there exists material numbers of institutions seeking loans of the kind that would be entailed in this. Senator COUZENS. You say you do not believe that? Mr. WESTBROOK. I do not believe that. With returning assurance and stability of incomes, individuals will recover their courage and confidence, and will be able to accumulate the initial amounts necessary for home ownership; deposits and purchases of building and loan shares will increase and policy loans will assume a normal aspect and all of this money will seek its normal field of investment. If the future Congress may permit and perhaps encourage a constructive coordination among appropriate groups of mortgage lenders, to the end that former dangers engendered by a ruthless and unintelligent competition may be avoided. The launching of large amounts of Government funds into a situation that normally is taken care of adequately, would cause a future aggravation. Senator COUZENS. You made reference to the amount of money borrowed on insurance policies. Have you any figures on that? Mr. WESTBROOK. Only for my own company. Senator COUZENS. What is that company? Mr. WESTBROOK. The Aetna Life Insurance Co. Senator COUZENS. What has been your experience? Mr. WESTBROOK. During the last year, our policy loans increased by about $13,000,000, growing up from $53,000,000, to about $66,000,000. Senator COUZENS. How many policyholders have you? Mr. WESTBROOK. Approaching 300,000. Senator COUZENS. What percentage of the 300,000 have borrowed on their policies? Mr. WESTBROOK. I can not answer that question, sir, because I do not know. That, concretely, sir, is the statement I wish to make, I have before me Senator COUZENS. Before you go into that, you said you had some opposition to the bill on general principles, and that you had some specific opposition to the particular provisions of the bill. Are you going to elaborate upon that? Mr. WESTBROOK. I thought I covered it. Senator COUZENS. But, assuming the bill is passed, have you any suggested changes to the bill as drafted? Mr. WESTBROOK. No, sir. Senator BULKLEY. Your conclusion is that we should not pass anything at all? Mr. WESTBROOK. Briefly, Senator Bulkley, my conclusion is that the emergency features of the situation-which we are perfectly prepared to admit-can be adequately taken care of by the Reconstruction Finance Corporation. I think there is no need for, and specific reasons against, the Federal Home Loan Bank as a permanent institution. Senator BULKLEY. I am sorry I was detained by some constituents, and did not hear the first part of your statement, but I shall read it later. Senator WATSON. Is there anything further you wish to say, Mr. Westbrook? Mr. WESTBROOK. Some of my insurance friends, knowing that I was coming to Washington this morning, have been thoughtful enough to send me several wires, which I will be very glad to read, if Senator Watson wishes me to. Senator WATSON. They are all the same? Mr. WESTBROOK. They are very much the same. They are all in opposition. If I may leave them with the secretary for inclusion. in the record, that will be satisfactory. Senator WATSON. Yes. I assume that every member of the committee has had a great many of them from both sides. They are all about the same. Mr. WESTBROOK. Yes, sir. It would take some time to read them. Senator WATSON. I have had about fifty of them, almost word for word. Senator BULKLEY. Propaganda letters? Senator WATSON. Propaganda, yes. We are very much obliged to you, Mr. Westbrook. (The telegrams referred to by Mr. Westbrook are as follows:) STILLMAN F. WESTBROOK, SPRINGFIELD, Mass., February 20, 1932. Vice President Etna Life Insurance Co., New Willard Hotel, Washington, D. C.: We strongly oppose proposed legislation to establish Federal home loan banks. We believe such legislation is unnecessary and if enacted would in time bring greater distress than at present to home owners on account of stimulating overbuilding at a time when there is a surplus of dwellings for sale on reasonable terms at less than construction costs. There is ample funds now available for all actual needs on this class of property. New construction should not precede the demand for it to avoid further depreciation and distress to home owners and wage earners now trying to save their property. Proposed legislation if enacted would further increase tax-exempt securities, thereby decreasing revenue to Government and benefiting only investors able to pay taxes and adding to burden of taxation of real estate one of the underlying causes of present economic depression. Bill if enacted would immediately start speculative building, which should be avoided. Proposed legislation if enacted would greatly encourage a group of interests now agitating