from that, however, Senator, that where an entire organization would be eliminated there would be no disruption in that particular instance because we are dealing with attitudes of people who invest large sums of money. Regardless of what the State law may or may not say, the decision as to whether these are legal investments depends upon the decisions of counsel to insurance companies based on thier interpretation of State laws, and it also depends on the attitudes of the various insurance commissioners in the various States. Senator RIBICOFF. But what we are actually doing in S. 1599 is transfering all the rights, powers, privileges, duties, and functions from one unit to another unit with a different name. Certainly, in the report that the committee would write if it approves the bill, we could make it very definite and certain that this is a succeeding unit-that this was the same agency, that its power and functions were being transferred, that there was no intention in any way to take away any of the rights or jeopardize past FHA or future FHA mortgage insurance. With that language in the committee report and with the assurance in the bill, I am at a loss to understand how any court or any mortgage lending institution would have any question in their mind as to the status of FHA. This transfer of functions happens time and time again and no one has raised any question as to the legality of that action. Mr. NEEL. I think it is reasonable to come.to that conclusion, Senator, but you would be astonished at the kinds of things that bother people who are investing large sums of money. Senator RIBICOFF. Well, I am astonished. But I know the difference between pettifogging and reality, and know I the difference between successful mortgage bankers and successful mortgage loan and homebuilders who understand what to be worried about and what not to be worried about. Mr. NEEL. I think that there is room where people could differ, but I do think it is not unreasonable to say that with some uncertainties in this thing there would be interruption in the programs. In one of these hearings in 1961 I know we had the same kind of conversation. Senator Muskie and Senator Humphrey and I were talking. Senator Humphrey talked about the fact they were going to anesthetize this agency and recreate it. I think it is different when you do something like that than change the name of the fellow who is running the organization. Here you are not continuing the existence of the organization. Senator RIBICOFF. When they created the Department of Health, Education, and Welfare, the Public Health Service, the Social Security Administration and other agencies, functions of the old agency were not_jeopardized. Mr. NEEL. Well the thing here that is different is you are up against a situation where your investments depend upon State law and the Federal Government can't control this necessarily. In other words you have to interpret what the laws of the various States say with reference to what happens. I think it is a little bit different where you simply are asking a question about what happens to a Government agency. Here we have to depend on what a whole lot of people say. The effect of this would be on the language of a lot of different State laws and I think you are going to have some arguments about it. Senator RIBICOFF. At this point in the record, I will insert a letter from Milton P. Semer, General Counsel of the Housing and Home Finance Agency, stating that in their opinion there is nothing here that would jeopardize or change the situation, and in the unlikely event a problem should exist in any State the Department will do everything necessary to remove the problem. I can't imagine any State not adjusting its law forthwith if there was any problem to conform with this technical name change of an agency. Mr. NEEL. I know that would happen sooner or later, Senator, but State legislatures don't meet at the convenience of the Congress necessarily and there is bound to be some hiatus in this thing. But I would like to see Mr. Semer's letter. (The letter referred to is as follows:) EXHIBIT 22 LETTER TO SENATOR RIBICOFF FROM HOUSING AND HOME FINANCE AGENCY HOUSING AND HOME FINANCE AGENCY, DEAR MR. CHAIRMAN: At the request of your staff director, Mr. Jerome Sonosky, I am commenting on his inquiry concerning the effect of the establishment of the Department of Housing and Urban Development (as provided in H.R. 6927 reported by the House committee) on some existing State laws which except loans insured under the National Housing Act from certain State lending restrictions. These are exceptions which appear to apply only if the loans are insured by the Federal Housing Administration or the Federal Housing Commissioner. Some concern has been expressed that these State laws, unless amended, would not apply to loans insured under the National Housing Act after the new Department is established, because the functions of the Federal Housing Administration and the Federal Housing Commissioner would be transferrred to the Secretary of the Department. We do not believe there will be any problem in this respect. In the first place, the Federal bill that would establish the Department makes it clear (in sec. 9(c)) that there would be no derogation of any powers and authorities otherwise existing. While this provision is for purposes of interpreting references in the Federal law, we are confident that State banking officials, as well as State courts, will adopt the same rule with respect to identical references in State law. This is so because the references in State law to insurance by the Federal Housing Administration or the Federal Housing