could not be put out or used unless these affiliated institutions came in with the proper security.

Mr. WILLIAMS. But in that event it would be practically a Government institution.

Mr. FRIEDLANDER. It would, but under the $100,000 which you suggest being put in

Mr. WILLIAMS (interposing). I have used that merely as an illustration.

Mr. FRIEDLANDER. Under the terms of this act, those members owning $100,000 could not get more than twelve times in loans, no matter how much collateral they put up. In other words, the amount they can borrow is based upon their stock subscription. In the first place, their stock subscription is based on the assets of the company which comes into membership. In other words, it is not left entirely up to them. It is not left entirely to the individual bank or building and loan association as to how much they will subscribe for in the way of stock of this bank and get membership privileges in it. They must subscribe for $2,500 worth of stock in the first place, plus a sum equal to 1 per cent of their eligible mortgage notes subject to discount under this act.

Mr. WILLIAMS. I understand that; yes. Suppose the whole amount amounted to $100,000?

Mr. FRIEDLANDER. Then the total amount of borrowings of those institutions would be $1,200,000, for which they would have to put up practically $2,000,000 worth of mortgages on their note obligation to repay the amount.

Mr. WILLIAMS. Now, do I understand that these member institutions, in order to get membership in it, have to put up security not to exceed-well, the security they put up is determined now? I am not clear on that.

Mr. FRIEDLANDER. Their membership; in the first place, let us divorce their borrowings from their membership.

Mr. WILLIAMS. I am doing that.

Mr. FRIEDLANDER. They apply for membership and they must subscribe and pay in within the period of a year-they all get a year in which to make their full payment-they must put in, let us say, an association of $1,000,000, having all of its assets in mortgage loans on homes of individual amounts not in excess of $15,000 apiece. Now, that concern_must subscribe to $2,500 plus 1 per cent. Mr. WILLIAMS. I understand that.

Mr. FRIEDLANDER. One per cent of the million dollars.

Mr. WILLIAMS. What do they put up as security for that subscription?

Mr. FRIEDLANDER. They put up cash.

Mr. WILLIAMS. They pay for it?

Mr. FRIEDLANDER. They pay for it; yes, sir. They must pay onefourth in cash, and then they have three other payments, but they must put up the $2,500, plus one-fourth of the other amount in cash, and the stock must be paid for at stated times.

Mr. HANCOCK. Let me get one thing further; because your argument is very interesting to me and very helpful.

The CHAIRMAN. Mr. Hancock, let him finish, and then we will take that up.

Mr. HANCOCK. I thought you said we would take those matters up at this time?

The CHAIRMAN. We will take them up on his arguments.

Mr. FRIEDLANDER. No. 6 of the opposition points, I believe, is next. It is claimed that by encouraging long-term home financing, it would tend to eliminate the short-term 3 and 5 year loans which now prove so costly and dangerous to the home buyer. "We submit that long-term home financing on a semiannual or monthly payment basis for periods ranging from 5 to 16 years is, and has been, available for many years for home owners desiring to take advantage thereof.”

Now, that is just a matter of fact, whether it has been or not. We contend that there is no fund at this time for home-mortgage financing for the average citizen of this country. We do say that there has been, up to a very recent time, some funds for home financing in some selected communities upon some selected property from selected persons. The property has to be a new home, just erected. It has to be on certain streets. It has got to have certain facilities. In some instances, it has to have two bathrooms. It has got to conform to modern architecture. It is this type of a loan which the life-insurance companies say, "We will take this loan for about 40 per cent of the actual value of the house and the lot."

Now, then, if that is adequate financing, we will admit that probably there is some of it to be had, but that does not touch the rank and file of the people of this country. There is a limitation, a minimum limitation, which they will even accept. They say they do not want any loans under $4,000 or $5,000. Why, the average income of the citizens of this country will not permit them to own homes that would stand a $4,000 or $5,000 loan at this time, and we say to you that there is a very, very divergent opinion, we make an overwhelming opinion, on the part of those who believe they know that there is not at this time adequate home-financing funds.

Mr. LUCE. Will you not enumerate the restrictions set up by the big life-insurance companies on the nature of their loans? Mr. FRIEDLANDER. I just mentioned a few of them.

