loaned by the building and loan associations and savings banks and such types of mortgage bankers as I represent may be regarded more as local money.

Now, the national money is more or less selective. The insurance companies such as the life-insurance company which I represent, not alone select the localities in which they make their investment, but they are rather restricted in the type of home loans that they will make and the terms and conditions under which they will make them; and that is applicable to most of the insurance companies and to similar national organizations in the sections such as our own, that throws the burden of home loaning on the building loan associations or the savings banks or commercial banks and such mortgage brokers as myself.

Now, in the smaller communities the commercial banks have undertaken the making of home loans, there being no other source available for money to those communities; and they found themselves, as you gentlemen very well know, in rather an embarrassed condition because of the nonliquidity of their assets in a period such as this. But, as a matter of fact, at any time where you have a condition existing where the supply of money and the point at which it is loaned are universally the same, you get a condition that is unfavorable to a permanent preservation of home banks. I will be more explicit if you will permit.

Senator WATSON. If you ladies back there want to hear this, come up and sit here. I imagine you could not hear. I saw you straining your ears. I am in favor of the women hearing this, because they do about one-half of the voting and 90 per cent of the talking. [Laughter.] And we have got to have them with us.

All right, Mr. Haase.

Mr. HAASE. In the building loan association that we operate, its stockholders are local people. Its borrowers are local people. The savings of the investors, the stockholders, go into the fund and they are loaned out to local people to enable them to build or own a home. When any period of depression strikes the community, whether it be a national depression such as the present one or a local depression, the blow strikes on both groups at the same time. The holder of the investment stock in the building loan association finds himself obliged, if possible, to withdraw his funds so as to have money upon which to live or meet his other obligations, and that, of course, completely absorbs the supply of money for loaning to a man who is similarly situated as to need and would like to borrow on his home. That would apply equally to the group of mortgage bankers of whom I speak, because their mortgage bonds are sold locally; and the demands being local, it is very likely that the holder of a maturing bond will want his money at the same time that the borrower would like to get the money.

Senator WATSON. Are your building and loan associations having trouble getting money to keep up?

Mr. HAASE. Here is the situation with our building loan association, and most of them in Tennessee are in the same situation: We are obliged to use all of the income to meet the requirements of withdrawing stockholders and have no money available for loaning under any circumstances. Very little money is available anywhere in the

State of Tennessee for loaning by the building loan association on homes.

Senator WATSON. Has that slowed down the business of building homes through the medium of the building loan association?

Mr. HAASE. It has not only slowed down the building of homesit is at this time a nonessential in my opinion-but it has led to an increase in the number of foreclosures. In my judgment the foreclosure situation is the one that needs imperative relief at the present time.

Senator MORRISON. A great many people mortgage their homes on account of the various evil vicissitudes that come to them besides those who build them in the building and loan associations.

Mr. HAASE. As a matter fact, building loan associations properly managed rarely lend themselves to the building contractor or the speculator. They are primarily intended and used for the benefit of the home owner himself.

Senator MORRISON. In addition to that, not in your business, not in the building and loan, but in the banks and money lenders a great many people have to mortgage their homes.

Mr. HAASE. They do.

Senator MORRISON. Or they say they do; and under present conditions those mortgages are so depreciated as credits in the whole money-lending world that people are having great difficulty in borrowing money on homes or getting renewals where they have loans on them.

Mr. HAASE. That is undoubtedly true.

Senator MORRISON. Do not you think this bill would have the effect of enhancing the worth of this sort of credit to money lenders and make it easier for people to carry mortgages on their homes than they are able to do now?

Mr. HAASE. This bill will not alone do that, but it will prevent the continuance of the present deflation of real estate in general and homes in particular, because the aggravated number of foreclosures react on the sound mortgages, reduces the value of the mortgage, and reduces the willingness of the holder of the mortgage to continue to carry for an extensive period the mortgage he has on an existing home. That leads, Senator, to a foreclosure.

Senator MORRISON. Exactly.

Mr. HAASE. That is the gravity of the situation.

