interest they were paying depositors in order to encourage savings it was impossible for them to any longer make loans at the straight 4percent rate set in 1944 in the GI bill of rights. Yields on Government securities also had increased, which was siphoning long-term money from the veterans' home-loan field into Government bonds, and other Government securities. We also found, not only in California but on the entire Pacific coast, that due to the tremendous drop-off in the construction of homes for veterans, unemployment was increasing in the construction field. There are today approximately 1,000,000 unemployed on the Pacific coast, of which about 700,000 are directly affected by the drop-off in home building. We came to the conclusion that it was sound and logical that the combination loans provided for in the Servicemen's Readjustment Act be eliminated, because they violated the principle of providing homes to veterans at a low interest rate; also, that the language of Public Law 901, which provides for 41⁄2-percent interest rate on veterans' loans, be clarified and be made more mandatory, so that when changes in the money market prevail an equitable adjustment will be made so that the veteran can secure home ownership without penalty. We also found that due to the insistence by lending institutions and by the Government that a home purchaser be confined to paying not more than one-fourth of his monthly earnings in monthly payments for a home, that the term of the loan would have to be increased from 25 to 30 years, thus lowering monthly payments. Many thousands of veterans in the West who desired home ownership found that, because of their earnings, they lacked from $2 to $9 per month to qualify, and, consequently, were denied their right of home ownership. The extension of the term of the loan as provided for in H. R. 1324 would permit these same veterans the right to home ownership. Our investigation also revealed that due to the restrictions of the governmental secondary market many lending institutions which had been very active in making GI home loans were holding all of the mortgages they could possibly absorb in their portfolios and with no secondary market available, their funds were frozen and they could no longer finance deserving and home-seeking veterans. Only a small percentage of these had been sold to the Federal National Mortgage Association by lending institutions when the market was open and unrestricted. But, due to a freeze date of April 30, 1948, enacted by the Eightieth Congress, the funds tied up in these mortgages became dormant. We feel that by removing the April 30, 1948, date and the opening up of a full 100-percent secondary market, that will allow these lending institutions to sell their GI mortgages to the Federal National Mortgage Association and that a tremendous amount of tied-up funds will again flow into the veteran housing field. You can readily see the effect of the flow of these funds. A large percentage of the unemployed will again become employed and the veteran who desires a home will be able to secure the loans necessary to provide this needed home ownership. We found, from talking to numerous veterans, that they would not object to a raise from 4 to 41⁄2 percent in the interest rate. They felt that they would much rather pay the slight increase in order to have home ownership and an ever-increasing equity than have the total loss when they were paying rent. Due to the slowness of this Congress in acting upon this needed legislation, the State executive committee of the American Legion again met in Santa Barbara, Calif., on May 7, resurveyed housing legislation and again endorsed H. R. 1324 and S. 616, and urged me, as the department commander, to vigorously support the enactment of this legislation. In the opening part of this statement I said that I also represented the State commanders council. On Wednesday, April 13, Alvin F. Kime, commander of the Veterans of Foreign Wars, Department of California; S. Tex. Rose, commander of the Disabled American Veterans, Department of California; and James J. Kehoe, commander, American Veterans of World War II (AMVETS) of California and myself, representing the American Legion, Department of California, met and formed a permanent organization known as the department commanders council. The purpose of this organization of department. commanders was to meet periodically, discuss problems affecting veterans' welfare, and then act jointly binding our organizations to the program. Following our organization meeting, housing legislation discussed and by unanimous vote of all present, the commanders council went on record in support of the Veterans' Home Loan Act of 1949, H. R. 1324 and S. 616. On May 21, 1949, after several meetings, the council again met and took into its membership the Military Order of the Purple Heart. With this addition of another California veterans' organization, the council again discussed the Veterans' Home Loan Act of 1949 and unanimously reendorsed H. R. 1324 and S. 616. Since that date the Veterans of Foreign Wars, the American Veterans of World War II, the Disabled American Veterans, and the Military Order of the Purple Heart have all held their State conventions. The newly elected State