help to hold a considerable number of people with higher incomes in the projects. This is a concept that many of us entertained in the beginnings of the program, but there were certain people in our camp who did not want to have anything except a purely rental program for low-income families. For a certain period they did want to extend public housing into the middle-income group.

A considerable number of the architects of public housing in its earliest stages felt that it was designed for a very large group of families who might be regarded as poor people and would always continue to be poor people. In the type of dynamic society that we have in this country, and even in the kind of society we have in other countries, there has been a great change in the basic attitude toward poverty. We are no longer willing to admit that the families that occupy public housing will always remain poor. I believe now that we will come to the situation in which we will regard public housing as a step upward in the economic ladder. We will use it as a means of lifting families to a higher scale of living. Some of us had this concept in the very beginning. We felt that it was a form of social security that did not have the taint of welfare or the form of dependency that called for a needs test. Public housing then must be shaped to meet the newer concepts of a dynamic society in which people have an opportunity of constantly moving up the economic ladder.

As we think of the rebuilding of the downtown sections of our cities we must think not only of housing units, but also of the type of social organization that will enable people to build communities in which family and neighborhood life will be possible. For this we need the type of leadership that will bring all groups in the community together in programs of mutual aid and self-help. This will call for a real organization of the community. We have the pattern for this type of organization in a number of sections of the country. We have it in the back of the yards in Chicago, in many areas of California, and in the Lackawanna project in New York.

The existing programs of social agencies and public-welfare programs in American cities do not have the strengths necessary to build the type of program that we should envisage. The leadership in this sort of program must come fundamentally from the people themselves, from their own strengths. I believe we have great leadership potentialities in all our public-housing projects. We need people who have the strengths and the talents necessary to build up organizations of the people themselves. If the existing social agencies are willing to undertake programs in the public-housing projects they should be encouraged to do so, but in order to do so, they will have to develop a new leadership. Highly specialized workers are not adapted to this kind of work. It might be necessary to recruit people from many other fields, such as recreation and education. With the conditions that prevail in the United States in regard to governmental organizations there is a real question as to whether this type of work can be done by government. Many times we will run into conflicts as between the different governmental organizations. The only way in which these conflicts can be resolved is by bringing together an overall citizens organization including all the existing organizations of the community as a whole. This, you will say, is a new approach; it will take time. But with proper leadership it would not take too much time.

The lack of leadership in the administration of public-housing programs today is a symbol of a lack of social leadership in the American community as a whole. We do not have adequate social implements to deal with the kind of disorganization that threatens the American city of today.

Senator CLARK. We have a number of statements and letters which will go into the record. Any others that may be received prior to the time of printing will also be inserted.

(The material referred to follows:)

STATEMENT OF NATIONAL ASSOCIATION OF MUTUAL SAVINGS BANKS

Mr. Chairman and members of the committee, this statement is presented on behalf of the National Association of Mutual Savings Banks, representing the mutual savings banks of the Nation, which are institutions operated solely for the benefit of their depositors with all their assets belonging to depositors. They are 520 in number, operating in 17 States, primarily located in the New England States, New York, New Jersey, and Pennsylvania. They had a total deposit

liability as of March 31, 1958, of over $32 billion and assets of $36 billion. They are traditionally known as depositories for small savers. The mortgage investments of mutual savings banks, amounting to over $21 billion, or nearly threefifths of their assets, are comprised of loans made in every State in the country, Puerto Rico, and Alaska.

The committee on mortgage investments of our association has carefully studied the provisions of the housing legislation presently pending before your committee and appreciates the opportunity of presenting herewith their comments.

Under date of February 6, 1958, we addressed a letter to Mr. Jack Carter, staff director, Subcommittee on Housing, Senate Committee on Banking and Currency, giving our comments on S. 2791 and making suggestions and recommendations based upon a thorough analysis of this bill by a subcommittee of our mortgage investment committee. As our specific suggestions and recommendations are in the possession of your staff director, we do not believe it is necessary to repeat them in this statement. We would like to reiterate our general conclusions however as outlined in the aforesaid letter of February 6, 1958, by quoting the two paragraphs which stated our position.

