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Now, I came here to Washington, and I learned that there was a provision in the GI bill which would have enabled the VA to raise the interest rate if the VA Administrator concurred with the Secretary of the Treasury, to 42 percent, and that had been in the bill for almost 3 years, but somewhere along the line, some vicious politics happened to be played, and that prevented many GI's in my area from getting a home who ordinarily would have been in a home and have been paying on it.

Have you taken into consideration those regional problems when you take this forthright stand in reference to the interest rate?

Mr. DOWNER. Mr. Stringfellow, we have taken them into consideration. I wouldn't say that we know what the answer is.

Of course, it would be a fine thing if there was some way we could smooth out the peaks and valleys in this availability of mortgage money throughout the country so that a veteran that lived in Utah or Texas didn't have to pay any higher interest rate and could get a loan as readily as a veteran in New England.

I don't know what the answer is. I don't know that there is an answer to it. It is a simple fact that capital is available in New England for loans in that area and is not available in the Southwest or the western areas for similar loans.

Consequently, one who wants to obtain a loan in an area where money is scarce probably has to pay a higher interest rate.

Now, I assume that such discrepancy occurs throughout the country in other matters, such as used automobiles, for example. Normally a used car will sell for a higher sum on the west coast than in the East. I don't know if there is any answer to it. I agree with you that it is an unfortunate situation. As to the matter of the recent increase to the 42-percent rate, I agree with you absolutely that when one needs a loan in build a home it is better for him to have one at 42 percent than not have any at 4 percent.

Mr. STRINGFELLOW. Why is it, then, that the veterans' organizations so vigorously opposed the raising of that interest rate from 4 to 412 percent?

Mr. DOWNER. Well, we really think that at that time that the change was made, and preceding the change, there was apparently great optimism among a great many of the lenders that there was going to be an increase to 412 percent, so "Let's not make any 4-percent loans, because, after all, the money we lend now at 4 percent, maybe in a few months we can lend at 412 percent."


I think that situation existed. I don't mean by that to be attacking of the lending group particularly. Certainly that is their right, if they think they can get an extra half percent on their capital, to do it. But I think that situation did exist and affected the availability of 4-percent money.

Mr. STRINGFELLOW. Well, the history of our mortgage situation in our State is that mortgage money dries up much sooner than in other areas. And I know that the lenders there would have been very happy to have made the loans if they could have taken them out of their portfolio and sold them, but they were just noncompetitive at 1 percent, and so they just did not take them.

Now, here is a situation where the will of the Congress was not carried out. You mentioned the Congress should have the authority

to set the rate of interest. Well, the Congress had placed within the bill the discretion to raise the rate to 42 percent, but the Veterans' Administrator sat on it, and I would like to know why, because there are many veterans, especially in my area, who just didn't get homes because of that fact, and I think it was just a plain political situation in the election year.

Mr. DOWNER. Well, that may be, Mr. Stringfellow. I think the Administrator of Veterans' Affairs did what he at the time considered was in the best interests of veterans. It is a matter on which reasonable minds might differ, of course.

My views on the subject may be erroneous, but that is the official position of our organization. This matter was debated at great length at our last national encampment in Milwaukee, and then the report of our committee that had jurisdiction over the matter reported the bill out to the convention floor, and it was the subject of debate on the floor. I admit and recognize that there is a great difference of opinion on it.

Mr. STRINGFELLOW. I feel that in dealing with this item of interest rates we have got to take into consideration regional problems, we have got to be realistic; because I am a veteran, I know that you have the interest of the veterans at heart, and we all want to help them get a home; but, when we have certain actions taken which absolutely prevent the veteran from getting a home because of these regional problems, I believe we should also take that into consideration in any stand that we might take as a national organization.

Mr. DOWNER. I appreciate your attitude, Mr. Stringfellow; and I am sure we do have the same objective; and, as long as we do have, I think probably we will eventually reach a conclusion that will be at least more than partially acceptable to both of us.

Mr. STRINGFELLOW. Now, you understand that the provisions as proposed in the bill does not set the interest rate. It merely establishes a maximum.

Mr. DOWNER. Yes; I understand that.

