Mr. SHISHKIN. My suggestion was prompted by one thought. I think the public ought to know who is opposed to this legislation. Senator RADCLIFFE. They ought to know who is for it and who is against it.

Mr. SHISHKIN. That was my purpose.

The CHAIRMAN. At this time the committee will stand in recess until 10:30 o'clock tomorrow morning.

(Whereupon, at 12: 45 p. m., a recess was had until 10:30 a. m. of the following day, Wednesday, December 5, 1945.)

GENERAL HOUSING ACT OF 1945

WEDNESDAY, DECEMBER 5, 1945

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met at 10:30 a. m., pursuant to adjournment on Tuesday, December 4, 1915, in room 301, Senate Office Building, Senator John H. Bankhead 2d presiding.

Present: Senators John H. Bankhead 2d (presiding), Murdock, Buck, Mitchell, and Carville.

Senator BANKHEAD. The committee will come to order. Senator Wagner is necessarily absent this morning. I am presiding in his place. I notice that a list of five witnesses has been furnished to speak for the American Bankers Association. There are other witnesses in attendance expecting to testify this morning. It is a problem as to whether such a large number should represent one institution. At the same time, if they want to testify, some of them may have to be held over until tomorrow. But I do not believe that this number of witnesses for the American Bankers Association ought to all be put on to the exclusion of other witnesses who in that case would not be able to testify this morning. I am wondering if there is any way by which this number of witnesses for this morning could be reduced, agreeably. Mr. F. G. ADDISON, Jr. We believe, sir, that the first three of us would provide a continuity that would be very beneficial, if we could have at least that privilege this morning. Our statements are not long, and our remarks are in continuity, rather than in duplication. Senator BANKHEAD. All right. Who is the first witness. Mr. ADDISON. I am.

STATEMENT OF F. G. ADDISON, JR., PRESIDENT, SECURITY SAVINGS & COMMERCIAL BANK, WASHINGTON, D. C., CHAIRMAN, COMMITTEE ON FEDERAL LEGISLATION, AMERICAN BANKERS ASSOCIATION

Mr. ADDISON. My name is Frank G. Addison, Jr. I am president of the Security Savings & Commercial Bank here in Washington. I am also chairman of the committee on Federal legislation of the American Bankers Association which has a membership consisting of 96 percent of the Nation's banks which represent 98 percent of the Nation's banking resources. I appear before you today on behalf of the American Bankers Association and of the National Association of Mutual Savings Banks.

The bankers of the country, with the large volume of assets they hold in mortgages and other real-estate interests, have a vital concern

with any legislation that might have far-reaching effects in the mortgage and real-estate markets.

Aiding in the construction of homes by making mortgage loans has always been an important function of banks. State-chartered commercial banks and mutual savings banks have been actively engaged in this kind of business for more than a hundred years. This is a natural function of banks in view of the large volume of savings funds which they hold.

The amount of savings and time deposits held by mutual savings banks, national banks, and State chartered commercial banks at the end of 1944 totaled nearly $34,000,000,000. It will be much higher than that at the end of 1945. A considerable portion of these savings funds is now invested in mortgages on real estate, principally on homes. For 30 years, ending in 1944, funds invested in mortgages have represented over 20 to 40 percent of the savings funds held by banks. A survey made in 1940, the last year prior to the war, revealed that 5,001 commercial banks and 294 mutual savings banks made a total of 308.818 new mortgage loans in an amount in excess of $1,150,000,000. The banks now have available over 20 billions of dollars which could be invested in mortgage loans.

As you know, banks are not the only institutions interested in home construction. Insurance companies, building and loan associations, mortgage bankers, home construction companies, and many others are anxious to see the revival of home construction and ready to lend for that purpose. All these institutions have more funds available for home construction than at any other time, and interest rates on mortgages are at a lower level today than at any time in history.

The institutions referred to above, in times past, have carried the bulk of home mortgage loans. At times these institutions have been accused of encouraging over-building of homes, and in a period when interest rates on mortgages were much higher than they are today.

We recognize that we are in a major housing crisis and one which may not yet have reached its peak. This crisis is comparable to the one which we faced at the end of the last war; but many of its elements are greatly magnified. World War I lasted for only 18 months. World War II lasted for 4 years. Home building has been suspended longer. The widespread increase in individual and family incomes, the increase in the number of families in our country, and the prospective increase arising from the return of men of marriageable age from the services are the determining elements in creating this crisis. Solving that crisis is the problem before us. There is only one solution possible. Obviously it is to increase the number of homes available for occupancy.

Previous testimony before this committee indicates that 12,600,000 units of new construction will be required in the next 10 yearsSenator BANKHEAD. Would you object to a question?

Mr. ADDISON. Not at all.

Senator BANKHEAD. What do you count as a unit of construction in homes?

Mr. ADDISON. It could be an apartment house, it could be a duplex house, or any separate and distinct place of abode for a family.

