it in and sell it to the finishing mill. If the price is sufficient, they will come into business-and go out of business if the price is insufficient. I have heard it said that the average price of $55 for No. 2 Southern pine is the absolute low at which you can keep these thous ands of small operators in business in the South. And it is literally true. They have to go into the swamps; they have to go over the hills. Their logging operations are very crude, but they are in that particular terrain and they operate in that area with small equipment because that is the only thing that will do the job.

When such things take place, and you still want 37,000,000,000 or 38,000,000,000 feet of lumber produced per year, then that finishing mill, in selling its end product, averages up its costs-because, after all, that must be done-and that is what he must base his price upon; and the price he gets for his lumber is dependent upon supply and demand, unlike steel mills, who have their source of supply from a single pit. Acceleration means merely putting more men on. Getting more logs to accelerate production is a more difficult and more costly job to do.

Mr. BROWN. There is more cost in cutting the small tree.

Mr. FULLER. I think you would be interested, Mr. Brown, in that respect, in the fact that the latest survey on the southern pine areas is that they are growing far more than they are cutting today. I think the South is doing a remarkable job of forestry. I think more people ought to know about that. With the mortality of fire, disease, and cutting, our growth is still exceeding that mortality figure substantially. I think that is a very interesting fact because I think the South is doing an outstanding job in that field.

Mr. BROWN. We cut too many small trees, and cannot make much money out of them.

Mr. FULLER. The lumber industry is going into that. I do not know how germane it is to this subject, but I think it is food for thought: The South is now doing a very good job of farming on trees, in the forests, and they are thinning out for the pulp mills-they are thinning out for posts and poles and are letting the larger trees have a chance to grow.

Mr. KUNKEL. Mr. Fuller, you said that the price of lumber went up, shortly after this spring, due to Government buying. What departments of Government were buying, and for what purpose did they buy that lumber? And was it in competition with the residential building program?

Mr. FULLER. There are a number of places where it is happening. I think the two outstanding places are the auctions which have been held at Memphis, as well as the buying by the Atomic Energy Commission, out on the west coast. They have been buying right through the winter, and where our market normally falls off in the winter they have sustained it far better than it normally would have been. They have been buying great quantities. It does not take too much, of course, to keep the market stable.

Mr. KUNKEL. Have the Government departments and agencies been buying the same type of lumber that would ordinarily go into construction of homes?

Mr. FULLER. Yes; they have. However, we do not feel that there will be a shortage of lumber. We think we can produce what is needed.

Mr. KUNKEL. Is the Government purchasing nearing an end, so that there might be a drop in the price of lumber?

Mr. FULLER. No; I would not say so. I would say that, if anything, the Government purchasing program is now being slightly accelerated. However, we do not feel that the price of lumber is too high.

Mr. BOGGS. The Army expansion bill which was recently passed should have an effect on it.

Mr. TALLE. How much lumber is included in the contemplated ECA shipments to Europe?

Mr. FULLER. At the moment they are only contemplating 800,000,000 feet. We exported approximately 1,400,000,000 feet last year. That is approximate. Of course they have not come to a definite determination of that figure, they tell us, because of the fact that there are many species, and there are many grades in these various species, such as in your area, Mr. Boggs.

The high-grade hardwoods are going begging in the market today. Mr. BOGGS. Well, how many feet did we import last year?

Mr. FULLER. It was almost a parity with exports.

Mr. BOGGS. That is right. I know we imported a tremendous amount of lumber through the port of New Orleans.

Mr. FULLER. That is right. Last year, in 1947, I think they were just about equal.

Mr. BOGGS. My impression is that we imported more than we exported.

Mr. FULLER. It could have been, Mr. Boggs, but it would be slightly more. I have not seen the final figures. I do not think we have the complete figures for 1947 as yet.

Mr. BROWN. We do not have any shortage of lumber, do we?

Mr. FULLER. No; we really do not have. Some of the problems we have had in lumber have been matters of distribution, such as shortage of freight cars, and so on.

Mr. BOGGS. This is not particularly germane to the legislation, but you mentioned conservation practices in the South. The pulp mills, much more so than the lumber mills, have been the offenders insofar as cutting small trees is concerned. Do you people try to work out a program?

