then we have been the leading regional dealer in Government securities. We service not only many commercial banks but, through them, hundreds of their customers who are individual investors in Government bonds and obligations of Government agencies. You would be amazed if you could see the number of small transactions in Government bonds that we handle.

I believe it is well known to your committee that the 14,000 commercial banks of the country were leading factors in the 8 war-loan drives of World War II, as well as in the day-to-day sale of savings bonds for which the banks are still primary outlets. All of this service of distributing Government securities to investors has been performed without cost to the Treasury, and as you know the Secretary of the Treasury has repeatedly expressed his admiration and appreciation of the aid given by the banks.

We are only one of hundreds of regional banks which perform this same type of service for their banking areas and which represent local small business in the truest sense.

The Housing Act of 1949 will enable local housing agencies to issue upward of $8,000,000,000 bonds. While it would not be technically correct to define these as the bonds of Government instrumentalities, they belong in the same general classification even though they are to be issued by municipalities. The housing bill also contains in section 502 an amendment to the Banking Act which will permit banks to underwrite and distribute bonds of the local housing agencies, which are payable out of unconditional contributions to be made by the Federal Public Housing Administration. It is to this section 502 that I wish to direct my comments particularly.

Banks all over the country are interested in the adoption of this amendment. If there is to be such a huge Federal housing program. they are anxious to help to the end that the financing may be done as economically and effectively as possible.

I understand that certain investment dealers who, for selfish reasons, are opposing the adoption of this banking amendment have stated before your committee that only the big Wall Street banks are interested in its adoption.

My associates and I have regarded this banking amendment as being so clearly in the public interest, because it would help to broaden the market for housing bonds, that we had assumed there would be no dispute about it. Now, we fear that because some of the big New York banks have come out in favor of the amendment it may be regarded with suspicion, and something which is really for the good of the country may be lost through misinterpretation of that sponsorship. If there is any question here as between Wall Street and Main Street, I represent Main Street, as do thousands of other small banks in average American cities.

It will be interesting to you to know that of the banks who have these bond department operations, there are 138 pretty strategically placed over the United States, locally in the States. Only eight of these bond departments happen to be in New York.

The dealers who testified here earlier this week managed to get this question of the banking amendment so befogged with talk about communism, socialism, and big business versus small business that there is danger of losing sight of the main issue. I wish you to remember that there are many more small banks than big banks. I

don't believe that Wall Street has any such power over Congress as was alleged by the dealers. My own observation is that Wall Street sponsorship is generally a curse rather than a blessing, certainly politically.

The banking amendment is desired by the Public Housing Administration and approved by the bank supervisory authorities. Opposition to the amendment has come only from some investment dealers who hope to control purchase and sale of these high-grade housing bonds. They fear that the competition of the banks will lessen their profits. Behind the men who have testified here against the banking amendment are the big Wall Street investment houses whom the witnesses have appeared to denounce. They are trying for special privilege in defiance of the public interest.

The point to keep in mind is that interest rates on housing bonds will be fixed by competition of the underwriters why buy the issues from local agencies. This competition will become the more intense as distribution of the securities is broadened, which will be accomplished most effectively if banks having investment departments and investment dealers work together and in competition, as they do on other public bond issues.

You have heard General Farrel, this morning, point out how, because of the competition, where the dealers had one account, there was a second account which consisted of banks and dealers, and the city of New York, on its recent housing financing, saved $740,000.

The great majority of the investment firms who have been represented to your committee as members of an organization opposed to bank distribution of housing bonds never have engaged in the business of underwriting State and local government securities and the obligations of Federal agencies. In fact, out of 2,700 reported as the total membership of the NASD, fewer than 700 appeared in SEC reports for 1948 as underwriters of corporate securities. The membership includes great numbers of brokerage firms and others who have no interest and probably never will be interested in housing bonds. The banks, and the dealers who want to work with them in housing financing, compose a very large part of the marketing power available for this job.

The dealers themselves are divided on this question. I understand that more than 170 small dealers, spread over 32 States, most of whom specialize in public securities, have already expressed by letter and telegram their conviction that it is in the public interest to have the banks participate in distributing and making a strong secondary market for housing bonds.

