of the National Housing Act. Advances made under the terms of this section shall be at such rates of interest and upon such terms and conditions as shall be determined by the Federal Home Loan Bank Board, but no advance may be for an amount in excess of 90 per centum of the unpaid principal of the mortage loan given as security."

SEC. 7. Section 13 of the Federal Home Loan Bank Act, as amended, is amended by inserting after the word "bank" in the second line thereof the words: "and consolidated Federal Home Loan Bank bonds or debentures".

SEC. 8. Section 19 of the Federal Home Loan Bank Act, as amended, is amended by adding at the end thereof the following:

"On and after July 1, 1935, the receipts of the Board shall be deposited into the Treasury of the United States and there is hereby authorized to be appropriated to defray the expenses of the Board as authorized by law, such amount as may be necessary.'

SEC. 9. That section 2 (c) of the Home Owners' Loan Act of 1933 be amended to read as follows:

"SEC. 2. (c) The term 'home mortgage' means a first mortgage on real estate in fee simple or on a leasehold under a renewable lease for not less than ninetynine years, upon which there is located a dwelling for not more than four families and containing not more than one shop, store, or storeroom, used by the owner as a home or held by him as his homestead, and having a value not exceeding $20,000; and the term 'first mortgage' includes such classes of first liens as are commonly given to secure advances on real estate under the laws of the State in which the real estate is located, together with the credit instruments, if any, secured thereby."

SEC. 10. The first sentence of subsection (c) of section 4 of the Home Owners' Loan Act of 1933, as amended, is amended to read as follows:

"(c) In order to provide for applications heretofore filed; and for applicants who in good faith prior to the date this amendment takes effect, sought relief by formal application, letter or otherwise, who file their applications within sixty days after this amendment takes effect: the Corporation is authorized to issue bonds in an aggregate amount not to exceed $4,750,000,000, which may be exchanged as hereinafter provided, or which may be sold by the Corporation to obtain funds for carrying out the purposes of this section or for the redemption of any of its outstanding bonds, and the Corporation is further authorized to increase its total bond issue for the purpose of retiring an amount of its outstanding bonds equal to the amount of the increase; such retirement to be at maturity or by call or purchase or exchange or any method prescribed by the Board with the approval of the Secretary of the Treasury: Provided, That no bonds issued under this clause shall have a maturity date later than 1952: Provided further, That the total bond issue shall not be increased by the amount of any bonds retired from the proceeds of the collection of principal on loans."

SEC. 11. Subsection (j) of section 4 of the Home Owners' Loan Act of 1933 is amended by adding at the end thereof the following:

"No person shall be appointed or retained as an officer, employee, agent, or attorney in any regional or state office or congressional district of the Corporation, who was, at the date of the establishment of such office, not a resident of the region or State or congressional district, 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 ninety days after the date of enactment thereof."

SEC. 12. Subsection (1) of section 4 of the Home Owners' Loan Act of 1933, as amended, is amended by striking out the last comma therein and the following: "or in any case in which the home mortgage or other obligation or lien is held by an institution which is in liquidation".

SEC. 13. Amend section 4 of the Home Owners' Loan Act of 1933 by adding the following subsection, following subsection (h) of section 4:

"(h-1) Provided no person shall be allowed to act as appraiser if he is in the employ of any company holding a loan on the property, or if he is interested in the subject matter of the loan."

SEC. 14. The fourth sentence of section 4 (d) of the Home Owners' Loan Act of 1933 is amended to read as follows: "Each home mortgage or other obligation or lien so acquired shall be carried as a first lien or refinanced as a home mortgage by the Corporation on the basis of the price paid therefor by the Corporation, and shall be amortized by means of monthly payments sufficient to retire the interest and principal within a period of not exceeding fifteen years; but the amortization payments of any home owner may be made quarterly, semiannually, or annually, if in the judgment of the Corporation the situation of the home owner requires it; 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." SEC. 15. Subsection (m) of section 4 of the Home Owners' Loan Act of 1933, as amended, is amended by striking out "$300,000,000" and inserting in lieu thereof "$400,000,000".