They will not take an old home. We can not all have new homes every year. If some of us do get new automobiles every year, not me, but we can not get new homes every year, and unless you have a brand new, spanking home, they will not loan the money on that while it is being built. They will not take that risk. Some of their mortgage-banker friends will have to take that risk for them while it is being constructed and, after it is constructed, and after they have passed upon the individual and the architecture, then they say they will not take less than $4,000 or $5,000, and it has to be on this street, and then they say, "We will loan you 40 per cent to 50 per cent of the value of the property."

Mr. LUCE. And did you mention the fact that they will not loan in places of less than 50,000 inhabitants?

Mr. FRIEDLANDER. They do not loan in places of less than 50,000 inhabitants, and, as we say, that does not constitute an ample, sufficient, available supply of home-financing funds, and that is a situation that this Congress ought to be interested in.

It is claimed that if all home-financing institutions become members of the system, funds for home financing would be increased by from 30 to 40 per

cent. We submit that home-financing institutions that have been properly managed will not need membership in the system. Institutions that need funds can not afford to purchase membership in the regional bank under the terms specified.

As to whether or not a well-managed institution would need the system at this time, I think that we have a pretty well-managed institution down home. I am egotistical enough to believe that, and our institution is a $10,000,000 institution.

After a loan is made, some things occur which force the institution to take back the property-a family breaks up, or something of that kind, but I think the percentage of mistakes in our balance sheet will measure up very well with the mistakes in the balance sheets of institutions very strongly opposed to this bill. I will say this, that our institution at this time needs the home loan bank bill very much, and that although it would call for an investment of $100,000 in the stock of the bank, we stand ready to-day to subscribe and put our money up and go into the system in order that our customers, people who have placed money with us, may get the advantages of the credit which they need at this time.

Mr. WILLIAMS. What is your reaction to the situation that exisits here now, with the Government facing a deficit of two and a half billion dollars, as to appropriating $150,000,000 more for this private enterprise?

Mr. FRIEDLANDER. Well, the answer to that is simply this: If the Government, through the investment, not the gift, of $150,000,000 would have been the means of having saved the closing of half of the banks that closed in the United States last year, it would have been money well invested for the people. I think that is the answer, and I think you gentlemen have shown that there is the answer in the liberality with which you have advanced money here to_cover situations which are not even as grave as these, which face the homes of America. I think your appropriation of $125,000,000 to the Federal land bank at this time indicates that. I think your Reconstruction Finance Corporation advances and other appropriations probably reflect that sentiment in Congress.

Mr. WILLIAMS. If you heard some of the arguments over here on the revenue bill that are going on now, you would see the terrible straits we are in to raise money.

Mr. FRIELANDER. I know you are between the devil and the deep blue sea; I admit that; and yet, at the same time, I do think that presently the problem, inasmuch as it is not a gift, it is an advance, as Mr. Luce presented the matter to you this morning, the thought occurred to me, what are we asking the Government to do in this emergency, so far as the emergency feature of this act is concerned, and that seems to be, the opponents make the difference between the emergency and the permanent need.

As to the permanent need, we could take some time to develop these plans out of our own funds, but what are we asking the Congress to do to meet the emergency of the home owners of America? Two things: One, a speedy action, because it is a crisis, which the opponents admit, and we seek to solve it.

The second is that we ask the Government to appropriate so much of the initial capital as is necessary so that these institutions may get to working immediately, and to forbear dividend participation,

principally for this reason, so that these institutions will be selfsupporting from the first, and attract other institutions into them so that the Government can get its money and get out that much more quickly that way than they would if they did participate in dividends.

Mr. WILLIAMS. To what extent have the building and loan associations of the country participated in the loans from the Reconstruction Finance Corporation up to date?

Mr. FRIELANDER. Of course, you understand that the Reconstruction Finance Corporation operations, I believe, are confidential. Mr. WILLIAMS. I do not mean the individual at all.

Mr. FRIELANDER. The other day a statement went out over the press that the Reconstruction Finance Corporation had loaned sixtyeight and a half million dollars to banks and building and loan associations, and that is a very impressive figure, but I think I am safe in saying that, of the sixty-eight and half million dollars loaned to banks and building associations, less than two and a half million dollars of it was loaned to building and loan associations. In other wards, it is sort of a proposition of having a chicken stew, one part chicken and one horse-that is, one chicken and one horse-and we happen to be the chicken end of it, very, very small, Mr. Williams, so far as relief is concerned.

