The CHAIRMAN. Gentlemen, the next witness will be Mr. Horace Russell, general counsel, United States Savings and Loan League, Chicago, Ill.

I understand Mr. Russell desires to testify regarding Reorganization Plan No. 1.

You may proceed, Mr. Russell.

STATEMENT OF HORACE RUSSELL, GENERAL COUNSEL, UNITED STATES SAVINGS AND LOAN LEAGUE, CHICAGO, ILL.

Mr. RUSSELL. I am Horace Russell, a lawyer, 7 South Dearborn Street, Chicago 3, Ill. I represent the Savings and Loan and Cooperative Bank people who customarily finance more than one-third of American homes and who have financed more than 75 percent of the first 100,000 veterans' loans. We object to Reorganization Plan No. 1 of 1946 under the Reorganization Act of 1945, first, because we believe it to be illegal, and second, because we believe part V provides an unwarranted method of governmental organization to deal with housing, home ownership, and home financing.

The Reorganization Act of 1945 in section 5, subsection (a), paragraph 3, makes it entirely clear that no reorganization plan which provides for, and no reorganization under the act shall have the effect of continuing any agency beyond the period authorized by law for its existence, or beyond the time when it would have terminated if the reorganization had not been made.

Executive Order 9070 issued in February 1942, under the First War Powers Act, created the National Housing Agency as a temporary war emergency agency and under the express provisions of said act and Executive order it is to terminate 6 months after the present war. It is perfectly clear that Reorganization Plan No. 1 of 1946 is illegal under the Reorganization Act of 1945, and I know of no other law which gives to the President the power to legislate in this manner.

Gentleman of the committee, I would like to point out informally in addition to what I have already said on the foregoing, two additional things. Section 5 (a) (3) of the Reorganization Act prohibits continuation of a temporary war agency, and section 5 (a) (4) prohibits the continuation of war functions. They are two separate and distinct propositions. I submit, Mr. Chairman and gentleman, that the provisions of Reorganization Plan No. 1 do continue a war agency. I want to discuss that separate from the function question.

Here is the Federal Housing Administration and here is the Federal Home Loan Bank Board, and here is the United States Housing Authority, and here is a temporary agency, a temporary war agency. Mr. JUDD. That is the National Housing Authority.

Mr. RUSSELL. That was imposed upon those three independent agencies of the Government created by Congress, as a new agency of Government. I have a copy of the Budget of the United States Government for the fiscal year ending June 30, 1947. I have examined the past Budgets of the United States since the order was issued February 24, 1942, studying up the National Housing Agency, and I submit to you, that it was set up as an agency under the First War Powers Act, that it was set up temporary as provided in that act, and the order says it is temporary. It says it shall expire, and if that

agency as such is a temporary agency and the whole substance of part V, or Reorganization Order No. 1 is intended to and does undertake to perpetuate that agency which is in the Budget in direct conflict with section 5 (a) (3) of the Reorganization Act of 1945.

Taking up the function-and let me point out that the function of these three constituent independent agencies was provided for by law and is permanent under permanent law. They are provided for by appropriations from year to year, both before the Executive Order No. 9070 and since that order.

Their functions are provided for in the same manner in an appropriation bill before Executive Order 9070, and since, and in addition, the functions of the National Housing Agency, a temporary war agency, are provided for in the appropriation bill, and those functions which are temporary, are undertaken to be carried over.

Here the proposed Budget for the next fiscal year that has the money in there to carry them over. It also has all the money to carry these admittedly permanent functions in three constituent agencies. There were several questions asked about economy. I submit to you gentlemen most seriously that the creation of that agency did not save any money in either one of these agencies when it was set up, the appropriations have been greater. I wish that you would call Mr. Foley up here, and Mr. John Fay up here and ask them whether it saved them any money or not. I know some people who have spent a lot of time since that time in what they call liaison work in Washington. In addition to what they would have spent if National Hoosing Agency had not been created, they have had that additional expense. The CHAIRMAN. Mr. Russell, at that point, let us assume that this present Reorganization Act that has been in effect, in September 1941, when Executive Order 9070 was issued pursuant to the War Powers Act. The creation of the National Housing Agency then, if it had been under this present law, would have been legal, would it not, and would have been in conformity with present Reorganization Act? Mr. RUSSELL. I think it would have, Mr. Chairman.

