Mr. SPIEGEL. I did not do the programing, but I do know they have scehduled something like 3,600 units.

The CHAIRMAN. And nobody will buy the mortgages?

Mr. SPIEGEL. That is right.

The CHAIRMAN. So what good is it?

Senator CAPEHART. Take Savannah, the Savannah River project. The Government has released or authorized only 3,600 units?

Mr. SPIEGEL. That is correct.

Senator CAPEHART. Up to this moment?

Mr. SPIEGEL. Of which 500 are to be built now.

Senator CAPEHART. Why have they not authorized a sufficient number to house all the people going down there?

Mr. SPIEGEL. I do not have the answer to that, Senator.

Senator CAPEHART. Does anybody know?

The CHAIRMAN. They have only authorized 500 to be built now. Mr. SPIEGEL. That is right-are authorized to be built.

The CHAIRMAN. The reason is, as the Senator said, that this bill that we passed in Congress allowing these communities to get certain facilities that they would pay back-water and sewerage-is still in the House, and therefore there is no money available to put water or sewers in the community, with 35,000 people going to work.

Mr. SPIEGEL. That is one of the problems.

I want to point out in response to your question, Senator, one of our builders in the San Diego area where they have programed 6,000 units, there are hundreds or possibly thousands of units being built now in that particular area that could be made available. Rather than relax or remove Regulation X with respect to the units under construction, they are programing 6,000 additional units which have to be built, they set a ceiling price on those units, and these builders in the area, they are extremely concerned, because they get no relief for housing that is already under construction now and could be made available in that area.

The CHAIRMAN. What about the repayment on the mortgages? Mr. SPIEGEL. With respect to the term?

The CHAIRMAN. No; I mean are many mortgages being paid up, to form a revolving fund?

Mr. SPIEGEL. That is correct, and when we refer back to the insurance companies and savings institutions monthly they are getting huge payments on account of amortization of these mortgages, which are then available.

The CHAIRMAN. What are they doing with the money, putting it back into building?

Mr. SPIEGEL. It eventually will come back into the program. The CHAIRMAN. You do not know what amount that would be? Mr. SPIEGEL. I have no idea as to those figures, Senator. We will try to get them and make them available to you.

The CHAIRMAN. That money would be available for building this year, or as soon as it is available. I would like to get that.

Mr. SPIEGEL. I will try to get those figures for you, Senator. Senator DIRKSEN. Mr. Spiegel, to what extent, if any, do you encounter any fear in the market that springs from the possible liquidation of this situation in Korea, and may touch off a little deflationary rather than inflationary spiral? If it did exist, obviously it would

make them play the credit rather close, and would account for cautious commitments in the credit field.

Mr. SPIEGEL. That is correct.

Senator DIRKSEN. Do you encounter it?

Mr. SPIEGEL. We have not yet encountered it, Senator, but I think that is the normal operation of any sound, prudent mortgage operation. They watch these conditions closely, and tighten up and loosen up where they think in their judgment it is the proper thing to do. The CHAIRMAN. Has there been much fear of an increase in interest rates, also?

Mr. SPIEGEL. Surely there has, there certainly has. The fact is that the mortgage bankers are actually demanding a higher interest rate. Their argument is, of course, that it is a commodity like butter and rent and everything else.

The CHAIRMAN. The higher the interest rate, of course the greater the cost of the house.

Mr. SPIEGEL. It adds to the monthly charges.

The CHAIRMAN. The increase in interest is approximately a thousand dollars on a $10,000 house?

Mr. SPIEGEL. It would amount to approximately $5 a month, and you eliminate immediately a large segment of the population.

The CHAIRMAN. The people buying homes-veterans, and everybody else

Mr. SPIEGEL. We are not advocating an increase in interest rates. The CHAIRMAN. I was just asking what you thought about it. Mr. SPIEGEL. We are not advocating an increase in interest rates. The CHAIRMAN. It would be a burden to the veteran, it would cost him that much more.

Mr. SPIEGEL. That is correct.

A further and important effect of the present situation will be severe unemployment in the building trades. A drop even to 800,000 from last year's figure would throw out of work approximately 400,000 to 450,000 men and the jobs of an additional 75,000 men would be done way with for each additional drop of 100,000 starts. In addition, the indirect effect in other fields of employment cannot be calculated-such as the manufacture of materials and equipment, the men in the forests and in the lumber mills and in the myriad industries that serve construction.

In cooperation with the building trades unions and the Federal Government we have trained tens of thousands of young men, most of them veterans, to become skilled building mechanics at high wage scales. Widespread unemployment in the building trades will disperse this skilled pool, built up over a period of several years. Most of these men will have to be retrained to other skills since most of the building trades workers are not readily adaptable to other kinds of defense production. These men will face either serious unemployment or, at best, reemployment at considerably less wages than they are now earning.

We are not unmindful of the needs of defense production and of the inflationary danger if civilian production were to continue at unreasonably high levels. We are convinced, however, that under the present controls we are heading right back into a serious housing shortage, perhaps even more acute than the postwar shortage which required 5 years to overcome.

Senator BRICKER. Is it not true at the present time that the number of rooms available, according to the population of the country, is greater than ever, the number of housing units is greater than it has ever been in the history of the country?

