Eighty-eight per cent of the resources of these associations, amounting to $7,790,835,171, is invested in mortgages, substantially all of which are on homes. The institutions of these people are an increasingly important unit of the financial structure of this country and the home loan bank measure would provide for them in a manner similar to the provisions made for other financial groups. The United States Building and Loan League was organized just prior to the first World's Fair in Chicago in 1892. To-day it includes 45 State leagues and represents over 6,000 of the leading building and loan associations in every State, both through individual memberships and through affiliated State leagues. The Home loan bank bill has been considered in detail by most of our State leagues, and, with one exception, they have unqualifiedly indorsed its principles and its present form. The United States Building and Loan League, represented by its directorate, following a conference of some 200 of the leading building and loan officials held in Washington at the time of the President's Conference on Home Building and Home Owership, adopted a resolution, which in part declared that: In times of depression when unemployment impairs the ability of our people to save systematically and causes them to draw heavily on their accumulated reserves, not only is the capacity of the building and loan associations to fully serve their patrons severely taxed, but the heavy calls to refinance resulting from the demands for repayment by institutions holding straight mortgages, whose funds are subject to immediate withdrawal, create a situation which makes necessary the establishment of a home-financing reserve system not only for temporary emergencies but for permanent needs as well. The building and loan association is a creature of the laws of our several States separate and apart from every other type of financial agency. Its beneficent purposes have given it universal recognition. In any proposed set-up for a rediscount or reserve institution, the functions and services of the building and loan associations should be preserved and no different financial types should be included so as to embarrass the standing and capacity of those savings and home financing organizations which have so successfully served the people of the United States and for whose plan no substitute or superior has ever been conceived. In a Nation composed so largely of wage earners and persons of moderate means it is apparent that home ownership must be achieved through financial institutions lending sufficient sums on the security of the home and on the faith and ability of the borrower to pay small amounts out of his earnings as received to cover interest charges, taxes, insurance, and a portion of the principal. The building and loan association provides this means of home financing without excessive costs and charges, and offers a time-tested plan of small, periodic payments spread over a sufficiently long period of time to obviate renewals or the calling of substantial sums of money. No straight mortgage or other plan of short or long maturity could have accomplished such successful results in home ownership. The officers of the United States Building and Loan League, as well as thousands of our membership, have studied the home loan bank bill and find it admirably adapted to supplying not only present but future needs of the home-financing organizations. The bill is satisfactory in form and principle and we urge its passage without change of its salient features. It will lace resources at the command of the home-financing institutions, which will lead, first, to lower costs of mortgage credits, and, second, to higher percentage loans to the sturdy, honest, home purchaser, thus gradually eliminating the onerous and costly second mortgage. We distinctly feel that this strengthening of the local home-financing institutions will immediately and permanently work to the benefit of the small savers and the purchasers and owners of homes. Mr. Chairman, if it suits your convenience, I would suggest that you call on Mr. Friedlander, who will present additional summary items on behalf of the United States Building and Loan League, and then if there are any questions the members wish to ask we will be pleased to answer. Mr. REILLY. Mr. Friedlander. STATEMENT OF I. FRIEDLANDER, CHAIRMAN ADVISORY COMMITTEE ON STATE LEGISLATION OF THE UNITED STATES BUILDING AND LOAN LEAGUE, AND PRESIDENT OF THE GIBRALTAR SAVINGS AND BUILDING ASSOCIATION, HOUSTON, TEX. Mr. REILLY. You also appeared before the other hearings? Mr. REILLY. Now, I make the same statement to you that I made to Mr. Best, that if you have anything additional to offer, we will be glad to hear you, or, if you wish to summarize in a short time the arguments you want this committee to consider, we will be glad to have them. Mr. FRIEDLANDER. I have been asked, Mr. Reilly, to attempt to cover the arguments, to sum up the arguments, for the building and loan proponents of this measure and also to attempt, inasmuch as we had no occasion to cross-examine the witnesses of the opposition before the Senate committee to meet some of the objections which were raised by leading witnesses there against the bill. Mr. REILLY. Yes; I would like to hear it. Mr. FRIEDLANDER. I believe that you will find that, while it may take some time, it will probably conserve the time of the committee, in that we are attempting to get it done with a few witnesses rather than with many. No committee of Congress would seriously consider an attempt to repeal either the Federal reserve laws or the Federal land bank enactment and substitute in the place of both, or either, any