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fact of what affects the mind of John Coolidge, of Plymouth, Vt., and men like him, men who sit on a soapbox and talk things over. It does not make any difference what the virtues or the defects of the Federal reserve system are. If the effect is that people lose faith in our institutions, it does not make any difference. We can not blame the Federal reserve system; but this bill is not going to cure that disbelief in our institutions.

Senator MORRISON. In your opinion.
Mr. TIBBETTS. In my opinion.
Senator MORRISON. You say about 20 banks failed in Boston ?
Mr. TIBBETTS. In the vicinity of Boston; in eastern Massachusetts.

Senator MORRISON. It is quite a natural thing that intelligent people would get a little nervous about a thing like that, is it not?

Mr. TIBBETTS. Absolutely.

Senator MORRISON. With banks failing in the large numbers that they are failing all over the Republic, it is quite a natural thing for people to get nervous about the banks, is it not?

Mr. TIBBETTS. Yes, sir.

Senator MORRISON. The bankers themselves formed a national credit organization, did they not, under the leadership of the President?

Mr. TIBBETTS. Yes, sir.

Senator MORRISON. To furnish rediscount facilities to banks which the present system did not furnish?

Mr. TIBBETTS. Yes, sir. Senator MORRISON. Taking the country as a whole—not Boston alone—was not one of the principal things they furnished that credit upon real-estate mortgages?

Mr. TIBBETTS. As one of the items.
Senator MORRISON. And the large one?
Mr. TIBBETTS. I think it was.

Senator MORRISON. You think it will depreciate the value of real estate and the value of real-estate mortgages current?

Mr. TIBBETTS. I do.

Senator MORRISON. If the Government sets up a system under which they can hope, in emergencies, to get some of that paper rediscounted or used as security for loans.

Mr. TIBBETTS. I do, because you can not-
Senator MORRISON. Now, will you tell us why?

Mr. TIBBETTS. Because you can not change the law of supply and demand.

Senator MORRISON. Would not that same argument apply to the rediscount facilities furnished for the limited credits enumerated by the Federal reserve system? Mr. TIBBETTS. No; it does not apply that way at all, in my opinion.

Senator MORRISON. Does it not have the same effect, and would not the same arguments apply to the farm land banking system?

Mr. TIBBETTS. I would not want to discuss the farm land bank system, because I know very little about it.

Senator MORRISON. You think that when farm-loan mortgages can not be rediscounted anywhere except by some friendly correspondent bank that might take some of them, to furnish an opportunity to rediscount would depreciate their value?

Mr. TIBBETTS. I think all that thing will be taken care of by the Reconstruction Finance Corporation.

Senator MORRISON. But you have testified that you thought this bill would depreciate their value.

Mr. TIBBETTS. I do.
Senator MORRISON. What I am trying to get at is your reason.

Mr. TIBBETTS. Because it is going to create other real-estate units; because it is going to put into the market, in competition with older pieces of real estate, newer pieces of real estate; and while temporarily it may give to some artisans some work, it does not seem to me that this bill is the way to cure unemployment.

Senator MORRISON. I suppose there are many home owners throughout the country with mortgages on their homes.

Mr. TIBBETTS. Yes.

Senator MORRISON. Don't you think, under existing conditions, they would have difficulty in getting those mortgages renewed if necessity forced them to do so?

Mr. TIBBETTS. I think they would have more difficulty in getting them renewed if there were more houses.

Senator MORRISON. You think that if more people built homes, it would depreciate the value of those who already have homes?

Mr. TIBBETTS. Is there any question about that?

Senator MORRISON. I think there is a very large question. I think it would depreciate the value of the people who were exploiting and imposing on those who did not have homes, but I do not see how it would hurt those who did.

Mr. TIBBETTS. That brings up the very next thing I intended to say. There was a statement made here this morning that I was rather surprised to hear. The statement was made that the public has been “gypped” for years. It seems to me that is fundamental with the management, then, of the “gyppers”; it has nothing to do with the insurance companies and the savings banks and the trust companies, who conduct a legitimate, honest, upright business, without any “gypping," without any bonuses, and without any fees.

