Evening star., 1954-04-23
FHA and Banks
Are Blamed in
Loan Scandal
Rucketeers Could
Be Halted EosiIy,
Justice Aide Says
By lanes Y. Newton

blamed today for what a Justice
Department official described as
the fleeing of thousands" of
home owners year through
Government-insured repair and
modernization loans.
Warren Olney III. Assistant
Attorney General in charge of
Justice Criminal Division. gave
lurid picture of the operation
of widespread home-improve-
ment rackets to the Senate
Banking Committee investigat-
ing the housing scandal.
Mr. Olney said the improve
ment rackets have been going
full speed since the war and
literally thousands" of home
owners have been heeced in the
last year by the operation all
over the country Of what he
called "bunco" men. He said the
''hoodlums, racketeers and the
bunco men" who Usually deal in
hot oil stocks or things like that
had "congregated in the home
Improvement racket"
Blames FILA.
The Justice official blamed in
large part the FILA which in
sures banks against loss in con-
nection with improvement loans
with the fact that the rackets
nave gone Unchecked over the
years. He said the IHA showed
absolutely no responsibility to
the victims"
1.-THE FILA can crack down and
stop this thing any time it
wishes by simply cutting off the
credit of the lending institution
which makes the loan the Gov
ernment insures," Mr.. Olney ad-
mitted.
I'm all fairness I would like to
say that the banks have a lot of
responsibility in this matter, T"
said Committee Chairman Cape
hart of Indiana. " because the
FILA deals with the banks and
not the individual home owner
or dealer making the so-called
improvements. OF course the
f'1A could have cut off the banks
where these sort Of things hap
pened."
Under the Governments home
repair and improvement pro-
gram. under which FILA has
underwritten nearly 81 million
in loans, the FILA insures the
lending institution against loss
and does not insure individual
loans. Such loans are made to
about 2 million home owners a
year.
Blocked Prosecution.
Mr.. Olney also charged that
the FILA had blocked Justice
Department prosecution of
"windtall" builders under the
apartment house construction
program.
"We can prove false estimates
and false statements, but the
FILA says it doesn't rely on them,
so We can't make a criminal
case." Mr.. Olney told the COM
mittee.
He described cases in New
berry, S. c., involving a $780,
900 mortgage loan, and in St.
Louis, Mo.
In the latter case, he said,
builders got a $3.6 million
mortgage, told the FILA it had
cost them $3,239,915 to build
and drew UP a secret contract
for 100000 less.
He quoted the FILA as saying
it was not interested in actual
costs or profits and declared:
"We can't prove the Federal
Government was defrauded if
they didn't rely on the esti-
mates. They're in the position
of saying they weren't defraud-
ed-they're just giving the stuff
away"
FBI Called In.
Mr.. Olney said the FBI made
survey of home improvement
racketS last summer, but had
no responsibility in actual pros
ecution of the cases until Pres
ident Eisenhower called them
into the housing situation 10
days ago when the housing scam
dals broke wide open. Up until
that time, Justice depended on
FHA to tell them where the
violations took place.
The FBI's attention was first
called to a bad situation ON the
West Coast, Mr.. Olney said, but
(COntinued IN PAGE A-2 Col ~