is easy to pay 100-cent debts with 50-cent dollars, but the reverse presents problems.

The farmer has become a capitalist. He has excellent reserves which he is holding awaiting future developments and the presentation of favorable investment opportunities. And it might be said in passing that this condition is not confined to the landowner. Tenants and sharecroppers have shared this prosperity. In my own local experience I know that many renting farmers have excellent bank balances and substantial accumulations of Government bonds. Many of them have bought and paid for small farms and property.

With the return of more normal construction costs the farmer will begin to relax his purse strings and make improvements that will add to living comforts for the members of his family. He learned a lesson in the roaring thirties and will not be in a hurry to get back into debt now. He has learned to be self-reliant and independent and those of us who live in close relationship with him want him to remain of that frame of mind.

Through legislation you have provided a program of soil conservation. The operation of that land-building plan has been a marvelous success. In it you are helping the farmer in the right place. By conservation he can build up a reserve of soil, just as he has been building up a reserve of money. That reserve of soil enables him to produce better crops and earn a larger income. Through succeeding years, by careful farming, he will be in a strong position to meet any unfavorable current or economic changes. How much better it is to lend a helping hand through an avenue where the farmer builds up his own resources, depends on his own abilities, and gives expression to his ambitions in the form of progressive accomplishments.

The studies of those who are sponsoring S. 1592 have undoubtedly developed a need for better housing and living conditions in what are known as one-crop areas, where tenant or sharecropping prevails. Improvement of housing is only one step and provides opportunity for better living conditions, but does not furnish that earning power so necessary to make possible living conditions in keeping with better housing conditions. In those farming areas where diversified farming prevails, the tenant or sharecropper is a participant in the larger and more stable income, and it is possible for him to improve his environment out of his own resources or by choice of more suitable and satisfactory available accommodations. Something might also be said about the manner in which a great many sharecroppers or tenants, through native ability, thrift, and close application, have changed their status from tenancy to landownership and then on into a position of successful operations with all attendant improvements in housing and living conditions. In the last analysis the premium must be put on ability. The educational opportunities afforded through the extension divisions of the various State colleges, and the teaching of vocational agriculture, along with the activities of the county agents and the home demonstration agents, have made substantial and lasting contributions to improvement in rural living conditions. That is help and guidance in the right direction because it is of a permanent character. It helps those who wish to help themselves.

The most desirable objective to be sought at this time is that of keeping agriculture financially sound. That is one of the chief pillars of the program of the Agricultural Commission of the American Bankers Association, of which I am now serving as chairman. Funds which are calculated to encourage inflation in land prices, such as we experienced about 25 years ago, with consequences with which we are all familiar, should be avoided. Whenever and wherever you and we can hold the line against inflated land values we should do so. One such means is that of discouraging the creation of debts now, to be repaid at some future and uncertain time. Better that we make our contribution to ways and means by which the farmer of every strata can improve his earning ability and out of his own accomplishments move up step by step into unincumbered comforts and conveniences for himself and family where he enjoys the consciousness and pride of well rewarded effort.

Excessive credit can be much more harmful than insufficient credit. It is my opinion that the credit provided in section 802 of title 8 of S. 1592 would serve to defeat rather than teach the objectives sought and might in many instances be unfair to the borrower.

STATEMENT OF JOHN N. THOMSON, CASHIER OF THE BANK OF CENTERVILLE, CENTERVILLE, S. DAK.

(Delivered to the United States Senate Banking and Currency Committee on December 5, 1945, with respect to Senate bill 1592, the General Housing Act of 1945. Mr. Thomson is chairman of the subcommittee on agricultural credit of the Federal legislative committee of the American Bankers Association) My name is John N. Thomson. I am cashier of the Bank of Centerville, Centerville, S. Dak., and chairman of the subcommittee on agricultural credit of the Federal legislative committee of the American Bankers Associations, whose membership includes 11,000 country banks. I believe the country banks of this Nation are very interested in the general welfare, the health, and the living standards of all farmers and are willing and anxious to assist and help them to obtain not only an adequate and larger share of the income of the country, but to live and raise their families in decent, safe, and sanitary housing which is stated to be the intent and purposes of S. 1592 and more particularly title VIII of the proposed act.

The American Bankers Association through its agricultural commission has for some years, and expects to continue in the future, to lend every effort toward increasing the productivity of the farm and the creation of reserves, both in cash and in soil, so that the economic condition of the farmer will not only be on a level with that of the other people of the country, but will tend to give the farmer a way of life that is economically independent such as he has been taught to believe is the goal of his well directed efforts.

