Mr. MARX. That has been due to two reasons, in my judgment, one, that a lot of those mortgages were written up to 100 or 110 percent of the value of the property as appraised in 1926 and 1927. The CHAIRMAN. Who did that?

Mr. MARX. That was attributed to wild financing on the part of some of these mortgage companies.

The CHAIRMAN. What company conducted business on that basis in this country?

Mr. MARX. There have been a number of them that just went out of existence. They would make a loan far in excess of the appraisal price and another contributing factor was the fact that there has been a marked depression in real estate values.

The CHAIRMAN. Certainly there has been. Take the Federal Land Bank which went on a 50-percent basis. They have accumulated large holdings of lands throughout the farming sections of this country and hold them now as a dead weight on the market depressing the value of land or at least contributing toward the prevention of the recovery of land values. How will real estate come back if the Government goes into any business and begins accumulating large holdings of real estate for which they have no use and out of which they would be expected to collect their investment. It seems to me all those calculations are involved in holdings of this kind, if we are to look ahead, and this legislation is not offered as an emergency measure; it is supposed to be a permanent institution in which this Government is to enter for all time.

Mr. MARX. If each individual case is handled on its own merit, I feel reasonably sure with an amortization of 10 percent each year that these mortages would be paid off.

The CHAIRMAN. You do mean to say that the mortgagors in this country are meeting their amortization fees on the mortgages now either urban or rural?

Mr. MARX. Where the loans have been made in the last few years, I can say yes. Of course, if the loans were made on high values numbers of them have already defaulted and are defaulting and will continue to default as long as we have this condition.

Mr. KOPPLEMANN. From your knowledge of real-estate values before the chaos and since the chaos, would you say that the decreased value of real estate and land is due to the fault of any human being?

Mr. MARX. No, it is not. The people who bought real estate as investments and who put all their life savings into real estate as investments, they are just the innocent victims of circumstances, something that is absolutely beyond their control. You have to have some governmental agency to help finance real estate and stabilize it. Mr. KOPPLEMANN. Why do you stress a governmental agency? Mr. MARX. Because there is no private channel that will make loans, particularly on industrial property.

Mr. CAVICCHIA. Up to what percentage of the appraised value does a private channel advance?

Mr. MARX. It depends on the different States.

Mr. CAVICCHIA. Your own State of Missouri?

Mr. MARX. Fifty to sixty percent.

Mr. CAVICCHIA. What would the mortgage companies go up to? Mr. MARX. Approximately the same.

Mr. CAVICCHIA. Your idea is that if the Government wishes to go in up to 80 percent of the appraisals, although they are less than during the boom years, the Government would be perfectly safe? Mr. MARX. Where the company is putting up additional collateral besides the real estate they have for their own business.

Mr. CAVICCHIA. You are not advocating here that the Government make 80 percent loans on the kind of loans you described to us, but you would give additional collateral to safeguard the Government as much as possible?

Mr. MARX. Yes.

Mr. CAVICCHIA. What is your idea as to how far beyond the appraised value, with the extra collateral that the Government demands-up to what percentage can the Government go?

Mr. MARX. You could establish a 60-percent loan on the appraised value and in practically every case except one or two of the cases I cited, that would materially take care of their requirements.

Mr. CAVICCHIA. When you mentioned the housing department making loans up to 80 percent, did you by any chance make a mistake and have in mind the Home Owners' Loan Corporation?

Mr. MARX. No; the Federal Housing Administration. They are setting up loans of 80 percent of the total value of the buildings and grounds. Of course, those are entirely through banks and they in turn discount them with the Federal Housing.

Mr. CAVICCHIA. My idea is that the Housing Corporation does mortgage loans. I may be mistaken and I would like to be corrected if I am.

Mr. WILLIAMS. We set up national mortgage associations and they provide also in their loans, which are made through other banking institutions, for loans up to 80 percent.

Mr. CAVICCHIA. I have heard a number of people make the same statement as the witness.

Mr. WILLIAMS. I think that is in error. The Government does not make those loans but they guarantee them under the act, and then these loans are made by approved institutions, and it provides for the establishment of national mortgage associations, none of which have been created unless there are one or two right recently.

