pleted a 12-week strike in GE, and the average earnings of our people in GE before the strike was $3.25 an hour. So if our fellow worked about 2,000 hours a year he earned $6,500. Now, as a result of this successful strike, and I put the word successful in quotes in part, we were able to up the earnings of our people in the first year by about 20, 23 cents, so the maximum amount of earnings of our people in GE will be about $3.50 an hour, whch means that for 2,000 hours these men and women will average $7,000 a year.

Now, since 1964 there has been a tremendous expansion of employment by young people in this country. Up to 1964 from 1958 to 1964 we had a problem. There was very little expansion in the mass production industry of America. But from 1964 we began to get expansion. In the last 2 years or so we have had about 30 percent to onethird of our people under 30 years of age in such companies as GE, Westinghouse, and General Motors. I just left Pittsburgh yesterday. We are negotiating on Westinghouse, and in the Westinghouse picture they have a breakdown on their census which I have used to estimate pension costs for those between 18 and 22, and there are 13,200 plus people between 18 and 22 years of age working in Westinghouse, and that is about one-tenth of the population. I think this is particularly true in almost all the mass production industries now. It is true in GE, true in GM, and true in Westinghouse.

Now, most of these people don't earn the average. They are young folks. They haven't got any skills. They are just starting out. They are averaging less than $3.50.

Well, let us assume the average is $3.50 and let us assume they wanted to buy a halfway decent house. And maybe my standards are spoiled, though, I don't think they are, I don't think you can buy a house at least in this area or in Cleveland for less than $20,000 that is halfway decent if you got a family and two-thirds. Most people don't have much to put down. Let's assume they can put $2,000 down and pay on $18,000. And assume an interest on the mortgage of 8 percent, which interest may be a litle low. Joe Keenan was talking here and he used 9 percent. Interest alone on $18,000 the first year would amount to $120 a month.

Now, this average person, these young people aren't average, they are earning less than average, would be receiving $100 to $110 after taxes. They get $140 before taxes, $100 to $110 after taxes, and I deduct for local taxes and social security. And based on an average of $110 a week, his interest alone would be $120 a month. I can't imagine anybody being able to run a house-that means your gas, your heat, your electricity, your repair, maintenance, and everything else for less than $80 to $100 a month.

Now, forgetting the amount of principal you have to pay, this person would have to pay pretty close to $200 a month on an income of $100 to $110 a week. I don't see how he can do it.

Now, Joe Keenan testified here the other day that with a 9-percent mortgage over 30 years, a $20,000 house would cost over $56,000. From my point of view, it is a crime. I don't think our people working in the factories-and I can talk only of them-can save $23,000 over and above their earnings, in a period of 30 years. I know I have got a far higher income and I haven't saved more than $20,000 out of my own

income. I have put my wife to work to save a little bit of that. And that is happening in our families in America.

I read an editorial in one of the Virginia newspapers which said that the FHA and GI insurance for housing had gone up to 9 percent because otherwise the GI's would not be able to get housing. From my point of view it is a crime that our guys who are over in Korea and over in Vietnam and have went through hell over there have to come back and have to pay 8 percent interest and have to mortgage their lives for years and years in order to be able to meet the high interest

rate.

Now, this country has done a number of things in the past. For instance, when we developed the railroads in this country, we did it with a subsidy. We developed a tremendous education plant in this country by the land grant college system and we used that system for individual colleges and all sorts of colleges in this country. We give tremendous subsidies to the planning of our large corporations for research.

Back in 1963, 1964, one of our largest corporations received $98 million for research. I am criticizing it. We have subsidized for farmers in this country. I think you can justify a good deal of it. We have subsidies in the form of tax rates for the oil industry. We have subsidies in one form for working people in the way of minimum wages. We have subsidies for pension plans in the form of a tax arrangement whereby the earnings and pension funds and welfare funds are not taxed. They are tax deductible. We have a large number of arrangements.

The housing industry means an awful lot to the American people both in regard to the need for shelter and with regard to the need to keep the rest of the economy prospering. And I think our people who cannot afford, whose earnings are not that high that they can afford to pay tremendous sums for housing and for interest ought to be taken care of either in the form of subsidy for them, in a manner in which these three bills are introduced so that we can have decent housing for the majority of Americans at prices they can pay. I think it is in line with the American tradition that we take care of these problems that

way.

Thank you.

(The prepared statement of Mr. Swire follows:)

PREPARED STATEMENT OF JOE SWIRE, DIRECTOR, COLLECTIVE BARGAINING SERVICES, IUE-AFL-CIO-CLC

Gentlemen, my name is Joe Swire. At present, I am director of the Collective Bargaining Services Department of the International Union of Electrical, Radio and Machine Workers, AFL-CIO-CLC. For 16 years, until December 1966, I was director of the Pension, Health and Welfare Department of my union and responsible for all pension negotiations. However, I am still responsible for negotiations in pensions and insurance with all the giants in our industry, including GE, Westinghouse, GM, Philco, RCA, and Sylvania, and pinch-hit on many other pension and welfare negotiations.