You have been told that pressure from the banks may be responsible for the action of these dealers. Actually, judging from my own experience, I know that the real pressure has been brought by the big investment houses to swing small dealers into line behind their opposition to the banking amendment.

The question before the committee is not whether commercial banks may buy housing bonds for their own investment accounts. That is permitted under present law. The question is whether banks can aid in the financing of this housing program to an extent warranting amendment of the Banking Act. I believe that we can. Other factors being equal, if you double the number and financial power of underwriters bidding for housing bonds, you will borrow at lower interest rates. If

you exclude the banks, local housing agencies will lose their neighborhood allies in meeting financial problems. The banks truly represent local business, if there were any valid reason for arguing that this is Main Street against Wall Street, the argument would be all on the side of 14,000 commercial banks.

Under the Banking Act as it stands today, commercial banks by authority of Congress are permitted to underwrite and distribute obligations of the United States or general obligations of any State and of any political subdivision thereof or obligations issued under authority of the Federal Farm Loan Act, or by the Federal Home Loan Banks, or the Home Owners' Loan Corporation, or which are insured by the Federal Housing Administration, or obligations of National Mortgage Associations. I believe that if housing agency bonds with the security proposed in the new bill had been outstanding when the present Banking Act was written in 1933, they unquestionably would have been included in the group of high-grade securities eligible for bank underwriting. Gentlemen, we are not asking for any change in the principles which Congress laid down in 1933 to govern banks dealing in securities. We believe that inclusion of the new housing agency bonds as eligible securities is entirely in accord with those principles. It is unjust to charge that this banking amendment would be turning back the clock to 1929. Speaking for my own bank and I believe for many others, I am sure that there is no desire to reenter the field of private corporation or risk securities.

The allegation has been made before your committee that the banks do not know how to analyze securities and that they proved their ig norance when the described proposed local housing bonds as securities supported by the credit of the United States Government. The banking amendment which we are discussing, namely section 502, authorizes banks to underwrite and distribute bonds secured

by a pledge of annual contributions under and annual contributions contract between such public housing agency and the Public Housing Administration if such contract shall contain the covenant by the Public Housing Administration which is authorized by subsection B of section 22 of the United States Housing Act of 1937 as amended, and if the maximum sum and the maximum period specified in such contract shall not be less than the annual amount and the period for payment which are requisite to provide for the payment when due of all installments of principal and interest on such obligations.

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Referring to the United States Housing Act of 1937, we find in section 10 (E) the declaration that the annual contributions referred to are assured by the good faith of the United States Government.

Surely a security of this merit deserves to be classified with the best. It has also been contended that banks should not be permitted to underwrite housing bonds because trust funds administered by a bank may not be invested in bonds which the bank owns. In practice there are many variations of this policy; but after an underwriting syndicate is terminated, any participating bank may buy bonds for its trust funds in the secondary market. And with $8,000,000,000 housing bonds to come, there will be a plentiful supply in the secondary market at all times.

To sum up what I have tried to say: The commercial banks of this country have been the mainstay of Treasury efforts to sell Government securities to investors. They have done this even though it means withdrawal of deposits. As a natural development of policy, the

banks have been and are important factors in underwriting and distributing State and local government securities and the obligations of Federal agencies. The proposed new form of security to be issued by local housing agencies under a pledge of Federal contributions sufficient to pay principal and interest, is equally eligible for bank underwriting.

The program to sell $8,000,000,000 of bonds within a few years is so huge that all distributing agencies, dealers and banks alike, should be encouraged to participate in order to lower interest costs and to effect the broadest possible distribution. I beg your committee to make your decision on this financial fact. We do not propose that anyone should be deprived of business. We advocate full and free competition in the public interest. From the viewpoint of a small bank, I hope that there be no mistaken notion that only Wall Street wants the banking amendment. Representing Main Street, I urge adoption of section 502.

Mr. BROWN. Mr. Hatcher, what is the capital stock of your bank? Mr. HATCHER. $7,000,000. I beg your pardon, $5,000,000; $2,000,000 surplus.