Mr. RUSSELL. They guarantee 80 percent?

Mr. WILLIAMS. I will not say that. There is a difference between title 1 and title 2. They guarantee those mortgages to the extent of 80 percent of the value of the property upon which a mortgage is taken.

The CHAIRMAN. The loan originally is 80 percent, but there is nothing in there about the 20 percent, so there is not so much risk in that.

Mr. MARX. As far as commercial and industrial real estate are concerned, there is no government agency or no bureau or association, and that is what they want set up here by the Government which will help the small industrialist and business man to finance his real estate. You have the Federal Housing Administration which will help the home owners and the owners of the two-family and four-family flats or apartments, but you have no other bureau or agency which will help the man who wants a factory or a store building or a warehouse. Mr. WILLIAMS. Of course, we provided that the R. F. C. and the Federal Reserve banks could make those loans. You understand that?

Mr. MARX. Yes.

Mr. WILLIAMS. Whether they make them, of course, is up to them, whether the security offered is satisfactory. The fact is we have a Government agency to take care of this situation.

The CHAIRMAN. They are equipped with abundant idle funds to do the job if they will, and of course, they would like to make the loans if in their sound judgment as business men they could make those loans because they would make money by making such loans, whereas their funds now are idle and earning nothing.

Mr. MARX. The R. F. C. mortgage company, as I understand it, will make loans if you are going to put up a new factory building and want to amortize it, but it will not help you buy a building, and there is a lot of distressed industrial property on the market, but you cannot get loans to buy it even if you want only a 40 percent loan. The R. F. C. mortgage company will not make the loan because they say it is not putting people to work.

The CHAIRMAN. You propose that the Government should go in and buy that sort of property or assist in buying it. That is what it amounts to.

Mr. MARX. If they do that, it would give these companies an opportunity to put additional people to work because they would have additional facilities for their character of hauling and warehousing.

The CHAIRMAN. Of course that is a temporary and emergency matter. We do not know what the employment conditions will be 5 or 10 years from now, and this law will operate forever and aye. Mr. GIFFORD. What are the conditions with the St. Louis banks? Are they lending money?

Mr. MARX. Yes. They have plenty of money, but the average business house cannot borrow unless you are actually putting up Liberty bonds or something corresponding to them.

Mr. GIFFORD. Why will not your banks lend money?

Mr. MARX. They do not like to loan on these long-term loans. That is what I have been stressing particularly. I am not arguing about the short-term loans other than from what these different business men and industrialists have told me, but on long-term loans the banks will not loan them the money on long-time real-estate loans. Mr. GIFFORD. Have you any experience with mortgages or bonds, selling to the people through some agency, selling mortgages through mortgage bonds?

Mr. MARX. At present?

Mr. GIFFORD. Have you done any of that sort of work?

Mr. MARX. Back a few years ago I was in the real-estate mortgage business, and this particular company was affiliated with one of the banks, and they sold conservative mortgages, but then they were the victim of circumstances, because such houses as some of the Chicago houses and what not had overfinanced property and it just left a bad impression with the investing public so that all legitimate mortgage bonds are thrown under the same classification today, and the only mortgage bonds we are selling today are of such institutions as the Catholic Church, buildings of that type.

Mr. GIFFORD. Have you had any personal experience selling bonds of that kind?

Mr. MARX. Yes.

Mr. GIFFORD. How much commission did they pay to those that sold?

Mr. MARX. One point commission.

The CHAIRMAN. I am glad to learn that some of the churches are still in good standing.

Mr. MARX. The only churches that I know of that are getting those loans today are just the Catholic churches. St. Louis is a bigmercantile town more than some cities and the people are conservative in their investments there and buy low mortgages.

Mr. CAVICCHIA. Did I understand you to say Catholic churches. are issuing mortgage bonds?

Mr. MARX. Yes.

The CHAIRMAN. I am glad to know that we have one church that can carry on on its own without asking the Government to help. Mr. CAVICCHIA. The Catholic churches have parish property. They have a system to take care of their financial obligations.

Mr. MARX. I do not know of any other church except the Catholic Church that is doing financing in St. Louis.

