Mr. WILLIAMS. Those would be for serious arrest records, sex offenses, and items of that sort.

Mr. PHILLIPS. Those items listed on the bottom of page 2 of your statement?

Mr. WILLIAMS. Yes, sir.

Mr. THOMAS. That is 1,800. Give Mr. Phillips the other breakdown.

Mr. PHILLIPS. Yes.

Mr. WILLIAMS. On the question of loyalty processed in the regional loyalty boards, 1,464 cases. Of those there were 1,399 eligible decisions and 65 ineligible decisions.

Mr. PHILLIPS. Wait a minute. What is that total now?

Mr. WILLIAMS. There were 1,464 cases processed; 65 were found to be ineligible for reasons of loyalty.

Mr. THOMAS. And 1,399 were found to be eligible?

Mr. WILLIAMS. In the case of the Loyalty Review Board, which is the Washington Board, there were 94 cases processed. Of those there were 61 eligible decisions and 33 ineligible decisions resulting in separations because of loyalty.

Mr. THOMAS. About one-third. I take it that is for the fiscal year 1951.

Mr. WILLIAMS. Almost exactly half in the case of the Review Board and about 5 percent in the case of the regional boards.

Mr. THOMAS. Is that for the fiscal year 1951?

Mr. WILLIAMS. Yes.

Mr. THOMAS. What is your total there, 1,833 and 65?

Mr. WILLIAMS. Yes, about 1,900.

Mr. PHILLIPS. I would make that about a third and about a half, 65 and 33; 33 is one-third of 99.

Mr. WILLIAMS. That is right.

Mr. PHILLIPS. That is pretty high. Of course, they are the only cases that actually got down to you, but even that is fairly high.

Mr. MOYER. I might add, Congressman Phillips, with respect to these suitability cases that a larger number of persons resigned after the investigation was started than were actually separated as ineligible. For example, there were 3,900 people who left during the course of the investigation. Now, we cannot assume that all of them left because of it, but I think it is reasonable to assume that some percentages could have left for that reason. The same is true in the loyalty process. As a matter of fact, the number of people who leave the service before an adjudication is quite high.

Mr. THOMAS. You would not have a figure for that?

Mr. WILLIAMS. I have it for a total from the time it started back in 1947; fifteen-thousand-odd investigations were made by the FBI. Approximately 3,000 of those people left the service before their cases were decided.

Mr. PHILLIPS. Here is a technical point that I do not understand. When you listed at the bottom of page 2, "Conversions to personnel services are based upon serious adverse information on such matters as sex offenses, alleged criminal conduct, embezzlement of property, and so forth," it isn't clear to me technically how you divide your work, so you have left out of that statement all question of loyalty. Why was that not also included in that list?

89877-51-5

Mr. WILLIAMS. Well, these are nonloyalty cases.

Mr. PHILLIPS. All of them?

Mr. WILLIAMS. All of these are purely nonloyalty cases.

Mr. YATES. In other words, you draw a distinction between a suitability case and a loyalty case?

Mr. WILLIAMS. That is right.

Mr. PHILLIPS. And you handle them separately?

Mr. WILLIAMS. That is right.

Mr. THOMAS. Will you permit a question?

Mr. PHILLIPS. Yes.

Mr. THOMAS. In what percentage of your cases do you find some information that warrants your further looking into them?

Mr. WILLIAMS. Well, sir, of the record check cases we make-4% percent of them develop information that should be looked into.

Mr. THOMAS. Now, of that 41⁄2 percent what part of them either, resign or are not placed permanently?

Mr. WILLIAMS. I can't give you that. I can't tell you that exactly. Of the cases that we finish, that is where the investigation goes through the total process, 221⁄2 percent result in ineligible ratings and dismissals. With 1,700 outright dismissals and 3,200 people quitting during the process of the investigation, that gives you roughly a total of 5,000 people who left the service on whom we had some unfavorable information, out of a total of 22,000.

Mr. PHILLIPS. I have two short questions. Do you have any duplication at all with the work of the Subversive Activities Control Board?

Mr. WILLIAMS. Not at all.

Mr. PHILLIPS. What is the distinction so that there is no duplication?

