and the Central Savings Bank also just established, and their only excuse was that there was lack of ready money. Mr. CLARK. Is that the only reason they were organized? Mr. LUCE. Yes; they would not have been organized without it. Mr. CLARK. Then it is a good thing for the country to have to face those situations; but when you are speaking of plenty of money, you are speaking of a relative term. We have not denied Mr. LUCE. I am not talking about that. I am talking about your assertion that is further repeated a few minutes later: "As I stated before, there is available all of the money necessary for legitimate projects." Why are you in a position to speak for the whole country? Mr. CLARK. Mr. Luce, who have you had here outside of the building and loan people as witnesses to testify and show that there was need of money? Mr. LUCE. I am speaking about what the Members of Congress believe as a whole, and individually. That is stated in all of the testimony we have heard on all of the matters brought before us. Our own personal experiences are just to the opposite of yours. We will simply put up the judgment of everybody against yours. Mr. CLARK. Mr. Luce, where does this bill give any moneyMr. LUCE. I am not talking about the bill; I am talking about the fact that you asserted there is plenty of money in the country. Mr. CLARK. I still assert there is plenty of money for legitimate projects; and I am speaking from the experience of a man who lends money. Mr. LUCE. Very well, sir. Now, in your further statement in the Senate hearing, you put in an excellent, or very sufficient, from your point of view, summary of objections to this bill, and your views as to the position of the proponents, and you say: It proposes a mortgage discount bank for the relief of institutions which, through practices inconsistent with sound mortgage banking, find themselves in a frozen condition. Now, the whole country is frozen. Has everybody followed practices inconsistent with your views of what is sound banking? Mr. CLARK. No; everybody hasn't. Mr. LUCE. It has taken its effect upon everybody in the country. Mr. CLARK. No; because this bill is primarily intended for the building and loan associations, and their policy is the thing that the mortgage bankers, in their first draft, presented to the Senate committee Mr. LUCE. I would like to say, for my own part in this bill, that I have always argued for the bill on the ground that it did cover all mortgage credits, no matter what type of institution. So let us forget, for the moment, the part that the building and loan people play in it, and see whether you are correct in your belief that all the mortgage institutions in the country have gone wrong in the matter of practices, and that the frozen conditions are due to the banks. I thought it was due to the drop in the value of property. Mr. CLARK. Mr. Luce, you have brought two points in there, and the second one is very important. I do not say that all the institutions that have gone bad have gone bad because of poor judgment in their practices; but we can not get away from the point that this is primarily a building and loan bill. Mr. LUCE. Well, you have covered that, in answer to the questions. Mr. CLARK. You have also referred, Mr. Luce-you have made a statement that is very important, that it affects the value of real estate and Mr. LUCE. No, no; I said that the business conditions throughout the country are due largely to the drop in values of all types of property, and not to the negligence of the financiers. Mr. CLARK. Yes; the real cause of that being too much money in 1922 to 1928. Mr. LUCE. Well, in the case of subsequent official investigation of previous crisis there were something over 100 reasons advanced. I think I must have heard 345 reasons for the present situation. Mr. CLARK. Yes. Mr. LUCE. So we will not attempt to analyze it now. Mr. LUCE. I wanted to be sure a little further as to what appears on the face of the bill, and I am referring to the statement that I previously took up with Mr. Cody, in part, and your statement covered the same ground. Mr. CLARK. This is Mr. Cody's testimony. Mr. LUCE. Now, I call your attention to part 3, page 585, of your testimony where appears a statement that may have influenced opinion more than any other statement that has been circulated. I call your attention to the fact that Mr. Cody's language was this: 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. Now, when you got to this same statement, you said: Proponents of the plan proclaim its power to stimulate construction of 3,000,000 new houses within the next five years. The mouth-to-mouth repetition of those statements is doing a lot of damage and making it difficult to