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Then we also have this question of yield insurance to attract insurance companies and trust funds into housing.

I understand that there has been filed with this committee a statement of Mr. Camp of the Liberty National Life Insurance Co. of Birmingham, Ala. I asked for a copy of that statement, because I wanted this committee to realize the position of the insurance companies as expressed by Mr. Camp, and I quote from his statement:

The life insurance companies do not look with favor upon this plan and do not seek the passage of yield insurance provisions.

Mr. BUCHANAN. What is the date of that statement?

Mr. WHITLOCK. May 21.

Mr. GAMBLE. Is that the date he testified here?

Mr. WHITLOCK. He has not testified.

Mr. KUNKEL. What is his position? Is he the head of one insurance company or is he the head of a representative group?

Mr. RAINS. He is the investment officer for an insurance company in Birmingham. I know him quite well personally, and he sent me a statement such as you have, and I wrote him back. If you read it all, it appears that he is against the bill-any type of housing-and he is against the Federal Housing Administration.

Mr. WHITLOCK. I am certain he is against the bill.

Mr. RAINS. He is a fine gentleman. I recommend him highly, but I disagree with some of his opinions.

Mr. KUNKEL. Does he have a position as representing life insurance companies generally?

Mr. WHITLOCK. He is the investment officer for a large life insurance

company.

Mr. COLE. Put it this way: We have had no life insurance companies come in and ask for it; have we?

Mr. BUCHANAN. Not yet.

Mr. COLE. Will we?

Mr. KUNKEL. Well, he speaks for himself.

Mr. WHITLOCK. I think he speaks for himself and I think he is highly respected in the life insurance field. I think he has filed a statement with every member of the committee. But I want to point out that, on this question of attracting life insurance companies, you find here his statement:

The life insurance companies do not look with favor

and he quotes from the appearance of the representatives of all the life insurance companies before the Senate Banking and Currency Committee on March 27, 1947, as follows-and this is a representative of their organization:

Yield insurance cannot reduce cost any more than can easy credit. Like the other features of this bill, it can only help temporarily to support an unfavorable cost situation and render the necessary adjustments more difficult to handle without disaster.

So Mr. Camp is opposed to it personally. And he puts into his statement a quotation from the representative of the Life Insurance Association made on March 27, opposing yield insurance.

Mr. KUNKEL. That statement will be in the Senate hearings, will it not?

Mr. WHITLOCK. It will be in the Senate hearings before the Committee on Banking and Currency, March 21, 1947.

Mr. KUNKEL. That statement substantially repeats the statement Mr. Foley made back in 1945?

Mr. WHITLOCK. That is true.

Mr. GAMBLE. Mr. Whitlock, do you know of any insurance companies that are interested, or that have expressed an interest in yield insurance?

Mr. WHITLOCK. I do not, sir.

Mr. GAMBLE. There is talk about it; when the joint committee went around the country, however, we did not find any insurance companies which did show any particular interest in it. I think it might be a good idea, but I just wondered if anybody would use it.

Mr. RAINS. Do you know anything basically wrong with yield insurance? I remember that the bankers for insurance did not even approve of the guaranteeing of bank deposits. They could be mistaken, could they not?

Mr. WHITLOCK. The basic wrong, as I see it, with all of this loosening of credit, at this time, has been very well stated by the Joint Committee on the Economic Report, and I think it was very well stated by Senator Taft when he was discussing, before the Senate, just on May 17-barely 2 weeks ago-this whole question of easing credit and putting more money into this market when all of the materials and all of the labor are being used up.

Senator Taft said:

I may suggest that every economist whom I know, whether he be left-wing or right-wing, is in favor of cutting down on public works when private construction is active, and the moment private construction lets up, then to go ahead with public works. They are all agreed as to what the effect would be on the gnneral economy and inflation, if there were piled on top of a full, private economy construction program, a tremendous expenditure of public moneys. From an over-all economic standpoint there can be no justification for increasing public works when there is a general boom in private construction and if we are going to take a national viewpoint, we ought to cut down on public programs now, when there is a general boom in private construction. If public works are dropped for a time, it will make no difference, so far as I can see, to the general ultimate welfare of the country. This is the time to cut down on public works. I venture to say that if the policy should be pursued over the next 10 years, and if we should increase public construction correspondingly in times of depression, or lack of private activity, we would get through just as soon with the PikeSloan plan and all other plans, as if we tried to force them now, which would result in general increases in all costs, a general increase in the price of every kind of material for which there is competition, a competition for labor and materials, which would seriously embarrass the country, and might bring about a condition where we could no longer proceed with any public works.

