The CHAIRMAN. You have introduced two new subjects before the committee, the protection of the Treasury and of the taxpayer, but we will be glad to hear you.

Mr. BENTLEY. If the Government does not protect the taxpayer, in my judgment, we are headed for financial ruin. It is very easy to overload him with ill-considered legislation, but more difficult to lift the burden.

Of the many handicaps to home building certain monopolies are the greatest. One of these with which this committee is certainly familiar is the monopoly of moneys and credits; some of your comments indicate that you have knowledge of it. To emphasize this permit me to recount a little history. I was present in the meeting, as a guest of my attorney, when the Investment Bankers Association of America was organized. In his office before we went to the meeting he showed me the records he had already prepared; he told me who the president was to be; and outlined the program it was going to launch. He said the American Bankers Association had decided there was too much credit running loose in America, that they were organizing this Investment Bankers Association to corral it and planned to set out on a 25-year program to promote the enactment of blue sky laws in every State in the Union, ostensibly for the protection of the innocent investor, but actually as a means of corralling the credit of the United States and forcing it all through banking channels for the gain of this credit monopoly. They estimated this program would take 25 years, for they intended to procure the enactment of blue sky laws in every State in the Union, in the District of Columbia, and then a national blue sky law, so they would have an absolute iron-clad national control of moneys and credits and so manipulate these laws as to make it practically impossible for a private individual, without endangering his liberty, to attempt to finance any enterprise of consequence.

I have watched the progress of this program for 25 years, and it amused me when I came to Washington 4 years ago to read the same old propaganda that first appeared 25 years ago and later in every State of the Union, for the enactment of the blue sky laws, and to see the final effort for a national blue sky law that would give them control of the whole financial structure of our country. This administration attempted to beat them to it in the enactment of a national securities act, a thing deliberately planned 25 years ago. They knew when they planned it that the climax would have to come in a crisis, would not be what they wanted, but could be amended from time to time under their tutelage. That control of cash and credit in the United States is the greatest monopoly on earth and makes most difficult every effort at legislation of this character.

Take the commercial banking business: The public understands that the Federal Reserve Banking System is an instrumentality of the Government. Anyone who thinks knows that the banking is as much a private business as a butcher shop or a farm, run for personal gain. The fact that banks have a public function enables them to gain this monopoly by means of the depositors money and necessitates Government control. So there is a bank monopoly with the Federal Reserve as its head. Now another monopoly has been, or is being created. Whether this is good or bad is yet to be determined. The question is whether it will handicap the home owner. I refer to the

Federal home loan banking system. To be of the greatest service, I think the Federal home loan banking system ought to be made a unified system, on a par with the Federal Reserve banking system with the right to issue currency based upon home-loan mortgages and be required to confine its business to financing the building and maintenance of the homes of America.

There has been a lot said in the past about slum clearance and low-cost housing projects. When I think that only 10 percent of the population of the United States lives in any kind of an apartment, and that 90 percent live in individual homes, and that the only money that the reconstruction program has made available for new home construction has been for slum clearance, mass housing, and subsistence homesteads; I cannot avoid the conviction that some undisclosed purpose has determined the policy of the administration. The Federal home loan banking system is tending toward a monopoly of home credit. This bill appears to be an effort to increase that monopoly.

The proponents of this bill are, first, the administration. I have met pleasantly nearly all who have appeared on behalf of the Government. There is nothing personal in anything I say. It is, however, contrary to the usual course of human action to be uninfluenced by self-interest, and anyone thinking he can get away from it deceives himself. The basic law of all constructive thinking is intellectual integrity. A man cannot be honest with his neighbor, even with himself; cannot even think straight unless he maintains intellectual integrity in thought and action. Some of these men evidently have that; others are the emissaries of intrusted groups with axes to grind and who tell them what to do.

One class of proponents has been those who represent the buildingmaterial and house-furnishings interests which have commodities to sell. It appears in testimony here that the man who in the main wrote this bill is connected with the General Motors Acceptance Corporation, a subsidiary of General Motors. This corporation, General Electric, and a few other large companies and combinations absolutely dominate the home-furnishings business of the country and make most of such home equipment excessive in cost. My chief concern is in the man who is trying to get a place in which to live. I could start tomorrow to remodel a house for a man who has six children, all under 12 years of age. He has a 4-room house and needs 8. It is distressing to think that I cannot buy the necessary material to remodel his house except at an excessive price.

