Mr. CHANDLER. That is my point. Mr. WILLIAMS. You speak of a referendum, and I believe you gave the information that those giving their opinion in that referendum had before them-I did not quite get that. Did they have a copy of this bill? Mr. CHANDLER. No, sir; Mr. Newton C. Farr, former president of the real-estate board, made a digest of the bill and published it in the real-estate magazine issued by the real-estate board. Mr. WILLIAMS. And they had that before them? Mr. CHANDLER. This is a copy of what we sent with our ques tionnaire. They had a copy of that for them to read. Mr. WILLIAMS. And based upon that information, they voted 4% to 1 against the proposition? Mr. CHANDLER. Against the proposition. Mr. WILLIAMS. That is all. Mr. CHANDLER. We also put in a report of the mortgage-loan committee to the real-estate board. Mr. REILLY. How long is that report? Mr. CHANDLER. Two pages. Do you want me to read it? Mr. CHANDLER. Giving their reasons. Mr. REILLY. I think it would be a good thing to put in the record right after that. Mr. CHANDLER. Do you want it read? Mr. REILLY. No; just file it with the reporter for the record. Mr. REILLY. We do not care about the analysis, only the reasons. Mr. Luce, have you any questions? Mr. LUCE. We have had an intelligent presentation of arguments from the Ohio State Bankers' Association, and they started off by saying they were against the bill, and repeated that statement, but when we got all through we found, with a few changes in the phraseology of the bill, they were satisfied with the bill and approved it. Have you any idea whether the answers you got to this were comprehensive-that is, whether the objection went to the whole program of the President's conference or whatever it went to the language of the bill only, as in the case of the Ohio Bankers' Association, and that they might change their attitude on the bill? Mr. CHANDLER. The committee, consisting of five of us, went through the bill and argued amongst themselves, discussing it from the point of view of the public and of the real-estate men. Mr. LUCE. You mean as a whole? Mr. CHANDLER. As a whole, the whole bill. Mr. LUCE. And you are against the whole program of the Presi dent and his conference? Mr. CHANDLER. Yes, sir. (The document referred to and submitted by Mr. Chandler is as follows:) REPORT TO MEETING OF BOARD ON MARCH 2, 1932 CHICAGO, March 2, 1932. Mr. President and fellow members: Your mortgage loan committee has analyzed the Federal home loan bank bill, now pending at Washington, known as H. R. 7620, and has come to the conclusion that it should be disapproved. This was the action of your committee at its meeting of February 10, 1932. The following resolution was unanimously adopted by those present, consisting of Sidney Lowenstein, Andrew A. Brock, Henry E. Coonley, Milton S. Yondorf, and Buckingham Chandler: Resolved, That the mortgage loan committee of the Chicago Real Estate Board makes the following recommendations to the Chicago Real Estate Board, namely, that the Chicago Real Estate Board disapprove of House bill No. 7620, a bill to provide a Government city home loan discount bank, and so notify the Senators and local Congressmen of such disapproval for the following reasons: "1. The bill is a further inflationary measure. "2. It further extends the bureaucracy now existing in the National Government, interfering with private initiative. "3. It will put an unfortunate rigidity in the loaning system, the board passing on real-estate credits; whereas, previously there were many men in each community who would look on different loans in different lights. "4. The board recognizes that loans are hard to obtain at the present time, but believes this is only a temporary condition as mortgage houses, banks, and insurance companies have always been able to amply take care of the situation and will be able to do so again. "5. The bill will not help the situation, because those mortgage houses that discount their loans will not likely be in the market until the discounted loans are disposed of, and as far as construction loans are concerned, there is no necessity for any homes now, there being a surplus on the market, and a further supply now would only further depress the market. "The board further recognizes that some banks may be financially assisted, at the present time, by being able to borrow on the mortgages in their portfolios, but this need is now fully covered by the reconstruction burean." The purpose of this bill is “to create Federal home loan banks ”—12 of them, 1 in each of the Federal reserve districts. But these will not be banks dealing with the home owners, like the Federal farm banks with the farm owners, but simply to be collateral loan banks where only the members-actual stockholders can borrow on their home mortgages up to 50 to 60 per cent of the face value of the mortgages. The membership is restricted to building and loan associations, banks, trust companies, and insurance