Senator MORRISON. Except this, that when they can not furnish adequate, legitimate accommodation, the poor and the struggling resort, as they always have, to those who impose on them. Is not that true?

Mr. TIBBETTS. Naturally, as long as human nature is as it is, there will be people who “gyp” others, and there will be people who will be "gypped." There is no question about that. But we are not going to change human nature by passing this bill, any more than the eighteenth amendment creates temperance. It is fundamental in human nature.

Senator MORRISON. Is there anything else you wish to state?

Mr. TIBBETTS. Yes. You asked one question about the clerk and the mechanic being worried to-day. It is not any great stretch of the imagination to look back to 1929, before the break. There were not any mechanics and clerks worrying at that time. I do not think this so-called “gypping ” business was going on then to any great extent. It is because of the crashing of our institutions—not banks, not insurance companies. You know better than I what caused it. Neverthe

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less, that break did come, and the only thing that seems to be left that did not break since 1929 is our mortgage security.

My point of view is this. Why do anything that is going to affect that adversely? That is the reason I am opposed to this bill, because I think it would. I might say, in passing, that I am a very strong administration

I am a great admirer of the President, and, as we say in Massachusetts, I would go to the jail door for him. I think his conception of the good to be done by the enactment of this bill is wrong. I am a standpat, Hoover variety of Republican.

Senator MORRISON. Great is your faith! [Laughter.] You will excuse that.

With respect to the banks that closed there in Boston, if they had had some place where they could, within reason and soundness, have discounted home-loan mortgages or borrowed money on them, don't you think it would have kept some of them open?

Mr. TIBBETTS. Yes; and the National Credit Corporation was open to those men, except that the National Credit Corporation, unfortunately, was not started in time to take care of our own little situation.

Senator MORRISON. Little situation? With 20 banks in the great city of Boston failing, you call that a little situation?

Mr. TIBBETTS. Some of the banks in the city of Boston are open to-day because of the National Credit Corporation.

Senator MORRISON. And that largely because they could take those securities that were not subject to rediscount at the Federal reserve bank?

Mr. TIBBETTS. I think, as a matter of fact, they took other securities. I think they took stock-market securities very largely.

Senator MORRISON. Some of both.

Mr. TIBBETTS. I do not know what other people have done. I can not say, except from hearsay. I know from hearsay that some of both were taken. But it was physically impossible there were no men capable of the physical power to take care of banks failing as fast as they came along there following the closing of the Federal National Bank.

Senator MORRISON. I ask you if it is not a pretty general opinion among business people in Boston, that if the National Credit Corporation had been doing business, it would have saved that situation in Boston ?

Mr. TIBBETTS. I do not think that is the general opinion in Boston. Senator MORRISON. You do not?

Mr. TIBBETTS. Because the National Credit Corporation was functioning

Senator MORRISON. I thought you said just now it was not.

Mr. TIBBETTS. It was functioning, but it was not functioning to the degree that it could take care of 15 or 20 banks all at once, and they went just like a row of candlepins. In other words, one bank failed, it had several affiliated branches scattered throughout the State.

Senator MORRISON. Some of them were actually broke, were they not?

Mr. TIBBETTS. When the mother bank went, naturally the others closed.

Senator MORRISON. Some of those banks were broke, and ought to be closed; isn't that true?

Mr. TIBBETTS. They were not liquid.
Senator MORRISON. Some of them were insolvent.
Mr. TIBBETTS. Some of them were, and some of them were not.

Senator MORRISON. All right. I do not believe I want to ask you anything more.

Mr. TIBBETTS. When this bill was first spoken of, Congressman Luce from Massachusetts, at least, is given credit in the newspapers for saying that there would be an inflation in building. I think that is an admitted fact, that if this thing becomes operative, there will be more buildings built, and I claim that is going to affect present conditions.

Senator MORRISON. Don't you think it would be a good thing to build more homes in this country, if people could pay for them?

Mr. TIBBETTS. If people can pay for them; yes.

Senator MORRISON. Why will not a man be able to pay for a home now, as well as any other time, if he has the advance payment and a job?

