home ownership in these States in the period from 1920 to 1930that 10-year period of our greatest prosperity.

To illustrate, and I have taken States from different sections of the country: In Maine the loss was 4.9 per cent for the 20 years from 1900 to 1920; the loss for the years 1920 to 1930, for the 10-year period, was the same, 4.9 per cent, the same in one-half the time. In Wisconsin, Mr. Chairman, your State, your loss in home ownership from 1900 to 1920 was 2.6 per cent, and in this great period of prosperity your loss in home ownership from 1920 to 1930 was 6 per cent in one-half of the time.

In North Dakota the loss was even greater. From 1900 to 1920 the loss was 13.9 per cent, and from 1920 to 1930, 10 years, in onehalf the time, the loss was 10.6 per cent.

In Alabama, in the South, the gain from 1900 to 1920 was 1.1 per cent, and the loss from 1920 to 1930 was 1.03 per cent.

In Utah, the Far West, the loss from 1900 to 1920 was 7.5 per cent, and in half the time, from 1920 to 1930, they had a loss of 4.6 per cent.

The main reason for this loss in home ownership, when there should have been a distinct gain under the conditions prevailing the past 10 years, is an insufficient amount of the proper kind of home-financing credit, the long-term, amortized, low-cost credit without the discouraging and costly features of short-term, commissionburdened, and second-mortgage type of promotional home financing. The home loan bank bill is offered for the purpose and is designed to serve the purpose of proper home-financing needs, and will, if enacted into law, in our judgment convert the steadily decreasing percentage loss of home ownership in the urban towns and cities of the country into an increasing percentage.

Second, because it forms a part of-and an important and integral part of the President's comprehensive program for economic recovery. The investment in the homes of the country is a significant and imposing portion of our national wealth. The paralysis which has overtaken values due to credit conditions which this bill is designed to relieve must be removed before business conditions can recover. I want to commend this committee for the important part which it played in so quickly passing the Glass-Steagall bill to broaden the eligibility provisions of the Federal reserve act. At the same time I desire to emphatically express the opinion that it is just as important that the life savings of millions of people, that were put into equities in small homes throughout the Nation, should be preserved from total loss. The prevention of further deflation in values upon these modest homes due to contracted credit conditions should receive similar consideration by the enactment of the Federal home loan bank bill to that accorded banks and their customers, which dictated the speedy passage of the GlassSteagall bill. All credit to you for doing what you could to save the savings of people invested in margins of stocks and bonds, by preventing enforced further liquidation of these securities; now, let us have similar consideration for the savings of families invested in homes.

Third, the next 10 years will see a further drift of capital formerly employed in the home-financing field away from such fields. The sad experience of private individuals holding mortgages on

homes, who, under present conditions, find themselves unable to use such notes as collateral and unable to find a market for them will prove sufficient to discourage a future investment of this nature. The closing of banks by the thousands, at least half of them ascribed. to" frozen conditions" due to inability to turn into cash mortgages held in their portfolios, has removed millions of capital that had been employed in this field, and the lesson of these banks will not be lost upon other banking institutions, who will not follow such a hazardous course of investment with the demand funds of their customers unless some reserve agency of this character is set up to give liquidity to mortgage investments. Life-insurance companies are facing the possibility of largely reduced income by reason of the enormous lapsations, which will naturally follow the stupendous totals of policy loans that have rapidly mounted to imposing percentages upon their balance sheets. This will reduce their lending facilities in this field. Building and loan associations, which have had to disappoint their millions of investors when, due to present extraordinary conditions, they have been unable to maintain a reputation of 50 or more years of returning the investment within a reasonable notice, will find their incomes reduced and their lending abilities materially reduced unless they can establish a credit agency that will bring new funds such as would reach them through the beneficent effects of the home loan bank bill. There have been hundreds of mortgage companies that had developed during the "easy times," which received their funds from the sale of mortgages and bonds, which are no more, and whose sorry records will prevent for years to come the development of other corporations of the same

character.