Mr. RAINS. Did the Senator oppose it in the committee of the Senate?

Mr. WHITLOCK. This is on the floor that he made these statements. Mr. RAINS. Did he oppose that section of the bill?

Mr. WHITLOCK. Well, I do not know what he did on that. He has of coures, advocated the passage of his bill.

Mr. RAINS. The point I am making, Mr. Whitlock-and I make it seriously-in all our studies last summer, with the Senate-House Joint Committee on Housing, we found many private enterprisers who said that yield insurance ought to be an answer to this kind of problem, and just because it is new-I think we ought to have some other reason for opposing it. You said there is a building boom on. That does not happen to be true. In my section of the country

building has stopped. And unless there is some provision made for some kind of housing financing, it is going to stop completely. I heard this morning an objection made to the bill to the effect that it would not give any immediate relief. In that statement, you are saying that it might give some temporary relief. Mr. Camp makes that statement.

Mr. WHITLOCK. I am surprised when you say that building has stopped, because all of the available material and manpower is being used in the construction industry now-all of it that we have. We are producing homes. We produced nearly 850,000 homes last year. We are producing at the rate of approximately a million homes this year. We are scratching around trying to make an apprentice training program work to get more workmen to use the materials, we have got our production lines working at full tilt, and we are worried about the possibility of them being upset, and I am surprised to hear you say construction is at a standstill.

Mr. RAINS. I have just come back from my home State, right next to Birmingham, and I would not make the statement if I did not know. No single GI can get any kind of a loan now in the State of Alabama. No bank will have it. No insurance company will have it. They are cut off every way they turn. The lumbermen in Alabama have excess lumber in their yards. Building in many of the Southern States is practically at a standstill, and figures to the contrary notwithstanding

Mr. WHITLOCK. Do you have all the carpenters and bricklayers you need down there?

Mr. RAINS. There are a lot of them not at work. And unless there is some kind of financing-I do not care about the Government doing it, but I want something done whereby these poor people who do not have the money with which to do it can build some kind of a home and I thought yield insurance would be a good way to do it.

The CHAIRMAN. Mr. Rains, I do not think your statement is a typical statement, for the reason that when the GI second mortgage program was stopped last year, there were two or three States whose financing of homes was seriously interrupted. It seems to me that there were only two or three States in the Union whose financing programs were interrupted. There is something wrong locally which should be corrected. Your bank can now sell this paper through the Federal home-loan banks.

Mr. RAINS. Long-term loans, of course.

The CHAIRMAN. These are all long term loans. They can discount their Federal Housing Administration paper with "Fannie May." I do not understand, when two or three States come in here and say they cannot do any financing because the banks will not make any loans. with all of these facilities for the disposal of mortgage paper available, why the banks will not rush in just as every other bank and insurance company in the United States are doing. So I cannot feel that your banks down there are typical of conditions in the country. Mr. RAINS. I am misled if the banks in the gentleman's home State are doing it.

The CHAIRMAN. Oh, yes. They are taking up title II's now, since title VI is no longer available to them. A report made the other day showed that since the 1st of May the increase in title II financing has increased immeasurably.

Mr. RAINS. All I know is that they say they are not willing to, and will not tie up their money at these long-term rates without some kind of secondary market, Mr. Chairman.

The CHAIRMAN. I do not think your banks are very progressive. They do not want to do business.

Mr. RAINS. That is possibly true, but I get the complaints from veterans' organizations all over the country.

The CHAIRMAN. Well, the veterans complain of the situations in these two or three States because the banks will not make the loans. That is not the fault of the Federal Government. We have surely given them every encouragement that we possibly can to make loans, and Nation-wide, when we cut out the secondary market on GI loans last year, there was not a ripple in the volume of home financing. think it went down a fraction of 1 percent, and then there was a boom after that which entirely offset the slight reduction. That indicates to me that there is something wrong in those two or three States. There is nothing wrong in the national program.

