business of which is the planning and construction of communities and dwellings. In any case in which, under the laws of its incorporation, such company is not permitted to issue nonassessable stock the Administrator is authorized, for the purposes of this section, to purchase the legally issued capital notes or debentures of such companies. The total face amount of loans outstanding, nonassessable stock subscribed for, and capital notes and debentures purchased and held by the Administrator under this section shall not exceed at any one time $100,000,000. Notwithstanding any other provision of law, the Administrator may, under such rules and regulations as he may prescribe (which regulations shall include at least sixty days' notice of any proposed sale to the issuer or maker), sell, at public or private sale, the whole or any part of the stock, capital notes, or debentures acquired by him pursuant to this section, and the preferred stock, capital notes, or debentures acquired pursuant to any other provision of law.

46

COOPERATION WITH OTHER GOVERNMENTAL AGENCIES

'SEC. 603. (a) The Administrator and the Housing Industry Division of the Federal Housing Administration are authorized to cooperate to the fullest practicable extent with any other governmental agency whose functions or duties relate to or affect the development and improvement of housing standards and conditions. "(b) The President is authorized to provide for the coordination of the research and other activities of such governinental agencies.

"SEC. 604. The Administrator is authorized to make such rules and regulations as may be necessary to carry out the provisions of this title."

SEC. 31. Sections 1, 4, and 5 of the National Housing Act are hereby amended by striking out the words "and titles II and III", wherever they appear in such sections, and inserting in lieu thereof "and titles II, III, and VI."

Now, this, of course, is much condensed; and, as a matter of practical illustration, there is no use of proposing something that cannot be administered and made to function. And that is the part which was solved first-the means by which this could be done, and the proposed amendment, of course, written afterward.

To visualize the matter, one way that it can be done is for this Housing Division to be divided into departments; and each of these departments has one of the main functions covered by this amendment. We would have the research department and a materials and labor department and a promotion department, which would deal with the State authorities, or the State agencies, that do public housing.

Senator BULKLEY. It is easy to imagine how those would function, but I wish you would devote a little time to telling us about the financial plan and financial proposition.

Senator STEIWER. Before you do that, Mr. Lawrence, I did not hear all your statement. Was this plan worked out after a consultation with the Housing Administration?

Mr. LAWRANCE. The Housing Administration, or the technical advisers to the Housing Administration, are and have been familiar with the different proposals which I have made from time to time and which have developed.

My understanding is that those technical advisers have stated that something of this kind has to be done, in order to effect the national housing program, and that this proposal seems to be a practical and logical way to do it.

Now, I have not discussed it with Mr. Moffett.

One of the other agencies, the Federal Emergency Relief, of course, was engaged in housing; and it is my understanding, from the man who had charge of the housing, over there, that this "clicks" entirely with their idea of what should be done.

Senator BULKLEY. Your thought is that this coordinates the F. E. R. A. housing with the Housing Administration?

Mr. LAWRANCE. It will tend to coordinate all of the housing activities of the Federal Government; yes, sir.

If you notice, in the latter part, there, the President has authority to coordinate them. I understand that he does not now have authority to coordinate any of these agencies that are created by Congress, unless it is specifically granted in this or some other act. Senator BULKLEY. Tell us, briefly, about its financial operation. Mr. LAWRANCE. The financing of the development companies? Senator BULKLEY. Yes.

Mr. LAWRANCE. There is no assurance that private industry will find it possible to engage in a real housing program, and employ the various means, such as technical and the various kinds of research, and the coordination that will make housing effective.

You see, there are great developments that have been made by the people who are manufacturing individual parts of housing. The electric-appliance people have made great progress in the development of their products. The heating manufacturers have made great progress in that. The material people have made considerable progress in the production of materials. But there is nothing that integrates, or that is engaged in the business of producing housing; there is no industry of any considerable size that is doing that.

Now, there are a good many people who are of the opinion that if the things which have been stated in here, such as the conducting of Federal housing, and the securing of low material costs and low unit labor costs, and efforts to make home ownership safer, are done, that private industry will go into this job immediately.

