that in several of the measures which are now before you, housing for the elderly is written with mortgage insurance based on "value" rather than "replacement cost." The recent history of the cooperative housing program when saddled with the "value" concept should make the committee aware that the use of the same concept in housing for the elderly would make it impossible for such a program to get any housing built.

We feel very strongly on that issue. Our experience has indicated that that program calculated for a speculative investment program just will not work for this type of program.

In the present urban renewal program, public housing is required to pay the entire cost of land acquisition, including slum demolition. Speculative housing, on the other hand, gets land for housing at a cost written down by Federal and local subsidies. We believe these two programs should be put on a comparable basis. This would be achieved by providing that public housing may take into account a waiver of taxes by a local community as the required capital contribution by the city or local community toward the cost of land.

We commend section 108 of the Rains bill for the provision authorizing the Commissioner of FHA to approve a mortgagor's certification. Such certification shall be final and incontestable except for fraud or material misrepresentation on the part of the mortgagor. This provision will make it possible for a builder or an organization to know that his undertaking is completed upon certification by the Commissioner unless he has willfully defrauded the Government.

We wish to compliment Congressman O'Hara for his measure, H. R. 9351, which would authorize the Small Business Administration to make low-cost loans to small business organizations forced to relocate due to slum clearance or urban renewal undertakings.

Last year the Congress authorized the use of cooperative section 213 of FHA in the acquisition of properties purchased by the residents from the Government, thereby making it possible for the Government to get out of the housing business through the sale of projects to tenants. We would like to see this provision extended to allow residents in a project to purchase that project from private ownership if such an undertaking meets the approval of the FHA Commissioner. This would make it possible for people to achieve home ownership of housing built in earlier periods at lower cost.

The Federal National Mortgage Association, under the law, has a ceiling of $15,000 per dwelling unit on any projects whose mortgages it purchases. The Administration has recommended lifting his ceiling under certain conditions. We feel such a change should apply also to cooperative housing units of more than three bedrooms, where larger families are involved.

This would encourage adequate housing for larger families and would substitute the regular FHA ceiling on such mortgages for the arbitrary $15,000 ceiling now required by FNMA.

We believe this committee has before it legislation which, if adopted at this session, could begin the process of providing proper shelter for millions of our people. We commend you for the work you are undertaking, in this highly important field.

Mr. BROWN. Mr. Campbell, what do you think of the proposal in the Rains bill to make 50-year loans at 32 percent interest available to nonprofit organizations?

Mr. CAMPBELL. We feel that is a very commendable thing. Obviously, there is a very great need for housing for the elderly. This need will not be met if you have to build houses and sell them to people who have only a few years left. The formula used in the Rains bill, since it has worked so well in college housing, might very well be adapted to housing for the elderly.

Mr. BROWN. It is my understanding that Fannie May has very recently increased its price in sections 202 and 203 from 98 to 99 percent. Do you think this goes far enough?

Mr. CAMPBELL. It is a step in the right direction, but it does not meet the recommendation made by your subcommittee, that the mortgages be purchased at par. We feel that it was the intent of Congress that they should be purchased at par. We see no reason at all for any discount. One of the prime functions of a cooperative housing project is to eliminate speculation in the financing of homes. When you have to buy at a discount or a premium, depending on the market, this tends to put speculative financing into cooperative housing, and since the FNMA loans pay their own way, both through fees and insurance, we see no reasons why there should be any penalty at all.

Mr. BROWN. What do you think of the part of the Rains bill which has a new proposal as regards commitments, with respect to section 213 cooperatives. What do you think about this device?

Mr. CAMPBELL. Well, the primary reason for that device is to make it possible to get started earlier on construction than you can under the present formula.

I was involved in a project which we tried to get started along in 1951 and 1952. It took us about 18 months to get organized. We had 24 families involved and when the mortgage market got particularly tight in June 1953, it wasn't possible to ge construction funds any place for love or money. Our project had to fail, with $200 loss to each of the 24 families involved. I could stand it because I had sold a house and was holding the income I got from the house. That is, literally, in terms of transferring my ownership from one house to the other, but some of the families couldn't afford to lose $200,

The loss was due primarily to the long process of organization. This technique proposed now would make it possible for a builder to certify that he would sell to a cooperative on completion of the dwelling, would use the same specifications in building the homes, that is, larger rooms, more bedrooms, in the projects, and so forth. Then sell it at cost as certified to FHA, to the cooperative upon completion. We feel that is a satisfactory thing to do and that there are ample safeguards in the FHA setup to see that there would be no exploitation of that procedure, so we are in hearty accord with the proposal.

