statistics have proven that the loans in the West are just as good, if not a little better, and in the Middle West and the South, than the ones in the East. There has been just as big a record of failures in the East as there has been in the West.

Senator SPARKMAN. Do you believe that the debenture, the terms relating to the debentures serve as much of an incentive for lending money?

Mr. BIALAC. A lot depends upon it, Senator. The actual risk of the loan is in the debentures. In other words, if the loan goes bad all they have to show for it is debentures, which are very good, but which they can't turn in for that term of years. Their money is tied up for this lower rate. While they are close to Government bonds now, if they were given a litle more incentive, rather than an increase in the interest rates, which would be taken out of the pockets of the people that would have to rent them, it would have to be tacked right onto that.

I believe that a good study of it, to make the actual rates really workable, would induce the insurance company to make more funds available all over the United States.

Senator SPARKMAN. Thank you.

Mr. BIALAC. Title II, section 115: We support paragraphs 1 and 2 of title II, section 115, and the first part of paragraph 3, up to and including $2,400 per room for elevator-type structures.

As builders of large-scale apartments we have concentrated mostly on garden-type structures because of the more realistic financing-tocost ratio and the availability of land close in to the heavily populated areas. However, in an alarmingly short time, because of the larger tracts of buildings filling in these areas and the fantastic pyramiding of land costs, which make the per unit price economically unwise, we are forced farther and farther away from the center of the city. The dangers of this condition are multifold; first, it is forcing more and more people to rely on their cars for transportation to their jobs in already overly congested streets; secondly, it is forcing the population to spread out, adding to the great and ever-increasing load on the school system's shortages of schools and has made proper patroling by police departments impossible. I could go on and on, and I'm sure that isn't necessary.

The cure for this condition lies in more elevator-type structures which can stand the higher land cost by dividing the cost of the land into many more units.

A step in the right direction has been taken by increasing the allowable room mortgage amount to $2,400 in the elevator-type structures which is a 17 percent increase over room mortgage amount of walkup apartments-the actual difference in cost is over 20 percentbut then cancels this gain by limiting it to only $7,500 per family unit which amounts to only a 4 percent increase when the average room count is under 4. In order to make the provision workable the figures must be changed proportionately to 17 percent. Therefore, this section should be corrected to read:

4. That in elevator-type structures the mortgage amount limitation be $2,400 per room and $8,500 per family unit-less than 4 rooms. This increase would be in exact proportion to the walkup structures.

May I expand in my remarks on this, sir?

I am afraid under this provision, limiting it to $7,500 that the builders are going to skimp on the room count and the room size, in the elevator-type structures, and by increasing it-if we say 17 percent, then the total cost should be raised 17 percent. Otherwise you will find more efficiencies and small one-bedroom apartments with small sized kitchens, which they must put in in order to build at that cost. And if given a realistic price they could and would want to put in bigger apartments.

5. We are opposed to the proviso that present statutory mortgage limits would continue unless the President has prescribed higher limits. These higher limits are needed now and should be incorporated in this bill.

Clarification of present statute: In the President's Advisory Committee on Housing report, on page 40, recommendation No. 14, reads as follows:

Your subcommittee recommends that section 207 of the present statute be amended to clarify the authority of FHA to insure loans up to 90 percent of value but not in excess of $7,200. The statute is presently interpreted to restrict this special aid to projects in which all units have two or more bedrooms. The subcommittee recommends that this be changed to projects in which the average number of bedrooms is not less than two per unit.

This is part of the bill that you passed last year. The FHA has interpreted it to mean if there is only one 1-bedroom unit in a project and all the rest are 2 bedrooms it would still go on the 80 percent basis, rather than averaging it as I am sure you gentlemen intended it to be.

Title II, section 128: 6. We are in favor of eliminating any termination date on this section as we feel it fulfills a definite need in the rental field.

The construction industry in this country has grown far beyond the position it formerly occupied and is now one of the most important industries in the United States today. I include all phases of construction in this category, housing, commercial, road building, dams, and general construction which takes in construction of public buildings, schools, defense factories, and so on.

The economic growth, health, defense, education and wealth of this country are all directly dependent on this industry, yet, the Government does not fully recognize or make full use of the mighty, but now disassembled arm.

A Department of Housing and Construction should be set up and a new cabinet post of Secretary of Housing and Construction created. I know this is not pertinent to this bill, but I felt by bringing it to the attention of your Action Committee, at this time, that the movement would start. The choice of a Secretary of Housing and Constuction is ready-made and proven in the present Housing Administrator, Mr. Albert Cole.

I again thank you for your consideration.

The CHAIRMAN. Any questions, Senator Sparkman?

Senator SPARKMAN. No.

The CHAIRMAN. I think your statement is very clear, and it speaks for itself.

You make some recommendations. I don't know whether they are good or not, but we will certainly go into them. We are going to have them analyzed and we will consider each and every recommendation made by our witnesses.

Mr. BIALAC. Thank you very much.

