Our present program on the appropriated fund side on approximately 9,000 units which we hope to fund for fiscal 1956, as compared with the total requirement which I have roughly estimated at 54,000, would indicate, therefore, that we are faced with something like a 6year program in order to work this problem out. That is a long time. Secretary Floete has discussed with you here this morning the reasons why we are inclined as a basic program, Mr. Chairman, to go on appropriated funds, but by the same token let me assure you I am very greatly interested in the program that this committee has under consideration because in my judgment there is a great improvement on the Wherry Act and provides the possibility that maybe we can finish this housing job, insofar as the Army is concerned, in 3 years instead of 6. If we can, in my judgment we have done a fine thing in the overall interest of the country.

Now, as far as S. 1501 is concerned, I think it's basically something that we would wish to take the fullest advantage of in the Army if it is enacted into law.

Senator CAPEHART. Would you prefer to have the defense establishment set up its own insuring agency rather than have FHA do it? Secreary STEVENS. Yes, sir, I would.

Senator SPARKMAN. Mr. Secretary, let me ask a question that has been running through my mind. The one to pay this mortgage off is the United States Government; isn't it?

Secretary STEVENS. I feel that way, sir, althought I know there was a little discussion with Senator Capehart

Senator SPARKMAN. And the mortgage can never be foreclosed, can it?

Senator CAPEHART. Oh, yes.

Senator SPARKMAN. It's Government-owned property. It's not going to be foreclosed. Why should the Government be put to the expense of paying an insurance premium in order to insure its own payment of its own debt? I just can't quite see that. I don't care how the money is raised; it's going to be paid off by money which otherwise Congress would appropriate for the payment of rental endowments. They are going to be Government funds to pay off the degt owed by the Government itself. Why is it necessary to insure the payment of that kind of a debt?

Senator CAPEHART. Would the Senator yield?

Senator SPARKMAN. No, I want to get their comment. That is a question that has given me a good bit of concern. Why does the Government have to insure the payment of its debt?

Secretary STEVENS. Mr. Chairman, I don't feel very competent on that point. I am really looking at this piece of proposed legislation as to the overall effect of it and the possibility of accelerating the completion of our permanent military housing job. I really don't have an answer for your question.

Senator CAPEHART. Mr. Chairman?

Senator SPARKMAN. Let me first ask, if I may, the other gentlemen if they will comment on that. The Government is a mortgagor. Secretary FLOETE. Sell the mortgage.

Senator SPARKMAN. Sell it to whom?

Secretary FLOETE. Investors.

Secretary DOUGLAS. I will comment on that, Mr. Chairman. I think you are getting into quite a complicated problem with a great many

considerations. If you want it to be United States Government debt there is no possible need for any guaranty provision. It apparently has seemed suitable to avoid creating United States Government debt and providing for a Government guaranty of what is in effect a private debt.

Now, I also suggest there is another advantage, perhaps, that should receive consideration-I do not know what the answer is—with respect to having a FHA hearing. There is a long history of FHA mortgage guaranties in this country with respect to the market that has been created for them. You don't have to create a new market for United States Government debt, but if you try to create a wholly new form of debt that in substance was Government debt, you might have a new market problem.

Senator SPARKMAN. But these mortgages are not comparable to the FHA mortgages. There the mortgagor is a private person, and the insurance is to insure the mortgagee against the default of that private person, but here the mortgagor is the United States Government. Why does anybody have to be insured aainst the default of the United States Government?

Secretary DOUGLAS. No one does, but you put a new assumption in there, Mr. Chairman.

Senator SPARKMAN. What is it?

Secretary DOUGLAS. That the Government is a mortgagor.

Senator SPARKMAN. Isn't it? Doesn't the Government own the houses and isn't it going to continue to own the houses—and on Government land?

Senator CAPEHART. Mr. Chairman, may I explain the workings of it? What you are going to do, each project you are going to award to some contractor to build X number of houses. At the same time he creates a corporation under which he builds those and when it's completed he turns over not only the houses but likewise the stock in this corporation to the military.

Senator SPARKMAN. To the United States Government.

Senator CAPEHART. Well, it amounts to that.

Senator SPARKMAN. They become sole owner.

