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 organization 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. and loan associations and the stitutions and the banks, say you must reduce your loans; cash; you must get the cash." 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 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.

The examiners that go to the building examiners that go to the savings in"You must cash in on your loans; you must get liquid; you must get That is all they ask for.

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.

Senator WATSON. That is altogether, city and town real estate, you deal in all of it?

Mr. KISSELL. No, sir. Some of our people deal in farm real estate. Senator TOWNSEND. Is it general over the country for the insurance companies to foreclose on mortgages, as they did in Pittsburgh, as you just related?

Mr. KISSELL. Yes; it is pretty generally the case, Senator.
Senator WATSON. You think this bill will work, do you?

Mr. KISSELL. Absolutely, it will work. And it is not only for this emergency. I am not talking about a building campaign at this time. I am not saying there is need for a lot of new homes. I am not trying to stimulate building at all. Colonel Ayer told me the other day at Cleveland that there probably was a lack of housing in the making. Possibly there is. But in 5 or 10 years, maybe 3 years, with the population increasing, there should be a change. The population of this country the last eight years increased 13,500,000, and in 257 cities there have been 1,222,000 less home units built in those identical cities since 1925 than would have been built had the 1925 program continued.

What does that mean? It means the supply has been going down and the demand has been continuing. Some day they are going to meet, and some day they are going to need new homes in this country. When that time comes this bill here will solve the problem and make it possible for these building and loan associations to function.

These building and loan associations are perfectly solvent, but they are simply frozen. There is no criticism of them, because the money was put in there for the purpose of loaning on mortgages. That was the idea.

I will venture if this bill had been in effect-Mr. Robinson spoke about the situation in Ohio-if this bill had been in effect I do not believe it would have been necessary to have put up the notice on the doors of the building and loan associations in Ohio if the people had been able to get their money. If they could take those good loans and rediscount them, the people could have satisfied their needs. They would not have wanted it in the quantity that they seemed to want it, because they knew there was a possibility that they could not get it at all. If this bill was in effect now it would not require any one billion two hundred million to straighten out the situation in Ohio by any means. If they could just rediscount a small amount of their mortgages it would help.

Senator TOWNSEND. Your judgment is, then, that the real need for this corporation is to take care of the present situation?

Mr. KISSELL. No, I won't say that, Senator Townsend. I think there is a definite need. I do not see how you are going to straighten all this situation out unless you do this, because it goes way beyond just the housing proposition. It goes beyond even the foreclosure proposition. There are a great many merchants over the country who had their surplus capital, working capital, in building and loan associations, which had to put up the notices, and they are in distress at this time. I happen to know of two in one city-they were not in the building and loan but savings institutions which closed, old concerns in the city-that are both in the hands of receivers. What does that mean? It means clerks out of employment, it means bookkeepers out of

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employment, it means vacant storerooms, the inability of owners to meet the demands on their mortgages, and so forth.

Senator TOWNSEND. Does not that confirm the thought that the present situation demands this sort of legislation?

Mr. KISSELL. I have said that. It is not the only thing. I think that in the present situation it is very urgent. But I do think there is a very tremendous need on the permanency feature of it. I can go back over many years when there was great need for building in this country, when the building and loan associations could not meet the demand.

Senator TOWNSEND. And that will come again.

Mr. KISSELL. Yes; it is bound to come again.

Senator MORRISON. There are a great many cases over the country where a mortgage has matured, partially amortized, and the home owner is unable to pay, has not paid in full, and he wants to refinance it. Mr. KISSELL. Certainly.

Senator MORRISON. Doesn't he have a great difficulty to find somebody that will let him have the money, regardless of the adequacy of the security?

Mr. KISSELL. Certainly. You can not blame the banks. They want to keep liquid.

Senator MORRISON. Absolutely. They must be liquid, whether they are safe or not.

Mr. KISSELL. Absolutely.

Senator WATSON. All right, much obliged to you.

(Witness excused.)

Senator WATSON. Any other of you gentlemen from out of the city that want to be heard tonight? Do all the rest of you live in Washington?

Mr. BODFISH. I am from outside of the city, but I will be here for several days.

Senator WATSON. Owing to the engagements of the members of this committee on other important committees, I do not think we can meet again to-morrow. But on Saturday I believe we will all be able to be together. Suppose you come back here Saturday morning at 10 o'clock and we will start in again.

(Whereupon, at 4.25 p. m. January 14, 1932, an adjournment was taken to 10 o'clock a. m. January 16, 1932.)

CREATION OF A SYSTEM OF FEDERAL HOME LOAN

BANKS

SATURDAY, JANUARY 16, 1932

UNITED STATES SENATE,

SUBCOMMITTEE OF THE COMMITTEE,

ON BANKING AND CURRENCY,

Washington, D. C.

The subcommittee met, pursuant to adjournment, on January 14, 1932, at 10 o'clock a. m., in the hearing room of the Committee on Interstate Commerce in the Capitol, Hon. James E. Watson presiding. Present: Senators Watson (chairman of the subcommittee), Couzens, and Morrison.

Senator WATSON. Mr. Bodfish.

STATEMENT OF MORTON BODFISH, CHICAGO, ILL.

Senator WATSON. Give the committee your full name.

Mr. BODFISH. Morton Bodfish.

Senator WATSON. Where do you live?

Mr. BODFISH. Chicago, Ill.

Senator WATSON. What is your business?

Mr. BODFISH. Executive manager of the United States Building and Loan League.

Senator WATSON. Is there a building and loan league in the United States?

Mr. BODFISH. Yes.

Senator WATSON. What is the object of it?

Mr. BODFISH. Principally to encourage and advance building and loan associations, which are designed for home financing and for systematic saving, particularly for low-income groups and the ordainary American people.

Senator COUZENS. Do you have an office in Washington?

Mr. BODFISH. No, sir.

Senator COUZENS. You do not engage in lobbying before State and Federal legislatures?

Mr. BODFISH. We naturally make an appearance when there is something affecting our associations or their shareholders. I would say we do not engage in lobbying, Senator. We desire to advance generally the interests of these cooperative home financing institutions.

Senator WATSON. How many persons are investors that are not borrowers?

Mr. BODFISH. Approximately 10,000,000.

Senator WATSON. Investors in building and loan associations?
Mr. BODFISH. Yes.

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