Mr. Scorr. I will say this, Senator, that there are a few whose demands for withdrawals are pressing them somewhat; but we have the same protection in that State as in almost every other State in the Union, that after the shareholder serves a 30-day notice of withdrawal and the 30-day period has expired, if your withdrawal commitments at that time are more than 50 per cent of your monthly receipts and you hold your withdrawal payments to that 50 per cent and follow the law strictly and not try to imitate a bank, paying it on demand, the building and loan associations can never be in distress even from the withdrawal standpoint.

Senator WATSON. What about the monthly payments?

Mr. SCOTT. The monthly payments have fallen off quite appreciably; I would say, 40 per cent.

Senator WATSON. Where men have borrowed and are paying so much a month on the loan, are they defaulting to amount to anything?

Mr. Scort. As I have stated at the outset, the collections are better this year than they were a year ago.

Senator WATSON. Does that mean that they are many or few or none? "Compared with a year ago" does not mean anything unless you have the figures.

Mr. SCOTT. The associations up there are paying 5, some 512, and one or two 6 per cent to the shareholders. That means that by the loan payments they have been able to pay that rate of return to the shareholder after paying the cost of operation and after meeting the contingent reserve fund requirements of the law; because we can not pay dividends out of interest earned but not collected.

Senator, WATSON. Do you have maturing stock? When it matures, is it paid by stock issued?

Mr. SCOTT. Yes.

Senator WATSON. Is that taxable in Minnesota?

Mr. SCOTT. It is not, because of the fact that we have a mortgageregistry tax, and the State tax commission has ruled that inasmuch as all of the money invested in a building and loan association is immediately loaned out on a mortgage on which the registry tax has been paid, the building and loan association must be exempt, or it would be double taxation.

Senator WATSON. Has that been tested in the courts?
Mr. Scort. Not in Minnesota.

Senator WATSON. Is there anything else that you desire to say? Mr. Scorr. Just this, that on January 18, 1932, the Department of Commerce sent out a circular letter to building and loan associations to secure their reaction as to this particular proposed legislation, but they did not send a copy of the new amended act. I merely suggest that if you want to get from the building and loan associations a true reaction, Mr. Building and Loan Man should receive from the Department of Commerce a copy of the act before he is asked to express his opinion on it.

Senator WATSON. It would look as if that would be the natural process. I would not want to ask a man to pass on something that he had never seen.

(Witness excused.)

STATEMENT OF B. C. HARDENBROOK, VICE PRESIDENT IN CHARGE OF THE BANKING DEPARTMENT OF THE FIRST NATIONAL TRUST & SAVINGS BANK, AND VICE PRESIDENT OF THE FIRST NATIONAL BANK OF CHICAGO, CHICAGO, ILL.

Senator WATSON. You represent a financial concern whose solvency and stability is never in question. I congratulate you. Mr. HARDENBROOK. Thank you, sir.

Senator WATSON. That is a rare distinction. You represent Mr. Traylor's bank?

Mr. HARDEN BROOK. Yes, sir.

Senator WATSON. Your business in connection with that bank is what?

Mr. HARDENBROOK. I have been connected with it for 41 years, and I think I have done almost everything.

Senator WATSON. What are you doing now?

Mr. HARDENBROOK. I am vice president in charge of the banking department of the First National Trust & Savings Bank; also in charge of the real estate department. I am also vice president of the First National Bank of Chicago, doing whatever I am told to do. Senator WATSON. Mr. Hardenbrook, you are a banker and accustomed to loans and all that sort of thing, and mortgages in the city of Chicago, and have been for years and years?

Mr. HARDENBROOK. Yes, sir. I have lived there all my life. Senator WATSON. Give us a statement about this bill as you see it and understand it.

Mr. HARDENBROOK. I am opposed to it. I might say "we are opposed to it, because if I understand it, the real purpose of this bill is to permit people to acquire homes.

