Mr. H. U. NELSON, MINNEAPOLIS REAL ESTATE BOARD, Secretary National Association of Real Estate Boards, January 14, 1932. Chicago, Ill. DEAR MR. NELSON: The board of directors of the Minneapolis Real Estate Board desires to express to the national association its approval of the efforts which the association has made to safeguard the provisions of the Federal home loan discount bank bill. This board expresses the earnest hope that the association will continue to guard the proceedings so that no pernicious features may creep into this bill. The Minneapolis Real Estate Board was greatly pleased by the recent visit of President Kissell and were greatly interested in what he told our board during his sojourn here. We appreciate this opportunity of becoming acquainted with a gentleman of such forceful and sterling character. Wishing you all success, we remain, Yours very respectfully, BOARD OF DIRECTORS OF THE MINNEAPOLIS REAL ESTATE BOARD, By FRED. B. CHOATS, President. Whereas Harry S. Kissell, president of the National Association of Real Estate Boards, has given so unsparingly of his time, and in conferences with the President of the United States and other agencies on the rediscount central bank plan, and through his tactful, diplomatic, courageous, and yet forceful presentation of the situation has been instrumental in bringing about the administrative approval of the plan; and Whereas President Kissell has unquestionably advanced the standing of the National Association of Real Estate Boards and of realtors, generally, throughout the country by his untiring efforts in behalf of real estate and, particularly, in behalf of the rediscount bank plan which is now before Congress: Now therefore be it Resolved, That the Chicago Real Estate Board unanimously commends Mr. Kissell for his splended and distinguished service in promoting this most important legislation, which will have a very beneficial effect for the betterment of real estate. THE OHIO ASSOCIATION OF REAL ESTATE BOARDS, Columbus, Ohio, January 19, 1932. HARRY S. KISSELL, President National Association of Real Estate Boards, St. Louis, Mo. DEAR HARRY: The executive committee of the Ohio Association of Real Estate Boards in meeting assembled, at Columbus, hereby express by resolution its appreciation of the splendid services rendered and record achieved by you during your incumbency as president of the National Association of Real Estate Boards. We are especially mindful of the splended achievements at Washington in connection with the various conferences called by President Hoover and especially in connection with the proposed establishment of agencies for the refinancing of real estate. Resolutions were also adopted requesting the officers of the Ohio Association of Real Estate Boards and of its local boards to urge upon their respective representatives in Washington immediate action on this proposal. W. W. WHEATON, Secretary. Sincerely yours, STATEMENT OF WARD B. WHITLOCK, VICE PRESIDENT SECURITY IMPROVEMENT BUILDING & LOAN ASSOCIATION, SPRINGFIELD, ILL. Senator WATSON. Please give your name to the reporter. Mr. WHITLOCK. W. B. Whitlock. Senator WATSON. Where do you live? Mr. WHITLOCK. Springfield, Ill. I am vice president of the Security Improvement Building and Loan Association. Senator WATSON. You have studied this bill, have you? Senator WATSON. That is so of a lot of us. I wish you would give your opinion about it, as quickly as you can, because we are compelled to leave. Mr. WHITLOCK. I would like to tell you something about this bill as affecting my own association. I am also secretary of the Building and Loan Association League of Illinois, an organization representing 700 of the building and loan associations in the State. Senator WATSON. The Building and Loan League? Mr. WHITLOCK. Yes; the Building and Loan League. We have an association in Springfield of $4,750,000, 90 per cent or more of it on loans on homes in Springfield. Last Friday when I left, we had 250 loans on our books that were from one month to more than a year past due-defaulted in pay ments. Senator WATSON. What do you do with those? Mr. WHITLOCK. God, I wish you would tell me what to do with them. Senator WATSON. What are you doing with them? Mr. WHITLOCK. We are trying to refinance them the best we can. We are trying to do anything that we can do to avoid foreclosure. If we go in and foreclose 200 loans, you know what that is going to do to Springfield and the State of Illinois. That is typical of the associations all over the State. Senator WATSON. They are all in that condition, you