Mr. THOMPSON. I think the Mortgage Bankers Association, with your permission, will be here and have something to say about that next week.

Senator SPARKMAN. That is true. Let me say that I think the Mortgage Bankers Association in recent times, based upon such selfexamination statements as that, have offered us considerable hope of new activity.

Mr. THOMPSON. It seems like an inconsistent position; doesn't it? Senator SPARKMAN. Yes.

Mr. THOMPSON. We oppose direct lending and selling of loans to FNMA.

Senator SPARKMAN. Yes.

Mr. THOMPSON. I said earlier, though, when Senator Bricker asked me if mortgage money was available for every community, that it was not.

Senator SPARKMAN. That is right.

Mr. THOMPSON. There is one loan in New Jersey, say, we can't sell to an insurance company. We sell it to Fanny May, because we haven't the means of getting money except out of the investment that we sell. Is that wrong if private enterprise won't supply the money? say "No."

I

Senator SPARKMAN. I agree with you 100 percent, as long as we are trying to stimulate home building in the country.

Mr. THOMPSON. Why don't we let private enterprise try to soundly finance cooperatives if groups of people want them, Senator Sparkman, if the thing is sound and if the project has enough investment on the part of the cooperators, to make it appear absolutely sound?

Senator BRICKER. There isn't a State in the Union that doesn't authorize nonprofit cooperatives, that I know of.

They have the same right to establish credit as anyone else.
Mr. THOMPSON. Yes.

Senator BRICKER. If they had enough of their own money in it, you or any insurance company would loan it.

Mr. THOMPSON. Yes.

I stated before my company had $165,000,000 of mortgages before we found out we had guaranteed too much. We issued guaranteed mortgages and certificates. Then we had to absolve our guaranty, because we undertook to guarantee $165,000,000-in that it was a mortgage on one of these large cooperatives. A very beautiful apartment. We took a very substantial loss after we acquired the property and upon the sale.

Senator SPARKMAN. I understood you to say in your statement that cooperative housing in this country had not been successful. Did you not?

Mr. THOMPSON. That is the fact.

Senator SPARKMAN. Now you make this point; then you come back and say, "Why not let private industry finance the cooperative?" You have said they can't do it because it has not proved successful. Mr. THOMPSON. I wouldn't say private industry would not now do it. Under a sound appraisal, full consideration, based on the experiences of the past, with substantially lower costs of acquisition or rental costs, the majority of the cooperative apartments, built and now used as conventional apartments, were of the luxury type, and even some luxury types of apartment which were not cooperatives

failed. Whereas, in this group of about 100 properties which my company owns, we have what we think are housing units for every group of the middle class. We neither go to the very low income nor to the high income.

We have properties where we consider our tenants our meat and potatoes. Then we have those that are the tossed salad ones once in a while. That is middle-income stuff. Private industry will take care of the middle-income group. That is the desirable class to take up from the standpoint of economic soundness.

We don't want the man of very large income one year and perhaps no income the next, or the one that needs Federal, State, or other aidhe who is an indigent.

Senator SPARKMAN. I assume, of course, that when the FHA program was originally proposed the same arguments were made about letting private industry in this country operate and take care of the private needs in this country. It would not have been done.

Mr. THOMPSON. No, because any private-enterprise company or system was unable to stand up during the depression under the mortgage guaranties that had been issued. All mortgage guarantors in the country had to go into court and be relieved of the guaranties. Because there isn't any corporation or any instrumentality or any Government that can assume unlimited debt and pay it in the event of recession or depression, or a change in our economic cycle.

Senator SPARKMAN. Mr. Thompson, I don't believe I misunderstood your statement or the implication in it: that this was a threat to private housing, to privately owned homes, and things of that kind. I believe that was contained in your statement.

Of course, you know that at the very time we are considering this we are considering other amendments that will stimulate the FHA program more.

We propose to allow section 608 to expire. I think that is long overdue. We are adding to section 207. It is not our purpose to do anything to hamstring or restrict private home building.