Mr. BROWN. I have heard of a proposal to permit a smaller FHA insurance premium for section 213 co-ops, for example, one-fourth of 1 percent, instead of the usual one-half of 1 percent. What justification would there be for that?

Mr. CAMPBELL. Our organization hasn't taken a position on that proposal yet so I am not at liberty to speak about it. I would think

if you want a personal judgment, that we should take a careful look at the experience and the costs involved in the section 213 loans. If the experience is such that FHA does not need the half percent premium, then the committee should give serious consideration to cutting that to a lower figure. Even before that is done, your subcommittee has pointed to a problem that is involved in that the fees that are charged to a cooperative project, filing for FHA mortgage insurance, turn out to be four times what the fees are for a 203 mortgage. Those probably ought to be brought in line before a study is made of the reduction of the insurance rate. Perhaps at a later time we can express a firm opinion or the reduction of the interest rate.

Mr. BROWN. Have you any questions, Mr. Talle?

Mr. TALLE. No, thank you.

Mr. BROWN. Mr. Patman?

Mr. PATMAN. Mr. Campbell, this cooperative part of your statement relates to the middle income groups as I understand it.

Mr. CAMPBELL. That is right.

Mr. PATMAN. Then you also advocate the provision for housing for elderly people as proposed by Mr. O'Hara of Illinois?

Mr. CAMPBELL. I think the provisions of his bill have been transferred into the Rains bill now. Is that right?

Mr. PATMAN. It is my understanding that it is in the Rains bill. Mr. CAMPBELL. I believe that is right.

Mr. PATMAN. Is it proposed in the housing for elderly people that they would have their social security benefits adjusted to take care of the rents or would that be a part of their social security benefits? Mr. CAMPBELL. I really don't know that. I haven't made a study of that at all.

Mr. PATMAN. Would the housing be available only for people on social security?

In other words, only for those who are in need or would it be available to people who are not necessarily in need to the extent that they are eligible for social security benefits?

Mr. CAMPBELL. As I recall it, there are two sections of this provision. One is housing for the elderly under the same formula as college housing. In addition, there is a provision in the public housing section for 10,000 units for the elderly. As I recall it, there is no "means test" in the section where direct loans are made, but there obviously would be in the section dealing with public housing for the elderly. The public housing units for the elderly are subsidized. The others are not subsidized.

Mr. PATMAN. I want to commend you, Mr. Campbell, for this very fine statement. It is an excellent statement. It discloses that you have given a lot of thought to this subject. In fact, having known you over a period of 15 or 20 years, I know you have given a lot of thought to this subject of housing and I value your opinions on the questions embodying housing as well as other things. You have made a contribution to this committee in its endeavor to try to pass a good housing bill.

I know your testimony will be helpful to all the members of the committee.

The questions that was raised in answer to the Chairman's question about these housing mortgages selling below par, I think is worthy

of a lot of consideration by this committee. Don't you think that has practically stopped the cooperative housing? Mr. CAMPBELL. That is right.

Mr. PATMAN. They are selling below par.

Mr. CAMPBELL. Up to the 27th of April, no use has been made at all of that $50 million FNMA authorization.

Mr. PATMAN. I know there are some people who are determined to raise interest rates in this country. I wish they would give consideration to the fact that every time they raise the interest rate, they unbalance every budget in America the Federal budget, States, counties, cities, political subdivisions, all corporations, cooperatives, partnerships, individuals, families, and everybody's budget is unbalanced by an increase in interest rates. I can't understand why this determination to keep on raising interest rates is done. It is putting an awful strain on the economy of this Nation. I can't understand it. I don't question the sincerity, honestry, or patriotism of anyone. I know it is a question on which honest people can properly differ, but it is so obvious that they are using the method of trying to control inflation, or what they claim to be a method to control inflation, that just raises interest rates.

