The person giving the testimony said he did not believe a comfortable and decent home could be built for less than $8,000. Mr. WILLIAMS. I now have under construction 23 houses, and most of them are six-room brick-veneer construction, including heater, hot water system, landscaping, lot, and everything included. They run in price from $6,000 to $7,000. Senator CONNALLY. Are you in the real estate business as well as in the loan business? Mr. WILLIAMS. No, sir. Senator CONNALLY. You said you had under construction 23 houses. What are you going to do with them? You cannot live in all of them. Mr. WILLIAMS. I meant that they had been contracted for through our office. I am not in the real-estate business, but the veteran buys a lot and we get the house built on it for him. Senator CONNALLY. Does that $6,000 or $7,000 include the lot? Senator LUCAS. Where were those homes built? Mr. WILLIAMS. In Columbia, S. C. Senator JOHNSON. Are they located in a good section? Mr. WILLIAMS. They are located in the very best section in town for that type of building. It is not in the society part of the town, but all city conveniences are available and furnished. Senator MILLIKIN. With sewerage? Mr. WILLIAMS. We have some homes constructed with septic tanks which were put in under the supervision of the State Board of Health. Senator MILLIKIN. Are the streets paved? Mr. WILLIAMS. No. They are graded but not paved. Senator MILLIKIN. They will have to be paved later on, will they not? Mr. WILLIAMS. Many of the sections down in that part of the country never do have paving. Some of the best residential sections in the city of Columbia are not paved. The surface is a good hard sand surface. The houses to which I have referred are available for a great deal less money than they would be if they had already been built. In the event that the proposed amendment is adopted, the provisions in section 500 (a), title III, of the original act should by all means be included as well as the provisions of section 505 (a), the inclusion of which would be beneficial to the veteran, the lender, and the Administration. Contrary to apparent erroneous ideas of the number of veterans who may seek loans for homes or business, it is found by actual experience that a very small percentage of the veterans desire loans at this time, and if anyone has the idea that these young men and young women who have been in the service are not wide awake to the fact that values are inflated, they are mistaken, for the most of them are well posted and they know that a home that sold for $5,000 before the war is not worth $8,000, or a farm that sold for $50 an acre is not worth $100 an acre, and they also know that it is the part of wisdom for them to have a careful appraisal by a competent appraiser other than the lender or the seller. Of course, out of the large number of veterans there would be many who, in their desperation for homes or farms, would jump to conclusions and invest unwisely and in the course of 5 years, more or less, they might find that they had been injured rather than helped by the GI bill of rights, and every intelligent person knows that to saddle a debt on veterans on the basis of inflated values will result in grief, disappointment, and, in many cases, bankruptcy. Senator MILLIKIN. Let us take for example one of the houses which you have described, that you are building or having built. Could that same house, on the same lot, have been completed for more or less money prior to the war than at the present time? What could it have been completed for prior to the war? Mr. WILLIAMS. As near as we can estimate it, the difference is between 30 and 40 percent, which is represented in greater cost of the materials at the present time. An existing house of the same type is now selling for some $2,000 to $3,000 more than the new houses which we are building. Any veteran could turn around and sell his house and make a profit of $1,500 or $2,000 in cash. There have been very few sales of existing houses because the prices for them have been so high. A five- or six-room house in Columbia which was built before the war, say in the years 1935 to 1940, is now selling at anywhere from $7,000 to $8,000 and as high as $10,000 cash price. So our problem seems to be in getting more houses constructed. One of the biggest problems in connection with building is getting material and labor. Senator MILLIKIN. During the course of your remarks will you give us your viewpoint with respect to protecting the veteran against inflation? Mr. WILLIAMS. You mean with reference to these appraisals? Senator MILLIKIN. Let us assume that the price of houses continues to rise over a long period of time. If we do not get the veteran in on the situation now, we will never be able to get him in unless we increase the guaranty. Mr. WILLIAMS. Protecting the veteran against future inflation is, of course, a rather difficult task if the market continues as it is. It will be a difficult problem for the investors in the present market. The remedy for the whole situation is to have more houses. Houses are not available at any price. A person who has a home and is living in it does not want to sell it. If someone