Mr. WILLIAMS. The President started with that idea, and he has proposed it as his idea, but I think practically no one who appeared before the committee in the very extensive hearings we had placed any material importance upon the proposition that it was necessary to have a new home-building program. Mr. BANKHEAD. Here is my object in making that point. If it goes out to the country, as stated by the President, that one of the major purposes is to provide for funds for new construction, whereas the real purpose of the sponsors of the bill in the House is to the contrary, it is liable to create considerable disappointment on the part of those seeking funds for new home construction. Mr. WILLIAMS. I think there can be no question about that. Mr. MARTIN. But as the assets of these organizations will become more liquid there will be funds available for new building, if the projects warrant it? Mr. WILLIAMS. That may be, but the fact is, according to all the hearings we have had, and I think it is a matter of pretty general knowledge, that now, so far as any need for widespread demand is concerned, there is not any for new home building. Mr. MARTIN. And what, if any, exists, could be taken care of? Mr. WILLIAMS. Yes; if the funds are made available. I come now to the point developed in the hearings on the part of the main proponents of the bill, principally the building and loan associations in the country. Of course, I am not here in opposition to them, because I think they have done a wonderful work, and are still doing it. But they have abandoned as the main object of this bill a home-building program, and they now come to the proposition that it is necessary to help those who are already in the building and loan associations and all ready to borrow from them to refinance their loans. That is the main, fundamental purpose, as announced by the proponents of this bill. Mr. SABATH. It was never intended, on the part of the building and loan associations who have advocated this legislation, that the funds should be utilized or used for new construction. The underlying reason or need for it was to relieve building and loan associations and their members and to save home owners from foreclosures on their homes and having their homes sold for taxes, and to relieve the shareholders or members in being able to keep up the payments and the interest. These building and loan associations, finding themselves in that position, due to unemployment and to the inability of the membership to pay their dues, it was a question whether they could survive or not, and the movement was started to bring about some relief for these building and loan associations, and thereby relief for the small-home owners in America, to save them from losing their property. I was one of the first ones who started to advocate it about two years ago, and I have here in my hand the indorsement of the bill by the National Building and Loan Association organization. Mr. WILLIAMS. There is not any question, Mr. Sabath, but what the men at the head of this organization are for the measure. Here is Mr. Bodfish, and Mr. Stickle, and Mr. Best, the president of that organization. Mr. Bodfish is the executive manager of the United States League of Building and Loan Associations. My point is that the building and loan associations as a whole are not for the measure. I am not saying they are all not for it; I can give you illustrations and examples, a great many of them throughout the country, of those who have not indorsed it. Mr. MARTIN. Why should not these people be relieved? Mr. WILLIAMS. I will tell you. I do not mean to say they should not be relieved. Mr. Cox. Getting back to Mr. O'Connor's question, what is wrong with the bill? Mr. WILLIAMS. The purpose is to relieve the home owner. In the first place, these home owners, a great many of them, and it is an unfortunate situation, have loans that are past due, men who are out of employment, men who have lost their jobs and who are not able to pay their taxes, who are not able to pay the interest or the installments due on their mortgage loans. I submit that that class of people, people who are unfortunate and in that position, can not be relieved by this legislation. In the first place—and I am talking purely from the standpoint of the building and loan associations, leaving out of consideration the banks, insurance companies, and trust companies who may be members of this institution if it is established. But from the standpoint of the building and loan associations, I just want to read an extract here from Mr. Bodfish himself, which goes to the very bottom of the question involved, showing his purpose. Their purpose, I say, is not primarily to relieve the home owner but to relieve the building and loan companies. Here is what he says. This is in the testimony before the Senate committee, and this is what he says in response to a question by Senator Watson. Senator Watson asked him: Of all of the borrowers of the country, how many have defaulted?