"Our subcommittee of the mortgage investment committee of the National As sociation of Mutual Savings Banks is of the opinion that S. 2791 (with certain of the refinements mentioned above) might well stimulate the use of long term lowdownpayment mortgages in local areas. For this reason alone, our committee felt that we should not oppose the plan proposed under S. 2791. Nevertheless, we do feel that one of the big shortcomings of the plan is the fact that it has many limitations which would preclude lenders from participating therein in the same manner in which they have participated in FHA and VA programs. In all probability, if the plan is enacted into law it will be a one-industry plan, primarily used by the Federal savings and loan associations with the possible addition of a smattering of participants among commercial and savings banks on a purely local lending basis.

"From the standpoint of mortgage lending institutions operating on a nationwide basis, we seriously doubt that it will be attractive to nationwide lenders. The first hurdle to be cleared will be the necessity of having State laws changed and it might prove difficult to get the same permissive legislation for this plan as is now in effect for FHA and VA lending. Lack of provision for incontestability of guarantee would also be a deterrent to nationwide lenders. Likewise, lack of a set of underwriting standards, particularly as they refer to large scale developments would be an adverse factor. In this connection, some thought might be given to adding a provision to S. 2791 which would provide that on projects of 5 or more units, prior submission of plans and specifications and qualification under FHA standards would be a prerequisite of securing coverage under the proposed plan."

With reference to the housing bill of 1958 (S. 3399), we would voice no opposition to an increase to $30,000 in the maximum amount for a 1-, 2-, and 3-family dwelling financed under section 203 as proposed in section 101.

We believe that section 102, as proposed represents desirable legislation and will aid in expediting the construction of homes and cut down on costs of closing, and improve processing procedure.

With regard to section 103, we feel that the revised provisions outlined, in connection with rental housing for elderly, are desirable with one exception. The proposed legislation omits the requirement (now contained in section 207) that the project be economically sound. We believe that under (7) of section 103 it should be provided that the project "shall be economically sound for its type of use."

We do not believe that FHA as a mortgage insuring agency should insure loans for any purpose unless there is a reasonable expectation of the project being capable of meeting its mortgage requirements. While the application of "economically sound" to rental housing for elderly may be too broad, it would seem that with the standards provided in (7) of section 103 of the bill the project should be in a position to attain economic soundness "for its type of use." While we recognize that housing for the elderly is becoming an increasingly important segment of our total housing requirements, we do not feel that it is sound to set up a special FHA insuring section (section 229 as proposed) in this field.

Our concern in this respect is increased by the likelihood that pressures in this area of housing will eventually lead to move liberal terms and interest rates, probably unacceptable to private lenders. Previous experience with

"special purpose" legislation under FHA has usually followed this pattern leading to an expansion of direct Government mortgage lending or special assistance under the FNMA program.

We wish to make it abundantly clear that we do not oppose a sound program aimed at providing rental housing for elderly persons; our opposition is to the procedure rather than to the program itself. We voice no objection to the proposed changes, except as previously outlined herein, but feel that these changes can be adequately made in section 207 rather than establish a new section 229.

Sections 104, 106, and 111 all meet with our approval. We do not desire to comment on sections 105-7-8-9-10-12 and 113.

Our association strenuously opposes the provision under section 201 to increase the limit on the amount of mortgage which can be purchased by FNMA under its secondary market operations from $15,000 to $20,000. We are of the firm opinion that such increase would constitute an unwarranted extension of governmental financing into this area of the mortgage market. Our association has consistently taken the position that secondary market operations of FNMA should be strictly confined to (1) areas of scarcity of mortgage funds, and (2) the providing of liquidity in the mortgage market. The proposal under section 201 meets neither of these tests. Even on the merits of the proposal we cannot find any justification for such action. Private lenders are actively competing for mortgages of all kinds at the present; mortgage money is available in good supply in all areas of the Nation, and indications point to a continuation of the ready availability of substantial amounts of mortgage funds in the foreseeable future.

Under such circumstances, why is it necessary at this time to expand sec ondary market purchases into new areas of operation? The only answer which can be given is a desire to continue to expand Government activity in the mortgage market. The public interest is not served by this proposal and for this reason, and those previously stated, we believe the proposal should be defeated.