Mr. SPIEGEL. That is correct, Senator.

I submit to you that, as long as our materials and labor are available, the construction of housing for the average man is not in any way inflationary. Our best opinion is that for some time to come labor and materials will be more than ample to meet the volume of production which we can foresee.

At th every least, credit controls should be eliminated from housing in those price ranges which the average man and particularly the average veteran can afford. In the report of this committee, when you passed the Defense Production Act of 1950, you included language suggesting that controls be so administered that the man of limited means receive preferential treatment. While the percentages in the present control regulation are less for the lower-cost brackets, it is our experience that they are nevertheless unduly affecting the man who can only afford a lower- or moderate-cost house. We suggest, therefore, that credit controls be completely eliminated for this

group.

We wish to comment also on section 106 (a) which would amend the definition of "real-estate construction credit" to place under control all existing properties. This committee will recall that a similar provision was stricken from the act in 1950. In our opinion, the imposition of credit controls upon existing construction would bring an already thoroughly confused mortgage finance situation to almost complete chaos.

Senator BRICKER. Do you mean houses now built, or being built? Mr. SPIEGEL. Already existing construction.

As we understand the primary purpose of real-estate credit controls, it is the avoidance of credit inflation in the mortgage field. The fact is that for the past several months mortgage financing has been so thoroughly deflated that at the present time in most areas of this country it is virtually impossible to obtain mortgage financing for new construction and almost as difficult to refinance an existing house. The excessively easy mortgage credit conditions which this section of the bill is designed to correct simply do not exist. While we hope that sufficient mortgage funds will become available during the next few months to start a reasonable level of new home production, it is clearly indicated that the supply of funds will not be in such volume as to cause any credit inflation problem.

Senator BRICKER. It would not do it if they only use the funds paid into them from existing mortgages, of course, but they are able to take their bonds to the Federal Reserve and sell them at any time, then you are pumping inflation into the stream.

Mr. SPIEGEL. That is right.

Section 105 of the bill touches on another aspect of real-estate control. It provides authority to freeze rents on housing accommodations, including those which have not heretofore been subject to rent controls even during World War II, including also those in communities in which the local governing body has, in fact, determined that controls are no longer necessary. As the committee knows, we have

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for some years been opposed to centralization of authority in Washington, particularly with respect to those matters which have been or can readily be determined locally. Therefore, it is our recommendation that rent control be left in the hands of the local community.

Finally, I would like to call your attention to section 102 (c) which adds a new section 202 to the Defense Production Act of 1950. The use of the word "improved" about three lines from the end of this section apparently grants to the President sweeping and unlimited power to condemn real estate and build upon it whenever he deems it necessary in the interest of national defense.. Such authority is apparently broad enough to include the construction of publicly ouilt and owned housing. Recently this committee considered the subject of defense housing in S. 349. We suggest that the section referred to be appropriateely limited so as to remove the implication that it covers by indirection the complicated and controversial subject of publicly built housing.

The CHAIRMAN. We thank you for your testimony.

Mr. SPIEGEL. Mr. Chairman, I have just a couple of statements and charts and figures which I would like to offer as part of this record. The CHAIRMAN. Without objection, they will be placed in the record, and also the other report that you have asked to file.

Mr. SPIEGEL. I can have copies made of the larger charts which I would be glad to provide for the record. I have here the number of FHA applications for all of 1950, and the first 4 months of 1951. I have the VA appraisal assignment for new construction since August 10, 1950, to date, which is the first date when they began to get these figures up, and I have one other statement, which is one of George C. Johnson, president of the Dime Savings Bank of Brooklyn, which covers the subject of inflation which I would like to leave with your committee as a part of the record.

(The material referred to follows:)

BROOKLYN, N. Y., September 29, 1950.—Criticizing the Federal Reserve Board, Government economists and certain segments of the banking industry for advocating excessively stringent curbs on home mortgage credit. George C. Johnson, president of the Dime Savings Bank of Brooklyn, fourth largest institution of its kind in the world, today termed severe mortgage restrictions as "unreasonable and unnecessary." Government's deficit financing is the real root of the Nation's inflationary troubles, he added.

"We are told by the Federal Reserve Board, Government economic advisers and a few bankers that the proposed stringent mortgage credit requirements in the form of extremely high down payments is necessary to halt inflation," Mr. Johnson said.

This is decidedly not the way to meet the problem," the banker continued. "Liberal mortgage credit, applied in a sound manner based on the borrower's ability to pay, is actually a weapon against inflation."

"When a family buys a new home," Mr. Johnson explained, "it uses up savings that have been accumulated for this purpose. The mortgage money that is provided by a lender also comes from savings and does not increase the total money supply of the country. Then more money is immediately taken out of the inflationary stream each month as that home buyer makes payments against the principal and interest of his mortgage.

"Recent restrictions on mortgage credit probably will reduce the number of homes built next year by the 30 percent suggested by the building industry and certain Government agencies. If it is evident in another 3 or 4 months that this is not fully accomplishing the aim, surely another 5 percent increase on down payments should release all the men and materials that can be absorbed in war industries.

"Home building is one of the greatest means of producing and creating real wealth that we have. Purchase of homes provides employment for millions of