sarily has to be and necessarily takes a long time to get it in operation.

Senator WAGNER. Mr. Stone, in what phase of the legislation is your own bank interested? You could not make loans under title I, could you?

Mr. STONE. Frankly, I do not think it would make a penny's worth of difference to our particular institution. I won't say a penny's worth-I think it would do considerable good in the city and thereby help us.

Senator WAGNER. You would get more depositors?

Mr. STONE. NO; we are not looking for depositors. We have all we want.

Senator WAGNER. I know you have a great institution.

Mr. STONE. But it would help the real-estate situation.

Senator WAGNER. Yes.

Mr. STONE. And I think perhaps that has not been emphasized quite enough.

Senator WAGNER. You are talking more as a citizen rather than just as president of this institution?

Mr. STONE. Yes.

Senator WAGNER. That is what I wanted to bring out.

Senator BULKLEY. If any of your mortgagors should borrow and renovize their homes you would have their security?

Mr. STONE. Yes, we would have that. Take Syracuse, a city of 200,000 population: I know perfectly well that if there was a feeling that if you could get a mortgage on a house, even if you don't get it and there was a feeling that you could get it, it would help us, because we would get rid of some of this property we have taken over. We are not taking those loans, and we are the biggest lender there. I know if there was that feeling the real-estate situation would improve.

Senator KEAN. You say you are not making any loans. How long has it been since you have made a loan?

Mr. STONE. I say we are not making any-we occasionally make -one. We have not made them as a general practice for a year and a half.

Senator WALCOTT. Do you agree with Mr. Miller's statement this morning that it would set in motion about three times as much money as the banks would have to lend? That is, your building fund, the money that would be used and in circulation would represent three times the amount of money loaned?

Mr. STONE. You mean this temporary proposition?

Senator WALCOTT. Yes.

Mr. STONE. Oh, yes.

Senator WALCOTT. It would be as high as that?

Mr. STONE. Yes.

Senator WALCOTT. So that it would put a great deal of currency into circulation?

Mr. STONE. Oh, it would. I would be a tremendous help if you can get the banks to do it, or the loaning institutions.

Senator WALCOTT. Yes. What do you think about that?

Mr. STONE. I think our situation is a little peculiar in Syracuse. I think we could get one of them to take it up and do it as a matter of civic duty for the community.

Senator WALCOTT. Would the strong banks, the banks that have had a good record through this depression, be willing to enter into that effort? Do you think they would feel like lending under this? Mr. STONE. I think they would do it for the good of the community. I do not think they would do it on a business basis.

Senator KEAN. What do you think of this? Do you think that the bank examiners would allow them to loan?

Mr. STONE. Oh, yes.

Senator KEAN. Do you think the bank examiner would allow them to loan on real estate now?

Mr. STONE. Well, I would hate to see them try to stop me if I Iwanted the loan.

Senator KEAN. They would throw it out.

Senator WALCOTT. It would depend on the appraisals.

Mr. STONE. No; they would not. Excuse me, but they would

not.

Senator WALCOTT. They would not with your bank, but there are a good many banks that might.

Mr. STONE. Oh, yes; that is true. But I mean unless a bank is shaky they haven't any inherent right to tell you whether you can loan on real estate or cannot.

Senator KEAN. But they would question the loan that you have on real estate and would not take any appraisal.

Mr. STONE. They intimate strongly that you should not do so and So. But we have not had any trouble on that. If I felt that we did not have too many mortgages now out we would be tickled to death to go out and do it and there would not be any criticism.

On the question of the formation of these 5,000,000 mortgage companies, I haven't any real opinion on that except to say in a general way that in Syracuse we welcome any loan agency that will loan money. I do not feel qualified to speak on the building and loan association matter. That does not enter into our field very much. I think that that is all I have to say.

Senator BULKLEY. All right; thank you very much.

Mr. STONE. Thank you, gentlemen. I believe Mr. Steffan is the next who is scheduled to speak.

STATEMENT OF ROGER STEFFAN, VICE PRESIDENT NATIONAL CITY BANK, NEW YORK CITY

Senator BULKLEY. Your connection, Mr. Steffan?