commanders were authorized to support the commanders council and each State convention endorsed H. R. 1324 and S. 616, strongly urging passage of this legislation as the only solution to the veterans' home-ownership problem. Gentlemen, the veterans of the West want this legislation. All of the department commanders of the major veterans' organizations in California feel that home ownership for the veteran is one of the finest contributions this Government can make. We feel that home ownership is a fundamental American principle and that any person owing a home andkpiece of the land of his Nation becomes a part of that Nation. With home ownership you find better citizenship and with home owners the desire and will to fight the inroads of any foreign "ism," especially communism. Few, if any, pick up a gun to defend a boarding house-but they all will fight to defend their homes. Thus, speaking for the American Legion, Department of California, and for the State commanders council, I fervently plea that this committee, after due consideration, enact the principles of H. R. 1324, as amendments to H. R. 5631, so that it might be adopted by the Congress of the United States and become a law of the land and the veteran of this country who has not as yet been able to acquire a home of his own may be given the opportunity to do so at the lowest possible monthly payments. Thank you for the opportunity of testifying before you on this important legislation. The CHAIRMAN. Are there any questions? Mr. COLE. I have a question. On page 2 you state that the housing committee of the American Legion had not discussed veterans' housing. Mr. WHITTEMORE. There has been no meeting of the national committee of the American Legion this year. Mr. COLE. This year? Mr. WHITTEMORE. That is right. Mr. KUNKEL. What you would like to have is a secondary mortgage without recourse? Mr. WHITTEMORE. That is right. Mr. KUNKEL. If you do that, why should the Government not make the loans dieret? Mr. WHITTEMORE. That is entirely up to your opinion on private enterprise and other different controversial matters. Mr. KUNKEL. Where you just put private enterprise in to make a profit without taking any risk, then it seems to me it is logical to have the Government make the loans direct. Mr. WHITTEMORE. I think your point is very well taken, sir. Mr. COLE. Do you have any comments to make? Mr. WHITTEMORE. I have comments to make that would not be very polite, I am afraid. I do not know what Mr. Alessandroni's official position is in the national committee. He is a vice commander of an area that takes in the New England States. He is not a department commander and never has been. Why he was sent down here and how he was sent down here, I am not acquainted with. Mr. COLE. He came here under the auspices of the American Legion. Mr. WHITTEMORE. That is no doubt true, but I have no information as to exactly who sent him down here, and I know the statements he has made relative to my appearing or not appearing. I was here for the hearing, and, due to pressure in my own department-our convention comes up within another week-and my own business, I had to return to the State. I am sorry I was not here during the hearing. I would have been delighted to appear with or against him on this constructive matter. Mr. BUCHANAN. The statements Mr. Alessandroni made were his own personal statements rather than any authorized statements from the national housing committee of the American Legion of which you are a member? Mr. WHITTEMORE. That is right. The national housing committee has never recognized Mr. Alessandroni in any way whatsoever, in any capacity. The fact of the matter is that the housing program of the national housing committee of the American Legion has been so weak, shall we say, that the national commander has not even seen fit to call his national housing committee together because we have not had a meeting at all this year. Mr. COLE. Did you have any last year? Mr. WHITTEMORE. Yes. The CHAIRMAN. If there are no further questions you may stand aside. Mr. MITCHELL. Just one question, Mr. Chairman, if I may. On page 5 you outline the need for a 100-percent secondary market and say if that is done with the elimination of the April 30, 1948, date, "a tremendous amount of tied-up funds will again flow into the veterans' housing field." You are saying that in relation to the 4 percent interest rate? Mr. WHITTEMORE. As far as we are concerned, the interest rate is not the most controversial matter. The thing we are vitally interested in is the re-creation of a secondary market. Mr. MITCHELL. There would be plenty of money for 4-percent mortgages, then, if the secondary market were complete? Mr. WHITTEMORE. There is no doubt about it. Mr. MONRONEY. How would you get more GI housing by going back behind the 1948 date? Those houses are built, financed, and the mortgages are in the hands of the investors. Mr. WHITTEMORE. There was a greater sum tied up in that 1948 date than will be available now, if these other bills are passed, and if those frozen funds are released we will have more money available. Mr. MONRONEY. The Government would be buying these 4-percent mortgages. It would be like an endless chain. You would siphon the 4 percent into "Fannie Mae" and