Mr. ALESSANDRONI. Now I would like to emphasize a few amendments which concern the GI bill of rights.

There isn't any question that we find ourselves in a bit of anomalous position today because we are not asking, in a sense, for any extended benefits under this GI program, but, rather, for a continuation of the benefits which this Congress gave to the veterans and which has turned out to be the greatest mortgage loan program in the history of the country.

It has provided more individual homes for veterans than any other one effort on the part of the Congress to help the veteran in his housing dilemma; and we find that over the past year or so some of those benefits have been falling by the wayside. So we are not asking for anything additional today. We are not saying the interest rate ought to be less. We are merely saying this was provided for a million and a half veterans.

As a matter of fact, the Congress the Seventy-ninth Congress, I believe it was changed the time when you could make application for this from five years to 10 years, and its purpose is apparent on its face. They did not want to rush the younger veteran into buying a home if he was not ready for it, but they did want to make available to him, just as they did to many of his other comrades who were able to do it, those same benefits at a future date.

But we find today that unless something is done to continue those benefits, the million and a half would get a kind of benefit which would not be available to the many hundreds of thousands who might still apply, and we might ask ourselves why these loans have decreased. As in most situations, there is not just any one thing that is responsible for it. There are a number of factors responsible. You have to add them up before you come to a result.

First of all, the cost of housing, since these original loan benefits were passed, has increased. There is no question about that. Therefore, less veterans can pay the price today; therefore, less veterans would obviously make application.

There was a demand by lenders for a higher interest at this time. last summer, and at that time the Government, in its fiscal policy, gave certain kinds of support. It was their attempt, at that time, to increase the amount of interest which was being paid for money.

The 505 (a) loan, which has been one of the bugaboos to the veteran-it is a bugaboo because the Congress, on the one hand, says, "You can have a 4 percent loan if you can find a lender," and the same Congress, at the same time, has a permissive authority for insuring in another agency loans which are of a higher interest; so that we find that the Congress has created two windows at the bank, one at which the lender can get 41⁄2 percent, plus some additional fees, such as brokerage fees, and it pays him to make the higher loan so obviously he is going to desire to parcel his money out of that window. This becomes important because the same Congress has provided those competing avenues which act to the detriment of the veteran. As a matter of fact on this 505 (a) loan there is not only that half percent interest but there is one-half percent premium, so that it is really 5 percent, and, on the second mortgage feature, it generally represents four-fifths of the veterans' loan. In percentage, it probably amounts to a 10 percent increase in the amount of the loan he can obtain, so that even though we say there are available to the veteran loans at 4 percent, because it is an insurance program only, we agitate the lenders by giving him more favorable interest rates in another program to force the veteran to take the higher one.

As a matter of fact, the FHA program, which is primarily for production credit, issues its firm commitments to the builder and then tells the builder, in effect, that they want the insurance program in its final aspects, which means that when the veteran wants to buy a house he is told that in order to buy the house he has got to take it under FHA, and FHA will cost him 10 percent more.

That is not criticism of FHA. That is what they are permitted to do under the law and it is difficult, in a sense, to criticize the lender in that situation because if we offer him the alternative he obviously will take the one that pays him the most money.

Mr. RAINS. Do you think the provisions of this bill providing for a secondary market will correct that situation?

Mr. ALESSANDRONI. We think it will help; yes.

When the Congress passed that act, it envisaged that there would be no down payments under the GI loan. But they are requiring veterans to put down down payments, due to more conservative lending policies and the fact that the cost of housing has gone up, so that many veterans who are unable to pay the amortization costs just do not have the down payment to put up and so they do not make application for a GI loan.

I am using these as illustrations to show that it is not just any one factor has has resulted in a decline in GI loans.

About this time last summer the yields on investments that are alternative to this kind of a loan were going up. There were higher dividends, and higher interest payments were necessary to attract savings, and therefore the 4 percent loan became less attractive.

Then another policy of the Congress and the Housing and Home Finance Agency-the transition from FHA's 4 percent loans under title VI to the 41⁄2 percent loans under title II-made it more attractive to engage in title II, 41⁄2 percent lending, which, I repeat, costs the veteran 5 percent.

There was no adequate secondary market for almost 12 months during the period 1947 and 1948, but there was a market for this FHA. So there again you had the desire of lenders to participate in that and to forget about the veteran and his 4-percent loan.

Then last summer, under the FNMA, there was a secondary market provided, but it has not proved to be as adequate as would be necessary to agitate for these GI loans. But, in a sense, that picture has changed today. We find that savings are up. The Government's policy is just the opposite of what it was. There is no attempt now to drive up the interest rates. That policy of price support has been withdrawn.

Mr. PATMAN. The trend is downward.

Mr. ALESSANDRONI. That is correct, sir. The yields are now lower, so that those investments that are alternative to the GI loan are closer to the GI 4-percent loan. We are hoping that that is going to mean that more lenders are going to get into the 4-percent GI loan market, and, as a matter of fact, the reports by the Veterans' Administration show that from a low the loans have begun to increase.

Mr. BUCHANAN. Section 410 of this proposed bill eliminates the section 505 (a); does it not?

Mr. ALESSANDRONI. That is correct.

Mr. BUCHANAN. I might say, Mr. Chairman, that Mr. Alessandroni is a resident of the State of Pennsylvania, and I want to commend him very highly for his very determined and energetic stand in behalf of veterans' housing and in helping to shape the national policy of the American Legion in this regard, especially with regard to slum clearance and public housing.

Mr. ALESSANDRONI. Thank you.

