program has had an antimortgaging out provision written into the statute since its inception. The program has provided 78,800 completed units of family housing, with an additional 19,180 in various stages of processing, for the armed services at average rentals less than the average quarters allowances received by the servicemenoccupants. We recognize that Wherry housing is limited to permanent installations and that it may have other limitations. However, to the extent that it has been used to date the Congress has assisted in providing housing for more than 78,000 service families and has been spared the direct appropriation of approximately $1 billion since 1949 in doing so.

On March 2, 1954, Mr. John M. Ferry, special assistant for installations to the Secretary of the Air Force, testifying before the House Banking and Currency Committee on behalf of the Department of Defense, urged an extension of the Wherry Act for another year. Upon direct questioning as to whether the provisions of title VIII were satisfactory, he replied: "Yes, sir. We are very, very pleased with it."

Later, upon being questioned by Congressman Deane and Spence, the Defense Department witness reemphasized this satisfaction with the Wherry program and the Department's desire for its extension. However, 2 months later, before the House Armed Services Committee considering authorization for direct public construction of family quarters, Assistant Secretary of Defense for Properties and Installations, Franklin G. Floete, proved most articulate on the subject of the disadvantages or limitations of Wherry housing.

In February of this year, before the Air Force Subcommittee of the House Appropriations Committee, Under Secretary of the Air Force Douglas made his position very clear with this statement:

Our position is perfectly clear. We like Wherry housing. It is one way to get acceptable housing.

It is significant that the Air Force is by far the major utilizer of the Wherry program and well qualified to speak on the subject.

We urge the committee to assert its jurisdiction over the subject of family housing for the military by extending the Wherry program for an additional year. Surely the action is justified on the basis of Under Secretary Douglas' statement before the House Appropriations Committee.

Senator CAPEHART. You know there has been no Wherry projects started since last August?

Mr. WALTEMADE. Yes, sir.

Senator CAPEHART. Why do you recommend the continuation of something that is not working?

Mr. WALTEMADE. We also know that since the investigation of section 608 there have been very few applications and very few section 207's started also.

Senator CAPEHART. Is it not the fact that they have not started because we wrote into the law that they had to certify as to their cost, and no housing has started since that time?

Mr. WILLIAMSON. I am not so sure of that, because the section 207 program, while it has slowed down, is certainly far from a dead program. I think that after Under Secretary Franklin Floete testified before the House Armed Services Committee it was very clear that as

far as the Department of Defense was concerned they wanted to have very little Wherry, and they made it very clear that they were going to seek the end of the Wherry program.

Senator CAPEHART. Is it a fact or is it not that there has been no Wherry project started since last August?

Mr. WILLIAMSON. That is correct.

Senator CAPEHART. Why?

Mr. WILLIAMSON. Well, perhaps atmosphere had a lot to do with it. I do not know. I think maybe the builders

Senator CAPEHART. Are you going to comment later on with respect to the military housing bill that I introduced along with 29 other Senators?

Mr. WILLIAMSON. We can make a comment on that now.

Senator CAPEHART. Is it a part of your statement?

Mr. WILLIAMSON. No; it is not a part of the statement.

Senator CAPEHART. Are you going to comment later on in your statement with respect to college housing?

Mr. WILLIAMSON. No, sir.

Senator CAPEHART. Are you going to comment with respect to the amending of the farm housing section?

Mr. WILLIAMSON. No, sir. Our testimony is directed at S. 1800, but we are prepared to make some comment on S. 1501 because we have studied the bill. We did not feel it was necessary to make it a part of this statement, although we welcome the opportunity to comment. Senator CAPEHART. Were you not instructed that the hearing was to be on all these bills, or don't you have any interest in the military housing and college housing?

Mr. WILLIAMSON. We have a definite interest. We just have no position on the college housing program. We felt that there was so much in this S. 1800 that we wanted to direct at least the major portion of our effort toward that bill, but we have studied S. 1501 and anticipated talking about S. 1501 at this hearing.

Senator SPARKMAN. I think while we are on Wherry housing, you might comment on S. 1501.

Mr. WILLIAMSON. Our principal objection to S. 1501 is that it is the employment of the FHA as almost a rubber-stamp insuring agency. Senator CAPEHART. Suppose we take FHA completely out of it and make the military their own insuring agency. Then are you opposed to it?

