Mortgage brokers, as a rule-I am speaking generally-their capital invested of their own is very small in comparison with the amount of business that they do. And, for that reason, I do not think that they should be classed with the banks, savings banks, trust companies, and building and loan associtions. If they want to dispose of their mortgages, and they are good mortgages, they can sell them to the banks and to the other concerns that have a right to membership under this bill, who are in the legitimate business of financing home owners on a reasonable basis.

Mr. WILLIAMS. Is not the main trouble we are in now the fact that these commitments were made on a very much inflated market? Mr. LA ROQUE. What commitments?

Mr. WILLIAMS. These obligations to pay were made at a time when earnings were much higher than they are now, and it has found us where we are.

Mr. LA ROQUE. There is no doubt about that.

Mr. WILLIAMS. Whether it was inflated then or is deflated now, that is the trouble.

Mr. LA ROQUE. Senator Vandenberg used a new word in the Senate the other day. He said "reflation." Status quo, so to speak. Status quo has another meaning as well.

Mr. WILLIAMS. In our country it does.

Mr. LA ROQUE. In mine, too.

The CHAIRMAN. Have you anything further to offer?

Mr. WILLIAMS. I want to ask just one question in seriousness here. This bill provides for a member institution, in order for a member institution to come in, a flat fee of $2,500.

Mr. LA ROQUE. That is not a fee. It is a subscription to stock. Mr. WILLIAMS. Well, all right, that is what they have to pay to get in.

Mr. LA ROQUE. Yes, sir.

Mr. WILLIAMS. What do you think about graduating that?

Mr. LA ROQUE. I do not think that would be necessary for this reason, Mr. Williams: In the first place, a bank can only borrow, I mean a building and loan or a savings bank can only borrow from the regional bank at twelve times the amount of their subscription, and the more stock he subscribes, the more he is going to be able to borrow from that bank, and it is to his advantage to have his subscription to stock as high as he can get it, so that he can get additional funds. Do you not think so?

Mr. WILLIAMS. On the other hand, is not $2,500 a rather large fee, initiation fee, to get into this institution, rather large for a little fellow, and it is intended to help him primarily, as you say. Do you not think that is just a little high on him?

Mr. LA ROQUE. I do not think so. In the first place, let us get away from that initiation-fee idea. It is an investment in stock. Mr. WILLIAMS. It does not make any difference what you call it. He has to pay that much to get in.

Mr. LA ROQUE. Yes, sir.

Mr. WILLIAMS. That is it.

Mr. LA ROQUE. But he should get interest on it just the same as making a mortgage for a $2,500 loan at 6 per cent, and it is assumed that this will pay him 6 per cent interest on his investment, just the same as interest on a mortgage for an equal amount.

Mr. WILLIAMS. But it withdraws that much money from his institution.

Mr. LA ROQUE. It withdraws it from direct loans to individuals, and puts it in an organization so that he can loan $30,000 to those people.

Mr. WILLIAMS. But it takes that much to start on.

Mr. LA ROQUE. Yes; but that $2,500 investment, rather than intiation, in addition to getting 6 per cent interest on that, he will borrow $30,000 with that as a basis, and I think, as a matter of fact, he had better make it $2,500 so as to help increase his borrowing capacity. The average association which does not need as much as $30,000 would not need this bank anyway.

Mr. WILLIAMS. What is your idea as to the necessity of appropriating the entire $150,000,000?

Mr. LA ROQUE. I think the greater the amount of capital, the greater good will will be accomplished. Now, I frankly do not believe the Government will ever have to put up half of that. I have in mind the calculations that are made to-day on North Carolina. North Carolina building and loan associations themselves will subscribe for $1,000,000 of that fund. The savings banks and other concerns in that State will subscribe for almost, I would not say quite that much; probably a half million. But, applying that generally throughout the country, building and loan associations throughout this country would subscribe to $100,000,000 of that amount, not within the first 30 days but I would say within six months at the outside. I do not really believe at the present time that the Government will ever have to put up over one-half of it. It is a good thing, and the associations are going in it, and if it is not a good thing it ought never to be started anyway.

I am assuming those members of the building and loan associations would have good common sense and my judgment is not any better than theirs, and that they would be delighted to come into a thing of this kind to provide the funds for their cities and their communities, and God knows they need it. I speak reverently when I use that expression, of course.

