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lower your rents you depreciate the value of the properties, because they must pay some return, and you simply would destroy values instead of stabilizing them. It is inevitable.

The other side of the picture is that I do not care whether you enact this legislation now or 10 years from now; it is not going to accomplish what you are attempting to do. It is certainly not going to do it at the moment. People are not going into the building business.

Senator Watson. As a banker do you think that 12 banks situated as these will be, can be placed on a sound basis through this sort of financing ?

Mr. HARDENBROOK. I thought the Federal land banks could, and I thought the joint-stock land banks could, but I was mistaken. I do not see why not, but in operation it has not worked out that way.

Senator WATSON. Of course, administration has a good deal to do with those things.

Mr. HARDENBROOK. Yes; but you can not attack the administration of your joint-stock land banks; you can not attack the administration of the Federal land banks successfully. I think they honestly tried to do a good job. We ran the joint-stock land bank, as you probably know. We ran two of them, and we have never taken à penny out of either bank; and we are not in much better shape than the fellow that paid dividends.

Senator WATSON. Is that all you want to say?
Mr. HARDENBROOK. I will say anything you want me to, Senator.

Senator Watson. I do not want you to say anything. You are a witness. I am just listening.

Mr. HARDENBROOK. I was asked to come down and express my opinion, and I think I have fully covered it.

Senator WATSON. Who asked you to appear?

Mr. HARDENBROOK. I think Mr. Sherrill asked Mr. Traylor to appear. He was unable to do so, and he suggested that I come.

Senator WATSON. Yes; that is right. We are glad to have you, jndeed.

(Witness excused.)



Senator WATSON. Where do you live, Mr. Murray?

Mr. Murray. Dallas, Tex. I am president of the Murray Investinent Co., of Dallas.

Senator Watson. What is your capital?
Mr. MURRAY. $100,000.
Senator WATSON. How old an institution is it?

Mr. MURRAY. The Murray Investment Co. was organized in 1908 by myself, Owen M. Murray, in a little town of 200 people, with a capital of $20.

Senator Watson. You are getting down to my class. I might start an institution like that.

Mr. MURRAY. I am wondering, Senator, if I still have the $20. Senator WATSON. How long have you been president of it?

Mr. MURRAY. I operated as an individual from 1908 until 1921. In 1921 I was incorporated. It is all my business.

In appearing before you, Mr. Chairman, I think I should apologize for the fact that

Senator WATSON. How much business are you doing, Mr. Murray?
Mr. MURRAY. I have $8,000,000 of loans.
Senator WATSON. What are they on?

Mr. MURRAY. About 50 per cent are on farms occupied by the owners at the time the loans were made, and 50 per cent are city loans.

Senator WATSON. And your city loans are on what-homes, usually?

Mr. MURRAY. Ninety-eight per cent, I would say, are on homes.

Senator WATSON. And 50 per cent of your entire business is on city homes?

Mr. MURRAY. On city property; and approximately 50 per cent on farm property.

Senator WATSON. What is the condition of thiuse loans on city property now?

Mr. MURRAY. Unusually good, considering the conditions. Out of that volume there is less than $4,000 delinquent in interest and principal. The foreclosures have been exceedingly light.

Senator WATSON. Is that because you have simply tided them over, or because there was no necessity for foreclosure ?

Mr. MURRAY. We have urged payment. We have urged borrowers to keep their payments up to date, because nothing discourages a home owner in meeting his payments as much letting him get a lot of payments behind. He will say, “I owe so much that I can not keep up.” It was necessary to use a great deal of forbearance, and we have done so. Mortgages have never been foreclosed as long as the borrower would take any interest in the property whatever.

Senator WATSON. You do not operate a building and loan association ?

Mr. MURRAY. No, sir.

In fact, it has been our policy to always make the borrower quit the job first; in other words, as long as he would stay on the job and pay as much on his property as a normal rent would amount to, or if he would pay us as much money as he would have to pay, or probably a little less than he would have to pay, for similar accommodations if he were renting any other property.

Senator WATSON. What is the average loan that you make to the home builder in your country?