temporary expedient for relief of credit, such as the recently enacted salutary Reconstruction Finance Corporation bill. And yet, the opponents of the Federal home loan bank bill, offered by the President as a permanent system of credit for the proper financing of homes, might properly, if they were consistent, make such a proposal, for every argument which has been made against this measure, if you would dignify their assertions as "argument," was made fore the committees of the House and the Senate at the time these against both the Federal reserve and the Federal land bank acts before the committees of the House and Senate at the time these acts were considered. The strenuous opposition arguments were likewise made by the identical interests that now so violently oppose this measure. Antagonists of the efforts to decentralize the commercial credit structure of the Nation, through the enactment of Federal reserve systems, made desperate efforts to prove to the Banking and Currency Committees of Congress 20 years ago that only temporarly relief measures were needed, and that, with the end of the then tem porary credit stringency, commercial credit, which had passed safely through the Civil War and other distress periods of finance, would need no additional or different system. In a similar way every conceivable effort was made three years later to delay and then to defeat all suggested remedial legislation designed to create the Federal land bank system, a system of reserve credits to serve the great agricultural interests of the country. Even as the great banking interests of New York 20 years ago strenuously opposed the enactment of laws creating a system that would give a comparatively even and ample flow of credit to all parts of the country as, when and where needed, and deprive the giant banking interests of that city of their practical monopoly of commercial credit dictation, so now do the gigantic life insurance companies of that same city and section, acting through their lending agents, the Mortgage Bankers Association, oppose the home loan bank bill before you, and for similar reasons. The same specious and spurious arguments are being made against this bill and are a part of the voluminous Senate hearings records, as were made against both of these great constructive acts, one of which stands as a monumental work of financial achievement to a former chairman of this committee, the Hon. Carter Glass, of Virginia. It may not be amiss to recall this little matter of past financial history to the attention of this committee so that proper and due consideration may be given to the dire predictions which are made by self-serving experts before congressional committees whenever financial measures are proposed for the benefit of the unorganized common, every-day folk. Such measures uniformly meet the opposition of those selfish interests that such measures tend to drive from special privilege monopolies. That you may compare the opposition that has developed to the rounding out of our credit structure through the enactment of a reserve credit agency for home-financing to the opposition made to the creation of the Federal reserve system, may I not quote a few excerpts from the authoritative History of the Federal Reserve System, written by Dr. Henry Parker Willis, of New York, who served as technical adviser to the Committee on Banking and Currency of the House of Representatives in the preparation of the Federal reserve act. Senator Glass, who appointed Doctor Willis in such capacity as expert in the technique of banking credits, wrote an introduction to the book of Doctor Willis, from which book I quote. Quoting the Hon. A. B. Hepburn, chairman of the Board of the Chase National Bank at the time of the passage of the Federal reserve act and who also was chairman of the currency committee of the American Bankers Association, Doctor Willis quotes in his book: The bankers did not desire anything that would put the Government further in the banking business. That being the case, it was necessary for him to modify his general statement that what was desired was a central banking system organized upon European lines. Such a system, in fact, was by no means what the bankers desired. They were willing to see the organization of a central banking system, but only upon condition that it should be confined to emergency uses. 113235-32-3 The same argument being made against the establishment of this credit system at this time, we find presented, which forms part of the Senate committee hearing, in which the interim committee of the American Bankers' Association to-day oppose a permanent credit structure for home financing, wanting only "emergency needs" taken care of through the Reconstruction Finance Corporation. I shall only give you a few sentences from this very interesting history to show you that previous committees of Banking and Currency of this body had to meet the self-same bugaboos from the self-same and related interests that you will be called upon to listen to in opposition to this measure. According to the author there were three lines of attack made by the bankers against the Federal reserve bill. The first and most obvious plan of attack was that seeking to discredit the bill as drafted on account of its "amateurishness." It may be well to note at this point that the Ohio Bankers' Association made such an attack upon the home loan bank bill before the Senate committee considering it and offered amendments that would emasculate it and defeat its worthy purposes. Quoting Doctor Willis again: The second method of criticism consisted of charges directed against the intent or effect of the bill in general terms. It was sought to show