— He was speaking of the building and loan borrowers— I do not know. Is there any considerable number? We have not had a great number in our building and loan associations. It has been one of the things that has helped the associations through this depression period. And so on. Senator WATSON. I do not see then the necessity for the passage of this bill to aid building and loan associations, if you are loaning right along. A man will pay these loans and his life insurance to the exclusion of everything else, will he not? Mr. BODFISH. True; but, Senator, we have a large number of people who saved their money in our associations, and saved it for a rainy day, due to lack of confidence they want their money at the present time. Senator WATSON. That is the investors, not the borrowers? Mr. BODFISH. The investors, not the borrowers. Senator WATSON. Yes. Mr. BODFISH. Building and loan borrowers are not suffering, in my judg ment Mr. SABATH. Will you pardon me right there? Mr. WILLIAMS. Yes. Mr. SABATH. You understand that all these members who have been paying in every week or every month for four or five years have been doing so with the hope, perhaps, that they may be able to buy a home and make a mortgage, but who have not reached that point, and who find themselves out of employment, and they need some of the invested or deposited cash or capital. They may make application, in order to save themselves from starvation, for a loan of a hundred, or two hundred, or two hundred and fifty dollars to get the money they have deposited. Do you say they are not entitled to be aided, or relieved, or assisted? It is their money, and they have it in there for that very purpose. Do you mean to say they are not entitled to that relief? Mr. WILLIAMS. I say this. Of course, that is one class of people, that is true. On the other hand, you will find a great many men in this country, and they call them investors; they are stockholders, they are certificate holders, they are men who have invested their money in the building and loan stocks and certificates, for the reason that they considered them good investments, and there has been a big dividend paid on them, and they have their money tied up and they want their money. There is that class in this also. I do say it is not the business of the United States Government to go into partnership with some private institution to help them realize on what perhaps has turned out to be a bad investment. Mr. O'CONNOR. Then their shares have matured. Persons investing in building and loan shares believe that when their shares mature they can get that money, just as they can in a savings bank. The Government is helping the banks to pay their depositors, and it seems to me building and loan shareholders ought to be treated the same as savings bank depositors, and if they can not get their money when their shares mature, either the building loans ought to be closed out or some help should be rendered. Mr. WILLIAMS. Do you not think, if they had their money, they are in the first class? Under this agreement among ourselves, is it a mutual affair? Mr. O'CONNOR. It is just savings. Mr. WILLIAMS. Some of it. Mr. O'CONNOR. I never knew anybody to approach it from that attitude. Mr. RANSLEY. Mr. Williams, the trouble with the building and loan associations around Philadelphia and in that vicinity has been that they have been forced to take their properties from the borrowers, and that has so weakened them that it is practically impossible for them to pay those people who have used the building loan as a sort of saving fund. Almost every building and loan association in Philadelphia and vicinity are loaded up to-day with properties that they are forced to take over, owing to the fact that payments can not be made. This bill would relieve building and loan associations, would it not? Mr. WILLIAMS. It would relieve them. Mr. RANSLEY. Therefore they would be able to pay the borrowers. Mr. WILLIAMS. It will relieve them in order to pay their investors, and perhaps, to a limited extent, the home owner. That, however, is purely a secondary proposition, as announced by every proponent of this bill. The purpose primarily is to permit them to get the money with which to pay their investors, and of course, if they are able to rearrange their financial condition it will be to their advantage. Mr. SABATH. You mean the shareholders, the members? Mr. WILLIAMS. Well, yes; I am using the language of the gentleman himself. He calls them investors. Mr. RANSLEY. What you call investors are frequently people of small salaries who really use building loans as a savings fund. Mr. WILLIAMS. Some of them. Mr. SABATH. They put in two, three, or four dollars a week. Mr. WILLIAMS. I want to come now to some other objections to the bill. I think that building and loan associations, to start on, and banks themselves are in an unsound unliquid condition by reason of some lack of foresight, in the first place, and I will tell you why. Many loans have been made-and there is not any getting around the fact that loans have been and are being made on fictitious values, or narrow margins, to men throughout this country to-day for homes. It is an unfortunate situation, of course, but they have homes with mortgages on them equal to or greater than the value of those homes. This