We would favor section 202 but oppose section 203 for the same reasons as stated in our opposition to section 201.

As the balance of S. 3399 deals with programs not directly connected with mortgage-lending activities, we have no comments on the proposals set forth. Similarly, we have no comments on other pending bills except S. 3064 which would amend the section 221 program for relocation of families to allow the FHA insurance programs to cover two-, three-, and four-family dwellings. We voice no objection to this proposal.

We appreciate the opportunity of placing our views before your committee and trust that our comments and suggestions will be of assistance to you in considering this legislation.

STATEMENT SUBMITTED JOINTLY BY THE AMERICAN LIFE CONVENTION AND THE LIFE INSURANCE ASSOCIATION OF AMERICA

The following statement is submitted in behalf of the American Life Convention and the Life Insurance Association of America. These 2 associations have a combined membership of 266 life insurance companies which hold 96 percent of the assets of all companies in the United States.

With regard to S. 2791, which provides for the insurance of the top 20 percent of certain conventional home loans and which also provides for a 2 percent coinsurance feature; it is clear that an amendment to most State laws regulating life insurance company investments would be required to qualify these mortgages. Most of the State laws governing insurance company investments provide that mortgages (except those insured or guaranteed by the Federal Government) cannot be made in amounts exceeding two-thirds of the value of the property. Inasmuch as S. 2791 provides for as high as 90 percent loans, such mortgages would be ineligible for life companies. Even taking into consideration the 18 percent guaranty by the Home Loan Guarantee Corporation, the insured portion would not be within the limits of two-thirds of the value of the property. There would also remain the question of whether the guaranty is by the Federal Government. For these reasons, therefore, an amendment to State laws would be required to qualify mortgages under S. 2791 for life insurance company investments. Experience indicates that this would be a time-consuming process.

We believe that this proposal requires much further study. If the plan for coinsurance and insurance of the top portion of a mortgage loan has merit, it would seem desirable to incorporate it in the regular FHA program.

Section 401 of title IV of the committee print dated May 8, 1958, provides that the requirement that FNMA purchase special assistance mortgages at par be made permanent. We believe that this is an unsound step which should be rejected. Under the secondary market function of FNMA mortgages are purchased at prices currently prevailing in the open market. This is a sound procedure in that it does not place FNMA in unfair competition with private mortgage lenders. This provision for purchase at par under the special assistance function will at times place FNMA in an unfair competitive position with private lenders. This is especially true when the maximum interest rate on Government-insured or guaranteed mortgages is fixed at a level below the current market rate. The special assistance function has now increased in scope to the point where, on a par purchase price basis, a substantial part of Governmentinsured and guaranteed mortgages will automatically go to FNMA. This will require an unnecessary drain on the United States Treasury for funds because the ready availability of residential mortgage credit from private lenders is now apparent.

This country learned in 1951 that pegging the prices of Government securities at artifically low interest rates could only be accomplished by making the Federal Reserve System an engine of inflation. Similarly, the pegging of interest rates on VA and FHA mortgages through FNMA support of the market has likewise been a source of inflation in the residential mortgage field. We believe that in all its operations FNMA should function in a manner to provide private lending institutions a fair opportunity to meet the residential mortgage needs of the country. This means that the special assistance mortgages should be purchased at the going open market rate.

STATEMENT OF JACK HARFORD, MAYOR, CITY OF ARLINGTON, OREG.

Hon. JOHN J. SPARKMAN,

United States Senator,

Chairman, Subcommittee on Housing:

The city of Arlington, Oreg., population about 700, is located on the Columbia River approximately 150 miles east of Portland and 60 miles east of The Dalles. The John Day River enters the Columbia 25 miles downstream from Arlington, and the site of the proposed John Day Dam is another 3 or 4 miles farther downstream.

The Arlington community plays an important role as a trading and shipping center for a large area within Gilliam County, and extending across the Columbia River into the southeast corner of Klickitat County in the State of Washington. The continued existence of the community is needed during the period of construction of the John Day Dam. The full potential of industrial and agricultural development in the region, resulting from power and irrigation benefits as a part of the comprehensive program of the dam and its reservoir, cannot yet be determined. It is certain, however, that these benefits will be substantial, and that the measure of new growth in the area will give additional need for the continuation of the Arlington community.

