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in your Memphis office you have an assistant regional manager from Atlanta?

Mr. ZIMMERMAN. Our regional offices are not staffed 100 percent by residents of their respective regions. Those offices have a relatively small percentage of people who are not residents of the regions. That percentage is relatively small.

The CHAIRMAN. When you opened the regional office in Atlanta you sent about 100 employees from Washington and staffed every position of any consequence with people who did not live and had not lived in the area of that office?

Mr. ZIMMERMAN. I do not know the number of people we sent there, but I think the committee will be interested in knowing that our problem was one of decentralization, a breaking down into segments the operation that was going on here.

I think it is fair to assume that in starting and opening a new office that those who are to give supervision and leadership to that new office, Mr. Chairman, should be familiar with the operations of our organization, and it was therefore logical to take those people from Washington. In doing so, however, we went just as far as we could in selecting people for certain regions who were legal residents of those States.

The CHAIRMAN. How do you justify that by the actual fact that the regional manager in Atlanta comes from another State, namely, Kentucky; that the assistant manager at Atlanta comes from another State; that you set up in Memphis a regional office and appointed a manager from North Carolina, which is in the Atlanta area, and an assistant regional manager from Atlanta and a personnel officer from Atlanta were placed in Memphis, and a personnel officer in Atlanta came from Washington, although he was a resident of New Jersey or Pennsylvania, at least those were the original conditions. How do you justify your answer by the actual facts?

Mr. ZIMMERMAN. You have cited 5 or 6 positions out of 500. My information is that it is a relatively small percentage of those people who are not residents of the Atlanta region. Those who are in the top executive positions were transferred from the Washington office, and our Washington office is made up of residents of all the States.

The CHAIRMAN. Why did you send a man from North Carolina to Memphis and a man from Kentucky to Atlanta as regional managers, if the policy was or is to send the men to their own regions? I had an amendment passed by the House requiring residence within the region where the employee served, but your Board opposed it and secured its elimination in the Senate. Why was that done if the policy was not as I have stated?

Mr. ZIMMERMAN. Answering broadly the implications of your question, I would say that one of the reasons that our labor turn-over is as high as it is and will be high, as we expect it will be, is because employees in responsible positions realize that their opportunities for growth in the Corporation are limited to the employment opportunities in their respective States. After all, we are a national organization attempting to do a businesslike job, and I think we know that national organizations favor opportunities in field positions for field people.

The CHAIRMAN. I am talking about regional managers, assistant regional managers, and personnel directors in regional offices. I have cited an illustration about which you know. The regional manager in Memphis came from North Carolina; the assistant regional manager in Memphis came from Atlanta; the personnel director in Memphis came from Atlanta. In Atlanta we have a regional manager from the State of Kentucky, an assistant regional manager from Kansas City, and a personnel director from Washington, whose residence is Pennsylvania or New Jersey.

Mr. ZIMMERMAN. Do you feel that our operations have suffered by reason of that?

The CHAIRMAN. Definitely so. The public in my State is dissatisfied with that sort of policy. It does not satisfy them to tell them that we have Georgia people in other regional offices in other States. They do not care anything about that. They see these outsiders holding these good positions that they feel our own people should have. You know that I presented that matter to the Board and it refused to do anything about it; and after we passed an amendment in the House to eliminate that practice Mr. Fahey succeeded in having it eliminated in the Senate. That is the situation that exists, and how you can say that is not the policy of your organization I cannot understand.

Mr. ZIMMERMAN. If it should be shown that 50 percent or more than 95 percent of the employees in a regional office are residents of the region in which they work, would you say it is our policy to staff the regional offices with people from the States in which the regional offices are located?

The CHAIRMAN. It is very definitely your policy to place people in charge of your regional offices when the people do not at the time the offices are established live within the areas served by the offices. Fahey tried to defend that with me.

Mr.

Mr. ZIMMERMAN. I would prefer to have Mr. Fahey or some member of the Board discuss questions of policy. I am in better position to discuss the details of our personnel operations, Mr. Ramspeck; but questions of policy, I think others should speak of.

Mr. MAHON. You are talking about executive positions and not clerical positions, Mr. Chairman?

The CHAIRMAN. Yes; those who direct the offices and hold the major positions.

You said you required a character investigation of all applicants for positions in your organization. What would you do about a man if you learned that 10 or 12 years prior to his employment by the Home Owners' Loan Corporation he had been found guilty of embezzlement; would you keep him in your employ or discharge him, even though his record since that charge was all right and his record with the Corporation showed that he had ability?

Mr. ZIMMERMAN. I would say that we desire sincerely to have people of integrity and honesty, and if we were convinced that we had in our employ a person who lacked character and honesty, some action would be taken to correct the situation.

The CHAIRMAN. Do you think it is good policy for any governmental agency to employ a man about whose character there is any question at all?

Mr. ZIMMERMAN. That opens up a rather broad field. If the public service throughout the Nation were to adopt a policy of refusing to employ people who had committed some misdemeanor or had been imprisoned, we would have a social problem on hand that would be very serious.