SEC. 16. Section 4 of the Home Owners' Loan Act of 1933, as amended, is amended by adding at the end thereof a new subsection to read as follows:

"(n) The Corporation is authorized to purchase Federal Home Loan Bank bonds, debentures, or notes, or consolidated Federal Home Loan Bank bonds or debentures. The Corporation is also authorized to purchase full-paid-income shares of Federal Savings and Loan Associations after the funds made available to the Secretary of the Treasury for the purchase of such shares have been exhausted. Such purchases of shares shall be on the same terms and conditions as has been heretofore authorized by law for the purchase of such shares by the Secretary of the Treasury, provided that the total amount of such shares in any one association held by the Secretary of the Treasury and the Corporation shall not exceed that heretofore authorized to be held by the Secretary of the Treasury. Of the total authorized bond issue of the Corporation $250,000,000 shall be available for the purposes of this subsection, and bonds of the Corporation not exceeding such amount may be sold for the purposes of this subsection. The Corporation is immediately authorized to purchase shares in building and loan associations, savings and loan associations, homestead associations, and cooperative banks organized and operated under State charter or under the supervision of the Comptroller of the Currency of the United States and to make deposits or purchase certificates of deposit or investment certificates in savings banks and building and loan associations upon terms agreed upon. Such funds shall be made available without discrimination in favor of Federally chartered associations."

SEC. 17. Section 6 of the Home Owners' Loan Act of 1933, as amended, is amended by adding the following sentence at the end thereof: "For the purposes of this section, the Secretary of the Treasury is authorized and directed to allocate and make immediately available to the Board out of the funds appropriated pursuant to section 5 (g) the sum of $200,000, which shall be in addition to the funds heretofore appropriated or made available pursuant to this section, and shall be subject to the call of the Board and shall remain available until expended. Such funds shall be used impartially in the promotion and development of local thrift and home financing institutions whether State chartered or Federal."

SEC. 18. Subsection (d) of section 8 of the Home Owners' Loan Act of 1933, as amended, is amended to read as follows:

"(d) The provisions of sections 29, 30, 32, 35, 37, 39, 112, 113, and 117 of the Criminal Code of the United States (U. S. C. title 18, secs. 73, 74, 76, 82, 83, 88, 91, 202, 203, and 207), insofar as applicable, are extended to apply to the Home Owners' Loan Corporation, its contracts or agreements, and an association under this Act which, for the purposes herein shall be held to include advances, loans, discounts, and purchase or repurchase agreements; extensions and renewals thereof; and acceptances, releases, and substitutions of security therefor."

SEC. 19. Section 8 of the Home Owners' Loan Act of 1933, as amended, is amended by adding at the end thereof a new subsection to read as follows: "(f) No person, partnership, association, or corporation shall, directly or indirectly, solicit, contract for, charge, or receive, or attempt to solicit, contract for, charge, or receive, from any person applying to the Corporation for a loan, any moneys, check, note, or other form of obligation, representing payment of any difference which may exist between the market value and the par value of the bonds of Home Owners' Loan Corporation. Any person, partnership, association, or corporation violating the provisions of this subsection shall, upon conviction thereof, be fined not more than $5,000 or imprisoned not more than two years or both."

SEC. 20. Paragraph (5) of subsection (c) of section 402 of the National Housing Act is amended by adding the following sentence at the end thereof: "The Corporation shall be entitled to the free use of the United States mails for its official business in the same manner as the executive departments of the Government." SEC. 21. Subsection (b) of section 403 of the National Housing Act is amended (1) by striking out the words "ten years" from the third line from the end thereof and inserting in lieu thereof the words "twenty years", and (2) by striking out the last comma therein and the following: "or the payment of any dividends if any losses are chargeable to such reserves".

SEC. 22. Subsection (d) of section 403 of the National Housing Act is amended to read as follows:

"(d) Any applicant which applies for insurance under this title after the first year of the operation of the Corporation shall pay an admission fee based upon the reserve fund of the Corporation, which, in the judgment of the Corporation, is an equitable contribution."