loan at 41⁄2 percent to the same fellows who held 4 percent. I do not see any headway there. If you do it for GI mortgages you have to do it for FHA mortgages, too. I can see some logic in your argument for opening up "Fannie Mae" as of the date of passage of the act, but I do not see how we can bail these people out, who were satisfied to invest at 4 percent, give them a chance to turn them in at the counter and make 421⁄2 percent on them. Mr. WHITTEMORE. Our contention was not meant to deal with those loans that were already existing. We were only interested in releasing those frozen funds. In other words, your bill now, I believe, provides $300,000,000. We are going to have to come back here again in January to get more money because that $300,000,000 will probably just about buy the paint on the houses that are even now pending in the applications. Mr. MONRONEY. If we go back behind this cut-off date and start mopping up all this prelending that is already outstanding, I do not see how we would be appropriating money to "Fannie Mae" from now on. I do not see any increase in housing that we would possibly get by picking up existing mortgages that are already financed by opening those up in "Fannie Mae". There is logic in your argument to open up new mortgages if you are having trouble getting them financed. Mr. WHITTEMORE. The intention was not to refinance existing mortgages, but I can see where that would enter into it. But, at the same time, it would be more or less up to the administrator whether or not that was done, would it not? Mr. MONRONEY. Oh, no. If you open it up, they dump them right on us. That is one of the problems we had a year ago when we were threatened with an increased interest rate up and down the line on FHA and GI loans, too, and it was one of the reasons why they put the cut-off date in: so that they could not dump a wholesale amount of 4-percent mortgages on us and immediately turn around and use money they had gotten from "Fannie Mae" to make 4%1⁄2 percent loans. Mr. WHITTEMORE. The remedy would seem to be an increase in the fund available to "Fannie Mae" for the purpose of financing new GI homes. Mr. MONRONEY. Unless there is more evidence introduced than I now see, I cannot see how we would be gaining a single house by opening up that cut-off date. Mr. WHITTEMORE. At that date there was close to $3,000,000,000 frozen in that sum-considerably better than $2,000,000,000-and the purpose of our making that request was to reactivate and release those funds. But if we are wrong in our contention we are perfectly willing to go along with an amendment to the present bill that will grant us additional sums without us having to come back here in January and ask for more money. Mr. MONRONEY. I think you can depend on the Congress. Any time we support "Fannie Mae" authorizations we will keep the authorizations of "Fannie Mae" deposits up. Mr. WHITTEMORE. There is one question: In our section of the country there is no saturation of veteran demand. It is the demand of those whose average pay of $204 a month is not in a position to qualify under the loan in the present set-up because the payment is something like $58.75 a month, and he cannot make it. Mr. MONRONEY. I agree on that point, but I do not see the other. Mr. WHITTEMORE. That probably was a hasty generalization that we did not take too much cognizance of. At the same time, we meant well. We will trade it for an increase in authorization. The CHAIRMAN. Are there any further questions? You may stand aside, Mr. Whittemore. There is a roll call in the House and the Members will want to answer their names. We have two bills on the Consent Calendar. That should not take very long. I understand the next witnesses are from out of town. We will try to get through with them this morning, if we can. We now have Mr. Bates, of the American Federation of Labor. You may proceed, Mr. Bates. STATEMENT OF HARRY C. BATES, CHAIRMAN, HOUSING COMMITTEE, AMERICAN FEDERATION OF LABOR Mr. BATES. I am very glad to have this opportunity to discuss with you a subject of deep importance to organized labor-the question of housing. Certainly there is no subject closer to the heart of the average worker than the home to which he returns after a day's work. So often adequate housing means the difference between sickness and good health, between juvenile delinquency and obedience to the law, between broken homes and happy family living. For these reasons, the American Federation of Labor has long interested itself in the problems connected with housing and housing legislation. Although the chief reason for my appearance here is to support H. R. 5631, the bill recently introduced by the very able chairman of this committee, I want first to congratulate the members of this committee for their efforts in behalf of the recently enacted Housing Act of 1949. As you know, the A. F. of L. has strongly supported the new housing law as well as the various bills which have preceded it in the other sessions of Congress. We are most gratified that the long fight for passage of this legislation has been won. Now, for the first time, we have the opportunity to start erasing the adjective "ill-housed" from President Roosevelt's famous phrase about the "ill-fed, ill-clothed, |