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agencies were consolidated with and made subordinate to a superagency of the sort contemplated in the reorganization plan. There is grave danger that the sources of private credit would quickly dry up, once these Federal lending and insuring agencies were covered into a permanent agency committed to restrictive governmental control over private enterprise. There would be no assurance, and no expectation, that the Government would continue to facilitate private building. The confidence so ably and successfully built up in government would be lost, and home building would suffer. There is, and always will be, marked differences of opinion between the so-called private housers and public housers. Call this what you will, competition, rivalry, or sincere differences of opinions, it is a fact that it does exist. It is too much to expect of any one individual that he find the “happy balance” which should be the Nation's goal. It is our belief that the credit functions of the Federal Government in the housing field should be coordinated, but not consolidated as would be the case under this reorganization plan. We recommend that these agencies be returned to their prewar status in the Federal Loan Agency to be coordinated with other Federal lending functions. To isolate the Federal Housing Agency and the Federal Home Loan Bank Board in a housing agency would bring grave risk of unbalancing the national credit structure. All parties who discuss this housing question, including the most enthusiastic supporters of public housing, state that the housing problem of the Nation should first be answered to the extent that it can be answered by private enterprise. And then the government, whether Federal or local, should supply the void which private enterprise cannot fulfill. Again they all agree that the only way to determine the extent to which government should enter this field should be determined by accurate date and statistical studies. By some I may be accused or classified as a strong private houser; however, I have always recognized that there is a field which private business possibly cannot fulfill for our underprivileged people. It is my sincere belief, and I respectfully but strongly recommend to this committee and to the Congress, that when a permanent housing program is developed, it should be based on the following premises, given in the order of their importance. First, private enterprise should be encouraged and supported to help on the housing which it can create. Second, a source completely independent of the private housers and public housers should make statistical studies and analyses which would determine the extent to which private enterprise has met the housing problem or can be expected to meet the housing problem. Then, based upon these disinterested studies, a division of government should be authorized to assist and activate a public-housin program within the boundaries indicated by these disintereste analyses. Studies of this housing question made by our association late in 1944 indicated that the most effective way to accomplish this end would be to have all agencies of government, having to do with home finance, gathered into one group; then that there be statistical work, analysis, and research in another entirely independent group; and finally that the public housing activities be grouped with other public activities, such as public works, public buildings, and public roads.

In summary, Mr. Chairman, we urge that the committee reject the dangerous and totally unnecessary proposal to establish a permanent national-housing agency which, far from encouraging and facilitating the construction of housing, would undermine the entire private-housing industry and prolong the housing emergency which we all are working to overcome.

The CHAIRMAN. The next witness will be Mr. Guy Hollyday, of the Mortgage Bankers Association of America.

STATEMENT OF GUY T. O. HOLLYDAY, VICE PRESIDENT AND CHAIRMAN OF THE EXECUTIVE COMMITTEE, MORTGAGE BANKERS ASS00IATION OF AMERICA

