in that it recognizes the value of the long-term mortgage as a homefinancing agency, the strictly building-loan mortgage, which is mainly amortized and shares in the profits and is not callable as long as the payment is kept up.

I think the differentiation between a mortgage of that kind, a mortgage of a long time, and the mortgage of a single year, like the mortgages that some of our banks indulge in, is a wise provision, and the division of 50 per cent in the one case and 60 per cent in the other is very good.

I take exception to a particular paragraph on page 13, because it does not seem to cover our type of mortgage in New Jersey. . Senator WATSON. Which paragraph?

Mr. STICKLE. Page 13, paragraph 1, in that we pay our instalments on the shares of stock that are pledged as security, and we do not pay them on mortgages. When a share of stock matures at $200 a share, they cancel the debt, and consequently some language ought to be inserted to cover that situation. It is a sort of a sinking fund plan. Senator WATSON. Supposing you draft it, and submit it. Mr. STICKLE. I have drafted one.

Senator MORRISON. It is very important. All of the real building and loan associations have that.

Senator WATSON. Paid on the stock and not on the mortgage?

Mr. STICKLE. Yes, sir. It might be very well to have a differentiation in the act between what constitutes an amortized mortgage and this other form, and I have drawn up such a differentiation. Senator Watson. There ought to be one there then.

Mr. STICKLE. I will be glad to let you have it.

Mr. O'BRIEN. You were talking just a moment ago about the amount of the mortgage that was

Mr. STICKLE. That is still another point.

Mr. O'BRIEN. Don't you think that subsection 7 of section 2 on page 2, lines 19 and following, take care of the case in which there are payments on shares of stock?

Mr. STICKLE. Subsection?

Mr. O'BRIEN. Section 2.

Mr. STICKLE. That describes what you consider to be unpaid principal but it does not describe what is an amortized mortgage.

Mr. O'BRIEN. But you are worrying about the case in which the unpaid principal is not considered, where there is payment against shares of stock. I think this takes care of your shares of stock case, doesn't it?

Mr. STICKLE. No, I think not. You say here in the third line: If secured by a home mortgage given in respect of an amortized home mortgage loan which was for an original term of eight years or more.

In the first place, we have no term. Ours merely mature. In the second place, it may be said that a mortgage which is not paid on account of principal is not an amortized mortgage, as distinguished from one paid on stock.

In our State we have 1,561 associations, and perhaps 15 per cent of them are finding difficulty in the matter of meeting these shareholders to whom we taught systematic thrift, and then when the rainy day comes, due to depression conditions, we do not have the funds for them, a very important part of our business.

Senator WATSON. How many building and loan associations are there in your State?

Mr. STICKLE. There are 1,561 in the State and about 600 in our county.

Senator WATSON. What is their condition?

Mr. STICKLE. About 15 per cent of them are unable to meet their withdrawals. We have had since 1903 a provision whereby we pay withdrawals within 30 days. Eighty-five per cent of our association to date have paid within that period. About 15 per cent of them are not able to pay.

Senator WATSON. Is there any new construction now through the building and loan associations?

Mr. STICKLE. There is no new construction, because with the withdrawal situation, until we can meet it, we can not have construction. And we can not borrow from our banks, because we have grown so big we are almost as big as banks.

Senator TOWNSEND. Is there any demand for new construction? Mr. STICKLE. I would not say there is any demand for new construction at the present time. We have borrowed 32 per cent of our loans now, and we can not borrow any more. If we could borrow 50 per cent, as the law permits us to borrow, we could meet every demand.

Senator MORRISON. Why are you unable to borrow?

Mr. STICKLE. The banks want to become liquid, and they don't want to help our associations. We are strong competitors.

Senator TOWNSEND. Do your associations take deposits?

Mr. STICKLE. No; we have not the deposit system in New Jersey. In time of prosperity we have paid on demand, but as a matter of law we are not compelled to do it before 30 days.

Senator WATSON. Do you issue shares of stock?

Mr. STICKLE. Yes.

Senator WATSON. Taxable by the State?

