conservator or receiver and is authorized as such to operate such insured institution, to adjust its management, and to take such action as may be necessary to put it in a sound and solvent condition, or to bring about a merger with another insured institution, or to organize a new Federal savings and loan association or to liquidate its assets, whichever shall appear to be to the best interest of the shareholders therein, and in any event the Insurance Corporation shall pay all valid credit obligations of such Federal savings and loan association, and shall protect the shareholders therein under the insurance provision of this title, and shall give them any additional net benefit which may arise from the orderly disposition of the assets.

(c) In the event any insured institution other than a Federal savings and loan association is in default the Insurance Corporation shall have full power and authority to act as conservator, receiver, or other custodian of such insured institution and its assets, and the services of the Insurance Corporation are hereby tendered to the court or other public authority having the power of appointment. The Insurance Corporation shall, in such cases, have full power to negotiate with other insured institutions and bring about a merger or a sale of assets or the organization of a new Federal savings and loan association or to liquidate the assets of the insured institution, but no action taken shall prevent the carrying out of the insurance obligation herein provided. The Insurance Corporation shall have full power to buy the assets of the insured institution.

(d) In the event an insured institution other than a Federal savings and loan association is in default and the Insurance Corporation is not appointed as conservator, receiver, or custodian it shall nevertheless carry out the insurance obligation and is empowered to bid for the assets of the insured institution in liquidation, or to negotiate for the merger of the insured institution or the transfer of its assets, or any other disposition of the matter in keeping with the interests of all concerned.

(e) In connection with the liquidation of insured institutions in default the Insurance Corporation shall have full power to carry on the business, to collect all obligations to the insured institution, to settle, compromise, or release claims in favor of or against the insured institution, and to do all other things in connection therewith, subject only to the regulation of the court or other public authority having jurisdiction over the matter. Full annual report of the operation of insured institutions in default and in possession of the Insurance Corporation or report of the administration of the assets of such insured institution if such assets have been received by the Insurance Corporation shall be made and filed with the trustees, subject to inspection by any officer of any insured institution or of any other interested party, and if such insured institution operated under State laws or under the laws of the District of Columbia, such annual report shall be filed with the public authority which had jurisdiction over the insured institution.

POWER TO ISSUE OBLIGATIONS AND MAKE INVESTMENTS

SEC. 308. The Insurance Corporation shall have full power to borrow money, to issue bonds, debentures, certificates, or other obligations upon such terms and conditions as the trustees may determine. Funds of the Insurance Corporation shall be deposited in the United States Treasury, or upon the approval of the Secretary of the Treasury, in any Federal Reserve bank, Federal homeloan bank, or invested in obligations of the United States, or in bonds or debentures of a Federal home-loan bank or Home Owners' Loan Corporation or Federal Farm Mortgage Corporation. When designated for that purpose by the Secretary of the Treasury of the United States, the Insurance Corporation shall be a depository of public money under such regulations as may be prescribed by the Secretary of the Treasury and may also be employed as fiscal agent of the United States, and it shall perform all such reasonable duty as depository of public money and fiscal agent of the Government as may be required of it.

TAXATION OF INSURANCE CORPORATION

SEC. 309. All notes, debentures, bonds, or other such obligations issued by the Insurance Corporation shall be exempt, both as to principal and interest, from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States, by any Territory, dependency, or

possession thereof, or by any State, county, municipality, or local taxing authority. The Insurance Corporation, including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.

SECRETARY OF THE TREASURY AUTHORIZED TO PREPARE FORMS

SEC. 310. In order that the Insurance Corporation may be supplied with such forms of notes, debentures, bonds, or other obligations as it may need for insurance under this Act, the Secretary of the Treasury is authorized to prepare such forms as shall be suitable and approved by the Insurance Corporation, to be held in the Treasury subject to delivery, upon orders of the Insurance Corporation. The engraved plates, dies, bed pieces, and other material executed in connection therewith shall remain in the custody of the Secretary of the Treasury. The Insurance Corporation shall reimburse the Secretary of the Treasury for any expenses incurred in the preparation, custody, and delivery of such notes, debentures, bonds, or other obligations.

