haven't they met the situation up to the present, created a demand for building, repair, and so forth?

Mr. HOPKINS. I presume the answer is there is no demand for it. There is no financing for it; they have developed a price level on the basis of scarcity.

Mr. WOLCOTT. You do not mean to say that there will be no building in the United States, no demand, unless this bill is passed?

Mr. HOPKINS. I think outside of Public Works, there is no sign of any extensive building being done privately.

Mr. WOLCOTT. Looking around the city, people are painting porches; people are having interior decorating done.

Mr. HOPKINS The statistics indicate a very slight increase of private building; very, very slight.

Mr. WILLIAMS. Will you let me make one inquiry? The general high-price level of building material now is materially lower than it was in 1926?

Mr. HOPKINS. I have some figures from the Procurement Division of Pubic Works, on a brick building and a frame building. Using 1929 as 100-these are on two buildings and they are from the Procurement Division of the Public Works branch of the Treasury; a brick and frame house of five rooms; counting 1929 as 100, it dropped to 97.4 in 1930; 84.6 in 1931; 75 in 1932; the first quarter of 1933, 77.2, and the first quarter of 1934, 94.1.

Mr. WILLIAMS. How does that compare with 1926?

Mr. HOPKINS. I have not those.

Mr. WILLIAMS. How does it compare with the general price level of building materials in 1926?

Mr. HOPKINS. I have not those.

Mr. WILLIAMS. That would be still lower.

Mr. HOPKINS. 1929 was high.

Mr. WILLIAMS. 1926 was also high.

Mr. HOPKINS. No; I think 1929 was high.

Mr. WOLCOTT. I have them here; I have the figures here, and I can give them. On the basis of 1926, using that as 100, in the index on brick and tile, in March 1934, it was 88.5, or 11.5 below the high of 1926.

Mr. PRALL. What about lumber?

Mr. WOLCOTT. Lumber, on the same basis, the index figure in March 1934, 86.4 or 13.6 below the 1926 level. In cement, the same basis, with the index figure in March, 93.9, or only 6.1 under the price in 1926. Structural steel is 86.8 in March 1934, or 13.2 under the 1926 price, and all building materials is 86.4 in March 1934, or 19.6 under the price.

I would like to get at another phase of this bill, if I may. It is quite agreed that section 3 of the bill provides for the insurance of loans for alterations, repairs, and improvements. Section 4 of the bill provides for loans for renovation and modernization, and section 5 of the bill provides for the insurance of mortgages given for new construction. Now, of course, section 3 and section 4 apply to existing homes, and section 5 does not apply to existing homes. Mr. HOPKINS. Yes.

Mr. WOLCOTT. The proviso in section 5, bottom of the page-this is following out the thought brought out by Mr. Williams-that ex

cept with the approval of the President, insurance of mortgages on existing homes shall be limited to an aggregate principal obligation on all such mortgages of not to exceed five times the aggregate par value of the Corporation's outstanding capital stock. That would limit the relief which is given in this Act to $1,000,000,000 for loans for altering, repairing, improving, renovating and modernizing existing homes. We will just forget for the moment that that can be increased with the approval of the President. There seems to be no limitation whatsoever upon the amount which can be raised to insure loans made for new construction. Do I understand that

was purposely provided in that manner?

Mr. HOPKINS. Yes.

Mr. WOLCOTT. On the theory, this being an insurance corporation, there should not be any limit to the amount of business it can do; am I correct?

Mr. HOPKINS. Yes.

Mr. WOLCOTT. In every other insurance set-up that I have ever known, there is provided by law a certain relation to the amount of insurance which they might have outstanding to the capital and reserves of the insurance companies. That is for the protection of the company and the beneficiaries on the policies. What relationship must exist, under the terms of this Act, between the capital and reserves of this corporation and the amount of insurance it can have outstanding?

Mr. HOPKINS. That is not an important factor, for this reason: That this is an insurance scheme, and that the insurance itself, no matter how much it is, is adequate to cover any loans, just as the Metropolitan Life Insurance Co. collects premiums that are adequate to meet its losses.

Mr. WOLCOTT. If the Metropolitan Life Insurance Co.-we will take exaggerated circumstances-had a condition whereby all of its policyholders died on the same day, they could not meet the obligations out of the capital and reserves.

