The CHAIRMAN. Mr. Held, I want to thank you on behalf of the ommittee and the staff for the fine cooperation that we have had from ou, personally, and your association.

Mr. HELD. Thank you, Senator.

The CHAIRMAN. You have been very helpful in the past, and we apreciate it. We may want to call you back for further testimony, when e get into writing this bill.

Unless there are further questions, I am going to have to go to Forign Relations for a little while, and I will ask Senator Bennett to reside. I will return as soon as I can.

I have a report on S. 2938 from the Comptroller General which ill be inserted in the record at this point. (The report referred to follows:)

ON. HOMER E. CAPEHART,

COMPTROLLER General of THE UNITED STATES,
Washington, D. C., March 25, 1954.

Chairman, Committee on Banking and Currency,

United States Senate.

MY DEAR MR. CHAIRMAN: This is in reference to the Housing Act of 1954 as roposed in the bill S. 2938, 83d Congress, now pending before your committee. Title III of the bill would provide a new charter for the Federal National ortgage Association designed to liquidate the existing mortgage portfolio of e Association and a basis for financing the new Association by private capital the maximum extent feasible. Control and management of the Asssociation's condary market operations ultimately would be transferred to private ownerip. I am pleased to note that section 302 (p. 69 of the bill) provides for a continuion of the audit of the rechartered Association by the General Accounting ffice under the provisions of the Government Corporation Control Act and to ntinue the applicability of other provisions of that act.

The bill requires the operations of the Association to be fully self-supporting, id provides that the Association pay for the use of Government funds, to pay to the Treasury amounts equivalent to Federal income taxes, and to reimburse overnment agencies for services furnished it. In order that this payment licy may be completely effectuated, there are certain other expenses, not ecifically mentioned in the bill, which the Association should bear. These late to the payment of civil service and disability fund expenses and for office ace and utilities furnished by the Government. Accordingly, it is suggested at an additional subsection be added to the proposed new section 309 (p. 64) ; follows:

"The Association shall contribute to the civil service retirement and disability ind, on the basis of annual billings as determined by the Civil Service Commison, for the Government's share of the cost of the civil service retirement system ›plicable to the Association's employees and their beneficiaries. The Associaon shall also contribute to the employee's compensation fund, on the basis of nual billings as determined by the Secretary of Labor, for the benefit payents made from such fund on account of the Association's employees. The inual billings shall also include a statement of the fair portion of the cost ' the administration of the respective funds, which shall be paid by the Assoation into the Treasury as miscellaneous receipts."

You may recall that the above language was added to the Small Business Act 1953 which created the Small Business Administration (67 Stat. 230, 235). ertain other corporations and business activities are required by law to bear is cost.

Also, the following proviso should be added at the end of subsection (d) . 67) of proposed section 309: “Provided, That the Association shall reimburse her Government agencies for office and other space and utilities furnished the ssociation."

Subsection (b) of section 309 (p. 66) provides that the Association shall deterine the necessity for and the character and amount of its obligations and penditures and the manner in which they shall be incurred, allowed, paid, nd accounted for. It is not necessary to specify this authority in the bill,

because the courts have recognized generally that such authority is inherest in Government corporations. In fact, it is not granted in the existing charter of the Association. However, the General Accounting Office would have objection to its inclusion in the bill, especially if the last clause is eliminated which provides that the determinations of the Association shall be final and conclusive upon all officers of the Government. This type of finality clause is unnecessary in view of the specific authority otherwise granted to the Association with respect to the making of its contracts and commitments.

Section 303 (b) (p. 48) provides for the disposition of earnings of the Asse ciation under its new secondary-market operations but is silent with respect to earnings derived from operations under section 305 and section 306. I suggest that a clause be added to the bill stipulating that earnings derived from operations under the two sections shall be paid into the Treasury as miscellaneots receipts when not required for capital purposes or liquidation of obligations. A proviso to this effect might be added at the end of the sentence beginning ot line 24 of page 48 of the bill.

As a result of section 2 of Reorganization Plan No. 22 of 1950 (64 Stat. 1277 the Association is indebted to the Housing and Home Finance Administrator for borrowed funds which he in turn obtained from the Treasury. Accordingly. lines 16 and 17 of page 60 of the bill should be revised to read substantially as follows: "shall be paid to the Secretary of the Treasury first in reduction of the indebtedness of the Association to the Housing and Home Finance Admi istrator and then in reduction of the indebtedness of the Association to t Secretary of the".

The proposed amendment of section 405 of the National Housing Act propose in section 601 (2) of the bill (p. 94) which would bar the enforcement of a claim against the Federal Savings and Loan Insurance Corporation for the payment of insurance after the expiration of 3 years from the date of defar? is in accordance with the recommendation contained in the audit reports the General Accounting Office on the Federal Savings and Loan Insurance Ce poration. See page 11 of General Accounting Office audit report of the Hore Loan Bank Board and the organizations under its supervision for the fiscal ye ended June 30, 1952 (H. Doc. No. 52, 83d Cong.). The Federal Deposit Insuran Corporation has a statutory limitation on similar claims of 18 months.

