sional district." Then, in line 10, I propose or suggest that you eliminate the words "or congressional district", which would leave the paragraph reading as follows [reading]:

No person shall be appointed as an officer, employee, agent, or attorney in any regional or State office of the Corporation, who was, at the date of the establishment of such office, not a resident of the region or State, respectively, served by such office, or who is an officer or director of any firm, corporation, or association engaged in lending money on real estate. This amendatory provision shall go into effect within 90 days after the date of enactment thereof.

That would mean that the Home Owners' Loan Corporation here in Washington would have the privilege of transferring an officer or employee from one congressional district to another. As a matter of fact, I am of the opinion that it ought to be so phrased as to permit the Home Owners' Loan Corporation at Washington to transfer a man from one State to another where his services are needed. I am going to be perfectly frank in stating that I think that political pull, and so forth, should be eliminated when it comes to the proposition of serving people who have been sweating blood for years.

Senator McADOO. Are you advocating this particularly in order to protect the people of North Carolina against your recommendations? Senator REYNOLDS. Not at all; but I was merely using that as a simple illustration. I appreciate that in North Carolina we have the most competent officials of the Home Owners' Loan Corporation, and I make that recommendation with the purpose of being of assistance to the national organization.

Senator TOWNSEND. We are convinced of that now.

Senator REYNOLDS. Mr. Chairman, you have been very kind to indulge me, and I will say, in conclusion, that I have but one other suggestion to make to the members of the committee.

On page 9, the concluding lines of section 14 read as follows, beginning at line 12 [reading]:

Effective thirty days after the passage of this Act, payments of any or all obligations due the Home Owners' Loan Corporation from a home owner may be paid at any branch agency of said Home Owners' Loan Corporation or at any post office or substation of any post office throughout the United States.

I respectfully recommend that that portion of lines 15, 16, and 17 be eliminated, beginning

Or at any post office or substation of any post office throughout the United States.

I make that recommendation for this reason: These payments have heretofore been made at the respective home-loan offices in the various districts. If you permit those who have borrowed money to make those payments to the post office, I am of the opinion, from all that I have learned through those who are interested in this matter, that it will bring about a very great confusion in bookkeeping. As it is now, of course, they have considerable trouble with these items, and if you permit those who are indebted to the corporation to make these payments at post offices as well as at the respective offices in their home towns, you are going to occasion a great deal more bookkeeping expense, and difficulty. That is the suggestion that I have had made to me from time to time.

I thank you, Mr. Chairman, for this opportunity to appear before your committee.

Senator BULKLEY. Very well. We will remember your suggestions.

Mr. FRIEDLANDER. Section 12, as I understand it, is a new section added in the House, which eliminates the preference that is given. in the present Home Owners' Loan Corporation Act to institutions in liquidation, wherein the notes are eligible for refinancing by the Home Oweners' Loan Corporation whether or not they are in distress. That is a matter that affects the Home Owners' Loan Corporation, and I do not care to make any comment on it.

Section 13 is another new section added in the House, which I think can be considered together with section 11. It seems to express a legislative policy, which I should imagine the Home Owners' Loan Corporation was already carrying out. It should not let anybody who might be interested in a loan pass upon it.

Section 14 is the one just discussed by the Senator from North Carolina, and the language which he suggests should be eliminated with regard to post offices seems to be about the only change made in that section. I have no expression to make, although I share with him his anxiety over having the postmaster make collections on these loans without proper books, and so forth. It seems to me it would create a lot of confusion.

Senator McADOO. I think the administrative difficulties there would be almost insuperable.

Mr. FRIEDLANDER. Yes. Section 15 is identical with section 9 of the Senate bill, and increases the amount allocated to repair loans from $300,000,000 to $400,000,000. I think perhaps the officers of the Home Owners' Loan Corporation can better explain that to the committee.

Section 16 is a substitute for section 10, and provides that the $250,000,000 which the original bill permitted to be invested by the corporation in the debentures of the Home Loan Bank System and in the purchase of shares of Federal savings and loan associations, is amended to include the purchase of shares in State-chartered institutions. This suggestion was made to the House by the United States Building and Loan League. We feel that it is a fair and necessary one. It follows the legislative policy adopted by Congress in the matter of investments by the Reconstruction Finance Corporation in banks, in that those investments were not limited exclusively to national banks, but were made without discrimination in State banks as well.

