Mr. MYLANDER. I would think so-" building and loan association; member of Federal home loan bank."

Senator WATSON. Aside from these objections you have made, have you other objections to this bill?

Mr. MYLANDER. Of course, we want to go along with all the amendments Mr. Monks has submitted here, not only the formal amendments which he prepared, but the suggestions, some of which he gave yesterday, and some to-day. If you have rather wondered where they came from, Tom and I were together all last evening. Senator WATSON. I understand this was a major operation. [Laughter.]

Mr. MYLANDER. It was a major operation.

Senator MORRISON. Before you leave, I would like to ask you this question. Do you not think it would help commercial banking if there was provided some safe and sound way by which they could discount home-mortgage paper?

Mr. MYLANDER. That depends on two or three things. First, I do not believe that the purely commercial bank, Senator, which has nothing but demand deposits, commercial deposits, and checking accounts, to get it down to common, every-day language, has any business making any real estate mortgage loans.

Senator MORRISON. But, as a matter of fact, they do it all over the country, do they not, and you could not run a bank in most small communities without it?

Mr. MYLANDER. Even in our recent wildcat days, when we were living in the "New Era," I doubt if you will find that many strictly checking accounts were invested in mortgages. Most banks, National and State banks, of all kinds, have both checking accounts and savings accounts in the banks, and if the banker has invested in realestate mortgages, he has felt that he was investing his savings accounts.

Senator MORRISON. According to my recollection, a gentleman from Cleveland, in your State, testified that his bank had $35,000,000 invested in these mortgages.

Mr. MYLANDER. And I think that same institution, which is the one with which Mr. Monks is also connected, has much more than $35,000,000 in savings deposits.

Senator TOWNSEND. Are the savings deposits and the general deposits segregated in your State?

Mr. MYLANDER. No, sir; they are not in our State.

Senator MORRISON. There is not any law requiring them to be kept separate?

Mr. MYLANDER. No, sir. There is only one State that I know of where that is the case.

Senator MORRISON. But your idea is that the bank itself does, in making investments of the funds, keep in mind how much of it is from the savings accounts?

Mr. MYLANDER. The banker keeps in mind that he has received so many deposits. Part of those he must be ready to pay instantly, because somebody may write a check down in New York and draw out all of his deposits. That has to be invested in strictly liquid assets. On the other hand, there is a savings department, in which savings have been built up for years and years. You would be surprised at some of those savings accounts. They start with noth

ing, and they build up, and build up, and there is never a withdrawal.

Senator MORRISON. So, as I understand you, generally speaking, the banks in Ohio have only invested in paper eligible for rediscount at the Federal reserve bank?

Mr. MYLANDER. By no means. There is a lot of paper in which we invest that is not eligible for rediscount. The eligibility rules of the Federal reserve system are very strict as to the type of paper that is eligible for rediscount.

Senator MORRISON. That is what I have in mind. Would it not help the banks if this additional provision were made to create some more paper eligible for discount somewhere?

Mr. MYLANDER. That is exactly what I said, Senator. We are in favor of the principle of this bill, but not the form in which it is drafted.

Senator MORRISON. Very well. I have not any quarrel with you. I did not understand you.

Senator WATSON. By special request of Vice President Curtis the committee agreed to hear next Mr. Charles W. Thompson from Topeka, Kans.

STATEMENT OF CHARLES W. THOMPSON, PRESIDENT ÆTNA BUILDING AND LOAN ASSOCIATION, TOPEKA, KANS.

Senator WATSON. What is your name?

Mr. THOMPSON. Charles W. Thompson.

Senator WATSON. You live in Topeka, Kans.?

Mr. THOMPSON. Yes, sir.

Senator WATSON. What is your business, Mr. Thompson?

Mr. THOMPSON. The building and loan business.

Senator WATSON. How long have you been in it?

Mr. THOMPSON. From 15 to 18 years.

Senator WATSON. How are you connected with the building and loan association?

Mr. THOMPSON. I am president of the Etna Building and Loan Association.

Senator WATSON. How many Building and Loan Associations are there in Topeka?

