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Mr. BUSBY. There would not be any trouble about that. You have had time to go over that for some time.

Mr. HARRIMAN. You are, of course, right in saying if we had 79 or 80 billions of income we would probably be reasonably happy. Mr. BUSBY. Yes, sir. What I am coming to is, that any project without employment and income on the part of the people who are to support the project is foredoomed to failure.

Mr. HARRIMAN. I will say this: As long as we have from 7 million to 9 million men and women out of work, we have got a hard row to hoe, and we must find some way of putting them to work and taking them off the Government bounty.

Mr. BUSBY. One or two other questions. I think this is entirely beyond the bill, because you expect the bill to be supported by the borrowing public and the borrowing public, without income, cannot respond sufficiently to return even a part of the money on its borrowings, without interest.

Now, without additional bank-check money, or without additional currency, do you have any hope of us ever reviving from our present situation?

Mr. HARRIMAN. Yes, I have.

Mr. BUSBY. How would you do that? Through borrowings? Mr. HARRIMAN. No; through means like this of putting people to work.

Mr. BUSBY. Do you not know that they are not going to prime the bank set-up with this type of activity?

Mr. HARRIMAN. If you are getting into a long discussion on the theory of money and currency and inflation

Mr. BUSBY. No, I am not.

Mr. HARRIMAN (continuing). I think you better call in Mr. Warren, for he is much more familiar with the circumstances than I am. Mr. BUSBY. Mr. George Warren?

Mr. HARRIMAN. Yes, or any one of them.

Mr. BUSBY. Mr. Pierson has been with us. But you are with us now and we do not have any trouble getting recommendations from your organization on everything else down here.

Mr. HARRIMAN. You have not had inflation recommendations from us.

Mr. BUSBY. No; I do not think we would ever have that from the United States Chamber of Commerce.

Mr. HARRIMAN. On the other hand, you did not find us opposed to the deflation of the dollar.

Mr. BUSBY. I do not know that. But what I am speaking of is putting buying power within the reach of the people, and when there is no way for people to get money there is no way for them to pay money, and any scheme or plan which is against the distribution of buying power of the people, and which is hanging a debt around their necks at the time they acquire that buying power is a detrimental arrangement, according to my view, and if this is such a scheme it cannot ultimately get any further than the amount of money which the Government furnishes.

Mr. HARRIMAN. As I read the history of Germany, France, and Italy, they did not borrow but they printed, and it did not turn out very well.

Mr. BUSBY. As you know, everybody who is well enough informed to discuss the money subject, has dropped that, because Germany did exactly what she tried to do, wiped out her internal debt, and what, if we follow some of our advisers, will be the end with regard to bonds and other internal debts in this country. If the buying power of the people cease and they have no earning power, budgets will not balance. That was the trouble with Germany.

Mr. FARLEY. I would like to ask just one question or two, Mr. Harriman.

Do you

One phase of this bill has had very little said about it. advocate that it is wise or necessary at this time for the Government to loan on homes not actually in need?

Mr. HARRIMAN. What did you say, sir?

Mr. FARLEY. Do you advocate that it is wise or necessary at this time for the Government to step in and loan on homes that are not actually in need?

Mr. HARRIMAN. I think this machinery, which is not Government lending, but private lending, for the taking of people out of the slums and out of improper homes and putting them in good homes

is wise.

Mr. FARLEY. That is not what I have had reference to. You have already built up a home-owners' loan organization to loan money to people who are in distress.

Mr. HARRIMAN. Yes, sir.

Mr. FARLEY. Now, then, there are provisions in this bill which would make it possible to set up another agency to loan to classes that do not come under the actually needy classes. Is that a wise thing for the Government to do at this time?

Mr. HARRIMAN. You mean the authority to loan 60 percent on existing homes up to $1,000,000,000?

Mr. FARLEY. That is the idea.

Mr. HARRIMAN. I do not think that is as important as the other feature.

Mr. FARLEY. If we do do that what effect will this have on other lending agencies?

Mr. HARRIMAN. I think the amount is so relatively small of the whole aggregate, that it will only be used for houses or homes which hereafter get into distress. But again it makes a great deal of difference what rate the Government puts on. I should hope that the Government would maintain a rate of not less than 5 percent and probably 6 percent net.