the establishment of Federal banks to operate on a similar plan to loan on city property, also distressed property other than dwellings, and put the Federal Government further into the mortgage loan and real estate business. MASSACHUSETTS MUTUAL LIFE INSURANCE CO., STILLMAN F. WESTBROOK, HARTFORD, CONN., New Willard Hotel, Washington, D. C.: Am heartily opposed to Home Loan Bank Bill (S. 2959) as both useless and expensive. Its operation involves payment of salaries to a large number of employees, and if its discount provisions are used, the issuance of tax-exempt securities. We do not need to stimulate new building temporarily when there are already too many houses, and if this bill should do that its ultimate effect would be bad. What we need is a restoration of value to houses now owned. This can come about only by leaving things alone. R. W. HUNTINGTON, President Connecticut General Life Insurance Co. CINCINNATI, OHIO, February 20, 1932.. S. F. WESTBROOK, New Willard Hotel, Washington, D. C.: We seriously doubt wisdom of stimulating home building as contemplated in Home Loan Bank Bill (S. 2959) at this time, when there is much vacant property throughout country. This plan would further complicate an already serious real estate situation, with net results of merely increasing vacancy. efforts in opposing this bill are much appreciated. Your W. HOWARD Cox, President Union Central Life Insurance Co. STILLMAN F. WESTBROOK, New Willard Hotel, Washington, D. C.: HARTFORD, CONN., In my opinion the home loan bank bill, as proposed, in the long run will injure rather than help the real home owner. A. A. WELCH. BOSTON, MASS., February 19, 1932. STILLMAN F. WESTBROOK, New Willard Hotel, Washington, D. C.: I believe that the passage of the home loan discount bank bill will lead to an inflation of credit that will react upon home owners. It will lead to overvaluations, speculation, and consequent foreclosures. Wider equities and an assured income rather than more plentiful money is the real need of the owner. GEORGE WILLARD SMITH, President New England Mutual Life Insurance Co. PHILADELPHIA, PA., February 20, 1932. STILLMAN F. WESTBROOK, Care New Willard Hotel, Washington, D. C.: It is our deliberate opinion that passage of the home loan bank bill would artificially stimulate home building and thereby add greatly to the present overbuilt condition with the result that real estate values would be still further depressed and foreclosures of existing mortgages would increase and the safety of the huge funds invested by life insurance companies and other financial institutions in city mortgages would be endangered. Any necessary emergency relief for frozen mortgage assets should be provided through the Reconstruction Finance Corporation, which is a temporary agency, and not through the establishment of a separate permanent organization of the kind suggested by the bill. ALBERT LINTON, President Provident Mutual Life Insurance Co., of Philadelphia. NEWARK, N. J., February 20, 1932. STILLMAN F. WESTBROOK, New Willard Hotel, Washington, D. C.: Do not regard the home loan bank proposal Senate bill 2959 as either presently or prospectively necessary or desirable. Sufficient loan opportunities are already available through existing facilities for all legitimate needs. Overbuilding has been prevalent and city and suburban real estate developments should not be forced until an increased demand for housing overtakes present excess accommodations. JOHN R. HARDIN, President Mutual Benefit Life Insurance Co. FURTHER STATEMENT OF THOMAS F. CLARK, PRESIDENT MORTGAGE BANKERS ASSOCIATION OF AMERICA Mr. CLARK. I have here, Mr. Chairman, briefs of many letters we have. It might bore you to read them all. Senator WATSON. Do not read the letters. Anybody can write letters. What have you to say about it? Mr. CLARK. We have here a summary Senator WATSON. Mr. Cody, I may say for the benefit of the committee, was here, and he said he had a statement representing the views of the opposition that he wanted to submit to the committee, summing up the whole situation. Senator COUZENS. What opposition? Senator WATSON. The opposition to this bill. Senator COUZENS. Yes; but what does it consist of? Senator WATSON. I did not ask him that. I am assuming that he meant mortgage bankers. Senator BULKLEY. Mr. Clark, can you tell us what it is? Senator WATSON. I told him he might submit such a statement. He is not here, and Mr. Clark has taken his place. Mr. CLARK. Yes. I came in this morning. I just got here. This is a summary of the Mortgage Bankers Association in opposition to the bill. I should like to present it at this time. Senator WATSON. Very well. Mr. CLARK. Federal home loan bank plans are unsound and dangerous, because: 1. They do not propose a "home" loan bank. They propose a mortgage discount bank for the relief of institutions which, through practices inconsistent with sound mortgage banking, find themselves in a frozen condition and unable to meet present demands from depositors, shareholders, and borrowers. J 2. Depreciation of Federal land-bank bonds should be a warning against creation of such a system. These banks now use funds collected from borrowers to purchase, at a discount, bonds sold to the public at par. They are not meeting the emergencies for which they were intended, and already the Government has had to advance an additional $125,000,000. 