ANNUAL REPORT TO CONGRESS

SEC. 311. The Insurance Corporation shall annually make a report of its operations to the Congress as soon as practicable after the 1st day of January in each year.

SEC. 312. The provisions of Section 8 of Home Owners' Loan Act of 1933, insofar as applicable, are extended to apply to contracts or agreements of Federal Savings and Loan Insurance Corporation as created under this title.

SEO. 313. If any provision of this Act, or the application thereof to any person or circumstances, is held invalid, the remainder of the Act, and the application of such provision to other persons or circumstances, shall not be affected thereby.

TITLE IV.AMENDMENTS

SEC. 461. Section 10, subsection (a) of the Federal Home Loan Bank Act is amended to read as follows:

"SEC. 10. (a) Each Federal home-loan bank is authorized to make advances to members, upon the security of home mortgages, such advances to be made subject to such regulations, restrictions, and limitations as the board may prescribe. Any such advance shall be subject to the following limitations as to amount:

(1) If secured by a mortgage insured under the provisions of section 5 of the National Housing Act, the advance may be for an amount not in excess of 90 per centum of the unpaid principal of the mortgage loan.

(2) If secured by a home mortgage given in respect of an amortized home mortgage loan which was for an original term of eight years or more, or in cases where shares of stock, which are pledged as security for such loan, mature in a period of eight years or more, the advance may be for an amount not in excess of 65 per centum of the unpaid principal of the home mortgage loan; in no case shall the amount of the advance exceed 60 per centum of the value of the real estate securing the home mortgage loan.

(3) If secured by a home mortgage given in respect of any other home mortgage loan, the advance shall not be for an amount in excess of 50 per centum of the unpaid principal of the home mortgage loan; in no case shall the amount of such advance exceed 40 per centum of the value of the real estate securing the home mortgage loan."

SEC. 402. The Federal Home Loan Bank Act is further amended by adding at the end of section 10 thereof a new section to be known as section 10a, to read as follows:

"SEC. 10a. At any time prior to July 1, 1936, each Federal home-loan bank is authorized to make advances to members, in order to enable such members and nonmember borrowers to relend such advances for the purpose of financing home repairs, improvements, and alterations. Such advances shall not be subject to the provisions and restrictions of section 10 of this Act, but shall be

made upon the security of, and only upon the security of, notes representing obligations incurred pursuant to, and insurable under, section 3 of the National Housing Act. Advances made under the terms of this section shall be at rates of interest and upon terms and conditions to be determined by the Federal Home Loan Bank Board."

SEC. 403. Section 11 of the Federal Home Loan Bank Act is amended to read as follows:

"SEC. 11. The Federal home-loan bank shall have power, subject to rules and regulations of the board, as follows:

(a) To borrow and give security therefor and to pay interest thereon, to issue debentures, bonds, or other obligations upon such terms and conditions as the board may approve, and to do all things necessary for the carrying out of the provisions of this Act and all things incident thereto.

(b) The board may issue consolidated Federal home-loan bank debentures which shall be the joint and several obligations of all Federal home-loan banks organized and existing under this Act to provide funds for such bank or banks, and such debentures shall be issued upon such terms and conditions as the board may prescribe, but such debentures shall not be issued at any time if any of the assets of any of the Federal home-loan banks are pledged to secure any debts or subject to any lien, and neither the board nor any Federal home-loan bank shall have power to pledge any of the assets of any Federal home-loan bank, or voluntarily to permit any lien to attach to the same while any of such debentures so issued are outstanding. The debentures issued under this section and outstanding shall at no time exceed five times the total paid-in capital of all of the Federal home-loan banks as of the time of the issue of such debentures. It shall be the duty of the board not to issue debentures under this section in excess of the notes or obligations of member institutions held and secured under section 10, subsection (a) of this Act, as amended, by all of the Federal home-loan banks.