These proposed technical changes to the bill were mentioned informally : Mr. Joseph P. McMurray of your staff, and have also been brought to the atte tion of the chairman of the Senate Banking and Currency Committee in conte tion with the companion bill, H. R. 7839, 83d Congress. Sincerely yours,

LINDSAY C. WARREN,

Comptroller General of the United States.

COMMENTS FROM HOUSING AND HOME FINANCE AGENCY WITH RESPECT TO TE LETTER OF THE COMPTROLLER GENERAL

1. In the fourth paragraph of the above letter the Comptroller General » serves that the bill requires the operations of the Federal National Mortg Association to be fully self-supporting, etc., and that the Association "pay the Treasury amounts equivalent to Federal income taxes." He then sugge consideration of a provision requiring FNMA with respect to its employees make payments in behalf of the Government to the civil-service retireme and disability fund and to the employee's compensation fund.

It is to be noted that the requirement of the bill that the Association pay t the Treasury amounts equivalent to Federal income taxes is restricted, in t it applies only to the secondary market operations of the Association un section 304. Neither its special assistance functions under section 305 nor management and liquidating functions under section 306 are comprehen by the tax requirement. Although there would be no objection to the prope if like requirements are to be applied to all other Government business operations, comparable requirements are at the present time applicable ( to the Small Business Administration (mentioned by the Comptroller ( eral) and to the Panama Canal Company and the Virgin Islands Corporation 2. FNMA has always paid rental charges for its office and other space for utilities, and, while no positive objection is made to the inclusion of proposed proviso that would be added at the end of subsection (d) (p. 67 ef as introduced) of proposed section 309 of the National Housing Act, the addi is necessary.

3. The Comptroller General makes reference to subsection (b) of section 309 (p. 66), which provides that the Association shall determine the necessity for and character and amount of its obligations and expenditures and the manner in which they shall be incurred, allowed, paid and accounted for. It is noted that the General Accounting Office would have no objection to the inclusion of this subsection in the bill, especially if the last clause were eliminated. Although the inclusion of the subsection is considered to be necessary, it has been determined that the final clause is not necessary, and therefore there is no objection to amending section 309 (b) by striking “, and such determinations shall be final and conclusive upon all officers of the Government". With this amendment, the subsection would be identical with the subsection appearing in the companion bill (H. R. 7839), as passed by the House of Representatives.

4. In commenting on section 303 (b) (p. 48) the Comptroller General notes that the bill is silent with respect to earnings derived from operations under section 305 and section 306. In the interest of clarifying the bill on this point, there can be added the amendment already incorporated in the companion bill (H. R. 7839), as passed by the House of Representatives, amending the bill by redesignating section "307" of the National Housing Act as section "307 (a)". and by adding subsections (b) and (c) to said section, as follows:

"(b) With respect to the functions or operations of the Association under sections 305 and 306, respectively, of this title, (1) there shall be no recourse to the capitalization of the Association provided for by section 303 of this title, and (2) mortgage sellers shall not be required to make payment to the Association of the capital contributions provided for by section 303 (b) of this title.

"(c) All of the benefits and burdens incident to the administration of the functions and operations of the Association under sections 305 and 306, respectively, of this title, after allowance for related obligations of the Association, its prorated expenses, and the like, including amounts required for the establishment of such reserves as the board of directors of the association shall deem appropriate, shall inure solely to the Secretary of the Treasury, and such related earnings or other amounts as become available shall be paid annually by the Association to the Secretary of the Treasury for covering into miscelaneous receipts."

5. The letter of the Comptroller General points out that as a result of section 2 of Rreorganization Plan No. 22 of 1950 (64 Stat. 1277), the Association is inlebted to the Housing and Home Finance Administrator for borrowed funds vhich he in turn has obtained from the Treasury. With respect to this point, t may be noted that the provisions of the bill contemplates that by the time of its enactment FNMA would otherwise have assumed the obligations of the Housing Administrator to the Secretary of the Treasury (in connection with 'NMA's operations). Since this assumption has not materialized, it is proosed that the bill be amended by adding thereto section 307 (sec. 307 of the billot sec. 307 of the National Housing Act as it would be amended by the bill). The new section 307, which would be added after line 23 on page 70, at the end of title III of the bill would read as follows:

"SEC. 307. The functions of the Housing and Home Finance Administrator including the function of making payments to the Secretary of the Treasury) nder section 2 of Reorganization Plan No. 22 of 1950, together with the otes and capital stock of the Federal National Mortgage Association held by aid Administrator thereunder, are hereby transferred to the Federal National Hortgage Association."

The foregoing was included in the companion bill (H. R. 7839) in the form 1 which it passed the House of Representatives.

Senator BENNETT (presiding). The next witness is Mr. Boris Shishin, of the American Federation of Labor. Mr. Shishkin, will you ome forward?

Mr. Shishkin, you may proceed as you wish. Do you want to read our statement or comment on it?