Mr. THOMPSON. I don't think that anybody, Senator, will say, without question, that it is your purpose, but the result may beSenator SPARKMAN. Let me tell you something that was rather interesting to me: Senator Bricker will bear me out in this.

But

In Sweden we found out that in spite of the fact that they had nearly a century of cooperative-housing programs, and I had the impression-I don't know whether it is true of Senator Bricker or notthat we were going to find practically all housing in cooperatives. not so. Even today a large percentage of the home building in Sweden is done by private individuals. I understand that only 20 percent of all housing in the large cities in Sweden is cooperative housing. I don't believe most people understand that.

Mr. THOMPSON. I didn't know that it was that much, myself. I didn't know it until I read this morning a report that was endeavoring to draw some analogy between what is proposed here and what has been proposed in Sweden, and the conclusion was that there cannot be any analogy drawn.

Senator SPARKMAN. No; I don't think anyone would believe that we could impose any set pattern in this country. What must be developed here, if the Government is going to lend encouragement to

cooperative housing, we must do it within the pattern that is accepted in this country, a private-home-building program.

That is what we are trying to do in this bill.

Senator BRICKER. I don't think, outside of a few of our large cities, Mr. Chairman, where the development has already occurred, that the American people are generally apartment-living people by desire. They like to have their homes. We heard that expressed on the part of the Swedish people also, time and time again.

I asked the question, if you remember, of the head of the housing department in Stockholm, as to when they expected to get back where they could get the homes that they were so proud of in the suburbs, and they said about 5 years.

Let me say for the record at this time, because you have mentioned that at the time of the depression the guaranty companies could not withstand the impact of the loss on their guaranties, I am fearful that if we get too much Government guaranties, if the debt continues to increase, if deficit financing continues to the point that we blow the economy up to the point where it breaks, then your Government guaranties are going to be imperiled.

I am fearful of too great Government guaranties even in the field of FHA, GI, and the like.

I think we should be cautious in the Government in going too far in guaranteeing that which we know could not be guaranteed in the last depression by private companies. I think it is a red flag that we ought to look at and analyze pretty carefully-this program of Government expansion of credit.

Mr. THOMPSON. I think the Government can overcredit itself.
Senator BRICKER. That is what I am fearful of.

Mr. THOMPSON. And the $2,000,000,000 proposal, or at least, by law, allowed to this program, is just not $2,000,000,000, it is another $2,000,000,000.

Senator BRICKER. Several two billion dollars make a lot of money. Mr. THOMPSON. Yes. Of course, we cannot accept the statement or the belief that this bill is designed for the benefit of the private enterprise.

Senator SPARKMAN. My own thought is that it is designed for the purpose of stimulating home building in a certain area which is not being adequately provided for at the present time.

Mr. THOMPSON. Well

Senator BRICKER. It comes back to the real purpose of this legislation; it is a social purpose. It is uneconomic in the system. If the social needs are so overwhelming as to overbalance the Government entering into competition, that might justify the enactment of this bill. It is a question of where that social justification begins, and where it ends, that I think ought to prompt us in passing or refusing to pass a bill of this nature.

I don't think you can say that this is good economy.
Mr. THOMPSON. No.

Senator SPARKMAN. I have no doubt we could argue for a long time on that. It seems to me that the question is if a depression comes again, are we going to have another HOLC, or are we going to prepare by means of a guaranteed program ahead of time. The same thing is true with the Federal Deposit Insurance Corporation.

Are we going to wait until then and have an RFC to bail them out, or have this program ahead of time?

Senator BRICKER. One other thought: That is, this is not creating a deficit insofar as the Government puts money into the works, but it is adding to the deficit.

Mr. THOMPSON. Precisely.

Senator BRICKER. If there is any deficit financing in this program, we have a deficit now. We will have one next year, which will ultimately destroy our local economy; government as well as private economy.

Senator SPARKMAN. There is this difference, though, between this program and FNMA, which you people had advocated: We take money out of the Treasury for FNMA.

Mr. THOMPSON. The National Association of Real Estate Boards is very much opposed to FNMA. That is one certain point.