institution, or no other institution, can legitimately or soundly refinance that condition because the security is not there. The building and loan associations and the banks themselves have gotten them in that condition in many instances. A good many men, at a time when credit was easy, were induced to do that, and the banks are responsible for that condition. These men were induced to build homes beyond their means, and when the time came when they lost their jobs they were not able to protect that home. A good many of these investors are small men, and they put their money in there to get dividends on it. They were induced to put their money in there to get the dividends, and large dividends, in some cases. Mr. SABATH. A building and loan association does not pay any dividends. After the series runs out or matures in 8, 9, or 10 years, they get their money with the little interest that the money has made. Mr. WILLIAMS. You can call it interest. It is an allowance. Mr. SABATH. And they do not pay dividends every six months or every year. Mr. WILLIAMS. That is one of the strongest things they have advocated in this measure. Of course they do-some of them. The CHAIRMAN. Suppose we let Mr. Williams enumerate his objections, and then we can discuss them. Mr. WILLIAMS. I shall be glad to do that. Mr. Cox. Unquestionably, Mr. Chairman, he exposes the weakness in this legislation, which runs through all legislation of this type, in that the Government is urged to come in and jack up the business of these institutions and support them on the basis of their operations of several years ago, when values were high and business was good. I do not think the Government can do it, or anybody else can do it. Mr. WILLIAMS. No. I want to make this observation in comparison with the Federal land bank system. We know what that is, and the proponents of this measure recommend it along that line. They say, "We furnish this credit to the farmers of the country, and the home owners ought to have it." I do not know what the feeling of the members of this committee is about the Federal land bank system of this country. My own observation and knowledge of it, from my study of it and my experience with it, is that it has been a miserable failure, and if they have not any higher recommendation for this measure than the Federal land bank system of this country, then it ought not to be enacted into law. Now, what did they do? They came here at the beginning of this Congress, perhaps the very first measure we had, and it came before the committee of which I am a member-the Federal land bank system, which was organized in this country for the purpose of helping the farmers, extending credit to them, and tiding them over a period of stress-and just as soon as this period of depression came, what did the Federal land banks of this country do? Did they step out and say to the farmers of this country, "We will extend you additional credit; we will help you over this period of depression and this crisis in which you find yourselves?" Not at all. They found themselves with their bonds selling almost for nothing, so far as the joint-stock land banks were concerned, and the Federals themselves selling generally around 75 cents on the dollar, and they came to this Congress and almost bludgeoned us-and I was one of them; I was a member of the committee that heard them and reported it out favorably, and voted for it and supported it, so far as that is concerned into giving them $125,000,000 to help the farmers of this country. And what did they do? The farmers of this country to-day are in worse shape, so far as their financial condition is concerned and so far as anything they have received from the Federal land banks is concerned, than they were the day we gave the Federal land banks of this country $125,000,000. There is $24,000,000 less in loans to the farmers to-day than there was then, according to their last report. The Federal land banks have $4,000,000 worth more of property, because they have gone on with their foreclosures, and they have $24,000,000 less loans to the farmers of this country to-day than they did when we gave them $125,000,000. They have used the money to pay the interest on their bonds and to bolster up the bond market of this country, I assume, but they have not used it in the interest of the farmers. And I say again that if the proponents of this measure can not point to something better than the Federal land bank system that we have established and sponsored during these years, in favor of this measure, it is on poor ground, because they have not rendered the help that they should have rendered. Mr. BANKHEAD. Are the Federal land banks lending any new money now? Mr. WILLIAMS. Not that I know of; and I know their report shows that they have less loans to-day than when we gave them this $125,000,000. I think the theory and principle of the thing is entirely wrong. Some one mentioned the Reconstruction Finance Corporation helping the banks. That is true. They are also helping the building and loan associations. Of course the members of this committee know that the building and loan associations are in the Reconstruc |