We invite the attention of the committee in that connection to this fact, that the development of Federal savings and loan associations is a new one. There are only 700 or 800 of those institutions in the United States today. Many of them are very small institutions just getting started. If the object of this provision is to start mortgage money flowing into the various communities, particularly during the time that the Home Owners' Loan Corporation is tapering off and private capital is getting started, certainly that can be more effectively and expeditiously done if those funds were also placed at the disposal of the 10,000 State-chartered institutions which now exist and serve their communities.

Frankly, I believe in the discussion before the committee, the chairman of the Board took the position that they were agreeable to the

suggestion of the United States Building and Loan League. They believe that these investments ought to be limited to institutions that are members of the Federal Home Loan Bank System, and that were insured institutions. There is a great deal to be said for the position of Mr. Fahey with reference to requiring the institutions that receive these investments to be members of the Federal Home Loan Bank System, because it would give to the Board a supervision and would certainly enable them to do that work much more expeditiously than if they were compelled-which they should do-to go into an institution and examine it before they allotted any certain Government caiptal to it. They do have a system set up of examinations through the Federal home-loan banks. My personal preference would be that this suggestion be added. I do not, however, follow the suggestion that they must be required to be insured institutions, for the reason that so far there are only 10 or 12 State chartered insured institutions in the country. That system has not gotten under way because of the premium being too high, which this bill undertakes to correct. But it would certainly retard the flow of mortgage money if it were confined only to insured State institutions, because there are but few of them now in existence.

However, I think the same object will be achieved with reference to supervision if the requirement is made that they be members of the Federal Home Loan Bank System. I personally am in favor of that suggestion of Mr. Fahey's.

Section 17 is identical with section 11, with the exception of the last sentence, which provides that:

Such funds shall be used impartially in the promotion and development of local thrift and home financing institutions whether State chartered or Federal. That is language that is similar to the original language in the act as passed, where the first $500,000 was appropriated. The Board have been of the opinion that they could not economically, and with any degree of success, utilize any of those funds for State-chartered institutions. That question having arisen, it would seem that Congress might determine, as a matter of policy, whether or not they desire that local thrift institutions be helped by this fund. Some of us are of the opinion that an organizer going into a community where there is a State-chartered institution might well devote several days of his time to giving information, making suggestions of procedure and loaning policies, and so forth, to a State-chartered institution, that would make it a better instrument for serving the local community than would the organization of a new Federal institution. That is a matter of legislative policy, to which we invite your

atention.

Section 18 is identical with section 12 of the Senate bill. It concerns itself with the Criminal Code. Mr. Russell can give you the reasons for it. I have not read the criminal sections.

Section 19 is identical with section 13 of the Senate bill, and provides that associations or individuals or anyone else getting Home Owners' Loan bonds should not be permitted to require any payment of difference between market value and par value of the bonds. I certainly favor the provision. I am wondering, however, if they ought to be required to pay back the premium, since they are above par now.

Section 20 is identical with section 14 of the Senate bill, and gives the free use of the mails to the Federal Savings and Loan Insurance Corporation.

Section 21 is the same as section 15 in the Senate bill, with the exception of payment of dividends in an insured corporation, if any losses are chargeable to reserves, the original bill providing that that might be done if the association would get permission from the Board at Washington. Some of us believe that that is impracticable, and that sufficient power and authority exists in the Board to prevent the abuse of it under other sections of the act, which I am going to ask Mr. Bodfish to discuss more in detail.

Section 22 is identical with section 16 of the Senate bill, and affects the premium paid by individual institutions for the insurance of shares. We are very much in favor of that section, because we believe that the reduction of the premium will enable the solvent institutions of the country to come in and get the advantage of this insurance system.

Senator TOWNSEND. This amendment does not reduce it, does it? It does not say it is reduced?

Mr. FRIEDLANDER. It reduces the premium which is now provided. No; that is section 22. I am reading ahead. I beg your pardon. That is section 23. Section 22 merely corrects an error in previous legislation.

