Lapas attēli
PDF
ePub

Senator BROOKE. I note an absence in your statement as to any real reference to public housing.

Are you aware of the proposal of the administration for minimum rental of public housing to be 40 percent of income.

Governor DUNN. No, I am not familiar with it, Senator.

Senator BROOKE. In other words, a tenant, living in public housing, would be required to pay 40 percent of the operating costs.

Governor DUNN. I see. I am not familiar with that. I think everybody ought to pay something for what they get.

I would assume that a low-income housing development would be built under the most reasonable of circumstances as far as overhead and operating costs are concerned, and I would just as soon-while 40 percent may be a totally impractical figure, the concept of paying something seems to me to be a very valid one.

Senator BROOKE. You want to endorse some payment?

Governor DUNN. I do not necessarily endorse 40 percent. I have no basis on which to believe that that would be an accurate or fair figure.

Senator BROOKE. You think there should be some minimum rent paid?

Governor DUNN. Absolutely.

Mr. LINCOLN. Senator, if I might add to that, in the past the Governors' Conference has supported the series of so-called Brooke amendments, which have established the rent ceilings. We have not specifically taken any kind of organized formal position on the particular administration proposal to substantially raise that potential contribution to 40 percent of the tenant's income.

Senator BROOKE. The conference has no position on it?
Mr. LINCOLN. Not a formal one.

Governor DUNN. I should have stated that was my personal opinion. a few moments ago.

Senator BROOKE. Your personal opinion that you would not necessarily endorse the proposal of 40 percent of operational costs, but your personal opinion is that you think some minimum rent should be paid?

Governor DUNN. Perhaps that is a philosophical observation; but yes, I do believe that.

Senator BROOKE. I understand the conference has taken no position at all.

Mr. LINCOLN. As I said, Senator, we have in the past supported the intent of the legislation which has set the tenant payment level at approximately 25 percent.

Senator BROOKE. So, since you have taken no action on it, I take it the position of the Governors' Conference is that you are still on record as supporting the so-called Brooke amendment, to establish a ceiling, but no floor?

Mr. LINCOLN. We have taken no step to negate that previous position.

Senator BROOKE. Thank you.
Governor DUNN. Thank you.

The CHAIRMAN. Are there any further questions?

We certainly are indebted to you, Governor, for your presentation.

Governor DUNN. You are very kind, Senator Sparkman. I want to thank the members of the committee for their kind attention, and Senator Proxmire, we are glad you are all in one piece.

Senator PROXMIRE. Thank you very much, Governor.

The CHAIRMAN. The next witness is Mr. Norman Strunk, vice president, United States Savings and Loan League. Mr. Strunk, we are very glad to have you, sir, and you may go right ahead with your statement as you see fit. It all will be printed in the record.

STATEMENT OF NORMAN STRUNK, VICE PRESIDENT,
UNITED STATES SAVINGS AND LOAN LEAGUE

Mr. STRUNK. Thank you. Before I start my statement, Mr. Chairman, I want to express my appreciation to each member of this committee and its hard-working staff for passing Senate Joint Resolution 160.

We regard that as a vote of confidence in the savings and loan business, and we will promise not to let you down.

The CHAIRMAN. I suppose you noticed that it was passed by a substantial margin.

Mr. STRUNK. And very promptly on both sides.

The CHAIRMAN. Unanimously. Very well. Thank you.

Mr. STRUNK. My name is Norman Strunk, and I am executive vice president of the United States Savings and Loan League. I appreciate this opportunity to appear before this committee and express the views of the savings and loan industry on the administration's housing

message.

As the committee understands, we have not had an opportunity to actually study the legislative language to be submitted by HUD, since that material was not available at the time this statement was prepared. We will be happy to respond further for the record, if appropriate.

We have reviewed the housing message, and appreciate the administration's careful examination of existing housing programs. Some of the proposals advanced are consistent with our views as expressed in our testimony in April before this subcommittee.

