In other words, they can not pledge more than $150 for every $100 they borrow, and the home-loan bank would require a greater amount of collateral than that.

Mr. CAMPBELL. They could only borrow $90.

Mr. HALL. Yes.

In Indiana they have both nonnegotiable and negotiable mortgages. The general practice is that the bank loans on unsecured notes. The law provides that notes may be assigned with the approval of the circuit court. The general opinion of the building and loan men, and of the attorneys for them, is that the law must be amended before they can come in and take advantage of the provisions of this bill. - However, the reasons they did not give me in their letter.

Those are the four States.

Mr. CAMPBELL. You mentioned something about Maine, and one other State, I think.

Mr. HALL. Maine and Nebraska. They can not borrow at all. Mr. REILLY. You have only heard so far from half of the States? Mr. HALL. That is all. The people in Kansas, for instance, said that they could come in all right, and they sent me a copy of the law, but I found this limitation, and it is almost identical in formwith the one in Massachusetts.

Mr. LUCE, I have the impression that the Massachusetts law was copied in some particulars by other States.

Mr. HALL. No doubt.

Mr. LUCE. Undoubtedly such is the source of that phraseology. Mr. HALL. It provided that they could borrow from banks, trust companies, insurance companies, and others of that character, being the only ones that they naturally would expect to borrow from. Then came along this Federal home loan bank bill, which was not included, and they have taken care of that this year, I think last month.

Mr. CAMPBELL. Do you not think that there will be a movement on the part of the building and loan people to have those laws amended so that they can get the benefit of this act?

Mr. HALL. Oh, yes.

Mr. CAMPBELL. Just as the banks throughout the country have had the State laws changed so that they can join the Federal reserve system?

Mr. HALL. Undoubtedly. That is why the 42-month provision was put in the bill, so that they could buy stock in it. There are more prevented from buying stock than there are from pledging their notes and deeds of trust.

Mr. CAMPBELL. When those laws were passed originally, they hardly had reference to this kind of stock.

Mr. HALL. No; but it states how they can invest their funds. Mr. CAMPBELL. If you could confine it to that

Mr. HALL (interposing). Yes; I think there will be a general movement among all the States. Maybe when they go through it with a fine-tooth comb, they will find other reasons why they can not loan, and those will have to be taken care of by amendments to the State laws.

Mr. CAMPBELL. We want to find reasons for lending the money, to get out of a bad situation.

Mr. LUCE. When the conference of those interested in the matter of redrafting this bill was held, we were handicapped by not having information concerning Missouri and several other States and the many building and loan witnesses from different States, who appeared before the Senate subcommittee, gave us assurance that there would be no difficulty in connection with the immediate participation of a large number of States. I for one am very grateful to Mr. Hall for bringing these facts before us; and, by the way, let me say that in the Senate hearings that conference, which was wholly unofficial, is referred to at times as the "House Subcommittee," which

was an error.

Mr. REILLY. It was one of the unofficial committees of the House. Mr. LUCE. One of the unofficial committees of the House. Mr. REILLY. The same as the unofficial committee on the repeal of the eighteenth amendment.

Mr. LUCE. In view of Mr. Hall's suggestions, I am hopeful that the 42-month provision can be redrawn by Mr. O'Brien to meet your needs.

Mr. HALL. I think it can be, and, as I say, we are perfectly willing to come in under the short-term loan of one year, or even take the 42-month provision. My personal opinion is that the bill will be better if it lets us in at the main part of it, but that, perhaps, will meet too much opposition. I am speaking directly for Missouri. ** Mr. REILLY. Do you not think that the sale of the debentures of this organization will be seriously handicapped if the idea got out that there was nothing back of it except the stock of the banks and the promissory notes of these institutions?

Mr. HALL. It would be, for the reason that you would have to carry around an expert with you all the time to explain what you' mean by that. It is an abstract thing, and hard to explain, regardless of the fact that for the last 100 years the banks have been lending to them and never lost a dime. Even then it is hard to get the idea over. I did not make any headway before the Senate Committee, for the reason that it came to them all of a sudden, "What? Loan without collateral? You can not do that;" and I was through before I got started; but the condition exists just the same, and whether you like the amendment or not, you have the same condition to deal with in the bill as it is now written. You have those States to do business with, and it would do more than anything else to force them to amend their laws so that they could come properly under it.