Mr. WILLIAMS. The distinction is this: We get cases of employees where the Subversive Activities Control Board gets its cases by direction of the Attorney General.

Mr. PHILLIPS. Outside of the Government?

Mr. WILLIAMS. Either outside of the Government or in the Government.

Mr. YATES. Subversive Activities Control Board is under the McCarran Act. The Subversive Activities Control Board, as I understand it, deals with cases under the McCarran Act involving persons who have membership in active Communist organizations or in so-called Communist front organizations. A member of the Government might be in that group or may not be in the group.

Mr. PHILLIPS. But there is no real place where they duplicate their work?

Mr. YATES. No.

Mr. PHILLIPS. The final question I would like to ask you, Mr. Moyer, is this: If we had recessed when we had expected to recess, which was the 1st of July or the 1st of August, or at the latest the 1st of October, would you have asked the Congress to be called back into session to vote this money for you?

Mr. MOYER. I don't think so.

Mr. PHILLIPS. That is all, Mr. Chairman.

Mr. THOMAS. Thank you very much, gentlemen.
It is always nice to see you.

HOUSING AND HOME FINANCE AGENCY

WITNESSES

B. T. FITZPATRICK, DEPUTY ADMINISTRATOR AND GENERAL COUNSEL

PERE F. SEWARD, COMMISSIONER, DIVISION OF COMMUNITY FACILITIES AND SPECIAL OPERATIONS

IVAN CARSON, DEPUTY ASSISTANT ADMINISTRATOR

JEROME F. MORSE, DIRECTOR, DIVISION OF LOANS FOR PREFABRICATED HOUSING

JOHN M. FRANTZ, AGENCY BUDGET OFFICER

J. STANLEY BAUGHMAN, PRESIDENT, FEDERAL NATIONAL MORTGAGE ASSOCIATION

JOHN T. EGAN, COMMISSIONER, PUBLIC HOUSING ADMINISTRATION

JAMES F. KELLY, BUDGET OFFICER, PUBLIC HOUSING ADMINISTRATION

FRANKLIN D. RICHARDS, COMMISSIONER, FEDERAL HOUSING ADMINISTRATION

JOHN D. BURROWS, BUDGET OFFICER, FEDERAL HOUSING ADMINISTRATION

DEFENSE HOUSING AND COMMUNITY FACILITIES AND SERVICES

Mr. THOMAS. The committee now has the pleasure of having before it this morning our friends from the Housing and Home Finance Agency who appear in connection with budget requests totaling $76,340,000 as contained in House Document No. 242. We have as our witnesses Mr. B. T. Fitzpatrick, Deputy Administrator and general counsel; Pere F. Seward, Commissioner, Division of Community Facilities and Special Operations; Mr. Ivan Carson, Deputy Assistant Administrator; Mr. Jerome F. Morse, Director, Division of Loans for Prefabricated Housing; Mr. John M. Frantz, agency budget officer; Mr. J. Stanley Baughman, President of the Federal National Mortgage Association; Mr. John T. Egan, Commissioner of the Public Housing Administration; Mr. James F. Kelly, budget officer. We also have the Federal Housing Administration represented by the very able Commissioner, Mr. Franklin D. Richards. Also we have Mr. Murphy, who is assistant general counsel, Mr. Vitale, the Acting Director of Research and Statistics, and Mr. Burrows, the budget officer.

Gentlemen, do any of you have a statement for us? We will be delighted to hear whoever wants to lead off.

GENERAL STATEMENT

Mr. FITZPATRICK. Thank you. Mr. Chairman and members of the committee, the budget estimates before you result from the recent enactment by the Congress of the Defense Housing and Community Facilities and Services Act of 1951, which was approved by the President September 1 and became Public Law 139.

DESIGNATION OF CRITICAL AREAS

In passing the new law, Congress recognized that unless the Federal Government could assist local communities in solving the problems

of housing and community facilities which result directly from the program to expand defense production, that program will inevitably suffer crippling delays. To avoid such delays, the act authorizes the President to classify as "critical defense housing areas" those areas where he finds that as a result of new or expanded defense activities, and of immigration of defense workers and military personnel necessary for such activities, there is a substantial shortage of housing or community facilities which impedes or threatens to impede the defense program in the locality.