Senator MORRISON. And the banks are trying to get themselves more liquid everywhere, are they not, and they are forcing the people to pay and there is not anywhere for them to go to get the money to pay?

Mr. HAASE. I may answer that concretely. The bonds issued by our mortgage investment banking house have been sound collateral at all times in any bank in the city of Memphis. They have stood up very well under this present depression. But under the present existing condition the banks simply decline to loan on that type of collateral at all. Their fear of a lack of liquidity has led them to a complete refusal to use that type of paper as collateral.

Senator MORRISON. And because there is not anywhere under existing conditions they can resort to get any sort of discount. Mr. HAASE. That is correct.

Senator MORRISON. They can not use them as collateral; therefore, they do not want them.

Mr. HAASE. That is correct. Now, what impressed me, if you will permit me to say, with respect to this bill is the fact that it is going to provide a medium by which the money that is seeking sound real estate mortgage investment throughout the country will flow to the homes and to the points where homes are needed. It will not flow to the points where homes are not needed and where there is an excess of homes. Furthermore, the mortgage bond in the United States in the past eight or ten years or more has suffered through the wide presentation of the of the mortgage bond predicated upon large building operations because it made a showy picture and because there was not available the type of sound first mortgage bonds that would be made available through this bill.

Senator WATSON. If the money were flowed to places where you say homes are not needed-and there are such places, sections, probably, in cities-how, then, can you maintain 12 banks that must depend exactly and precisely and solitarily on this one phase of home building and house building?

Mr. HAASE. Let us assume the operation of the banks in the territory of demand in that territory in which, since I come from Memphis, Memphis is located. There would be a supply of money available if there were a need within our community; there would be a supply available from the particular bank in which our territory has such a need. As I understand the bill-and I have read it with reasonable care-there is an interchangeable use of money between the respective banks also under a situation where one section or one bank has a surplus of money and the other section or the other bank has a scarcity of money. I think I am correct.

Senator TOWNSEND. Is there also an interchange of profits to the banks?

Mr. HAASE. I do not understand there is an interchange of profits to the banks.

Senator MORRISON. If these 12 banks would carry the volume of credits you are now struggling with of this character, you would have a pretty heavy volume of business, would not you, regardless of any new bill?

Mr. HAASE. Let us take that from the building and loan viewpoint, if I may. There are about $9,000,000,000, I believe, in building and loan associations in the United States, and I think I am reasonably conservative in saying that probably 70 per cent of them, or 75 per cent of them, are unable at the present time to advance any money for new building or for preventing the foreclosure of a shorttime mortgage, payment of which is demanded at this time.

Now, unquestionably the building and loan associations of the United States would enter immediately into this system and they would enter for two reasons: They would enter for the reason that many of them have at the present time a demand for withdrawals or a demand for the payment of maturing stock which they can not supply. They are in a position to give adequate and conservative security to the system for the moneys that would be required. They also have on their files demands for new loans, absolutely sound loans predicated upon the present values of the property which they can not meet because of the situation, as I spoke of, in our own

association. We dare not loan new money regardless of how desirable the loan may be because, while we would not be obligated to use, under our particular State laws, more than two-thirds of the money that comes in for withdrawing stockholders, retaining onethird for borrowers, still we do for the benefit of the withdrawing stockholders let them have all of the money. Now, I could in the particular association use $250,000 advantageously, and not to build new houses. I could use it on conservative loans on present existing houses where the borrower is confronted with demands for the payment in full of the principal of a short-time loan and has no place to turn from which he can get the necessary money.

Senator WATSON. How many of those people borrow money to buy automobiles?

Mr. HAASE. There has in the past been some borrowing of money to buy automobiles, but that is negligible. My observation is that with the average citizen, while he talks much about his automobile being the prime requisite of existence, fundamentally he wants his home and he makes every sacrifice possible to maintain his home; and please understand I am talking about the small home owner. Senator MORRISON. That small-home owner frequently is in debt, is he not; like everybody he owes money?