One concrete illustration is better than any further discussion. I renovized an eight-room house recently; we tore down an old kitchen, put in heating and plumbing, sanded the floors, plastered and painted, put on a new roof and a new porch, at a cost of $2,100. I will tell you how we did it. I knew a number of unemployed men, carpenters, plasterers, and so forth, to whom I said, This man cannot get a loan for what he needs, so the work must be done for less or not at all; if you are willing to underwrite the labor I will make no charge for my efforts, will turn all discounts into the pool; we will first pay for all materials and distribute the surplus prorata among the workmen, which proved to be rather small pay but afforded a living. Some have talked about the price of lumber; out of the

$2,100 total cost, $750 went for heating and plumbing, and only $356 for lumber. In the end when the net proceeds were divided up, there was only $400 for labor, an average for carpenters, plasterers, painters, and all, of $2.8411⁄2 per day of 8 hours. I speak of this to show what I think will bring us out of this depression; that is, for every man where he is to do what he can without too much regard for profit-making.

Mr. CAVICCHIA. How about the labor unions, Mr. Bentley?

Mr. BENTLEY. I will speak of them; without regard to much profit until the wheels get to rolling and then prices and profits can advance. I have been favorable to labor unions all my life; am yet, but not to those disposed to strike for $1.37 an hour; or to those who tie up a Government building and throw a thousand men out of work over a scrap as to who shall put metal tops on the radiators. Such jurisdictional strikes are crimes against society; there ought to be legislation that makes them impossible. Let them strike constructively. Let those on the job do the work, and then when they decide who should have done it, pay them, whether they did the work or not. I do not know about the merits of any individual strike, but I do not believe that any small minority has a right to dominate the great majority in anything.

The CHAIRMAN. I am sure, Mr. Bentley, everybody is enjoying what you have to say, but as we are pressed for time, if you would permit me, and I certainly do it with profound respect, to suggest that you address yourself a little more to the point.

Mr. BENTLEY. I digressed simply to answer his question and will soon be through. A great handicap, one that can and should be removed, is the handicap of the price-fixing features of the N.R.A. codes. This is the greatest handicap to the building of homes today, is a complete monopoly in each industry having to do with home building.

I have found these codes, instead of being codes of fair competition and cooperation are codes of no competition and of monopoly, in practically all material the home builder has to buy and, they have increased the price out of all sense and reason. In my opinion they create economic tyranny and will degenerate into political tyranny.

There is not less than $8,000,000,000 worth of home construction that can be cut loose in this country, if the powers that be will kill the price-fixing feature of these codes and then you will not have to be concerned about this legislation. Mr. Chairman, and gentlemen, I am grateful for the attention you have given me.

Mr. CAVICCHIA. Are you in favor of the bill?

Mr. BENTLEY. I am not in favor of the bill as it stands; neither is the organization I represent, and neither is your committee.

Mr. CAVICCHIA. Just one more question; when you began to speak you stated you would like to see money lent cheaply on mortgages at no greater rate than 6 percent. That is to include amortization and interest. How much would you allow for interest on a mortgage?

Mr. BENTLEY. In my opinion, money to finance home building should be available originally at 4 percent, with 1 percent for amortization and 1 percent to cover other costs.

Mr. CAVICCHIA. How long a period of time would a mortgage run, when you only amortize it 1 percent?

Mr. BENTLEY. I would leave 2 percent for expenses and amortization, the work to be done on a non-profit basis, and amortize in approximately 20 to 25 years. I think home financing ought to be divorced from too much profit consideration and done more as a public service matter.

Mr. CAVICCHIA. When you say "nonprofit basis" do you mean under Government supervision?

Mr. BENTLEY. I think the nonprofit institutions that are lending money, and doing the best are not Government agencies but under Government supervision without Government liability. My fundamental conviction is every time the Government reaches out into business, it makes a bad job of it.

Mr. CAVICCHIA. You are of the opinion that Uncle Sam is a poor businessman, in business?