Over the years, I have participated in and had impact on over 1,000 settlements involving pension negotiations and have had to analyze and do cost studies with regard to each of these. In addition, I had to analyze the fund earnings and investment policies, wherever we could get information on investment policies. I cannot pose before you as an expert on investments and have no right to do other than to give you the results of my experience and whatever opinions I may have on the subject.

As you know, unions have been negotiating with companies on pensions for at most 20 years, if we except the original 1946 strike settlement agreement between the coal industry and the United Mine Workers back in 1946. In the mass production industries, the first real negotiations were completed in the fall of 1949 between the steel industry and the United Steel Workers.

Basically, the expansion of pension funds to any considerable degree began with the introduction of collective bargaining on pensions in 1949. Since then, there has been a tremendous expansion of assets in pension funds. Within a year after the beginning of negotiations on pensions, that is, by the end of 1950, the assets of corporate noninsured pension funds in this country were minimal. By 1957, the assets had risen to $19 billion. As of the end of 1968, the assets of corporate pension funds had risen to $80 billion. The increase in assets in 1968 were approximately $15 billion higher than at the end of 1967.

It is obvious that this has been a substantial expansion of assets. However, this is not the entire story. In recent years, there have been improvements also in the value of pension funds for state and local governmental bodies. I believe we do have to omit the assets in social security, civil service pensions, and railroad retirement, from our calculations of assets available for investment purposes. I believe, however, that it is legitimate to include the assets of local and state government pension plans as a source for investment.

The 1968 figure for assets of local and State government pension funds was $4 billion higher than in 1967.

If we combine the assets in corporate funds as of December 31, 1968, with those in State and local governmental pension funds, we come up with some $125.8 billion.

While this may seem like a large sum of money, I believe that we have to take another step to get a real feeling of the problem. Judging by the increase in assets of these funds from 1967 to 1968, and assuming that the economy prospers and that these funds continue to grow by the same amount each year, we will have approximately $298 billion in these funds by January 1, 1975. I am assuming interest at 5 percent.

If we use the same approach and, again, assume interest at 5 percent, the value of these funds by 1980 will be approximately $485 billion.

Almost all of the discussions on new sources of investment refer to pension funds, as if this were the sole large untapped source available.

There is another source which I consider equally important with pension assets and that is the reserves of the life insurance companies. Many of these reserves are built up as a result of individual and group life policies and health programs, and will be available as reserves for years to come and are also showing rapid growth, year by year. It is true that many insurance companies have a large proportion of their assets in mortgages. About 37 percent of the assets of U.S. life insurance companies are investing in mortgages. It is also true that a number of the larger pension funds have some of their assets invested in mortgages, although, obviously, not to the same extent.

Life insurance company assets, including assets of insured pension funds, amounted to $188.6 billion, as of December 31, 1968. Again, the 1968 figure was $11 billion higher than the 1967 figure.

If we combine assets of the life insurance companies with those of corporate non-insured plans and State and local governmental pension plans, we had approximately $314.7 billion in assets, as of December 31, 1968. If we assume an annual dollar increase similar to the increase between 1967 and 1968, and assume interest at 5 percent, the value of these combined funds will be: $626 billion by 1975; $964 billion by 1980.

I may well be off in the figures. The economy may very well sag this year and during the next few years, in which case the annual contributions to the funds may be less than what I anticipate. Mortgage money and fund earnings as well as earnings by insurance companies may be less than 5 percent, although most of us will doubt this possibility for the next few years. Again, I stress that I am not an expert in this field. However, I use these figures to illustrate a point. Look at the figures for a moment.

Pension assets not including insured pension funds by 1975--
Total assets including pension and insurance reserves_

Pension assets by 1980__.

Total assets, as above by 1980_.

Billion

$298

626

626

964

41-658 0-7024

These are tremendous figures. How are pension and insurance reserves being invested today? There is no set pattern. Executives of insurance companies—a comparatively few of these control the vast majority of the assets-invest their moneys in whatever appears ready to give them a good return.

The banks and here again, perhaps 10 or 15 banks control the bulk of pension funds-invest their assets in whatever appears to promise a good return, assuming that they are on the ball. Some pension fund trustees and some banks handling pension funds have in some situations in my experience not been too alert to market conditions.

During the period when pension fund and insurance company assets are comparatively small, this is not a serious problem. But when funds soar into the hundreds of billions and promise to reach half a trillion within a few years and a trillion within the decade, then someone in this country has to consider the impact on our economy of indiscriminate investments of such tremendous sums which do not take into consideration the needs of this country.

As of now, I do not know of any planning on a large scale by any governmental or non-governmental body on the impact of such large sums of money on the economy. If we add to these sums, the amount annually becoming available through mutual funds, I think we will agree that we have a serious problem. Poorly thought-out investments, disregard of national problems or needs, and haphazard policies on investment can easily wreak havoc in our Nation. This committee knows much better than I the impact of the various economic interrelationships on the economy.

