Senator COUZENS. Just what position is such a man in who has reached 45 years of age, and probably paid 75 to 80 per cent on his home, but now finds he has reached the age limit for employment? What condition is he going to be in to carry on?

Mr. FRIEDLANDER. Well, that is a social problem that I should not say I am qualified to answer.

Senator COUZENS. But this whole thing is a social problem. This is the most socialistic legislation that has ever come before the Congress.

Mr. FRIEDLANDER. I think you have had a companion measure in the Federal land banks. I do not think the Nation owes any more in the way of providing a farm for the farmer than it owes in the way of aiding the man who wants to live in his own home in the city.

Senator COUZENS. I think there is quite a distinction in that the farm is a producer. We maintain the farm to produce food products.

Mr. FRIEDLANDER. Yes.

Senator COUZENS. The farm is like the factory, it produces needed commodities just as the factory produces articles of manufacture. But the home is a static capital investment, is it not?

Mr. FRIEDLANDER. It is. But the Nation certainly is concerned with the matter of providing suitable housing for those who live in cities and towns. I should say that the problem is as great or greater perhaps in the small towns than in the cities. In the small towns you will find no credit facilities at all under present conditions open to the prospective home owner.

Senator COUZENS. Well, I want to assure you that you can find none in Detroit now, where there has been the greatest unemployment problem in the country on account of the condition of the motor-car business. But that is not the point I am raising. No one believes in the home any more than I do. But haven't we got to give the worker some assurance that he is going to be able to pay for a home before we invite him to purchase a home? How is he going to pay for a home if he is hired to-day and fired to-morrow?

Mr. FRIEDLANDER. I quite agree with you that there is something out of joint in our economic system, but that is quite apart from this discussion.

Senator CouZENS. I think not. I think it is fundamental. If we are going to encourage home owning, in which I am heartily in favor, it seems to me we are starting at the wrong end of the matter; that we ought in some way to start out to assure the man that he is going to have adequate income, either by means of stabilization of industry or unemployment insurance or something of that sort. It seeems to me we are attacking this proposition at the wrong end. We are encouraging a man to get a home and then we say to him: We do not know how long you will have a job. He may lose his job to-morrow, and then he will lose his home."

Mr. FRIEDLANDER. That is a very fine viewpoint, but it seems to me if we do not relieve the burden pressing upon those who have already started on the way to home ownership, we are never going to induce this great body of men you are speaking of to ever start out. There is another phase from the building and loan associa

tion's standpoint that I think should be considered: We have approximately 13,000,000 people in the United States who are useing these cooperative institutions. They have for years been making investments monthly or by way of lump sums in these institutions, which in turn have been lending to people on homes. If you will take our own institution as an example, we have induced in 10 years about 12,000 people living in Houston to invest their money in our association to the extent of about $10,500,000, and which, we, in turn, have loaned to 3,500 people there to build homes. Then along comes this period of depression, and those people, or some of them, need their funds. This money that we have invested has been placed in what has been considered a prime security, and yet at this time we are unable to take $10,000,000 worth of notes and do anything with them in order to give these people some relief, those people who are needing to recapture a part of their savings. That is quite apart from this purely lending feature of the home loan bank, but it is a very important part of its accomplishment and should enter into the consideration of this bill.

Senator COUZENS. That is entirely the emergency feature of it, and that is what we are trying to draw a line on, that is, between emergency and permanent needs. I think no one denies the need to do something for the emergency. But what some of us are trying to fix in our minds is as to a permanent need for this organization. Mr. FRIEDLANDER. I think one desirable feature would be the lowering of interest rates; would be the granting of credit at a rate more or less uniform by reason of your central board. We would be enabled to get our bond money at a lower rate of interest, which bond money we in turn could loan to the home owner at a lower rate of interest than we have been able to do by way of getting money from investors in our section. I think that is a very desirable feature from the permanent set-up standpoint.

Senator WATSON. How many foreign bonds were sold down in your part of the country?

Mr. FRIEDLANDER. Too many, Senator, but I do not know.
Senator WATSON. A great many?

Mr. FRIEDLANDFR. There have been quite a few sold in Houston, and in the cities.