Mr. BENTLEY. I am of the opinion that if Uncle Sam was an individual who could act without a thousand strings tied to him, he would be a good businessman, because he has such ample resources. I am convinced he is a good businessman for certain things, like the Postal Service. Some think it is not run as well as it might be, but still it renders a great service at a small cost. I think it is a mistake to put the United States into the business of guaranteeing mortgages for private institutions that will operate as national concerns for private gain and give these concerns a place to dump their old mortgages, fix up their own condition, and thus create a monopolistic control, sufficient to dominate the home mortgage market. These national mortgage agencies, in my opinion, will simply be effective tools in the hands of some of the people who have helped to write this bill and of other big fiscal interests. Nobody can pick up five million these days for discounting home mortgages, except the institutions that will use it for private profit and that without much concern for the home owner, actual or potential.

The CHAIRMAN. Mr. Bentley, we thank you very much.

STATEMENT OF E. AVERY MCCARTHY, LOS ANGELES AND SAN FRANCISCO, CALIF.

Mr. MCCARTHY. If there is no objection, I have come 3,000 miles to give a 3-minute talk.

The CHAIRMAN. Are you opposed to the bill?

Mr. MCCARTHY. I am for the bill.

The CHAIRMAN. We had decided we would not consume any more time in hearing proponents of the bill.

Mr. MCCARTHY. I will only require 3 minutes.

The CHAIRMAN. All right.

Mr. MCCARTHY. I am vice president of the California State Real Estate Associates, a member of the National Association of Real Estate Boards, and president of the Real Estate, Owners, and Builders, operating in California since 1892.

I offer these few suggestions: I cannot see that this bill would force all or any large percentage of present-day straight loans into amortized loans.

You gentlemen are undoubtedly familiar with the universal mortgage bank rule that a larger percentage of value is loaned on amortized loans than on straight loans. Also that straight or flat loans as we call them in California, are made for a short term only—1, 2, or 3 years. It is not possible for home buyers to pay for small homes in any such short period of time. The sum of all loans possible under this bill is, after all, a small percentage of the total of fifty-one millions in mortgage loans on homes. It would not be possible to upset the mortgage market for years to come.

This, I take it, is essentially an emergency measure, a necessity. Since banks and mortgage-loan companies are not lending for new homes, nor for reconditioning old ones their advertisements to the contrary notwithstanding.

As a great help to the unemployment situation you gentlemen have had testimony on this point and it is in the Senate hearings to the effect that 65 percent of the cost of new and reconstruction work is labor-some of the evidence gives labor cost as high as 80 percent-my own experience would indicate 6623 as a sane average for labor.

As to the insurance feature, I think you gentlemen may take "judicial notice" of the fact that all insurance companies and corporations with good management have made nice profits and we cannot presume that the management of such a set-up as is proposed by this bill would be less experienced.

As to the 50-mile radius, it would seem to me that is correct as to metropolitan areas; but in the great stretches of the West and of California the radius might be 150 miles outside of metropolitan

areas.

I take it this bill is intended to fit in as a much-needed cog or gear to a financial machine that is not functioning as it should, is not operating as it did, and is not, nor will it be a detriment, but rather a stabilizer to the banking system.

Much attention and help has been given by the Government to short-term loan banks and bankers; but except for the home loan, none to the long-term loans on homes. Homes cannot be paid for on short terms by 95 percent of the home buyers of the country.

As to the details of the bill, and such amendments as may be necessary to carry out a proper purpose and intent, you gentlemen should be able to present such an amended bill as will provide what California needs, what the whole country needs; and I may suggest that you look more to the purpose and not the procedure, and it seems wise to leave a wide latitude of detail and of procedure to the management to be set up under the bill and to presume that the management must and will be of the highest type and order.

The fundamental purposes as expressed in the preamble I trust will not be lost in a maze of counter discussions.

And I trust these purposes will be met in the final bill: (1) Interest reduction. This is inevitable and my observation is to the effect that the principal opponents to the bill object to lower interest. (2) Long-time amortization. (3) Lower loan costs. (4) Repairs. Many homes have been lost because purchasers could not keep up all of the expenses, interest, refinancing, and repairs.