(For a more complete description of the present economy of the community, its trading area, and its future role in the development of Gilliam County and the Middle Columbia River region, etc., see the report "Relocation of Arlington, Oreg.," prepared by Harlan A. Nelson, planning consultant, for the Walla Walla District, Corps of Engineers, United States Army, July 1957.)

The reservoir to be created by the John Day Dam will inundate the present town of Arlington to such an extent that the entire business district, industrial and other facilities in the waterfront area, and the largest part of its residential area will need to be relocated.

Upon request of the Corps of Engineers, public hearings have been held in the community to describe the reservoir to be created by the dam and the effect it will have on Arlington; and to explain the courses of action available to the city and the property owners. Following the public hearings, the people of Arlington expressed themselves as preferring relocation. This preference was unanimous. As a consequence, the city council took action to formalize the community's expression, and to submit a statement thereof to the Corps of Engineers.

The physical characteristics of the town site, particularly its topography, the important drainage course, and the necessity to retain such features as the Condon spur of the Union Pacific Railroad, access roads to the interstate highway, etc., dictate the necessity of relocation within the site of the existing community, as contrasted with more or less complete removal to an altogether new site.

Briefly stated, the relocation process in the Arlington vicinity will involve the following projects:

1. Acquisition of all property in the areas to be affected by the general disturbance and the specific relocation projects. This will include all business, commercial, industrial, and other nonresidential, as well as all residential properties.

(In order to carry out the relocation of that part of the community which falls within the so-called “area of taking”—the limit of the Government's responsibility through the Corps of Engineers-it will be necessary for the community itself to assume the tasks of developing new streets, new residential areas, new industrial sites, relocating displaced families and other householdes, etc. These tasks involve land areas and projects far beyond the scope of the Government's responsibility. Essentially, the tasks, taken collectively, amount to an almost complete community redevelopment project.)

2. Acquisition of undeveloped land areas at the high elevations for development of a new residential neighborhood. Because the areas needed for replacement housing and other facilities are improperly platted and of divided ownerships, etc., it will be necessary to use public power to acquire, replan, and redevelop these areas before improved land can be made available to the displaced families or private builders for the new housing which will have to be provided.

3. Construction of housing for families, single-person households, elderly persons, and others displaced in the relocation process. Such housing facilities as will be needed should be provided by private enterprise on land made available by an urban redevelopment project at prices based on market value. Some public assistance may be needed to provide dwelling accommodations for those unable to provide for themselves or buy or rent dwellings offered through private enterprise.

4. Relocation of families and others into the new housing areas. Demolition or removal of existing residential structures.

5. Temporary relocation of businesses, public utilities and facilities to make way for Government relocation and construction projects affecting railroad and highway facilities.

NOTE: The projects involved in the accomplishment of the work outlined in steps 1 to 5, inclusive, above, are largely the responsibilities of the community, and cannot be considered as part of the John Day project of the Corps of Engineers. To achieve that relocation which is necessary because of the area needed for the reservoir, community redevelopment on a large scale must be commenced first. None of the following activities, consisting principally of Corps of Engineers' projects, can as much as be started until the community's own relocation and redevelopment program is formulated and the work carried to an advanced stage.

6. Relocation of Union Pacific Railroad main lines and spur line to Condon, including depot, maintenance, and all other facilities.

7. Relocation of existing Highway U. S. 30 and connections with State Highway 19.

8. Placing of fill to obtain relocation site for the new business district. 9. Construction of spur line, drainage canals, highway access ramps, and other features of the total project.

10. Construction of streets, utilities, and public and private facilities for the new town.

11. Sale of land in the redevelopment areas, and construction of new buildings and other facilities by private owners or investors.

12. Final relocation of business, industrial and municipal operations from temporary to permanent locations.

The concept of the use of urban renewal powers and Federal assistance is based on the recommendations contained in the relocation report prepared for the Corps of Engineers, and on the plans offered in connection therewith.

The use of urban renewal powers at the local level, and the employment of Federal loans and capital grants has been suggested as a means of permitting