Senator WATSON. What bonds?

Mr. FRIEDLANDER. South American bonds.

Senator WATSON. Any European bonds?

Mr. FRIEDLANDER. I think very few European bonds.

closer to South America down there than we are to Europe, apparently. They had a stronger appeal.

Senator WATSON. But proximity did not help you much in the matter of the investment.

Mr. FRIEDLANDER. Perhaps not.

Senator WATSON. Not in every instance.

Mr. FRIEDLANDER. As I stated before, the investing public are going to be more discriminating in the future.

Senator WATSON. Until there is another boom.

Mr. FRIEDLANDER. Well, perhaps that would becloud their judgment. At any rate, until that happens, and I do not see any other boom in sight any time soon, if real estate continues its downward

march in deflation it is going to be a rather difficult matter under the present set-ups to get a flow of money back into it.

Senator WATSON. That is true. Now, the legislative drafting agent would like to ask a few questions.

Mr. O'BRIEN. Some suggestion has been made in these hearings that in view of the manner the building and loan business is conducted it is going to be impossible to ascertain originally the term of a loan for the purpose of determining whether or not, that loan being an amortized loan, it is for a term of eight years or more, and therefore entitled to an advance equal to 60 per cent of the unpaid principal. I should like to ask you whether in the conduct of your business it is possible for you to know at the time of making a loan, in the case of payments made in respect to shares, how long that loan is going to stand. That is, are you able to tell with reasonable certainty whether that loan will be paid off in 81⁄2 years or 1012 years or 15 years or whatever it may be?

Mr. FRIEDLANDER. We are not able to arrive at it with mathematical certainty on account of the fact that it depends upon dividends paid by the institution and credited to the shares. But you ought to be able to ascertain fairly accurately as to about the time. However, according to the terms of the bill as I have read them, your limit is 75 per cent of the appraised values amortized mortgage that would be eligible for use as collateral. Now then, you provide that if it runs 8 years or more, the advance would be 60 per cent of that, which would be 45 per cent of the value. Then you have a further limitation that the advance can not run over 40 per cent of the value of the deposited security. Then you have a further limitation that the amount of the mortgages maintained must be at the ratio of 190 per cent of the amount of the bonds, which of course is a further limitation, because you are going to get these mortgages from the individual association borrowers. As I figure that out a building and loan association need not worry much about the 8year minimum because it is only going to get about 30 or 35 per cent anyway. There might be a few loans on the border line and which would have to be eliminated, but as a matter of fact it would have enough acceptable mortgages to come within the limit that it should borrow. Very few loans made on the amortized basis would pay out in less than 8 years.

Mr. O'BRIEN. Then there is no objection to using the phrase eight years?

Mr. FRIEDLANDER. NO.

Mr. O'BRIEN. I understand that in a case where a building and loan organization makes a loan to a member of the organization it is frequently if not usually an amortized loan. Now, the suggestion has been made that amortized ought to be defined for the purpose of this act, and a great deal of trouble has been encountered in defining amortized for the reason, at least in the conception of the House committee, and I do not think the House committee thought an amortized loan was one in which in case it ran 10 years and 1 per cent would be paid off each year and a great big payment or renewal at the end of 10 years-for the purpose of arriving at that result, is there any percentage of the amount of the loan, in the payment of interest and principal, which is prorated over the number of years

of payment, which can be arrived at where it is an amortized loan within the meaning of the act?

Mr. FRIEDLANDER. I think if you put a limitation of 20 years in the act itself you should arrive at that constant figure as to how much reduction would have to be made to come within the 20 years, which I think is sufficiently long. I studied the amortization feature of the bill because that suggestion came to me from New Jersey, and I think you have it pretty well covered in your definition of unpaid principal. By inference or analogy payments made on stock would be considered principal payments that would make that come within the meaning of an amortized loan. I do not think there is any need for any further exposition of that, although, of course, if you care to make it absolutely sure you could put in a definition of an amortized loan and include in it the definition that you have here on "unpaid principal." That would satisfy the New Jersey associations, I feel

sure.

