Evening star., 1946-11-03
Firm Asking 52hiIlion
|As Loan Put Up Only
$4,000, RFc Reveals
By Robert J. Lewis

By Robert J. Lewis
The Lustron Corp. of Chicago
offered to put up only $4,000 in
cash in its application for a $751;
000, 900 loan to launch mass produc-
ton of factory-built homes, Charles
B. Henderson, chairman Of the Re-
construction Finance Corp, said last
night.
The loan was turn down unani-
mously by the RFC directors last
week along with requests for smaller
loans totaling $3,810000 from three
other prefabricated home firms.
Those applications, as we'll as two
which were approved for $2,500, 900,
and five for $30, 5000 that still are
pending before RFC, had the back
ing of Housing Administrator Will
son w. Wyatt. Lustrons loan would
mean building 10000 houses and
the remaining 10 an additional 76, 900
houses.
Mr.. Wyatt indicated yesterday he
would use his powers under the
Veterans Emergency Housing Act
in an attempt to overrule RFC and
direct that it make the loans de-
spite the objections.
Rejection Explained.
In a statement explaining why
the Iustron loan was turned down,
Mr.. Henderson said the RFC direc-
tors did not consider it sound or
reasonable"
In reply, Mr.. Wyatt said last night
he was convinced the Lustron Corp,
and other prefabricated manufac-
turers whose product Government
technical experts have examined,
can produce homes (which will be
Of great value in the solution of the
housing problem"
"A too-fine balancing of normal
equity and capital ratio is not the
test now of whether loans should be
granted" he said.
I'VE, therefore, believe the people
Of the United States, through the
Government and through the RFC,
are amply justified in making the
loans and taking the bulk of the risk
to gain great benefits.
War Loans Recalled.
"This is not a new idea. During
the war, the Government made
many 100 per cent and 80 per cent
loans. We merely are taking a leaf
out of the war book to get produc-
tion that requires risk by having the
Government assume most of the
risk"
Mr.. Wyatt added that in addition
to the small amount of cash Lustron
offered to put up, it had invested
hundreds of thousands of dollars
in experimental and developmental
work and In tools and dies, and what
may amount to millions in patent
rights"
He added that a large Chicago
bank had expressed willingness to
loan Lustron s2,00O,0OO contingent
on its receiving an RFC loan. The
same bank, in cooperation with
others, also offered a 20,000 900 loan
with the proviso that RFC guaran-
tee large part" he said.
Negotiations Discussed.
Discussing RIGS part in the loan
negotiations, the RFC chairman
said:
Il told Mr.. Wyatt yesterday this
is by far the largest application for
a Ioap that hoe hoo,, raforrad fo ne
I assured him that this action (re-
fusal of the loan) in no way reflects
any lack of understanding or appre-
citation on our part of the impor-
tance of the Veterans Emergency
Housing Program, nor does 1t pre-
clude consideration of subsequent
applications from Lustron or others
where the relationships between the
capital on the loans and that pro-
vided through equity securities more
nearly approximates what might be
considered as sound and reasonable
in view of the nature of the enter
prise.
Il pointed out further that the
Iustron application, as filed with
us, is for $50, 900 900, and shows that
only $500 is to be put up by the
applicant"
Mr.. Henderson emphasized that
RFC board members would have no
feeling" against Mr.. Wyatt in case
he issued directives ordering RFC
to make the loans. and that any di-
rective would be referred to RIGS
general counsel for an opinion on
what action should be taken.
"All this is very friendly" Mr.
Henderson said. This statement was
echoed by Mr.. WYATT,