Mr. MONKS. At Columbus, Ohio. Senator WATSON. How many bankers attended the meetings? Mr. MONKS. There were representatives from the nine districts that the State is redistricted into. Senator WATSON. And you discussed this bill in all its phases, did you? Mr. MONKS. Yes, sir. Senator WATSON. Now, give us your conclusions and your present opinion. Mr. MONKS. I first want to say that I want to correct an impression that has gone out from here that the Ohio Bankers Association and certain Ohio bankers have approved this bill as it is. When the President's statement as to a Federal home loan bank bill came out in November we had meetings and discussed all phases of it, and approved such a bill to be acted upon. The first bill that came out, I think, was your bill, 35, and upon it they had meetings and approved it. There were certain parts of it that they were opposed to. When the present bill came out, 2959, we were opposed to many sections of it. We have taken that bill and gone over it very carefully, and have some amendments that we would like to suggest in that bill if you want to listen to them. Senator WATSON. Certainly we want to listen to them. That is just what we are here for. Now give your first amendment, and tell where it is, and tell why you believe in it. You leave us copies of all these proposed amendments, Mr. Monks. Mr. MONKS. Yes, sir. The first objection we have is on page 4. starting with line 6, paragraph. (2). We are opposed to this paragraph for two reasons. First. That it would exclude any kind of mortgage loans but longterm loans. Second. It leaves to the judgment of the board whether savings banks, trust companies, and other banks can become members of a Federal home loan bank. To correct this we recommend that it be changed as followsSenator WATSON. What is a long-term loan, in your judgment, Mr. Monks? Mr. MONKS. Well, Senator, the longest term loan that I know of that is recognized now is made by the Metropolitan Insurance Co. and some of the other insurance companies, which is for a term of 15 years. If it is a 50 per cent loan they require no amortization the first two years. If it is a 60 per cent loan, they demand amortization right from the start. We recommend that you strike out lines from 4 to 11, inclusive, being subsections (1), (2), and (3), and rewrite as follows: SUBSECTION (1). Building and loan associations, cooperative banks, and homestead associations; That is as it reads now. (2). Savings banks, trust companies, national banks, and other banks; and (3). Insurance companies. That is as it is now. Senator WATSON. You leave No. (2) as it is? Mr. MONKS. No; No. (1) as it is. Senator WATSON. No. (1) as it is? Mr. MONKS. No. (1) as it is. Senator WATSON. And No. (2) "Savings banks, trust companies, national banks, and other banks "? Mr. MONKS. Yes. Senator WATSON. Tell us why you want to strike out all the language previous to "Savings banks" in (2). Mr. MONKS. Let me go on. Mr. MONKS (reading): No. 4. Such other financial institutions whose time deposits and financial condition in the judgment of the board warrant making home-mortgage loans. Senator WATSON. Yes. Mr. MONKS. I have stated our reasons for objecting to it as it is. We do not believe if this is going to help the savings banks, the trust companies, the national banks, and other banks, that any board. should say whether they are to have relief under this bill. This bill should explicitly state when it is passed that this class of institutions, financial institutions, is to have relief, and be given the same consideration as everybody else under this bill. Senator BULKLEY. Banks and trust companies should be in absolutely without any qualification? Mr. MONKS. Absolutely, without anybody passing judgment on it. Senator COUZENS. What is your objection to the term of the mortgage? Mr. MONKS. I beg your pardon, Senator? Senator COUZENS. What is your objection to having only longterm loans in there? Do you want to rediscount two and three-year mortgages! Mr. MONKS. Senator, I will come to that a little further on, if you will please wait a minute. Senator COUZENS. Yes. Mr. MONKS. Page 5, line 8, we believe that 1 per cent should be changed to one-half per cent. We are of the opinion that 1 per cent is too high an entrance fee for a large number of the smaller banks and loan companies, and might be the cause of them being kept out of the system. To correct this we recommend that it be changed to read one-half of 1 per cent. Senator WATSON. One-half of 1 per cent? Mr. MONKS. One-half