold three-fourths of their assets in mortgages, primarily residential mortgages. Since 1946, 4 out of every 5 dollars in growth in savings banks have been channeled into housing. Savings banks are the leading holders of FHA and VA mortgage loans, and the Nation's leading supplier of permanent mortgage credit for FHA urban redevelopment and revitalization programs.

We feel, therefore, that we have a very real interest in the subject being investigated by your committee and we are happy to respond to your request to discuss the problems.

We would like to emphasize at the outset that savings banks do not like high interest rates. The record is clear that we have always propered more, obtained higher deposit flows, and been more able to meet the Nation's housing and mortgage needs in periods of low interest rates.

41-658-70-23

When the interest rates went up in 1959 with the issuance of the magic 5's, and in 1966 when the economy again took off at a high interest rate level, our deposits dropped seriously, and even in the latter part of 1969 and January 1970, we have experienced further outflows. Therefore, we are acutely aware of the fact in a high interest rate structure we are not able to compet for savers' funds, and are therefore unable to take care of the Nation's mortgage needs.

We recognize the challenge and the necessity of meeting the housing goals of our country and of doing our part in providing the 26 million housing units which are estimated to be needed in the next 10 years. We feel, however, that not too great a change in the emphasis of our national resources is necessary to reach this. Based on the statistics set forth in my statement, it appears that an increase or a diversion or transfer of only 1 percent of our Nation's resources from other areas into housing will meet this goal.

But to achieve these objectives several important things need to be accomplished. First, we need a better balanced monetary-fiscal policy. When anti-inflationary measures are essential and the burden of these fall solely in the monetary area, savings banks are unable to compete for funds, and are therefore unable to supply mortgage needs.

It is only with the addition of fiscal controls and a balanced budget that the interest rates will be brought back down to an area where the average family will be able to obtain mortgage funds.

Second, aside from the solution, we hope, to the inflationary spiral and the increasing interest rates we need a more viable thrift industry. Thrift institutions such as savings banks are faced with three major adverse developments: vigorous competition by commercial banks for funds, a high interest structure which attracts savings to other areas than savings banks, and more recently, enactment of additional Federal tax burdens, not only increasing our taxes but our internal interest costs.

Therefore, we feel that the thrift industry, including the savings banks, must have broadened and more flexible powers to serve better the housing industry as well as savers and borrowers. For the savings bank industry this can be achieved essentially through Federal legislation permitting access to the dual chartering system. And I am happy to say that this committee and its chairman have supported our efforts in this direction in the past.

We hope to renew these efforts in the future, and we hope at that time that you will also be sympathetic with our desire to broaden the powers of the savings bank industry in order to permit them to compete for funds which can be loaned out then on mortgages.

Third, additional sources of residential financing are needed. Although only 1 percent of our national product needs to be transferred to the housing area, new sources must be found. And among the most likely candidates in this area are pension funds and trust funds which have large aggregations of long-term resources which to date have not been invested in the mortgage markets.

These institutions have not been attracted to mortgage finance largely because of the nature of the mortgage instrument. But a mortgage-backed security guaranteed by GNMA, pursuant to the Housing Act of 1968, is expected to come onto the market shortly, and this

should prove attractive to pension funds and, we hope, direct some of their resources into the mortgage area.

We appreciate the intent of H.R. 15402 to channel tax exempt pension funds into mortgages on a mandatory basis, but we believe that this legislation should be studied further, and at least be held up until the success of the mortgage-backed security approach can be determined.

Fourth, we need a reordering of our Federal programs, policies and priorities. The Nation must make a stronger commitment to housing, especially for low and moderate-income families, and resources must be reallocated in this direction.

To accomplish this, several specific things can be done.

First, federally subsidized housing programs should be improved with more funds and less burdensome regulations. The new FÍA sections 235 and 236, to which Mayor Alioto referred, have been successful within the limits in which they have been working. The interest rate subsidy approach maximizes private participation in the mortgage market, and minimizes Federal spending. And we feel that additional appropriations to this area would be helpful.

Second, we feel that the FNMA/GNMA tandem plan of financing should be expanded. In this plan, again, private funds are brought into housing, and the cost of the financing, the additional cost in the form of points, is absorbed by GNMA. Here again, each dollar of cost to the Federal Government is highly leveraged.

Third, we should increase minimum denominations and lengthen maturities of Treasury and Federal agency securities. The evidence is clear that these high-flying obligations have drained funds away from mortgage-oriented institutions like savings banks and have hence reduced the availability of housing credit. The Farmers Home Administration has raised the minimum on its obligations to $15,000 and $25,000 and GNMA has announced a minimum of $50,000.