There are so many other weapons they can use, so many other ways they can go about controlling inflation. It is not necessary to raise interest rates every time you want to control inflation, and I just am very sorry that they have let these housing mortgages go below par, or Government bonds either, for that matter, because they are guaranteed by the Government, they are the same as Government obligations, and instead of preventing speculation, it looks like speculation is being encouraged.

It is a terrible thing. It looks like we want to do the same thing we did in 1953 and 1954. You will recall in 1953 the bonds were forced down to about 92 and then, of course, a lot of people bought up bonds. Then they went right on back up in 1954 and they sold their bonds, and the profits of just a few of the commercial banks in this country engaging in speculating activities-that is, buying and selling government bonds, their profits ran from $39 million in 1953 to $416 million in 1954, or a profit of 966 percent in 1 year. Now those are official figures, and it looks like we are going through the same thing again, run bonds way down, then allow them to go up, buy them low, sell them high.

Now that is very fine for people in the know, you know, who are just thinking about their profits and not thinking about the country and not thinking about other folks. I guess it is all right from strictly a personal selfish standpoint, for the person who is in position to engage in speculative activities like that, but it is awfully hard on the country, hard on home builders.

You are also interested in farming, aren't you, Mr. Campbell? Mr. CAMPBELL. Yes, indeed.

Mr. PATMAN. Your cooperative has a lot of interest

Mr. CAMPBELL. The majority of our members are farmers.

Mr. PATMAN. Family-type farmers, aren't they?

Mr. CAMPBELL. All of thm.

Mr. PATMAN. Don't you consider interest rates about the most important factor in causing the farmers to take less for what they sell and pay more for what they buy than most anything else?

Mr. CAMPBELL. It makes a tremendous difference in the farmer's income. It makes a great difference in his living. You remember in the REA program what a difference it has made for the farmers to be able to borrow money at 3 percent and in some cases at 2 percent, to build electric lines, where they couldn't possibly have built those same lines and served themselves at 6 percent interest, for example.

Mr. PATMAN. I think it goes way beyond that. I asked Mr. Martin, Chairman of the Federal Reserve Board, about the farmers' interest rate, and he was very quick to point out that the farmers' rate generally was rather low in comparison to some other rates, but that is not the whole story the way I see it.

Now when a farmer produces something, and it moves to the market, we will say it moves through at least 10 hands-and I think that is the minimum. I believe you agree to that-from the farmers to the consumer, including the manufacturing, processing, packaging, transporting, and distribution systems. Now we will take for instance, an increase of one-half of 1 percent in the basic interest rate.

Well the farmer, when that product begins to move to the consumer, it is taken out of his price. He is unprotected. He just can't do a thing about it, and so it is every one of the 10 that takes out the increased interest rates clear on down to the consumer.

Let's take his price. That means the farmer gets less. Then on the other hand, when he buys a piece of machinery, everything from the iron ore, and the barge, and the blast furnace, the pig iron, the steel, and the fabricating and the transporting, and the distribution of the farm machinery right on down to the farmer, we will say there are just 10. That interest rate has been added on every time, the farmer being the only unorganized one and unprotected one.

Therefore, the farmer has had the interest rate taken out of what he has sold-he has had added onto what he buys, and he is considerably crippled, and have you noticed that since the interest rate was broken March 4, 1951, when the Open Market Committee defied the Government of the United States, and the President of the United States, went contrary to their agreement with the President, and broke the long-term interest rate of 22 percent, March 4, 1951, haven't you noticed that ever since then, the farmer has been going down, down, down, in what he sold, and that everything that he is buying has been going up, up, up?

Have you noticed that, Mr. Campbell?

Mr. CAMPBELL. I hadn't identified it with that date, but it certainly is true that the farmer's income is down about 30 percent since

1951.

Mr. PATMAN. That is right. I have watched it. This is not partisan in the sense that it is a matter between the Democrats or Republicans. It started under the Democrats, and it came on down to 1952 and has continued on down. It has continued ever since that time. Of course, I think the Republicans should have stopped it. They didn't. I think the Democrats should have stopped it. They didn't stop it. President Truman, to his credit, it can be said, he opposed it, and he had a promise out of the Open Market Committee it would not be done, but they violated that promise. They violated that promise, and ever since then they have been increasing interest rates and increasing interest rates, all the time, all under the guise and

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