Mr. FULLER. We have what is known as the American Forest Products Industry, and through that we are trying to educate, and in my estimation we are doing a good job. Our first program was in Alabama. And we are going through the South now.

Mr. BOGGS. Do the pulp mills buy their lumber from the peckerwood mills?

Mr. FULLER. No; they generally buy timber lands. A wood-lot farmer, a man with 160 acres, with a hundred acres of wood, can make a very substantial income and show a very nice profit if he will handle his forest properly. If he will do his thinning of cordwood for the pulp mill and poles, and give his larger trees a chance, he can go in and cut lumber every 5 years.

Mr. MULTER. Mr. Fuller, this couple which may be occupying a fiveroom house now, do you think they ought to move back to a two- or three-room house or apartment?

Mr. FULLER. I certainly do not think they ought to, unless you leave the free play of the American system of doing things come into being.

When that happens, I think you will find that whole situation will iron itself out very quickly.

Mr. MULTER. You said that private enterprise should undertake the risk.

Mr. FULLER. Yes.

Mr. MULTER. Including doing without Government financing, and Government guarantees of mortgage, and so on.

Mr. FULLER. May I give you my position as well as the position of the National Lumber Manufacturers Association?

Mr. MULTER. Yes.

Mr. FULLER. That is, that I think the Federal Housing Administration, which is what I presume you are referring to, was conceived in 1933 or 1934, to help a very critical situation. Since that time we have increasingly bettered our financial position. That being the case. it seems to me that every effort should be made to curtail the activities of the Federal Housing Administration. We cannot, of course, take a baseball pitcher and put his pitching arm in a cast and leave it there for 12 or 14 years, then remove the cast and expect him to pitch a ball game the following afternoon. But we can take that arm out of that cast, and let it go along for 4 or 5 months, and let him use that arm again, and finally he can recover the full use of that arm.

Mr. MULTER. Do you think Government guarantees of financing in the real estate field should be withdrawn today?

Mr. FULLER. I tried to make myself clear on that point. Mr. Multer. I do not think it should be withdrawn immediately; no. I believe that every effort should be made to gradually curtail its activities. I think there is ample financing available to do this job, but you must realize that bankers throughout the country, loaning institutions throughout the country, for a number of years, have relied upon this cast.

Mr. MULTER. They ought to go back to free enterprise?

Mr. FULLER. That is right. But you cannot put the shackles on the construction industry for 16 years and draw them off overnight and expect it to function immediately.

Mr. MULTER. You also said that private enterprise can be relied upon to achieve as much as it is economically feasible in the realm of housing. Does that include low-income housing?

Mr. FULLER. Yes.

Mr. MULTER. Can private enterprise achieve that goal economically? Mr. FULLER. I know that they can.

Mr. MULTER. Will they do it?

Mr. FULLER. You have seen evidence of it all your life.

Mr. MULTER. That, of course, includes a profit to private enterprise? Mr. FULLER. Yes, certainly.

Mr. MULTER. Will they do it?

Mr. FULLER. Why, certainly they will.

Mr. MULTER. Do you know where they are doing it today-private enterprise? Is it putting up any low-income housing without Government financing?

Mr. FULLER. Mr. Snyder testified this morning that 13 percent of the housing being built today was in the low-income bracket.

Mr. MULTER. Low-priced bracket?

Mr. FULLER. Yes.

Mr. MULTER. How much of it is going to low-income families?

Mr. FULLER. That is the same thing. It should be going to lowincome families, of course.

Mr. MULTER. No low-income families can afford to buy it?

Mr. FULLER. There again, Mr. Multer, I do not think that the thought of buying should be uppermost in our minds.

Mr. MULTER. When I say "buy" I mean buy or rent.

Mr. FULLER. That is a different story. The availability of low rent, clean and safe and sanitary housing can and is being achieved, and certainly that whole process will be speeded up when and if rent control is removed.

Mr. MULTER. In what communities is it being made available?
Mr. FULLER. I think in every community in the country.

Mr. MULTER. I would like to have you show us where it is in New York.

Mr. FULLER. Do you have any new dwellings being built in New York?