comes along and offers him a very high price, probably he would sell. Senator LUCAS. How many people do you have in Columbia, S. C.? Mr. WILLIAMS. You mean what is the population? Senator LUCAS. Yes. Mr. WILLIAMS. Taking into consideration the inflated population, it is at present about 200,000. Senator LUCAS. Let us take the inflated portion of the population out; then how much do you have left? Mr. WILLIAMS. The normal population is around 100,000. Mr. WILLIAMS. Naturally prices will come down. Senator LUCAS. No; I mean what is going to happen to the 100,000 who came in during the war? What will happen to them, in your judgment? Mr. WILLIAMS. A great many of them will go to places where there are large manufacturing industries. Outside of the cotton mills, we do not have very many manufacturing industries in our section, and many of the persons who are living there now will move away eventually. According to the statements which have been made by repre sentatives of the chamber of commerce, the population will be considerable even after the reduction which it is expected will take place. Senator LUCAS. How many homes, normally, would you say it would require in Columbia, S. C., to bring the present inflated price of the old homes down to what it ought to be? Mr. WILLIAMS. Under normal conditions before the war it required 500 homes a year in order to take care of the increase in population. Since 1940, very few homes have been constructed. The population has increased, and therefore the demand has increased. It has been estimated that it will require 2,000 homes a year for 5 years in order to catch up with the demand. Senator LUCAS. That is contemplated on the basis of new houses. Mr. WILLIAMS. Yes. There is no way around paying more for a house, whether already built or newly constructed, under present conditions. Senator MILLIKIN. If you were to pay $7,000 today for a new house, in 5 years it would be worth $4,000, would it not? At least, it would be worth less. Mr. WILLIAMS. I do not think it would fall back that far, because our whole structure of financing is on a different basis than it was following the First World War. Practically all home loans are issued on an amortization basis over a long period of time, consisting of very small payments. If the owner should get into difficulty he could always rent the house for enough to meet the payments. Senator MILLIKIN. If he wanted to sell, he would have to sell according to the market? Mr. WILLIAMS. Yes. Senator MILLIKIN. That situation would reflect the squeeze-out in the inflation to which you have referred. Mr. WILLIAMS. Yes. In regard to the possible number of veterans who might apply, if every veteran in South Carolina should apply, it would take $700,000,000 to loan the veterans of South Carolina the nominal sum of $4,000 each, with the Government guaranteeing one-half. The total number of enlisted men from South Carolina, not including women, is 185,000, and of this number approximately 35,000 have been discharged and are now classified as veterans; and eventually there will be approximately 185,000 veterans in South Carolina. If we were to assume, as some seem to believe we should, that all veterans will apply for loans and each veteran in South Carolina will apply for a nominal sum of $4,000, it would take the staggering sum of $700,000,000 to make these loans in South Carolina alone, which is several times the resources of all the banks in the State. Assuming that 10 percent of the total number should apply, it would require $70,000,000 in South Carolina alone. This would mean 1 out of every 10, and this number is probably within the neighborhood of the number of veterans who will apply for loans before the termination of the provisions of the act. Insofar as some complaints are concerned, regarding inability to obtain loans, I wish to say that we have had no difficulty in negotiating these loans where the veteran is employed and has a sufficient income above his living expenses to make the payments. Should a veteran obtain a loan, who is not sufficiently employed to take care of the payments, such a loan would result in trouble for the borrower 77877-45-23 as well as the lender, and would be economically unsound and impracticable. Such a system, if practiced, would not meet the approval of investors, although the loan or a portion of it might be guaranteed or insured by the Government. The major reason that more veterans have not applied for loans under the act is beyond the concept of the act, and should be given attention by the proper authorities, and for the record I might cite the following facts. Building material is not available in sufficient quantities to build homes for even a very small percentage of the veterans, and this situation, together with the shortage of manpower, is making it impossible to build homes in any considerable volume. Therefore, the demand for loans is not as much as it would be if arrangements could be made to release building material and the labor which is necessary to build the houses. Insofar as the loans are concerned, I am in a position to state that our investors are ready and willing to handle every loan that is properly