Now, the provisions for an alternative direct loan market. There has been some criticism of the American Legion's attempt to say that when there is no GI loan available the Government ought to make that money available. Since the beginning of the GI homeloan program there have been sections of this country where you nevericould obtain a loan. There just weren't any banking facilities or lending facilities available to the veterans. So, on the one hand, the Congress said, "We will make it available," but through some lending group, and there was no lending group there.

The American Legion policy in this connection is certainly such that there is ample precedent for it. It is not world-shattering in its concept. The Farmers Home Administration has been doing this thing for some time. It seems to us that if we can do it under that situation, we ought to be able to do it under another.

The Home Owners' Loan Corporation, which was so successful, did that very thing. Also the Reconstruction Finance Corporation. We think you can use the same analogy in lending money to the veteran, and we point out that it is an alternative program. Where the funds are available there would be no need for the Government, through the Veterans' Administration, to make those direct loans.

I think we must keep one thing in mind-and I have referred to it briefly and that is the distinction between the basic thought underlying FHA and the basic thought underlying the Veterans' Administration as it concerns a home-loan program. FHA has been providing production credit, and, through their firm commitments, they have made available to thousands of builders the opportunity to build homes with little or no capital. That is all very fine. But when, by the same token, they saddle those builders with a promise that is predicated on their agreeing to give to FHA the final insurance, you are going to find that the money is going to go into the higher-interestrate loans to the detriment of the veteran, whereas the Veterans' Administration is concerned with consumer credit only. They want to give credit to the ultimate purchaser of the house, the ultimate owner. They do not have that direct concern with the builder, as is FHA's responsibility. And it has been in the program so long that there is no question but that is their basic, underlying desire—and a proper one.

That, Mr. Chairman and members of the committee, in addition to my formal statement, I think will illustrate the American Legion's ideas on this problem. We feel very strongly about this one particular thing under consideration by your committee today because the American Legion takes pride in the part it played in this GI home-loan program; and it has been so successful that it reminds me of the man who travels all over the world and finally comes back and finds out that the things necessary to his own happiness and good are right here at home.

We find that situation today. The Congress, in its attempts to help the veteran solve his problems, has considered hundreds of bills and ideas to assist him. We have here, in this simple tool which the Congress created some years ago, all that is necessary, if we make it applicable to today's times. It does not have to be radically changed. The instrument is there. It has worked. A million and a half veterans have been assisted, and it is just incredible that in such a short span of time so many could have been helped. All we need to do is be realistic and make it applicable to today's changed market conditions.

I am going to close by asking a not very erudite question, but in the common parlance it is easily understandable: "Who is kidding who?" I am going to answer part of it. There are some very respectable groups in this country whose main function today is to drive up the interest rate on the GI loans, and they are using all these various reasons as to why that is necessary. Well, of course if you make it 41⁄2 percent there is no reason why you should not make it 5. The American Legion believes that if it ever does go to 41⁄2 percent it is just the first step until the FHA raises theirs a half percent, which, if my memory serves me correctly, they can do by regulation without authority of the Congress. And I think the pressure would be so great that they would.

As a matter of fact, there are certain so-called veterans' groups which have been formed specifically to bring about an increase in this interest rate. And I say very frankly to the members of this committee: I am not so concerned that it would affect this immediate problem of housing to the veterans and raise their costs in the buying of a house, but what I am concerned about is that if there are what are apparent respectable groups in this country who would dare lower

themselves to the level that they are now beginning to use veterans front organizations in order to tell the Congress that if they vote for this or that bill they are helping the veteran, the Congress might very well, at this early stage, inquire very closely into those organizations who come here saying that they represent untold numbers of various veterans' organizations. If you added them all up, you would find that they would not have enough legitimate members to equal half a dozen Legion posts of the American Legion, out of the seventeen or eighteen thousand.

Mr. MULTER. Do you care to name any of those front organizations?

Mr. ALESSANDRONI. Yes, I can give you the name of one of them: The Veterans' Council of Altadena, Calif. And I hope they testify before this committee because they sent more literature to mayors and to Congressmen and to civic organizations throughout the country -I know of four pamphlets myself, on any one of which the postage alone is such that the American Legion would hesitate to spend that kind of money.

Mr. MULTER. Who is behind that organization?

Mr. ALESSANDRONI. As a lawyer, I do not care to say. I think it is known because the literature speaks for itself. Mr. PATMAN. If they appear we will ask them. Mr. ALESSANDRONI. I wish you would do that.

Mr. PATMAN. I have seen that literature. It is very expensively gotten up. The postage is very high, and it has been distributed, I am sure, to every member of the House and Senate. I was wondering myself how 1 American Legion post out of about 10,000 would take it upon itself to wage such a campaign.

Mr. ALESSANDRONI. It is not an American Legion post.

Mr. PATMAN. I mean a veterans' group.

Mr. ALESSANDRONI. As a matter of fact, the purpose outlined in its literature is merely for this program and not anything else.

Mr. RAINS. It is not really an American Legion post?

Mr. ALESSANDRONI. It has noting to do with the American Legion. Mr. PATMAN. Oh, no. It is a veterans' organization, apparently. Mr. ALESSANDRONI. I must say, however, with some degree of shame, as to a problem we have in our own family, the American Legion, that the department commander of California has indicated, on the one hand, that he is backing this, and on the other hand, in statements to us, that he is not.

He filed a statement the other day before the Senate Labor and Public Welfare Committee. I do not know what he said, but I assume that if the statement was introduced by a proponent of S. 166 that he is in favor of it.

I do not think I need to remind this committee, certainly not its chairman and Congressman Patman, who has long been on our side, that only one group in the American Legion speaks to the Congress for the American Legion, and that is the national legislative committee. No Legionnaire or department commander has a right to come in here except under his own name. The department commander of California can do that, but he cannot speak for the American Legion, which can only speak by convention mandate--and this is a convention mandate.