say, more or less? Mr. WHITLOCK. There are always some exceptions. Senator WATSON. I say, more or less? Mr. WHITLOCK. More or less: yes. We have an association at Danville with $7,000,000, and they probably have $1,000,000 worth of real estate on hand now. Senator WATSON. In the form of foreclosures, where they have taken over the properties? Mr. WHITLOCK. Foreclosures. Some have been voluntarily deeded to it. If they foreclosed all that they could under the law, they would probably have another $1,000,000 worth on their hands. We have had six associations during the past year that have had to go into voluntary liquidation on account of the accumulation of homes for which there is no demand. Our organization as a whole is not to blame for this condition, because we could sit still and function, but what about the poor devil who has money in our institution and who needs it? He has lost money in the bank, probably. He is out of employment, and he needs a place. I do not think, as a rule, now, we need a lot of new homes right now, but as soon as this boy can get work, he is going to get out from under the wing of his mother-in-law and get a home of his own. Within a short time, we are going to need new homes to take care of these people that are huddled together in one home. Senator WATSON. Do you think this is a financially sound institution? Mr. WHITLOCK. Yes, sir; I do. I am for it, and I would like to take out stock in it to-day, for my association. Senator WATSON. That is the best proof of your faith. Senator WATSON. I would like to ask you some questions, but I have not time. We are very much obliged to you. Mr. WHITLOCK. I would be glad to come back and answer anything that would be of any value to you. Senator WATSON. Is there anybody else who wants to be heard to-day? (No response.) What I intend to do is this. I want to get all the members of the subcommittee together, and probably have two whole days devoted to further hearings, as soon as we can get to it. I want to have some of the strongest men on both sides here to testify, and then have a free-for-all and let everybody ask questions all the way through, and just fight it out right here in the presence of the full committee. That will develop the strength of the opposition and the strength of the proposition. In that way we can finally come to some conclusion about the matter. Mr. WHITLOCK. I think, if you can stop bank failure in Illinois, probably we can work ourselves out, but we are going to need some help to get started. Mr. NELSON. Senator, if you are going to do that, can you advise us when that will be? These men here are all busy men, of course, and they are from distant cities. They can not just roost here in Washington. Senator WATSON. We will adjourn, then, subject to my call. I will let you know. Before we adjourn, I would like to place in the record a telegram which the committee has received from Hugo Porth, of Ed. Porth & Sons, Milwaukee, Wis. (The telegram referred to is as follows:) GIBBS W. SHERRILL, MILWAUKEE, WIS., January 25, 1932. Assistant Secretary Banking and Currency Committee, Washington, D. C. The writer has been actively studying the Federal home bank since the bank. was proposed at the Baltimore Convention of the National Association of Real Estate Boards. Attended this convention as president of Milwaukee Real Estate Board and entered discussions in general meetings and mortgage and finance division. Attended sessions of board of governors of Mortgage Bankers of America at Chicago, New York, and Dallas. Was member of committee of five for Mortgage Bankers of America to study this subject. Attended Hoover home conference and devoted time to study of this subject. We oppose the plan because we fear the further infiltration of governmental dictation into the life and labor of the American people. We oppose the issuance of any additional tax-exempt securities. The proponents of this bill call attention to foreign central mortgage banks. A study of the market of bonds issued by these banks present a sorry picture. The proponents lay stress upon the foreclosure situation. Milwaukee has had a great increase in foreclosures during the past few years. There has been a plentiful supply of money for mortgage loans. Milwaukee situation disapproves theory that the home bank will relieve foreclosure situation. Only the ability to earn interest and taxes will relieve foreclosure situation. HUGO PORTH, ED PORTH & SONS. (Whereupon, at 12 o'clock, noon, the subcommittee adjourned, subject to call of the chairman.) CREATION OF A SYSTEM OF