(c) At any time that no debentures are outstanding under this Act or to refund all outstanding debentures issued under this section, the Board may issue consolidated Federal home-loan bank bonds which shall be the joint and several obligations of all of the Federal home-loan banks, and which shall be secured and be issued upon such terms and conditions as the Board may prescribe.

(d) The Board shall have full power to require any Federal home-loan bank to deposit additional collateral or to make substitutions of collateral or to adjust equities between the Federal home-loan banks.

(e) Each Federal home-loan bank shall have power to accept deposits made by members of such bank or by other Federal home-loan banks or other instrumentality of the United States upon such terms and conditions as the Board may prescribe, but no Federal home-loan bank shall transact any banking or other business not authorized by this Act.

(f) The board is authorized and empowered to permit, or whenever in the judgment of at least four members of the board an emergency exists requiring such action, to require Federal home-loan banks to rediscount the discounted notes of members held by other Federal home-loan banks or to make loans to, or make deposits with, such other Federal home-loan banks, or to purchase any bonds or debentures issued under this section, and, in any case, upon such terms and conditions as the board may prescribe.

(g) Each Federal home-loan bank shall at all times have an amount, equal to the suns paid in on outstanding capital subscriptions of its members, plus an amount, equal to the current deposits received from its members, and may have additional sums invested in (1) obligations of the United States, (2) deposits in banks or trust companies, (3) advances with maturity not greater than one year made to members or nonmember borrowers, upon such terms and conditions as the board may prescribe, and (4) advances with maturity not greater than one year made to members or nonmember borrowers the amount of whose creditor liabilities (not including advances from the Federal home-loan bank) does not exceed 5 per centum of such member's or nonmember borrower's net assets, which advances may be made without the security of home mortgages or other security, upon such terms and conditions as the board may prescribe.

(h) Such part of the assets of each Federal home-loan bank (except reserves and except sums provided for in subsection (g)) as such bank may deem available therefor, and as are not required for advances to members or non

member borrowers, may be invested, subject to such regulations, restrictions, and limitations as may be prescribed by the board, in obligations of the United States and in such securities as fiduciary and trust funds may be invested in under the laws of the State in which the Federal home-loan bank is located."

SEC. 404. The Farm Credit Act of 1933 is amended by adding at the end of section 86 thereof, a new section to be known as section 86a and to read as follows:

"SEC. 6a. With the approval of the Governor of the Farm Credit Administration and under rules and regulations to be prescribed by the Production Credit Commissioner, production credit associations organized under the provisions of the Farm Credit Act of 1933 are authorized and empowered (without regard to the provisions of said Act respecting the requirement for the ownership of Class B stock or any other limitations therein contained) to make loans to farmers for the purpose of enabling them to make home alterations, repairs, and improvements; to sell, discount, assign, or otherwise dispose of any loans made by them under the provisions of this section, under such restrictions and limitations as to endorsement and liability as may be approved by the Governor of the Farm Credit Administration; to avail themselves of the benefits of insurance under the provisions of section 3 of the National Housing Act; and to do any and all other things reasonably necessary to carry these provisions into effect."

SEC. 405. Section 24 of the Federal Reserve Act, as amended, is amended by adding to the end of the third sentence thereof the following:

"Provided, however, that in case of loans secured by real estate which are insured under the provisions of the Federal Mutual Mortgage Insurance Act, such restrictions as to the amount of the loan in relation to the actual value of the real estate and as to the five-year limit on the terms of such loans shall not apply."

SEC. 406. Section 24 of the Federal Reserve Act, as amended, is further amended by adding at the end thereof the following:

"Loans made, however, to finance the construction of residential or farm buildings and having maturities of not to exceed six months, even though secured by a mortgage or similar lien on the real estate upon which the residential or farm building is being constructed, shall not be considered as loans secured by real estate within the meaning of this section but shall be classed as ordinary commercial loans, provided that no national banking association shall invest in, or be liable on, such loans in an aggregate amount in excess of 50 percent of its actually paid-in and unimpaired capital. If accompanied by a valid and binding agreement of an acceptable person, association, partnership, or corporation to advance the full amount of the loan upon the completion of the building, notes representing such loans shall be eligible for discount as commercial paper within the terms of the second paragraph of section 13 of the Federal Reserve Act, as amended."

