Mr. FRIEDLANDER. I stated a few minutes ago that to meet the need, so far as the needs of the emergency are concerned, the unfreezing of the home financing institutions of this country would take at least half of what the Reconstruction Finance Corporation have had appropriated to its credit and capital. The chances are the very establishment of these banks would so give confidence to these institutions that would come in that you would never need it, but I do not believe they would be overcapitalized on the basis of $150,000,000.

Mr. WILLIAMS. If they were organized and the minimum of $5,000,000 was established, it would do really very little good.

Mr. FRIEDLANDER. The object, of course, of the $5,000,000 was this: There are some sections of the country where the needs are greater than others, where there are larger amounts invested in homes than in others. Take in your larger cities and areas, and where the authors of the bill did not want the Federal bank at Washington to be in a position to say: "We will establish a million dollar bank up in Wisconsin to take care of four or five States," and "We will establish a $50,000,000 bank in New York City," so they put a minimum so that this would be widespread throughout the United States, and its effect be given to all sections of the country.

Now, then, they have that difference between the $60,000,000 and $150,000,000, which they can use if they find a necessity in certain sections for a higher amount than $5,000,000. That was the object of the bill.

Mr. CAMPBELL. How much money that is loaned out would have 2 to 1 security?

Mr. FRIEDLANDER. Three to one security.

Mr. HANCOCK. Do you think that our best thought and effort now should be directed toward some permanent long range economic planning rather than the continuation of so much psychological legislation? I notice you referred to the psychological effect. I believe that word has been overplayed lately. It has been worked to death according to my notion.

Mr. FRIEDLANDER. At least, we have not seen much benefit flow yet from that psychology.

Mr. HANCOCK. I do not mean to reflect upon anybody at all. Mr. FRIEDLANDER. That is the reason we are presenting and insisting upon this plan as a permanent matter.

Mr. HANCOCK. Would it not be better to start on a smaller scale, contemplating increasing the structure, if necessary, rather than for merely psychological effect? Should we not begin now to consider the possible harmful effect that further remedial legislation will have on Government securities?

Mr. FRIEDLANDER. Well, we certainly want to unfreeze the institutions, because otherwise you destroy confidence before you begin, and that, of course, is the emergency feature.

The CHAIRMAN. Mr. Friedlander, how many institutions are there that you think would take advantage of this law? That would be a kind of an estimate.

Mr. FRIEDLANDER. That would be speculation. I would say that the building and loan associations where they would be permitted under the law to take advantage of it, would very largely take advantage. Now, in New York State, they have the State land bank

system up there, which has worked very well for New York State, and yet we find the largest institutions in New York State for this bill. That is true all over the country. I could not give an estimate of it, but so far as the building and loan associations are concerned, they are for the bill. So far as the banks are concerned I understand of those who have replied, they are three to one for the bill. The insurance companies, I understand, are about fifty per cent for the bill. I think you will find the smaller life insurance companies throughout the country are for the bill. I know that in our section, the National Standard Life Insurance Co., of Houston, has gone on record in telegrams to their respective representatives here, asking support of the bill. The Life Insurance Co., of Beaumont, which is just about 50 miles from Houston, is for the bill and have so wired their representatives. A smaller insurance company at Houston, Tex., is for the bill. I think you will find that there is a pretty wide participation in the bill when it is passed.

Mr. WILLIAMS. In that connection, concerning the questionnaire that was sent out, I have not had a chance to look at it, even. The institutions that have answered that questionnaire-did they have the bill before them at the time?

Mr. FRIEDLANDER. I do not think they did. I think the questionnaire was on the basis of the need for an institution of this kind, and whether they would like to see one set up.

Mr. WILLIAMS. Preceding it was a statement from the President? Mr. FRIEDLANDER. Yes; the statement of the President as to its

purpose.

Mr. WILLIAMS. I understand now from your statement that they did not have this particular bill before them when they answered the questionnaire.

Mr. FRIEDLANDER. I do not think they did, no. That is my understanding. Is that correct, Mr. Luce ?

Mr. LUCE. Yes, the nature of the questions, did not call for a knowledge of the details of the bill.

Mr. WILLIAMs. It can hardly be considered an answer to this bill, then.

Mr. FRIEDLANDER. I do not say it was, no.

Mr. WILLIAMS. The reason I am asking is because I did not have an opportunity to read it.

The CHAIRMAN. I presume it is an answer to what they thought of the necessity for this legislation, in their judgment.

If that is all, Mr. Friedlander, thank you very much for your testimony.

We will adjourn until 10.30 o'clock a. m.