With respect to any area determined by the President to be a critical defense housing area, the act requires the Housing and Home Finance Administrator to survey the local need; work out a specific program to meet that need; and publish a statement of the need for general information. In such areas, the act further authorizes six kinds of action by the Federal Government to meet defense needs:

1. Residential credit controls established under the Defense Production Act of 1950 are to be relaxed or suspended.

2. Mortgage insurance on liberalized terms may be made available to private builders under the new title IX of the National Housing Act, or under title VIII, which is extended and broadened to cover atomic energy installations.

3. For the balance of this calendar year (and within an over-all limit of $200 million), advance commitments for the purchase of mortgages on new defense housing may be issued by the Federal National Mortgage Association.

4. Where the need is temporary, housing of a temporary character may be provided through public construction. Where there is a permanent need which will not be met by private enterprise (as evidenced by failure of local private builders to undertake the full job during a waiting period of not less than 90 days after the announcement of the need), permanent housing may be provided by public construction.

5. Assistance may be extended to local public bodies in the provision of necessary community facilities and services through loans and grants; where the necessary facilities cannot be provided through these means, they may be provided by direct Federal construction.

6. If the President determines, with respect to an isolated or relatively isolated area, that the needs cannot otherwise be met or that speculation in land will otherwise result, the Government may acquire sites, make general plans for the development of such sites, and dispose of the land to private enterprise or to local public bodies for development in accordance with such plans.

In addition, the act authorizes loans within a limit of $15 million to existing manufacturers of prefabricated housing in order to retain the productive capacity of such manufacturers during the defense

emergency.

ITEMS INCLUDED IN ESTIMATE

It may be helpful at this point for me to briefly summarize these items before the committee, as we have done beginning on page 2 of the justification. They are as follows:

1. An appropriation of $1,340,000 for the Office of the Administrator, to cover the cost of making analyses and surveys necessary

for the identification and designation of critical defense housing areas; for the measurement of defense related housing and community facilities needs such localities; and for the preparation of specific locality plans or programs designed to bring to bear the resources provided by the act to meet the needs identified.

2. An increase of $51,000 in the administrative expense authorization and of $2.5 million in the nonadministrative expense authorization of the Federal Housing Administration, to provide for increased workload resulting from applications for mortgage insurance under the new title IX of the National Housing Act, from the extension of title VIII, and from the changes made by the act in credit regulations affecting housing.

3. An increase of $450,000 in the administrative expense authorization of the Federal National Mortgage Association, to permit the association to put into effect the advance commitment authority provided in Public Law 139 and in general to use its powers to encourage the freer flow of mortgage funds into the production of needed defense housing.

4. An appropriation of $50 million for the provision of housing by public construction in critical areas where private enterprise is unable to meet the entire defense related need, including $500,000 for the expenses of Public Housing Administration during the current year in connection with the development and construction of such housing. 5. An appropriation of $15 million for the provision of certain community facilities primarily water and sewer systems-essential to meet local defense needs.

6. An appropriation of $10 million practically none of which will be spent until an active program is initiated-to make title IV of Public Law 139 operative by establishing the revolving fund in the Treasury authorized by the title.

7. An authorization of $110,000 to cover added administrative expenses related to the expanded program of prefabricated housing loans under title V of the new act.

Most of these powers are urgently needed now. True, the original legislation was introduced in January. But during the 8 months that passed before the final legislative action, what were then future needs have become present needs. The billions of dollars which the Congress has appropriated for defense in recent months have made their way through the process of allocation and contracting and are resulting in the establishment of new plants, the expansion of existing plants, the reactivation of closed military installations, and so on. The movement of civilian workers and military personnel to these new and expanded activities has created in an ever-growing number of areas the very problems which the Congress foresaw when it began work on this legislation last January.

Thus, we find ourselves confronted with needs which have piled up, and which weekly grow more pressing. The Housing Agency has hoped from the beginning that by prompt action we might avoid a situation in which ordinary considerations such as holding down costs and utilizing private enterprise wherever possible might have to give way to simple haste and urgency. We believe that the sooner an effective start is made, the more nearly these aims can be realized.