The CHAIRMAN. I had supposed we would first just sit around the table and talk matters over, but it might be best to have a public hearing and have the committee reporter take down what is said and then we will print it. I expected later to get to a public hearing anyhow, but I had thought first this morning we would have an executive session and have an informal sort of talk over the measure. Still we might save time by having a record made of the proceedings and going on regularly.

There are present certain gentlemen who are familiar with the questions involved and who have had to do with the preparation of the bill. Mr. Frank C. Walker, executive director, the National Emergency Council, is here, and there are other gentlemen present who will follow him.

First, I might say that I have a letter from Mr. John H. Fahey, Chairman of the Federal Home Loan Bank Board. He is not able to be present this morning, but will appear a little later. I think it might be well to enter his letter on our record.

59284-34- 2

MAY 11, 1934.

Hon. DUNCAN U. FLETCHER,

United States Senate, Washington, D.C.

DEAR SENATOR FLETCHER: In discussing the mortgage problem with your committee I ventured to express the opinion that we would not succeed in establishing financial stability and insure the return to prosperity, which our people have a right to expect, until we solve the urban mortgage problem.

A most interesting and comprehensive survey of our debt problem in the United States was financed by the Twentieth Century Fund and published by the MacMillan Co. under the title "The Internal Debts of the United States." A summary of this study was printed in the Graphic Survey in June of last year, and in the belief that it will be of interest to you I send you herewith a reprint of that article.

I would direct your attention especially to the graph on page 4 of this pamphlet showing the distribution of long-time debts in this country. You will note that the mortgage debt against urban real estate is nearly double the debt of the Federal Government and that of our railroads; that it is approximately three times the farm debt and over 30 percent in excess of all State and municipal indebtedness.

It is my conviction that the debt problem as it affects the great mass of our homes of less than $20,000 in value and which represents a total of approximately $21,500,000,000, has not begun to receive the attention which it deserves. Sincerely yours,

JOHN H. FAHEY, Chairman.

Now, Mr. Walker, will you please come forward to the committee table and state your name, address, and occupation, and then you may proceed in your own way to discuss the bill.

Senator BARKLEY. Mr. Chairman, I have read the pamphlet that accompanies Mr. Fahey's letter. I suggest that that pamphlet be inserted at the beginning of these hearings, together with Mr. Fahey's letter.

The CHAIRMAN. Without objection, that will be done.
(The document entitled "Housing Bill" is as follows:)

HOUSING BILL

The greatest amount of present unemployment exists in the building trades. General construction has dropped from an annual pre-depression level of $11,000,000,000 to a present annual level of around $3,000,000,000. In home construction the figures are even more startling. From a $3,000,000,000 annual volume before the depression, home building has dropped to a tenth that amount, or a $300,000,000 volume.

These actual figures acquire added significance when it is remembered that in building construction more than in any other form of activity the preponderant share of the expenditure goes to labor. It is estimated that 3,500,000 of our unemployed are persons who would normally be engaged directly in construction activities and that directly and indirectly the slump in the building industry accounts for more than 5,000,000 of our present unemployed.

The contemplated legislation definitely strives to revive the building trades and to bring them again to a point where they can be an assisting factor rather than a retarding factor in the recovery program.

The proposed legislation constitutes a single interrelated program, but may be considered in five divisions:

(1) Home modernization and repairs.

(2) Mortgage insurance.

(3) Mortgage associations.

(4) Building and loan insurance.

(5) Supplementary amendments to existing legislation.

I. HOME MODERNIZATION AND REPAIRS

A very substantial impetus to recovery and a sizeable relieving of the unemployment situation can be accomplished over the summer months by a Nationwide program of home modernization and repair. Such a program also leaves