The CHAIRMAN. As a matter of fact, under civil service they do eliminate people with criminal records, do they not?

Mr. ZIMMERMAN. Yes.

The CHAIRMAN. You are familiar with that?

Mr. ZIMMERMAN. Yes.

The CHAIRMAN. It is the policy of the Civil Service Commission to eliminate those with criminal records?

Mr. ZIMMERMAN. Yes; under conditions. Do you understand that it is a 100-percent elimination?

The CHAIRMAN. I understand that such persons are barred from examinations. I understand that persons who have criminal records are barred from examinations. I may be wrong, but that is my understanding.

Mr. KITCHENS. I realize the extreme difficulty of employing these workers. They hired a man in my State on congressional designation who had a reputation as bad as it could be. He was charged with destroying books and embezzling $75,000; he deliberately stole all the ballots, tally sheets, and returns from every box in one county in my congressional district.

The CHAIRMAN. Who employed him?

Mr. KITCHENS. The Home Owners' Loan Corporation.

Mr. ZIMMERMAN. Did it retain him?

Mr. KITCHENS. They kept him until he got another job and went away.

Mr. ZIMMERMAN. He is not now in our organization?

Mr. KITCHENS. No.

Mr. ZIMMERMAN. Was he discharged?

Mr. KITCHENS. No; he resigned.

Mr. ZIMMERMAN. Will you give me his name?

Mr. KITCHENS. Yes; his name is Eugene Aiken, Crossett, Ark. Mr. MOSER. Victor L. Goodheart, State appraiser of the H. O. L. C. in Pennsylvania, is former sheriff of Burke County, Pa., and he was once short $64,000 in his accounts as sheriff. Mr. Jacob H. Mays, State administrator for Pennsylvania, was the subject of unsavory newspaper comment concerning his conduct, and he resigned on account of his health. Mr. Mays' assistant resigned because his nerves were "shot."

Mr. ZIMMERMAN. Are you referring to the early days of the Corporation? If you are, I think it is additional evidence of the importance of the work this committee is doing.

Mr. KITCHENS. It was in the early part of 1935.

The CHAIRMAN. Do you think it is good personnel administration to retain in the employ of your Corporation a man who takes off from an hour to 2 hours every afternoon to run a private business even though it may be claimed he charges that absence to annual leave?

Mr. ZIMMERMAN. Is the business in competition with our business? The CHAIRMAN. No; it is a furniture business.

Mr. ZIMMERMAN. I would like to say that as a matter of policy we frown upon employees, although they have a right to take their leave when they can be spared from their work, absenting themselves from the office if it interferes with their work.

The CHAIRMAN. As a matter of fact, do you not think it is wrong for an employee of any Government agency to engage in private business?

Mr. ZIMMERMAN. We look with disfavor upon it in our organization and we have sent instructions to the field on that point. We do not approve it.

The CHAIRMAN. I am asking these questions for this reason: Not because that happened to be a case within my personal knowledge, but because I have a definite conviction, whether it is right or wrong that the policy of the Home Owners' Loan Corporation has been to whitewash every charge of inefficiency or lack of character on the part of its employees that has been brought to its attention. That is the result of my personal experience in dealing with it. The cases I have mentioned are in the files of the Corporation and the persons involved are still working for the agency despite the fact that evidence has been presented in reference to this last case wherein a man over a period of months took from 1 to 2 hours every afternoon to go to his private business, and the only answer I got from the Corporation was that he took annual leave.

Mr. ZIMMERMAN. He is legally within his rights in taking annual leave, but if there is any evidence that his work is suffering, I think it is bad practice.

The CHAIRMAN. He is not within his legal right in taking annual leave except when his supervisory officer gives it to him. He has no right to arbitrarily take annual leave when he sees fit. We passed such a law, and I reported it out.

Mr. ZIMMERMAN. Did the supervisor know about it?

The CHAIRMAN. No. He knew nothing about it until I brought it to his attention, and then he whitewashed it.

Mr. ZIMMERMAN. I am not familiar with the case.

The CHAIRMAN. If you ask your chief auditor down there about it, he will know; but he does not do anything about it.

If there are no further questions, let us take a recess until tomorrow at 10:30 a. m.

FEDERAL HOME LOAN BANK BOARD,
Washington, February 25, 1937.

Hon. ROBERT RAMSPECK,

House of Representatives, Washington, D. C.

DEAR MR. RAMSPECK: I am glad to give you herewith, as promised, the legal residence of the 2,277 employees of our Washington office for inclusion in your hearing records.

Yours very truly,

R. R. ZIMMERMANN,
Director of Personnel.

Legal residence of home-office employees, as of Jan. 31, 1937

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(Thereupon at 12:15 p. m., Wednesday, Feb. 17, 1937, the committee adjourned, to meet at 10:30 a. m., Thursday, Feb. 18, 1937.)

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