The CHAIRMAN. Thank you, Mr. La Roque.

Mr. LA ROQUE. I thank you gentlemen for the opportunity.

STATEMENT OF WILLIAM C. ERMON, PRESIDENT EQUITABLE HOMESTEAD ASSOCIATION, NEW ORLEANS, LA.

Mr. ERMON. My name is William C. Ermon, of New Orleans, La. I am president of the Equitable Homestead Association of New Orleans, having served as president for 23 consecutive years. I am also president of the New Orleans Homestead Clearing House Association, an organization of homesteads in New Orleans which exchanges credit information and other data for the benefit of all of the homesteads in New Orleans, and I am here after a meeting of three hundred homestead men in New Orleans who indorse this bill in toto.

I also represent at this hearing the Louisiana Homestead and Building and Loan League of the State of Louisiana.

At page 504 of the proceedings before the Senate Committee is an exhibit presented by Mr. Clark in which the information is given

regarding various States, and the replies indicate whether the different States and cities are overbuilt.

In the exhibit, shown as New Orleans, is the name of Mr. J. P. Hogan, and Wilfred G. Gehr. I have been in New Orleans 52 years, and I never heard of either of those gentlemen. Two of the Congressmen from New Orleans-neither of them know them. One United States Senator does not know them. The managing editor of the Times-Picayune, our newspaper, was not acquainted with them. I am at a loss to know how men unknown in the home building and financing industry could have gotten information that New Orleans is overbuilt.

There is one other corporation used in the exhibit, the Canal Bank & Trust Co. The Canal Bank & Trust Co. has not, to my knowledge; taken a loan on a home in its whole existence. At least, their vice president recently told me they never had, and, as far as official records go, I never have noticed any.

I claim New Orleans is not overbuilt, and I am fairly active in the affairs of New Orleans. Perhaps, if you make a measurement building for building, we have too many buildings, but a great many of them are not modern, and a great many need modernization, and, Mr. Williams, if you have gotten many letters from the building supply men in New Orleans, you have gotten them because those gentlemen, I have information, are endeavoring to arrange for the modernization of those buildings, and we had encouraged that all we know how, primarily in an effort to assist the unemployment situation.

I visited recently the office of the welfare committee and there it was found that of the men that the welfare is aiding, that a majority consists of carpenters, tinsmiths, paperhangers, and plasterers, and men employed in the building trades of our city, and for that reason we made a special appeal to the building supply men to take as part payment on any orders for building supplies, and in some cases as full payment on orders for building supplies, all homestead stock, which represents stock-in most cases it is on the withdrawal list, and which the holders of the stock who desire to make improvements to their buildings can not get the money for. I make that explanation in justice to the building supply men. If they have asked you to support this bill, they have done it at our urging, and after our efforts to get them to start the wheels of commerce going again.

In our town and in our State the question of a State loan bank, which is similar to the legislation you are now considering, has been the live issue for several years. We have watched closely the operation of the New York State land bank, and our legislature in 1930 gave us affirmative authority to subscribe for stock in either a Federal or a State loan bank similar to what we are now urging. A Federal home loan bank is needed to prevent a recurrence of our present situation where the building and loans find themselves in a position of being called upon to pay interest to the commercial banks as high as 8 per cent per annum, and this only after a 10 per cent deposit is maintained, making the interest charge 8 per cent. Much can be said on that feature, which approaches dangerously close to a violation of the usury law.

Now in our State, we are operating under the Napoleonic code, and a notary public is quite an important individual under that code;

in fact, next to the mayor of the town. They are limited in number and heavily bonded, and are, in a large measure, what you would call trust officers, I imagine, in a common-law State. They make investments, examine titles, and act as general trust officers, and many of those men handle millions of dollars. In the past one of our notaries has handled considerably more mortgages than any building and loan association has. Now, the time has been reached when his clients, because of the failure of business and because of the failure of the sugar crop, and I suppose you are familiar with that, these men, clients of this notary, want their money, and the notary publics and others similarily situated are making demand on the people who have had straight mortgages. Daily, and I mean that literally, daily I have from 3 to 10 people who approach me in my capacity as president of the New Orleans Homestead Clearing House Association and ask me to get loans for them, and of the 55 associations in our town I am unable at this time to find one that can accommodate these people.