3. The plan involves costly administration at a time when Federal Government expenses greatly exceed its income. 4. "Instrumentalities of the Government of the United States," as applied to the bonds of the proposed banks, is a misleading term which appears to imply governmental guaranty. Through the use of this term, the public will be led to believe the bonds are guaranteed by the United States. They would not be so guaranteed. 5. With normal growth of population, several years will be required to absorb the existing surplus of empty houses, yet proponents of the plan proclaim its power to stimulate construction of 3,000,000 new houses within the next five years. 6. Of 273 telegraphic reports received since February 12, 1932, from 112 cities of varying sizes in 37 States, 209, or 77 per cent, reveal a surplus of homes; 64, or about 23 per cent, disclose a normal supply; and 1, or less than four-tenths of 1 per cent, shows a need of new construction. 7. Temporary inflation in the home building market will lead inevitably to sharp deflation in existing home values already seriously depreciated. Increase in foreclosures will naturally follow. 8. The real need is for the type of emergency relief already provided in the Reconstruction Finance Corporation Act. 9. The "home loan bank" plan proposes a permanent establishment for development of new mortgage credit, yet in normal times there is an abundance of such money. In fact, this was the immediate cause of the present overbuilt condition. 10. It would create a subsidized reserve bank owned by a small group of members, which would develop a competitive advantage unfair to other investors in real-estate securities, both large and small. 11. Tax exemption features of $1,800,000,000 in bonds which might be issued by the proposed banks would lead to increased public taxation. 12. As mortgage loan institutions, the banks would not have direct contact with the home owner, thus eliminating the personal element which is always so important in home financing. 13. As mortgages in default could not be carried by the proposed banks, there would arise many occasions in which the Federal Government would be placed in the position of having to foreclose on homes of its citizens. It is no more difficult to meet obligations to one mortgagee than to another. As regards relief for the home owner unable to meet mortgage payments, therefore, the plan fails utterly. 14. The plan would mean a further surrender of the rights of States to regulate local private business. It is claimed that: 1. It would decrease foreclosures. On the contrary, it would increase foreclosures, due to the lack of any sympathetic interest in local communities, as best evidenced by the fact that the Federal land banks, organized on a basis similar to the one proposed, have foreclosed and taken from the owners millions of dollars' worth of farm homesteads. 2. It is claimed that it would help home buyers to get mortgage credit not now available. On the contrary, mortgage credit not based on sound business judgment is as dangerous to the borrower, as it is to the lender. Överlending on mortgages means inability to refinance at maturity. 3. It is claimed that it would release vast amounts of frozen funds invested by savings banks and building and loan associations in mortgages. We claim that the reconstruction Finance Corporation was created for the purpose of releasing frozen assets and affording other assistance to savings banks and building and loan associations, as well as other institutions needing financial relief, and no additional legislation is necessary. 4. It is claimed that such a system would tend to restore public confidence in home buying, thus giving support to a depressed real estate market. We claim that confidence in home buying can be restored only by proper selling and sound loaning methods, neither of which would develop from the proposed plan. 5. It is claimed that it would create a central credit system for mortgage finance which ultimately would bring about standard practices, stabilize conditions and protect home owners' investments. |