Senator WATSON. But who do not borrow money?

Mr. BODFISH. That is true.

Senator WATSON. Do you know whether or not most of them invest for the purpose of buying in the future or invest primarily for the sake of investment?

Mr. BODFISH. A substantial number of them invest in building and loan associations to accumulate money ultimately to buy a home. The building and loan associations emphasize a great deal the saving of money with the objective of owning a home.

Some inquiries and references have been made in the course of the hearings regarding the distribution of building and loan associations, their assets and membership. It might be useful for the committee to have in the record these data and also information on the mortgage loans of the building and loan associations, their membership and number of associations by States, as well as their safety record.

Senator WATSON. Why not just insert that in the record?

(The data referred to, contained on pages 918, 919, 920, 921, 922, and 923 of a pamphlet entitled, "Excerpts from Building and Loan Annals, 1931," are here printed in the record in full as follows:)

STATISTICAL TABLE FOR 1930

The following statistical table shows, by States, the number of associations, the total membership and total assets, and increases or decreases for the year. The data given are for the fiscal year of the respective State supervising departments ending in 1930:

TABLE I.-Summary table of number of associations, total membership, and total assets of building and loan associations by States, 1930

TABLE 1. Summary table of number of associations, total membership, and total assets of building and loan associations by States, 1930.-Continued

MORTGAGE LOAN INVESTMENTS OF BUILDING AND LOAN ASSOCIATIONS

The mortgage loan investments of all building and loan associations in the United States in 1930 amounted to $7,760,163,958, a decrease of $30,671,213 over the amount held the previous year. Including the Territory of Hawaii, the total mortgage loan investments amount to $7,764,034,674, which is 88 per cent of the total assets of these associations, as compared with 89.6 per cent in 1929. The accompanying table shows comparatively, by States, the amount of mortgage loans held in 1929 and 1930, the amount of increase or decrease of such loans for the year and the percentage, by States, of mortgage loan investments held to total assets.

TABLE II. Mortgage investment of building and loan association

TABLE II.-Mortgage investment of building and loan association-Continued

TABLE III.-States reporting mortgage loans made in 1930 compared with 1929

One hundred and ninety failures of building and loan associations were reported by the supervisors of the several states for 1930, as compared with 159 reported for the previous year, distributed among the states as follows: Arkansas 1, California 5, Florida I, Illinois 2, Indiana 3, Kansas 1, Michigan 2, Missouri 4, Nebraska 1, Pennsylvania 153, Ohio 5, Oklahoma 4, Texas 4, and Wisconsin 1. There were also 2 failures in Maryland where there is no supervisory department. The probable loss which will be sustained by the shareholders in these various failed

associations is estimated at $24,676,059, which is the largest loss ever reported in a single year, and probably exceeds the aggregate sum which building and loan association shareholders have sustained during the last three-quarters of a century of their existence. The total loss for the preceding 10 years for which figures are available amounted to only $5,555,935. Losses from failures by building and loan associations have been exceedingly small. The unusual and excessive amount shown during 1930 is attributable mainly to the speculations of a few crooks who unfortunately got into the building and loan business. Over one-half of it is chargeable to the dishonest practices of one man, George H. Beesemyer, a former banker, who looted the Guaranty Building and Loan Association of Hollywood, Calif., and affiliated companies, and who is now serving time in the California State Prison. There is nothing inherently wrong with building and loan associations and they should not, as an institution, be held accountable for acts such as these. Honestly managed, building and loan associations still continue to be the safest possible place for savings investments. This experience simply emphasizes the primary importance of capable and honest management which the public will look for in selecting building and loan associations for patronage. Yet in all fairness and to the everlasting credit of building and loan associations it should be stated that only in rare instances have officers or directors violated their sacred trusts.

SUMMARY OF BUILDING AND LOAN ASSOCIATION FAILURES 1920-1930

The following is a summary of building and loan association failures and losses for the years 1920 to 1930, inclusive, together with a statement of the total number and total resources of all associations for each year, the total liabilities of failed associations for 1930, and annual per cent of loss to total resources:

Senator WATSON. Of course, that is not a consequential question. when it comes to the merits of the proposition.

Mr. BODFISH. As some building and loan leaders see the bill, it will do much to revive public confidence in the associations at the present

time.

Senator WATSON. Are you interested in this measure primarily for new construction or the salvaging of homes that are already built, the owners of which are in distress?

Mr. BODFISH. Primarily for the assistance it will give building and loan associations in aiding them to function normally. It will do much toward salvaging homes, as far as the building and loan associations are concerned, because all of our mortgages are long-time mortgages without a due date, so there are no foreclosures in connection with building and loan associations caused by mortgages coming due. Borrower distress occurs where they have these one and two year mortgages coming due, and then the bank or trust company, or whoever made that type of mortgage, insists on a substantial reduction in the mortgage or refinancing.

Senator COUZENS. Do I understand that these long-time amortized mortgages do not have a due date?

Mr. BODFISH. They do not have a due date. A building and loan mortgage contract, Senator, is not due until it is paid off. That is a universal condition. The contract is one for monthly repayment, and when the monthly repayments are made the mortgage debt is completely extinguished. Most of our mortgages run from 9 to 13 years.

Senator COUZENS. Is that true in every State?

Mr. BODFISH. It is true in every State.

Senator COUZENS. Do these contracts not provide a specific time to amortize the mortgage?

Mr. BODFISH. Yes, a specific monthly payment.

Senator COUZENS. Would that not automatically fix the date of maturity, if the amortization amounts were paid off at specified periods?

Mr. BODFISH. Yes; but the amortization covers the whole amount of the loan.

Senator COUZENS. I understand, but if they fall down on an amortization payment, then there must be some due date for the principal, isn't there?

Mr. BODFISH. Yes; if they fail to make their monthly payments, the whole amount is accelerated and the mortgage is foreclosed.

Senator COUZENS. Then they do foreclose on them.

Mr. BODFISH. There are occasions, but that is only when a borrower can not make his payments, and, naturally, to protect the investors in building and loan associations.

Senator COUZENS. Isn't that true of every mortgage, that when the borrower does not pay his installments or his interest or his principal, his mortgage is foreclosed?

Mr. BODFISH. That is true, but there are hundreds of mortgages which have been made for a term of one or two years.

Senator COUZENS. I understand that. But I understood you to testify to the fact that the borrowers in your institutions do not have any fixed date when the mortgages must be paid.

Mr. BODFISH. That is true.

Senator COUZENS. There is no difference between your customers' condition and those who borrow from a bank, if there is a failure to live up to the contract, is there?

Mr. BODFISH. That is true.

Senator COUZENS. Then automatically there must be a due date, if all the amortized amounts are not paid during the life of the mortgage. Mr. BODFISH. Yes, Senator.

Senator COUZENS. Then I do not see any difference between your form of doing business and the form of doing business by a savings bank, except as to the period of time, of course.

Mr. BODFISH. The period of time is of major importance to the borrower. We have considerable distress in Chicago right at the present time, due to 1-year and 2-year mortgages. The due date comes and the bank or trust company insists upon the borrower refinancing in another institution of making a major reduction in principal. This never happens to a borrower from a building and loan association.