Mr. FISH. You made the statement, Mr. Harriman, that we ought to possibly spend $11,000,000,000 in order to work ourselves out of the depression. Is it not a fact that our national debt went down to $16,000,000,000, and to get out of the depression we are spending up to $31,000,000,000, and probably very much more? That is $15,000,000,000 which we know of, and probably a great deal more. I am only developing that for the sake of accuracy.

Mr. HARRIMAN. I am using a figure which has been very commonly used. I am not sure whether it is exactly right or not.

Mr. FISH. I think you will follow me when I say that the national. debt went from $26,000,000,000, as a maximum, down to $16,000,000,000; and then, under the Republican administration, appropria

tions for the Reconstruction Finance Corporation and others caused it to go up to $20,000,000,000.

Mr. HARRIMAN. Of course, that has not all been expended with no returns. A great deal of it has been loaned, and much of it has already been paid back to the Reconstruction Finance Corporation, and we were talking about net amounts.

Mr. FISH. That is true. The information which I want to get from you-because you represent a very powerful organization—is this: The Government puts this $200,000,000-which, of course, will eventually come out of the taxpayers; it has to be paid by somebody and I assume it will eventually be paid by the taxpayers-the Government puts that money into the venture. The other organizations which participate are permitted to extend that fivefold, to $1,000,000,000. Now, will all that $1,000,000,000 be tax-exempt or only $200,000,000?

Mr. HARRIMAN. Only the $200,000,000, as I understand it. Private loans which are made by the banks are not tax exempt, and that $200,000,000 may never be called upon to the full extent. The estimates made by the actuaries are that it will not be over $50,000,000. Mr. FISH. Has your organization taken any position on taxexempt securities?

Mr. HARRIMAN. We have taken a very strong position on limiting Government borrowings and Government activity to the utmost that it is feasible to do.

Mr. FISH. I mean as to the matter of tax-exempt securities. Can you tell us if your organization has ever gone on record in that regard?

Mr. HARRIMAN. We have never taken any position as to whether there should be a constitutional amendment in the matter of taxexempt securities.

Mr. FISH. Have you any views which you would care to express in that regard?

Mr. HARRIMAN. No; I have no views which I would care to express in that regard. I do not think I should.

Mr. FISH. Until your organization has discussed it?

Mr. HARRIMAN. Yes, sir.

Mr. FISH. As to the principle of the Government loaning up to 20 percent, or giving its credit up to 20 percent for this particular purpose, I assume that you regard it as an emergency proposition? Mr. HARRIMAN. Yes, sir.

Mr. FISH. Not as a permanent proposition?

Mr. HARRIMAN. No; certainly not.

Mr. FISH. You are not in favor of it for other industries. You are not in favor of it for the steel industry or the shoe industry?

Mr. HARRIMAN. They are getting help to a degree through the Reconstruction Finance Corporation. This industry has been getting help and the railroads as well through the Reconstruction Finance Corporation.

Mr. FISH. Actually, you are not in sympathy with the principle of putting up money permanently for such purposes, but, as an emergency proposition, you are willing to go that far?

Mr. HARRIMAN. Yes, sir; but, of course, we are not putting up any money in connection with the much larger sums which will be spent for new homes, and there is no guarantee of the Government

on that, but it will be fully covered by the reserves that will be set up. But I want those reserves spelled out in the bill. I do not agree to the bill at all in its present form, with those reserves left unstated. I think the minimum insurance should be 1 percent and amortization of 3 percent as a minimum, which should be stated in the bill.

Mr. FISH. I was not here, but I assume you have already made your suggestions for amendments to the bill?

Mr. HARRIMAN. Not specifically, except in answer to Mr. Luce's questions,

Mr. FISH. That is very important, because you have evidently made a very careful study of this bill. Have you any other suggestions by way of amendments to improve this bill?

Mr. HARRIMAN. I think I said that I had certain queries. I very definitely think that the reserves should be stated on sound actuarial grounds, in minimums, and that that should be stated in the bill. I think that the commission which is to govern this insurance corporation should have at least three members on it who give all their time to it, and that it should not be left to Cabinet members, who are busy on other things, with a chief clerk doing the work. I personally feel that the limit of 75 percent would be better than a limit of 80 percent, or that the reserve for depreciation would be set at 4 percent for the first 5 years instead of 3, but I am not sure that those figures are based upon anything other than caution.

