Senator COUZENS. Isn't this a fact, Mr. Hennessy, that the more agitation there is about these moratoria the more disposition there is to default payment?

Mr. HENNESSY. Absolutely. I am very glad you mentioned that. Senator COUZENS. And it has a tendency to defer payment even from those who can afford to pay?

Mr. HENNESSY. In my opinion, Senator, you must in your disposition of this problem think of the money lender as well as the money borrower, and the money lenders are usually institutions who represent vast numbers of the population and the home owners of this country, either as holders of life-insurance policies or as savers who have accumulated by processes of thrift and frugality the savings which are invested in these securities.

Senator BULKLEY. Now, Mr. Hennessy, of course you understand that by reason of asking questions I am not intending to express any opinion.

Mr. HENNESSY. Yes, sir.

Senator BULKLEY. I am trying to clear up the situation. The last question that I asked you certainly does not imply any detriment to the lender of the money. On the contrary, it would be a convenience to him. As I understand your answer, it is that it is not a subject matter of the Federal Government, but rather of the State. Am I right about that?

Mr. HENNESSY. I would say in a broad sense-I am not a lawyer, but I would say that I am in accord with the idea that the Federal Government is interfering with private business to a greater extent than is necessary or expedient for the prosperity of this country. I think wherever matters can be properly left to the State governments they ought to be so left.

Senator BULKLEY. I assume your acquaintance with this subject is so close that your opinion would be valuable as to whether this is one that will be adequately taken care of by the States.

Mr. HENNESSY. I think it could be, but the fundamental difficulty is the economic prostration of the country today, which affects men in every walk of life.

Senator BULKLEY. Yes; of course. If we can restore prosperity, that is the real answer. But assuming that we cannot do that immediately, what are we going to do to carry over?

Mr. HENNESSY. I am not prepared, sir, to offer any answer to that question that I would feel is sufficiently reflected upon before offering it to a committee of this importance.

Senator BULKLEY. I meant to make the question so simple as this: Merely do you think that the Federal Government ought to concern itself at all with the question of tiding over the home owner?

Mr. HENNESSY. May I tell you what has happened in England, where I go very frequently? At the end of the war they undertook to settle the housing problem, because there was a real housing scarcity in Great Britain, as there was in this country, after the war. Parliament adopted various systems of subsidy to people who would build houses. And, incidentally, one of the arguments made for adopting this as a public policy was that it would abolish the slums and make England "a country fit for heroes to live in ", which was a bouquet to the returned soldiers.

It was recently stated in Parliament that the cost of that experiment in state socialism-that is what it amounts to-was a prodigious one, thousands of millions of dollars-I cannot give exact figures. That is to say, the loss to the public treasury and the loss to the local treasuries, because part of the burden was laid upon the localities, the municipalities, has been tremendous, and yet not a single slum has been abolished. The subsidies at the expense of the taxpayers proved futile. Poverty is greater in England today than it was after the war. The slums are still there. The statement of the cost of this experiment was made by the Minister of Health in Parliament, I think, less than 6 months ago.

Senator COUZENS. Let me ask you this: Would a revaluation of the gold proposed in the pending legislation help the home owner who is in distress?

Mr. HENNESSY. I think if there is such a thing possibly as what is called controlled inflation, and I assume that

Senator TOWNSEND (interposing). Do you think it is possible? Mr. HENNESSY. I would answer in the language of the gentleman who preceded me, who said that his knowledge of economics on that subject did not justify him in offering an opinion, but I have grave doubts about it. But to the extent that inflation can be controlled. to that extent it will undoubtedly raise prices, and one of the first prices that will be raised will be the price of real estate.

Senator BULKLEY. One of the first prices?

Mr. HENNESSY. That is to say, it will be reflected in increasing land values.

Senator COUZENS. The other witness testified the other way. Senator BULKLEY. Yes. Mr. Schmidt said it would be one of the last.

Mr. HENNESSY. I think he is in error about it. I think it will be reflected immediately. I heard a prominent man in New York City say at the dinner table not long ago that if inflation is coming he is going out to buy real estate.

Senator TOWNSEND. And common stocks.