Mr. STICKLE. Yes. And I might say that our shares of stock have stood up better than our installments at the present time. We are at the present time in New Jersey hoping to build up a State agency that will help to take care of these needs of liquidity, and we hope perhaps you will see your way clear to allow our State organization, if it comes into being, or any similar State organization throughout the United States, to make a cooperative arrangement with your agency, because I think it would be helpful to our agency and to your agency as well.

If we could get funds, such as this agency would enable us to get, we could meet these withdrawals and stem the feeling that is producing many of these withdrawals. When these discount banks come into our territory, come right back home, as distinguished from the finance corporation, and the people know that the United States Government to a degree is behind our sound institutions, the psychological effect would be splendid, and many of our people who are now seeking to make withdrawals would stop, and that would stem the tide. Many of them would want to put it back.

Just like the experience they had in Mechanicsville, N. Y., where two banks failed. When the banks failed the shareholders of the building association sought to withdraw their money and withdrew $67,500 the first day. They have a State land bank in New York,

and while it is organized for development purposes rather than liquidity purposes, they recognized the situation and stepped in and put $150,000 into that building and loan. The surrounding associations, who realized for the first time that a chain was only as strong as its weakest link, came in and put some money in with the result that by the third day the run had stopped, and the people who took the money out on the first day tried to put it back on the third day, and your organization will do the same thing for the building and loan movement in this country.

Senator TOWNSEND. This was a State land bank?

Mr. STICKLE. A State land bank, yes; which is organized to sell bonds. But it is not a liquidity organization such as we have in mind and such as they have in Massachusetts.

Senator WATSON. As a general rule, Mr. Stickle, how much has real estate depreciated for loan purposes?

Mr. STICKLE. I should say at a maximum about 33% per cent and as a minimum about 25 per cent.

Senator TOWNSEND. That is less than it is in a great many places, is it not?

Mr. STICKLE. Yes; it is. I think perhaps that is true, but I don't think I would be accurate in putting it any higher than 33% per cent. This bill, I think, would have not only a psychological effect, but a very great practical effect.

Senator WATSON. Your building and loan association loan is about as safe an investment as you can have, is it not?

Mr. STICKLE. We think so. In New Jersey we have the individual plan as developed by the President's finance committee. They recommended the kind of a loan under which a home owner could put up 20 per cent and the balance or the remaining 80 per cent be taken care of by an amortized mortgage. We do just that. And we have done it very successfully in our State since 1903.

Senator MORRISON. What do you do with stock of a defaulting member?

Mr. STICKLE. Sell it at public auction.

Senator MORRISON. Does it bring almost always nearly par?
Mr. STICKLE. Almost always par, yes.

Senator MORRISON. Do you know of any security in the country that has brought as nearly par as that? Sold at auction?

Mr. STICKLE. I wish I had all my money in the building and loan! Now, Senator, there may be some few slight amendments in the verbiage that I would like to suggest.

Senator WATSON. Yes.

Mr. STICKLE. I will prepare those and send them to Mr. O'Brien. Senator WATSON. Yes. He will give you his address.

Senator MORRISON. Do you think the plan set forth in this bill would be successful?

Mr. STICKLE. I think it will be successful. I think the plan is something we need and have needed.

Senator MORRISON. And you think the banks and the building and loan associations which by its terms are permitted to join it, would subscribe for the stock and become members?

Mr. STICKLE. Yes, I do. And I don't have the fear that the preceding speaker had about the size of the fee, because if you observe the terms, you may pay in 1 per cent in installments and you may

borrow twelve times the amount you pay in, so when you pay the first quarterly installment, you may borrow enough from the bank to pay the remaining three-quarters.

Senator MORRISON. And don't you think it would have an excellent investment?

Mr. STICKLE. I do.

Senator WATSON. Is that all?

Mr. STICKLE. Yes, thank you.
Senator WATSON. Much obliged.

(Witness excused.)

STATEMENT OF H. S. KISSELL, SPRINGFIELD, OHIO

Senator WATSON. You are Mr. H. S. Kissell?

Mr. KISSELL. Yes, sir.