FEDERAL HOME LOAN BANKS MONDAY, FEBRUARY 15, 1932 UNITED STATES SENATE, ON BANKING AND CURRENCY, Washington, D. C. The subcommittee met at 10 o'clock a. m., in the hearing room of the committee on Interstate Commerce, the Capitol, pursuant to call of the chairman, on Monday, February 15, 1932, Senator James E. Watson presiding. Present: Senators Watson, Townsend, Couzens, and Bulkley. Senator WATSON. The committee will be in order. There are a number of witnesses here, as you all observe. The committee plays no favorites, but takes the witnesses just as the secretary has made out the list. He has made out a list, and we will follow the list and there will be no use for any of you to come to me to ask that you be put on first, unless you are sick, in which case you have no business to be here; or some member of your family is sick and you have to go home. I hope there will not be a breaking out of sick ness. The first witness is Mr. Walter S. Schmidt. You may come forward, Mr. Schmidt, and sit right down. STATEMENT OF WALTER S. SCHMIDT, REPRESENTING THE NATIONAL ASSOCIATION OF REAL ESTATE BOARDS, CINCINNATI, OHIO Senator WATSON. Will you give your name to the committee? Senator WATSON. And you are from Cincinnati, Ohio? Mr. SCHMIDT. Yes, sir. Senator WATSON. What do you represent? Mr. SCHMIDT. I represent the National Association of Real Estate Boards. Senator WATSON. What is that? Mr. SCHMIDT. That is an association of realtors, men engaged in the real estate business, a National association, comprising both men who are active in the brokerage business and in the management field, and also owners of real estate, a total membership of about 42,000. Senator WATSON. There is a national organization, is there? Mr. SCHMIDT. Yes, sir. Senator WATSON. What is the object of that organization? Mr. SCHMIDT. The object is to improve methods and real-estate practice. Senator WATSON. You are located in Cincinnati? Mr. SCHMIDT. Yes, sir. Senator WATSON. Do you represent, in any wise, a building and loan association? Mr. SCHMIDT. Not at this time. I was president of one. Mr. SCHMIDT. During the European war. Senator WATSON. But not since that time? Mr. SCHMIDT. Not since that time. Senator WATSON. Now you may proceed with any statement you care to make, Mr. Schmidt. Mr. SCHMIDT. I would like to make just a brief affirmative statement, gentlemen of the committee, as regards this bill. We feel that it is a matter of permanent necessity to create such an agency as that proposed. We feel that there is a distinct gap in our financial structure which makes that creation necessary. Senator WATSON. When did that become noticeable? Mr. SCHMIDT. It has been noticeable at various times in the past, and the present emergency merely has pointed the weakness; some two years ago the conditions began to make the necessity even more noticeable. Senator COUZENS. When, prior to that date, did you first notice it! Mr. SCHMIDT. It has always been a noticeable fact that mortgage money on homes was more expensive than any other type of conservative financing. Business loans have been securable at from 5 to 512 per cent when money was easy, but home mortgages have been at 6 per cent or more. Senator TOWNSEND. You think this legislation should be permanent and not temporary? Mr. SCHMIDT. Most decidedly so. Senator BULKLEY. When you say there has been a difference in cost of loans, has that not been dependent on the percentage of value that is loaned on the mortgage? Mr. SCHMIDT. In part; but mortgage money on home loans has always been at least 6 per cent in almost any section of the country, and it runs up to 8 or.9 per cent in various sections. Senator BULKLEY. Even on a 50 per cent loan? Mr. SCHMIDT. Even on a 50 per cent loan. Senator WATSON. Why is that? Has it not always been regarded as one of the safest assets, to loan on real estate? Mr. SCHMIDT. It is the safest asset, and experience proves that; but, of course, the amount is small, and the market conditions govern the situation. Senator WATSON. Mr. Schmidt, what is the situation now that emphasizes the necessity for this legislation? Mr. SCHMIDT. The situation now is that because of the nonliquidity of mortgages; the fact that they are not good collateral for loans; and the fact that they are not salable since private money has entirely disappeared-because of these facts a frozen condition exists in banks and building associations, which results in their inability to pay depositors; the need of cash then causes foreclosures, for the reason that banks require their money and when mortgages are due |