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of small homes. There is no question about it in my mind at all. Rents are going up some at the present time, and vacancies are pretty well down in many cities. This little building and loan association that I referred to a while ago in Chicago made four construction loans in the last couple of months.

Senator GORE. Does this apply to both city and country?

Mr. BODFISH. Our proposal deals with institutions that operate primarily with regard to urban homes.

Senator GORE. And we have a movement on the way to get people out of the city and back into the country, which would lessen the demand for city homes. But I do not mean that that ought to make any difference.

Mr. BODFISH. With a resumption of industrial employment you will find the country boys will go back to town. In a year or two, if we have any business recovery, we will boom in the small construction field.

Senator TOWNSEND. What has been the increase in cost of construction?

Mr. BODFISH. We made a check-up cost of building a 6-room house, and you will understand that I am quoting figures from memory, and it was in Grand Rapids, Mich., Senator Couzens; and as I recall, we were as to present costs, and this included both labor and material, within 10 percent of the 1929 high; that is, I mean at the present time. And we were about 25 percent above the lows of 1931 in the case of building materials.

Senator TOWNSEND. The dealer in building materials is not permitted to discount that price for his material under the code, is he?

Mr. BODFISH. That is my understanding, although I also understand that the code group and the N.R.A. are beginning to see the wisdom of lower building material prices somewhat, and have taken some steps in that direction. But of course there was the reason for the quick move in building material prices, was the N.R.A. code in that connection.

The CHAIRMAN. How about labor?

Mr. BODFISH. Well, I am really quite reluctant to discuss labor in the construction fields, because I think we have there the worst side of organized labor. We have a rather poor labor situation in that connection. The idea of plasterers in Washington getting $1.1212 an hour and striking for $1.3712. It is improper. I believe in higher wages and everything else, but it has been a little overdone along this line here.

Senator GORE. The Secretary of Labor decided that the proper price was more than a dollar an hour when private contractors are paying $8 a day.

Senator WAGNER. I think in that connection you ought to consider what the prices of things which the worker has to buy are, whether they have increased or not. As a matter of fact, have you ever had a chance to study the figures during the so-called "

prosperous years and see the line of profits, to what extent they increased as compared to the increase in wages?

Mr. BODFISH. Well, wages always lag, and I think it is a very undesirable thing. I think we ought to find vehicles under both to stabilize them.

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Senator WAGNER. They not only lagged here but there was a disproportion which resulted in a general catastrophe.

Mr. BODFISH. Well, in the building trades wages never lagged very much.

Senator WAGNER. But generally speaking, since a year ago prices have gone up very much more than wages. The result is that the worker has received perhaps an increase of about 10 percent, yet prices of the things he has to buy have gone up more than that. I am not speaking of this particular case, and you may be right about that, and it may be an unjust demand; but, generally speaking, that statement is so frequently made, and it is not justified.

Mr. BODFISH. I agree with you completely. I think, however, the careful observer will agree that the situation of the building trades has been substantially different from that of general labor. Of course, they have had more seasonal employment, which justified it somewhat.

Senator GORE. Still there are 10 million unemployed in the country, and in November 50 million people were eating at the expense of the taxpayers.

The CHAIRMAN. Mr. Bodfish, do you oppose section 5 of the bill?

Mr. BODFISH. Entirely. And in the amendment I am presenting on behalf of our people we have a substitute program that we think would be more immediate and more feasible to use the existing agencies. To use the Home Owners' Loan Corporation and the Home Loan Bank System and get a start if you gentlemen want immediate action in connection with the employment of the building trades.

The CHAIRMAN. Have you a substitute for section 5?

Mr. BODFISH. Yes. It is rather long, and I doubt if you want me to read it, but in essence it provides for the purchase of shares

The CHAIRMAN (interposing). We want it to go in our record. Mr. BODFISH. All right.

Amendment: On page 6, lines 8 through 25, and on page 7, lines 1 through 8, strike out all of present section 5 and insert in lieu thereof the following:

SEC. 5. The Home Owners' Loan Act of 1933 as amended is further amended by inserting after Section 5 a new section as follows:

SEO. 542 (a). In order to contribute to the employment of labor, particularly in the building trades, the Home Owenrs' Loan Corporation is authorized to subscribe for shares, stock, make deposits, buy certificates of deposit, investment certificates, or make loans as follows:

(1) To subscribe from time to time for any amount of full-paid income shares of Federal Savings and Loan Associations.