Commissioner are clearly references to insurance provided by the Federal Government through that agency or official. The loan insurance has, and will continue to be, provided by the Federal Government. Also, the customary savings provisions contained in section 9(c) of the legislation expressly state that, with respect to any function, power, or duty that may be transferred under the bill, the reference to the officer, office, or agency shall mean the Secretary. Accordingly, State officials and State courts will surely recognize that what is involved is a change of name and not of substance. State officials and State courts have had many occasions with respect to individuals, private corporate entities, and public bodies to look beyond a change of name. This has been the case even when the new entity, in the case of a private corporation or a public body, is a broader entity exercising greater powers than its predecessor. Secondly, in the unlikely event that a problem in this regard should exist in any State, the Department would of course make any adjustment in its administrative organization necessary to remove the problem. This could easily be done by preserving names or terminology for official purposes. In any event, the FHA insurance program will remain fully operative and will continue within the Department at no loss of stature or importance. It will, as a matter of fact, be strengthened in many ways due to the upgraded status of the parent agency. Sincerely yours, MILTON P. SEMER, General Counsel. Mr. CAMERON. My State happens to be one of those. My State legislature goes out of session this month. If this bill is passed it means I may be out of mortgage money for North Carolinians until 1967. Senator RIBICOFF. My guess is that if the law is passed your association's general counsel and the attorney general of North Carolina and every builder and every lawyer that represents the insurance companies and the banks would find there would be nothing in this bill that would stop the flow of mortgage money from FHA to North Carolina. I have been around in this a long time too. I know what to be frightened of and what not to be frightened of. I think you people are certainly raising a bogeyman here. STATUS OF FHA IN NEW DEPARTMENT You say on page 2 that the bill would eliminate FHA and on page 6 that the proposal would abolish FHA this has an ominous ring. Isn't it more understandable and less ominous sounding to simply say that the function of the Federal Housing Commissioner would be transferred to the new Secretary and the rest of the FHA will simply move over to the Department? Haven't you gained a Secretary and an Assistant Secretary rather than lost a Commissioner? Isn't that what you have? Mr. CAMERON. Well, that may be true. We don't know what is going to happen. This is our worry. How is the FHA going to be comingled with the other housing and home finance operations? Senator RIBICOFF. How is everything else as a matter of efficiency done? How many employees work in your organization? Mr. CAMERON. 235. Senator RIBICOFF. From time to time you reorganize to make it more efficient, I am sure. You might change your plans and your system and the officers that administer your departments. Every private business and every Government agency should. If we took your philosophy regarding S. 1599 we would never have any changes in our Government. There is a lot of inefficiency in our Government. We are trying to make it more effective and more efficient in every way possible. But every time you want to make a change, people who are usually for efficiency and saving the taxpayers' money immediately come in and oppose it because they are afraid to look reality in the face. I am sure that you must be one of the men who justifiably keep writing to Congressmen and Senators against Government waste and inefficiencies and for saving as many taxpayers' dollars as you can. This committee is trying to do that. Reorganization of this Government is long overdue. We are operating on an executive organization plan that hasn't changed much in 30 years. We heard the Director of the Bureau of the Budget testify at one of our earlier meetings that he doesn't know, and he wouldn't hazard a guess as to how many programs there are in the Federal Government. Do you think we should continue without responsible people knowing how many functions there are and how many programs the Government administers? Mr. CAMERON. I wouldn't be here arguing today, Mr. Chairman, if this were a typical Government agency that cost the Government money. Going back to my own operation, if I had a wholly owned subsidiary with an established name that was a very profitable subsidiary I wouldn't think of reorganizing that subsidiary into the parent. Senator RIBICOFF. No; you might not. But then your tax adviser or counsel would come to you and say it might be a lot wiser and you would save sufficient tax dollars if you would effect a merger, and you would find that you would merge. If you pick up the Wall Street Journal or the New York Times financial page every day, you will find new mergers taking place. Maybe your own company has had some mergers with other mortgage companies in the past. Mr. CAMERON. We have, but generally they weren't making money. IMPORTANCE OF PRIVATE INVESTMENT Senator RIBICOFF. Senator Harris has to go to another meeting, and I would defer to Senator Harris. Senator HARRIS. Mr. Cameron, let me compliment you on the statement which I read ahead of time, and I apologize for having to go to another Committee on Small Business to hear Mr. Foley. I want to say first that I do hope that we can, in response to testimony such as you have