These are precedents which should be carried over to other Federal obligations so that critically short housing funds will not be further drained out of thrift institutions.

Finally, we need to study new policies. Only through increased saving can long run inflationary tendencies be curbed and adequate funds for housing assured. In addition to the other techniques suggested here to increase the flow of housing credit, it would be worth the time of this committee to explore thoroughly proposals to encourage more saving by individuals and others, through special taxexemption provisions or otherwise.

Madam Chairman, I conclude this statement on the same note on which I began. The mutual savings bank industry is committed to work against high interest rates. They hurt our industry. They hurt housing and urban revitalization. They hurt the development of needed social and economic programs for all our people. In short, until interest rates come down from their historically high levels, we are prevented from moving forward on a number of critical national fronts.

Madam Chairman, I would like to add one statement, or one point which I think would, in effect, answer a suggestion made by the former witness as to the cost of housing which can be afforded in this country today.

I think it is not correct to say that a $12,000-a-year man cannot afford a $24,000 home. On the basis of mortgage financing as provided by most of the Nation's lenders, including savings banks, a $12,000 income will support a $28,000 mortgage. Now, this would permit a man in this area to buy a home, I would think, in around the $30,000 mark. So that to this extent it is not the high cost of interest that is inhibiting the purchase of homes but probably the high cost of the type of home that the man making $12,000 a year would like to live in. Madam Chairman, thank you again for the opportunity to appear before this committee and to present our views. And, naturally, I will be happy to answer any questions that you or any of the other Congressman would like to put to me.

(The prepared statement of Mr. Krout follows:)

PREPARED STATEMENT OF JOHN E. KROUT, SENIOR VICE PRESIDENT, THE PHILADELPHIA SAVING FUND SOCIETY, AND CHAIRMAN, COMMITTEE ON MORTGAGE INVESTMENTS, NATIONAL ASSOCIATION OF MUTUAL SAVINGS BANKS

Mr. Chairman, my name is John E. Krout. I am senior vice president of The Philadelphia Saving Fund Society. I appear here this morning, however, in my capacity as chairman of the Committee on Mortgage Investments of the National Association of Mutual Savings Banks. I am accompanied by Dr. Saul B. Klaman, vice president and chief economist of our national association.

We are happy to respond to your request to discuss the Nation's deepening housing crisis, amidst continued financial pressures and record high interest rates. We do not presume to have the solution to this crisis, but will offer proposals for your consideration, and for meeting the goal established by Congress of adding 26 million housing units in the decade of the Seventies.

Because mortgage credit has been an overriding need in the post-World War II years, savings banks today hold three-fourths of their assets in mortgage loans, primarily on residential properties, and since 1946, $4 out of every $5 of growth in savings bank resources has been channeled into housing credit. Within mortgage markets, savings banks have long been the leading holders of FHA and VA mortgage loans, which are typically associated with lower-to medium-priced housing. The records show, moreover, that we are the Nation's leading supplier of permanent mortgage credit for FHA urban redevelopment and revitalization programs.

SAVINGS BANKING AND HIGH INTEREST RATES

It should be emphasized at the outset that the savings bank industry does not like high interest rates. The record is clear that mutual savings banking is seriously hampered in its ability to serve the financial needs of individuals and communities when interest rates are high and rising. During such periods, savings bank earnings lag behind those of other financial competitors, and deposit flows decline sharply as savers seek higher yields available on open-market securities. Thus, over a decade ago when the Treasury issued the "magic 5's" of 1959 in a climate of high and rising rates, savings bank deposit growth fell by 47 percent from 1958. And in 1966, when the economy was again under severe financial strain and interest rates in the open market were probing new highs beyond the 6 percent level, savings bank deposit gains dropped by almost 30 percent from the preceding year.

These adverse experiences were more than matched last year and in early 1970 when interest rates reached the 8 to 9 percent areas. During 1969, for the first time in decades, savings banks actually experienced net deposit outflows (excluding the crediting of interest) of $753 million. And in January 1970, severe adverse deposit experience continued in most savings bank areas, with outflows (excluding the crediting of interest) of $225 million.

The savings bank industry has, therefore, long been acutely aware of the seriously harmful impact high interest rates have on its competitive viability, o11 its deposit structure, and hence on its ability to provide housing credit for American families. Savings banks function most effectively and usefully whe interest rates are relatively low and stable. In such a climate, we are able to

« iepriekšējāTurpināt »