Mr. THOMPSON. I think we have six.

Senator WATSON. How many are there in the State of Kansas? Mr. THOMPSON. One hundred and fifty-one or one hundred and fifty-two.

Senator WATSON. What is their general financial condition at this time?

Mr. THOMPSON. I should say that it is not anything like as good as it was two or three years ago. The people have been pulling out their savings, and using them, and for that reason they are not as full handed in the way of cash as they have been for some time. They have not been able to make any loans, I would say, for a year. Senator WATSON. You have not?

Mr. THOMPSON. No: we have not.

Senator WATSON. Why?

Mr. THOMPSON. We have not had the money to make loans and meet the demands for withdrawals.

Senator WATSON. And could not get the money?

Mr. THOMPSON. I would not say we could not get it. We could borrow money. Conditions in Kansas are such that building and loan associations can borrow money temporarily.

Senator WATSON. Borrow it from whom?

Mr. THOMPSON. The banks.

Senator WATSON. What assets have you on which you can borrow money?

Mr. THOMPSON. Our association has $18,000,000 resources. We have shrunk about $2,000,000 in the last two years. Some of that was due to a law that repealed the intangible law in Kansas, and left building and loan associations out on a limb, on an ad valorem tax, and there were a lot of people who could not afford to pay 31⁄2 or 4 per cent on their savings, who were not satisfied with that, of course; but before the session was over, they passed a law exempting our mortgages, which brought it down to where the associations could pay their own taxes, without burdening them, and the shareholders were not taxed.

Senator WATSON. It has been claimed for this bill that it would set up a permanent establishment of great value in the future, and also that it would meet an emergency, in that a very great number of borrowers on home mortgages are not able to carrry their debts and pay the monthly installments. Is there any of that in your country?

Mr. THOMPSON. Yes, sir.

Senator WATSON. How many mortgages has your building and loan association foreclosed in the last year?

Mr. THOMPSON. I could not tell you exactly, Senator. I think I can give you a fair estimate of it. We have about 10,000 mortgages. There is only one reason we have for foreclosing a mortgage, and that is to get possession of the property after the borrower can not carry it any longer. Kansas, as you know, has an 18-month redemption law, which operates very adversely to any lender, but we put up with that, and get along all right with it. I would say that we have had around 100 foreclosures.

Senator TOWNSEND. Out of 10,000.

Senator WATSON. How many have you been carrying along and not foreclosing, when you might have done so under the law? Mr. THOMPSON. A great many of them, Senator.

Senator WATSON. How do you deal with them?

Mr. THOMPSON. We operate a little differently. I do not know of anyone who operates just as we do. If a borrower gets delinquent, say five or six months-six months puts him in the foreclosure realm. We can not foreclose under the law until he is back six months on his interest and dues, or whatever his indebtedness is. We do this. We substitute. You understand that we have stock with our loans. Senator WATSON. Yes.

Mr. THOMPSON. It is hard for me to describe it. A lot of people do not understand the distinction. We call our loans amortized, although the stock is paid for, and eventually wipes out the loan. We substitute the stock, and credit all they have paid, with the earnings on the mortgage, and start them out with the new mortgage, a new 10-year loan, in other words, at a reduced amount of principal.

Senator WATSON. Are you required to do that rather frequently? Mr. THOMPSON. Yes. In the last two years we have done a lot of that. Of course, it is very helpful, because it reduces the monthly payments that they are required to make.

Senator WATSON. Are your loans generally made to men who work on the railroads, or clerks, or business men?"

Mr. THOMPSON. Practically altogether, Senator.
Senator WATSON. Altogether what?

Mr. THOMPSON. Loans to people who have homes. I would say 85 per cent of our loans are made to home owners, people like railroad people. We operate a little differently from most people. We cover the State of Oklahoma and the State of Kansas. Our institution was big enough so that we could do that, and we started 40 years ago, and really pioneered Oklahoma in the way of financing homes.

Senator WATSON. What will be the effect on your institution, in its present situation, if we do not pass this bill, or some similar legislation?