Mr. STEFFAN. My name is Roger Steffan; vice president of the National City Bank of New York. My only qualification for appearing here is to give information regarding the credit aspects of the home-modernization phase of the bill. I know nothing about the rest of it at all. I have had charge of the personal-loan department, handling entirely small loans of our bank from the time it started, now about 6 years, and the question was asked whether our experience had showed if the average American citizen was a good credit risk and some of the details regarding that phase of the work, which I am very happy to give if the committee is interested to have it.

Our answer to that question, from the experience that we have had over this 6-year period, would be that he is probably the best

credit risk in the world for this type of loan; that the record of losses during the entire period, which includes the 2 so-called "boom years" and the 3 or 4 years of depression, has been far smaller than the record of losses for national banks for all purposes.

Senator BULKLEY. I do not think you have quite sufficiently defined what you mean by small loans and the terms on which you make them.

Mr. STEFFAN. Yes. The loans are made in sums of from $50 to $2,000, average $320, and are made to a borrower and his wife with two cosignors on the paper; in fact, three-name paper, it is called. Senator BULKLEY. And without security?

Mr. STEFFAN. Without other security. These loans are made for all purposes of an emergency or constructive nature, and 5 percent. of them are made for home repair and modernization at the present. In other words, we made 5,000 loans last year totalling a million three hundred thousand dollars for home modernization work of this character that is proposed in the bill, and the others were for various purposes, such as sickness, education, all purposes of that character.

Senator WAGNER. Just what inquiry do you make about the applicant before you grant these loans?

Mr. STEFFAN. Well, briefly, the information that is essential. Of course, there is considerable detail on the application, Senator. Senator WAGNER. Yes.

Mr. STEFFAN. But we inquire of the employer as to the fact that he is employed, where he is, that his salary is what he states it is, and the employer's opinion if he is likely to be there for a year, which is the period of the loan.

Senator BULKLEY. Your loans are all made for a year?

Mr. STEFFAN. Yes, sir.

Senator BULKLEY. And on what payments?

Mr. STEFFAN. The borrower deposits one twelfth of the amount borrowed each month in a savings account, so that at the end of the year he is able to pay it off.

Senator WALCOTT. At 6 percent?

Mr. STEFFAN. At 6 percent. And we pay 2 percent to the deposits. That is our regular savings rate. The figures are rather steady for the entire period, around 90,000 loans a year for about $25,000,000, and the total number of loans made is 493,000 for $158,000,000.

The credit loss figures are I think of interest to the inquiry, because I had been asked by those interested in the home-modernization features what our opinion would be as to safety of the loans in question and to the need of the 20-percent guarantee of the Government. On loans made in 1928, our losses were 0.31 percent. 1929. 0.51 percent, which was the worst year we had. Senator KEAN. That is a half of 1 percent?

In

Mr. STEFFAN. A half of 1 percent; 1930, 0.31. 1931, 0.21. The figures are not complete for the following years, but our estimates indicates that it will be 0.19 for 1932, and 0.18 for 1933, and 0.16 for 1934. Those estimates are based on curves which we are able to complete from previous years. Roughly peaking, the losses have been under a quarter of 1 percent for the full period.

Senator WAGNER. Have you any figures to indicate how many applications you reject of this type?

Mr. STEFFAN. We make 92 percent of all applications presented

to us.

Senator WAGNER. Is that so?

Mr. STEFFAN. And we reject 8. We try to make the loan. We try to get the man in shape so that he can make it, if there is any question arises that indicates that it cannot be made. The purpose of the department is to be helpful and not to say no to people if they

can.

Senator WAGNER. Do you conduct a sort of a campaign to inform these small borrowers?

Mr. STEFFAN. On the contrary, Senator, we do not, because we do not believe in advertising for loans, and our observation has been of other companies that when you do, you do not get such good applicants. That is, higher-rate companies.

Senator WAGNER. Are they made mainly by these branch banks that you have around the city?

Mr. STEFFAN. The branch system aids it a great deal, although one third of the loans are made at the central point at Forty-second Street, where we have our central office for this department; but applicants can come into any one of the 72 branches, and they do.