Mr. BROWN. What were your deposits last year?

Mr. HATCHER. Approximately $100,000,000.

Mr. BROWN. What was the amount of loans you made last year? Mr. HATCHER. Our bank ran high. About $50,000,000, and we were told with the exception of one of the banks in Dallas that we had perhaps the second highest loan ratio to deposits of any bank in the country.

Mr. BROWN. You have a farm program and also a veterans' program, in your institution? Will you explain same?

Mr. HATCHER. Well, we like to think that our bank has done a good deal to contribute to the economy of the State of Georgia. Our late president, Mr. Robert Strickland, started a program of aiding the farmers. Each year, a good many thousands of dollars are appropriated to what we call the farm and industrial development department of the bank. I was delighted that Mr. Brown mentioned this, because I am sure that we have created a great amount of goodwill as well as going a long way toward the development of the resources of our State.

As you know, coercion has been a great problem in our section of the country. One of the things done by this program was to get GI boys coming out of the service, and finance the purchase of dirtmoving equipment for them. There was surplus equipment available just after the war. There was an article in Reader's Digest not too long ago which reviewed this thing, and they called it reservicing the State of Georgia.

These men worked with the local county agricultural agents, and I do not think there is any question but what it has been a very fine thing for the State.

Mr. BROWN. I notice every year you have a meeting in each congressional district in Georgia.

Mr. HATCHER. Yes, sir.

Mr. BROWN. Will you explain these programs?

Mr. HATCHER. Whenever these meetings are held, and they are held each year, it is for the purpose of outlining the program for the coming year, and in addition to that, we give a prize to any one of the banks

in the smaller cities which has been judged to have done the most outstanding job in the promotion of agriculture and the betterment of economic conditions.

Mr. BROWN. Does anyone have any other questions?

Mr. MCMILLEN. What interest did those bonds bear where there was a public sale, and some $740,000 was saved? What interest did those bonds bear?

Mr. BROWN. Are you talking about the city of New York?
Mr. McMILLEN. That is the New York City deal.

Mr. BROWN. Do you know about that?

Mr. HATCHER. I could make a guess, but I would rather not say definitely. It was between 2 and 22 percent. That was the maximum yield. The net interest I would guess was around 214 percent.

New York City, incidentally, is the only city which has loaned its credit to a housing authority. Consequently, that sale of bonds could be considered as the best illustration of what might develop in your housing market should this amendment to the banking act be passed. Mr. BROWN. Do any other members desire to interrogate the witness? If not, thank you very much, Mr. Hatcher, for your very illuminating testimony.

The committee will recess to reconvene at 2:30.

(Whereupon, at 12:25 p. m., the committee was recessed, to reconvene at 2:30 p. m., the same day.)

AFTERNOON SESSION

Present: Messrs. Spence, Brown (presiding), Patman, Buchanan, Mitchell, Wolcott, Kunkel, Talle, McMillen, and Cole.

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

Mr. Calvin Snyder is our next witness. Identify yourself and proceed, Mr. Snyder.

STATEMENT OF CALVIN K. SNYDER, SECRETARY, REALTORS' WASHINGTON COMMITTEE OF THE NATIONAL ASSOCIATION OF REAL ESTATE BOARDS

Mr. SNYDER. Mr. Chairman, my name is Calvin K. Snyder. I am secretary of the realtors' Washington committee of the National Association of Real Estate Boards. Our offices are at 1737 K Street NW., Washington, D. C., and 22 West Monroe Street, Chicago, Ill. I am appearing on behalf of the National Association of Real Estate Boards.

With me, Mr. Chairman and members of the committee, are Mr. Robert F. Gerholz, past president of the National Association of Home Builders and chairman of the realtors' Washington committee, who will present briefly facts and conclusions concerning H. R. 4009 as they will affect the practical builder.

After Mr. Gerholz, we should like to present Mr. William D. Davis, president of Farm Management Associates, Inc., and vice president of Suiter Farm Co., Inc., of Kansas City, Mo., who will discuss the farm section of the bill.

With your permission, Mr. Chairman, I should like to address my comments to the declaration of policy at the very beginning of the bill.