approved in South Carolina for veterans. The trouble is not a scarcity of funds but, as I have stated, the veteran must have something that he desires to invest his money in before there is a demand for the loan. I have consulted Mr. B. M. Edwards, president of the South Carolina National Bank, the largest bank in the State, who is an authority on financial and Government matters, his bank having handled more FHA and GI loans than any other bank in the State, and Mr. Edwards said: By all means, let the Federal Housing Administration appraise the home loans to be handled by banks, and let the banks handle the business loans without further inspection, the banks making their own appraisal and investigation as to business loans. Senator JOHNSON. Does that complete your statement, Mr. Williams? Mr. WILLIAMS. Yes. Senator JOHNSON. Are there any further questions? There seem We thank you, Mr. Williams. You have given us some very valuable information. to be none. Mr. WILLIAMS. Thank you, sir. Senator JOHNSON. Mr. Chester R. Davis, of the American Bankers Association. STATEMENT OF CHESTER R. DAVIS, CHAIRMAN, AMERICAN BANKERS ASOCIATION COMMITTEE ON SERVICE FOR VETERANS Senator JOHNSON. Proceed in your own way, Mr. Davis. State your name for the record. Mr. DAVIS. My name is Chester R. Davis. I am vice president of the Chicago Title & Trust Co., Chicago, Ill., and chairman of the American Bankers Association Committee on Service for Veterans. In order that the members of the Committee may understand something about the scope of the work we are doing, and in view of some of the questions which were propounded to previous persons appearing before the committee, I believe it would be well to say something about the association and organization of the work of our committee. The association has a membership of approximately 15,000 banks representing about 98 percent of the total banking resources of the country which, as of December 31, 1944, amounted to $152,947,000,000. The association created the afore-mentioned committee a little over a year ago to keep the member banks of the association fully informed. regarding the guaranteed loan provisions of the Servicemen' Readjustment Act of 1944 and the regulation of the Veterans' Administration pertaining thereto, and to otherwise coordinate and stimulate the activities of the banks in serving the financial needs of the veterans. Under the leadership of our committee most of the State bankers' associations have set up similar veterans' service committees. Most of the banks have set up special departments or have designated specific officers for handling the guaranteed loans to veterans, the heads of such departments and such officers wherever possible being veterans of World War I or World War II. In a number of communities the banks have organized central offices to assist veterans in making applications for guaranteed loans. The committee has been in close touch with the banks and has considered many suggestions regarding the guaranteed loan operations. The banks of the Nation both individually and collectively are making every effort to serve the financial needs of returning veterans. However, banks have been handicapped in making the guaranteed loans under the Servicemen's Readjustment Act of 1944 because of the limitations and restrictions in the banking laws under which they operate. Also, experience has shown that amendments to the Servicemen's Readjustment Act and regulations are needed to make the guaranteed loan operations more practicable and workable. Because of specific limitations on the ratio of the amount of loan to the appraised value of the real estate and limitations to shorter maturities than 20 years, national banks and many State banks have not been able to make many loans to veterans under the Servicemen's Readjustment Act. National banks, for example, may make a real-estate loan for a term in excess of 5 years only on condition that installment payments are sufficient to amortize 40 percent of the principal of the loan within a period of not more than 10 years. On the other hand, realestate loans guaranteed by the Administrator may be amortized over a period of 20 years but must be amortized even with shorter maturities at a rate sufficient to pay the entire amount of the loan within the life of the loan. Real-estate loans made by national banks which are guaranteed by the Administrator would thus have to be fully paid within 10 years. Furthermore, under section 24 of the Federal Reserve Act, the amount of such loans cannot exceed 60 percent of the appraised value of the property. Because of these limitations and restrictions veterans are denied access to a large reservoir of credit for the financing of home purchases, and national banks are denied the privilege of fully serving the veterans' needs. I should like Mr. Addison to comment on this. S. 795, introduced by Senator Johnson on March 27 of this year, would remedy this situation by providing that national banks may make any loan guaranteed by the Administrator without regard to the limitations or restrictions of any other statute with respect to the ratio of amount of loan to appraised value or to the maturity of the |