Senator WAGNER. What is this branch of your business called? Mr. STEFFAN. The Personal Loan Department. While it is true that these loans differ in two or three respects, one of which I think is rather important, from the loans that are contemplated, I should like to say this, that while we have what we call co-makers on each loan, and as I have said, our credit losses are less than a quarter of 1 percent, we collect less than a half of 1 percent from comakers. I only mention that to show that as far as solvency is concerned these loans can and are paid 991⁄44 percent by the borrowers themselves.

Therefore, there is no reason why the type of loan that is suggested here, if made with equal care and the same credit investigation, should not be paid 99 percent. Whether or not they will be is a question, because of some other factors, but it is possible that it can be and should be. As a matter of fact, I would estimate, if I could hazard one element of opinion, when really I ought to only give facts, there is no reason why losses on loans for home modernization, even on single-name paper as is proposed here, it seems to me, should run beyond 5 percent, and I would guess that they ought not to run much beyond 1 if they were made with proper care and made fairly liberally.

Senator BULKLEY. The amount of loan that you make to anybody must be relative to his earnings so that you know that his monthly payment can be made out of earnings, isn't it?

Mr. STEFFAN. That is the most important factor, Senator. And that fact plus this one: The time element. Amortization, of course, monthly amortization, is absolutely essential. Otherwise the thing falls immediately.

The only place that it seems to me perhaps there is a little too much optimism in the bill is the suggestion of a 5-year period. Now, I perhaps am not as thoroughly informed about it as those who are interested in it, but it seems to me that a 3-year outside figure, and preferably a 2-year figure, for this type of loan is preferable.

Senator BULKLEY. Naturally the long time increases the risk. Mr. STEFFAN. Undoubtedly it does, and it not only increases the risk, but you cannot foresee circumstances. And there are very definite figures for people of this type. Let me say that the average person that we deal with has a $2,800 income, which of course, is higher than it would be outside of New York City. About once in every 3 years he runs into an emergency that he has not provided for.

Senator BULKLEY. What requirement do you make in making a loan as to life insurance or sickness or accident insurance?

Mr. STEFFAN. Life insurance is a prerequisite of every loan.
Senator BULKLEY. It is what?

Mr. STEFFAN. It is required on every loan.

Senator BULKLEY. Is it a specific insurance on the loan?

Mr. STEFFAN. It insures the decreasing balance, and it is provided so that at any time the borrower dies no further deposit is required. and the insurance is paid by the Prudential Insurance Co., the loan is paid by the Prudential Insurance Co.

Senator BULKLEY. And the borrower pays a premium to cover that, does he?

Mr. STEFFAN. He does. It is practically painless. It is so small that it is not noticeable. It is 20 cents for $100, and it is taken out each time so that he really does not know that he pays anything, it is so small.

Senator BULKLEY. That is very interesting. Now what about sickness or accident insurance?

Mr. STEFFAN. It does not seem to be important. Originally we had that, but disability is a very difficult thing to define, and we had all kinds of trouble with people with crooked fingers and broken eyelashes, and it is not a very important phase of the business. Death is important because that stops everything.

Senator WAGNER. Have you any figures on the death during the life of the loan, the percentage?

Mr. STEFFAN. Yes; I have it here. In 1933, last year, full year, $65,000 worth of loans liquidated, which probably means that on the average half of them were paid off. That is $125,000 face of loans, and they average $300 apiece. That is, 400 of our loans were paid by insurance. That many people died.

I think this time element is a very important one. I would not emphasize it, but I am sure that as I started to say, once in every 3 years the average city family must come to an emergency lender such as ourselves, or the industrial banks who do a very good job also, to get assistance. Now, if all his available savings are being taken for a past home-modernization project, he is going to be left and his family is going to be endangered if he does not have this thing paid down, and I do not like to see people forced into a situation like that.

Senator WAGNER. Those are very interesting. I did not hear them.

Mr. STEFFAN. About once in 3 years the average family has to have emergency financial assistance, and that is why I do not like to see a loan of any character which is not a mortgage loan made for longer than the period of preferably 2 years, so that whatever emergency arises, like a child in the family or a broken leg or a mother