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But again, this is a subject which is not properly my area for discussion.

Senator PERCY. You mentioned the regional field offices. We certainly do want to emphasize that the best programs don't come from Washington down. They come from the community up. The people will be far more responsive to them if they feel the programs are theirs.

The 235 program has grown out of the experience I and others have had in seeing developments around the country where the community got together. People have gone about rehabilitating buildings, screening families, moving them in and getting the money for them and letting them become homeowners and seeing what happens to that community as it upgrades itself through home ownership. The community supports the National Home Ownership Foundation. This was designed to create community participation, help find and screen groups, get people together and offer them technical assistance and guidance on how they can do much of this.

I am concerned we will not get enough of this into the community until we have a mechanism. Would you feel an organization like the National Home Ownership Foundation would be helpful if we can get the House to fund it? I think the Senate will create many more maybe several hundred-neighborhood organizations as against a dozen we now have working effectively.

Mr. HUNTER. Senator, I am aware and have been for some time of your, you might call it, crusade for home ownership. I think the fact that the Congress has enacted section 235 and the Department is so deeply into it now, has in large measure come about because of your interest and persistence.

With regard to the particular organization of which you speak, I feel that it can serve a purpose, and again I would personally favor seeing it activated. As far as the Federal National Mortgage Association is concerned, we stand ready to buffer the market for FHA loans to the extent of our ability. We will continue to do so.

Senator PERCY. Well, I appreciate that. Your judgment as a person is just as good to me as speaking officially on behalf of FNMA, because you are here as an expert in a field where we need counsel and guidance. We very much appreciate that.

. How high a priority, Mr. Hunter, would you place on housing as against many of our other domestic needs as a means of national building, building dignity into people and upgrading our life. We have a number of problems—hunger, health, and so forth. In your judgment how high on the list of priorities is housing, good adequate housing for all Americans, as a means for giving people a sense of fulfillment in life?

Mr. HUNTER. I would say the overall problem of environment is the No. 1 domestic social problem, and, let's say political issue.

I believe that housing, the problem of housing, stands as the keystone to this overall problem because without decent housing in a suitable environment, the other problems of transportation, air pollution, crime, education, and the like, can never truly be solved. There has to be a decent place for each American family to live before the overall problem can ever be resolved in a satisfactory fashion.

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Senator PERCY. In other words, to the hundreds of thousands of people who live in urban ghettoes, it would be awfully nice for them to know that the streams of the country are clear and clean but probably, many of them have never seen å stream and never will see a flowing river.

It is nice to have clean air but if you live in a rat-infested tenement and are paying more than it is worth, or if you are living in a condition beneath human dignity, you can't get too excited about pollution and pollution control. Housing is very important to those people.

Considering our budget of $200 billion, do you think we are really putting enough resources behind housing at the Federal level ? Are we in the appropriations we make, using the guarantee power effectively. Let's say that is not costing us too much in dollars, are we putting enough priority in appropriations for housing which can be used to back up, guarantee an interest supplement and other things in light of all of our national priorities!

Mr. HUNTER. Let me answer it this way. I think it depends on your definition of "enough.” I would say we need more funds if we are to meet our announced housing goals. However, our country has a number of problems, and the administration has serious fiscal problems, which go far beyond the problems of environment. But in order to meet these announced goals, there will have to be aditional funding.

As you are aware, Secretary Romney announced he was requesting a supplemental appropriation of $25 million for the section 235 program and $25 million for the section 236 program. The reason for that is that all the money appropriated heretofore is committed and there are thousands of applications for feasibility outstanding throughout the United States with no funding available.

Senator PERCY. Mr. Chairman, I would like to express my appreciation to Mr. Hunter. I imagine outside of this committee there are very few people who realize he is one of the biggest tycoons of industry in America. I think FNMA has passed Ford Motor Co. in size now. I think it carries $11 billion in assets. It is a tremendous enterprise and the work is performed in a magnificent way.

I was tremendously impressed with the statements in Chicago, and I commend the Board and President for the exceptional job they are doing under exceedingly difficult circumstances. No one could be working under worse conditions than you are in trying to carry out your objectives, and I can assure you as a member of this committee I want to give you all the help I possibly can, seeing what we can do to break through in this crisis.

Dr. Schwartz, I apologize for monopolizing Mr. Hunter so much but our time was limited. I would like at some time to have a good chat

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Senator PROXMIRE. Before I call on Senator Cranston I would like o say the reason we were both late for the committee is that we were clashing on independent research and development and I know the Senator of California took the contrary viewpoint very ably.

I am delighted to say on the subject he is about to engage you I am wholly and enthusiastically in support of him.

Senator CRANSTON. I regret I was unable to be here because we did have to be before another committee. I am particularly sorry that I

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couldn't be here when my fellow Californian was appearing. I understand and I am glad that you fully recognize the quite remarkable accomplishments of another fellow Californian, your predecessor Ray Lapin during the period he served as President of FNMA.

I may say I take strenuous exception to the way in which he was removed from his post. I take exception with the fact that the vacancy was filled with an interim appointment. I must turn around and say I take no exception to the fact that you were the man chosen to fill this position because your background qualifies you to carry that. I really don't propose to enter into any points.

I also want to say that I am glad you indicated the transition of FNMA to full private status will be completed in the month of May. I am also glad you feel it is necessary and I hope you will do all you can to achieve the full independence that the law requires FNMĂ to achieve. Mr. HUNTER. Thank you, Senator. Senator PROXMIRE. Thank you, Senator, very much. The committee will recess until tomorrow morning at 10 o'clock when we hear from Secretary Romney.

(Whereupon, at 12:35 p.m., the committee was recessed, to reconvene at 10 a.m., Tuesday, March 3, 1970.)

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SECONDARY MORTGAGE MARKET AND MORTGAGE

CREDIT

TUESDAY, MARCH 3, 1970

U.S. SENATE,
COMMITTEE ON BANKING AND CURRENCY,
SUBCOMMITTEE ON HOUSING AND URBAN AFFAIRS,

Washington, D.C. The subcommittee met, pursuant to notice, at 10:05 a.m., in room 5302, New Senate Office Building, Senator William Proxmire presiding.

Present: Senators Proxmire, Hollings, Cranston, Bennett, Brooke, and Percy.

Senator PROXMIRE. The committee will come to order. .
Mr. Secretary, we are

delighted to have you here. . I want to apologize for Chairman Sparkman who had a long-term commitment to speak this morning and that is the only reason he is not here. He regrets he couldn't be here and wants to apologize to you for not being present. Other members will come shortly.

You have an excellent statement and proceed in your own way.

STATEMENT OF GEORGE ROMNEY, SECRETARY, DEPARTMENT

OF HOUSING AND URBAN DEVELOPMENT; ACCOMPANIED BY WILLIAM B. ROSS, DEPUTY UNDER SECRETARY, AND SHERMAN. UNGER, GENERAL COUNSEL

Secretary ROMNEY. I will try to shorten it some because I know it is a rather long statement. I think you will be able to follow the parts I don't read.

(The full prepared statement may be found at p. 161.)

Secretary ROMNEY. I appreciate this opportunity to discuss the very serious situation in housing and, more particularly, the problem of housing finance.

CURRENT SITUATION The core of the current housing finance problem has been (1) the erosive and discriminatory inflation generated by inappropriate economic policies in an attempt to live beyond our means in previous years and (2) the monetary tightness that had to be implemented this past year to attempt to bring the accelerating inflationary spiral under control.

In this economic environment, as in all similar past situations, interest rates throughout the open market soared and private sources of mortgage credit rapidly evaporated. Housing again became the prin

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