Senator SPARKMAN. May I ask you just a few questions in order that we may be clear in our thinking on this. How are savings and loan associations regulated now as to the amount that they can lend? Mr. ROBERTSON. The Federals are limited to a loan-to-value ratio of 80 percent. Senator SPARKMAN. Is that by regulation of the Board? Mr. ROBERTSON. Yes, sir. Senator SPARKMAN. Subject to change by the Board itself? Senator SPARKMAN. I take it you are in agreement with this idea that the times have simply been a larger loan-to-value ratio over the past several years but that you have not made those changes for savings and loan associations, so the question is, If it is necessary to make them how best to protect that higher rate? Is that correct? Mr. ROBERTSON. Yes, sir; exactly. Senator SPARKMAN. So the question comes up of the two alternatives you mentioned. One is self-insurance, which means that each individual savings and loan association by building up the reserves within itself would carry the risks for those particular loans. Mr. ROBERTSON. Yes, sir. Senator SPARKMAN. So that if some one particular community should be hard hit, why, you would have a very bad situation there with reference to that one association, whereas if the risk were spread all over the country it would not perhaps be a ripple. Is that correct? Mr. ROBERTSON. The risk would be spread. Senator SPARKMAN. The risk would be spread. Yes. May I ask you this question Senator BUSH. On the other hand, Mr. Chairman, if I may just develop the point, it raises the question there as to whether it would not possibly invite imprudent lending in some sections of the country to the detriment of other sections of the country where the lenders are more prudent. Senator SPARKMAN. I believe there is in this bill-and, of course, again we do not claim that the bill is perfected Senator BUSH. I understand that. Senator SPARKMAN. It was offered for the purpose of study- Senator SPARKMAN. But I will call your attention to the fact that on this 20 percent there is a coinsurance feature. Is that correct? Mr. ROBERTSON. Yes. Senator SPARKMAN. And I will remind the Senator from Connecticut that on the title I, home insurance loans, they have a coinsurance feature, and I believe that has been one of our most effective and satisfactory programs in the field of housing. I believe those loans have been quite safe, largely because of the coinsurance features, because the loans are made with virtually very little supervision, except as given by local banks who do the coinsurance. Mr. ROBERTSON. I think we should say one thing about any insurance program. It is fundamental that an insurance company or the insurer take in more money than he pays out, and consequently any such program as this must be assured of adequate premium income; of a sufficiently simple administrative program so that it does not eat into the premium; that the underwriting be basically sound; that whoever administers the program should have the same privileges as any other insurer to reject unsatisfactory clients and to limit the proportion of risks. In other words, this program, if it is to be approached as a sound credit indemnity program, has to carry all of the features that are inherent in any insurer's program: Spreading of risk, distribution of risk, sound underwriting, adequate premiums, and economical administration. Senator SPARKMAN. Yes, sir. I wonder if I may ask this question. You may not care to answer it. But is the Board itself at the present time considering the feasibility of changing the regulation as to the loan-to-value ratio? Mr. ROBERTSON. I think that we can say that we are. I cannot say we will. Senator SPARKMAN. As a matter of fact, as you correctly point out, that is the action of New York State, which I suppose, is the State with the biggest business in the country. If a few more States followed that you are almost going to be compelled to do it, are you not? Mr. ROBERTSON. There is going to be a great pressure on us to do it and, of course, there are some States where they do not have any loanto-value limitation. Senator SPARKMAN. When you say "pressure" you mean just the natural development. Mr. ROBERTSON. That is right. Senator BUSH. May I ask one more question? I do not want to take up too much time. Senator SPARKMAN. That is all right. Senator BUSH. Under this bill on page 2 of my analysis here it says, "Percent of appraised value to be loaned up to $20,000 is 90 percent." That would mean for example in New York State that they could go up under their present laws to 90 percent, but under this bill, if this bill were law, then that whole 90 percent would be guaranteed by this Association to be set up, except for the coinsurance factor, which would be just 10 percent of any loss which might later be established. Is that right? Mr. HALLAHAN. Yes, Senator. I think under the provisions of that bill as written