companies, and no one else. The privileges of borrowing can not be obtained by realtors or real estate agency corporations. Of course, from the realtor's point of view there is little reason for him wanting to borrow on the mortgages he has on hand, when the limit is 50 to 60 per cent, unless he finds himself called by his present banks; and then, of course," any help in time of storm," etc. But, help at such a time does not mean that the realtor will start making new loans. A realtor will not make any new loans unless he believes there is a reasonable chance for him to sell them in the near future and secure his capital back shortly to make new loans and other commissions. So far I have been taking the realtor or realtor agency corporation's view because I know that the best. But I also know this, the point of view of the investment house and of the real-estate loan department of banks and trust companies is practically the same as the individual realtor's who is specializing in making and stocking for sale real-estate loans. They make their profits from making and selling mortgages not from carrying them. The proposed bill does not create Federal home banks who will buy mortgages, but merely banks who will loan 50 to 60 per cent on good mortgages, and are not our banks to-day doing even better than that? Most of the collateral loans were on an 80 or 90 per cent basis, and with the scarcity of cash buyers, I have a feeling that most of the collateral loans are still considerably above a 50 to 60 per cent basis. And, even if they were not at present on more than a 25 to 30 per cent basis, I do not believe any investment house would begin to make new home loans just because they could borrow 50 to 60 per cent on their new mortgages. What I have been trying to show is that the proposed bill would not make new home mortgages any easier to be obtained. It would relieve the banks and trust companies of part of their frozen collateral loans. That would be a good thing undoubtedly, but there really is not such a lot of this kind of collateral. Most of the frozen collateral is on real-estate bonds and mortgages over $15,000. The proposed Federal home banks would be limited to individual mortgages not exceeding $15,000. And what is the price this country would have to pay for the thawing out of the minor part of the frozen collateral? The bill provides, section 16: "There is hereby authorized to be appropriated the sum of $500,000 for salaries, travel, and subsistence expense," etc., "to the organization and establishment of the banks, until the end of the calendar year 1932." After January 1, 1933, it has to be borne out of the profits of the banks. But if, when times become normal and there is no further use of the banks, does anyone believe that the constituent banks are going to be dis banded by their officers and employees just to save the taxpayers' money? The bill provides that when withdrawals of members take place the Treasury of the United States will supply the capital so withdrawn, so that each bank shall at all times have a minimum capital of $5,000,000, and there are 12 banks, or a combined $60,000,000 of the taxpayers' money, the income of which must be used to pay the salaries and operating expenses of each home loan bank and the central board. If the bill were drawn as an emergency measure and the banks would cease when the emergency was past, there might be some slight excuse for it, if it could not be covered in some other way, but to saddle this country with a permanent institution at this time when "economy" is being preached is uncalled for and ridiculous. It is just creating another Federal institution for salaries and expenses. Do we want any more like the Farm Board? The Mortgage Bankers Association of America has come out unequivocally against the bill and is distributing a “Digest of Sound Opin.on" with "15 reasons" for disapproval. I also understand that the sound insurance companies can not see any value in it, and I, a realtor, am certain it will not help us. There are also many individual realtors opposed to the passage of the proposed law. BUCKINGHAM CHANDLER, Chairman Mortgage Loan Committee. Mr. REILLY. Mr. Cody, I believe you appeared before the other hearings. STATEMENT OF HIRAM S. CODY, PRESIDENT OF MORTGAGE BANKERS ASSOCIATION OF AMERICA-Concluded Mr. CODY. Yes, sir. This memorandum contains entirely new material. Mr. REILLY. Proceed. Mr. CODY. As requested by the chairman, our presentation will be limited to facts in rebuttal or in answer to questions by the committee. A clear understanding of the actual cost to the borrower of the different types of loans from different sources must prove helpful to this committee. The facts are shown in the following tables: Table 1 is taken from pages 509 and 510 of the textbook prepared under the direction of the United States Building and Loan League, entitled Elements of the Modern Building and Loan Association," by Mr. Horace