For example, we have recommended substituting market rates of interest on FHA loans in lieu of a statutory maximum interest rate and we have supported an expanded section 23 leased public housing program. However, Mr. Chairman, to us the significant feature of the housing message is its recognition of the need to, in its words, "alleviate the immediate housing credit problem."

The Congress took a very important step earlier this week to alleviate the immediate housing credit problem by approving Senate Joint Resolution 160, which directs the Federal banking agencies to place ceilings on all types of consumer savings accounts and certificates under $100,000.

We are most appreciative of this action and in particular applaud the initiative of the members of the Senate Committee on Banking, Housing, and Urban Affairs.

The most important thing that the Congress or the administration can do to alleviate the immediate housing credit problem is to get money flowing back into savings and loan associations. It should be

noted that the very first proposal in the President's housing message was addressed to the savings and loan industry. The President announced a $2.5 billion forward commitment program by the Federal home loan bank system to support new residential housing, with the actual disbursement of funds 6 months or more from now.

But frankly the action that the Senate took on Monday can be much more significant. Elimination of the "wild card" certificate and the rate war between commercial banks and savings and loan associations could produce $2.5 billion in additional funds for home lending each and every month.

In addition, your action should provide funds for housing at reasonable rate levels-levels much lower than the 81⁄2 percent advances of the Federal Home Loan Bank Board program.

In connection with the savings rate war, we recommend that the Congress carefully oversee the implementation of Senate Joint Resolution 160. It is important that the banking agencies not ignore congressional directives and intentions. In this regard, we recall that in December 1965 the Federal Reserve decided to in effect ignore the law and to raise regulation Q ceilings so high that they would be ineffectual in controlling cutthroat rate competition.

Indeed in the future Congress itself might want to create a mechanism whereby it could directly participate in decisions as vital to housing as the determination of rate ceilings for savings.

Our problem on the savings side of our business in recent months has actually come from two directions. As you well know, there is the "wild card" competition from banks, until the agencies take appropriate action.

Another problem is what is now known as disintermediation; that is, money leaving financial institutions, financial intermediaries, for direct investment in market instruments. Treasury bills, Treasury notes, agency obligations, commercial paper, and bankers' acceptances have increasingly attracted small savers.

These are packaged by some dealers into $10,000, or even smaller, units for purchase by the small saver. We are hopeful that the trend in money market rates of recent days continues and there will be some relief from this threat to consumer savings.

We believe that the three phases of the President's program to ease immediate credit restrictions-the forward commitment program through the Federal Home Loan Bank system, tandem plan subsidy assistance to FHA/VA loans, and increasing the insurance coverage for FHA mortgages-will be helpful, although not as important in impact as the President's message suggested.

With respect to recommendations for long-term improvements in the credit system, we agree that the recommendation to permit market level interest rates on FHA loans should be implemented.

We think the best idea there is one that would authorize the socalled dual rate program for FHA loans, with fixed rates on the one hand-with discounts permitted-and market rates on the otherwithout discounts. Greater flexibility in repayment plans for federally insured mortgages would be appropriate as well, particularly if it would be a step toward the variable rate mortgage plan which so often has been advocated as part of a necessary broad reform for the mortgage market.

We do not support the idea of a mortgage interest rate tax credit in lieu of the bad debt deductions now provided savings and loan associations and mutual savings banks in the Internal Revenue Code. This idea comes from the Hunt Commission. I know that this may be a subject for other congressional committees, and so I will not dwell on it at length in this statement, except to point out some serious problems as follows:

1. If one type of lending is to receive a direct tax subsidy through a tax credit, then there will be tremendous pressure to extend this tax treatment to other worthy causes.

2. There is a built-in incentive in any tax credit approach to charge higher mortgage rates-and thereby receive higher tax subsidies. 3. It would remove the stabilizing effect of present requirements compelling savings and loan associations to invest in home loans. 4. Its impact falls unequally on similar-sized lending institutions. If a new tax provision for housing is felt necessary at this time we suggest a tax incentive for savings deposited in thrift institutions. Not only would this attract new funds to the institutions specializing in home finance, thereby enabling lower mortgage rates, but it would serve an important anti-inflationary function for our general economy as well.