(2) To subscribe for any amount of shares in building and loan associations, savings and loan associations, homestead associations, or cooperative banks organized and operated under State charter or under the supervision of the Comptroller of the Currency of the United States and which are members of a Federal Home Loan Bank: Provided, That no share shall be subscribed for if such institution accepts deposits or has any other shares which are preferred as to dividends or in liquidation to such shares so subscribed': And Provided further, That the institution in which such shares are subscribed is in such financial condition as to be able in the judgment of the Board of Directors of the Corporation to pay dividends at a rate of at least 3 per centum per annum.

(3) To make deposits or purchase certificates of deposit or investment certificates in mutual savings banks and stock savings banks, provided such banks are members of a Federal Home Loan Bank and provided the same are in such financial condition as in the judgment of the Board of Directors of the Corporation to be able to earn and pay on such deposits, certificates of deposit, or investment certificates at the rate of at least 3 per centum per annum.

(4) To make loans to insurance companies which are members of a Federal Home Loan Bank, to bear interest at the rate that such companies earn on their investment capital, provided such companies are in such financial condition as to be able to earn, in the judgment of the Board of Directors of the Corporation, at a rate of at least 3 per centum per annum.

(b) The funds authorized by this section to be invested, deposited, or loaned shall be invested, deposited, or loaned, in the discretion of the Board of Directors of Home Owners' Loan Corporation so as to contribute to the employment of labor and the maintenance, repair, modernization, enlargement, building, and financing of homes, and combinations of homes and business properties, and so as to promote thrift and strengthen the savings and home-financing institutions receiving and administering such funds.

(c) Such funds shall not exceed $500,000,000, and shall be invested, deposited, or loaned for the full term of 5 years, and thereafter to be withdrawn, repurchased, or mature, as the case may be, at the discretion of the Board of Directors of Home Owners' Loan Corporation, but not to exceed an amount equivalent to 10 per centum of the original amount of any such investment or deposit or loan in any one year.

(d) The Home Owners' Loan Act of 1933, as amended, is hereby further amended by striking out from Section 4, subsection (c), thereof, “ $2,000,000,000” and inserting in lieu thereof “$2,500,000,000.”

I want to make one more comment before passing section 5. I think our building and loan associations are closer to resuming normal lending operations at the present time than they have been at any time in the 4 years of the depression. We have been assisted rather substantially by the Home Owners' Loan Corporation. We have gone through the difficult period of application for admission to the home-loan bank system, where they examined us from top to bottom, and some 2,500 associations have been admitted, and some 2,500 more are on the way to admission, which, incidentally, was a good thing, because it was a voluntary joining of the system by these thrift and home-financing institutions. All the credit of these institutions is now available to some 2,500 institutions, and we think we can function if we do not encounter somethig here to discourage the directors and investors of these institutions.

I should now like to call the attention of the committee to page 7 of the bill, section 6. I want to have the committee note that in order to carry out the purposes of repair and modernization, and also in order to carry this insurance of mortgage proposal that is in section 5, the unlimited credit of the Federal Government is placed behind these proposals. They are obligations that are not limited in any way and are to be guaranteed as to principal and interest by the United States.

Senator GORE. Are those repairs?

Mr. BODFISH. If I may repeat the statement I made a moment ago, the essence of this proposal is that there is a credit corporation with $200,000,000 capital established, and

Senator GORE (interposing). In this thing?
Mr. BODFISH. Yes.
Senator GORE. Is that to be a new institution?

Mr. BODFISH. Yes. To guarantee two types of mortgage loans. One of them is for repairs, modernization, and alterations, and the other one is to be long-term mortgage loans made for construction of new homes by refinancing existing mortgages. It is the latter part of the program that we object to very strongly on behalf of the building and loan associations.

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Senator GORE. Does the repair and modernization program include air conditioning?

Senator COUZENS. Sure. That is the motive behind the bill.

Senator BARKLEY. Well, there is a good deal of air conditioning that goes on here in the committee room regardless of law.

Senator GORE. Yes; but that is hot air, and this would be cold air. It may be that they will neutralize each other.

Mr. BODFISH. I call attention to the bonding power in passing

Senator BARKLEY (interposing). If the committee should see fit to adopt your amendment as to section 5 of the bill, Mr. Bodfish, would you still oppose the provisions of section 6!