Mr. SHISHKIN. If I may, Mr. Chairman, I would like to present the atement the way I have it.

Senator BENNETT. Fine.

44750-54-pt. 1-61

STATEMENT OF BORIS SHISHKIN, SECRETARY OF THE HOUSING COMMITTEE OF THE AMERICAN FEDERATION OF LABOR

Mr. SHISHKIN. My name is Boris Shishkin. I am secretary of the housing committee of the American Federation of Labor. I greatly appreciate the opportunity for us to present our views on the pending housing legislation, which we consider of utmost importance at this time to our economy and to the economic welfare of our country.

I would like first to deal with the question of national housing policy, involved in this legislation.

What the present Congress does about the Nation's housing problem will profoundly affect the course of this country's economic development as well as the level of future welfare of the American people.

The far-reaching import of this legislation compels us to be forthright regarding its deficiencies. It also prompts us to be as constructive as we can be in the recommendations we are here to submit.

Sound housing legislation cannot be written in a vacuum. It cannot be divorced from the realities of economic life of the Nation. Neither can it be left separate and apart from the larger goals of national policy.

Does such legislation make a positive contribution toward sustaining and advancing our country's prosperity? Is it geared to a stable expansion of production and employment? Is it responsive to the known present need for better housing and anticipated future requirements? Is it designed to meet the deficiencies in income distribution and the financial ability of important parts of our population to have adequate housing within their financial reach? Does it help in sound planning of future development and growth of our communities?

The proposed legislation before us, S. 2938, is no doubt well intended But all of the many provisions that fill its one hundred and odd pages do not add up to a national housing policy. Nor do they betray any relationship to a broader policy goal of building a stronger, healthier, more prosperous America.

The proposed program does not meet the three minimum requirements we consider indispensable.

The first test of a 1954 housing program is its responsiveness to 1954 conditions. Our economy is no longer one of full employment and full production. The first responsibility of national policy is to reverse the present recession trend and help resume the progress of economic expansion. Yet, the admitted goal of S. 2938 is the construction of a smaller, not larger, number of dwelling units than we have had in the past.

The second minimum requirement of the housing enactment before us is that it contributes to a long-term healthy and balanced growth of American communities and of the whole economy. Legislation affecting housing has long-term effects. The construction of housing differs from the production of other commodities in that it has more than a transitory effect on the economic life of the Nation.

The long-term financing of housing, the effect that it has on land and other property values, the durability of housing, and standards of its construction, all leave long-term imprints on the economy.

Above all, on the provisions of such legislation depends the feasi bility of sound redevelopment of existing communities and develop

ment of new communities in the future. Yet, the proposed program aims mainly to patch up and make do what we already have instead of helping to build anew.

The third, and perhaps the most important requirement which the pending housing legislation must meet, is its responsiveness to the Nation's housing need. Yet the proposed program has been framed with glaring disregard of the housing needs of American families.

Let me first consider this overriding question of housing need. The housing need: How many houses do we need? What groups in the population have the most urgent need for housing? To what extent can we rely on the existing supply to meet housing needs? How many new houses must be constructed? How soon must we have them? Perhaps the first and foremost reason why we need a high level of residential building activity in this country is that our population is rapidly increasing. The actual growth of population has outstripped all past estimates of the Census Bureau and other population experts. Now we can look for an even more rapid increase in population in the years ahead.

By 1960 our present population of about 161 million will increase to approximately 175 million. Thereafter the population will increase even more rapidly as the huge crop of World War II babies reach the age when they marry and begin to have children. By 1970, we should have a population of more than 200 million.

In addition to the housing needed to keep up with this population growth, we must also replace the large existing supply of substandard housing, and I have appended to my statement a very brief and a very sketchy summary of the fundamental facts in relation to the housing supply and its age which I would like to have included in the record at the conclusion of my statement, if I may.

Senator BENNETT. Yes.

Mr. SKISHKIN. I would like to mention just one additional point in connection with the population growth, Mr. Chairman, and it is this. Inherent in it is the continuing trend in family formation which has, over the past 10 to 12 years, shown a very rapid increase. The requirement for more units outruns the actual population growth. In order to accommodate the social formation of our families, to provide for the greater number of older people, for the kind of community life that exists, we need a larger number of dwelling units in relation to the population growth. So that, if anything, the facts that we have submitted on population growth understate the actual housing requirements that would be apparent if the family-formation problem had been taken into account.

To get back to the question of the housing supply, and the proportion of substandard housing in it, let me point out that in 1950 there were at least 8 million substandard nonfarm units in the United States, and by now this number has increased considerably.

The fact is that the current level of housing construction has not even kept up with the rate of population increase. As a result, none of this new construction has been left over to replace the run-down dwellings in which millions of American families are forced to live. In the past few years, housing construction has been at a high level. But, relative to the growth of population, it has lagged behind. The fact is that even on an absolute basis, housing activity has barely topped that of the 1920's. Thus for the years 1923-27, construction