Mr. MORGAN. There are two reasons why we suggest that. One is because those figures are not realistic and secondly because we do not believe that there is any necessity for going to 95 percent and for putting in this new section, which is covered at the middle of page 4 of my statement.

Mr. FOLGER. In the next paragraph of your statement-and I ask this in connection with your observation that so far as public housing is concerned, you think that should be limited to the very needy, those who are physically handicapped or in a comparable position

Mr. MORGAN. That is correct.

Mr. FOLGER. But in connection with this same insurance feature, you say

if the permissible insurance ceilings provided for in title II amendments are increased as we have just suggested, we believe that there will be no need for the inclusion in this bill of the amendment to section 203 (b) which would provide a special $6,000 90- or 95-percent mortgage with a maturity of 30 years then the observation that certainly a special $6,000 category will not build many homes. Now, whether you take it in single homes or multiple dwellings, these people in the very lowest income, and these handicapped people, could not occupy and would not be expected to occupy a home that costs $11,000 or $12,000. What are you going to do with them if you cut out the $6,000 provision?

Mr. MORGAN. The $6,000 provision, sir, we feel is unsound in that it also includes a 95 percent of value, and is for a 30-year term. Those two things are unsound in the resident-mortgage business. It is too long a time, and it is too high a proportion. Ninety-five percent is too high, and unless you are very careful, it may well be 105 percent. Mr. FOLGER. I realize that.

Mr. MORGAN. It is so close that we cannot measure it, sir.

Mr. FOLGER. Is there an indication there that you cannot really construct the $6,000 homes?

Mr. MORGAN. No: I think that has nothing to do with whether or not you can construct. It merely is that the $6,000 figure, with a 95 percent and the 30-year-maturity provision, really does not make sense to us. Mr. TALLE. Mr. Chairman.

The CHAIRMAN. Mr. Talle.

Mr. TALLE. I would like to refer to the last page of your statement. Mr. GAMBLE. He has not read it yet, Mr. Talle. He had just gotten down to his conclusions when the questioning started.

Mr. MORGAN. Perhaps I could answer your question by reading it and then answering your question.

Mr. TALLE. Perhaps I can quote the sentence to which I refer:

It will be no favor to those who need homes if this measure causes an increase in the price of the homes they seek.

I wanted to give my approval to that statement. As a matter of fact, materials are short, and labor is short. Your statement, then, as I read it, means that we should not do anything that would bring about an increase in the cost of homes?

Mr. MORGAN. That is correct, and it looks as though they are beginning to flatten out in price, and we hope you will not do something that will start them on the upward spiral again.

Mr. TALLE. I would like to see the cost curve bend downward. Thank you very much.

The CHAIRMAN. You may continue with your conclusions. Mr. MORGAN. We believe that the private financing provisions of the bill, in its present form, should result in an increase in the already high level of housing construction. We further believe that, if our amendments are adopted, this increase may be much more substantial.

One word of caution should, however, perhaps be uttered. In our consideration of this measure, we have been mindful of the possibilities of an increase in inflationary pressures through the operation of its provisions. When the bill first came up for consideration, we considered this factor of paramount importance due to the then-existing scarcity of labor and materials. At that time, we thought that any substantial increase in the financing available for housing, either through private or public channels, could only increase the number of those competing for the limited supply of labor and materials. It is now our judgment that the supply of labor and materials has increased sufficiently so that the bill may be enacted without encountering the substantial dangers that formerly existed. It nevertheless remains true that the measure must be carefully administered in order to minimize these dangers. It will be no favor to those who need homes if this measure causes an increase in the price of the homes they seek.

In summary, we are mindful of the acute need for homes on the part of many of our people; we are aware of the safeguards that are contained in the bill to guard against inflation and overspending; and, finally, we believe that those to whom its administration will be assigned are conservative, prudent, and capable administrators. It is from this point of view that we are submitting the foregoing recommendations in the hope that the bill, with our suggested amendments, will produce more of the housing that the country needs so badly today.

The CHAIRMAN. Are there further questions of Mr. Morgan?
Mr. GAMBLE. Mr. Chairman.

The CHAIRMAN. Mr. Gamble.

Mr. GAMBLE. Mr. Morgan, you told me the other evening that you thought one city in Massachusetts had done quite a job in rehabilitating itself. What place was that?

