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Senator COUZENS. May I ask Mr. Oakman if he comes here representing himself alone or some organization?

Mr. OAKMAN. We Detroit real estate men talked over this legislation. There was not any official meeting. We had a meeting of what is called the real estate committee.

Senator COUZENS. Of Detroit?

Mr. OAKMAN. In Detroit. I said I would go to Washington and study the situation. Some feel pretty blue about the present bill in Detroit. Some think it is of no earthly use. It can not be used to any great advantage in Michigan, as far as we know.

Senator COUZENS. You mean that the bill can not be used?
Mr. OAKUM. This bill can not be used to best advantage. No.

Senator COUZENS. Do you represent yourself or some organization which passed a resolution authorizing you to speak for it?

Mr. OAKMAN. No; there was no resolutions passed. We have had general conversations. We have been talking about the proposal for months.

Senator COUZENS. When you say “we” you mean the real estate board or some agency?

Mr. OAKMAN. I am on various committees and on the real estate committee of the Union Trust Co. that is handling many mortgages. So I volupteered to come down. I am not an official representative or anything of that sort.

Senator Watson. Tell us now why this bill will be ineffective if passed.

Mr. OAKMAN. In the first place, it is uniworkable. As was said before it will not pay if it is carried through. That is, it will pay if it is changed and improved but the reason it won't pay now is because under it we real estate men can not get the money to make it do business.

Senator WATSON. You have the old bill, I believe, Mr. Oakman. Mr. OAKMAN. Is there something newer than this one?

Senator WATSON. Oh, yes. Here is the new bill. You have old 35 there, which is entirely different from this new one.

Mr. OAKMAN. The points I wanted to discuss in detail on were the $15,000 loan limit and the 50 or 60 per cent loan.

Senator WATSON. Yes, those are in this bill.

Mr. Oakman. These are the only details I wanted to talk about this morning.

Senator WATSON. That is all right.

Mr. "OAKMAN. In the first place, it was understood that the bill would be passed to relieve the mortgages held by banks, and so forth, on the homes of working people. I don't know of any working man who has a home good enough to have a $30,000 mortgage. I would hope that a son of toil would have a $30,000 home or a home that would be valuable enough to have a $15,000 mortgage. But that would be ridiculous. A working man's home must be based on his earning power. If he has a son or daughter working, then it can be, perhaps, a little better than usual. But if he goes beyond a certain amount, it is a case of luck to be able to pay such as somebody giving him money. I believe in the first place that your loan should be cut down to not more than six or seven thousand dollars.

Senator Watson. This is not to exceed $15,000.” It means that no one could borrow at any time over $15,000.

Mr. OAKMAN. I wouldn't allow anybody to borrow that much. Make it not over six or seven thousand dollars, not over that. I would confine it to that amount. If you go beyond that, I think you will find that the borrower can get a loan at a bank.

Senator COUZENS. In other words, you would limit the value of a workingman's home to from twelve to fourteen thousand dollars?

Mr. OAKMAN. Yes, as a limit. And he has a good home when he has that. That is one item. Take the percentage here. Some people talk about depression. They don't know what depressions are. They never saw one until the present one. But I have seen other depressions, where people said land was of no value, and so forth and so on, and that everything was gone. I remember in my early days in the panic of 1893-1898 that I went down with the rest of the boys because I tried to buy up half of the world, the northeast section of Detroit up by the Dodge factory, and instead of becoming a rich young man, the panic came, I woke up one morning and found I wasn't worth 30 cents.

But that wasn't careful legitimate business at all. We were going at everything smash bang, to get every dollar that we could, and we lost. But 15 years afterwards property that sold at $8 or $10 a foot in the hard times was sold as high as a thousand or may be three thousand a foot. So we got out of that depression and we are going to get out of this one. I am not afraid of real estate. I have been city assessor during a time of depression. People would come in and say, “We must have our assessments reduced; our rents have gone down,” and so forth. What is the use of reducing the assessments? If you did it for the business man you would have to do it for the home owner. We equalize our assessments.

Senator Watson. You said you wanted to say something about the 50 and 60 per cent.

Mr. OAKMAN. Yes. I will see if I can find it.
Senator WATSON. Mr. O'Brien will show it to you.
Mr. O'BRIEN. Here it is.

Mr. OAKMAN. The advance may be for an amount not in excess of 60 per cent of the unpaid principal of the home mortgage loan.

What does that mean? This bill was undoubtedly prepared by somebody who thought that the real intrinsic value of the property has gone down and the present market value has gone down and isn't going to pick up again. Take in our institution, the Union Trust Co. Suppose we have $4,000,000 of frozen stuff. All good, practically: We want a million dollars. We send over to your proposed bank for a million dollars. What have we got to do? First, you have got to have a million dollars' worth of original value. Then you take 40 per cent off of that. Forty or fifty per cent of the actual value of the property is what the first bank will loan. So the bank is getting about a 25 or 30 per cent loan on the property, and if they do they won't have any more assets to borrow on. No bank will deal with them and no trust company can deal with them on that basis.

Senator COUZENS. Just a minute. The legislative lawyer is here who helped to draft the bill. I think perhaps from the way he is shaking his head he does not interpret the law the same way you do. So let him explain it.

Senator WATSON. Mr. O'Brien.

Mr. O'BRIEN. My interpretation may be wrong, but I think the theory on which the bill is drafted is this: That no loan can be made in excess of 60 per cent of the unpaid principal.

Senator WATSON. That is right.

Mr. O'BRIEN. Of the loan to the borrower. No loan can be made in excess of 40 per cent of the value of the real estate.