The CHAIRMAN. We will now stand in recess until 10 o'clock tomorrow morning, at which time we will have the following witnesses. United States Savings and Loan League, National Association of Home Builders, Disabled American Veterans, and Ralph Perk, councilman, city of Cleveland.

We will now stand in recess until 10 o'clock tomorrow morning.

(Whereupon, at 11:55 a. m., the committee recessed to reconvene at 10 a. m., Tuesday, March 23, 1954.)

HOUSING ACT OF 1954

TUESDAY, MARCH 23, 1954

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met, pursuant to recess at 10 a. m., in room 301, Senate Office Building, Senator A. Willis Robertson, presiding.

Present: Senators Capehart, Beall, Maybank, Robertson, Sparkman, Frear, and Lehman.

Senator ROBERTSON. The hearing will be in order. The first witness this morning is Mr. Charles E. Foster, representing the Disabled American Veterans. We will be glad to hear Mr. Foster.

STATEMENT OF CHARLES E. FOSTER, ASSISTANT NATIONAL DIRECTOR OF LEGISLATION, DISABLED AMERICAN VETERANS

Mr. FOSTER. Senator Robertson, I am Charles E. Foster, assistant national director of legislation, Disabled American Veterans.

We appreciate the opportunity to appear before you relative to our position on S. 2938, the Housing Act of 1954.

Our interest in this bill is confined to those provisions which have a bearing, directly and indirectly, on the home loan program of the Veterans' Administration, and the housing preferences afforded veterans by existing law.

In enacting Public Law 346, commonly known as the GI bill, together with its amendments, the Congress has enabled approximately 3.25 million World War II and Korean veterans to acquire residential and farm dwellings for themselves and their families. Time has proven that the home-loan provisions of the GI bill has been both a social and economic gain to the Nation as a whole.

Socially, because it has enabled millions of young veterans to start their families in the environment of a new home; economically, because it has been a stimulus to the building trades, and the repayment record of these veterans' loans is without equal in the history of lending institutions.

At the present time, there are still many millions of World War II veterans and Korean veterans who are now, or shortly will be in the market for homes or farms under the same credit terms. The DAV is alarmed that the amendments to title II of the National Housing Act, as proposed by S. 2938, will impair the credit preference veterans now enjoy by extending virtually the same preference to nonveterans as well.

In other words, if the Congress extends this credit preference, as provided in the bill, to everyone, the preference will cease to exist.

As a veterans' organization, we are irrevocably committed to the proposition that veterans are a special class. Operating on this premise, we must necessarily oppose the cancellation of a veterans' preference by the somewhat unique approach of extending such preference to everyone. We may be criticized that this is a selfish position to take, but as an organization representing America's wartime disabled, we sincerely feel that we have no alternative.

We are likewise opposed to section 201 of the bill, beginning on line 9, page 40. If enacted, it would authorize officials of the execu tive branch of the Government to regulate the maximum interest rate which may be established from time to time on residential and farm mortgage loans guaranteed by the Veterans' Administration.

The section provides that the rate of interest may not exceed 22 percent, plus the annual rate of interest determined by the Secretary of the Treasury by estimating the average yield to maturity on outstanding marketable obligations of the United States having remaining maturity of 15 years or more, adjusted to the nearest one-eighth of 1 percent.

The DAV vigorously opposed the increase in the rate of interest of GI-guaranteed home and farm loans from 4 to 42 percent. We have the utmost confidence in the elected representatives of the people serving in the Congress of the United States and deplore the delegation of authority by Congress to officials in the executive branch of the Government to tamper with the interest rate on GI home loans. We have to recognize that such officials are far more susceptible to pressure from groups seeking an increase in the interest rates and we sincerely believe that if the Congress had not delegated authority to the Administrator of Veterans' Affairs and the Secretary of the Treasury to increase rates of interest on GI home and farm loans, that the rates would still be 4 percent.

If the provisions of section 201 had been in effect during the calendar year 1953, the maximum interest rate on GI loans could have been 514, rather than the prevailing 4 and 412 percent. On the basis of the number of loans guaranteed by the Veterans' Administration during this time, the increased cost to the veteran would have aggregated $429 million over the life of the loans.

Looking at it from another angle, and taking the figure of $9,480 as the average loan made to veterans in 1953, the increase in the interest rate from 42 to 54 percent would have cost each veteran, as additional interest payment, $932.83 for a 20-year loan. The increase in interest during the first year on a 20-year loan in the amount of $9,480 would have been $70.72.

We, therefore, urge the Congress not to take any action which might tend to increase the interest rates on GI guaranteed loans by delegating authority to the executive branch of the Government to fix or determine the prevailing rate of interest. We should remember there are still many millions of veterans in this country who will be in the market for homes and farms within the next few years. These veterans should have the same opportunity as those who have already used their entitlement to GI guaranteed loans.

Title VIII of the bill would appear to eliminate the preference accorded veterans by existing law to acquire Government-built housing. Inasmuch as this preference is of but 30 days' duration, we can