Now, Mr. Chairman, that is the extent of the statement which I had to make, although Mr. Gove and I will be glad to answer any questions. And I would like to ask Mr. Gove with your permission and that of the committee, to make an additional statement, to give you an idea of what one company which has been the leader in the building of low cost rental housing has been able to do. The CHAIRMAN. Thank you. Mr. BESTOR. Thank you. (The testimony of Mr. Lewis W. Douglas is as follows:) TESTIMONY OF LEWIS W. DOUGLAS, PRESIDENT OF THE MUTUAL LIFE INSURANCE Co., OF NEW YORK, BEFORE THE SENATE Banking and CURRENCY COMMITTEE ON DECEMBER 17, 1945, ON THE WAGNER-ELLENDER-TAFT BILL (S. 1592) [Printed by the Life Insurance Investment Research Committee, a joint undertaking of the American Life Convention and the Life Insurance Association of America] FOREWORD Mr. Lewis W. Douglas, president of the Mutual Life Insurance Co. of New York recently appeared at the hearing of the Senate Banking and Currency Committee, at the invitation of the Life Insurance Investment Research Committee, on the Wagner-Ellender-Taft bill. This bill proposes among its other provisions a substantial reduction in the rate of interest on certain types of mortgage loans as a means of stimulating new building. Mr. Douglas took this occasion to explain to the Senate committee the significance of the interest rate to the 71,000,000 policyholders, the 27,000,000 American families who have acquired security through taking out life insurance. He showed how the precipitate fall in the rate of interest during the course of the last 14 years had increased enormously the cost of life insurance. He pointed out (1) that the bill was deficient in that it aggravated the consequences of the declining rate of interest to this large segment of the American public and, (2) that it was completely indifferent to the fundamental problem of housing, namely, the cost of land, of construction, of materials, and the unit cost of labor. In preparing and presenting this testimony, Mr. Douglas has performed a real service in the best interests of policyholders and the public. Because of the great importance of the questions involved, the Life Insurance Investment Re search Committee has obtained Mr. Douglas' permission to publish his testimony for the information of interested persons, governmental agencies and financial institutions. Mr. Douglas has asked me to thank all those who contributed so generously of time and material in the gathering of the data. JOHN S. SINCLAIR, Chairman, Life Insurance Investment Research Committee. I. HOUSING, INTEREST RATES, AND THE COST OF LIFE INSURANCE May I express my gratitude to the committee for inviting me to appear before it and to discuss, candidly and frankly, certain phases of the housing legislation which it is now considering. It would require the most ingenious man to exaggerate the meaning of housing-its immediate and future importance to the American people. The immediate significance is, I think, now unmistakable. The returning service men and women and their families, the war workers migrating to places where peacetime factories are now beginning to hum or will begin to hum, face a grave shortage of housing facilities. Unless we deal promptly with this critical situation, we will, I fear, experience, in some measure at least, mounting prices of homes, rising rentals, and widespread inconvenience if not privation. One of the alternatives to rising rent prices is to clothe the Government with authority arbitrarily to suppress prices and hold down rents. But this will not cure the deficiency, in housing accommodations. It will not provide homes that do not exist. Housing's importance Stretching out over the future years, housing, in dramatic fashion, is of equal importance to the American people. There is, I believe, a relationship between quality of the quarters in which men and women live and the sense of ponsibility they, as citizens, possess. It is certain that clean and sanitary housing facilities and a clean and wholene environment tend by themselves, though they are not by any manner of pans the only factors, to reduce the amount of disease and the volume of crime, d to improve health, and to create a more wholesome life. During the last quarter of the last century, one of the important events in r economic history which resulted in a high level of industrial activity, accomnied on the whole by full employment, was the construction of the railroad stems that were to span the continent. During the 1920's, the development of e automobile industry and the expansion of the electrical generating and disibuting systems played a similar role. It is not an exaggeration to say that housing, if undertaken in an appropriate conomic environment and under a legislative mantle of encouragement, can play he same role during the next decade, perhaps even during the next quarter of century, that the construction of the railroads, the development of the autoobile industry, and the expansion of the public utilities have played in the past. Ience, any legislation which deals with the problem of housing is of pressing ignificance, now and in the future. ife insurance and housing Life-insurance companies, as you know, are deeply concerned with the general health of the people of the country. They realize the relationship between living conditions and disease, or the absence of disease. They realize the part that housing, if undertaken in an appropriate environment, can play in providing, or going far toward providing, full employment and full production during the coming year, and they realize that housing has been throughout the years, and should continue to be, in one form or another, a very appropriate and legitimate outlet for the investment of the funds which have been placed in their hands as custodians by 60,000,000 to 70,000,000 policyholders. I do not want to bore you with a carefully documented statement which would demonstrate beyond doubt that life insurance companies have in the past looked upon housing as an appropriate and prudent field for the investment of funds. Perhaps, however, you will be interested to know that at the end of last year the insurance companies held approximately one-third of all the FHA mortgages insured under title II, section 203. This amounted to about $1,000,000,000. They held nonfarm-mortgage loans in the total amount of about $5,600,000,000. Many millions were secured by single-family residences which were not insured under the FHA. Many millions were on apartment houses of various kinds. The sum of all the nonfarm mortgages represented about 14 percent of all the funds which the life insurance companies held in custody for their policyholders, and accounted for over 18 percent of all the non-farm-mortgage debt. EXHIBIT I.-Proportion of total families paying life insurance premiums, 1935-36. |