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would have authority to insure. Thus, the effective use of title VI firm commitments would be eliminated as a means of production credit for the homebuilding industry. Furthermore, it would make it necessary to return to a system of case by case audit of actual costs, similiar to that used to control the sales prices of priority-assisted housing, and require a large increase in administrative personnel and in the time required to process applications for insurance. Consequently, the committee has recommended an amendment which, while retaining the estimates of necessary current cost as the basis for insurance operations under title VI, would direct the Federal Housing Commissioner to use every feasible means which, in his judgment, would assure that the estimates will approximate as closely as possible the actual costs of efficient building operations.

The committee has also been concerned as to the inflationary aspects of legislation, whether in title VI of the National Housing Act or in other legislation, which may tend to encourage the execessive use of credit. However, the committee has felt the necessary action to extend the title VI authorization should be taken at the earliest possible date so as to avoid an unanticipated, abrupt termination of operations thereunder, with consequent dislocation in home-building operations, and that any action as may be necessary or desirable from the standpoint of minimizing any inflationary aspects should be considered with the general program or in connection with the consideration, during the early part of the next session, of the necessity for any extension of title VI.

Senator TOBEY. Now, I will be through in just a minute. If it is true, as you say, that you oppose from your experience the 95-percent guaranty, if what we are doing is in effect underwriting the profits of the building interests here, who look upon this as a basis for established profits, why in heaven's name should we make it 95 percent?

Mr. FOLEY. My argument is I do not think 95 percent is necessary, therefore you should not. If I felt you could not get this housing otherwise, as against the situation explained by the distinguished chairman before you came in, I would say, yes, let's go to that, because it would seem to cost less than other Government experience. I do not think it is necessary, because I think enough builders will make the necessary investment on a 90-percent ratio.

The CHAIRMAN. As I explained, I have made no determination on 90 or 95 percent. I want the record to show that clearly.

Mr. FOLEY. I understand.

The CHAIRMAN. I want to get this clear: I wasn't talking about the admiral's quarters at the navy yard or the general's quarters at the camp. I was talking about housing projects for enlisted men and civilian personnel. I did not think that could be done under the appropriations bill without suspending the rules.

Senator TOBEY. Now, one question more.
Senator WHERRY. May I ask a question?

Senator Tobey. In this committee here, or in the Senate, Bob Taft, whether people like him or not, has stood by his guns and has been the father of all this housing legislation, in my judgment. He knows more than anybody else about it. He is a sound man in economics, and he is opposed to the 95 percent. He thinks 90 percent is too high, has often said we ought to go back to the 80 percent provided in title II, and that any builder that cannot afford to put in 10 percent of the necessary capital besides his personal overhead and profit amounting to another 10 percent is not worth much after all.

We talk about putting crutches under people in the country. What you are doing is putting crutches and a platform under one class of people. I think it is unsound, and I shall oppose it on the floor, if this is 95 percent, with all the energy I have. When men like Foley

and Taft come before me—and Foley with his experience in housing makes the statement he does--and take that position, I am going to follow in their train as effectively as I can. That is all.

. The CHAIRMAN. Senator Wherry.

Senator WHERRY. After the observation made by the Senator from New Hampshire and the answer to his observation that you made, if this is so profitable why have we not had any of these installations at any of these places during the past year?

Mr. FOLEY. For reasons I already have given.
Senator WHERRY. What are the reasons ?
Mr. FOLEY. One is the leasehold, which has been

Senator W'HERRY. They could have been adjacent to the installation if there was any profit in it, could they not?

Mr. FOLEY. The other one

Senator WHERRY. If it is profitable could they not have been located near the installation?

Mr. FOLEY. The other was the determination of risk requirements, which you yourself have pointed out is one of the major changes in your bill.

Senator WHERRY. Until that has been accomplished, I ask if there is a chance at all of getting any builder to go out and build these installations. Is there any chance, if you do not put in this leasehold and the guaranty that these installations shall continue, is there any chance of having the buildings there?

Mr. FOLEY. Let me again correct you. I do not understand that the military is going to guarantee permanency. They are going to certify that to their best judgment. I will not say that nobody would build any anywhere, but I will say what we did have is not sufficient to accomplish the purpose.