at first that the influence of the measure would be to produce a very great contraction of the currency and hence a severe panic. In singular contradiction to this effort was the attempt to make out a case for an inflationary tendency on the part of the bill. The doleful predictions and hopelessly pessimistic forecasts thus put forward at first had a great effect upon the minds of the committee members, but as soon as it became evident that there was a contradiction between the inflation and the contraction schools of thought, members of Congress not unnaturally refused to be frightened. And here we find a parallel in the consideration of the home loan bank bill before the Senate committee, for we see some mortgage bankers and insurance companies raising the scare of "inflation of "over-building," while others charging that the terms of the bill are so restrictive that they could not possibly offer an expansion of credit that would be helpful to the institutions or to the home owners. Dr. Willis says further that Another effort to influence the situation was, however, set on foot in New York. The plan determined upon was that of arousing alarm about the price of United States bonds. · And, while I will not pursue this line of attack in detail, I merely call your attention to the remarkable similarity of argument here with the great concern expressed by one of the chief opponents of the bill, Mr. Hiram F. Cody, who attempts to make this same point against the home loan bank bill in his summation of arguments against it, being his point No. 4 of his testimony. I want to give you a summation of this chapter of the history in Doctor Willis's own words: There is the obvious indication that the bankers no more than other sections of the community were inclined to follow the public interests and that they did their utmost to defeat or emasculate a measure that was subsequently considered to be conspicuously sound and beneficial. Their opposition, moreover, was directed at the characteristic elements in the measure and had it been successful would entirely have deprived the bill of any effectiveness or merit. This is an important fact of financial history, deserving to be carefully borne in mind. It effectually unmasked a hypocrisy, which had for long years maintained that the bankers of the country were seeking only the wellbeing of the business world or of the Nation, a view which had been very currently and very widely adhered to throughout the country. The Federal reserve act was perhaps the first measure of broad international significance which was completed and eventually brought to passage with the direct, consistent, and steady opposition by the banking interests which were most materially affected by it, and which nevertheless within a comparatively short time proved its utility not merely to those interests, but to the Nation as a whole. This is history that stands out boldly as persuasive proof that, having been wrong in their opposition to the enactment of a credit measure, with which details and effect they were, or should have been, more intimately familiar with than with the home-financing mortgage business, upon which subject their experience is narrowly restricted that they may be likely wrong in their present opposition to this measure. It should be borne in mind by this committee that this bill is before you as a result of the recommendation of President Hoover to Congress in his regular message and in his later special message dealing with the economic condition, in each of which messages he urgently recommended the passage of a bill of this character He stressed the need for such enactment as a permanent measure. to take its place as a complement to the two great reserve credit systems already successfully and beneficially operating, namely, the Federal reserve system and the Federal land bank system. He also stressed the beneficial effect that would arise from the relief given under present emergency conditions to the home-financing institutions and to the hard-pressed home owner, who is being sorely tried and severely harrassed by threatened and actual foreclosing of homes by the thousands throughout the country, due to contracted credit conditions. He did not offer this measure as an alternative for the Reconstruction Finance Corporation or vice versa, but as a companion measure to it, and in his announced program suggested the if necessary, of $150,000,000 of Government funds as initial capital for this banking structure. We are for the home loan bank act because? First. There is a distinct need for the completion of our credit structure that the requirements of the aspiring home owner may be properly met by the extension of home-financing credit to him at low costs. We should face the ugly and discomforting fact that home ownership in the United States is falling sadly behind and that we are drifting into a Nation of tenants. The percentage of homes owned and occupied by the owners has been slipping now for 30 years. The percentage figures for the year 1900 census for the entire United States were 46.1 per cent of families owning their own homes; by 1910 it had fallen to 45.8 per cent; and by 1920 it had again been reduced to 45.6 per cent-not such a great loss, but any loss in this wealthy and growing country is too much. The facts released from time to time by the Census Bureau since January 1, 1932, bearing upon this subject of home ownership and giving the 1930 census figures, are even more startling in their significance. Only about one-fourth of the States have had their figures completed, but a few typical ones from different sections of this great country will evidence even greater losses in percentage of |