Fourth, because thousands of men now unemployed can again be gainfully employed if the credit facilities of the home loan bank bill are speedily put into action to furnish money for needed repairs and additions and modernization of homes already erected. Thousands of other citizens having jobs and having saved for years with the intention of building when conditions were "right" would build now, when labor and materials are the cheapest they have been for years, if they could secure assistance in credit channels without bonuses and without incurring the dangers of short-term financing. Fifth, because through the mobility of credit afforded by this bill and the continuous supply of available credit upon proper terms, interest rates upon the best security of proven experience the security of the home of the family-will be reduced and funds will be available through local lending agencies that are attuned to the sympathetic consideration of their own fellow citizens.

Sixth, because the millions of investors in building and loan associations and policyholders in life insurance companies are entitled to have the safeguard of a credit reserve system to which these corporations may go and use the mortgage securities into which the customers' funds have been placed and secure, by the assignment of such mortgages, upon a safe and workable reserve credit basis, the cash with which to return them their investment when they need it. Seventh, because having induced thousands upon thousands of good honest citizens to undertake home ownership the wrong way— by a short-term mortgage now coming due-it is incumbent upon the mortgage brokers and life insurance companies to lend every

assistance in the establishment of a system whereby these citizens may save their equities by finding credit upon a proper basis through amortized long-term loans.

Eighth, because the experience through which thousands of homeowners are going in the loss, by foreclosure, of their homes, home ownership will be permanently injured as a national objective unless through the establishment of a credit system designed to prevent the recurrence, the public may know that such conditions can not again prevail.

Ninth, because unless there be a restoration of confidence in realty values hundreds of towns and cities having heavy bonded indebtedness and which depend upon the collection of ad valorem taxes upon real estate, principally homes, for the repayment of their debts and interest, will have their credit permanently destroyed. Property owners are failing and refusing to pay taxes under the present demoralized conditions of realty values, and the home-financing institutions are unable to advance the money for them for the simple reason that they do not have the surplus funds with which to make any loans even as necessitous as they may be. The millions of people who have placed their all in the purchase of a home must once again feel secure in their investment and have the courage to continue towards the full accomplishment of home ownership.

Tenth, the home-mortgage bank system will eliminate the costly and burdensome second mortgages. Assuming intelligent purchases of a home by a sturdy and reliable person, the moral risk being high, advances up to 70 and 80 per cent of sound value will become the practice of local lending institutions, in order to obtain such preferred loans and to keep their funds employed. The necessity of high-cost second mortgages will be thus eliminated.

Now, in the hearing before the Senate committee, an attack was made by representatives of the Mortgage Bankers' Association. I think it is but fair to this committee that you understand that a mortgage banker is not what we ordinarily call a banker in the commonly accepted sense of the term. In Texas no one is permitted to use the word banker, or bank, unless they are really a bank, and the Mortgage Bankers' Association are mortgage loan corporations representing largely life insurance companies of America. I state that authoritatively because I have here a pamphlet containing the roster of members of the Mortgage Bankers' Association of America under date of August 1, 1931, and I find listed the membership, first and foremost at the top of the list of the classification of insurance company members, which are as follows: The Aetna, the Massachusetts Mutual, the Metropolitan, the Equitable, and about 30 others, and the Union Central, and then we find affiliated and local groups, of which there are about 15 or 20, and there follows by cities a list of the mortgage bankers, most all of them listed as security companies and bond companies and mortgage companies, and individuals. There are very few of them that are banks in the commonly accepted sense of the term. Now, naturally, this bill undertakes, as I said before, to decentralize home financing credit. The only agency that we have to-day that is doing intersectional home financing from one city, where the home office is located, throughout the country, are the life insurance companies, and it is very easy to see that if funds be placed in the hands of your local banks and your

local trust companies and your local building and loan association, the power existing in a few institutions in the United States to control largely the policies and the rates of mortgage loans will be broken through the passage of this act, and, of course, these gentlemen representing those life insurance companies, and receiving commissions again and again on those loans and the commissions on the renewals of those short-time loans are vitally interested in opposition to this measure.

I have referred to the interim committee report of the American Bankers' Association. I have nothing to add to what I have said there. Now, I think it is sufficient to note that they fought long and stubbornly in opposition to the Federal reserve act. Whatever any critic may say about that act, the Lord only knows what would have happened in this country had we not had it during this time.

