Evening star., 1932-01-23
HOME LOAN BANK
VIEWS CONFLICT
Proposed Plan Attacked and
Praised Before Senate
Subcommittee.
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obsolescence of existing structures does
not warrant increasing the annual rate
: of home construction so per cent more
above the foregoing normal figures.
Such an abnormal promotion of build
ing activities could only bring tempo
rary prosperity to the building and real
estate interests. 1t would add greatly to
the present overbuilt condition, with an
additional depreciation of real estate
values. A drastic increase of foreclosures
in existing home mortgages would 1ol-
low, with resultant distress and loss to
present home owners.
This would also adversely affect the
basic security behind the financial insti-
tutions which today hold $4,000, 100000
of mortgages.
2. Existing credit agencies, augment
ed by the Reconstruction Finance Cor
poration, the National Credit Corpora
ton and the strengthening of the Fed
eral land bank system, should be given
an opportunity to demonstrate their
usefulness in the present situation.
Emergency relief for frozen mortgage
assets is provided by the Reconstruction
Finance Corporation.
Oversupply of Mortgage Funds.
There is no need in normal times for
any additional agency, such as the pro-
posed home loan bank. On the con-
trary, the present overbuilt situation
was partly created by the overSupply
of mortgage funds in recent normal
years. - There is no more need for
a permanent organization to relieve the
frozen real estate mortgage situation
than there is for permanent organl-
Zation to relieve frozen railroad bonds,
or to relieve other troubled industries.
3. The bonds of the proposed home
loan bank system cannot be sold at
low enough interest rate to allow rea-
sonable interest rate to the member
borrower, as the expenses OF the new
system would have to be paid from the
interest differential.
4. The sale of home loan bank
bonds, tax exempt, would further de-
plete tax income to the Federal Gov
eminent, the States and smaller gov
ernmental units. 1t would depreciate
other Government securities. The ad-
ditionaI $l25,O0O,0o0 proposed for the
Federal land banks predicates the is
suance of additional taX-eXempt bonds,
and the S150,o00,000 for the proposed
home loan bank predicates the is
suance of $1,000, 100000 of tax-exempt
bonds.
Cites Federal Land Banks.
5. We should profit by the experience
of the Federal Land Bank system dur
ing the current depression, when their
bonds are deprecated, new bonds can
not be sold. comparatively little can be
loaned and the land banks must be
furnished additional funds by the Gov
eminent to restore liquidity.
6. The fiscal situation of the Govern
ment should be considered. To provide
for already scheduled expenditures of
the Government, for the capital needs
of the Reconstruction Finance Corpora
tion and for the Federal Land Banks
(not including the reflnancing of ma
turing governmental obhgationS) will
require financing upon governmental
credit during 1882 of $4,000 900, 900 TO
$4,000, 600, 900 Of new money; in other
words, the creation of new debt to this
amount. This program calls for an
increase in taxes and borrowing greater
than ever required in peace times. To
provide up to $3.50 600, GOO more for the
proposed Federal home loan bank
would add to the already heavy burden.
Z. There has been strong and grow
ing tendency for the Federal Govern
ment to usurp the functions of State
governments IN supervision of local
private business. This bAl is further
effort along this line. 1t proposes to
take the control Of real estate finance
out of the States and put it in the
hands Of the Federal Government.
Other Witnesses Opposed.
Three other witnesses heard during
Il.
Winston Z. Ogden, Summit, N. j.,
and Thomas F. Clark of New Haven,
Conn, told the committee they be-
lieved the home loan banking system
would add burdens of taxation as well
as encouraging enfationary develop
ment.
Mr.. Ogden declared that speculative
builders are just awaiting for such a
financial move to start operations
again, and he predicted their renewed
operations would start new depres-
sion in prices that would go far below
the current levels. Mr.. Clark argued
that the proposal was unsound as a
matter of law or business and that it
would not supply funds for the indi-
Vidual who desires to build home of
moderate cost because Of his difficulty
in finding second mortgage money.
Henry r. Robbins Of Philadelphia
asserted he was disgusted with business
interests that run TO Washington ito
dip into the Federal Treasury every
time they get into jam"
Urge Need of System.
Robert Oakman, Detroit former
State tax commissioner of Michigan,
and Isadore Friedlander of Houston,
Tex, building and loan association
both urged the need of a mortgage
banking system and declared that since
the Government already is in "the
credit business" it should provide the
means for financing the homes Of the
working man.
Mr.. Oakman, however. said the meas
ure under consideration did not CO.
incide with the recommendations made
by President Hoover and should be re-
written to carry out the ideas Of the
Chief Executive.
He said one of the principal defects
of the measure is the provision limit
ing loans to so or so per cent of value.
by including that (provision) you not
only have made it impossible for the
working man to go ahead with home
ownership without previous start, but
you have fixed 1t so that there will be
a gradual depletion Of resources CT
loaning agencies which have put up
twice as much collateral" he said.
"a banker makes a loan, say, of
$4,000. or about half of the value Of
the house. The banker wants to trans
fer that mortgage TO the Government
bank. He can get for it only 60 per