Dr. CASSIDY. Yes. Mr. WILLCOX. Yes. Mr. LAW. Yes. Mr. LUNDINE. Incidentally, that might be doable by this committee. That is the only thing that you suggested that I could see is clearly within our jurisdiction. Mr. MCKINNEY. Could I add a fourth? I think they stated pretty clearly that ERISA should be modified in some fashion so that this would be considered a prudent manager concept. Mr. LUNDINE. OK. Now, I forgot-finally, along the lines of Mr. Coyne's bill about Government debt, without commenting on its merits, there may be some additional authority to allow thrift institutions or some other financial institutions to make these loans. That may be helpful, is that correct? Dr. CASSIDY. Yes. Dr. MODIGLIANI. Yes. Mr. Law. Yes. Mr. WILLCox. Yes. Mr. LUNDINE. Dr. Cassidy, you are an expert in this area. In your opinion do they have that authority now? Dr. CASSIDY. The Federal Home Loan Bank Board does have the authority to make those changes. It is currently being reviewed. On the liability side of S. & L.'s balance sheets, they are able to do it now for large certificates of deposit and for certificates of deposit over 32 years' maturity, because they are deregulated. As they are deregulated more, of course, they can do that. It is a very good possibility that something will happen. Mr. LUNDINE. Are there any other major areas that have been forgotten? Dr. MODIGLIANI. Yes, I would like to stress the fact that since the price level adjusted mortgage may take time, there should be a stress in the meantime on the thrift institutions making available some type of low start payments like, you know, something that would use a floating rate, as a debiting rate, but would certainly permit this slow start in the period. Dr. CASSIDY. They have authority to do that now. Mr. J. COYNE. May I comment on that? I want to throw a little bit of a pessimistic note in here if I can. If you wait for financial institutions to do this, they are still doing the rule of '88. We are never going to see it happen. I guarantee that. There are no more conservative people in this country than those people who determine lending policy for the Nation's Mr. MCKINNEY. Merrill Lynch is taking over the banking busi nesses. Mr. J. COYNE. The only way I think you are going to see it done is for us to take a very aggressive role in the Government financing of our Federal debt this way, overnight. Dr. MODIGLIANI. That solves it. Mr. J. COYNE. If you wait for financial institutions to do it, even with all of the prodding and jawboning that we and the President could do, you have a very, very long wait. There was an article in the journal a few weeks ago about how slowly new types of creative things are evolving throughout the country. Dr. MODIGLIANI. Some things catch fire. Mr. J. COYNE. Commercial treasuries and corporate treasuries have initiated some things because they are more aggressive, because it is their money. I challenge you to name some home financing initiatives that have caught on. You can't come up with too many. Dr. MODIGLIANI. It would take a lot of prodding, I agree. Mr. Law. I foresee the creation of mortgage pools similar to the money market funds so that we can, by favorable tax legislation, which is within your power, that you can create what amounts to a money market fund in a mortgage pool so that it goes into housing and helps the housing industry rather than going in money markets that don't help the housing industry. This would not help the thrifts, but it would help the housing industry. Mr. J. COYNE. It could help the thrifts. I wanted to put some reality into this discussion. Mr. LUNDINE. I would like to thank all of the witnesses today. There aren't very often times when we have hearings where we aren't really pushing some bill or well-defined concept to begin with and several of my colleagues in or out today asked me what bill is this. I don't have a bill. This was a hearing in the classic sense that we are trying to get information that we can take and fashion into legislation, and one criteria that you might say would be a fair judge of how successful or unsuccessful a hearing is other than the media attention which we didn't get a great deal of, is how provocative you are, how many conversations does it provoke among other people and I think the noise level today is not an indication of a lack of interest, but rather, the reverse; you have been very provocative. Thank you all very much for coming. [Whereupon, at 4:35 p.m., the subcommittee was adjourned.] [The following additional material was submitted for inclusion in the record:] Comptroller of the Currency Washington, D. C. 20219 May 11, 1982 Dear Mr. Chairman: On April 21, 1982, the House Subcommittee on Housing and Community Development held hearings on H.R. 4787, legislation which would recharter the Federal Home Loan Mortgage Corporation ("FHLMC") to make it more private in its operation. We have testified before Congress on several occasions urging a review of the housing finance system to rationalize it in light of the recent economic realities. We are very pleased that the Subcommittee has undertaken such a review, and to consider H. R. 4787 as part of it. As part of this broad review of the housing finance system, we support the enactment of H.R. 4787. In a letter to Chairman Jake Garn, dated March 8, 1982, we supported the enactment of S. 1805, which, like H.R. 4787, would allow FHLMC greater flexibility in purchasing and selling mortgage loans. In our opinion, the approach represented by these legislative proposals will enable FHLMC to increase its effectiveness in bringing more capital into the home mortgage market. As a result of economic shifts between the various classes of providers of financial services, commercial banks are experiencing an increased demand for mortgage loans. Therefore, there exists an increased need for banks to resell their loans in the secondary market, thus keeping pace with that demand. H. R. 4787 also would resolve a long-standing concern of the banking industry by enabling commercial banks to sell mortgages to FHLMC on the same terms available to thrift institutions, thereby eliminating a possible inequity in the access to and participation in FHLMC's secondary market programs by banks and bank-affiliated mortgage companies. We would be pleased to assist the Subcommittee in its continuing consideration of H. R. 4787 and the broader issues of facilitating an efficient, competitive and stable mortgage market. Sincerely, pArus Barpet Jo Ann S. Barefoot Deputy Comptroller Industry and Public Affairs The Honorable Henry B. Gonzalez Chairman Subcommittee on Banking & Community Development Washington, D.C. 20515 The American Bankers Association with a membership of more than 90 percent Commercial banks and bank affiliated mortgage banking companies represent Because of the enormous capital required for mortgage lending exceeds the liability base of depository institutions, mortgage lenders have developed an active secondary mortgage market as a source of funds. Institutions whose actual deposits have not been keeping pace with the demand for mortgage loans have been able to maintain loan activity by reselling their loans in the secondary market, thus raising the funds for further lending. Operating nationwide, the Mortgage Corporation plays a significant role in facilitating the ability of commercial banks and other mortgage lenders to assist their customers with mortgage financing. ABA's support for H.R. 4748 (and its counterpart proposal S. 1805) has evolved over a period of years of working with the management of the Corporation for more equitable treatment of bank seller/services. As you know, when the Mortgage Corporation was created by Congress in 1970, it was envisioned primarily as a secondary market institution to provide savings and loans with their own market facility for the sale of conventional residential mortgages. For this reason, the Board of Directors of the Corporation are composed of the members of the Federal Home Loan Bank Board. |