proper methods of solving them. There are undoubtedly many who do not believe in borrowing from the Federal Government.

A further factor must be considered in any attempt to evaluate the demands which may eventually be made on the Federal Treasury. Senator Fulbright has stated that he believes our colleges and universities need 234 percent loans and that private lenders should meet this need or stand aside for the Federal loan. Since investors generally and institutional trust-fund buyers particularly must be governed by other considerations as well as the needs of borrowers for funds at any given rate of interest, and since S. 1744 proposes a rate of 234 percent, it may be assumed that if S. 1744 becomes law private lenders with rare exception will be forced to stand aside while loans which might have been made by private capital at reasonable rates are made by the Federal Government at an arbitrarily fixed rate.

Under the present program, all eligible private college and university financing is being taken by HHFA, while that of most Stateowned-and-operated institutions is being taken by private investors due to the income-tax exemptions feature. Also, private investors are taking bonds issued and loans made for purposes other than housing, whether self-liquidating or otherwise. However, if S. 1744 becomes law, it follows that the Federal Treasury will be called upon to furnish substantially all funds required to finance future borrowings by colleges and universities. The exact size of the burden is not apparent, but surely the increase of $200 million authorized by S. 1744 will be but the first of such requests for increases.

Inasmuch as estimates of necessary plant expansion run into billions of dollars over the next few years, ruling out private lenders appears to imply the assumption of a very considerable money responsibility by the Treasury at the direction of the Congress. S. 1744 represents the first intimation of such a policy, and it seems doubtful that educators themselves wholly favor it.

Parenthetically, if S. 1744 becomes law, those engaged in efforts to widen the public markets for college and university financing to obtain more favorable terms for the borrowers will perforce turn their attention elsewhere. As an obvious result, progress achieved to date will be lost in the competition for private funds, and the demands upon Government will be intensified. It looks very much as though the Treasury would take over in a field where private investment might well supply much of the required financing.

If it be assumed that it is undesirable for college and university plant-expansion borrowings to be wholly financed by the Treasury, it must follow that a program of direct Federal loans at 234 percent interest for 50 years is not the proper channel for Federal aid which may be granted by the Congress. Indeed, if it be assumed that aid is desired to be granted, it appears highly questionable that any program of direct loans is the best form of aid regardless of maturity or interest rate. Senator Fulbright has stated that the Federal Government may assist by outright gift, by subsidizing students, or by lending at low interest rates. Lending at low interest rates is actually a loan of the credit of the United States, which must itself borrow in order to have funds to lend. When the question of a loan. of the credit of the United States arises, it puts the Government in the position of a finance company if such question is answered in the affirmative.

Since proponents of such action lay stress on the essential soundness of the operation, pointing out the difference between giving and lending, it seems reasonable to expect the Congress to inquire as to the full facts and the steps taken by the prospective borrowers to help themselves before asserting flatly that private funds may not be made available under feasible terms and conditions.

The best available information discloses no action on the part of educational institutions of higher learning beyond inquiry by individual prospective borrowers as to terms offered by prospective lenders, and a reluctance to make even such simple inquiry has been observed. No proposals for any form of concerted action have been apparent. No studies or recommendations of long-term financing methods and alternatives appear among the many studies of building problems made by colleges with or without educational foundation aid. Much consideration has been given to various methods of obtaining gifts, particularly from corporate givers, but the problem of obtaining long-term financing appears to have been immediately resolved by requests for Federal assistance, a procedure not favorably regarded by those very corporations from whom gifts are earnestly solicited. Even the rather simple alternative of concerted action through a mutual surety association or corporation has not been proposed.

The conclusion remains that no intensive effort to obtain private funds at favorable terms has yet been made by the colleges and universities themselves, either through contacts with those in the field of finance or otherwise.

In addition, suggestions that a program of federally insured loans would better serve the public interest have aroused no perceptible enthusiasm, which is understandable as long as direct loans are available. If the colleges and universities can prevail upon Government to assume the entire burden through long-term and low-rate loans, this is the simplest solution from their point of view.

From the point of view of the Congress, however, an insurance program has ample precedent and will result in the use of substantially fewer tax dollars. Other advantages include less administrative cost, less Federal debt, removal of Government from business, avoidance of discrimination between institutions having the power to issue taxexempt bonds and those not having such power, and avoidance of the holding by the Federal Housing Administrator of a large volume of securities not marketable except at large discounts. In considering other forms of Federal aid which might be extended by Congress, an insurance program appears to be a clearly superior form to the present direct loans program.

In point of fact, the essential difference between State-owned-andoperated colleges and universities having the power to issue bonds exempt from Federal income taxes, and privately owned-and-operated institutions whose obligations are a form of corporate loan bearing taxable interest is nowhere more marked than in the ability of finance plant expansion and improvement. It is entirely within the power of the legislatures of the various States to furnish funds by appropriation for such purposes. Beyond that point, it is the decision of the taxpayers of the particular State as to whether or not State bonds shall be issued for the purpose.

This has been done in Vermont and Connecticut, as examples, where interest rates under 2 percent were obtained. The decision to authorize and issue revenue bonds is again that of the taxpayers of the State, if such method be their pleasure. There appears no true necessity for Federal financing in these cases. Indeed, is not a Federal program of loans which includes State colleges and universities an intrusion into purely State affairs?

The situation is somewhat different in the case of private colleges, especially the smaller ones. Of the more than 1,850 colleges and universities listed by the United States Office of Education, over 1,000 are in the 500-or-less-students class. Regardless of whether or not they are all basically sound financially, their small size makes borrowing more difficult. Nevertheless, if loans are to be repaid, the essential security must be the same whether the loan is through Federal or private sources. Certainly in the aggregate they possess great financial strength, and it is evident that reasonable plant expansion is entirely possible at reasonable cost if mutual security measures are adopted whether or not they are aided by a Federal insurance program rather than by direct loans.