F. Clark, Ph. D. (Wis.), associate professor of engineering economics, Iowa State College, and Frank A. Chase, educational director American Savings Building and Loan Institute. This book is one of the Land Economic Series, edited by Dr. Richard T. Ely, director for the Institute for Research in Land Economics and Public Utilities. It is approved for the standard real-estate course by the United Y. M. C. A. schools and the National Associa tion of Real Estate Boards, as well as by the educational division of the United States Building and Loan League, known as the American Savings, Building & Loan Institute, and was prepared under the direction of the textbook committee of the league. It was published in 1924, and the figures in Table 6, issued by the Department of Commerce in December, 1931, indicate somewhat higher percentages at this time. (Table 1 and the other tables submitted by Mr. Cody are as follows:) [Appendix, p. 509, Elements of the Modern Building and Loan Associations, by Clark and Chase] TABLE 1.-Building and loan interest rates in United States in 1924 (based, on $1,000 loan) I The number which occurs most frequently in any given series of items. It must be remembered that these actual interest figures are based on transactions to be completed in the usual way, i. e., the borrower will complete his payments on the stock and the stock will cancel his loan. In cases of default, or when the loan is paid before maturity, the membership and loan fees and the fines and forfeitures of 25 to 50 per cent of the dividends and profit on the stock will result in a much higher actual cost than is shown in this table. (Clark and Chase, pp. 259-260.) mortgages not exceeding $15,000. And what is the price this country would have to pay for the thawing out of the minor part of the frozen collateral? The bill provides, section 16: "There is hereby authorized to be appropriated the sum of $500,000 for salaries, travel, and subsistence expense," etc., "to the organization and establishment of the banks, until the end of the calendar year 1932." After January 1, 1933, it has to be borne out of the profits of the banks. But if, when times become normal and there is no further use of the banks, does anyone believe that the constituent banks are going to be dis banded by their officers and employees just to save the taxpayers' money? The bill provides that when withdrawals of members take place the Treasury of the United States will supply the capital so withdrawn, so that each bank shall at all times have a minimum capital of $5,000,000, and there are 12 banks, or a combined $60,000,000 of the taxpayers' money, the income of which must be used to pay the salaries and operating expenses of each home loan bank and the central board. If the bill were drawn as an emergency measure and the banks would cease when the emergency was past, there might be some slight excuse for it. if it could not be covered in some other way, but to saddle this country with a permanent institution at this time when economy" is being preached is uncalled for and ridiculous. It is just creating another Federal institution for salaries and expenses. Do we want any more like the Farm Board? The Mortgage Bankers Association of America has come out unequivocally against the bill and is distributing a "Digest of Sound Opin.on" with "15 reasons" for disapproval. I also understand that the sound insurance companies can not see any value in it, and I, a realtor, am certain it will not help us. There are also many individual realtors opposed to the passage of the proposed law. BUCKINGHAM CHANDLER, Chairman Mortgage Loan Committee. Mr. REILLY. Mr. Cody, I believe you appeared before the other hearings. STATEMENT OF HIRAM S. CODY, PRESIDENT OF MORTGAGE BANKERS ASSOCIATION OF AMERICA-Concluded Mr. CODY. Yes, sir. This memorandum contains entirely new material. Mr. REILLY. Proceed. Mr. CODY. As requested by the chairman, our presentation will be limited to facts in rebuttal or in answer to questions by the committee. A clear understanding of the actual cost to the borrower of the different types of loans from different sources must prove helpful to this committee. The facts are shown in the following tables: Table 1 is taken from pages 509 and 510 of the textbook prepared under the direction of the United States Building and Loan League, entitled Elements of the Modern Building and Loan Association," by Mr. Horace F. Clark, Ph. D. (Wis.), associate professor of engineering economics, Iowa State College, and Frank A. Chase, educational director American Savings Building and Loan Institute. This book is one of the Land Economic Series, edited by Dr. Richard T. Ely, director for the Institute for Research in Land Economics and Public Utilities. It is approved for the standard real-estate course by the United Y. M. C. A. schools and the National Associa tion of Real Estate Boards, as well as by the educational division of the United States Building and Loan League, known as the |