Mr. HENNESSY. Yes; and common stocks. It is already reflected in the increase of copper prices, copper stock prices, because in the last analysis they rest upon real estate.

Senator CouZENS. Entirely outside of that, no one buys on a falling market, and if the market is rising everybody wants to buy. Mr. HENNESSY. Yes.

Senator COUZENS. It does not make any difference whether it is stocks or whether it is real estate or what not.

Mr. HENNESSY. But I do say that there will be relief come, it seems to me, if there is controlled inflation. If it tends, as economists generally agree that it will tend to increase the values of all commodities, it will be reflected at once, in my opinion, in the price of real estate, especially in the price of vacant land. And one of the evil effects of that, by the way, will be that it will tend to check the very splendid movement that is quietly taking place in this country today from the cities back to the farms.

Senator BULKLEY. You are through, are you, Mr. Hennessy?
Mr. HENNESSY. I am through, Mr. Chairman.

Senator BULKLEY. Thank you very much, indeed.

Mr. SCHMIDT. Mr. Chairman, I would just like to state that I quite agree that the value of vacant land will immediately rise under inflation, as Mr. Hennessy stated, but that values in buildings will respond more slowly. There is consequently no difference between Mr. Hennessy and myself. In practically every country where there has been inflation rents have been quickly controlled by rent legislation, by law or administration. England and Germany are concrete examples. Such control tends to stop value rise, even in homes. Senator BULKLEY. I believe we will have just about time for a short statement by Mr. Woodhouse, if he desires to make a statement

now.

STATEMENT OF HENRY WOODHOUSE, ECONOMIST, NEW YORK CITY

Senator BULKLEY. Will you please state your name and address for the record?

Mr. WOODHOUSE. Henry Woodhouse, 280 Madison Avenue, New York, and Willard Hotel, Washington. Editor of Scientific Age, Scientific Economist, former delegate of the State of New York to the City Planning Conference, and author of a number of works on economics. I may add, owner of a collection of 100,000 historic economic records.

The purpose of this bill is a noble one, no doubt. As stated in President Roosevelt's message, dated April 13, 1933, it is a very important measure, as it aims to "protect small home owners from foreclosure", and to carry into effect the national policy, expressed by the President as being "that the broad interests of the Nation require that special safeguards should be thrown around home ownership, as a guaranty of social and economic stability, and that to protect home owners from " inequitable enforced liquidation, in a time of general distress, is a proper concern of the Government." That is a noble and broad policy, and I have studied this bill with that in view.

Gentlemen, I may state I own thousands of acres of land in different places, different parts of the United States. I have many tenants. They are not paying their rents, of course. They cannot pay any at the present time. The distress throughout the country is appalling-far beyond the relief provided by this bill.

I will try to give you the broad results of a visit to 49 different cities and practically all of the States, as well as of correspondence, done partly through a patriotic council of which I am chairman, called the National Recovery Council", a patriotic organization, and partly through publications in which I am interested either as an editor or owner or contributor.

The problem, briefly, is this: We have close to 123,000,000 persons in the United States, and there are 30,000,000 homes, roughly. In the highest period of prosperity, 1929, there were 48,000,000 gainfully employed. About one half were employed in producing commodities the market for which has been greatly reduced.

We have just heard the figures from Mr. Russell, the counsel of the Home Loan Bank Board, to the effect that out of the population of the United States, out of the 30,000,000 homes, there are something like 10,000,000 and some homes individually owned, I believe,

and that those homes come under different valuations and are used for different kinds of families.

These families, at six persons to a home, represent one half of the population of the United States.

In the best period of prosperity, which we are striving to restore by such measures as this bill, the heads of 10,000,000 families bought homes, and now a large majority apparently owe money on those homes.

I will state here as an economist and having made surveys and having been to the different departments of the Government, that there is no such a thing as exact figures as to the number of homes of different classifications, or as to the percentages of homes occupied by one, two, and three families, as to the values, the amount of mortgages on each class of homes, or the relation of the value of the homes to the amount of the mortgages. I have found that each organization that supplies figures supplies a different kind of figure. The importance of accuracy in statistics in such a vital subject is self-evident. It is vital.