The CHAIRMAN. Therefore, under the present Reorganization Act then we are not granting any additional functions to the National Housing Agency that are not in existence at the present time and cannot extend any of the functions beyond their life under the War Powers Act.

Mr. RUSSELL. Mr. Chairman, if you will let Reorganization Plan No. 1 go into effect, you will continue a temporary war agency by virtue of it and there is no doubt about that. You will also continue certain functions which have been developed under that agency, and which were not in these three constituent agencies, and that were not provided for by law in the permanent law.

You and I have been in Washington enough to know that functions grow in Washington and they have grown to the extent that in this Budget here is $450,000 for the functions of the National Housing Agency. In addition to the functions in these others there is that request for authorization for money. And in addition it authorizes money which they collect from my clients to run that office. Therefore, an agency will be continued in violation of the statute and those functions will be continued in violation of the statute.

The CHAIRMAN. Let us assume that the name had been changed from National Housing Agency to National Housing Department.

Would you still take the same position that we would not have authority under the Reorganization Act?

Mr. RUSSELL. If in all other respects the subject matter was the same, I would say that the Reorganization Order No. 1 was illegal. The CHAIRMAN. Under section 4, as I recall, of the Reorganization Act:

Any reorganization plan transmitted by the President under section 3 shall change, in such cases as he deems necessary, the name of any agency affected by a reorganization, and the title of its head; and shall designate the name of any agency

and so forth. Concerning this plan, I think it is very loosely drawn and I do not like the policy of putting the lending agencies under the building agencies, but I am just wondering if it is not in conformity with the provisions of Public Law 263 of the Seventy-ninth Congress.

Mr. RUSSELL. Mr. Chairman, I submit to you that if plan No. 1 had abolished the present National Housing Agency and sent these agencies here back to the reorganization Mr. Roosevelt set up under the Reorganization Act of 1939, it would have been legal, or if it had abolished the National Housing Agency and transferred these three permanent agencies of the Government to the Treasury Department or to the RFC, it would have been legal, but there are two illegalities in the action before the committee.

One of them is that without any doubt and in spite of a lot of double talk, it continues a temporary war agency and it continues very substantial functions that were never known before the temporary agency was set up, that we never appropriated money for until the National Housing Agency was set up. The appropriations are where I looked to see what I pay for when I look to the United States.

The CHAIRMAN. Did I understand you to say that if we changed the name of this new set-up under the new set-up under part V of the Reorganization Plan No. 1, that it would have been in conformity with the reorganization?

Mr. RUSSELL. I did not say that, Mr. Chairman; I said if you would merely substitute another name, such as the one you have mentioned, that it would be illegal. I say that a legal reorganization could have been accomplished under the Reorganization Act. I said that these three agencies could have been sent back to the Federal Loan Agency where they were reorganized under the Reorganization Act of 1939. I say that they could have been transferred to the Treasury Department, but I say that to enact this law that the President undertakes to enact by directive, he violates the Reorganization Act in two respects; one, he continues an agency, and two, he continues certain functions drawn up in that agency and there has been established by congressional appropriations over these years.

The figures are in the book and they are substantial figures in addition to the functions carried on by these three agencies.

Mr. JUDD. What you are saying is that you can change the name, but if it carries on the same functions, why it is the same agency. Actually he is continuing the agency and merely changing the namesno, he did not; but he could change the name of the agency. Even if you accept that techninality, that changing the name from No. 1

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to No. 2 means that No. 1 has been discontinued even though it carries the same functions, the very fact it does carry the same functions, it is in violation of section 5 (a) (4), because it says you shall not continue any function beyond the period authorized by law. Is that right?

Mr. RUSSELL. That is my view.

When Executive Order 9070 was issued in 1942, creating the National Housing Agency as a temporary war agency, patriotic motives prevented us and others from making any objection. Since the wars have been won, the Wagner-Ellender-Taft bill, S. 1592, has been introduced and passed in the Senate. It provides in title I thereof, substantially the same thing that is provided for in part V of the Reorganization Plan No. 1 of 1946.