Mr. HOPKINS. No insurance company could.

Mr. WOLCOTT. The same is true of fire-insurance companies; if their insured buildings all burned on the same day, they could not meet the obligations out of the capital and reserves.

Mr. HOPKINS. That is right.

Mr. WOLCOTT. The law compels them to build up a certain reserve, which is considered a safe margin to do business, the same as we used to require that there should be 40 cents of gold in the Treasury behind every dollar.

Mr. HOPKINS. Yes.

Mr. WOLCOTT. If, at any given time, the Insurance Corporation was called upon to meet its obligations to its policyholders, the loan-bank companies, and so forth, then the taxpayers of this Nation would have to pay the differences between the capital and the reserves and their losses?

Mr. HOPKINS. If they all went into default at the same time, we would have the whole bill; that is true of banks.

Mr. WOLCOTT. Is it not the part of necessity to create some relationship between capital and reserves and the potential losses? Mr. HOPKINS. I would not think so.

Mr. WOLCOTT. You throw the whole force and weight of the credit of the United States behind this bill without any provision being made for building up adequate reserves?

Mr. HOPKINS. I throw the full weight behind an adequate insurance fund.

Mr. WOLCOTT. This insurance fund merely creates the means to pay the obligations, and yet these bonds that are outstanding are guaranteed; the Government has to pay them.

Mr. HOPKINS. Yes.

Mr. WOLCOTT. Don't you think it would make a better bill if you provided some limitation so there will be some relationship between the capital and reserves and the potential losses?

Mr. HOPKINS. If you limit it to the amount that represents the total amount of potential building to be done.

Mr. WOLCOTT. Don't you think it is economically unsound for the Congress of the United States, representing the taxpayers, to take the lid off completely the amount of obligations which any individual or group of individuals can create against the taxpayers? Mr. HOPKINS. No; because I think this insurance fund is a very conservative device.

Mr. WOLCOTT. I might agree with you if there was some limitation placed upon it. I do not want to open the Treasury of the United States to any individual, as much faith and confidence as I have in the President of the United States; I do not think it is fundamentally sound to put in the hands of any one individual the authority, without some limitation, to obligate the United States Government and the taxpayers of this Nation. Do you think that is good economics?

Mr. HOPKINS. No; I do not. I thing it is a perfectly sound thing for the Congress to do, providing the insurance fund is sound. I think there are some dangers of limiting it; if we get recovery we Lave to get it through the construction industry.

Mr. FISH. Speaking of recovery and the construction industry, do you think these artificial methods are going to secure recovery? Mr. HOPKINS. I do not think there is anything artificial about it. Mr FISH. You do not think having the Government go into this degree of socialism

Mr. HOPKINS (interposing). I do not think it is socialism; it is private funds that are put out.

Mr. FISH. Is there not only one way to restore the normal conditions of the country, and is that not through confidence rather than through the lending of money and helping get people into debt further?

Mr. HOPKINS. So far as this measure is concerned, it gives the money to me, to the lender-it seems to me that is what it does.

Mr. FISH. If you have confidence you do not need Government money. With confidence private money will come out.

Mr. HOPKINS. You do not restore confidence by sitting tight.
Mr. FISH. By encouraging business, you do.

Mr. HOPKINS. This is encouraging business very much.

Mr. FISH. When we guarantee the whole thing, I do not know that it is.

Mr. PRALL. Have you been watching the Literary Digest poll of this situation throughout the country?

Mr. HOPKINS. Yes.

Mr. PRALL. Would not that indicate that the confidence is returning or increasing?

Mr. HOPKINS. So far as the people are concerned.

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Mr. FISH. Of course, that vote was on the question of the " new deal", and at least 50 percent of the issues of the "new deal" were supported by the opposition party. Over 50 percent were supported by the opposition party, so when you ask a question as to whether or not you believe in the new deal", I do not see why it should not be almost unanimous. If the question was, Do you believe in Socialism, the revolutionary and radical movement, or the "brain trust "? I do not think we would have 75 percent. However, you are basing it on the whole "new deal", the restoration of the banks, and everything, and everybody was for that.

Mr. HOPKINS. The whole business.