Mr. CAMPBELL. There is no likelihood of any involvement by having this amendment in there, is there?

Mr. HALL. I do not think so. I have given it quite a good deal of study, and I have almost gotten to be a "bug" on the subject, but I can not see any reason why it would do anything to hurt the situation.

Mr. WILLIAMS. But your amendment would not relieve the situation as to all of these States, would it?

Mr. HALL. Not Maine and Nebraska, who can not borrow at all. They will have to amend their laws. But as to those who are limited as to the pledging of their securities, they give them the general right to borrow for all corporate purposes, and some of them pledge their.

securities for a certain thing. I think this would take care of most of them. We can borrow, and all of them can borrow money, so far as I know, except these two States in the Union.

Mr. WILLIAMS. Did I understand that there are some other States that have laws that prevent them from borrowing from an institution like this?

Mr. HALL. Some of them are restricted; but that could be changed. Massachusetts has that, and so has Kansas.

Mr. WILLIAMS. That would require a change in the law?

Mr. HALL. That is true.

Mr. WILLIAMS. And there are other States, as I understand you, that could not borrow from the institution for the purpose of making other loans or paying off loans that do exist?

Mr. HALL. Yes.

Mr. WILLIAMS. Your amendment would not relieve that situation, would it?

Mr. HALL. Not immediately.

Mr. WILLIAMS. Have you any suggestion as to how to reach them? Mr. HALL. I do not know how to give them immediate relief, because they are prohibited generally from borrowing, except for certain purposes.

Mr. WILLIAMS. Then we have two States that have no exception, and for that reason they can not come in at all, and your amendment would not reach them?

Mr. HALL. No; not at all. I think that there are, perhaps, innumerable amendments that the different States would like to introduce to take care of minor defects, and no doubt you have had many of them presented, but this is of such major importance that I do offer it, because it would be a great help and an immediate help. Mr. CAMPBELL. It goes as far as you think it is possible to go? Mr. HALL. Quite so.

Mr. CAMPBELL. And it meets as many emergencies as it is possible to meet?

Mr. HALL. It meets the greatest number.

I would be glad to give you a memorandum of what I have learned from the different letters as they come in.

Mr. CAMPBELL. How long ago did you send them out?

Mr. HALL. About 10 days, I think; but some are a little slow in answering.

Mr. REILLY. They probably have to get an opinion from the Attorney General in many instances.

Mr. HALL. Lots of them do, and lots of them do not want to answer, perhaps, but there will be more of them coming in.

Mr. REILLY. We are very much obliged to you, Mr. Hall, and if you will give us some more information along that line we will be glad to receive it.

(Subsequent to his appearance before the subcommittee, Mr. Hall left with the subcommittee the following memorandum :)

STATES THAT COULD QUALIFY UNDER FEDERAL HOME LOAN BANK BILL WITH POSSIBLE CHANGE IN STATE LAWS

North Carolina.-General practice is to pledge mortgages when required, but borrowing is often done on unsecured notes. The law is silent as to power to pledge mortgages and deeds of trust and may have to be amended.

Michigan. The general practice is that associations make loans on both negotiable and nonnegotiable notes and mortgages. Some have by-law provisions prohibiting the assignment of mortgages as collateral. Associations generally borrow from banks on unsecured notes (without collateral). Effort will be made at a special session of the legislature this year to clear up the situation by necessary amendment.

← Mr. REILLY. Is there anybody else that wants to be heard in favor of the bill? If any of you gentlemen against the bill want to start now, you may do so.

STATEMENT OF HIRAM S. CODY, OF CHICAGO, ILL.

Mr. REILLY. Give your name and address and whom you represent. Mr. CODY. Hiram S. Cody, of Chicago, appearing simply to read the statements of absentees.

