Even though relatively the amount called for during the early years of the program are small, it is the over-all commitments to which the Government would be obligated by H. R. 4009 which must be considered in the light of the present Federal debt of more than $250,000,000,000.

In addition to the sums to be provided by direct appropriations, H. R. 4009 also would authorize over a 5-year period $1,000,000,000 in loans under the slums clearance program, $1,500,000,000 in loans (including outstanding loans) under the public housing program and $250,000,000 in loans under the farm housing program, a total of $2,750,000,000. Funds for such loans would be provided by the sale of obligations of the Government agency administering the particular program to the Treasury. The Treasury in turn would be authorized to use the proceeds from the sale of Government obligations in the open market to purchase the obligations of such agencies.

With a budgetary deficit anticipated for the current fiscal year and a still larger deficit expected in the 1950 fiscal year, the Treasury's problems in the management of the public debt have become acute. If deficit financing must be resorted to the economy of the country will again be subjected to inflationary pressures with the accompanying dislocations and threats of governmental controls and regulation. If, in the alternative, taxes are increased, the present rates are already so high and the burden so great that it would not take a very substantial increase to reach a level of diminishing returns. The enactment of H. R. 4009, calling for the expenditure of such huge sums, even though spread over a period of years, cannot help but further complicate the Treasury's debt-management problems.

If Congress deems that an expanded public housing and slum clearance program is desirable, it is submitted that a sounder program and one which would have less serious impact on the fiscal policies of the Federal Government could be developed, if the principles set forth at the beginning of this statement, which the association formerly presented to the Subcommittee on Housing and Urban Redevelopment of the Senate Special Committee on Postwar Economic Policy and Planning, were to serve as a guide.

We believe that not only should the control and administration of public-housing and slum-clearance projects be lodged exclusively in the hands of the local agency but also that the State or municipality should have a substantial financial stake in the project or projects. This would both assure a realistic ascertainment of the need for the project before it was undertaken and would better guard against waste and inefficiency in the development and operation of the project after a need therefor was determined.

To this end, we would recommend that the State or municipality be required to put up at least 50 percent of the funds to defray the acquisition and development costs of slum-clearance projects, and 50 percent of the funds to defray the acquisition, development costs, and operating deficits of public-housing projects and that the Federal Government be not required to assume more than 50 percent of such costs through loans, grants, or annual contributions.

It is also recommended that in the case of public-housing projects occupancy be strictly limited to those families whose ecnomic and financial circumstances would entitle them to local relief. Respectfully submitted.

WILLIAM A. RECKMAN,

Chairman, Subcommittee on Mortgage Financing and Urban Housing, Committee on Federal Legislation, American Bankers Association. MAY 3, 1949.

(Whereupon, at 12: 10 p. m., the committee was adjourned, to reconvene at 10 a. m., the following day, Wednesday, May 4, 1949.)

HOUSING ACT OF 1949

WEDNESDAY, MAY 4, 1949

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met, pursuant to adjournment, at 10 a. m., the Honorable Brent Spence (chairman) presiding.

Present: Messrs. Spence, Brown, Patman, Monroney, Buchanan, Multer, Deane, Mrs. Woodhouse, Messrs. McKinnon, Addonizio, Dollinger, O'Hara, Wolcott, Kunkel, Talle, Kilburn, Cole, Hull, and Scott.

The CHAIRMAN. The committee will be in order.

We will resume the hearings on H. R. 4009.

General Smith of the United States Savings and Loan League is our first witness. Identify yourself, General Smith, and proceed.

STATEMENT OF GEN. RALPH M. SMITH, CHAIRMAN, LEGISLATIVE COMMITTEE OF THE UNITED STATES SAVINGS AND LOAN LEAGUE

General SMITH. My name is Ralph M. Smith. I come from West Somerville, Mass., and I appear before the committee as chairman of the legislative committee of the United States Savings and Loan League.

I think, as you gentlemen know, that league is the 56-year-old Nation-wide trade organization that represents 3,700 savings and loan associations and cooperative banks in all the States of the Union.