Senator CAPEHART. Of course, the same thing is true under Wherry. The projects are built on Government land. The only difference there is the project is built on Government land, but you permit a private sponsor to come in and operate them and rent them and make money out of them. Here we are trying to eliminate that very thing.

Senator SPARKMAN. That is the difference.

Senator CAPEHART. It's the only difference. In talking about the insurance fund, if there is never any default then the fund is available to the Government. It's their money.

One of the things you do by putting it on this basis is put it on a business basis. You put it on a self-sustaining basis, and the service operate as a private enterpriser would operate his business. By putting it on that basis, I believe the services will be more inclined to be more careful and not overbuild; they will be more inclined to keep the project filled; they will operate it as a business.

If there are no defaults-and there will not be any defaults, that is why I am certain you can sell these mortgages for 311⁄2 percent or maybe less then this insurance fund becomes available to the Gov

ernment. That is why I rather liked the FHA route in the first place because I thought FHA could build up a lot of insurance money there. But FHA and the builders don't seem to like it; they don't want to get it mixed up. I think they are overlooking the fact they have been able to pick up several million dollars worth of funds there that they could use for something else if they wanted to later on, but they seem to have missed that point entirely.

But what you are doing here, you are simply borrowing money to build needed houses for the military rather than borrowing money the bond way. That is all there is to it. That is just how simple it is. That is just exactly what you are doing. When you go a mortgage route you have got to go through certain mechanics. You have got to organize a corporation, and that corporation holds the mortgage and they pay it off. The man buying the mortgage looks to that corporation to pay it off. In this case it would be the contractor until the job is finished, and then it becomes the service; they own the stock. It's just a question of whether you want to sell bonds to build houses or whether you want to sell mortgages to build them.

Frankly, I think the mortgage route is better myself. I think it's more practical, more sensible. It puts them in business. I think they are more likely to operate as a business. They know they have got to pay it off. They have got to pay it off out of rents. Where you go the bond route, direct appropriation, you have got the money; it's built; it's already paid for. The bonds haven't been paid for but the project has been paid for.

Senator SPARKMAN. Had you completed your statement?

Secretary STEVENS. Yes, sir.

Senator SPARKMAN. Mr. Douglas, did you want to say anything additional?

Secretary DOUGLAS. Nothing further.

Secretary GATES. I'd just like to say, Mr. Chairman, for your information, that the Navy public works request, if granted by the Congress, plus permission under past laws, would amount to $69 million and would produce 3,900 units, approximately, which would be applicable to this deficit of 44,347 as indicated in Mr. Floete's chart.

I would like to emphasize along with the other Secretaries the terrific need for adequate housing. I would like to say to you that an enormous change, as you are aware, has taken place in the marriage status of the services. In 30 years the Navy has gone from 10 percent to 40 percent, including everybody in this, and in high pay grades such as the chief petty officers the figure is 89 percent married, and the lowest grades, seamen and under, is 23 percent. So in 30 years, in 1926 the total Navy was 10.7 percent married, and today it's over 40 percent married.

Senator CAPEHART. Do you see any insurmountable details to be worked out in respect to this S. 1501? Do you see anything that is not practical, not workable? I mean the question of whether it costs more or less, let's forget that for the moment.

Secretary GATES. I think they can be worked out.

Senator CAPEHART. Do you see any insurmountable factors? It's exactly like direct appropriation except you are going to get your money by selling mortgages instead of bonds. You are going to sell the mortgage, get the cash, pay the contractor. If you go the bond

route, you are going to sell the bond, get the money, and pay the contractor.

Secretary GATES. I don't see anything that can't be worked out and I'd like to cooperate in working them out. Some of the implementation of the bill I am not clear about.

Senator CAPEHART. Those are details we can easily work out if we decide on the principles, and there is a principle involved here.

Secretary GATES. And we would like, if we have the opportunity, to discuss with you clearing up the question of covering fleet personnel that are not assigned to a short station, because they are just as big a problem with us as anyone else in fact, the biggest problem. But I don't see any reason why we can't work out the details.

Senator SPARKMAN. I'd like to present to the committee this morning our distinguished visitors, Mr. Otto Suhr, lord mayor of Berlin; Senator Paul Hertz, of Berlin; and Mr. Strauss, representative of the State Department.