Mr. REILLY. Have any of these men appeared before the Senate committee?

Mr. CODY. There were about 40 witnesses desiring to be heard in opposition to the bill when we were concluding the Senate hearings, and in order not to prolong those hearings, we did not call the witnesses, although the opponents of the bill had presented only 11 witnesses, as against 34 in favor of the bill. The hearings had gone on for some time, and those witnesses that I have just referred to were not called; and for the same reason, in these hearings, we have asked your permission to submit these statements from those who would be glad to come if they were called, but it would take several days' time to hear them, and as we have a number of witnesses coming for to-morrow and the next two days, we believe that that. will cover the presentation.

The first statement is from Senator Charles O'Connor Hennessy, who is described in the official book of the United States Building and Loan League as one who has made significant contributions to building and loan practices, and who will be known especially for his excellent and constructive efforts in guiding the affairs of the legislative committee of the United States League to many a significant and successful conclusion which has protected and strengthened building and loan principles.

Then this memorandum goes on to say that the chapter on national legislation in this volume indicated the extent of Senator Hennessy's contribution to the legislative background of building and loan.

The Senator says

(Mr. Cody thereupon read Mr. Hennessy's statement, which was later expunged from the record.)

Mr. REILLY. Did he not appear before the committee at the hearings?

Mr. CODY. No, sir.

Mr. REILLY. Did not Mr. Hennessy give extended testimony before the committee before?

Mr. CODY. No, sir. He filed a statement; and in that connection, with his statement Senator Hennessy presented an article Mr. REILLY. It must be the other Hennessy.

Mr. CODY. He presented before the United States Building and Loan Convention an article on this general subject. There are two

statements in the Senate proceedings; the proponents of the bill have filed his address, which, on reading, would give you the impression that he is in favor of this bill, but if you will look at the appendix you will find his later statement.

Mr. LUCE. I have on my desk several hundred letters, I should say, from persons of responsibility and standing in their communities approving this bill. I had not thought of asking their insertion in the record, and I am wondering whether we would better establish the precedent.

Mr. REILLY. I have the same number, and I was wondering whether those letters ought to go in. I have a great many letters in my office on one side or the other. I think what this committee is interested in hearing are arguments as to the merits of the bill more than a man's view as to whether it is propaganda, or what it may be.

Mr. CODY. That is what we intend to present.

Mr. REILLY. As far as this hearing is concerned, and the other hearing, the matter has been a debate; and I think this committee is interested more in arguments on the merits of the bill, and con.

Mr. CODY. That will be the nature of the testimony that will start to-morrow morning. While many of these are not arguments, I see your point, and if you will permit me merely to give the names it will save a lot of time.

Mr. REILLY. We are trying to deal with facts. If the facts have not been presented correctly, something to show that they are not facts ought to be presented now.

Mr. CODY. I see the point.

Mr. REILLY. I do not think that we had better file that letter. Just give the names of the men.

Mr. LUCE. In your testimony before the Senate committee, on page 140 of part 1, you set forth three things that the advocates of this bill contend. The second was this:

That it will help the manufacturers of building supplies and members of the building trades. According to estimates made public by the Federal Government, it would be possible to construct 3,000,000 residences within the next five years, if the plan should be put into effect.

Will you inform me as to what branch of the Government made that statement?

Mr. CODY. I will be glad to. The New York Times, of December 6, contained a 2-column, square-boxed article, stating that reports made to the Federal reserve and the Treasury Department indicated that 3,000,000 residences could be constructed as a result of this bill. I will be glad to get you a copy of that clipping, and endeavor to run that down through the Federal reserve and the Treasury Department, to come to the source of that report.

However, in the latter part of the testimony, Mr. Nelson, executive secretary of the National Asociation of Real Estate Boards, said that the estimate of the Department of Commerce was 2,000,000 new residences intsead of 3,000,000 new residences, and, even without going further on the other, the opponents of the bill would accept that correction, if such is intended, and take the 2,000,000. But if you have a house that you want to sell or rent in one block, and there are two other houses empty in that block, one new residence in that block is contrary to your best interests.