I want to express our appreciation for this opportunity to appear before the committee. We know that you are holding prolonged hearings and have devoted much attention to these important questions and therefore, we will be as brief as possible. I would like to make just a few general observations and then, with your permission, call on Mr. Morton Bodfish, chairman of our executive committee to present our principal statement.

Also with us today are Mr. Abner Ferguson, our Washington counsel, and former FHA Administrator, and Mr. Horace Russell, of Chicago, our general counsel and former general counsel of the Federal Home Loan Bank Board. Both of them are available for questions and comments regarding the bill if the committee desires their assistance.

Unlike the general housing acts proposed during the Seventy-ninth and Eightieth Congresses, H. R. 4009 does not include provisions relating to private home and apartment financing and does not deal with such Government agencies as the FHA, VA, and Federal Home Loan Bank System which work with private lending institutions. This is

entirely a Government-housing and a Government-financing bill. It involves the expenditure over a period of time of approximately $20,000,000,000 of public funds. Therefore, the issue of the role of the Government with regard to Government housing is before the Congress without the confusion which has arisen in the past from the inclusion of sections dealing with home ownership and private credit. The bill has just four major titles and one of these-Farm Housingis so completely outside our field that we will not presume to comment on it. I can, however, give you briefly our feelings on the other three titles because they deal with housing for the low- and middle-income groups and, for 118 years, savings and loan associations have been in the business of assisting this type of families to home ownership on a sound and economical basis. Currently our associations are doing about one-third of the Nation's home financing and in 1948 advanced over $3,600,000,000 for the construction and purchase of housing. Over 10,000,000 people have savings accounts in our institutions whose total assets stand at $13,350,000,000. We have made almost $3,000,000 in GI loans and, even last year when, as you know, the GI program slowed down, our institutions loaned over $500,000,000 to veterans at the 4-percent rate.

With respect to title I-Slum Clearance, we are wholeheartedly in agreement with the objective of clearing blighted areas and clearing the land for redevelopment, but we are in disagreement with the means used in this bill. We recognize the need for the power of eminent domain and the need for a finanical contribution to "write down" the cleared land to its reuse value. Obviously Government participation in slum clearance is necessary and desirable. We would prefer that this assistance come primarily from the local and State governments, and indeed, over half of the States now have slum-clearance legislation in effect. The Federal Government has no money which it does not take from people of the several States and there is no magic formula for clearing slums which is not available to States and municipalities.

We feel that under this title, the land cleared would be primarily used for additional public-housing projects and that the Federal Government would be writing the ticket on slum clearance almost all the way through.

By way of contrast, we have urged the consideration of bills in the past, involving Federal grants which we are confident would work toward the real purpose of slum clearance and genuinely make the cleared land available for redevelopment, including appropriate housing, commercial, open space, and public uses.

We suggest something like H. R. 4012, introduced during the Eightieth Congress by Representative Dirksen. It is simple and easy to understand, and the local participation is bona fide and not camouflaged by loans and subsidies with which to repay loans. It would be administered by the Federal Works Agency and the cost would be easily determined. If it apears necessary that Federal aid be granted to the localities in slum clearance, we feel very strongly that this is the best approach to the question.

Title II has to do with public housing and, as we have indicated in all of our previous testimony, we do not feel that Government ownership, operation, and control of housing is in the best interests of the

Nation. Mr. Bodfish is going to discuss the broad question of Government ownership of housing.

I would like to call attention to the fact that this bill would provide for a sixfold increase in Government housing in this country and certainly cannot be construed to be a small or minimum entry into the field. We now have 200,000 public-housing units after 12 years under the United States Housing Act. During the next 7 years we would build five times as much during the past 12 years. In such a controversial matter as Government housing, it would certainly seem unwise to make such a drastic change overnight. Under the bill the Federal Government could build 250,000 public-housing units in a year, and this would be more than the total number of all urban housing units in the entire State of Kansas. It would also mean that the Federal Government alone would be building at a rate equal to 50 percent of the average annual home construction for the whole Nation during the past 20 years. And, of course, practically all proponents who have appeared before this committee have called this program a "minimum" program and "only a start." The Administrator of the Public Housing Administration has indicated to your committee that there is a need for 6,000,000 public-housing units. Of course, this is six times as many as this bill proposes and would ultimately cost over 96,000,000,000 of taxpayer dollars.