Section 23 is the premium section, which reduces the amount from one-fourth to one-eighth.

Section 24 is a new section which the United States League recommended to the House committee, a change in the language with reference to the disposition of the assets of an institution in default. We do not believe that there is any objection to that change of language on the part of the Board. Under the present language the Board itself felt it necessary to clarify it by regulation, so that the investors of these institutions, in amounts above $5,000-as you recall, the insurance act limits the insurance to $5,000-will not be subjected to having the Corporation become a preferred creditor. The Corporation merely steps in and becomes subrogated to the rights of the shareholder, whom they insure, and this changes that language.

Section 25 is identical with section 18 of the Senate bill. I believe there is a slight change in that which I noticed in going over it. However, we are not particularly interested in it. Mr. Russell and Mr. Fahey will probably go into it with the committee.

Section 26 is identical with section 19 of the Senate bill. It affects the National Housing Act, and permits insurance of loans up to $50,000 on hotels, apartment houses, hospitals, and so forth, and does not concern building and loan associations.

Section 27 is identical with section 20 of the Senate bill, reducing the minimum capital of national mortgage associations from $5,000,000 to $2,000,000, with which we are not concerned.

Section 28 is identical with section 21 of the Senate bill. It raises the bonding capacity of national mortgage associations, with which we are not concerned.

Section 29 is a new section, with which we are not concerned.

I think, Mr. Chairman, that that completes a rather hasty account of our position. There are some few matters of importance there

that represent a conflict between the Senate bill and the House bill that I would like to have Mr. Bodfish, our executive vice president, go into with the committee in more detail, if you have the time. Senator BULKLEY. More detail about what?

Mr. FRIEDLANDER. There are two or three of these items which are in conflict as between the Senate and the House bill.

Senator BULKLEY. I think, if Mr. Bodfish has some suggestions to make, we had better hear him at this time. Is that all you wanted to say, Mr. Friedlander?

Mr. FRIEDLANDER. That is all I care to say. We are very favorable to the legislation. Thank you very much for the courtesy of the hearing.

STATEMENT OF MORTON BODFISH, EXECUTIVE VICE PRESIDENT UNITED STATES BUILDING AND LOAN LEAGUE

Mr. BODFISH. Mr. Chairman and gentleman of the committee, my name is Morton Bodfish. I am executive vice president of the United States Building and Loan League, and was a member of the original Federal Home Loan Bank Board.

In the interest of your record, Mr. Chairman, I wonder if it might not be worth while to include in your record the petition which we presented before the House committee, which was addressed to both the original House bill and the original Senate bill, and which makes a matter of record our suggestions, at least, on the original legislation. It is only 8 or 9 pages in length, and it would put in your Senate hearings the exact proposals we made with regard to the bill as originally introduced. If it meets with your approval I would like to have that in the record.

Senator BULKLEY. Very well.

(The statement referred to will be found at the conclusion of Mr. Bodfish's statement.)

Mr. BODFISH. I also have-which I think would be helpful to the record the latest tabulation of the number and distribution of the building and loan associations throughout the country. It is a simple little table, and the Senators often ask questions about it.

Senator BULKLEY. Yes; I think that should be in the record.

(The tabulation referred to will be found at the conclusion of Mr. Bodfish's statement.)

Mr. BODFISH. I have put in memorandum form an analysis of H. R. 6021 in relation to S. 1771, which I think would be helpful to you in your study of the bill. They interrelate all the sections, and that sort of thing.

(Mr. Bodfish submitted the following matter for printing in the record:)

To: Senate Banking and Currency Committee, Subcommittee on Home Loan Banks and Related Matters, Hon. Robert J. Bulkley, chairman.

Memorandum Re: H. R. 6021, Passed by House of Representatives March 12, 1935. In the Senate of the United States March 13, 1935.

From: United States Building and Loan League, 104 South Michigan Ave., Chicago, Ill., Morton Bodfish, executive vice president.

PRELIMINARY STATEMENT

The executive committee of our national organization, meeting in Washington, February 25, 1935, gave its unqualified approval to H. R. 6021, as reported