Senator WATSON. To keep the homes which they have already acquired under mortgage. It is supposed to be an emergency proposition and a permanent proposition.

Mr. HARDENBROOK. I would like to conclude my sentence by saying that it does not accomplish it if that is the alleged purpose of the bill.

As to retaining homes, I have heard a lot of talk about foreclosures and that the banks are calling loans and insisting upon their repayment and that the borrowers are unable to refund elsewhere, and they are doing this because they are trying to keep their assets liquid.

In our State it takes us, at a minimum, 18 months to foreclose a loan, and it will probably be closer to two years, if not two years and a half, before we acquire title. We are certainly not maintaining our liquid condition by foreclosing loans. We can not do anything with it after we get it foreclosed.

Senator WATSON. How many loans on homes have you got in your bank?

Mr. HARDENBROOK. That I can not answer.

Senator WATSON. Many?

Mr. HARDENBROOK. Yes; quite a few.

Senator WATSON. Paid directly by the bank to the home owner? Mr. HARDENBROOK. No; not directly. We were never able to develop a counter contract with our home owners. That is done largely through our outlying banks.

Senator WATSON. It is done through a system of rediscount by your bank?

Mr. HARDENBROOK. Purchase rather than rediscounting.

Senator WATSON. Do you rediscount any building and loan securities?

Mr. HARDENBROOK. The First National Bank loans to building and loan associations as it would to any other enterprise.

Senator WATSON. On their securities?

Mr. HARDENBROOK. Probably on their securities in some instances; certainly on their name.

Senator WATSON. Do you know in value how many of those loans you have in the First National Bank?

Mr. HARDENBROOK. I am sorry, but I do not.

Senator WATSON. Have you ever had any trouble with them on account of lack of payment?

Mr. HARDENBROOK. I can only cast my mind back and say that in 1893 to 1896 we had a great deal of trouble. We have not had any recent trouble. We had trouble with real estate at that time, and I think other large cities had. I know we had plenty of it in Chicago. Senator WATSON. You have plenty of trouble of other kinds? Mr. HARDENBROOK. Along with that.

Senator WATSON. Did you ever discuss this bill with Mr. Traylor? Mr. HARDENBROOK. Frankly, no. I think he left it to me to express my own opinion. I do not think, however, that that opinion is at all at variance with Mr. Traylor's.

Senator WATSON. Could you revamp this bill or rewrite it so as to make it effective for its purpose?

Mr. HARDENBROOK. I would not care to, Senator, at the present time; no. At present I can see no necessity for this bill, that is, for its alleged purpose, at this particular moment. I have heard a great many statements made this morning in reference to this bill and how it could be amended. Mr. Adams, for instance, has a scheme that might work.

Senator WATSON. I do not know his scheme, as you call it, is. We will get to that later.

Mr. HARDENBROOK. I want to say that I am not making this statement as a self-serving statement, but as a general statement that I should think most intelligent people could realize. We are trying to overcome a depression, if possible. That, I presume, means lack of work, lack of business, and also means a steady dropping of prices. We certainly have had a dropping of prices without any question, and I do not know of any particular line that is not affected. If it were possible, which, in our opinion it is not, to stimulate home building by this act, it would just create more vacancies than we have at the present time in our present real-estate housings.

Senator WATSON. Are you overbuilt in Chicago?

Mr. HARDENBROOK. Absolutely.

Senator WATSON. In the home phase?

Mr. HARDENBROOK. Probably not as much in the home phase of building, although I would question very seriously the statement that there is a 5 per cent vacancy in a survey of 32 cities. I think those figures are not correct

But suppose we could build homes under this plan: that means vacancies somewhere else, and that means lowering of rents. If you

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 busi

ness.

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 a 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, indeed.

(Witness excused.)

STATEMENT OF OWEN M. MURRAY, PRESIDENT MURRAY INVESTMENT CO., DALLAS, TEX.

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 those 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 62 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 22 per cent of the principal semiannually.