get fair judgment on this proposition. Therefore, I inquired as to the source of that statement, and found that it was in an article in the New York Times which, if accepted on its face, might warrant the belief that some Treasury official had authorized it. As far as the inquiry goes, or has gone, and it has gone far enough, nobody connected with the urging of this proposal, from the President down, has ever made any such statement. Are you still of the belief that the proponents of the bill intend, or wish, or expect, that it will result in the building of 3,000,000 homes in the next five years? Mr. CLARK. Not now, Mr. Luce, I would not. Just a minute, let me finish this. If you will refer to the testimony of Mr. Nelson in part 3 Mr. LUCE. I do not need to refer to it. I have it right here. Mr. CLARK. Please permit me to make this statement for the record. Mr. LUCE. Go ahead. Mr. CLARK. You are putting me in a position that might be a little bit peculiar later on, and I know you do not want to do that. Mr. LUCE. No; putting in Nelson's citation there does not seem to me important. Mr. CLARK. I think it is very important, because as you say, this one institution loan program has disturbed Members of Congress, and it has disturbed some billions of dollars of investors in real estate to-day more than the Members of Congress could possibly be disturbed. Mr. LUCE. It is on page 549, part 3. Mr. CLARK. Can I get this into the record? Mr. Herbert Nelson, the secretary of the National Real Estate Board, stood up at a meeting of the Senate Committee on Banking and Currency during the hearing on this bill, as I was concluding the summary for the opponents, and he said: Senator Watson, I wonder if I could ask Mr. Clark one question? Mr. CLARK. If I am able to answer it, Mr. Nelson, I shall be delighted. Mr. NELSON. The statement has been made repeatedly that the proponents of this measure propose to build 3,000,000 homes inside of five years, and I know that no such statement has been made by our group or by the building and loan, or anyone else. And further he says: This country does not require 3,000,000 homes in the next five years. The best estimate that we have been able to get for the decade 1920 to 1930 indicates an annual requirement of about 500,000 homes; assuming that, during the next five years, we will have a somewhat declining population, immigration being cut off. That ties it all on the statement that we need 2,000,000 homes at the maximum. No getting away from that as authority Mr. LUCE. Certainly, I can interpret this statement as to the total home-building construction in the United States. The financing of that is an entirely different proposition. It may be necessary for you to build houses for 2,000,000 families, or 2,000,000 homes, but how large a percentage of the money for that will come through institutions concerned with this bill? What you have given out is that we are passing this bill in order that this bill may result in the building of that number of homes. What you have just said to us is the total of what all types of financing may be, whether the man puts in all of the money, without borrowing a dollar, or whether he borrows part of his money from a mortgage broker, or wherever he gets his money. The total of the building in the next few years, from all of these lending agencies, is the figure that you have given. Now, you have changed in your idea-I will not say you have changed, but rather the repetition from mouth to mouth, the way all stories go, has changed the statement that the housing of the country the next five years ought to be a given figure, to the statement that this particular proposition is needed to do it all. Mr. CLARK. Mr. Luce, the inclusion of 3,000,000 homes in the statement of the Mortgage Bankers' Association was not, and could not be, interpreted at that time, or now, as being the one objection of this; but, your New York Times of Sunday, December 6, 1931, that Mr. Cody had yesterday, I submit for the record, to show where the 3,000,000 homes came from. Mr. LUCE. I have put that in the record, in my statement. I just said it was in the New York Times. Mr. CLARK. Yes; it is in the Record, but the President's program included the building and taking care of unemployment. Mr. REILLY. Now, if you people want to say any more, we will come back to-morrow morning. If not, we will adjourn until Monday morning. Mr. CLARK. Mr. Chairman, may we put this in the Record, this extract? Mr. REILLY. Yes; you may. (The matter above referred to is as follows:) [New York Times, Sunday, December 6, 1931] HOMES IN THE UNITED STATES—THE PRESIDENT'S BUILDING PLAN President Hoover's program for a home-building loan system, to which he