given and in contacts which I have had with mortgage bankers in my own State as well as with homebuilders, work out some language either in the bill itself or in the report which will provide for the separate identity of FHA consistent with the purposes of the bill. I do want to ask you a question about something which you are going to testify on a little later, I understand, from your statement. That is the absence of any declaration or reference in the bill as to the assistance which private investors have been in this field of housing and mortgage finance. I notice that you recommend an amendment to the bill on FHA, but I don't see any recommendations so far as reference to private financing and so forth. Do you have any suggestions along that line that we might include in this bill? I think all of us would agree that private financing has been a major factor in the building of industry and in housing and home finance. Mr. CAMERON. No, I have no specific recommendations, Senator. I particularly noticed the absence of private industry, private enterprise when I looked back at the housing bill of 1949, the Housing Act. If I might just read one sentence from that: The policy to be followed in attaining the national housing objective hereby established shall be: (1) private enterprise shall be encouraged to serve as large a part of the total need as it can; (2) governmental assistance shall be utilized where feasible to enable private enterprise to serve more of the total needs. Senator RIBICOFF. If the Senator would yield at that point. I agree that a good point is made that no mention has been made of the role of private enterprise. So far as I am concerned, I think private enterprise should play as big a part as it can before Government acts. It is my intention to have the staff frame a proper amendment to specifically declare in the declaration of purpose of the private housing industry in realizing national goals of good housing and urban development. I would like your legal counsel to sit down with our staff to work out such language that would make sure that there is no question in anybody's mind this is the intention of the committee. I know it is mine and I think it is the intention of most members. Senator HARRIS. I certainly commend you for bringing that to my attention. I apologize for the fact I have to leave, but I have registered my impression of it. FUNCTION OF FHA Senator RIBICOFF. Thank you, Senator Harris. Mr. Cameron, on page 4 you say you would like to see FHA restored to its original independent status. You say in the pursuit of this goal your objective is to have FHA perform strictly market-type mortgage insurance functions. Yet, I think you realize that the problems of relocation housing, urban renewal housing, housing for the elderly and nursing homes are responsibilities given FHA by Congress. In other words, over the years Congress has given FHA these functions in addition to the private mortgage function you would like it limited to. While you might look forward to going back to a simpler day, don't you recognize that we have many problems in our urban society that private enterprise can't and won't do, and understandably so, since they are not profitable? Yet our society needs them. Therefore, we have a series of laws that Congress has enacted over the years giving FHA these functions, and I don't see how we can take them away from them. Mr. CAMERON. We don't necessarily think they can be taken away, Senator, but we would like to see them clearly defined and kept separate. Senator RIBICOFF. Well we have laws giving these functions to FHA which is their public responsibility. I have always felt, to the fullest extent, as I indicated to you before, that if private enterprise can do something the Government should stay out. Yet when it comes to law rent housing or public housing of various types you will find that private enterprise just won't go into it, and understandably, because they are absolutely unprofitable and will not bring a return. I can't expect and I don't think anyone can expect private enterprise to undertake public projects and lose money. Mr. CAMERON. Yes. As long as we keep promoting below market interest rates in FHA programs I don't think we will ever attract private industry to those programs because with the great growth we anticipate in this country we just can't see that interest rates will ever come down to a 3-percent level. AMENDMENT TO S. 1599 Senator RIBICOFF. Looking at your amendment (exhibit 19) I don't see where there is much difference between the amendment adopted by the House committee, at the suggestion of the National Association of Home Builders, and your own. Your objective seems the same as theirs, but your language differs a little. You want to place authority in a presidentially appointed Commissioner, who would be subject to the supervision and direction of the Secretary. The House bill vests the autority in the Secretary first with the requirement that a presidentially appointed Assistant Secretary shall be designated to administer the FHA function under the Secretary's supervision and direction. Having been a member of the Cabinet, heading a Department with a lot of constituent agencies over which the Secretary did not have adequate legal authority, in my view it doesn't make good sense or for good public administration to put authority in the hands of an agency head and then the administration in the hands of an administrator who has no responsibility to the head of the agency. I don't see why the two amendments would be at cross purposes. After all, you would have a Presidential appointment in the Secretary of the 47-686 0-65-15 |