the insurance would terminate when the loan had been paid down to 50 percent of its original appraised value. Senator BUSH. That is right. Mr. HALLAHAN. Until that time, as you say, it would be. Mr. ROBERTSON. Perhaps I misunderstood the Senator but I think under this bill the top 20 percent would be insured and not the full amount of the loan. Senator SPARKMAN. That is right. Senator BUSH. That is from 90 down to 70. Mr. ROBERTSON. Yes. Mr. HALLAHAN. Yes. It would really be 18 percent. Senator BUSH. 10 percent would be lost of any established loss. Senator SPARKMAN. Thank you very much, Mr. Chairman and gentlemen. I appreciate your helpfulness. Attachment A to your prepared statement, your suggested amendments, Mr. Robertson, will be inserted in the record at this point. Mr. ROBERTSON. Thank you, sir. (The document referred to follows:) ATTACHMENT A SUGGESTED AMENDMENTS TO S. 2872, 85TH CONGRESS AMENDMENT NO. 1 At page 2, line 5, immediately after the period, insert the following new sentence: "In the event that any such insured institution makes any such change, the status of such institution as an insured institution shall automatically terminate at such time as the Federal Home Loan Bank Board shall by order fix, and such order shall for the purposes of the last five sentences of section 407 be deemed to be an order of termination within the meaning of that term wherever used in said sentences." AMENDMENT NO. 2 At page 2, delete lines 10 to 17, both inclusive. Senator SPARKMAN. Next we will call on Mr. Richardson. Is he here? STATEMENT OF ELLIOT L. RICHARDSON, ACTING SECRETARY; ACCOMPANIED BY DR. LLOYD BLAUCH, ASSISTANT COMMISSIONER FOR HIGHER EDUCATION, OFFICE OF EDUCATION; DR. GEORGE C. DECKER, CHIEF OF CAMPUS PLANNING DEPARTMENT, OFFICE OF HIGHER EDUCATION; DR. ROBERT BOKELMAN, SPECIALIST IN COLLEGE AND UNIVERSITY BUSINESS MANAGEMENT; AND THEODORE ELLENBOGEN, LEGISLATIVE ATTORNEY, OFFICE OF GENERAL COUNSEL, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE Mr. RICHARDSON. Mr. Chairman, I would like to introduce first myself and then a number of members of the Office of Education staff who are here today. Dr. Flynt is not here. He had to be at another committee meeting. My name is Elliot L. Richardson, presently Acting Secretary of the Department of Health, Education, and Welfare. On my left is Dr. Lloyd Blauch, who is Assistant Commissioner for Higher Education in the Office of Education. On his left is Dr. George Decker, Chief of Campus Planning, Department of the Division of Higher Education. On my right is Dr. W. Robert Bokelman, specialist for college and university business management. On his right is Mr. Theodore Ellenbogen, legislative attorney in the Office of the General Counsel. I have a prepared statement, Mr. Chairman, which perhaps I might most conveniently read through. Senator SPARKMAN. Just go ahead and proceed in your own way. Mr. RICHARDSON. Thank you, Mr. Chairman and members of the subcommittee. I appreciate very much the opportunity to appear before the Subcommittee on Housing of the Senate Committee on Banking and Currency. The Department of Health, Education, and Welfare is greatly interested in various proposals before your committee to provide Federal loans for colleges and universities to construct build ings for educational purposes and to provide certain types of educational equipment. These proposals are embodied in Senate bills 3213, 3281, 3351, 3399, and 3713. There is no question of the need for facilities which is envisioned in the purpose of the several bills which are before your subcommittee. Enrollment in the approximately 1,900 colleges and universities was 3,068,000 in the fall of 1957. By 1960, enrollment is expected to reach 3,567,000; by 1965, 4,677,000; and by 1970, over 6 million. These enrollments will require great expansions in the physical facilities of the colleges and universities both for housing the educational programs and for housing students and faculties. You will readily understand, therefore, why the Department of Health, Education, and Welfare is deeply concerned with the problems which relate to the expansion of the physical facilities for higher education. Accordingly, the Office of Education of the Department is currently engaged in an extensive survey of physical facilities of colleges and universities. Preliminary results of this study-which covers 72 percent of the Nation's institutions of higher learning, enrolling 90 percent of the college and university students-indicate that colleges and universities plan a substantial increase in the rate of new construction programed to 1960, preliminary to further expansion in the following decade to accommodate an estimated twofold increase in students by 1970. During the years 1951-56, the institutions reported the construction of $1.17 billion in instructional and administrative facilities alone. Of this total, about 15 percent