Mr. WILLIAMSON. We certainly have no objection to the Department of Defense, for example, constructing its own housing in those areas where it is not feasible for private enterprise. There are many areas where a permanent construction is not feasible and where Wherry housing is not feasible. We think that the Department of Defense has the ultimate responsibility to house its people, but the Congress for the past several years has been seeking some means of employing private enterprise and private capital for the construction of family housing. I personally do not believe that the Department of Defense ever liked Wherry housing, because I think the Department of Defense would like to have, own, and operate its own housing. And I think that they have a right to such a preference. But we do believe that in some areas private housing, housing financed by private capital, is feasible for the military, and to the extent that that would spare the Congress from direct appropriations of untold millions of dollars,

we believe the Congress should make every effort to devise some formula for the employment of private enterprise.

Senator CAPEHART. The only difference between that and the direct appropriation route is that the Government finances through insured mortgages rather than direct appropriations. What is your objection to that?

Mr. WILLIAMSON. The objection is to the fact that FHA insures a mortgage without the right to use its discretion.

Senator CAPEHART. I said we will take the FHA completely out of it and make the military their own insuring agency. What is wrong with that?

Mr. WILLIAMSON. We see no objection to that particular element, and it may be that some formula can be devised. We just do not think that FHA should be brought into the picture where it would have no discretion in its underwriting. As to the other features, on the bid basis it is our understanding that the mortgage would be the bid that was accepted, and I think in testimony recently a question arose-I believe it came from Senator Lehman-as to what would happen if the lowest bid was $2 million and the costs were $1,500,000, and whether that would amount to a windfall. And I understood the reply involved renegotiation.

Senator CAPEHART. In the first place, it would not be a windfall, because we would expect that every fellow that bid on these houses would make a profit in constructing them.

Mr. WILLIAMSON. That is right.

Senator CAPEHART. It only became a windfall when he not only made a profit in constructing them but he continued to own them, as he did under Wherry and under section 608.

Mr. WILLIAMSON. I remember the statement made that the contracts would be renegotiated, I do not think that you would ever get anybody other than a below average builder to enter the program if you had a bid and then you had a renegotiation afterward.

Senator CAPEHART. The contract to build for the Government should not be subject to renegotiation, and yet the fellow that is given a contract to build tanks or electronics or airplanes must be subject to renegotiations? Are you taking that position? If the Government awards a contract to a man to build a warehouse or to build a camp or to build a bridge or to build anything, why should he be less subject to renegotiation than a man who is given a contract to build tanks or electronics or radios or airplanes?

Mr. WILLIAMSON. I would like to answer that in terms of the ultimate success of any program which the Congress approved, and in our opinion we just do not think a program like that would work. Senator CAPEHART. Why?

Mr. WILLIAMSON. We are not the builders, but we just do not think you are going to get the builders who could do the job to enter a program of that nature.

Senator CAPEHART. You want to make the statement that the builders are immune from renegotiation simply because they are building houses or building a warehouse or building a camp, and yet a builder of tanks and airplanes ought to be subject to the Renegotiation Act? What kind of fellows are you? What sort of meat does this builder eat that you think it entitles him to special preference?

Mr. WILLIAMSON. But if you ask a builder to submit a bid on a housing project and he makes a bid, and then through his ingenuity and through certain cost-saving techniques-maybe he is a multioperation builder and he gets materials a little less-if he were faced with the ultimate objective of renegotiation that would deprive him of the profit that he has made through cost saving techniques.

Senator CAPEHART. My dear sir, that is exactly what happens under the Renegotiation Act. It applies to everybody. You give a man a contract to make tanks. He agrees to make a tank, let us say, for $100,000, and if through his ingenuity and so forth he can build it for $75,000, he is subject to the Renegotiation Act. I am amazed that you take the position that a contractor building houses or warehouses or building bridges or building roads or building anything else for the Government is different and he will not do business the same as the tank manufacturer, the same as the automobile manufacturer and the radio manufacturer and electronics manufacturer and shoe manufacturer. The reason you are not getting Wherry housing, I am told, is because we wrote into the bill that when they were all finished they had to certify their costs, and if the cost was less than the amount agreed on when they got the insurance for the mortgage, they were to apply it on the mortgage. I understand-if I am wrong, I want to be corrected that the contractors, these Wherry builders, have refused to start any projects since that time.