Mr. HAASE. Frequently.

Senator MORRISON. And in the present circumstances he is liable to have his home sold to satisfy that indebtedness, is he not? Mr. HAASE. Undoubtedly, and is having it sold.

Senator MORRISON. And it is not a matter of building homes alone but of taking care of the indebtedness of the home owner who is being pressed in this liquidating period we are passing through and can not find any accommodation?

Mr. HAASE. Senator, if I may be permitted to express an opinion, I think that reference to the building of new homes at the present time is merely a bugaboo that has been presented to scare away an intelligent consideration of the real need of this system, and that is the maintaining of the present existing homes.

Senator MORRISON. Let us see about that. I agree with you except in one case, and I would like to get your opinion about that. Now, a laboring man or a clerical worker, somebody with a fixed salary and a job that he thinks is permanent, who has saved the first payment within reason on a home, he probably never has seen as good a time or never will again to build a home as right now if he could finance it.

Mr. HAASE. Either to build or to buy.

Senator MORRISON. Or to buy of a distressed owner; and under present credit conditions he can not do that.

Mr. HAASE. That is true. Now, let me illustrate that further. The opportunity to buy at the present time is superior to the opportunity to build. The cost of building on the lowest obtainable figures at the present time, coupled with the cost of the lot, is more than it would cost to produce in most communities in the United States by purchase of existing distressed property for a home.

Senator MORRISON. And the inability of people to buy these distressed homes is driving the value of old homes down.

Mr. HAASE. That is true.

Senator MORRISON. And the creditor is unable to get his money frequently on account of that depreciated value, is he not?

Mr. HAASE. That is true. I will submit a concrete example of that. I submitted an application for a loan of $2.000 on property that a man was buying, distressed property that he was paying $4,100 for and spending $300 in improvements. He had about six or seven hundred dollars that he could put into the property, and it would have cost to reproduce at the present time probably $5,500. He can not borrow at the present time the $2,000 for the reason that the present attitude of the money-lending officers is, not alone that he has a loan of only 50 per cent or thereabouts, but also he must have that substantial equity above that $2,000 because of the fear that, having a smaller equity, his equity may be eliminated at an early date and they would be unsafe or would be forced to take the property even at that low figure.

Senator WATSON. Mr. Haase, some Senators believe that this measure may be justified as an emergency proposition to meet the existing condition of the home owners in America, but can not be justified as a permanent institution. Others think it would be justified as a permanent institution but not as an emergency proposition. Now, those who say that it is not justified to meet the emergency proposition say that the financial reconstruction bill which we passed and which is now law and in operation, together with the present bill which we are about to pass and hope to this afternoon in the Senate, will obviate the necessity of any measure of this kind as an emergency proposition. Now, what do you think about those two phases of this question?

Mr. HAASE. I think both are wrong, and I think it is an absolutely necessary emergency program and a very essential permanent program. Now, as an emergency program it happens that my own is a concrete case as to the Reconstruction Finance Corporation meeting any requirements of our building loan association. I received about a week ago a questionnaire that came through the Reconstruction Finance Corporation asking as to the requirements of the Home Building and Loan Association, but with the comment that unless there be very, very urgent requirement, it would not be advisable to send in. I had no very, very urgent requirement that in my judgment threw me within the consideration of the Reconstruction Finance Corporation.

Senator WATSON. Of course.

Mr. HAASE. We have a million dollars of assets, we owe the bank about $40,000, and we are not more than 30 days at any time behind in paying the requirements of any withdrawing stockholder. So we have no urgent situation. But our community has an urgent situation, because if I could take $500,000 of my seasoned mortgages and put them up as collateral for $250,000, I could make that $250,000 available to deserving borrowers to keep them from losing their homes and still continue to pay my current income to the withdrawing stockholder to meet his daily requirements.

Senator WATSON. They argue that there is no demand for it because there was no necessity for this kind of measure before the depression, beginning a year and a half ago; and they say that after the depression shall have passed away and we resume normal conditions of business and flow of the circulating medium, when we get