SEC. 23. Subsection (a) of section 404 of the National Housing Act is amended by striking out the words "one-fourth" from the fourth line thereof and inserting in lieu thereof the words "one-eighth", and subsection (b) of such section is amended by striking out the words "one-fourth" from the second and third lines from the end thereof and inserting in lieu thereof the words "one-eighth." Such subsection (a) of section 404 of the National Housing Act is further amended by the addition of the following words at the end thereof: "Each insured institution which has paid an insurance premium based on the rate prevailing before this amendment takes effect shall be credited on its future premiums with the difference between what it has paid and what its premium would have been at the rate provided in this amendment."

SEC. 24. Section 406 (b) of the National Housing Act is amended by striking out the last sentence in (b), reading as follows: "The net proceeds which may arise from the orderly liquidation of the assets of any such association, after reimbursement of the Corporation of all amounts paid by it for such insurance, shall be distributed pro rata among the shareholders of the association.", and inserting in lieu thereof the following sentence: "The surrender and transfer to the Corporation of the insured account shall subrogate the Corporation with respect to the amount of such insurance but shall not affect any right which the insured member has in the uninsured portion of his account or any right which he may have to participate in the distribution of the net proceeds remaining from the disposition of the assets of the insured institution."

SEC. 25. Section 406 of the National Housing Act is amended by adding at the end thereof a new subsection to read as follows:

"(f) In order to prevent a default in an insured institution or in order to restore an insured institution in default to normal operation as an insured institution, the Corporation is authorized, in its discretion, to make loans to, purchase the assets of, or make advances to an insured institution or an insured institution in default."

SEC. 26. The last sentence of section 2 of the National Housing Act is amended to read as follows: "No insurance shall be granted under this section to any such financial institution with respect to any obligation representing any such loan, advance of credit or purchase by it in excess of $2,000 for the purpose of financing alterations, repairs, and improvements on real property other than apartment houses, hotels, office and other commercial buildings, hospitals, orphanages, colleges, schools, and manufacturing or industrial plants; and no insurance shall be granted under this section to any such financial institution with respect to any obligation representing any such loan, advance of credit or purchase by it in excess of $50,000 for the purpose of financing alterations, repairs, and improvements on real property improved by apartment houses, hotels, office and other commercial buildings, hospitals, and manufacturing or industrial plants, including installation of new permanent equipment and machinery in such manufacturing or industrial plants; nor unless the obligation bears such interest, has such maturity, and contains such other terms, conditions, and restrictions, as the Administrator shall prescribe."

SEC. 27. Subsection (d) of section 301, of the National Housing Act is amended to read as follows:

"(d) No association shall transact any business except such as is incidental to its organization until it has been authorized to do so by the Administrator. Each such association shall have a capital stock of a par value of not less than $2,000,000, and no authorization to commence business shall be granted by the Administrator to any such association until he is satisfied that such capital stock has been subscribed for at not less than par and paid in full in cash or Government securities at their par value."

SEC. 28. Section 302 of the National Housing Act is amended to read as follows: "SEC. 302. Each national mortgage association is authorized to issue and have outstanding at any time notes, bonds, debentures, or other such obligations in an aggregate amount not to exceed (1) fifteen times the aggregate par value of its outstanding capital stock, and in no event to exceed (2) the current face value of mortgages held by it and insured under the provisions of title II of this Act, plus the amount of its cash on hand and on deposit and the amount of its investments in bonds or obligations of, or guaranteed as to principal and interest by, the United States. No national mortgage association shall borrow money except through the issuance of such notes, bonds, debentures, or other obligations, except

with the approval of the Administrator and under such rules and regulations as he shall prescribe."

SEC. 29. The first sentence of section 2 of the National Housing Act is amended by striking out the word "January” and inserting in lieu thereof the following: 'April".

Passed the House of Representatives March 12, 1935.
Attest:

SOUTH TRIMBLE,

Clerk.

STATEMENT OF I. FRIEDLANDER, PRESIDENT UNITED STATES BUILDING AND LOAN LEAGUE

Senator BULKLEY. You are president of the United States Building and Loan League?

Mr. FRIEDLANDER. President of the United States Building and Loan League.

Senator BULKLEY. Mr. Friedlander, we have under consideration H. R. 6021, and would be glad to have you express your views about it.

Mr. FRIEDLANDER. The United States Building and Loan League, which represents the building and loan industry, is very favorable to the legislation that is pending before the committee.