of 1 per cent. On page 11, lines 6, 7, and 8, they now read: Directors of classes A, B, and C, whether appointed or elected, shall be chosen from among persons connected with the home-financing business. We have no idea what the definition or the construction would be on "home-financing business." So we recommend that starting with line 22 on page 10, section (c), that be cut out. Senator WATSON. Will you say that over again? My attention was attracted away from what you said for a moment. Mr. MONKS. Starting on page 10, section (c), cut it out. On page 11, section (d), cut it out. Lines 1 and 2 on page 12, cut them out. And in its place we recommend, as follows: (c) Nine of such directors, three of whom shall be known as class A directors, three of whom shall be known as class B directors, and three of whom shall be known as class C directors, shall be first appointed by the board and shall serve until the end of the calendar year 1932. Their successors shall be elected as provided in subsection (d)— which follows here. Senator WATSON. Yes. Mr. MONKS (continuing reading): and of such successors first elected one of each such class shall serve for one, two, and three years, respectively. Thereafter all such directors shall serve for three years. Section (d). Senator WATSON. Just a moment. You just strike out, then, lines 6 and 7? Mr. MONKS. No. I am giving you (d) now, Senator Watson. (d) The board shall divide the members of each of the Federal home loan banks- Senator WATSON. Let me get you, Mr. Monks, please. I thought beginning with line 22 on page 10 you decided that you would amend section (c) so as to leave that all in down to line 6 on page 11. Am I right about that, or do you cut out the whole section? Mr. MONKS. Cut out the whole thing, and then rewrite it in this kind of a way. Senator WATSON. Yes. Mr. MONKS. Which virtually follows some of the language that is in the present section. It naturally would. (d) The board shall divide the members of each of the Federal home loan banks in two groups Senator TOWNSEND. Instead of three? Mr. MONKS. Yes, sir. [Continuing reading:] The board shall divide the members of each of the Federal home loan banks into two groups which shall ge designated as A and B, which groups shall represent respectively and as fairly as may be, the large and small members, the size of such members to be determined according to the net value of their holdings of home-mortgage loans. The board may revise the membership of such groups from time to time. Class A and class B directors, whether appointed or elected, shall be chosen from the officers or directors of the member institutions. Class C directors, whether appointed or elected, shall be chosen from among persons actively engaged in commerce, agriculture, or some business, or industrial pursuit. Each member shall be entitled to nominate a suitably qualified person for election as director of the class corresponding to the group to which such member belongs and one suitably qualified person for election as a director of class C. The directors of each class shall be nominated and elected in accordance with such rules and regulations as may be prescribed by the board. Now here are our reasons for changing this. You will note from the above that we have eliminated class C directors from the membership and substituted therefor members drawn from those actively engaged in commerce, agriculture, or some other business or industrial pursuit. This set-up follows somewhat the Federal reserve act which has worked very satisfactorily. The group C directors would be expected to furnish an outside viewpoint on general business condi tions which would, we believe, be very helpful to the management of all the banks in determining business policies. Furthermore, these directors could be generally regarded as representing the public interest when the time came to offer the bank's debentures in the market. On page 15 strike out lines 3 to 7, inclusive, and rewrite as follows: (1) If secured by a home mortgage given as security for an amortized home mortgage loan having a maturity date not exceeding ten years, the advance may be for an amount not in excess of 60 per cent of the unpaid principal of the home mortgage loan. Senator WATSON. You have no objection, then, to the 60 per cent? Mr. Monкs. No, sir. Our reasons for this, Senators, are that we can see no justification for a specified time the mortgage has to be drawn for to qualify. Any good mortgage, be it a short-term mortgage or a long-term