That bill has been, and is, just about unanimously opposed by everybody in the United States with any experience and practical knowledge of real estate, housing, home building, and home ownership. It is opposed by the building material people, the builders, the real estate people, the bankers, mortgage bankers, and savings and loan people. Our opposition to it has been primarily on account of the provisions in title I of it which we believe to be designed to socialize housing in the United States and directly in conflict with our program of thrift and home ownership which has provided more homes than any other type of institution.

It is amazing and astounding to us, in view of the status of S. 1592, before the Banking and Currency Committee of the House of Representatives, the Reorganization Plan No. 1 of 1946 should include part V, undertaking to do, by Executive order, what we believe clearly is opposed by a great majority of the people of the United States and could not be accomplished by legislation. We believe that part V of the plan is not only prohibited by section V of the Reorganization Act, but also that it is in direct conflict with the purpose and intent of this committee and the Congress in prohibiting the continuation of war emergency agencies and functions by Executive order.

We have had more than 4 years of experience with the National Housing Agency and we do not like it. They say one thing and do something else. They have talked home ownership and built public housing. In the 4 years, 1942, 1943, 1944, and 1945, they have actually accomplished the building of substantially more than one-third of all new housing units as public housing, built, owned, and operated by the United States and local housing authorities under its control.

They propose to continue this system. In order to continue it, they seek a dictatorship of American housing under a single administrator, with an organization in Washington and throughout the country, with power to act and with means of propaganda heretofore unheard of in our American system of Government.

They accomplished the building of 40 percent of all new houses built as public housing during 4 years when the Government needed its funds and when the public had more equity money than ever before in our history and mortgage money was available on the best terms ever known in this country and while many small builders were anxious to build houses which ordinary citizens wanted to build. They not only built 40 percent of the housing during this 4-year period with Government money-and the total built was about 1,800,000but they succeeded in channeling the building permits and priorities

which they controlled for private housing to a handful of large builders who would and could build under extreme Government controls effected through this system, and I say to you it was nearly all tenement housing. They did not let us build a house we wanted to build, hardly.

The CHAIRMAN. I thought your policy was to eliminate slums. I am surprised that they were building tenement houses.

Mr. RUSSELL. I saw one in Harrisburg, Pa., that looked more like a slum than I ever saw. It looked like a picture they take of the slums, because it was washday.

We object not only because of experience with the system but also because of the clear intent and purpose under part V of Reorganization Plan No. 1 of 1946. The Administrator of the National Housing Agency is given the greatest possible dictatorial power over the whole field of housing and home ownership and in a large measure, the whole field of real estate.

The Congress created the five-man Federal Home Loan Bank Board to encourage thrift and home ownership, and it has done an excellent, effective, and economic job at the expense of the savings and loan associations dealt with and without a burden on the taxpayers. The Congress created the Federal Housing Administration which is largely competitive and serves all mortgage institutions and therefore its benefits have extended to many millions of our population.

Public housing was set up as the United States Housing Authority as an independent agency to travel on its own merits and demerits. It has received no authorization from Congress since 1937. Its authorization for 1938 was defeated in the House, in 1939, by an overwhelming vote of more than 2 to 1, and it has since been unable to get any authorizations.

Part V of Reorganization Plan No. 1 of 1946 would give the National Housing Administrator complete control of these three activities. His chief interest and concern to date has been and, in the future, will be, under such a system, public housing and control of private housing, home finance, and home ownership. We do not want to be associated with any such program and we do not wish to be under the control and dictation of such a scheme. We are perfectly willing to return to our status as provided by the Congress.

Furthermore, if coordination of Government activities is desirable, we are perfectly willing to be coordinated with all private home financing instrumentalities of the Government and with other private lending functions, such as the Federal Loan Agency or the Reconstruction finance Corporation or in the Treasury Department.

We seriously submit, however, that the private home finance facilities referred to as created by Congress have performed efficiently, effectively, economically and well without expense to the taxpayers and that they ought not to be associated with, or be put under the control of, any public housing group.

The five-man Federal Home Loan Bank Board was authorized by Congress and has made extensive administrative law affecting the 3,600 members of the Federal Home Loan Bank System, including the 1,500 Federal savings and loan associations and the system of insurance of savings and loan accounts protecting about 6,000,000 savers. This part V would transfer to the National Housing Administrator power over and power to change this administrative law. It includes