Senator SPARKMAN. I will say the Mortgage Bankers Association, then. Many of the people who take similar views that you do with reference to this legislation are very strongly in favor of FNMA.

When we vote funds to FNMA, we actually increase the national debt.

Senator BRICKER. There isn't any question about that. That is dangerous, too. On the face of it, it should be guarded against. We don't want to make FNMA or any other finance program a dumping ground for unsound securities.

Mr. THOMPSON. That is precisely what it is.

We don't sell it a sound mortgage. It has no alternative but to buy what we offer. Senator SPARKMAN. Let's not make it that strong. It does provide that you certify that they are good mortgages.

Mr. THOMPSON. Good

Senator SPARKMAN. I think you are required to certify to that.
Mr. THOMPSON. Good in what sense?

Senator SPARKMAN. So far as you know.

Mr. THOMPSON. How do we know that 10 or 15 years from now the property

Senator SPARKMAN. Of course

Senator BRICKER. Good as of today.

Senator SPARKMAN. That is as much as anybody could ask.

Mr. THOMPSON. May I make this statement: That the association which I represent this morning was the only trade association in the building industry that heartily supported the establishment of the Federal Housing Administration at its inception.

Senator SPARKMAN. Of course, you are here in more or less two capacities.

Mr. THOMPSON. No one

Senator SPARKMAN. The one you speak officially for supported the FHA.

Mr. THOMPSON. Precisely.

Senator SPARKMAN. Was that the only trade association which did support it?

Mr. THOMPSON. Yes.

As for the Mortgage Bankers Association, I am an extinct president. Senator SPARKMAN. Yes.

Thank you very much, Mr. Thompson.

Mr. Oscar Kreutz, please.

Mr. Kreutz, will you identify yourself for the reporter, and then just present your testimony in your own way.

We are glad to have you with us.

STATEMENT OF OSCAR R. KREUTZ, EXECUTIVE MANAGER OF THE NATIONAL SAVINGS AND LOAN LEAGUE

Mr. KREUTZ. Thank you, Mr. Chairman.

Mr. Chairman and members of the committee, my name is Oscar R. Kreutz. I am executive manager of the National Savings and Loan League. On behalf of the league I thank you for this opportunity of making a statement in regard to the proposed amendments to S. 2246, to provide for the creation of a National Mortgage Corporation for Housing Cooperatives and for the guaranty of the bonds of the Corporation by the United States. The National Savings and Loan League represents a substantial and growing segment of the savings and loan business. Our member institutions are located all over the United States.

Last year, as also in 1948, savings and loan associations made more than 3.5 billion dollars of loans to finance homes of our people. Mortgages held by our institutions represent approximately one-third of the urban mortgage debt of the country. In number they represent many more than one-third of the mortgaged homes of America.

Traditionally savings and loan associations have financed the homes in the medium- and low-priced field for people in the lower income brackets. In fact, our institutions are often referred to as the "poor man's banks."

We have a deep interest in this proposed legislation. Our interest stems from a long and favorable history of more than a century of encouraging thrift and assisting American families to acquire homes of their own.

Certainly we have no objection to cooperative enterprise. Savings and loan associations are themselves private cooperative undertakings. Most of them are mutual institutions where many people join together for the common good and the individual's gain. Through these cooperative efforts many millions of people have learned to practice thrift and additional millions have eventually found themselves in debt-free ownership of homes. Our institutions have had a major part in bringing about the very high percentage of home ownership in this country-over 51 percent. Our institutions have also contributed, largely through our long-established monthly amortized loan plan, to the fortunate debt-free condition of so large a portion of America's homes. The figure given by the Federal Reserve Board is 55 percent. Traditionally our institutions have also encouraged lower costs of homes and of home financing. Our institutions have supported programs for, and also taken the initiative in, the reduction of interest and other home-financing costs and the reduction in the over-all carrying charges on home loans.

As a matter of fact, the only element in the cost of home buying that has declined appreciably for more than a decade is the cost of home financing. Interest rates of home financing are only two-thirds of what they were prior to the war, and yet all other costs have risen substantially during the same period. Many have doubled. Some have gone even higher.