Mr. MURRAY. Approximately $4,000, taking it straight through. Senator Watson. What is about the highest that you loan?

Mr. MURRAY. $12,500 is the maximum loan we have on any home; and they are greatly in the minority. I would say that there are not more than ten loans that exceed $10,000.

Senator Watson. What is the rate of interest?
Mr. MURRAY. The average I would say is 61/2 per cent.
Senator Watson. Do you have amortized loans ?
Mr. MURRAY. Almost wholly.
Senator WATSON. And the payments are kept up accordingly?

Mr. MURRAY. We have some farm loans, but they are amortized also at the rate of usually 21/2 per cent of the principal semiannually. But the large majority of the loans are fully amortized over a period of 10 to 15 years.

Senator WATSON. Give us your opinion of this bill, Mr. Murray.

Mr. MURRAY. I have a selfish interest in this bill, by reason of the fact that I want to protect the investors who have purchased my loans. If this new bill will do what it is suggested it will do, that is, cause the building of a great number of new homes, it will only add to the present vacancy. Any time we create one vacancy or two vacancies in a city block we necessarily reduce rental value of all other properties in that block. Every time we foreclose a mortgage and sell that property out, we have reduced the value of property in that block.

Senator WATSON. Do you take into account increase in population plus the desire on the part of a lot of people who live in apartments to get out and own individual homes?

Mr. MURRAY. Yes; but we find that we are having a great many people going to apartments because they want to get away from the trouble of owning a home. They like to give one check to the landlord and then they are through with it. They do not have to cut grass and water the flowers. It is a bad situation, but they can rent apartments cheaper than they can own a home, and use the rest of the money for buying an automobile.

Senator WATSON. So the desire for the individual home, in your judgment, is not as great as it once was? There are a lot of young people getting married who are quite content to live in apartments?

Mr. MURRAY. Yes. That is a situation which confronts us and which we admit is a bad one, but it is a condition and not a theory. We are confronted with that every day.

I think the bill is bad, Mr. Chairman, by reason of the fact that it will help but very few business institutions. Any business such as mine will receive no benefit from this bill. Neither will we receive any bad effect, other than depreciating our securities. It will help the building and loan associations, but we have two types of building and loan associations. We have one type that declines to speculate. I believe the building and loan associations throughout Texas are collecting from their borrowers a rate of interest averaging around 9 per cent. I may be mistaken, but I think it will average that. If you permit those people to take a great bunch of those 9 per cent mortgages or 8 per cent mortgages and dump them into a Federal bank and discount those mortgages at 512 or 6 per cent, permitting them to make a 3 per cent spread or 312 or 4, you naturally cause a desire to speculate and take that money back to make more loans on inflated values, rediscount them and make a larger spread.

We have a conservative type of building and loan association which will not use this bank, because it is recognized, I believe, by all that it is not good policy for any institution to go out and hypothecate its assets for money to reloan. It is bad business for anybody to borrow money to make loans with. That is my opinion.

For temporary help I think the reconstruction bill is very fine. All of the companies that need temporary help can certainly get it from this new bill, but I can see no reason on earth why we should put up a permanent refinancing bill here for only a few companies when they can obtain the temporary relief that they need perhaps in the next 30 or 60 or 90 days.

Senator WATSON. Not knowing whether or not this bill could ever pass, or, if so, before what time, and anticipating that under the most favorable conditions it would have a rough voyage through Congress under existing conditions, after the passage of the other two acts, we undertook to write in a clause that would be helpful in the Reconstruction Finance proposition, just as you suggest.

Mr. MURRAY. I think that was very fine, Mr. Chairman.

Senator WATSON. It do not think it covered the whole situation that might be contemplated by this bill, but it at least partially relieved that situation.

Mr. MURRAY. This statement may seem a little strange, but from a careful observation it is my opinion that if you inflate your building to the extent of having an average of two dwellings, two vacant dwellings, in every city block throughout every city, you will find you have a reduction in your rental values from 10 to 20 per cent, because those two vacancies in each block will cause competition, and the tenants will say, “I can rent this house for $35," when they are paying $45 now. You will absolutely destroy your values.