I have been told by one man at least of considerable means that he intends to do that. Now, there are a good many people who feel that the large interests that are engaged in the production of parts that go into housing, may finance companies and really get into a housingdevelopment business if these other things are done.

So it may not be necessary for the Government to finance any housing development and construction companies, and it is to be hoped that the Government will not find this necessary.

There is, however, no assurance that these companies will come in. And it is probable that some demonstration should be made of the way these companies can function. Therefore, I think it is very advisable that the Congress should authorize the establishment of such corporations and the encouragement of them by financing.

Now, it is not contemplated that that will be a subsidy, in any sense of the word, but a loan, based on the judgment of the Federal Government, that will work and be repaid. It is a necessary thing to do, in order to get housing started. Because housing now is becoming profoundly affected by the situation where home ownership has decreased considerably, in popularity. And that is one of the reasons that private industry cannot go ahead with a real housing business, and supply housing, as it should be and might be supplied. It

is because the public are not so interested in home ownership as they were at one time. And the reason they are not interested is because housing has not kept abreast of other lines. One gets a great deal more for his dollar in many other lines than he does in housing; and it is made very much easier for him to acquire, than in housing; and his ownership, after he gets it, is not so precarious.

Senator BULKLEY. Mr. Lawrence, I think it will be a help if you will be a little clearer in proposing what you intend to do, instead of going into so much detail as to the necessity for this.

Mr. LAWRANCE. Well, the bill specifies exactly what I propose to do: It is to set up this Housing Division. within the Housing Administration, which will have authority to conduct Federal research.

Senator BULKLEY. Yes; I understand the research part of your program. Now, what about this financing? That is what I do not clearly understand. You have suggested that it might not be necessary, at all.

Mr. LAWRENCE. Yes.

Senator BULKLEY. Now, how does it work, if it does work? Under what conditions do they have to do it, at all; and how does it work?

Mr. LAWRANCE. Well, if private industry does not come forth and establish private housing development and construction companies, which will undertake this, to the satisfaction of the Administrator, then he would be authorized to purchase stock in, or otherwise to help in the financing of, housing development and construction companies for the purpose of getting them to engage in this housing business along the lines that the Administrator feels the problem should be solved.

Does that fully answer what you had in mind?

Senator BULKLEY. Well, after a fashion. It does not follow through, and outline the operation very well, as to how these would be managed, and what the Administrator would have to do with the management of them.

Mr. LAWRANCE. Well, I did not go into that in this statement, and I think that would be left entirely to conditions as they develop.

It is my understanding that the Federal Reserve, for example, buys and owns stock in banks, and that it is in position, by virtue of that stock ownership, to participate in the management of those banks.

Now, the Administrator of this act would, because of his ownership in some of these corporations, have some participation in the management of them; as long as the Federal Government had that stock, I think they would have that right.

A provision is made in here that the Administrator may dispose of that stock at any time he wishes, and in any way, and terminate that relationship. Now, that termination might be dependent on many conditions, one of which was that these companies no longer needed any assistance.

Senator BULKLEY. Well, I think we are impressed with the importance of the ends that you have stated; and we shall have to give further consideration to the practicability of the plan.

I am glad to see it in the form of a definite amendment.

Mr. LAWRANCE. I wish you would ask me more questions about it. I could talk about the various things involved in it for hours.

Senator BULKLEY. Well, I hardly think that will be necessary at this time.

Mr. LAWRANCE. The necessity of research work is great; I think that is obvious. Because, it is well known that great developments have to be made along that line, in housing research, and all phases of it.

The administrator is empowered, under this amendment, to conduct research; and he is empowered to establish these housing development and construction companies. The rest of it is of a matter of encouragement, that he is authorized to encourage these things. Another thing which is contemplated in this, and which you touched on, is the necessity of coordinating the different activities. And that does not mean any putting of them, in any way, under one direction, but means giving the President authority to see that these various acts of Congress function in coordination.

Senator BULKLEY. All right; thank you very much. We shall give careful thought to this.

Mr. LAWRANCE. Would you be interested in a chart showing the method by which this would function?