Mr. MULTER. Some.

Mr. FULLER. Just some?

Mr. MULTER. Are you talking about multiple dwellings now?

Mr. FULLER. I am speaking of all types of homes.

Mr. MULTER. They are building high-cost types of homes.
Mr. FULLER. And a lot of them out in the suburban areas?

Mr. MULTER. Yes; but none that can be bought or rented by the lowest-income groups.

Mr. FULLER. Of course not; not in the quantity that you would want. Mr. MULTER. In any quantity.

Mr. FULLER. But the people that should be moving into the higherpriced units are not moving.

Mr. MULTER. In New York private enterprise is not erecting a single house which the lowest-income group can touch either by purchase or rental.

Mr. FULLER. I cannot answer that on the statistics, because it is not in my field, as you know, but I will say that certainly a better distribution of the houses available could be had without this distinction that Iam speaking about. Another thing, your State of New York, I understand, has quite a housing program.

Mr. MULTER. That is right, and both the Governor of the State, who is a Republican, and the mayor of our city, who is a Democrat, have asked this Congress to give them help. because they have stretched to the limit what they can do in either the municipality or the State in the way of financing.

Mr. FULLER. Do you mean that their State indebtedness compares with that of the Federal Government?

Mr. MULTER. With their income-taking income and expenditure and liability, of course, it is far in excess, in comparative figures, than that of the Federal Government.

Mr. FULLER. You feel that way about it?

Mr. MULTER. Yes, sir.

Mr. FULLER. I see.

Mr. NICHOLSON. Do you want me to build a house for you, Mr. Fuller?

Mr. FULLER. No; I want to build my own.

Mr. NICHOLSON. All right. Let us build our own house, then.

The CHAIRMAN. Thank you, Mr. Fuller.

Mr. Rouse.

Mr. James W. Rouse represents the Mortgage Bankers Association. Mr. Rouse, we are very happy to have you proceed.

Mr. ROUSE. Thank you, sir.

My company is the Moss-Rouse Co., in Baltimore, and I appear on behalf of the Mortgage Bankers Association, as chairman of their Federal legislative committee.

Mortgage Bankers Association is an organization of life insurance companies and mortgage companies throughout the country.

STATEMENT OF JAMES W. ROUSE, CHAIRMAN, FEDERAL LEGISLATIVE COMMITTEE, THE MORTGAGE BANKERS ASSOCIATION OF AMERICA

Mr. ROUSE. Mr. Chairman, my name is James W. Rouse, and my home is in Baltimore, Md. This statement is submitted on behalf of the Mortgage Bankers Association of America. The proposals contained in S. 866 for financing aids are based on the premise that through the extension of liberal credit the construction of more housing units can be encouraged and that action to meet special needs can be induced by specially liberal aids for projects designed to meet those needs.

It has been amply demonstrated over the past few years that the extension of more liberal mortgage credit does, in fact, encourage construction both by reducing the builder's initial risk and by broadening his consumer market.

The case against liberal credit aids does not deny its effectiveness but is made because of it. The demand for labor and materials to construct new housing units has continually, since the end of the war, exceeded the available supply. The intense competition created by this excess of demand over supply has forced a steady increase in prices and has precipitated a succession of shortages which have delayed the delivery of completed housing units to the market. There can be no doubt that the effective demand for new housing is increased directly as credit is liberalized and the ability of the builder to build is thus expanded. But, as liberal credit does not in any way improve the supply of materials and labor with which to meet the increased demand, the only result can be an increase in competition for the available supply and an inevitable increase in the cost of housing.

When liberal credit adds new demand to an already high level of effective demand, thus increasing prices, it tends to nullify the intended benefits, for the easy terms provided by the more liberal credit are more or less canceled by the larger loans which are required to meet the higher building costs resulting therefrom. Furthermore, a serious excess of demand over supply spreads thin the available supply, thus creating shortages and delays which postpone completion. It is entirely possible that more new housing units might be occupied today if fewer had been started and completion dates had been thus accelerated.

On the other hand, the argument against liberal credit carried to its extreme could curtail mortgage credit so severely and reduce demand so abruptly that actual construction would fall behind the avail