Studies have been made which show that the farmer is conscious of the need of improving his farm and his living and housing conditions, but that he has been compelled to defer his program because of his inability to secure material and labor. He has in cash and Government bonds more than $16,000,000,000 that he can use at least in part toward improving his housing conditions.

We believe that when conditions become more stabilized and the farmer thinks that he will secure a dollar's worth of value for a dollar expended that he will make improvements in his housing, and continue to move toward a higher standard of living by utilizing these cash reserves which he has been accumulating plus such credit as he may find necessary. In those cases where some credit may be necessary there are already available to the farmer private and cooperative credit sources in adequate quantity and at reasonable rates. There is no need or necessity for Government financing such as provided in this bill.

We have consistently stated our belief that the Government should not directly engage in the money-lending business in competition with its private citizens and chartered institutions. We have recognized that there may be emergency circumstances such as war or disaster where it might be desirable for the Government to make direct loans or grants so as to socialize or spread the risk or loss over all the taxpayers. We do not, however, think that the need for better farm homes is such an emergency or disaster as to require either governmental loans or grants as are proposed by this act.

We also believe that whenever an emergency exists such as to require direct governmental loans or grants, then these loans or grants should be so restricted as to limit them only to those farm people who are not able to obtain credit from private sources at reasonable terms. If such restrictions are not clearly set forth then we might expect people who do not need such help to take advantage of the easy terms offered by the bill. This would tend to undermine sound credit sources to farmers, including their own cooperative credit system. Section 802 of this act limits loans "only to the owners of farms who cannot elsewhere receive the necessary credit on terms comparable to the terms provided herein."

We do not believe that such a purported restriction is really a restriction at all. In fact, sound, successful farmers eligible to secure necessary credit from private sources at reasonable terms will be tempted to take advantage of the special terms contemplated in section 802.

Section 808 appears to attempt to furnish to low-income families in rural areas not able to obtain the credit provided by section 802 with assistance comparable to that furnished to families in urban areas under the United States Housing Act of 1937.

We do not believe that rural housing improvements can be achieved by the employment of urban slum clearance methods. We believe that a much sounder approach to the problem would be one of helping farmers to increase the productivity of their lands so as to raise their level of income and by that means increase their ability to improve their housing facilities and raise their standards of living.

The CHAIRMAN. Mr. Mahan.

STATEMENT OF L. E. MAHAN, MORTGAGE BANKERS ASSOCIATION OF AMERICA

The CHAIRMAN. Mr. Mahan, you represent the Mortgage Bankers Association of America?

Mr. MAHAN. That is correct. Yes, sir.

The CHAIRMAN. That is quite an organization.

Mr. MAHAN. Mr. Chairman, and members of the committee: My name is L. E. Mahan. I am immediate past president of the Mortgage Bankers Association of America. I have here today with me Mr. Dean R. Hill, president of the Hill Mortgage Corp., of Buffalo, N. Y. Mr. Milton T. MacDonald, vice president of the Trust Co. of New Jersey, of Jersey City, N. J., was to be here, but is not now present. He may come in later. We represent the Mortgage Bankers Association of America.

The membership of our association consists of life insurance companies, commercial banks and trust companies, mutual savings banks, fraternal organizations, mortgage companies, title companies, and mortgage loan correspondents. It represents, as nearly as we can determine, excluding investment funds in the hands of individuals, something in excess of 70 percent of the available mortgage-lending funds of the country. The members are well diversified, both as to type of lender and geographically, and are direct investors in both city and farm loans.

The general housing bill of 1945 is far reaching in its scope and touches on many phases of our economy. We find it very difficult to make a brief report on so broad and extensive a subject."

It would seem to us that the bill has been framed without regard to, or proper analysis of, the primary or secondary markets for mortgage loans as an investment. The flow of money must be encouraged to a given industry if that industry is to prosper. If this bill retards the flow of money to the housing industry and home ownership, then it will defeat the very purpose for which it is intended.

We recognize how important the provisions of this bill are to the Nation's urgent housing program and to all of those engaged in the financing of it. We sincerely urge that the provisions of the bill be most carefully considered by members of the Congress, by the Government departments which it affects, and by those groups representing private enterprise, builders, materialmen, finance, and labor, before it may be enacted into law. We particularly urge that legislation which so seriously affects our whole economy not be hastily approved. We recognize that even among the membership of the Mortgage Bankers Association of America there may be some variance of opinion on features of the bill, but in the main, we shall attempt here to convey to you what we consider represents a cross section of the thinking of our membership.

POLICY PREAMBLE

We commend and are in sympathy with the policies set forth in the preamble of the bill and any arguments contained in this report are made with the view of being helpful to accomplishing the purposes stated therein.