Mr. THOMPSON. I think it would be a great hardship, Senator. If I have the picture of this proposition right, the President's program and the program in this bill will give us a place to make loans, if loans are necessary. We could get along now, I think, without making any loans, particularly. The people have adjusted them, selves. As some one said a while ago, they are with their fatherin-law, mother-in-law, or uncle, or whatever it is. Those people are not out in the rain. They are being housed. I think we could get along without any building program, but I see another important feature to this bill, and to my mind it is more important right now. The people who have saved this money are the clerks, widows, and orphans, and everybody who could save and was willing to save. The money belongs to them. They have saved all the way from $10 to $2,000 or $3,000. The money belongs to the people who have saved it, and it has come time now when they are actually living on their hump, so to speak. A camel is able to cross the desert because he has stored up something. These people are actually living on the money they have saved. A building and loan association can not keep a lot of money on hand. It was not intended that it should. It was not intended that it should be a bank, in the sense that you bring the money in to-day and take it out to-morrow. But it would be a hardship on many, many thousands of people if they could not avail themselves of the money they have saved. So, I think this bill will help. For instance, if we had a call for more money than we have on hand all the time, we could take $100,000 worth of these loans, or half a million, for that matter, and have a place where we could put them. We do not need to leave them there forever. We could buy those back, as I understand it from this bill, and constantly pay out to these savers who need the money.

If you will permit me to tell you this story, I can get at the picture better, as I see it. I was in the mercantile business for many years before I went into this business, and I have had merchants write me by the hundreds, saying, "This is the first time that I ever was asked to put a mortgage on my home. The banks have been kind to us always. Our credit has been good, but the department has said,

'Now, you must cut these loans down some. We do not want to carry you year in and year out as we have been doing.'

Hundreds and hundreds of merchants that we have really kept on the map are in that same situation. And, of course, in doing that, we have helped the little banks out, too.

Senator WATSON. Does your building and loan association pretend to do a straight banking business?

Mr. THOMPSON. No.

Senator WATSON. Do you take time deposits, or demand deposits? Mr. THOMPSON. We do not take deposits at all. We issue a certificate, either for 5 years or 10 years, as the case may be, and they can pay by the month, or they can pay in advance so much money, and it matures in the future, or they can put a lump sum in and get 5 per cent.

Senator WATSON. And if you have funds, they can take it out at any time?

Mr. THOMPSON. Yes. We have always been able to do that, and we are doing it now, but I should say that 80 per cent of the institutions in Kansas, and I think in Oklahoma, are not able to pay out now, because they can not borrow the money as they did from banks. They say to the building and loan associations, as they do to the farmers, "We have not the money to pay. Even if we have it, we do not know what is going to happen. The people who own it may call on us any time."

I think it is essential to keep these institutions in a position where they can be tided over the conditions we have now. In communities where there has been a shutdown in industry, or where the big railroads have laid off their men, we often pay the taxes for them, pay their insurance for them, but of course, there is a limit to what we can do unless we have a place where we can get the money from somebody else to do that with.

Senator MORRISON. Suppose a young man had saved a reasonable first payment toward building a home, and had a job that he hoped, and had reason to hope, was a permanent one. Suppose he was employed. Except for this difficulty about credit, would not this be a splendid time for him to either buy or build a home?

Mr. THOMPSON. Senator, there never was an opportunity such as there is now. I am glad you brought that up.

Senator MORRISON. And yet he can not do it because of the difficulty of getting money on a home mortgage.

Mr. THOMPSON. Absolutely. There never was an opportunity such as there is to-day. Of course, somebody is losing money on these properties. That can not be helped. But there never was a time when this proposition would give so many people an opportunity to buy a home and have it financed at less than it cost. Men with plenty of money can always go out and make money. They can buy a place when somebody is hard up and has to sell it. The poor man can not do that, unless he has a place to get the money. Senator MORRISON. At the same time, that would tend to boost the price of real estate and homes, which is now very much depreciated. Mr. THOMPSON. Senator, let me tell you another thing: In Kansas and Oklahoma-and I think it applies in Iowa, and every other place I do not think people have had the real picture of the building