I

Mr. BROWN. I think Mr. Rains is correct when it comes to small communities, small towns. The GI's are not getting any loans, because the banks in those communities can lend only a limited amount. With a secondary market, they could sell many of these loans and accommodate more veterans.

The CHAIRMAN. All of the small banks in my district have correspondent banks in two principal cities. They have correspondent banks in Detroit. Detroit banks have correspondent banks in Chicago. I think there is something wrong with the boards of directors on these banks if they do not want to make loans and make money.

Mr. RAINS. Whether it is in the State of Michigan, in a little town, or whether it is in Alabama, or Texas-if you read the record that we compiled last year, and the reports which are before this committee, you will find that it is not confined to Alabama, you will find that it is in Florida, in Georgia, in Tennessee, in the States where we went, in the small banks. They do not want all this capital tied up. They say they cannot afford it.

The CHAIRMAN. Are they member banks?

Mr. RAINS. Sure.

The CHAIRMAN. Every member bank of the United States can go to the Federal Reserve.

Mr. BROWN. If you talk to Members of Congress, you will find 90 percent of them have received letters asking for a secondary market for such loans.

The CHAIRMAN. I know you have. And it amazes me that this situation is confined to two or three States.

Mr. BROWN. It is not confined to two or three States.

The CHAIRMAN. It cannot be all over the United States, because, as Mr. Whitlock has indicated, and as the facts before this committee have indicated, we are well on our way to building a million homes this year. Mr. BROWN. I am not disputing what Mr. Whitlock says. Mr. Rains is speaking about building for GI's.

The CHAIRMAN. I just told you how GI's can get a hundred percent. guaranteed mortgage. What more do they want?

Mr. BROWN. I do not agree with what the chairman says on that point.

The CHAIRMAN. Many of the banks thought, and they told me, that they did not think the guarantee, in the case of 50 percent, was sufficiently large enough to cover the risk they were taking, so a lot of the homes that they were selling to the GI's for $8,000 were not worth the 50 percent guarantee which they got for them. Some of the banks and mortgage financing companies saw fit to peddle that stuff to the Reconstruction Finance Corporation without recourse, to get their money out of it, and in that way restore their capital, and build up, with a 2 percent carrying charge, a fund from these loans. So it is to their benefit to turn these over just as rapidly as they can. They were not financ ing them. The Federal Government was financing them.

Mr. BROWN. Take Mr. Fletcher from California. He stated they have the same trouble out there. A lot of GI's cannot secure loans for want of a secondary market. I understood him to make this statement the other day.

Mr. FLETCHER. That is correct, Mr. Brown. I think it is one of the most serious problems today.

Mr. BROWN. I venture to say that 90 percent of the Members in Congress today have received letters requesting a secondary market for GI loans.

The CHAIRMAN. They have been taught to believe that the secondary market is a panacea for all their housing ills. I think we know it is not.

Mr. WHITLOCK. Mr. Chairman, in order to make it clear that the remarks that I have read concerning public works, also, apply to housing, in Senator Taft's mind, I would like to quote further, during that debate on the floor

Mr. BROWN. Will you pardon me a minute? We are doing a lot of building in our part of the country. Most of the carpenters and builders are employed. I was talking about one phase of it-homes for the GI's.

The CHAIRMAN. The GI's do not need a cent of money to get a house. They do not need a cent of money.

Mr. BROWN. I do not agree with the chairman.

The CHAIRMAN. In what respect do you not agree with me?

Mr. BROWN. In this respect: You stated on the floor of the House when we had up for consideration the extension of the Reconstruction Finance Corporation that a secondary-market provision could be placed in the bill we are now considering. It certainly was not thought then that the RFC bill made adequate provision for GI loans.

The CHAIRMAN. That is right. I said that we would try to work on the GI bill of rights, thinking at that time that it was necessary to amend the GI bill of rights, to put the GI mortgages in the same comparable position in which the Federal Housing Administration paper is, so that we could safely open this secondary market to GI loans. Now, a study of the situation since then, of the law, has convinced me that we need no secondary market other than we have at the present time. GI's can go to the Veterans' Administration and borrow up to 20 percent of the amount of the cost of the project, and that interest is frozen at 4 percent. So that, regardless of whether we provide a flexible interest rate, up to 4 or 5 percent, the GI can get up to 20 percent of his money at 4 percent, and have that wholly

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