Mr. FISH. If you put it on the basis of certain socialistic issues or certain radical issues or "brain-trust" issues, I do not believe you would have the same response.

Mr. CAVICCHIA. I have a telegram in my office; it comes from a building and loan official in the State of New Jersey, who, in the main approves of this bill, but who objects to that feature of it which calls for insurance of mortgages held by building and loan associations. His communication says it will cost the building and loan associations in the State of New Jersey $6,000,000 a year. They have been making very little profit in the last 5 years; that additional $6,000,000 cost to them will drive many of them out of business. Can you answer that question?

Mr. HOPKINS. In general, I think the answer is unless we can get a situation in this country which will permit building and loan associations to loan more money, to leave money in building loans, instead of taking it out and putting it in savings banks, we will not go far.

Mr. CAVICCHIA. Another building and loan association telegraphs "Why insure building and loan mortgages that are good. Why insure them if they are bad"? Is there any answer to that question?

Mr. HOPKINS. Well, of course, a lot of building and loan associations have some good mortgages in them; perfectly good ones. I know about several, but I think this insurance fund, for a building and loan association properly protected, is beneficial.

Mr. CAVICCHIA. Is this mandatory?

Mr. HOPKINS. No; there is nothing mandatory about it; they do not have to do it.

Mr. CAVICCHIA. Is it your opinion that in the industrial cities, where they are working only on part time, where there are vacant homes, that this bill is going to be of any benefit?

Mr. HOPKINS. I thing so far as the repairing and remodeling is concerned, yes. I think in certain communities there will probably not be. If you take the country as a whole, there is going to be a great deal of good.

Mr. CAVICCHIA. I happen to be a building and loan lawyer; I know many of the people who own homes on which they have first and second mortgages, and they have not paid their dues and in

terest and not even their taxes. Those homes do need modernization, but what good will it do them to borrow to paint and repair them if they cannot keep up their payments?

Mr. HOPKINS. You would not lend to the person who could not keep up his payments. It is not intended to lend to people who cannot afford to borrow.

Mr. CAVICCHIA. And, inasmuch as the act mentions homes occupied by the owner, I presume it will cover three- or four-family houses?

Mr. HOPKINS. I cannot answer that; I do not know.

Mr. CAVICCHIA. The law says that loans may be made on homes occupied by the owner. I would like to know what definition you give to that; does it mean three- and four-family houses, as we interpret it in the Home Owners' Loan Corporation Act?

The CHAIRMAN. That involves a matter of legal construction. I think we can wait for a discussion of that until we get into executive session.

Mr. FISH. When we wrote the Home Loan Act we designed by law the type of building that should be eligible for loans. It might become desirable to do that.

The CHAIRMAN. In a recent enactment involving a similar type of legislation, we were careful to make those definitions, but I think we can first consider those matters in executive session.

Mr. WOLCOTT. Aside from the provision in the act which requires that this insurance be given under rules and regulations by the board of the Home Credit Insurance Corporation, is there any provision in the bill for the subrogation of claims?

Mr. HOPKINS. Of what?

Mr. WOLCOTT. The subrogation of claims. I will make myself clear. Assuming that a bank takes a mortgage from an individual and that mortgage is insured by the corporation and there is a loss and the insurance company, the Home Credit Insurance Corporation, pays the bank up to the extent of its liability. Is there any provision for subrogating the Home Credit Insurance Corporation to whatever rights the bank might have had in an action at law, or otherwise, against the obligor?

Mr. HOPKINS. I cannot answer that, Mr. Congressman.

Mr. FISH. I would like to ask a question of the witness. Mr. Hopkins has been administrator in New York, where he rendered splendid service. Mr. Hopkins, will your administration have anything to do with the control of this legislation if it is enacted into law? Hr. HOPKINS. No; you mean the Relief Administration?

Mr. FISH. Yes.

Mr. HOPKINS. No.

Mr. FISH. Not even indirectly?

Mr. HOPKINS. I cannot answer that.

Mr. FISH. I can only say I regret it, because I think you would be competent to administer it. There is no relation between the C.W.A. and the administration of this bill?

Mr. HOPKINS. Not in this bill.

Mr. FISH. I regret that. Have you any knowledge of the situation of the housing authority bonds and the attempt to have the Government guarantee the principal and interest on those bonds?