The actuaries who worked this out said that it would be safe, if 25 percent of the moragages went sour in the first 5 years of the period, and the Government realized only 50 percent on those loans.

You must remember that this is not a guarantee in cash. In order for the bank or the loaning corporation to avail themselves of the bill, they have first got to foreclose and get the property, and then they turn it over to the Government, free and clear, and they take a 3-percent bond, which runs for 2 years more than the unexpired term of the house, 2 or 3 years more. So that you will see that the Government is not paying out cash but paying out these 3-percent bonds in place of the 5- or 6-percent rate of interest.

Mr. FISH. It does guarantee them, does it not?

Mr. HARRIMAN. It guarantees to give these 3-percent bonds, under those conditions, but it sets up reserve, just as an insurance company would.

Mr. FISH. Your suggestion is that those reserves should be changed?

Mr. HARRIMAN. No; I am not suggesting that they be changed. I am suggesting that they be definitely stated in the bill.

Mr. FISH. Yes, sir.

Mr. HARRIMAN. And made a part of the bill, just as the insurance law states that. I raise the question of whether or not the maximum should not be 75 percent instead of 80 percent. But you will see, if you set up 3 percent in 5 years, you have added 15 percent, taking that off of the principal of your mortgage. And on the compoundinterest principle, that is working up to a larger and larger sum as it moves on, because the purchaser guarantees not 3 percent but a sum which, over a period of the loan of 20 years, will pay it off. Mr. FISH. That is all, Mr. Chairman.

Mr. MEEKS. I would like to ask a question or two, Mr. Chairman. The CHAIRMAN. Yes, sir.

Mr. MEEKS. Mr. Harrison, do you expect a substantial demand for loans of this character?

Mr. HARRIMAN. I do.

Mr. MEEKS. And from what class of persons?

Mr. HARRIMAN. I should think that they would come very largely from people whose income ran from $3,500 to $5,900.

Mr. MEEKS. And in what parts of the country?

Mr. HARRIMAN. In a great many parts. I do not know that I would say where, particularly.

Mr. MEEKS. Would you say it would be quite general in the country, or whether it would be evenly distributed?

Mr. HARRIMAN. I do not think that the demand would be as large in Massachusetts, where there are good building and loan associations, as it would be in other States where they may not be as good. Mr. MEEKS. In my State of Illinois I have some communications from building associations, one of which is the largest in the State, my home city, and I presume that reflects the sentiments of other building-association people. They are out advertising for borrowings, for funds which they may lend on homes, and they report that they are unable to obtain borrowers for the reason that any prospects which they have are fearful that they have not a steady enough an income to warrant them entering into obligations of that character. What have you to say about that?

Mr. HARRIMAN. I think one reason is that most building and loan associations probably would not loan as high as 75 percent. They would take a part of it and the man would have to go to a second mortgage to raise the balance. The second mortgage has been the bain of the home-building industry.

Mr. MEEKS. I agree with you on that. But do you think that that is a full explanation of it, or do you think the other phase has anything to do with it, namely, that they are fearful of contracting that obligation?

Mr. HARRIMAN. If the object of this bill were merely to build homes, I should not favor it. I favor it because it has a double purpose, of putting men to work, and I think that the principal thing that will pull us out of the depression is to get men immediately to work in the construction industry.

Mr. MEEKS. The method of lending money which they are offering to prospective borrowers would put men to work, would it not?

Mr. HARRIMAN. I hope, Mr. Representative, that it will. I do not think anybody can give assurances of it.

Mr. MEEKS. If an association is soliciting borrowers, a part of that lending, at least, is for the construction of new homes and the renovation of other homes, but the explanation which they gave is that people are afraid to borrow.

Mr. HARRIMAN. I think that the psychology of a plan like this for Nation-wide home construction, where people can afford it, will have a good deal of effect in causing people to act, where they would not act except sporadically, one person here and one person there.

Mr. MEEKS. Then, there is the insurance feature which they speak of, which they think is unwise and would extend general borrowing,

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