It is my belief that enactment into law of S. 1744 is not in the public interest because:

(1) The necessity for expanding the college-housing program is not established in view of large uncommitted balances available under the present program.

(2) The necessity for liberalizing the college housing program is not established in view of the absence of proof through comprehensive studies or otherwise demonstrating such liberalization to be the only or even the most satisfactory solution.

(3) The expansion and liberalization of the present program as contemplated by S. 1744 would have the practical effect of ruling out private lending except for a few large institutions issuing taxexempt bonds, and would therefore establish a precedent logically resulting in the Federal Treasury eventually assuming a burden of financing estimated as well into the billions of dollars.

(4) A program of direct Federal loans is not the best method of granting financial aid by Government to our colleges and universities.

In conclusion, I believe that "the Lord helps them who help themselves." The sound way for financing the building programs of our colleges and universities is through the use of the ample private funds available, and the colleges and universities themselves can do much to make these funds available at lower rates. A program of direct Federal loans represents the easy way not the best way, and certainly should be a last resort. If Federal funds are to be used at all, I believe either grants-in-aid or an insured loans program would represent the best use of the taxpayers' funds and would not compound the cost by causing large Federal holding of bonds or loans the income from which would otherwise be taxed by the Government.

Thank you very much for the opportunity of presenting this statement for your consideration.

Senator MONRONEY. Thank you very much, Mr. Emerson, for appearing and giving us the benefit of your advice.

I do not believe there are any questions to be asked.

The committee has a statement from Mr. H. R. Northup, executive vice president of the National Retail Lumber Dealers Association, STATEMENT OF H. R. NORTHUP, EXECUTIVE VICE PRESIDENT, NATIONAL RETAIL LUMBER DEALERS ASSOCIATION

I appreciate this opportunity to present to the committee the view of the members of the National Retail Lumber Dealers Association on Senate bill S. 1800 pending before your committee.

This bill would provide for the continuation of certain programs of the Housing and Home Finance Agency.

Mortgage insurance authorization

S. 1800 would increase the authorization for FHA mortgage insurance by $4 billion. This additional authorization is necessary to assure continuation of the FHA programs and should be approved. Home repair and modernization

One very important provision of S. 1800 is section 2 which would extend the FHA title I home repair and modernization program for 5 years to July 1, 1960.

This program has, over the last 20 years, provided a means of financing home repair for over 18 million homeowners. In 1954, over 112 million borrowers used property improvement loans insured by FHA.

The title I program has had the effect of lowering and stabilizing financing charges on property improvement loans and has stimulated interest of lending institutions in this type of loan.

Many families have found it necessary to expand their living quarters because of an increase in the size of their families or for other reasons. Others have used the program to prevent deterioration of their property.

The title I program is a necessary adjunct to the urban renewal program for neighborhood conservation and improvement provided for in the Housing Act of 1954.

Lumber and building material dealers have a vital interest in the title I program. The repair and modernization business is a major source of revenue to dealers which would not be available without adequate financing of major improvements.

We, therefore, urge the continuation of this program.

In your consideration of the continuation of the title I program, we suggest that thought be given to certain amendments which, in our opinion, would improve the program.

The President's Advisory Committee on Government Housing Policies and Programs recommended that "Title I of the National Housing Act should be amended to permit the insurance of class 1 (a) loans to finance the modernization and repair of existing structures up to a maximum amount of $3,000 and up to a maximum term of 5 years and 32 days."

The basis for this recommendation was that the present statutory limitation of $2,500 is not sufficient in terms of today's prices to finance home modernization operations while the present 3-year maximum

term requires a debt service on larger loans that is beyond the ability of many families to carry.

Last year the Congress amended the law to make title I available to new house owners only after a 6-months occupancy. We believe that your committee might find it advisable to reexamine this provision to determine (1) whether it accomplishes the purpose for which it was intended; and (2) whether it is unnecessarily discrimatory against new homeowners who, by reason of this restriction, are forced to finance home improvements through other more costly channels.

This program has been in effect for 20 years and has become an accepted method of financing home repairs, as much as the mortgage insurance and guaranty programs of FHA and VA are now accepted by most lenders. We believe that it would provide more stability to the program and to home modernization if the title I program were made permanent instead of a periodical renewal of the program by legislation.

We do not want to be misunderstood in making these recommendations. Of primary importance is the extension of the title I program. Our suggestions for amendments would, however, we believe, improve the program.

Public housing

In the past, an authorization for public housing has been on the statute books and the issue of the number of units to be approved has arisen each year under appropriation bills for the Public Housing Administration.

Because the authorization existed, we are confident that many Senators and Representatives supported the appropriations for a limited number of public housing units only because they felt there was a moral obligation of the Government to provide such funds.

Your committee, however, has a much greater problem to consider in connection with S. 1800. It is no longer a question of a moral obligation to provide funds for an authorized program. You, as a legislative committee, must decide whether or not additional authorizations should be granted to continue this program. Without such authorizations the program ends.

A thorough study of the public-housing program will, we are confident, convince your committee that a continuation of the program cannot be justified. Such a study will reveal that public housing is not serving the purpose for which it was intended; that it is more costly than anticipated by Congress; and that it is "political housing."

Without reiterating the arguments against public housing made in the past, we want to emphasize that your committee has a much greater responsibility than Appropriations Committees have had in the past. You must decide whether socialistic housing is to remain part of our Government policy or whether the program is to be terminated as an unsuccessful experiment.

This association and its members urge your committee to permit the public-housing program to terminate.

Military housing

Senator Capehart's bill, S. 1501, would create a substitute for the present Wherry Act housing program for servicemen.