Mr. STRINGFELLOW. And then the President can establish the interest rate in an area which will be competitive within that range. Mr. DOWNER. I understand that. But the problem we get, it seems to me, is in regard to the differences in rates throughout the country. If we undertook, say, to set a rate in Texas that would make money available in Texas, then, if we applied that rate in New England, we would require a veteran in New England to pay a higher rate than he otherwise would have to pay.

If we established the rate in New England as the rate required to secure a loan there, then we would have a veteran in Texas paying a higher rate than a veteran in New England. It isn't a simple problem, I think.

Mr. STRINGFELLOW. It is not a simple problem, but I don't think that we have to worry too much about New England. I am not a financial expert, but the situation there is highly competitive, and I just do not believe that gives us an adequate picture.

Now, I would like to develop this veterans' preference thing just a minute.

Do you mean the overall veterans' preference legislation? Is that what you are opposing? Or just as it applies to housing? It was men

tioned in the statement made by the American Legion that they were opposed to any tampering with veterans' preferences.

I question the wisdom of that statement because I do not believe that we should be in the business of subsidizing incompetency, whether it be a veteran or anyone else.

I believe that we should give consideration to maybe revamping veterans' preference on a more logical basis because the present veterans' preference laws, I believe, are a deterrent to the veteran rather than an asset. That is my personal opinion.

Mr. DOWNER. If you are referring to the veterans' preference in the civil service, I think there is no protection of incompetency through it, because the veteran's performance must be good or better before he is entitled to the protection of it.

In regard to this particular bill, Mr. Stringfellow, I had two points in mind in regard to preservation of the veterans' preference. One was that discussed in the last paragraph of my statement in regard to war housing.

The other is in the overall picture, in that this bill, generally speaking, makes credit available to the entire population on the same basis that it is now available to the veteran population. It gives them almost equal credit terms.

We wonder, if we are to carry on a vast nationwide program of the Government guaranteeing 95 percent of a mortgage for a period of 30 years, if we may not ultimately collapse real-estate values in this country. I don't pretend to be such an expert that I would want to take any definite position on that and try to defend it, but we merely call that to your attention as something that we think is worthy of consideration.

Mr. STRINGFELLOW. We certainly appreciate-I do, for one, at any rate the interest of the veterans' organizations in these various problems.

Mr. DOWNER. Thank you very much, we appreciate your interest in the matter.

Mr. STRINGFELLOW. That is all, Mr. Chairman.

Mr. O'HARA. Mr. Chairman.

The CHAIRMAN. Mr. O'Hara.

Mr. O'HARA. I notice that the position taken by your organization and that taken by the American Legion are about the same.

Mr. DOWNER. I believe so, sir.

Mr. O'HARA. Have you, in your organization, talked over this with the representatives of the Legion?

Mr. DOWNER. We have really had no consultation or conferences on it to compare positions of the organizations. A time or two I have had some brief conversation with Mr. Kennedy.

I think the fact that our positions are somewhat parallel is a coincidence that frequently happens. We are both interested in the welfare of the veterans of the country.

Mr. O'HARA. Would you say that one reason that you are on the same level of understanding and advocacy is the fact that this is in an area that you have been exploring for a number of years past? Mr. DOWNER. Yes, sir; that is correct.

Mr. O'HARA. During that period of exploration, you have heard from the rank and file of the veterans, have you not?

Mr. DOWNER. Yes, sir.

Mr. O'HARA. I have been in the veteran movement for a good many years. I am one of the original members of your organization, and that goes back a good many years.

Mr. DOWNER. I am aware of that, sir. I think you were at one time national judge advocate of our organization, is that correct?

Mr. O'HARA. I did have that distinction, but a greater distinction is that enjoyed by our distinguished chairman. I would say that the greatest department commander that the Veterans of Foreign Wars ever had is the present chairman of the committee.

Mr. DOWNER. I think that is a popular opinion, Mr. O'Hara.

Mr. O'HARA. Nothing would please me more than someday to see the chairman of this committee, commander in chief of the veterans. I hope that will come to pass.

Getting back to the subject of this bill, there were some who were more inclined to favor the bankers than the veterans, were they not? Mr. DOWNER. Yes, sir; there was some disagreement.

Mr. O'HARA. It was a very stubborn disagreement, wasn't it?
Mr. DOWNER. Yes, sir.