We are dealing with the problem that I suppose you have-housing. Secretary DOUGLAS. Mr. Chairman, I would just like to make it clear for the record that the Air Force is pleased with the start that is in process of being made through the appropriated fund group. We feel that the need is so great that it is imperative that all sound methods be used. We think it's important that Wherry be extended for a year, as Mr. Floete recommended, and that it is very important that a bill, substantially such as S. 1501, be added as a new source for accomplishment of family housing.

Senator CAPEHART. The extension of Wherry for a year on certain projects is in S. 1800, introduced by Senator Sparkman.

Secretary DOUGLAS. Yes. I just wanted to emphasize the fact we need the housing and we'd like to see every sound

Senator CAPEHART. Do you see any insurmountable factors involved in this S. 1501?

Secretary DOUGLAS. No, sir; I do not.

Senator CAPEHART. You think we will have no trouble working out practical, sound, sensible details in connection with it.

Secretary DOUGLAS. I think that is correct, and I think Senator Lehman really suggested the solution; part of his concern he expressed by referring to certification. There is no reason, it seems to me, that if the thing can be tightened up by a proper provision of certification

Senator CAPEHART. Renegotiation.

Secretary DOUGLAS. I mean certification of cost. That is, of course, another route that may be appropriate, but although I would think that a renegotiation is essential in a good deal of Government business, my feeling is it is probably not necessary in this kind of thing.

Senator CAPEHART. Everybody wants the contractors who build these projects to make a legitimate profit, no more or no less than hẹ is entitled to, and no more or no less than he makes on his normal work. We always should see that private enterprisers make a legitimate profit. Otherwise you have an unsound economy.

Senator SPARKMAN. Senator Payne.

Senator PAYNE. I'd just like to ask Secretary Douglas one question. Getting back just briefly to cost as between appropriated and Wherry housing, I imagine you have had a chance to inspect the so-called appropriated housing at Loring Air Force Base.

Secretary DOUGLAS. No; I have not seen it at all, sir.

Senator PAYNE. According to the figures-and I went over it fairly carefully when I went up there-between appropriated housing and Wherry housing, they show Wherry housing was actually less than the appropriated. Furthermore, in the appropriated housing it basically took in the question that Senator Sparkman mentioned-the cost of construction of the units, which are all very similar in type so that there was no distinctive pattern to the houses. But in addition to that, in another setup, they had to take care of the improvements, the running of the utilities, the paving of the streets, the building of the sidewalks, the landscaping, and all the other things which would have been added on top of that; whereas, the Wherry project which was constructed and the facilities were very attractive; I went through a number of them-included all the costs, including utilities, including streets, including sidewalks, including landscaping, and everything else.

Secretary DOUGLAS. I think it's fair to say that although we have some satisfactory appropriated fund housing, most of the satisfactory Air Force housing today is Wherry housing. We have something over 30,000 units.

Senator PAYNE. Are we making some headway on Presque Isle? Secretary DOUGLAS. We are in the process of negotiating a Wherry project there, which will very greatly improve the situation. We can't assert with certainty we can successfully negotiate it. It has also been brought out that the problem of accomplishing Wherry Acts this year has not been very good.

Senator PAYNE. In one housing project on Presque Isle they used plans for housing in Florida.

Secretary FLOETE. We will be very glad to work with the staff of this committee, if you so desire.

Senator SPARKMAN. Thank you very much. We all want to work out a good program, the whole committee does.

There is one other thing that if we had time I should like to question you about, but I think I will just ask you if you will give us a letter or submit a statement. That has to do with section 222, which is extending, we might say, the GI benefits to servicemen. Remember we included that in the program last year. If you'd give us a memorandum as to how it is operating, to what extent it is being used and any recommendation you have regarding it, we should appreciate it.

Senator PAYNE. Would it be possible, if it's not classified information, or if it can be submitted at least for the information of the committee, because I am tremendously interested in this Air Force problem due to the nature of SAC installations which have to be strategically located because of their mission, and on which you have got some very real problem of housing in connection with the Air Force personnel-would it be possible to make available to the committee in any manner, not by designated areas but an overall picture of the problem that is presently confronting these SAC bases throughout the country. Most of which, as a matter of fact, are located in areas far removed from the general pattern of housing facilities.

Secretary DOUGLAS. I think it would be possible, but I would disagree that the situation was very different or more difficult than the situation with Air Defense Command.