was financed from borrowed funds. By contrast, new construction of instructional and administrative facilities programed to 1960 is estimated to cost $1.5 billion, of which 12 percent is expected to be financed from borrowed funds. The Department of Health, Education, and Welfare favored the program of loans authorized under title IV of the Housing Act of 1950 as amended (Public Law 475, 81st Cong.). Under the present college housing loan program, loans are made, as the committee knows, for housing students and faculty members at colleges and universities, as well as for auxiliary facilities such as student unions, cafeterias, and infirmaries. The facilities for which loans are made are selfliquidating in character. This legislation is administered by the Housing and Home Finance Agency through the Community Facilities Administration. The Office of Education, by agreement with the Community Facilities Administration, makes recommendations concerning the educational eligibility of institutions which apply for loans and provides other pertinent information. The need for facilities to house and instruct the increasing numbers of students in our colleges and universities must be put in the perspective of the other needs of education at all levels. Recent events have focused attention upon certain educational needs and deficienciessome of which exist in the field of higher education-which are of such a nature as to endanger the national security. We believe that effective Federal action to help meet these educational needs is essential in the national interest. The Department has recommended enactment of S. 3163, now before the Senate Committee on Labor and Public Welfare, which would authorize a Federal program designed to assist State, local, and private efforts to overcome these deficiencies which endanger our security. Briefly, S. 3163 would authorize programs designed to— (1) Encourage more of our ablest students to go to college by improving testing and guidance and counseling in our schools and by providing scholarships for able but needy youngsters; (2) Assist States and local communities to expand and improve their school programs in the fields of mathematics and science; (3) Assist in expanding and improving the instruction of modern foreign languages, including important languages not generally taught in the United States and to assist in the support and development of area study centers; (4) Expand graduate education and provide fellowships for graduate students who are interested in teaching at the college and university level; and (5) Improve our methods of obtaining factual data on the status of American education. In addition, we have recommended enactment of S. 1917, also before the Committee on Labor and Public Welfare, which would provide Federal grants for the construction of medical and dental teaching facilities. These recommendations were based on the most careful consideration of educational needs and their relative urgency and priority in terms of Federal action to help meet these needs. Since the Department has already reported to your committee on those bills before you with which our Department is principally concerned, I shall discuss them only briefly, although I shall wish to present somewhat more extended views concerning S. 3713. Four of the bills to be discussed propose amendments to the Housing Act of 1950 and one proposes an amendment to the National Housing Act. 1. S. 3213 proposes to increase by $250 million the borrowing authority of the Housing and Home Finance Agency for college housing loans, increasing the total borrowing authority from $925 million to $1,175 million. 2. S. 3281 and S. 3351 would expand the scope of the present law by authorizing loans for the construction, remodeling, and initial equipping of facilities for sciences, mathematics and engineering, and S. 3351 would also make libraries eligible. S. 3351 would increase the total loan ceiling under the program by $200 million and would make the total amount available for these new types of facilities, while S. 3281 would increase the total program ceiling by $325 million and make $150 million of the total ceiling available for these new facilities. 3. S. 3713 would amend title IV of the Housing Act of 1950 to authorize loans to educational institutions for the construction, rehabilitation, alteration, conversion, and improvement of classroom buildings and other academic facilities of all types. It would authorize an additional $250 million in borrowing authority for the Housing and Home Finance Agency for this purpose. 4. S. 3399, the administration bill, proposes to extend and amend laws relating to the provision and improvement of housing and the conservation and development of urban communities, and for other purposes. One section of this bill would make technical and other improvements in the provisions of existing law dealing with rental |