referred again in his address last Wednesday at the Conference on Home Building and Home Ownership, will soon be laid before Congress. The President holds that home owners to-day are suffering many hardships and that the building of new dwellings would serve also as a factor in the economic recovery of the Nation. According to reports just made to the Treasury and the Federal Reserve Board, based on a survey of the situation, it would be possible to construct 3,000,000 residences within the next five years if the President's plan should be put into effect. There is no exact estimate of the present number of dwellings in the United States, for the figures of the 1930 census have not been tabulated and will not be available until March or April. The number of dwellings recorded in the 1920 census was 20,697,204. Taking as a basis the President's statement that 200,000 individual homes are erected annually in normal times, it is probable that the total at present is close to 23,000,000. In 1910 the dwellings numbered 17,805,845, so that in the decade of 1910-1920, the increase was roughly 2,890,000. There are sharp variations in the estimates of dwelling-house construction. Against the President's statement that more than 200,000 individual homes are built every year, are the figures given by construction companies. One company estimates that over a 25-year period the census figures show an average yearly residential construction of 310,000 dwellings; a second company holds that the normal construction annually is about 400,000 houses. The 1920 census gave the number of families in the United States as 24,351,676. Of these, 12,943,598 rented their houses, 6,522,119 owned homes that were free of mortgages, and 4,059,593 lived in homes that were mortgaged. The census taken 10 years earlier showed 20,255,555 families. Of these, 10,697,895 lived in rented houses, 5,984,284 owned mortgage-free homes, and 2,931,695 had mortgaged homes. Mr. Hoover's plan to stimulate construction contemplates the creation of a system of home-discount banks with a capital of $150,000,000. There would be 12 banks of this character, 1 in each Federal reserve district. The President intends that the banks be privately financed, although Congress will be asked to permit the Federal Government to subscribe capital in the event insufficient funds are subscribed in various communities. (Thereupon the hearing was adjourned until 10 o'clock a. m., on Monday, March 28, 1932.) CREATION OF A SYSTEM OF FEDERAL HOME LOAN BANKS MONDAY, MARCH 28, 1932 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE OF THE COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The subcommittee met this day at 10 o'clock a. m., Hon. Michael K Reilly (chairman) presiding. Present: Messrs. Reilly (chairman), Campbell, Luce, and Williams. Mr. REILLY. Gentlemen, the committee will be in order. Mr. Baltz you may proceed to make any statement you care to give the committee. STATEMENT OF EDWARD C. BALTZ, SECRETARY PERPETUAL BUILDING ASSOCIATION, WASHINGTON, D. C. Mr. BALTZ. I just want to say to you, Mr. Chairman, that I am from an association that is not in need of any help, but which desires to help. A rather unusual situation, but that is our position. Mr. REILLY. Have you got a statement you desire to make? Mr. REILLY. Do you approve this bill? Mr. BALTZ. I do. I have a very short statement that I desire to make, and I have a suggestion to accompany it, but here is what I want to say, very short, but to the point. Mr. REILLY. Well, all right, go ahead. Mr. BALTZ. Speaking as the secretary of a local building association and with 24 years' experience in that line of work as a background, I would like to make the following observations regarding the bill you gentlemen are now considering. I will cite our association as a typical example of the type of institution that desires to become a part of the home loan bank system, to be created by this bill. If the home loan bank bill becomes law-and I hope it will-our association will immediately have available for loans on small homes the million and a half dollars we now must keep in cash. As a member of the system, we would be secure in the knowledge that, should an emergency arise when funds should be needed, they would be available through the reserve system created by this bill. Under present conditions, because of the lack of any suitable agency where any part of the $27,000,000 worth of mortgages owned by our association could be pledged by us as collateral for the borrowing of money, we are obliged to keep on hand between one and a half and two million dollars, money which would be and should be, used in financing the small homes, for which purpose this asso 113235-32-25 383 |