mortgage, should be eligible for advances to be made upon it. I think, Senator Couzens, that answers your question, does it not, that you asked a moment ago? Senator CoUZENS. Yes. Senator TOWNSEND. I thought you had a limit of 10 years in there? Mr. MONKS. Up to 10 years. Senator WATSON. You are not making the term 10 years, are you? Mr. MONKS. No; anything less than 10. Senator WATSON. I see. Anything less than 10. You would not go beyond 10. Mr. MONKS. Well, it is perfectly proper for you to go beyond, but I can not see why the original term should be eight years or more. That is what we object to. Senator WATSON. Yes. Mr. MONKS. We say that any mortgage that is a good mortgage, whether it is a short-term mortgage or a long-term mortgage, should have the advantage of this law when it is enacted, if this bank becomes operative. Mr. O'BRIEN. Just a moment, Mr. Monks. Do you mean that in the case of mortgages running for more than 10 years they are to have some other figure? Mr. MONKS. What is that? Mr. O'BRIEN. Mortgages with maturity dates of more than 10 years, are they to get higher or lower discount rates? Mr. MONKS. Well, that is for the committee to decide. Mr. O'BRIEN. I was interested in Mr. MONKS. We are putting this in here on a 10-year basis at 60 per cent. Mr. O'BRIEN. Well, how about those more than 10 years? What do they get? Anything? Mr. MONKS. We would see no objection to a 15-year mortgage. Mr. MONKS. Along the same line as your insurance companies are now. If they are 50 per cent mortgages, started to be amortized in two years; if they are 60 per cent mortgages, to be amortized immediately. Mr. O'BRIEN. How much would your idea be that they should get? You say you are providing specifically that mortgages running 10 years or less shall get 60 per cent. Now, have you any provisions about mortgages running more than 10 years, or are you just omitting them from the bill? Mr. MONKS. Why, if they run longer than 10 years, instead of loaning them 60 per cent you could cut that down to some other figure if you see fit. On page 15, line 18, where it tells about that they are not to take mortgages that run more than 20 years, we question the wisdom of taking 20-year mortgages as collateral without some provision being made for reappraisals. Many districts in the larger cities experience great changes in far less time than 20 years, and values decrease rapidly. Furthermore, many of the buildings as constructed to-day will have very little value in 20 years unless they are kept right up to the minute during this period. We have always figured that the best part of a building is its first 10 years. After 10 years it starts to deteriorate and it is on the down grade. And unless there is a lot of money spent to keep it right up to date it soon goes to rack and ruin. Line 20, where it says three-fourths of the appraised value, we think should be made 60 per cent. Senator WATSON. How much? Mr. MONKS. Sixty per cent. Line 22, where it says 60 per cent, we think it should be made 50 per cent. And our reasons are, as above stated, on account of the deterioration. Senator WATSON. What have you written there about a reappraisal? Mr. MONKS. We question the wisdom of taking 20-year mortgages as collateral without some provision being made for reappraisals. Page 16, line 23. You have, in fact, to start on line 21 to get the sense of that paragraph, to get what I want to tell you there. [Reading:] At no time shall the aggregate outstanding advances made by any Federal home-loan bank to any member exceed 12 times the amount paid in by such member for capital stock subscribed for by it. Inasmuch as we recommended over on page 5 that 1 per cent be changed to one-half per cent, we think it would be wise if on page 16 that that was all cut out. That is, starting— At no time shall the aggregate outstanding advances made by any Federal home loan bank to any member exceed twelve times We think that all ought to be cut out. That that ought to be left to the discretion of the board. I think I can show you why. For instance, a member pays $2,500 entrance fee. Take our own case, for instance. We have got $36,000,000 worth of mortgages in the Guardian Trust Co. Let us say that half of them are eligible. That would mean that on a 1 per cent basis we would pay $180,000 in there, if half of those were eligible. That would make $182,500 that we would have in capital in the bank. If we could only borrow twelve times that amount, it would not amount to a larger sum. Now, if we cut that to one |