Legislation introduced by Senator Brooke and Senator Taft is in the right direction.

We do not see the need of nor do we support the proposal to provide assistance to private mortgage insurance companies-the idea that the FHA should be a reinsurer for such companies. There are a number of substantial and well-financed private mortgage insurance companies in this country today.

They do not need this type of Government support. One of the most successful and encouraging developments in the mortgage field in recent years has been the development of private mortgage money.

This has been a most successful private enterprise venture and should not be regulated or taken over by the Federal Government which is precisely what the administration's program would do for it. Private mortgage insurance is today accepted in the secondary markets as well as the primary markets. Behind this proposal, apparently, is the thought that this would encourage pension funds and life insurance companies to invest in conventional mortgages.

We see no reason why such investors have to be encouraged to invest in conventional mortgages by offering the crutch of the Federal Government. Billions of dollars of private funds have been going into conventional mortgages without Federal reinsurance of the PMI's. A major part of the President's message deals with the question of low cost housing. The U.S. Savings and Loan League was not among those who viewed with distaste or alarm the program initiated in the Housing Act of 1968 and particularly they suffered from bad newspaper publicity related to FHA foreclosures in general-often foreclosures which did not involve the assisted programs at all.

As you may know we joined with the National Association of Home Builders, and the National Association of Mutual Savings Banks in engaging Anthony Downs of Chicago to make an exhaustive, independent survey of the whole question of housing subsidies and how best to approach the problem of providing better housing and better

living environment for low-income families. We subscribe to his conclusions which essentially are that of all the ways to help lowincome families in their search for better housing, and the 235 and 236 approach is the best.

As we noted in our testimony to your committee last April, the experiences of the savings and loan business with the section 235 and 236 programs were good. We believe that the overall record of these programs was such that it did not deserve the summary execution given them by the administration in January.

We question, too, the reliance on a completely new and still experimental housing allowance program or direct cash assistance to provide for the housing needs of Americans in the lower economic brackets.

I think that the costs of a broad housing allowance program versus the cost of subsidies via the 235 and 236 programs should be looked at very carefully. We find it hard to believe that the housing allowance program would be significantly less costly in the long run than the 235-236 program.

Possibly housing allowances or general income maintenance should be the principal means of assisting the very lowest income families in obtaining adequate shelter. But a production subsidy along the lines of the 235 program may be needed as well, for areas of tight supply and for the moderate income families above poverty but below median income levels who can afford to pay some, but not all of the interest costs involved in home ownership.

The Senate took a significant step Monday in restoring flows of funds to the mortgage market, and for our part the United States League will do what is necessary and appropriate to expand savings and loan participation in the financing of homes for lower income families under whatever program Congress decides is most appropriate for effective action to bring better housing to all American families.

Thank you, sir.

The CHAIRMAN. Thank you very much. I have a question that Senator Packwood asked me to put to you as follows:

In his housing message, the President suggests that approval of mortgage interest tax credit for financial institutions will supply a steady supply of funds for housing needs. Do you agree with this conclusion?

Mr. STRUNK. No; Senator. We think it actually results in further destabilizing the housing market. This tax credit is too gimmicky. It may look good today, but it could easily be changed in another period. It is important to understand, I believe, that this tax credit would not be an additional tax incentive. It would be in lieu of the present bad debt deduction that Congress has carefully developed over the years to permit the thrift institutions to grow and to have strength. The administration program would take away our bad debt. allowance and substitute for it this tax credit, and this tax credit could come and go.

It could be changed just as the 7-percent investment tax credit provided for new plant and equipment. If we ever lost our bad debt. allowance and then lost this tax incentive also, our institutions would be very vulnerable. It is important that this business, that is locked into housing and mortgage credit, that the institutions stay alive.

« iepriekšējāTurpināt »