Mr. MORGAN. The city of Newton, Mass., has acted under a measure passed by our legislature 2 years ago, by which they have bought and are putting in streets, sewers, and services, and they are arranging with a contractor to build a basic unit five-room house at $7,800 above the land and to sell it to the veteran at $7,800 above the cost of land. When that job is done-some 415 houses-the city of Newton will have taken care of all the veterans who have indicated a desire for houses, but the houses will again be on the tax roll, and the land they are on, and the city will not have incurred a permanent tax-exemption liability, so to speak.

Now, gentlemen, that seems to me and that is accomplished through capital grant-to be the approach to a great deal of this problem, and not everlasting subsidy, which will run for 40 years, which builds up every year, and which causes the very troubles that Representative Smith spoke about.

Mr. GAMBLE. We had quite a little testimony, as you know, when the Housing Committee was going around, in connection with making a grant and getting it through within the first year, deciding how much

to spend along the line of the highway bill, with a matching proposition, with the Federal Government allocating X dollars to New York City, then in New York State allocating X dollars to New York City, with both putting up a part of the money.

Mr. MORGAN. One of the best towns in our State decided that there was a shortage of housing in the town, of houses for veterans. They followed the situation carefully, polled it carefully-not by asking everybody how much less they wanted to pay than they were now paying-but by asking and finding out those who were actually doubled up, built the houses and took its loss. Capital grant personified.

Mr. MULTER. I want to endorse all that my colleague, Mr. Boggs. said, and to add that in my opinion if more so-called capitalists attempted to attack our economic ills from the same viewpoint as you have, we would have less to fear from possible socialism and communism in this country.

With reference to your comment on yield insurance, I suggest that either you or your counsel reread pages 40 to 59 of the bill with special attention to page 51, and I am sure you will want to revise your remarks and I am sure the committee will give you unanimous consent to revise your remarks in that respect if you desire.

Mr. MORGAN. Perhaps we misunderstood it, but I would like to read just one clause which I think bears on the situation. On page 45, lines 15, 16, and 17:

But this is the amount of such difference as determined by the Administrator but not exceeding in any event an amount equal to the aggregate of the minimum annual amortiaztion charge and the insured annual return.

As a matter of fact, the bill in many places contemplates an operating loss. If it contemplated an operating loss, then they would cer tainly have included, in the possibilities of reimbursement, the taking care of that operating loss. This is a fundamental part of that bill. You are perfectly right.

Mr. MULTER. Yes, sir; you must keep clear in your mind, when you are speaking about yield insurance, the protection of the investment, and, of course, making up a loss that may be sustained by the project.

Mr. MORGAN. That is correct.

Mr. MULTER. If there is a loss this year which must be made up in the over-all picture, there still must be enough in the fund to make it good. When you get to page 51, you find that there is an absolute guaranty by the United States against any loss, by the investor.

Mr. MORGAN. Under no circumstances is there a complete guaranty. Mr. MULTER. I was inaccurate when I used the words "complete guaranty."

Mr. MORGAN. There is no complete guaranty in any case. The individual may turn the property over to the Government when his loss has accumulated to so much, and the Administrator may ask to have that turned over when it has accumulated to a different figure.

Mr. MULTER. And then he gets back principal and interest?
Mr. MORGAN. If he asks for it.

Mr. MULTER. Surely as long as the investment is paying, he is not going to turn it back. When it begins to show a loss, he has the option of turning it back calling upon the Government to make good its guaranty.

Mr. MORGAN. Well, I am glad you called it to my attention and 1 would like the privilege of changing my remarks if I am wrong, but it is reasonably clear to me that so far, at least, that is the case.

Mr. MULTER. I think we are also in agreement that people who can afford to pay rents over the maximum rents of low-cost housing should not be there, and I think you indicated that there should be something written into the law tending to get these people out of these low-rent houses?

Mr. MORGAN. That is right.

Mr. MULTER. Up to the present time, at least in New York State, the courts have refused to put out those higher-income tenants, because the court held that they were covered by our rent-control laws.

You will find on page 78 of this bill, the amendment to section 601 (b) taking care of that. So that if this is enacted into law, the courts can then evict those higher-income tenants and make room for the low-income tenants, as intended by the bill. That is on page 78 of the bill.

Now, I think you said you spent some time in Europe?

Mr. MORGAN. That is right.