Mr. O'HARA. But more and more you heard from the rank and file, is that not true?

Mr. DOWNER. That is correct; yes, sir.

Mr. O'HARA. Were there charges at the time in some quarters that the veterans organizatitons with historical backgrounds, were turning the veterans over to the mortgage bankers?

Mr. DOWNER. I think that charge has been made; yes, sir.

Mr. O'HARA. Then after thoroughly exploring the situation the leaders and the rank and file of the organizations took the position that you have so well presented today; is that not so?

Mr. DOWNER. Yes, sir.

Mr. O'HARA. You think that it is absolutely necessary that the Congress retain control of the fixing of the interest rate?

Mr. DOWNER. Yes, sir.

Mr. O'HARA. Now, you have complete confidence in the President of the United States, haven't you?

Mr. DOWNER. Why certainly.

Mr. O'HARA. No question about that?

Mr. DOWNER. No question whatsoever.

Mr. O'HARA. But you know that the President of the United States is a very, very busy man and that he has to delegate, and he always does delegate, many responsibilities to subordinates.

Mr. DOWNER. Yes, sir.

Mr. O'HARA. Putting it plainly, you know, do you not, that in the event of the passage of this bill in its present form, the President himself would not set the interest rate, someone would do it for him? Mr. DOWNER. Yes, sir.

Mr. O'HARA. You don't wish to repose your trust in whoever that might be, do you?

Mr. DOWNER. And it is really not so much a matter of trust. I think we all know that that person or group of persons would be continually subjected to pressure to increase the rate. This bill, by saying not more than 21/2 percent, gives a level to shoot at. I think it would be almost like an attractive nuisance to a child, having it expressed as a 21/2-percent ceiling.

Mr. O'HARA. Now I am going to go into the field that my beloved colleague from Utah suggested. I want to say in the Congress we are very proud of the gentleman from Utah. We are proud of the great national honors that have been so deservedly given to him, and I appreciate his position in regard to veterans preference-perhaps no man in this Congress, no man in the country, has given more to his country than the gentleman from Utah, as a serviceman. I think his position is most admirable.

And yet I cannot agree with him. I have always thought that the veteran is entitled definitely to a preference. I could never see the consistency, when the war is on and people at home are shouting for the boys in the foxholes, and then when they get back, saying "Well, they are just like everybody else." And I read in the newspapers almost daily of some weird crimes that are committed, and they are weird crimes, and they follow every war. We take young men from the homes where they have been brought up in kindly ways. Then we make soldiers out of them, and begin by breaking down all the fine sentiments of religion and of good hearts. And they come back and we expect them to be the same normal creatures that they were if we hadn't taken them from homes and put them in theaters of war. As long as we are foolish enough to have wars, we must give attention to war's wreckages.

So I am glad that the Veterans of Foreign Wars and the American Legion are holding steadfastly for a continuance of Veterans' preference in every proper way. And I am saying that to you, sir, as one very much older than the gentleman from Utah, and having profound respect for him, and a great understanding of the idealism and the unselfishness of his remarks, but behind my words I am putting a long lifetime of experience and observation, and I hope that always this country will hold to the tradition that the best that we have to give to our veterans is the least that in right and justice we can give. Mr. STRINGFELLOW. Will the gentleman yield?

Mr. O'HARA. Certainly.

Mr. STRINGFELLOW. I want to thank you for the very kind remarks that you offered in my behalf, but I would like to clarify the record. I wasn't opposed to the veterans preference outright. My stand was simply that I believe, Mr. O'Hara, we should take another look at the veterans preference laws, and probably make them more consistent with the times in which we live.

I think the Congress should take another look at the veterans preference laws, because in many instances they are deterrent to the veteran rather than a means of assistance.

Mr. O'HARA. I don't think that I misunderstood the gentleman. Perhaps, in my clumsy way, I put what he had said in inaccurate words. I think I understood the gentleman as he has now expressed himself.

Thank you very much, and thank you for clarifying your position, Mr. Stringfellow.

Mr. DEANE. Mr. Chairman.

The CHAIRMAN. Mr. Deane.

Mr. DEANE. Following Mr. Stringfellow's comments with reference to interest rates, I wonder if you would discuss briefly your observation based on this, that GI mortgages are paid off in cash, whereas

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