Senator WATSON. From Springfield, Ohio?

Mr. KISSELL. Yes, Senator.

Senator WATSON. And what is your business?

Mr. KISSELL. I am appearing here as the retiring president of the National Association of Real Estate Boards.

Senator WATSON. Representing how many real estate boards?
Mr. KISSELL. Five hundred and sixty-two.
Senator WATSON. All over the country?

Mr. KISSELL. All over the country, with approximately 17,000 active members and 42,000 members altogether.

Senator WATSON. Were you consulted about the preparation of this bill?

Mr. KISSELL. I was.

Senator WATSON. Did you participate in formulating it?

Mr. KISSELL. Only to a small extent. I was with Mr. O'Brien part of the time.

Senator WATSON. Tell us what you think about it.

Mr. KISSELL. Senator, I am not appearing for any financial organi- . zation or for the banks or building and loan associations, but I want to speak for the people over this country, who are having their homes foreclosed and who have their savings in these institutions and who saved them through good times, to take care of the lean years and who are now out of employment and when they want and need their funds to buy the bare necessities of life they can not get them. Those are the people that I would like to speak for, because there are thousands and tens of thousands and hundreds of thousands of people like that all over this country.

As to the bill, if I may put it this way, the banks who are dealing in short-time paper, which they can call in within 60, or 90, or 120 days, have, in addition, a great reservoir to which they can go in the shape of the Federal reserve, while the banking institutions dealing in longtime paper in mortgages, where the money is deposited with the idea. solely of loaning it on mortgages and the people who deposit it there know that that is the case-when they get out of work or when the time of stress comes and they need their funds and go for them, those institutions have no second line of defense, they have no place to which they can go to get funds to take back and meet the needs of their instutitions and their banks.

The result is that thousands of people are having their homes foreclosed who should not have their homes foreclosed. There is no reason why a man who has saved for 5 to 10 years to buy a home and put every dime he and his wife could scrape together into the home, and then when we get into a period like this, when this man is out of employment, can not pay his interest or his mortgage falling due during this period of stress, and he can not refinance it, should not be given a certain amount of time to get together enough to save that home which he has been through this long period of time striving to buy.

You asked about the depression in real-estate values. Here is the situation. The insurance companies will not give any quarter. If a man is deficient in his interest, they will foreclose, and he can not refinance at this time. What is the result? They throw that property on the market.

It happened this past week in Pittsburgh, where one insurance company advertised 60 homes for sale at the face of the mortgage. Now, what does that do? That is the thing that is depreciating the value of the balance of all securities and depreciating the value of the mortgages in all these other institutions. That is one big cause of this depression in real-estate values.

If it was possible for them to refinance; if it were possible so that the institutions which have the loans, were not forced to get cash, they could get along.

Let me bring out this point. The examiners that go to the building and loan associations and the examiners that go to the savings institutions and the banks, say "You must cash in on your loans; you must reduce your loans; you must get liquid; you must get cash; you must get the cash." That is all they ask for. Senator WATSON. Call your loans?

Mr. KISSELL. Yes. The bank takes its best mortgages to foreclose on if they are in default, because they know they will get but a little loss on those. They will foreclose on the ones where they can collect on the easiest. And it is mainly property which should not be foreclosed at all, because the owners have large equities in them, sufficient equities; equities of 50 to 60 per cent. Those people should not lose their homes. There is no reason why they should lose their homes at this time. But it is those mortgages which will produce the cash that the examiners are demanding.

You can not blame the institutions. Their first duty is to their depositors. They must get the cash if they can. And here, with the people in the state of hysteria they are in, there is nothing else to do but get the cash and pay their depositors, if they can.

Senator WATSON. What do these boards that you represent deal in? Mr. KISSELL. We are not connected with any of the financial institutions.

Senator WATSON. I know, but you buy and sell real estate.

Mr. KISSELL. Yes. Some of the men operate themselves, some of them are in subdivision work, some of them are simply brokers, some of them are dealing in down-town property, leases, and so forth. Senator WATSON. So that you are familiar with the values of real estate?

Mr. KISSELL. I think so.