(Whereupon, at 4.30 o'clock p. m., the subcommittee adjourned.)

CREATION OF A SYSTEM OF FEDERAL HOME LOAN BANKS

THURSDAY, MARCH 17, 1932

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF COMMITTEE ON BANKING AND CURRENCY.

Washington, D. C.

Hearings were resumed on H. R. 7620 at 10.30 o'clock a. m., Hon. Michael K. Reilly presiding.

Mr. REILLY. The subcommittee will be in order.

The subcommittee will hear Mr. Stevenson now for a few moments.

STATEMENT OF LAWRENCE T. STEVENSON, OF PITTSBURGH, PA., PRESIDENT NATIONAL ASSOCIATION OF REAL ESTATE BOARDS

Mr. REILLY. Give your name, please.

Mr. STEVENSON. L. T. Stevenson, president, National Association of Real Estate Boards, Pittsburgh, Pa.

Mr. Chairman, I have a short statement on behalf of my organization which I would like to present at this time.

I am the president of the National Association of Real Estate Boards. I appear before you as the spokesman of this association and by authority of its duly appointed delegates, directors, and officers, to advocate the early passage of the Federal home loan bank bill.

Our association consists of 543 local real estate boards, united in one nation-wide organization. Our local membership includes 16,000 firms and individuals engaged in the real estate business, and 24,000 firms and individuals, who because of their interest in real property and home ownership have affiliated themselves with us, making a total of 40,000 members. In connection with our local real estate boards, we have created property owner divisions in 119 cities, which are working with the real estate boards in protecting the interests of the home owners, especially in tax matters. In these local property owner divisions, there was in 1931 a total enrollment of 14,000 real estate and home owners. Our association, with its local and State units, is representative, therefore, not only of the real estate business, but of those who own real estate and the home

owner.

For years we have sought, through the simplification of archaic State legislation, to reduce the cost of home acquisition. Through tax research conducted by able men at the University of Chicago, who are accumulating facts concerning State and local tax systems and through activities of our 32 State organizations, we have tried

to reduce the unfair tax burden. We have tried to reduce the tax burden which to-day everywhere penalizes home ownership, and which is generally admitted to be unfair. Through the development of real estate license acts, we have sought and in a measure succeeded, in eliminating those who prey upon the home buyer.

Our association has long recognized that methods of home financing throughout the country have been cumbersome and costly. The home buyer has had to pay excessive interest rates in many communities. Home financing funds have been badly distributed throughout the country. Too many home owners have had to borrow money for short terms without the assurance that their loans could be renewed or extended. As a consequence, the ownership of a home, which we and many others have been advocating, has proven in many cases a source of difficulty and insecurity instead of peace of mind and security.

We believe that the home loan bank bill is the most constructive measure for the development and encouragement of home ownership in the United States which has ever been brought forward, for the following reasons:

It will meet present emergency needs, first, by stopping foreclosures. The fragmentary figures which we have been able to gather from 84 cities indicate that probably 150,000 families lost their homes last year through foreclosures occasioned largely by the inability of home financing institutions to function normally, and give the necessary extensions or renewals for home loans. We believe that the reserve system set up by the home loan bank bill will go far toward correcting this situation.

Second, if foreclosures can be checked, the demoralization of the home market will be checked. Thousands of properties offered for sale at the amount of the mortgage throughout the country, depress all real estate values. In my city of Pittsburgh 60 homes were recently offered for sale in one day by one company at the amount of the mortgage, and the disastrous effects of this action were felt throughout the city.

I would like at this time to give you a picture of the foreclosure situation in my own city. These are actual facts pertaining to foreclosures over a period of six years. In other words, starting in 1926, in the county of Allegheny, in which the city of Pittsburgh is located, with a population of a million and a quarter people, there were foreclosed in 1926, 406 mortgages. In 1927, there were foreclosed 605 mortgages; in 1928, 759; in 1929, 909; in 1930, 1,279; and, in 1931, 1,555. In January of this year, there were foreclosed 156; in February, 221, and the present list which is out, which was printed last Saturday, carried a total of 230. In the last two months, February and March of this year, out of 221 in February, there were 171 homes of the character of the property we are talking about in this bill. This present list which was published for the first time last Saturday shows that of our March foreclosures, a total of 230, there were 194 homes. Giving you a complete summary of this March situation, there were 194 homes, 9 apartments, 16 stores, 7 vacant lots, 1 listed as a building, 1 as a stable, and 1 as a storage house; making a total of 230 right at my home.

Our city is only a normal city, probably above the average of cities as we see them, but there are many cities that I find in my travels