Senator WHERRY. Take the airfield I mentioned near Omaha. Do you know of any private builder anywhere that has offered to build, that has applied to you for funds or Federal Housing insurance to build an installation

Mr. FOLEY. I am afraid you had better ask that of the Federal Housing Commissioner. I do not handle that.

Senator WHERRY. Do you have an application?
Mr. FOLEY. I would not have it. It would come to him.

Senator WHERRY. Were you not in the meeting we had a year ago this summer, where we had all the Government agencies, including the Federal Housing authorities and the RFC, and all the other agencies we could get interested in a meeting, in an attempt to get something done relative to insuring these risks so we could get installations there?

Mr. FOLEY. I attended various meetings of that kind. I do not know that I was at the one you are particularly mentioning.

Senator WHERRY. You were invited.
Mr. FOLEY. Then I was probably there.

Senator WHERRY. Is not the problem the very thing that makes the
difference between what I am asking for and what the Senator from
New Hampshire says that he is against ?
Mr. FOLEY. I cannot

agree with that statement. Senator WHERRY. What can you agree with?

Mr. FOLEY. I can agree, as I have already said, that with the proposals of this bill, and the amendments that we have proposed, you

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will have in our judgment one that will in large measure be effective.

The CHAIRMAN. Now, I want to make this statement, because I thoroughly agree with many of the things that the distinguished former chairman of this committee has already said. I have always voted for the housing bills in this committee. Once he called me on the telephone and voted me by proxy.

Senator Tobey. And the bill would not have passed unless I had. The CHAIRMAN. As far as this bill or any bill is concerned I would always like to look at all the applications of it. While I agree with all that has been said about the work Senator Taft has done, I want to remind my good friend that if we had not had that amendment by Senator Russell the Senate would never have passed a bill to send to the House. So we just changed the 90 or 95 percent on the rural housing

I have not made up my mind. I am inclined to agree with Mr. Foley if we can get the people to do it on 90 percent

Mr. FOLEY. May I say at this point, I may have given a wrong expectation to the committee. I do not know that Mr. Richards is here prepared today with a list to submit.

Senator Cain. Mr. Foley, under the legislation we have had there have been certain draw-backs, have there not, to the building of these establishments to serve military establishments? No. 1: So far as I know no permission was heretofore available for the private builder to build on a governmental reservation.

Mr. FOLEY. It could have been done, but there was a revocation provision in the lease. As far as the builder was concerned, that was not the stumbling block. It was for the lender.

Senator Cain. That is right. But it made the consummation very undesirable.

Mr. FOLEY. That is right.

Senator Cain. In addition to which, the average establishment that might have been built just outside of the military reservation would not subscribe to what you refer to as an acceptable risk, including standards as to neighborhood and market availability. Is that not correct?

Mr. FOLEY. As a practical matter, what the Commissioner had to find was that if that installation was to be closed there was another market available to use the housing. In these isolated cases that was not true.

Senator Caix. Therefore, the average investor, the average builder, was not interested in any way, shape, or form in going through all the trouble when he had good reason to believe before you began that he would never get anywhere. Now, the new legislation provides and makes it easy

Mr. FOLEY. You might have found builders willing even under those conditions. Either the Federal Housing Commissioner could not insure or the lending institution was unwilling to accept the situation as regarded title.

Senator Cain. Completely apart from the 90 or 95 percent, the proposed legislation does make it much more easy to build accommodations on military reservations, and it waives the test of acceptable risk, and so on.

Mr. FOLEY. To the best of our judgment.

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Senator Cain. And against that, your feeling is that the 90 percent will be adequate to the consummation of the intention of the legislation.

Mr. FOLEY. I think that is true, particularly at this time, and with the present trend of costs.

The CHAIRMAN. You have made the statement, as I understand it, that you believe there would be plenty of builders who would build at 90 percent. Mr. FOLEY. That is right.

The CHAIRMAN. I realize that it might be embarrassing for one contractor to list his name, while another one did not. That would be sort of prying into private business.

Mr. FOLEY. I think we would have to respect at this point the confidence involved in preliminary discussions with an agency over proposals of a private nature, and we would want to have the builder's permission before giving his name unless the case had progressed to a point where we had secured a commitment, and then it is a matter of public record.