Mr. TIBBETTS. May I reply to that by asking a question? If they are in a position to buy homes, why don't they buy them to-day? I know a great many pieces of property

Senator MORRISON. Because they can not get a bit of credit in the world, anywhere except in Boston and Syracuse, that we have heard of.

Mr. TIBBETTS. They can buy homes now, without any particular amount of credit. think many banks have properties for sale where they would be glad to give a deed without any down payment, and take their payment in mortgages, like rent. I know that to be a fact.

Senator MORRISON. There might be isolated cases.

Mr. TIBBETTS. I am going to state again that I think the Reconstruction Finance Corporation will take care of the frozen real estate loans, and will help out, to a large degree, the owners who now seek renewals. The majority of corporations and persons interested in the mortgage business to-day, including the savings banks, the State banks, and insurance companies, have no need of this Federal Home Loan Bank. I think that is a fact. I think my canvass and my talks with various interests have demonstrated to me that from their point of view they do not need it.

Senator MORRISON. In your city, you mean? Mr. TIBBETTS. No; I mean in other cities. I mean in New York. If this bill is designed to create commissions for real estate operators, it is a good thing for them. If it is designed to help out building and loan associations, which have attracted capital which they can not pay back, by paying high rates of interest, it is a good thing for them. But I can not see, by any stretch of the imagination, where it is going to be any great help to the man we are trying to help, and that is the home owner. I think it is designed to help somebody besides the home owner. I think the President's and Mr. Luce's original design had that very thing in mind, but I do not think this bill accomplishes what they had in mind originally. This bill helps people it was not intended to help originally. I am not criticizing those men who are in the real estate business, or the building and loan association business. They have a right to make money, just as I have; but I do not think, if they are hiding behind this bill, as I suspect, that they ought to use this bill selfishly to help themselves, and help to wreck the institutions that have stood by during this time of strenuous depression.

During boom times, I doubt very much whether this proposed bill would function. With the restrictions in it as to the class of property which could be handled—small units, not exceeding $15,000, upon which $7,500 could be advanced, I do not think it would function as a practical matter so that they could make money. It would take a great many units at $7,500 per unit to pay the overhead alone, and the official salaries, before they begin to make any return to the stockholders or pay back the Federal Government the amount of money it will have to advance. If they could have some larger units to carry the burden, well and good.

There is another thing about it. There has been some discussion about how much it costs a man to borrow money to-day. In the first instance, the home owner goes to his local bank. He pays a title examination fee. He possibly pays a commission. He pays for recording. He pays for drafting the papers, a fair, legitimate charge, and everybody is paid in good shape. Perhaps he has to pay for an appraisal. When that loan, we will say, of $15,000, is pledged by a member bank with the central bank, there must be another appraisal. Somebody has to pay it. There has to be another title examination. Somebody has to pay it. There is an attorney that comes in. Somebody has to pay him. I am an attorney, and I have to be paid. My time is my living. That is another set of fees.

Now, if the debentures called for by this bill are set up, then that $7,500 unit is pledged again with some trustee, and the trustee is not going to enter into this thing unless he is paid, and there must be a third examination and a third lawyer's fee. When all that overhead enters into a $7,500 transaction, there will have to be a very great many of them in order to produce income enough to carry on a small Federal reserve system, and that is what this bill sets up. There will be big salaries. The directors will have to be paid for their services. The stockholders will have to be paid. It seems to me it is going to be an extremely expensive proposition, and I doubt very much whether the home owner can afford to pay all these various repetitions of fees.

Another thing. It removes from society, if you please, the interested home savings bank, which loans the money to John Doe. If John is up against it, he goes into the bank and sees the president and explains the situation, and is given six months additional to pay his interest, or some more time to pay his taxes. Perhaps the insurance has run out, and the bank will advance him that.

Under this bill, there is not very much question of discretion. If a man defaults, he is in default. Somebody has to pay, and he has to pay promptly. You have removed from the small town and the small town banker that place that he has held in the esteem of the American people. He is the man to whom you can turn in time of trouble and distress. I do not believe very many people think of the Federal Government as an agency to which they can turn in time of personal worry, any more than I believe a man who has an insurance policy in some big insurance company is going to rush to the home office of that company with some distress situation in his family. He will go to the local man with whom he has placed his policy.

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