I am not thinking in terms now of the availability of pensions or insurance funds for housing purposes. This may be the immediate problem, but the real problem we have is how to channel for good constructive economic use the increas ingly large sums of money available to us through these new developments of group security, pension funds and insurance reserves.

Some years ago, I discussed this matter with Adolf Berle, who had written on the matter and who had taught corporate law at Columbia since the twenties, been an Assistant Secretary of State during World War II, an Ambassador to Brazil at the tail end of the war, I believe, an author of a number of books on economics. Mr. Berle was, and may still be, at the time I talked with him, president of Sucrest Corporation. He has had first-hand experience with banks, insurance companies, and the top men in this country who handle investments.

I have had no such experience in discussions with corporate men handling pension and health negotiations. I cannot, therefore, lay claim in any degree to expertise in this field or to his degree of expertise.

I was very much impressed by his statement that a comparatively small number of top insurance companies and banks handle most of the moneys we are discussing today. I was also impressed by his statement that the men responsible for these investments have no real set policy. He did not say that they are floundering in their attempts to invest money, but he said that they could use new ideas.

Basically, I think it is dangerous for this country to permit such substantial sums of money to lie around without a firm national policy for investment, which will be for the good of the nation.

I think it is dangerous to permit continuation of a haphazard investment policy of such sums.

I think it is imperative that some body, governmental or quasi-governmental, have the authority year by year to survey the needs of the economy and to suggest investment in specific fields. This year, the need may be in the field of low-income housing. Next year, it may be hospitals and clinics. Next year, it may be slum clearance and rebuilding center cities. The year after that, it may be another need, perhaps involving pollution problems or stimulation of companies for the development of idea or programs to eliminate pollution. Or it may be a compilation of approaches.

My recommendation would be that we have an advisory body to the government or to a specific government department which includes the top economics in the country, government, business, university, labor, agriculture, and also groups with social outlooks, such as church and consumer groups. The function would be to analyze the economy and to make recommendations as to the areas which require stimulation for the good and welfare of the nation and the amount of money required to provide such stimulation.

It is for this reason that I am particularly interested in the legislation that is being proposed here. This is the first legislative attempt I have seen to tap

some of the money in these funds for what is obviously a socially-approved objective for the good of the American people. This is a solid step, in the right direction.

I wish to point out, however, that while housing needs are important now, there may well be other needs in the future and that this country must develop a coordinated policy towards investments of these pensions and insurance funds to help the American people resolve some of the various complicated problems that will develop in the coming decade.

I want to say a few words about pension fund earnings. Insurance companies are paying 6 to 61⁄2 percent for new pension money which are involved in insured pension plans. However, there are many trusted pension plans which earn much less than that. I know of one plan in California, which I reviewed last week, which earned 2.37 percent last year. I have reviewed several other plans in the last 2 years which earned less than 4 percent and some just about 4 percent. I consider these earnings disgraceful considering the condition of the market in recent years.

I raise this point because I think any investment in mortgage money by pension funds will be helpful in raising their earnings. A number of smaller pension funds would do well for their beneficiaries if they earned 6 percent or higher. Even a number of the pension funds of giants would benefit by such investments. I deal with a number of large corporations. One of the companies which have had good investment policies and which is well funded is that of General Electric. In 1968, the GE Pension Fund earned 6.1 percent. I reviewed Labor Department reports from a number of large corporations to determine their earnings. Unfortunately, the latest forms used by the Labor Department do not make it possible to determine the net profit from the sale of securities.

The following figures include only the interest and dividends earned by the funds. I do not wish to name the companies because their funds might have higher yields because of net profits from the sale of securities, but I will list them by industry:

With regard to this entire problem, and as a result of my experience reviewing fund earnings of insured and non-insured plans in preparation for negotiations, I am convinced that the vast majority of these funds would benefit by involving in government-guaranteed housing mortgages with interest equal to or above what the funds are earning today.

Mrs. SULLIVAN. Thank you, Mr. Swire. I have a million questions I would like to ask you. But I would just like to bring out one thing you mentioned in your testimony, on the use of pension funds. Can you tell me what is the average interest that the pension fund from IUE would bring in? What is the return it would bring in in a year?

Mr. SWIRE. It varies from plant to plant. You folks have made a study of it. I made a partial study. This last year in 1968 a large number of funds of large corporations, some IUE and some not, have averaged around 4, 4.1 percent. Now, last year, because one of our plans out on the west coast was earning 37 percent. A large number of pension funds, and those are important, too, are earning less than 4 percent at the present time.

Mrs. SULLIVAN. So that I don't take too much time, will you, when you get your transcript back, enlarge on that? I would appreciate it. Now to go on, what would happen if you would use your own pension funds from the IUE to make loans for mortgages to your own people for housing? Would that create such a terrible burden at, say 5 percent, if you are averaging now a 4-percent return?