The CHAIRMAN. I certainly would not want to embarrass any contractors who are working with the FHA. When Senator Wherry left to go to the White House he said he wanted to ask you one or two questions. You answered that you would be glad to answer any questions either here now or at any time he would desire to ask you. I might suggest this in the absence of Senator Wherry since this is his bill, and he came down here to testify. Instead of presenting the names of any contractors I will ask you this question again. You believe that there some?

Mr. FOLEY. Yes.

The CHAIRMAN. And you would be more than pleased to confer with Senator Wherry regarding it.

Mr. FOLEY. Or any member of the committee.

The CHAIRMAN. Or any Senator for that matter. I know your willingness to help. And at any time he desires, before we consider this bill finally, you will confer with him!

Mr. FOLEY. That is true, Senator. The responsibility, of course, for making this determination rests first with this committee and then with the Congress. The most we can do is give you our best advice.

The CHAIRMAN. It would rest so much easier with our committee knowing that what you say is a fact.

Mr. FOLEY. Even though there may be information, which as a matter of public policy, should not be given publicly, certainly in private conversations we would want to give you all that we have. You will finally have to determine whether our judgment on the basis of the facts we present is right or wrong.

Senator TOBEY. I would just like to say this. I favor the objectives of this bill very definitely, even though it will not necessarily benefit enlisted personnel on a broad scale. I would like to see it enacted into law, and I favor it, but I will not favor it with the 95 percent, against the judgment of those two men whose judgment I implicitly believe in. The leasehold arrangement seems sound. Take out some of the quirks, and we will all be for it, in my judgment. Incidentally, giving the names of these contractors is a new thought to me.

The CHAIRMAN. I just said I would not embarrass the contractor. Senator TOBEY. That is a man's private business.

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The CHAIRMAN. Yes.

Senator TOBEY. Any individual-John Jones-does not want his competitors to know about it. Why should his name be published, and then have pressure brought to bear on him. Let him operate and be a free agent, but without holding him up to pressure groups, and so forth, “Come across or else." I think you should consider that very seriously before you agree to give any names.

The CHAIRMAN. That is exactly what I said.
Senator TOBEY. Then I feel just as you do in the matter.

Mr. FOLEY. I think there is one exception to Senator Tobey's remark. If a case has proceeded to a point where the Federal Housing Administration has issued a commitment to insure the mortgage it is then actually a public transaction.

Senator TOBEY. It's fait accompli then.
Mr. FOLEY. Is that all ?
The CHAIRMAN. Unless there are questions. We want to thank you

very much.

Mr. FOLEY. Thank you very much indeed.
(The following were ordered inserted in the record :)

HOUSING AND HOME FINANCE AGENCY,

OFFICE OF THE ADMINISTRATOR,

Washington 25, D. C., April 27, 1949. Hon. BURNET R. MAYBANK, Chairman, Committee on Banking and Currency,

United States Senate, Washington 25, D. C. MY DEAR SENATOR MAYBANK : This is in further reply to your letter of March 8 requesting the views of this Agency with respect to S. 1184, a bill to encourage construction of rental housing at or in areas adjacent to military installations.

I have today appeared before the Housing Subcommittee of the Senate Committee on Banking and Currency and presented my views on the substitute measure for S. 1184 proposed by the sponsors of the bill. The main purpose of this letter, therefore, is to set forth, for the convenient use of your committee and the members of its staff, the amendments to the substitute bill which I desire to recommend for consideration by your committee. Several of these amendments were referred to in my testimony before your committee. The others are for the most part of a technical nature to conform this new title of the National Housing Act more nearly to existing provisions of the act.

The recommended amendments are as follows:

AMENDMENT NO. 1

Page 3, line 8, insert before the word “General” the following: The Commissioner is hereby directed to transfer immediately to such Fund the sum of $5,000,000 from the War Housing Insurance Fund created by section 602 of this Act.

This amendment would provide moneys immediately for the fund to be established for the new title VIII of the National Housing Act without the necessity for appropriations.

AMENDMENT NO. 2

Page 3, lines 17 and 18, strike out the words “any mortgage which is" and insert in lieu thereof the following: mortgages (including advances on such mortgages during construction) which

are

The substitute language would specifically permit insurance of advances on mortgages during construction as well as upon completion. This is consistent with other insurance coverage under the National Housing Act and, I believe, is desirable,

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