The point I made a while ago is, if the only relief which the building and loan gets is to take money which goes to the bank, and instead of owing the bank, it owes the Reconstruction Finance Corporation, you have not given any relief to these people waiting for and needing the money, and to the people who will not borrow money from these institutions, you are not giving any relief by relieving the banks of an obligation and substituting the obligation to the Reconstruction Finance Corporation, and I understand that there has been a limitation made by the Reconstruction Finance Corporation; that is, to the extent to which building and loans can expect to receive aid from the Reconstruction Finance Corporation.

We do not blame them for it.

Mr. WILLIAMS. I do not know now if this is already in the record. If it is, I do not care to encumber the record. I have not read the Senate record as to the extent of the homes in this country now of the kind described in this act-3-family homes and dwellings. How many are there in the United States?

Mr. FRIEDLANDER. As described in this act, well, of course, that includes 1, 2, and 3 family dwellings.

Mr. WILLIAMS. Yes; up to that limit.

Mr. FRIEDLANDER. I think the last census return showed that there are something like 20,000,000 in the United States.

Mr. WILLIAMS. What percentage of them is now mortgaged? Mr. FRIEDLANDER. The figures, I think, will show that more than 50 per cent of the homes are mortgaged.

Mr. WILLIAMS. And what per cent of that business is handled by the building and loan associations?

Mr. FRIEDLANDER. The building and loan associations' total resources are $9,000,000,000. I think that the figures given by the Mortgage Bankers' Association are that there are $27,000,000,000 invested in the homes of the people of the Nation, so that about onethird of the total is held by building and loan associations.

Mr. WILLIAMS. About one-third of 50 per cent-the building and loan associations would have, on that basis, 1623?

Mr. FRIEDLANDER. About 3313 per cent.

Mr. WILLIAMS. Of the loans?

Mr. FRIEDLANDER. Yes.

Mr. WILLIAMS. But there would be 163 per cent of the homes of the country being carried now by the building and loan associations of this character, I mean?

Mr. FRIEDLANDER. I would prefer to present to the committee those figures.

Mr. WILLIAMS. That is perfectly all right. Perhaps it is already in the hearings.

Mr. FRIEDLANDER. I think probably the figures are in there, but to make sure we will present the figures to the committee.

Mr. WILLIAMS. You have stated here, as I understand you, that you are simply here representing the unorganized folks. Whom do you represent here?

Mr. FRIEDLANDER. I did not state that I was here representing the unorganized folks.

Mr. WILLIAMS. I understood you to say that there were these great organizations opposing this, and the others were rather unorganized.

Mr. FRIEDLANDER. I stated that whenever a proposal is made before Congress that you will find groups opposing the wishes of the unorganized group. I will say this, that the building and loan association comes closer to really representing the home owners of America than any other group in America, for this practical reason: We do not sell any mortgages. If we make a loan, we retain those mortgages, and notes, until they are paid, from 10 to 12 years later. We have nothing to sell. We do not build any houses. The building and loan associations do not build a house. We are bound to be on the home buyers' and the home builders' side, because those homes represent our security. He is the man that I am talking about that is unorganized.

Mr. WILLIAMS. What percentage of the funds of the building and loan associations is used for building houses?

Mr. FRIEDLANDER. You mean for building new houses?

Mr. WILLIAMS. Yes.

Mr. FRIEDLANDER. I should say, judging from the statistics in our State, and in the Southwestern group, which your State is a partI, last year, was the president of that group of building and loan associations, and I am familiar with conditions in Missouri, Kansas, Texas, Oklahoma, Louisiana, and Arkansas-that about two-thirds of the funds of the building and loan institutions are loaned upon homes that are already erected. In other words, about one-third goes into new loans.

Mr. WILLIAMS. The associations have considerable other activities outside of simply loaning on homes, have they not?

Mr. FRIEDLANDER. Not that I know of. That is their principal activity. They are not permitted to invest their money in any other

way.

Mr. WILLIAMS. Do you not sell certificates and stocks?

Mr. FRIEDLANDER. Yes; that is where we get the money to loan. Mr. WILLIAMS. That is what I mean, and you have stockholders who are not necessarily borrowers.