Therefore, that is one of the purposes that I will mention where the bill can be improved. I suggest an amendment to provide a "coordinator" in this bill to obtain accurate statistics and make such information available to the United States Government hereafter, and to the Nation generally. However, I mention this only in passing at this time. I shall submit a written amendment to the consideration of the committee to provide for a "coordinator."

Now we have, then, distributed over 42 States comprising 3,072 counties and 10,598 municipalities, a population of 123 million, with roughly 30 million homes, of which ten million three hundred and some thousand, are apparently owned by individual owners or by two or more families, or have been leased; somebody else has them, perhaps under a mortgage, perhaps by contract, perhaps because it was convenient to the owners to let somebody else occupy them.

They involve, apparently, $20,000,000,000 in mortgages with from 6 to 10 percent interest, taxes, and charges. Nobody knows exactly what it is. No one knows whether the $2,000,000,000 provided by this bill would cover the interest and charges due or overdue. I can state I have had 3 years of trying to find out, and nobody has been able yet to produce such figures.

I will add further that I have sought such statistics from the different Government departments and from different public and private organizations and that I went, for instance, for the first time to the United States Treasury to make an analysis of the income tax returns of the different years from 1914 to 1932

Senator COUZENS (interposing). You testified once before.

Mr. WOODHOUSE. Yes. I testified to finding that I discovered a discrepancy of over $400,000,000,000 per year in the national income. But I did not testify as to what I found about homes

Senator COUZENS. What have you got to say about the bill?
Mr. WOODHOUSE. Now, as to the bill-

Senator TOWNSEND. You are familiar with the bill?

Mr. WOODHOUSE. I am familiar with the bill. I have studied its purpose, its mechanics, its possible benefits, its shortcomings. I

have tried to figure out whether the home owner will benefit or lose from the bill.

Senator ToWNSEND. Is it workable?

Mr. WOODHOUSE. It is workable, with amendments, and it is a worthy purpose at this time. But basic amendments are necessary, as I shall show. I will go back to the figures. Out of the 48,000,000 gainfully employed of 1929 and their dependents you now have probably 10,000,000 destitute and starving, and you have about 20,000,000 who are partly employed on such a small income as to be reduced to bare necessities. Lack of food is added to the danger of losing their homes.

Senator TOWNSEND. What amendments do you suggest?

Mr. WOODHOUSE. The major amendment that I would propose is intended to safeguard against plunging the home owners into a loss of $10,000,000,000 from reduction of their investments and savings. It is to make available to the home owners and to the holders of mortgages and to the 48 States, 3,072 counties, and 16,508 municipalities, means with which money may be available, which will benefit those home owners and their communities and the Nation as a whole. In other words, with which people may have something to meet their obligations if the other provisions of this bill work adversely.

I propose to do that by an amendment which would read as follows:

The Reconstruction Finance Corporation is authorized and empowered to make available out of the funds of the Corporation to each State an amount equal to not more than $20 for each individual residing in such State as shown by the report of the census of the United States of 1930, and to each county, municipality, and other political subdivision of each State an amount equal to not more than $20 for each individual residing in such county, municipality, or other political subdivision, as shown by the report of the census of the United States of 1930.

I would provide further that that money shall be made available to each State, county, and municipality upon their application by their executive authority made to the Reconstruction Finance Corporation upon their own credit, the credit of those States, counties, and municipalities borrowing, without their showing that they are in distress otherwise.

I would not require them to show that they cannot raise their funds otherwise, because that involves a great deal of investigation, which is not possible under the present pressure from the distress of over 10,000,000 men, women, and children who are starving.

I would grant it to them on the same basis that the United States borrows on the credit of these same States, counties, and municipalities when it borrows for any purpose required for the Budget. They have, collectively, assets representing a total national wealth of about $350,000,000,000. Therefore, they will not be borrowing more than a fraction of the amount represented by their resources.

As to that, if you prefer I will just let it go in the record as it is written in the amendment which I submit, and the explanations which I have prepared to show the benefits to be derived.

Senator BULKLEY. Yes. I will have to say, Mr. Woodhouse, that as to witnesses that we have arranged with in advance I have to keep a very strict time.

(The matter submitted by Mr. Woodhouse is as follows:)