Every industrious American should be entitled to a decent and happy home, and any means that may help or assist him to accomplish this should be encouraged.

TITLE I. NATIONAL HOUSING AGENCY

On April 3, 1945, we canvassed our entire membership on a declaration of policy and asked for a yes or no vote on the following:

The Mortgage Bankers Association of America approves legislation directing that the Federal Housing Administration and the Federal Home Loan Bank Administration be restored to the Federal Loan Agency.

There were only three dissenting votes. I can, therefore, definitely state that it is practically the unanimous opinion of the members of our association that the Federal Housing Administration and the Federal Home Loan Bank Administration be restored to the Federal Loan Agency, and it is the concensus of opinion that those provisions of Executive Order 9070 of February 24, 1942, wherein these agencies are placed under the National Housing Agency shall cease to be effective.

Our conclusions are predicated on the fact that we believe all lending or insuring agencies affecting housing or any given industry should be placed under a financial agency and should not be distributed throughout the Government agencies. The arguments supporting this opinion were thoroughly considered by the Congress and the President with respect to removing the Federal Loan Agency from the Department of Commerce, and restoring it to its original status earlier in the year.

The National Housing Agency is purely a wartime expediency. Private enterprise and the industrial forces of our country have cooperated with it to the fullest extent in carrying on its wartime functions. These groups in the main, are now opposed to a perpetuation of this Agency through a peacetime economy, and urge that either through act of Congress or by Executive order, the functions of the National Housing Agency be terminated.

TITLE II. RESEARCH, MARKET ANALYSIS, AND LOCAL PLANNING

We recognize the importance of a more complete study of the housing needs of the country and subscribe to the idea that the Government can be of great assistance to private enterprise in the development of studies and published reports relating to building materials, etc., but we believe that departments of government capable of making such studies, are already established, and we would recommend that this research be combined with other types of research now being carried on in the Department of Commerce through the Bureau of Standards. We would thoroughly recommend that with respect to rural housing, the Department of Commerce should work very closely

with the Department of Agriculture and use the State agricultural departments and colleges.

The Department of Commerce, through the Bureau of Census has already demonstrated its ability as a fact-finding organization. The figures and data obtained and analyzed in the census reports have the respect of the entire industry, as well as the consumers.

It must also be considered that the Department of Commerce has already, with the approval of Congress, established a Construction Division which is assembling valuable data. and statistical studies touching on the construction industry, including housing. The Department of Commerce has facilities in the field, of spot checking the data from time to time. These facilities may be enlarged to serve all the objectives anticipated in the provisions of title II of the act. We are also familiar with large scale research now being undertaken by private enterprise. This will be a further aid to the housing industry.

INTRODUCTION TO STATEMENT OF TITLES III, IV, V, AND VI

Our approach to the analysis of the provisions of titles III, IV, V, and VI is best explained by a section taken from my report to the membership and presented to it at the annual meeting on November 15, 1945, from which I quote:

There is a serious housing shortage throughout the entire Nation and mortgage funds are required for industrial and commercial expansion. The mortgage banker has a grave responsibility and must give every assistance possible, and the best of his talents, to avoid an inflationary trend. We have maintained that this can better be done at the lending level than at the price level and this is what the Director of the Office of War Mobilization and Reconversion meant at point 4 of his six point program, which reads as follows, and I quote: "The Federal credit agencies will cooperate to discourage excessive and unsound lending on mortgages and enlist voluntary cooperation of private lenders to minimize the danger of inflated prices due to excessive demand."

To those of us who have conducted a mortgage business during World War I and through the boom and depression which followed there is recognized no more serious hazard in our business than overlending. When once started, it grows in our economic system like a cancer in the human body, and can end only in ruining the fine tradition of the mortgage as a sound investment. Legislation, price control, and all of the regulatory measures are of little value, if we, ourselves, do not watch our day to day transactions.

The trend toward overlending is manifesting itself in every area and through many lending agencies. This charge applies to many members of our association as well as those that are not. The pressure to get the funds employed is great, and the same specious arguments that we heard 25 years ago are being used to justify our acts today.

We would like to draw the committee's attention to the following schedule showing the total mortgage debt in the United States as of December 31, 1944, which shows that the Savings and Loan Associations held approximately $4,750,000,000 of mortgages compared to the total mortgage debt of $31,656,000,000. I present that table of figures because I did not find it in any other testimony, and I think it will give to the committee some figures which were compiled by our association to show the distribution of mortgage money as we find it today. That means that the total mortgage debt held by the various groups classified here is about $31,000,000,000. Percentageise, the amount of mortgages held by the Savings and Loan Assotions is approximately 14 percent of the total, or about one-seventh.