Senator BANKHEAD. In other words, your 12,600,000 contemplates housing facilities for 12,600,000 families?

Mr. ADDISON. 12,600,000 families in the next 10 years.

Senator BANKHEAD. Let me ask you a further question which arises there. You say in the next 10 years. That is a long period.

Mr. ADDISON. The next sentence shows what is projected for this

year.

Senator BANKHEAD. And the next year?

Mr. ADDISON. That covers the year 1945 through December 1946. Continuing, the demand will be about 4,660,000 units-2,900,000 for married veterans without established homes and single veterans who marry. When these demands are considered in the light of the fact that the maximum number of dwelling units ever built in a single year prior to this war period was not over 937,000 units, it is submitted that it may well be dangerous to our economy to make additional provision for credit for home buying by increasing demand through credit for that which is not available and thus increase the inflationary pressure of demand beyond supply.

Granted that we have the land, there are three essentials to the building of a home. First, building materials; second, skilled labor; third, money and credit.

Is there a shortage of money and credit? Only a casual glance at statistics of the present financial situation would lead one to say, "No," immediately. Individuals have money in banks, in other financial institutions, in currency and in bonds. This is even true of many returning veterans, as we learn from talking to them when they come into our banks to talk about home ownership. In addition, they have certain privileges under the GI bill of rights in the acquisition of homes.

There is no shortage of money or credit and, as we said before, there is so much competition among financial institutions to secure mortgage loans that interest rates on such loans and the financial conditions and terms surrounding mortgage loans are more favorable to the borrower than at any other time.

Are we short on building materials for homes? Yes. It is commonly reported throughout the country that it is now more difficult to secure materials for residential construction than it was prior to the lifting of Limitation Order L-41 of the War Production Board. The major portion of building materials in many communities appears to have been diverted into the construction, repair, and improvement of business and industrial properties within the past few weeks. The residential construction industry seems to be standing begging for what is left.

Is there a shortage of skilled labor? Yes. Our contacts with various sections of the country lead us to believe that in nearly every area the demand for skilled labor far exceeds the supply as far as residential construction is concerned. In meeting this supply we might learn something from the training methods used in war production. For a time there was a great shortage of skilled labor in making munitions of war. However, new training methods were devised and after a comparative short time an ample supply of labor became available for the mass production of war goods. New training techniques learned in the war can be adapted to the problem before us. In addition, encouragement may be given to more apprentices to undertake construction work. All this can be done immediately and without legislation.

What can be done was also shown during the war in meeting the need for food. At the outbreak of the war the country feared a shortage of food. Some proposed that a food supply should be attained. by merely increasing the amount of Government credit to farmers. However, farmers and bankers alike demonstrated that the bottlenecks to more food production were not money or credit, but the shortage of farm machinery and labor for food production. When that was made clear the Government acted. It increased the supply of farm machinery and made more farm labor available. As a result we produced a record amount of food not only for ourselves but for our allies. The situation is analogous. This experience showed us how a crisis in food production could be met.

The bill before us seems to be built on the premise that the housing crisis would be resolved through more money and credit and new forms of Government guaranty to institutional and private lenders and by greatly increasing the amount of Government grants to public housing activities. It provides that all losses which may be incurred by such guaranties and the additional subsidies to public housing would be transferred to the taxpayer. But credit and guaranty devices are not the bottlenecks. As stated before, the bottlenecks are material and labor shortages.

Such remedies as this bill suggests are, for the most part, characteristic of the depression economy. During the thirties the Government set up institutions to issue mortgage loans and other institutions to grant Government credit for construction. Then we had a deflated economy. Private credit was weak. State and local governments were deeply in debt. But the Federal debt, comparatively speaking, was low. Now, the conditions are reversed. Private credit is abundant. State and local debt is very low, but the Federal debt is tremendous. While it is true that we have a housing shortage, the way to solve it is not through measures which would encourage inflationary forces by increasing the size of the Government debt. This bill would ultimately add over $4,000,000,000 to our Federal debt, but it still does nothing to increase the supply of building materials or to divert such materials to home construction. Neither does it do anything to increase the supply of skilled labor. By such increase of your credit supply faster than the other two essentials of home construction, you add to the inflationary forces by creating pressure of demand for labor and materials and even increase the competition for existing homes. This will add to the cost of production and will depreciate the buying power of the dollars our people have saved in bonds and bank deposits.

We recognize that the problem before us is a difficult one. We appreciate the fine work that has been done by members of this committee in studying this problem. We are all anxious for an immediate revival of home construction. As we said before, there are three essentials for such a revival: Materials, labor, and credit. Credit we now have in abundance. This bill primarily increases the supply of credit, the only effect of which would be higher production costs and such costs will retard, not accelerate, a revival of home construction.

There are, however, certain features of the bill which have significance from the point of view of a long range housing program. Both features of this legislation must be considered together. What I have said represents our opinion with respect to the effectiveness of many of