Mr. MULTER. Do you know anything about the low-cost housing projects in Holland, Sweden, or Denmark?

Mr. MORGAN. I am not sufficiently vested on it to speak about it. Mr. MULTER. I do not think anybody would deny that Holland had low-cost housing since 1901; Denmark, since 1911; and Sweden, since 1922. I point to those three countries as countries which are not being socialized or communized by low-cost housing.

I think that situation also prevails in Massachusetts. Let me quote from a letter I received today from the Honorable William O'Dwyer, mayor of the city of New York. He says in part:

From reports, I ame afraid that the bill may be lost in the last-minute ruslr. I understand, too, that there is danger that the bill may not even be reported out of the House Banking and Currency Committee. I need not, in this letter, repeat all the compelling reasons I have so often stated heretofore as to the necessity for the enactment of the Taft-Ellender-Wagner bill. I do know that we still desperately need more housing in the city of New York, particularly low-cost housing, which does not compete with private construction. To meet this crying need, we must have Federal help through the Taft-Ellender-Wagner bill, supplemented by what the State and city have done and are doing now.

Do you not agree with that last statement?

Mr. MORGAN. I really do not know the New York City picture well enough to know.

Mr. MULTER. Does your State not need Federal help in addition to what it is trying to do itself on this low-cost housing?

Mr. MORGAN. I am a great believer in the localities doing it for themselves. I honestly think that in encouraging Mr. O'Dwyer and other people to ask you for help you are making a lot of trouble for yourself.

Mr. MULTER. Do you think your State could get along without any Federal funds?

Mr. MORGAN. We would like to ask for that just as much as any other State, but I honestly think it is the wrong method.

Mr. MULTER. Even though the State and city would do the work and the Federal Government would have no control of the construction, you still want no Federal funds to help?

Mr. MORGAN. You are talking about a general situation. I think it is a little unfortunate that we are locally and Statewise being asked and led to think that we can get money in Washington for anything.

Doctors, medicine, education, highways, harbors, and now what is the last one-to build our houses for us. The local conclusion is, one. two, three houses, food, clothing, and what else?

Mr. BUCHANNAN. Did the doctors ask for money?

Mr. MULTER. Has your State extended itself to its full financial ability to create more low-cost housing?

Mr. MORGAN. It is clear to me that no State has extended itself to its full ability to do so.

Mr. MULTER. We in New York think we have.

Mr. MORGAN. It is clear to me that even New York has not. That I am sure of.

Mr. MULTER. You know we are borrowing money to do it now?
Mr. MORGAN. I know.

Mr. GAMBLE. If you have not extended yourself thoroughly, the Saltonstall amendment will certainly bail you out.

Mr. TALLE. I should like to ask you, Mr. Morgan, how your bank got its name?

Mr. MORGAN. Because it was founded to take small deposits, and we were agreeable to accepting a deposit as small as 5 cents at a time. Mr. TALLE. That is why it came to be called the Boston Five Cent Savings Bank?

Mr. MORGAN. That is right; the average depositor has just about a thousand dollars in our bank. For years it has been less than that. Mr. TALLE. In what year was it founded?

Mr. MORGAN. 1854.

Mr. TALLE. In those days, a nickel was worth 5 cents, was it not? It was the era of the good 5-cent cigar.

Mr. MORGAN. I think so.

Mr. TALLE. I have always been very much interested in mutual savings banks. Did you say that the average deposit in your bank is about a thousand dollars?

Mr. MORGAN. Yes, sir.

Mr. TALLE. You have no stockholders?

Mr. MORGAN. We have no stockholders. We work purely for the depositor himself.

Mr. TALLE. Do you have any depositors who are special in the sense of being preferred as to profits?

Mr. MORGAN. No, sir; we declare one rate on every penny that is on deposit in the bank.

Mr. TALLE. Your banks have a very fine record.

Mr. MORGAN. Thank you, sir.

The CHAIRMAN. Thank you, Mr. Morgan.

Mr. GAMBLE. So does Mr. Morgan also have a very fine record. Mr. TALLE. Yes, indeed.

Mr. MORGAN. Thank you very much.

The CHAIRMAN. Thank you, Mr. Morgan.

We will now hear from Mr. Brooks. Mr. Brooks is executive secre

tary of the Five Boro Taxpayers' Defense of New York City.