Mr. Williams asked a question as to how the borrower is benefited by this thing, and I think Mr. LaRoque answered that fairly well, but let me tell you of a condition that has come under my personal observation before I left home, when I was at the home of a friend. whose home is worth $15,000 in normal times, and who at one time had a $6,000 mortgage, which has been paid down to $4,500. Now he says, "I see you are advocating to help the unemployment situation by urging us to modernize." He said, "I need $1,500 worth of repairs to this home." It is a beautiful home, in the so-called garden district. He said, "I need modernization, but where am I going to get the $1,500? Why do you not provide the means of getting that for me? If I go to a loan company such as the Morris plan, you make me pay it back in 10 months to a year. I can not stand that." A few homesteads will open up, and that is synonymous to a building and loan. "If you make me a loan of $1,500 and bring back my loan to $6,000 where it was originally, I can very easily spend $1,500 and start $1,500 in the channels of trade."

We were unable to accommodate that man. It was simply out of the question, and there are literally thousands of people like that in our town.

Now, in the district where I was born and raised, the old part of New Orleans, there are literally thousands of houses that have no baths, and no plumbing connections whatever. If we could accommodate those people with a few hundred dollars in each case, we would start the wheels of commerce going, and they would be made happy, and we would begin to start a pay roll going around our town.

I heard some reference here to the Reconstruction Finance Board. I came up here especially to appear at the Reconstruction Finance Board and to protest against the personnel of the local advisory committee.

Where do the homestead men come in? I have not yet been able to get a blank to apply for a loan. Only after I reached Washington did I learn of a loan made to a homestead in North Carolina. Up to this moment we have not been able to get substantial consideration at the Reconstruction Finance Board.

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I am going back to-morrow to do some more fighting. Perhaps we will get somewhere. Up to now we have not gotten anywhere. Mr. HANCOCK. How long has an application been filed with them? Mr. ERMON. We have had no blanks up to this good minute. Mr. HANCOCK. Have you tried to get application blanks?

Mr. ERMON. Yes, sir. They are not printed yet. They have not left Washington yet. They had not left at midnight last night. That is a banker's party.

Mr. HANCOCK. You say it is what? I do not quite understand you. Mr. ERMON. It is a banker's party. It is all for the bankers. Excuse my slang, but that is what I mean. It is controlled by the bankers in our town, and I would like to be particular to say this, that not every man on the advisory committee is unfriendly to homesteads, but the head of the thing is not only unfriendly but unfair to the homesteads. He was not even fair in an explanation of the meaning of the Reconstruction Finance bill when he made an address in New Orleans recently. I protested against his being on the board at all.

Mr. WILLIAMS. Just a question for information concerning that. Are they getting out a special form for the homesteads or building and loan associations to make the applications on? Is that what you mean?

Mr. ERMON. Yes, sir. We were not in it at all. We sent a wire of protest immediately to President Hoover, then.

Mr. WILLIAMS. They are specifically mentioned in the act. Mr. ERMON. They are positively, but we might just as well not be in the act. There is no building and loan man on the boards anywhere in the country. The five men in my county are tarred with the same brush, and the head of the thing is unfriendly. I am a responsible citizen of New Orleans, and I am not telling it secretly. There are four generations of my family there.

Mr. HANCOCK. Was your name suggested for the committee? Mr. ERMON. It may have been.

The CHAIRMAN. What is that organization you are talking about there, the Electric Bond & Share?

Mr. ERMON. That is the parent company that controls all the street railroads in a great many cities in the South. They control our street railway, electric company, and gas company, and the man who is the head of our committee is chairman of the city board of liquidation. He is the chairman of the Electric Bond & Share public service corporation. He is chairman of the bankers' clearing house and is chairman of Uncle Sam's committee. He has his foot on our necks in every organization there, and I am jealous. I want to distinguish between jealously and enviousness. I propose to have a part in the management of things in my town.

Mr. WILLIAMS. Do you have any fear that if we set up this organization it might get in control of that kind of men?

Mr. ERMON. I guarantee you that it will not.

Mr. HANCOCK. We were assured that this new organization-the Reconstruction Finance Corporation-would take care of the little fellows in distress as well as the railroads and big banks, though we knew they would come in as secondary beneficiaries.

Mr. ERMON. I wish I had been sworn as a witness, so that it would carry more force, if that would be possible.