Give me one good reason why the man who goes out here and builds a warehouse for the Government should not be subject to the Renegotiation Act the same as the fellow that bids and is the low bidder and is awarded the contract to build anything else.

Mr. WALTEMADE. I do not think we object to the fact that he should be subject to renegotiation the same as the builder of tanks. We just think as a practical aspect the good, busy builder is just not going to submit a bid of that type when he can get other building and does not have to worry about renegotiation. We agree with you it should be subject to renegotiation, but the practical aspect is that you are not going to get the top builder to do that and be subject to renegotiation. That is the practical approach to it.

Senator CAPEHART. He is just not going to do it?

Mr. WALTEMADE. He is not going to do it, because if he through his force and ingenuity can do that, he can do it on some private job. Senator CAPEHART. Suppose the tank manufacturer takes the same position?

Mr. WALTEMADE. Nobody builds tanks except for the United States Government.

Senator CAPEHART. It takes $100,000 to build a tank and his legitimate profit is 10 percent that is about what they allow them on renegotiation-anywhere from 10 to 15 percent. If he can make savings through ingenuity and make 20 to 25 percent, he argues likewise that he ought to be able to keep the money.

Mr. WALTEMADE. Except the tank manufacturer knows that Senator Capehart is not going to buy any tanks. The United States Government is the only tank buyer.

Senator CAPEHART. My dear sir, you know the Renegotiation Act applies to everything.

Mr. WALTEMADE. I am just saying tanks or any

Senator CAPEHART. Let's talk about clothing. You amaze me, gentlemen, when you tell me that the contractors that you represent, the builders in the United States, are setting themselves up here now as a separate class of businessmen. That all other businessmen should be subject to the Renegotiation Act but your boys will not play if they are. Do you really mean it? Do you want the record to stand on that?

Mr. WALTEMADE. We do not say they should not be subject to it, but the practical approach is you will not get the top-flight builder to do it.

Mr. WILLIAMSON. If the builder has a choice to build with or without, he is going to build without it, and you will not get the big builders to enter that program.

Senator CAPEHART. I do not mind telling you that the Federal Government is guaranteeing your mortgages, guaranteeing your building, and yet you sit there and tell me that you ought to be set out completely away from all other businessmen. That you will not play, that you are going to pick up your marbles and will not help the United States Government if you are subject to renegotiation the same as other people. That does not sit well with me. I do not mind telling you the Federal Government has been awfully good to the building industry in America. I do not know any other industry in America today where the Government guarantees the mortgages or guarantees the financing. They do not do it in automobiles. They do not do it in radios or television. They do not do it on anything else. Mr. WALTEMADE. They guarantee the bank deposits.

Senator CAPEHART. They guarantee the deposits, but they certainly do not guarantee the credits of the manufacturers of the United States. Yet you tell me that these fellows will not play if they are subject to renegotiation.

Senator LEHMAN. I understand, Mr. Chairman, that is just an expression of opinion of these two gentlemen.

Senator SPARKMAN. I was wondering myself if we are not spending too much time on this particular point, which is just an expression of opinion.

Senator CAPEHART. They represent the real estate boards of America. They started out here and told who they represent.

Mr. WALTEMADE. All we are expressing is what we think would happen.

Senator CAPEHART. Your personal opinion?

Mr. WALTEMADE. Yes; it is our personal opinion of what would happen if you had such a provision as part of any housing construction, such as in S. 1501 or Wherry housing.

Senator LEHMAN. May I raise this question. Even granted that the builders would be willing to subject themselves to renegotiation, as I understand the Capehart bill the bonds would be issued for the full amount of the bid. In other words, if the bid was $2 million and actual cost was only $1,500,000, regardless of the renegotiation, regardless of the fact that the Government possibly would take the position that all the bidder could receive would be a reasonable profit on his undertaking, the full amount of the bonds would still be outstanding, because they are issued in the amount of $2 million. But you could not, as I understand it, reduce that bond issue from $2 million.