I would also like to call attention to the fact that under the bill there is no way to suspend the Government housing program even if tremendous vacancies occur in the housing field, and we have always had a good ratio of vacancies except during wartime or the early stages of business booms. Under this bill, even in a major depression, with millions of private rental units vacant and begging for tenants, the Government would continue to build at least 50,000 more Government housing units. That 50,000 happens to be just short of the alltime previous record for public-housing construction in our country set in 1938 when 65.000 public-housing units were started.

With this introductory comment, I would appreciate the committee hearing the chairman of our executive committee, Morton Bodfish, of Chicago, whom we consider one of the most widely informed men in the country on matters of home ownership, mortgage financing, and housing. After his statement, I am sure he will be glad to answer questions and Mr. Ferguson and Mr. Russell and myself will be glad to respond to any inquiries that the members of the committee may care to make.

Mr. Bodfish.

Mr. BUCHANAN. May I ask one question first?

The CHAIRMAN. Mr. Buchanan.

Mr. BUCHANAN. On page 4 of your statement, did the Administrator of the Public Housing Administration actually say that there is a need for 6,000,000 public housing units?

General SMITH. So I understand.

Mr. BUCHANAN. Or did he say that there are 6,000,000 substandard dwelling units in the country?

General SMITH. Well, it would seem to me that one would follow the other. If we are trying to clear up substandard housing, there is a need for that number of replacements.

Mr. MULTER. Mr. Smith, I would like to find out just what the interest of your association or league is in this matter.

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Are you here stating the official position of the United States Savings and Loan League?

General SMITH. Yes, sir.

Mr. MULTER. And that is made up of savings and loan associations? General SMITH. Yes, sir.

Mr. MULTER. They in large part are owned by the depositors, are they not?

General SMITH. They are mutual institutions; yes, sir.

Mr. MULTER. The boards of trustees, boards of governors, and boards of directors are all self-perpetuating bodies?

General SMITH. I would say not.

Mr. MULTER. In large part they are.

General SMITH. We have annual elections every year in which the members are entitled to vote and can control and elect the board of directors.

Mr. MULTER. Did your league solicit any opinions from its members who own these associations in taking the position you are taking here? General SMITH. We are constantly doing that, Mr. Congressman. We report to all of our member institutions and get their reactions and discuss them at our annual conventions, and I have never seen any other organization that goes to such great length in trying to find out the ideas of its individual member institutions.

Mr. MULTER. And you tell us that the opinions you are setting forth here are the opinions, by and large, of the membership that owns your associations?

General SMITH. Most emphatically; yes.

Mr. MULTER. Just why do you take the position you do? What is your interest?

General SMITH. Well, I can state my own personal interest, perhaps, in answer to your question. It is not so much that I feel that we have a selfish interest. I have a little $9,000,000 association up in Somerville, Mass.

Mr. MULTER. And you can exist as long as you make loans on real estate?

General SMITH. I think if public housing goes through we can still continue to operate, so that I am not fearful that this is going to drive us out of business, but my own personal reason for so strongly opposing this bill is because I believe that items of this kind are destroying the character that has built up this country. We have got to help people that want to save and want to own homes.

Mr. MULTER. I think you agree with the general proposition that slums must be cleared.

General SMITH. There is no doubt about it.

Mr. MULTER. And the existence of slums tears down character. General SMITH. There is no doubt but what slums should be cleared. Mr. MULTER. What has your organization done to clear up slums, anywhere in the country?

General SMITH. Well, we are constantly trying to get local legislation on slum clearance, and have been for that right along.

Mr. MULTER. Then if you want local legislation you are not opposed to Government clearing slums?

General SMITH. No.