I just want to add this, that I do not believe the interim committee, and I do not know who composes it, but I do not believe they are representative of the thought of the United States even among the bankers. That is evidenced by the fact that Mr. Luce has introduced into the record replies to the questionnaires received from the bankers of the country, showing a ratio of 3 to 1 of those who replied in favor of the relief of this character. I have not looked over the tabulation of States, but I will venture to say that those replies come from the highways and byways of this nation, from the little towns, where, after all, about the only credit facility that is offered for home financing in those crossroad towns are the local banks.

Now, then, I am going to take up I think the principal argument made by the principal antagonists of this bill as Mr. Clark, the vicepresident of the Mortgage Brokers' Association, and, I believe, chairman of the legislative committee, summed up their opposition in numerical terms. He states first, in discussing our contention or the contention of the proponents of this bill, that we say it would decrease foreclosures. His answer to that is: "On the contrary, it would increase foreclosures, due to the lack of any sympathetic interest in local communities, as best evidenced by the fact that the Federal land banks, organized on a basis similar to the one proposed, have foreclosed and taken from the owners millions of dollars' worth of farm homesteads."

Now, the Federal farm loan act does not need any defense at my hands, but what are the figures? The mortgage loans, on December 31st, of the Federal farm loan or land banks amounted to $1,162,000,000, and the real estate judgment and foreclosure amounted to $38,000,000, which is approximately three per cent, and I want to tell you that the Federal land banks must have shown a great deal of consideration for the farmers of this nation, because I went over a few statements of the life insurance companies which deal in mortgage loans and few show a very much smaller percentage of property on their statement than 3 per cent.

The joint-stock land banks have $530,000,000 in loans. I do not have their figures as to foreclosure, but I want to answer that statement by saying that evidently Mr. Clark has not read this bill, because, had he read the bill he would not have made such a silly objection to it. The bill does not take away that sympathetic

interest on the part of local financing institutions. We do not propose, under this Act, as Mr. Luce explained to you this morning to send money down to a town and lend it direct to an individual. The building and loan association or life insurance company, and the bank continues to function just as it did before, and when it discounts a mortgage note the original bank or building and loan still is under the obligation to pay that obligation. The bank only uses that man's note as security and there is no change in the relationship or contacts existing between the man that borrowed then and the man that borrows from institutions now. So, there is nothing to that argument.

The second claim attributed to we proponents is that it would help home borrowers to get mortgage credit not now available. [Reading from Clark testimony:]

On the contrary, mortgage credit not based on sound business judgment is as dangerous to the borrower as it is to the lender. Overlending on mortgages means inability to refinance at maturity.

Now, the inference there is that there is plenty of mortgage money available, and if you just want money you can borrow it. This is that inflation argument. As a matter of fact, the criticism made by the Ohio bankers and others to this bill was that the limitations put into that bill of holding down the credit to twelve times the amount of stock and the limitation of 40 per cent of the value of the property and limitations of that character which with respect to the lending were too restrictive. Further, as a matter of fact, there is no mortgage money in this country to-day. You will note in going through that testimony submitted to the Senate committee hearings, you will find reports from all over the country, and you will find some reports stating that there is a surplus of houses. Well, now, we are not advocating the building of any more houses unless there is need for them, but if there is need for them in any community in this country there should be a source of credit supply ready for the man who needs a home, to take advantage of the present prices to build that home and to get it at a fair price.

Mr. Clark, in his testimony, stated that there was plenty of money available. I have a newspaper clipping from New Haven, where he comes from, a statement that of the building and loan association published, stating that they have applications for loans on file now for $150,000 without any money available for home financing, and I believe the record will show that another gentleman followed Mr. Clark and also made some statements to show about how much money is available even in New Haven. The fact of the matter is I want to discuss that testimony just a minute. I believe he said that his company is a mortgage company, and had an authorized capital of $300,000, and that they only had $80,000 paid in. I believe those were the figures. The record on that will bear me out. He says we have loaned millions of dollars.

Now, you gentlemen are on the Banking and Currency Committee, and if he has loaned millions of dollars on the basis of $80,000 in capital, he has had a source of credit, and he has had a source of credit that was more elastic than we put in this bill. In other words, he has been operating under conditions, gentlemen, that so far as inflation is concerned, would make your bill, Mr. Luce, look insignifi