6 Mr. BODFISH. If they will adopt my amendment, it is not necessary to change that.

Senator BARKLEY. Why?

Mr. BODFISH. Because, while you can involve a lot of money in this repair and modernization program, yet you can involve millions when you guarantee mortgages. It can run into the billions of dollars.

Senator COUZENS. Under this provision I understood your predecessor to say you could engage in any activity along almost any line.

Mr. BODFISH. It would be a replica of your joint-stock land banks. They were corporations operated for private gain. I think it flies in the face of everything we tried in building and loan associations in 1890, and that was the first great mortgage debacle we had in this country. And the first mortgage concerns to fall in this depression were concerns trying to operate Nation-wide, and some of which had a guaranteed mortgage scheme. In Senator Wagner's State of New York the legislature was engaged for a year and a half trying to reinstate them. It shocks us that this bill, proposed under Federal sponsorship, should repeat that on 80-percent loans.

Senator GOLDSBOROUGH. And you think that would be dangerous, do you?

Mr. BODFISH. I think we ought to go into the stock-promotion business if this bill were to pass.

Senator BULKLEY. That is, the joint-stock land banks were limited in the matter of territory?

Mr. BODFISH. Yes.
Senator GORE. And nearly 100 percent of them failed?

Mr. BODFISH. This concern proposed here could roam up and down the land.

Senator GORE. It is the free and unlimited coinage of mortgages, isn't it?

Mr. BODFISH. Senator Gore, that phrase is worth a trip to Washington. However, in the matter of unlimited coinage of mortgages,

Senator GORE (interposing). I just got back from Oklahoma this morning and was anxious to know something about this bill.

Mr. BODFISH. This Corporation could have any sort of capital-stock set-up that its promoters might develop and that it could get approved here in Washington. And I think it very unsound to bring stock promotion and stock selling in a broad way into the homefinancing field. My studies of the situation and they began before I had any direct connection with building and loan associations

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led me to the conclusion that a sound home-financing structure should be based upon the development of the local cooperative institutions, managed by local citizens, and making loans that went beyond the limits to which a prudent life-insurance company should go. Just like your building and loan associations made 6623 percent or 70 or 75 percent mortgages, because they were local institutions, and they were a combination of real estate and character loan.

Senator GORE. And it was one business in this country that had remained decentralized, and it had succeeded, and it was distressing to me when you came here and insisted upon getting on the doorstep of the Government.

Mr. BODFISH. We set that structure up very conservatively, and we merely wanted a device by which we could cooperate with each other, and our participation has been along that line.

Senator GORE. I think your word“ device " is a good point. And I think your feet are in the stocks, and I do not know how you will ever get them out.

Mr. BODFISH. I hope the Federal Government will encourage sound local cooperative institutions. That is the only way in the world you can make 75-percent or 80-percent loans and ever hope to collect them back. It is when a little group of neighbors makes a loan to somebody they know. That is the reason for the Federal Government to conceive one savings and loan program,

Senator GORE. That presupposes a little good luck, does it not?

Mr. BODFISH. Yes. But our mortgages are being paid back, not because the real-estate values are so essential today but because of the kind of people we deal within this country are essentially honest and are dealing with their neighbors. They will pay off their debts to them.

Senator GORE. And they are not letting their loans become distressed.

Mr. BODFISH. I wish you had not mentioned that subject. But our problem of the past year has been to lend to men who can pay, who were not borrowing in the hope of getting a public handout.

Senator GORE. And there were men that the Government of the United States invited not to pay.

Mr. BODFISH. The $2,000,000,000 given to the Home Owners' Loan Corporation—and I had a modest part in the planning of that Corporation—was employed to take care of short-term mortgages in this country. But the publicity and the public psychology that flowed from it caused many people to cease to carry along their obligations; I mean people that had full capacity to do it. Out in my town the first man to get a H.O.L.C. loan was a man who had been on the public pay roll for 6 years.

Senator WAGNER. Hasn't your organization transferred some loans to the Home Owners' Loan Corporation? And are you sure there was a need for the transfer ?

Mr. BODFISH. For the first 7 or 8 months' operation of the Corporation the whole responsibility was on the mortgagee to decline to take the bonds if the borrower could make his payments. I cannot describe to you the pressure that they put on our interest rates.

Senator WAGNER. I agree with what you say. But I want to know if your own association was unable to meet the demands upon it.

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