Evening star., 1961-08-11


had increased steadily in the
last three years and that a
cyclical downturn in real estate
had appeared. Out of a port
folio of $50 billion on December
81, the Federal Home Loan
Bank Board has determined
that $30.l billion was repre-
sented by loans on the books
for three years or less, he said.
reserve, he declared.
Remarking that on newer
loans a smaller portion of the
payments can go to reduce
principal, the witness specified
that on a 25-year loan, princi-
pal is reduced only 10 per cent
in the first five years.
Past experience and the
present nature of the mortgage
portfolios Of savings and loans
clearly demonstrate the need
for the present IL per cent
reserve, he declared.
Representative Payne of Wis
consin expressed skepticism
that the IL per cent reserve
was necessary to meet possible
mortgage losses and questioned
Mr.. Wellman at length.
Patman Scores Banks
Mr.. Patman took some heavy
swings at the bankers at the
afternoon session, charging
that they have been beating
their drums for the proposed
legislation. The proposed bill
would tax the mutuals out of
existence, he said.
The bankers have worked
themselves into such a frenzy
that their cannibalistic instincts
are showing" he declared.
Mr.. Patman called the COM
mittee's attention to "the tre-
mendous favoritism and the
vast subsidies which the Fed
eral Government pours into the
commercial banks"
Immediate effect of the pro-
posed bills to reduce the re-
serve allowance Of the savings
and loans would be to raise in
terest rates in general and
home mortgage rates in par
ticular, Mr.. Patman said.
The witness estimated vari-
Gus Federal subsidies to COM
mercial banks were equal to IS
billion a year and said a large
part Of this should be elimi-
mated. 80 j.
Among the subsidies he said
banks enjoyed were free use
of the Governments power to
create money; interest-free
use of demand deposits; inter-
est on Government securities
acquired through use Of the
power to create money; free
Federal Reserve services, and
interest-free drawing privilege
on the Federal Treasury.
George L. Bliss of the Saw
ings Association League Of New
York and William j. Mckee
yer, president of the Pennsyl-
vania Savings and Loan n
League, were other witnesses
opposing the proposed tax
change for the mutuals.
| Mr.. Bliss said the Treasury's
recommendations were based
on erroneous premises and If
enacted into law would impose
a direct tax on millions of
thrifty savers, ranging from
one eighth to one-half of one
per cent per annum on their
savings.
I 1T is absolutely vital to the
preservation of our type of
savings and loans that a rea-
sonable allowance be made for
accrued losses on present port
folios without regard for any
period artificially thought to
depict a representative per-
iod," said Mr.. McKeever.
Closes for Bankers
Winding up the bankers case,
Howard j. Stoddard. co-chair-
man of the Bankers Commit
tee for Tax Equality, declared
that mutual institutions do not
need a IL per cent reserve for
losses as a deductible item in
computing their income taxes.
an my opinion a mortgage
on a home in America, proper
ly made and properly serviced,
still is the best collateral in the
world, with the possible excep-
ton of the United States Gov
ernment's bonds" he said.
Recalling his service as a
lieutenant of Chairman Jesse
Jones of the Reconstruction
Finance Corporation in Detroit,
Mr.. Stoddard said the mod
crate losses of the Detroit saw
ings and loans over a five year
period following the bank holi-
day proved beyond any doubt
that a IL per cent loss reserve
is excessive.
4 Mr.. Stoddard. who is presi-
dent of the Michigan National
Bank at Lansing, Mich, said
there is no necessity for delay
in fully taxing the mutual in
stitutions and urged that ac-
ton be taken at once to provide
the taxes so badly needed by
the Federal Government.