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 man. 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. I 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.

Senator MORRISON. Does it have that effect?

Mr. TIBBETTS. Doesn't it?

Senator MORRISON. Does it have that effect with the Federal banks in the Federal reserve system?

Mr. TIBBETTs. That is a different situation.

Senator MORRISON. Have the people ceased to do business with the local bank because they have set up a rediscount reservoir to which, in time of need, they can resort? Has it had any such effect as that on those banks?

Mr. TIBBETTS. Here, if you please

Senator MORRISON. And if not, why will it have that effect to set up something akin to the same thing for the dealers in another type of credits?

Mr. TIBBETTS. Here, if you please, if my vision of the bill is right, a mortgage for $15,000 is given to the X savings bank. That is pledged with the Federal loan bank, and that is put on record. Senator MORRISON. Put on record how?

Mr. TIBBETTS. It is put on record by assignment in the office of the registrar of deeds, so that the central Federal loan bank then becomes the owner of record of that mortgage. If there is any question about it, can the owner go to the Federal central bank and do business? Of course he can not. He has to deal with his own banker, and that banker, in turn has to deal with the Federal bank. Senator MORRISON. Does not the merchant doing business with the Federal reserve system, with his paper up for discount, deal the same way with it? Isn't it up, and rediscounted at the Federal reserve bank, and when it is due, does not the banker substitute something else, and take it down, and renew it if he wants to?

Mr. TIBBETTS. You are dealing with a different type of mind altogether. Here is a man with a little home. The man or the institution which holds the mortgage on his home, in his opinion, is almost next to God.

Senator MORRISON. That is not so down in my country.

Mr. TIBBETTS. Well, you know who is next to God-the reverse of it.

Senator MORRISON. Are you through?

Mr. TIBBETTS. Yes, sir. I thank you for this opportunity.

Senator MORRISON. While I do not agree with you, I thank you for your contribution.

Mr. TIBBETTS. I hoped you might say, as you did to one of the gentlemen who favored the bill, that you respect my opinion. I think you do.

Senator MORRISON. I am perfectly satisfied yours is a quite sincere one, and while I do not agree with it, I respect any sincere opinion.

(Whereupon, at 1.05 o'clock p. m., the committee adjourned until 2.30 o'clock p. m.)

AFTER RECESS

The committee reconvened at the expiration of the recess, at 2.30 o'clock p. m.

Present: Senators Watson, Townsend, and Morrison.

STATEMENT OF ALFRED K. STERN, A DIRECTOR JULIUS ROSENWALD FUND, CHICAGO, ILL.

Mr. STERN. Mr. Chairman and gentlemen, my name is Alfred K. Stern. I am a director of the Julius Rosenwald Fund in Chicago; president of the Michigan Boulevard Garden Apartments, a large housing development on the South Side of Chicago for negroes; chairman of the Illinois Housing Commission; and chairman of the large scale operations committee of the President's Conference on Home Financing and Home Ownership.

Senator MORRISON. Do you favor the bill before us or do you oppose it?

Mr. STERN. I favor the bill if it reaches certain objectives which I would like to state. I come to this meeting not as a banker or real-estate operator nor as a mortgage broker. I am not connected with any insurance companies. These are all businesses which I only know about indirectly.

My point of view is mainly that of one interested in the economic and social aspects of housing. As chairman of the large scale operations committe of the President's housing conference I had a remarkable opportunity to be educated in many aspects of the general housing problem as related to single-family homes and urban housing, apartments, as well as homes.

As regards the bill, as I stated before. I do not know enough yet about what its ultimate results will be. In other words, what it will accomplish is not entirely clear to me from listening to the discussion this morning.

It seems to me that there is a definite need for the holders of mortgages on homes, especially in the smaller communities where the banking facilities are limited, to be protected against the foreclosure proceedings that are going on at such a tremendous rate.

Senator WATSON. Are they going on at such a rate?

Mr. STERN. I am so informed.

Senator WATSON. In instances with which you yourself come into immediate contact?

Mr. STERN. Not directly. I am told though that the possibility of getting renewals of mortgages is extremely limited, and that insurance companies are holding rigidly to the terms of the mortgage, and that building and loan associations, to meet demands from banks and insurance companies have had to foreclose.

Senator WATSON. Do you come in immediate contact with building and loan associations?

Mr. STERN. No, sir; not directly.

I think though that some instrumentality should be set up whereby the home owner who has a mortgage and who is in a sound position so far as his business is concerned should be able to renew and get a long-term amortization basis.

Also, I am told that in many cities, and the smaller communities particularly, the loan-banking building and loan associations are being drawn on heavily for their savings deposits, and that they in turn are closing down on mortgage holdings. That situation is of an emergency nature, and if this bill is going to relieve it, it seems to me, in itself to be a sound mechanism under able administration.