Senator WATSON. Have you had correspondence over the country about this bill?

Mr. FRIEDLANDER. I have had a great deal. I am chairman of the advisory committee on State legislation of the United States League of Building and Loan Associations, and am a member of their Federal legislative committee, and chairman of the legislative committee of the Texas Building and Loan League.

Senator WATSON. That is, the Building and Loan Association League?

Mr. FRIEDLANDER. Yes.

Senator WATSON. How many members are there in that league? Mr. FRIEDLANDER. In the United States league?

Senator WATSON. Yes.

Mr. FRIEDLANDER. They have two classes of membership. They represent practically all associations through the State leagues, who are members of the United States league. And then they have individual memberships. I think there are something like 2,200. However, I should say they represent about 60 or 75 per cent of the total resources of all institutions. I was rather active in the deliberations held here in Washington that the gentleman just before me referred to as secret deliberations. There were about 250 building and loan men brought here for the President's Home Ownership Conference, by invitation, and while here we took advantage of the fact that there were quite a few present, to hold meetings for the purpose of obtaining information and ideas on what should be incorporated in legislation of this kind, if it was proposed.

Senator WATSON. To whom did you make your suggestions?
Mr. FRIEDLANDER. How was that?

Senator WATSON. You formulated some suggestions in those meetings?

Mr. FRIEDLANDER. Yes, sir.

Senator WATSON. And to whom did you make those suggestions? Mr. FRIEDLANDER. Our suggestions were made to the Department of Commerce.

Senator WATSON. Now, is there a consensus of opinion among building and loan people in favor of this bill?

Mr. FRIEDLANDER. I think you will find the building and loan interests will be behind the bill, and that they are behind the bill. Senator WATSON. Are they familiar with the provisions of this new bill? That was S. 35 that you gentlemen had and were corresponding about, I take it.

Mr. FRIEDLANDER. Yes. Well, the suggestions were offered to S. 35, and as I understand it the present bill has now gone forward within the past few days to building and loan men. I have the feeling that our Texas men are fully for the bill. Of course, you will find some building and loan men who are opposed to this measure, just as you found many bankers opposed to a Federal reserve bank, and as you will find others opposing any legislation. But I am sure you will find the consensus of building and loan opinion behind this

measure.

Senator WATSON. Mr. Friedlander wanted to insert in the record some telegrams. They may be incorporated at this point.

I. FRIEDLANDER,

PORTLAND, ME., January 25, 1932.

New Willard Hotel, Washington, D. C.:

Hartily in favor of redrafted bills. Have no suggestions. Hope may have speedy passage.

I. FRIEDLANDER,

LEO GARDNER SHESHONG.

MEMPHIS, TENN., January 25, 1932.

New Willard Hotel, Washington, D. C.: Federal home land bank bill, H. R. 7620, fully meets requirements home-loan situation and should be passed without delay to prevent acceleration already serious foreclosure situation affecting small-home owner. I speak from viewpoint, not alone of building and loan association, but also as loan representative for more than 30 years of one of larger life insurance companies and also as mortgage banker selling mortgage bonds direct to private investors. CHARLES J. HAASE,

Secretary Home Building & Loan Association.

I. FRIEDLANDER,

Willard Hotel, Washington, D. C.:

SHREVEPORT, LA., January 25, 1932.

If percentage of compulsory stock ownership by individual associations were reduced I would consider home loan bank bill ideal. Even with this objection I unqualifiedly agree with your enthusiastic statements about the content of the bill and what the system will accomplish. It seems to me that the permanent service this system will perform to as many institutions of our class as will want to joint is sufficient reason for the approval of this prograin by every building and loan association in the Nation. We must set up this agency or the day of progress in our business is approaching its end. PHILIP LIEBER.

I. FRIEDLANDER,

THOMPSONVILLE, CONN., January 23, 1982.

New Willard Hotel, Washington, D. C.:

I am in full accord with the new administration bill, H. R. 7620 and believe it will substantially strengthen the stability of building and loan organizations and inspire confidence in the 12,000,000 members in these organizations.

WALTER P. SCHWABE,

President Connecticut Building & Loan League.