The CHAIRMAN. Of course, we are discussing here with some degree of freedom and it does not always justify the conclusions that might be reached. We try to think out loud in these meetings but there are some of us, I am sure, who have some question in their minds about how far we ought to put the Federal Government into private investments or private business in the United States. Of course, you can answer that by saying we have done that in some instances, but that does not mean we would like to keep it up until it reaches its legitimate end, and I think it will end sometime that way.

Mr. GIFFORD. The Government has loaned large amounts on ships. on mortgages. Do you know how we disposed of those mortgages rather than take the ships?

Mr. MARX. No way that I know of.

Mr. GIFFORD. They sold the mortgages back to the owners who gave the mortgages, and I am wondering whether we are poing to do the same way with the home loans, dispose of them or whether they will take them as they are.

Mr. MARX. This is my personal opinion. I feel that the Government should come in to help the small, not necessarily small industrialist but all the business interests and industrialists throughout the country, particularly on their real estate to the extent of at least 50 to 60 percent, and if this company that the Government will loan to has a past record on their operating expenses as far as their rent on real estate is concerned, if that expense is such that it is in line with the pay-off and the interest and the taxes that they are asking now under a mortgage, I do not see where the Government is taking much of a chance.

Mr. KOPPLEMANN. In this bill there is permission given to the banks to provide a lending agency for readjustment of their loans in case they want the money or cash. The bank makes the loan and makes them for a long term, and if it finds it needs money at any time, it can take the loan and get it rediscounted under rules and regulations of the law, and therefore would be encouraged to make loans without going to the Government, without the individual going to the Government to get the loan. Private organizations, financing organizations with which you are acquainted could do the same thing.

My question is this: In view of that feature of this bill, do you believe that banks and private financing organizations would make loans for which you are arguing before this committee?

Mr. MARX. They would. If they had some place where they could rediscount that paper they would make those loans. If you go to the banker today for a long-term loan on real estate, he laughs you out of his office because the cannot make it.

Mr. KOPPLEMANN. Are you not aware that we have already a law by which these banks, as I understand, can rediscount on loan collateral?

Mr. MARX. My argument is that it is not complete enough in what you are offering. What you have already presented to the public is not complete enough to take care of all the cases.

Mr. KOPPLEMANN. Your experience shows that they do not take care of them?

Mr. MARX. In some cases they do not take care of them and other cases they cannot take care of them. For example, take this one man that wanted to buy the building and the closed bank owns the property. The closed bank is in receivership and its receivership extended for 2 years. If that paper was not held by the closed bank, if for some reason or other that paper could be extended for 10 years by the R. F. C. bank, that would be different, and the R. F. C. would have made that loan, but the receivership was for 2 years and the R. F. C. turns that loan down, because they cannot extend the loan longer than the receivership.

Mr. KOPPLEMANN. You referred to purchasing property. We have been trying to relieve those who already own property and are not leasing it, but we have not gone to the extent you suggested in the cases you have outlined. That is quite true.

Mr. MARX. What we are pleading for is somebody, some agency or bureau, which will fill up that gap in what you have already, with what is needed to give a complete service, without putting the Government in the real-estate business, to make loans of 80 or 90 percent, but I do make the plea that there be some bureau or agency to fill up this gap to complete a real-estate loaning service.

Mr. KOPPLEMANN. What you are asking for is the same identical thing in this bill as in the Farm Credit Act for farm mortgages, with the addition to it that this corporation could buy as well as rediscount. Is that what you are asking for?

Mr. MARX. Yes.

The CHAIRMAN. The Federal Farm Loan Act was in no sense an institution owned by the Government. They were set up with temporary government assistance under plans by which every borrower would take 5 percent of his loan in stock in the land bank and the land banks would sell consolidated bonds backed by all 12 of the banks to the investing public so that the farmers owned the Federal land banks and the Government merely subscribed for nine millions of the initial capital of those banks. They were reimbursed by the Government and the Government had collected its investment. The Government did buy some of their bonds during the war, because they did not want those bonds thrown on the market in competition with Government bonds. Those bonds were taken over by the banks and the Federal land banks were owned by the borrowers of this country.