Senator BULKLEY. Yes; I think you had better leave that. Surely. Mr. LAWRANCE. All right. There are several charts in there.

FURTHER STATEMENT OF JOHN H. FAHEY, CHAIRMAN FEDERAL HOME LOAN BANK BOARD

Senator BULKLEY. Mr. Fahey, do you think of anything more that ought to be said on the subject we were discussing yesterday, with Senator Bankhead?

Mr. FAHEY. With reference to the regional offices?

Senator BULKLEY. With reference to his proposition that the regional offices should be abolished: Have you any further data to submit on that subject?

Mr. FAHEY. I do not think that there is anything we can add to our statement of yesterday. That statement, summarized, is just this: That, first of all, every one of these Government agencies operates on a national basis and, for necessary supervision, has to maintain corresponding facilities. We are convinced that it is absolutely essential to our operation.

Secondly. To attempt to disintegrate the regional organizations, and carry them back into the States, would so exaggerate our expense and would be so uneconomical-certainly, under present conditions-that we feel that it would impose a financial burden on the Corporation, which is unjustifiable. As was explained yesterday, if we attempted to do that, we assume it would cost us close to 3 percent to operate, as against about 1 percent which we can do, by this method.

As we have tried to explain, all the problems of accounting, handling of bonds, and the handling of cash, are so complicated that, on the one hand, it is utterly impossible to concentrate them, here in Washington. On the other hand, to carry them out into all the States, would be so expensive that it would obviously be uneconomical.

Senator BULKLEY. For the year 1934, what was the cost of operation, stated in percent?

Mr. FAHEY. I do not think I can give you that in percent. Do we have that figure?

Mr. PRESTON DELANO (general manager Home Owners' Loan Corporation). It was about nine-tenths of 1 percent.

Mr. FAHEY. A little less than 1 percent.

Senator BULKLEY. A little less than 1 percent?
Mr. FAHEY. Yes.

Now, as a matter of fact, of course, there is a lot of expense in connection with the loaning operation, which would disappear when loaning is completed.

Senator BULKLEY. I do not quite see how you reconcile that with what you said before. You have operated at less than 1 percent, and you did not have the regional office in that year.

Mr. FAHEY. But, of course, the regional offices became necessary as the volume of loans grew here.

If we had not established the regional offices we would have had to organize correspondence facilities here in Washington as the volume of loan files grew. And that will continue still further. When we have a million and a half of loan files to take care of, instead of 800,000 or 850,000 that we now have, the situation would be still worse if we attempted to do it in Washington.

Senator BULKLEY. You mean to say that with an increasing volume of loans the percentage of cost would normally increase?

Mr. FAHEY. No. What I mean to say is that if we attempted to carry on the checking of the loan files and the accounting and the rest of it, here in Washington, with a million and a half, as against 750,000 or 800,000, the necessity for the employment of oversight, and all that sort of thing, would be complicated still further.

Senator BULKLEY. Yes; but what I do not understand is this: You actually operated in 1934, at an expense of less than 1 percent? Mr. FAHEY. That is right.

Senator BULKLEY. Now you say you cannot continue to do that, because your volume is increasing. I should think that your increase of volume would enable you to operate for still less.

Mr. FAHEY. Oh, no; I did not mean to say that, Senator.

Senator BULKLEY. Possibly I misunderstood you. Just how does it work?

Mr. FAHEY. No; the actual operating cost, under present circumstances, did not increase beyond what it is now-around 1 percent. Senator BULKLEY. Then, it was less than 1 percent at a time when you did not have regional offices; and with an increased volume, you ought to be able to do it for even less than that.

So.

Mr. FAHEY. Well, I would not say that that would necessarily be If we can go on operating at around 1 percent, we are going to do pretty well. That is much cheaper than any of the Nation-wide organizations are doing business.

Senator BULKLEY. Is not your low cost of operation due to the fact that you have not really serviced at all?

Mr. FAHEY. Of course, that is right. The servicing has just begun during this last year the actual servicing. And that will increase in volume from now on, of course.