I find a mistaken idea among many people who are in favor of this bill as to what the bill will provide. Before I left Dallas Saturday a good friend came to me and asked me if I was going to Washington, and when I said I was he said, “I hope you get that bill passed. I want to get a $10,000 loan on my property from the Government so that I can invest that money in certificates, because I can make 20 per cent discount.”

Senator Watson. What somebody thinks about it down in Dallas, Tex., has no relation to the merits of the bill.

Mr. MURRAY. No, of course not; but that is the sentiment over the country that this is going to be easy money.

Senator WATSON. We do not build up our financial structure on sentiment. We try to do it on the solid basis of reality.

Mr. MURRAY. I appreciate that; but I am trying to explain to you the sentiment among the people back home. The contractors are of the same opinion. They think that as soon as this bill passes they are going to build more houses.

The foreclosures that are being had at this time are wholly brought about by the fact that we were so liberal in our credits. We had loaned too much money. Values had depreciated to the extent that the owner had absolutely no equity in the property. If he has no equity now, this proposed bill would be of no value to him, because he could not borrow a hundred per cent on the value of the property; so he would not be benefited in the least.

We have had a lot of building and loan failures, but I do not think this bill would help them, because they are in liquidation. They are paying their stockholders almost nothing out of the liquidation. They do not have proper securities to go to this bank and get sufficient money to place them back on their feet, so it would be of no benefit to them.

It has been stated here that homes can not be refinanced at this time. That is not true in the Southwest. We have ample money and have had all the while for taking care of all loans that come to us on homes.

Senator Watson. Suppose we pass this bill: how would it interfere with your business? In other words, have you a selfish interest in opposing it?

Mr. MURRAY. Not a particle. I am glad you mentioned that. If this bill is passed it will help no one except the high-rate companies

Senator Watson. It would not benefit you?
Mr. MURRAY. It would not benefit me.
Senator WATSON. It would not harm you?

Senator Watson. Or interfere with your business or your future loans ?

Mr. MURRAY. Not a particle. I will use the example that this gentleman here has, a home. He wants a reasonable loan. He comes to me or to some other representative loan company. He can borrow 50 per cent of the value of the property at 6 or 612 per cent. Why, then, would he go to some bank that would reissue the paper throagh this proposed bank where he would have to pay 7, 712, or 8 per cent to get that money?

It will not affect our business, except that it might cause a few loans to be made at excessive amounts and cause extra buildings to be constructed where there is no need, and then reduce the value of properties that are already on the books.

It has been stated to-day that home owners will lose their homes on account of loans maturing and they can not be refinanced. I question that statement. I know of no insurance company or no local bank or private institution, such as my own, that is foreclosing any loan at maturity if we can persuade the borrower to sign renewal papers.

Senator WATSON. We have had quite a lot of testimony to that effect here. It may not be so in your immediate locality.

Mr. MURRAY. I can only speak for the small State of Texas. I know of many a case, including my own, where a borrower would become delinquent; he would have one or two semiannual settlements, and we would rewrite his loan entirely and start him off fresh and clean. That has saved many foreclosures. Where properties are being foreclosed they are being sold on long-time terms at 1 per cent a moņth, including interest and principal, interest at 6 per cent. This would prevent the building of new homes, because a man can go to any company that is foreclosing property and purchase property with almost no down payment. A 5 per cent payment would be acceptable immediately. Then he can pay the balance of it at 1 per cent a month, including interest at 6 per cent.

We can not see that this bill will do any one any good but in the long run it would be a detriment to every home owner in the country.

Senator Watson. Thank you, Mr. Murray.

Are there any further witnesses? If not, we will adjourn until 10.30 in the morning.

Mr. Rush. May I just rise to say a word, Mr. Chairman? I am Charles J. Rush, formerly executive secretary of the Texas Association of Real Estate Boards. In Texas our nominal interest rate is 8 per cent. My personal experience in San Antonio is that we

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