Senator WATSON. Section 3 there. Mr. O'BRIEN. Forty per cent of the value of the real estate. Mr. OAKMAN. Forty per cent of the value of the real estate? Mr. O'BRIEN. Yes. Mr. OAKMAN. That is not in the old bill then, is it? Mr. O'BRIEN. No. Three is not in the old bill. Mr. OAKMAN. I see. Senator Couzens. Would you, Mr. Oakman, like to take the new bill and come back to-morrow on it?

Senator WATSON. Yes, he better do that.

Mr. OAKMAN. Yes. I didn't see that. But I see enough there now to still think that there is not much change in that. But what I want to do is that I want to say that I am opposed to the bill for many reasons, and I think I can show how you can improve the bill 80 we will call Congress blessed if you pass it.

Senator WATSON. You mean the home owners?
Mr. OAKMAN. Yes, the home owners. I am much obliged, Senator.
Senator WATSON. Thank you.
(Mr. Oakman left the table.)

Senator Watson. Any more persons to be heard to-day? If not, we will meet again at 10.30 o'clock to-morrow morning.

(Thereupon, at 11.35 a. m., Wednesday, January 20, 1932, the subcommittee adjourned until 10.30 o'clock a. m. the following morning.)

CREATION OF A SYSTEM OF FEDERAL HOME LOAN BONDS

THURSDAY, JANUARY 21, 1932

UNITED STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE
ON BANKING AND CURRENCY,

Washington, D. C. The subcommittee met at 10.30 o'clock a. m. in the hearing room of the Committee on Interstate Commerce in the Capitol, pursuant to adjournment on January 20, 1932, Senator James E. Watson presiding.

Present: Senators Watson (chairman of the subcommittee) and Couzens.

Also present: Representative Robert H. Clancy, of the first congressional district of Michigan.

Senator Watson. I will go on with the hearing. Is Mr. Adams here?

Mr. Adams. Yes.

STATEMENT OF E. J. ADAMS, CHAIRMAN, SPECIAL BOARD OF

INVESTIGATION, FEDERAL TRADE COMMISSION, WASHINGTON,
D. C.
Senator WATSON. Will you state you name and address?
Mr. ADAMS. E. J. Adams, 4707 Connecticut Avenue.

Senator WATSON. And you are connected with what governmental body?

Mr. ADAMS. The Federal Trade Commission.
Senator Watson. Have you studied this bill, Mr. Adams?
Mr. ADAMS. Yes, sir.
Senator Watson. How did you happen to make a study of it?

Mr. ADAMS. I have been interested in this matter since 1884. First as a loan broker in Michigan. Later as a builder of homes, and also as a legislator, and the practice of law. Those are the four branches that have made this a very interesting subject to me, and has been for many, many years.

Senator Watson. Where did you practice law?
Mr. ADAMS. Michigan, and in Washington State.
Senator Watson. When was your attention first called to this bill?
Mr. Adams. You are speaking now of S. 35?

Senator Watson. Well, it is the forerunner of the present measure we are considering.

Mr. Adams. As soon as I noticed it had been introduced, and I received a copy upon request from the document room.

Senator Watson. And you have seen the other bill, the new one? Mr. Adams. No; I have not seen the new one.

Senator WATSON. Well, there is all the difference in the world between S. 35 and the one we are considering.

Mr. Adams. Well, there ought to be.

Senator WATSON. There is. How can you speak of the present bill if you have not read it?

Mr. Adams. I did not know that there was a present bill other than S. 35. I have not been attending the meetings here.

Senator WATSON. You had better study the bill and then come back the next time we have a meeting, because the bill under consideration is entirely different from S. 35.

Mr. ADAMS. What is the number of that bill?

Senator Watson. S. 2959. We will have a meeting of this committee next Tuesday, and you can come back at that time. In the meantime compare it with this bill and come back and give your impression of it.

Mr. Adams. If it would be of any use to the committee I will be glad to submit for comparison a draft I have prepared.

Senator Watson. These bills are altogether different, and what you have to say with reference to S. 35 may not strike this at all.

Mr. Adams. Well, I was thinking perhaps the chairman or somebody on the committee might be willing to read the draft that I have prepared and compare it with the bill that you have.

Senator Watson. You do that yourself and then come back next Tuesday. This committee will have no more hearings until next Tuesday at 10 o'clock.

Mr. Oakman, did you want to conclude your testimony?

Mr. OAKMAN. Yes. STATEMENT OF ROBERT OAKMAN, DETROIT, MICH.—Continued

Senator Watson. Mr. Oakman, you were testifying yesterday, and you want to conclude your statement now?

Mr. OAKMAN. Yes, sir; if you please. When I came yesterday I had not seen the new bill. I have put in all the hours I could on it.

Senator WATSON. The bills are quite different.

Mr. OAKMAN. Yes. And I have the same opinion about that new bill that I have of the other, which I will explain.

I became interested in the idea from what had been spread as to what the President of the United States had accomplished in the way of helping unemployment, and what he proposed to do to aid work on homes and to relieve what might be called the frozen or slow credits, and so on, early in the summer. We all felt very much pleased with it, and at meetings of the insurance men and money lenders we used to discuss what we understood would be in the bill, and what a great good it would be. And when we came to look at the bill we found it did not meet the expectations apparently even to a degree, if I may use that expression,

Now, I have made some notes here. I do not want to enlarge on every detail, but sufficiently so that if you thought it any good you could read between the lines and complete the idea. I will not take up any more time than necessary. Senator WATSON. All right, you may proceed, Mr. Oakman.

Mr. OAKMAN. I am opposed to the Federal home loan discount bank as it stands to-day. It does not meet the requirements advo

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