Senator ToWNSEND. The House bill or the Senate bill?

Mr. FRIEDLANDER. I shall undertake to discuss both of them. Senator BULKLEY. There is not very much difference between them. Mr. FRIEDLANDER. There are some items of the House bill for which we have a decided preference, and there are some items with respect to which we perhaps prefer the Senate bill. I shall take them up section by section and go through them rapidly, because Mr. Bodfish will go into more detail on some of the controversial sections.

I will state that so far as section 1 is concerned we are favorable to it. We see no reason why it should not be adopted.

As to section 2

Senator TOWNSEND. Are you reading from the House bill or the Senate bill?

Mr. FRIEDLANDER. I am reading from the House bill. As to section 2, our thought has been that the change in the requirement of cumulative dividends on Government capital may be justified at this time as an emergency proposition. We are rather proud of the fact that the Home Loan Bank System has paid its own way, and has paid the Government a 2 percent dividend upon the stock invested, aggregating something in excess of 22 million dollars, besides paying the expenses of the bank and meeting the assessments of the Board. But we do believe that by the elimination of this requirement of cumulative dividends it will be possible for the banks at this time to lower their interest rate without the fear of running into the red with the Government, and perhaps continue to earn the dividend and widen its usefulness and service.

For instance, as an illustration of that point of view, the Little Rock regional bank, of which I happen to be chairman of the board, at its monthly meeting on Saturday deferred any action with reference to the reduction of interest rate to its member associations pending the outcome of this legislation. If this cumulative dividend feature was taken out of the bill, we would have no hesitancy in making a reduction of interest rate, and we think that would widen the influence of the bank through the institutions and members.

Senator TOWNSEND. How much do you feel you could reduce the interest rate?

Mr. FRIEDLANDER. Our present rate now to member institutions is 4 percent. The board has, by resolution, authorized banks to make a rate of 32 percent. We do not feel justified in taking a chance on that reduction on the present volume of business without the elimination of this stipulated dividend which accumulates to the Government.

Senator BULKLEY. A dividend on the Government stocks.

Mr. FRIEDLANDER. Yes.

Senator TOWNSEND. That resolution was made with the anticipation of this amendment going through?

Mr. FRIEDLANDER. I think so.

Senator BULKLEY. What you are advocating is in line with what the home-loan bank board recommends, is it not?

Mr. FRIEDLANDER. Yes.

With respect to section 3, the House wrote a new section into H. R. 6021 as a substitute for the Senate provision. I shall discuss briefly section 3 in S. 1771 first, and then the substitute section. They have no relationship one to the other, but in going through H. R. 6021 in an orderly fashion, I imagine that would probably be the best procedure.

Under S. 1771, section 3, it is proposed that the directors of the regional banks be reduced from 11 to 9 members, and that the elective members elected by the membership be 6 directors instead of 9, and that the public-interest directors who, under the present act, represented constitute members appointed by the board, be increased to 3. The total reduction in directors is, as stated, from 11 to 9, but there is a shifting of the representation, decreasing the representation of elective directors and increasing the representation of appointive directors.

Senator BULKLEY. In other words, it was proposed to make the representation on these boards exactly the same as on the boards of Federal Reserve banks.

Mr. FRIEDLANDER. As I understand, that is correct.

The United States Building and Loan League opposed that suggestion before the House committee, and the section was eliminated. We object to a change at this time for two reasons. First, we feel that the psychological effect upon the system, which is a voluntary system-in other words, the member institutions voluntarily come in and become members-will be bad, at a time when we are doing what we can to induce the institutions that are not members to come in. Senator STEIWER. Why would it be bad?

Mr. FRIEDLANDER. For the simple reason that it interlocks with the additional reason that we do not see any reason for it, as I will try to develop in the second reason, except the tendency to concentrate, perhaps, more power in the board at Washington.

There is a wide disagreement as to whether or not that is wise. The institutions that have not become members might hesitate longer and be more reluctant to come into a system where the present members were induced to come in with a certain representation on the Board, and now having that representation reduced.

If the suggestion as made was one whereby the Board would predominate, in other words, if they were overturning completely the