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Section 213.-Cooperative housing-Status as of Feb. 28, 1954

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The CHAIRMAN. Are there any questions of Mr. Campbell?

(No response.)

The CHAIRMAN. Mr. Campbell, we are very glad to have had you

here.

Mr. CAMPBELL. Thank you.

The CHAIRMAN. You have made a contribution. Thank you very much for it.

We will stand in recess until tomorrow morning at 10 o'clock. (Whereupon, at 4:56 p. m., the committee adjourned to meet at 10 a. m., Tuesday, March 16, 1954.)

HOUSING ACT OF 1954

TUESDAY, MARCH 16, 1954

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met at 10 a. m., Hon. Jesse P. Wolcott (chairman) presiding.

Present: Chairman Wolcott (presiding), Messrs. Gamble, Talle, Kilburn, McDonough, Widnall, Betts, Oakman, Hiestand, Stringfellow, Van Pelt, Spence, Brown, Patman, Multer, Deane, O'Brien, Barrett, and O'Hara.

The CHAIRMAN. The committee will come to order.

We will proceed with the consideration of H. R. 7839.

We have with us this morning the American Legion, the VFW, DAV, Jewish War Veterans.

Mr. Kennedy, we will be very happy to hear from the American Legion first.

STATEMENT OF MILES KENNEDY, LEGISLATIVE DIRECTOR, AMERICAN LEGION

Mr. KENNEDY. Mr. Chairman and gentlemen of the committee, my name is Miles Kennedy. I am the legislative director of the American Legion.

I have with me, who will give the testimony for the Legion, Mr. Wilbur C. Daniel, who is chairman of our national economic commission, which has jurisdiction over housing matters in our organization. I would like the record to show that the American Legion is very grateful to you, Mr. Chairman, and your associates on the committee for giving us this opportunity to present our views with respect to the bill H. R. 7839 which is now before you for consideration.

Mr. Daniel has two statements, both of which I would respectfully request be incorporated in the record. One statement, with your permission, Mr. Chairman, he would like to read. It is approximately 62 or 7 pages long.

But, as I say, I respectfully request that both of them be incorporated in the record in full.

The CHAIRMAN. That will be perfectly agreeable.

I might say we are all very glad to have the American Legion before us.

Mr. KENNEDY. Thank you, Mr. Chairman.

Now, I will ask Mr. Daniel to proceed.

The CHAIRMAN. You may proceed, Mr. Daniel.

STATEMENT OF WILBUR C. DANIEL, CHAIRMAN, NATIONAL ECONOMIC COMMISSION, AMERICAN LEGION

Mr. DANIEL. While we are not concerned with those provisions not affecting veterans, there are two sections which we must strongly object to in their present form. We respectfully request that they be given serious consideration by the committee.

The first provision the American Legion objects to is contained in Title II, Home Mortgage Interest Rates and Terms, section 201, pages 40, 41 of the bill.

Under the provisions of section 201 the President is authorized, without regard to any other provision of law except provisions hereafter enacted expressly in limitation hereof, to establish from time to

time

(1) the maximum rates of interest (exclusive of premium charges for insurance and service charges, if any) for various classifications of residential mortgage loans insured or guaranteed or made under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended: Provided, That no such maximum rate of interest shall, at the time established by the President, exceed 22 per centum plus the annual rate of interest determined by the Secretary of the Treasury, at the request of the President, by estimating the average yield to maturity, on the basis of daily closing market bid quotations or prices during the calendar month next preceding the establishment of such maximum rate of interest, on all outstanding marketable obligations of the United States having a maturity date of 15 years or more from the first day of such next preceding month, and by adjusting such estimated average annual yield to the nearest one-eighth of 1 per centum.

This plan, if adopted, would change the method in which interest rates may be set on mortgages under the GI loan provisions of Public Law 346 of the 78th Congress, approved June 22, 1944, and Public Law 101 of the 83d Congress, approved July 1, 1953. The latter law amended the Servicemen's Readjustment Act of 1944 so that the Administrator of Veterans' Affairs, with the approval of the Secretary of the Treasury, may prescribe by regulation from time to time such rate of interest, not in excess of 412 percent per annum, as he may find the loan market demands.

When the original Servicemen's Readjustment Act, Public Law 346, 78th Congress, was written, great consideration was given by the proponents of same, in cooperation with representatives of the lending industry, the Treasury Department, and the Veterans' Administration, in the setting up by Congress of the present method of determining interest rates; and a ceiling was placed on the interest rate to be charged on VA loan guaranty mortgages so that there might not be a prohibitive interest rate charged to those who had served in the Armed Forces and to whom this legislation was intended to give assistance in reestablishing themselves on a sound economic basis.

The American Legion, after giving this problem serious consideration over a long period of time, felt that it was wise to insert this provision in the Servicemen's Readjustment Act in order to protect the veteran home buyer from excessive interest payments. To us it is crystal clear that a move is now underway to remove the protecting

ceiling also placed on said interest rates by Congress when Public Law 101 was enacted on July 1, 1953, at which time the rate was permitted to be increased to 412 percent. The American Legion opposed said increase in the interest rate.

The American Legion objects to the foregoing provisions as set forth. in said section 201 (1) for the following reasons:

1. The American Legion recommends any change made should be by the Veterans' Administration and by no other agencies or individual.

2. The American Legion believes in the maintenance of a separate housing program for veterans under the sole jurisdiction of the Veterans' Administration. The American Legion wants the present policy continued.

3. We believe that the power to regulate interest rates should remain in Congress.

4. We submit that the phrase "the President is hereby authorized, without regard to any other provision of law"-section 201, page 40, lines 17-18-is too broad, and that only specific authority should be granted not only to the President but to any other Government official who may be concerned.

5. The American Legion is unalterably opposed to section 201 because it would unquestionably result in increase in the interest rate as fixed by Public Law 101 of the 83d Congress. In addition, the proposal carries with it a distinct possibility of discrimination between veteran home purchasers.

We would like to be permitted to invite the committee's attention to an article entitled "Easy Money Comes Back," which appeared at pages 100-102 of the February 26, 1954, issue of the U. S. News & World Report, a reputable and reliable business magazine. A true copy of said article is annexed and made a part of this statement. The article includes a chart showing interest rates average for longterm United States Government bonds for the years 1951, 1952, 1953, and 1954.

(See p. 684 for article mentioned above.)

Reference to the chart shows the percent yield for these years to be as follows:

(The chart referred to is copyrighted by U. S. News and World Report, and is not reproduced in the hearing.)

Year 1951, from 214 percent to nearly 234 percent; year 1952, from 212 percent to 234 percent; year 1953, from 234 percent to 3 percent; year 1954, from 212 percent to 234 percent.

As has been stated above, the interest rates on VA loans to veterans was increased to 42 percent pursuant to Public Law 101, 83d Congress, approved July 1, 1953. Using this 412-percent rate as a base and adding the 212 percent increase above "average for Government long-term United States bond yield," as herein proposed, for the years 1951 to 1954, both inclusive, reference to the chart from the U. S. News & World Report readily shows that, had the maximum rate proposed under section 201 been in effect during the years in question, veterans would have had to pay the following rates of interest on their mortgages:

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