Evening star., 1961-08-10

per cent reserve allowed to the
mutual institutions be6ore e
taxes.
Representative Multer criti-
cited the Federal Reserve
Board and the Federal Deposit
Insurance Corp. for joining the
Treasury and commercial banks
in support of the legislation
which would lower the allow
able reserves of the mutuals to
between 2 and 3 per cent.
Sees S0lvency Threat
The witness charged that the
proposal would impair the SOL
vency of the mutuals.
He said the Federal Home
Loan Bank Boards opposition
to the proposal was not incon-
sistent with the administra-
tion's economic program, as
had been pictured.
He urged the committee to
call in the bank regulatory au-
thorities and question them
closely as to why they think a
IL per cent reserve for the mu-
tuals is excessive.
Representative Baker, Re-
publican of Tennessee asked
the witness if he thought it fair
to let the mutuals go virtually
tax-free while the commercial
banks paid heavy taxes.
Representative Multer re-
piled that the basic injustice in
the tax system is the taxation
Of profits both at the source
and upon their distribution to
stockholders. This would have
been corrected long ago except
for the heavy tax loss that
would have resulted, he said.
II will be q mistake to force
this injustice also on the mu-
tusls. he declared.
Cites National Need
- eSman for the Ameri-
ess Be-. ~ Association told
rle cG,anl. yee that in a time of
',z,Io..zl . IL the national in
r--,.- SPpg zTAis the removal of
20 "a :. siteE now enjoyed by
E7at-sl . naEcial institutions.
r. G. zrtes z. Walker, ABA
CxsCEu . wee president. said
thss despite the clear and
,-r17Aling need for a selflrSs
reArd alton to the national in
SsEFF. Fe find in the mutual
fInz1H. ! institutions a sll0
tss3,E industry paying annual
ESn al taxes Of less than 100
Of re per cent Of total assets
syS less than 3 l0ths of one
y1 cent Of income before divi-
dgnds and interests"
Arguing that these institu-
tions represent a prosperous,
rapidly growing industry well
able to bear its share of the
nstional tax burden, he said:
The simple but hard eco
nomic fact is that our ex-
panded defense effort will call
for billions of dollars. If our
national economic health is not
to be impaired-if we are to
maintain fiscal responsibility
every appropriate source of
F. deral revenue must be
taxed"
1The ABA spokesman cited
Treasury estimates of an
additional $378 million in
revenue if these institutions
were fairly taxed"-an amount
ehual to more than 10 per
cent of the extra defense fund
recommended by President
Kennedy as essential to ma
tpnal survival.
lDr. Walker, one time assist
ant and principal economic
adviser to former Treasury
Secretary Robert Anderson,
termed incorrect the charge
that heavier taxation of saw
ings and loan associations
would adversely affect the
flow of funds into real estate
mortgages.
Doubts Bad Effects
eve do not believe that
the housing industry can be
supplied with sufficient funds
only by granting a tax
subsidy to certain-but not
all-financial institutions" he
said. Tax laws should not be
used for discriminatory sub
sides; if subsidies are needed,
let them be frankly and forth
rightly bestowed rather than
hidden in the tax structure"
DR.. Walker said there is no
credible evidence that even a
single home will go unbuilt as
a result of fair taxation of
mutual financial institutions.
A modest decline in their rate
OF growth as a result of fair
taxation need not result in a
decline in the volume of mort
gage loans acquired by these
institutions, he said.
This is because mutual in
stitutions hold or are acquiring
some assets other than resi-
Dental mortgages. Thus a
small decline in the flow of
new savings to these inStitu-
tions may we'll be reflected in
a. change in policies with re-
spect to the holding or acquisi-
ton of other assets"
He also pointed out that the
extent to which banks facilitate
the financing of home owner
ship is far greater than is con-
ceded by opponents-roughly
one-third of new savings.
1"Actually, if we consider true
savings deposits and the total
Of commercial bank loans
which go directly to facilitate
housing Presidential real estate
loans and repair and modern
ization loans), the percentage
is closer to AZ per cent"