The CHAIRMAN. You may proceed, Mr. Hollyday. Mr. Hollyday. It is my desire to testify regarding Reorganization Plan No. 1. My name is Guy T. O. Hollyday, and I live and have my offices in Baltimore, Md. I am president of the Title Guarantee & Trust Co., of that city. I appear as vice president and chairman of the executive committee of the Mortgage Bankers Association of America. Our association was organized in 1914 and our membership consists of life insurance companies, commercial banks and trust companies, mutual-savings banks, mortgage companies, title companies, and mortgage-loan correspondents. It represents as nearly as we can determine something in excess of 70 percent of the available funds for mortgage lending in the United States, excluding investment funds of individuals. Our members are direct investors in city and farm loans and we come from every kind of city and State in the Union. It is our membership, gentlemen, which composes a great portion of the market for veterans loans and other types of home loans. We deal daily with the Federal Housing Administration and we have a direct interest in proposals which will modify or rearrange our relationships with this agency. I am, therefore, appearing today before your committee to discuss that part of the President's Reorganization Plan No. 1 which would make the National Housing Agency permanent and which would extend the jurisdiction of that Agency to control completely the policies and operations of the Federal Housing Administration, the Federal Home Loan Bank Board, and the Federal Public Housing Authority. Before going into detail as to the merits of this portion of plan No. 1, I would like to emphasize, before this committee, that the Mortgage Bankers Association is affirmatively in favor of a thoroughgoing, practical reorganization of those agencies of the Federal Government which deal with financing or the extension of credit to private lending institutions. I repeat, our association as we have stated before other congressional committees, is in favor of such a reorganization, and we have previously set forth some concrete suggestions as to the form which such a reorganization might take. Our association is not only willing but anxious to lay before any committee of Congress which wishes to hear it, our suggestions on this matter. However, in our opinion that part of the President's Reorganization Plan No. 1 which is now before your committee for consideration, and which would make permanent the present National Housin Agency, is not a reorganization in any proper sense. It will not abolis unnecessary functions and unnecessary personnel. It will not create a more economical or more practical method of handling within the Government problems connected with real-estate financing. It will not eliminate duplication or increase efficiency. For these reasons it is the opinion of our association that this part of the President's proposed plan is unnecessary and unwise and should not be adopted at this time. While your committee will hear many considered reasons why this part of the President's plan should not be approved, I would like to direct my attention today to this one basic weakness; namely, the proposed plan does not really “reorganize” at all. It adds. It combines. It increases. It multiplies. But it does not reorganize. What the plan does is to impose upon Federal Housing Administration and Federal Home Loan Bank Board the unweildy and unsympathetic weight of another holding company. It will give this holding company, the National Housing Administration, not general powers of policy coordination but, instead, powers of “superintendence, direction, coordination, and control of its constituent units.” It will give the National Housing Administrator complete authority over the regulations and over every detail of operation of the Federal Housing Administration, the Federal Home Loan Bank Board, and the Federal Public Housing Authority. It will take from these agencies control over their statistical activities. During the war, this association was not, opposed to the creation and operation of the National Housing Agency. As we have previously stated: The Federal Government, in our opinion, acted wisely in simplifying its organization in order to expedite war housing and to prepare the Nation for any emergency which might arise and to improve our war effort and production. We believe that many benefits were derived from this simplified organization and that the program for war housing and for financing such housing was expedited and was very beneficial during the wartime emergency. But it is our opinion that since the war emergency has passed, the Federal Housing Administration and the Federal Home Loan Bank Board should be divorced from the National Housing Agency and the functions of housing finance, of credit, and of the insuring of credit should not be involved with the many technical problems of housing construction and research. It is true that these two problems are related, but as with most first cousins, marriage between them is bound to be biologically unsound and economically unproductive. We believe that Government agencies created in a time of emergency should be liquidated as soon as that emergency has passed. We see nothing sacred in the birth of an agency which compels its perpetuation after it has served its purpose. We see no reason to adhere to what I sometimes call the mother-inlaw principle—once arrived, here to stay forever. The members of our organization are particularly concerned with the Federal Housing Administration and the Federal Home Loan Board. We have done business with these two organizations since they were established. We have their confidence and they have ours.

They were established by Congress to perform necessary definite functions, and they have performed them splendidly.

You gentlemen must sometimes wonder if you are ever to hear a businessman speak well of any governmental agency. You are now witnessing that phenomenon. Here are two agencies of which over 1,100 business concerns who are our members are now saying, “We like them. We would like to continue to do business with them. But we do not much like their proposed new permanent boss, the National Housing Agency. That looks like a different breed of cat to us."

These two organizations which are our friends are in many ways similar to the thousands of soldiers in our citizens'

army.
These

agencies were drafted in 1942 by the issuance of Executive Order No. 9070 for service under a commander, the National Housing Agency, whom they did not choose and whose supervisory services they did not need in peacetime. During the war their liberties were curtailed and their energies diverted from normal channels. We believe they performed their military service well, and without criticism of their superiors.

But now, the war is over. We have demobilized our soldiers, and we should demobilize their agency counterparts. Now that the National Housing Agency's job of commanding officer is done, it should be retired and the recruits should be permitted to get back into civilian clothes.

What these agencies need is rehabilitation and not restraint.

We believe that if this part of the proposed plan No. 1 is adopted the former harn onious and productive relationships between these agencies and the institutions which we represent may be impaired. We are not certain of this, but there have been many indications that it will happen, and we see no reason to incur this unhappy possibility when it is entirely unnecessary.

We would remind your committee that under this proposal the direct responsibility of these agencies to the Congress will be obscured, and your ability to deal directly with them and to inquire into their affairs and to consult with their heads will be seriously circumscribed.

We would also like to direct the attention of your committee to our belief that the functions proposed for consolidation under this part of the plan are fundamentally different. You have heard this from other witnesses before your committe. No chemist even in this age of the atomic bomb has yet advertised that he was able to successfully combine oil and water without the aid of an outside agent. Yet under this part of the proposed plan its authors are attempting by a stroke of the pen to amalgamate such basic variables as the credit operations of the Federal Housing Administration and the Federal Home Loan Bank Board and the welfare functions exercised by the Federal Public Housing Authority.

No, gentlemen, in this case the hand is not quicker than the eye.

The result of a consolidation of these functions will either be the weakening of sound principles of credit in the interests of welfare or restriction of the principles of welfare through application of the point of view of a credit operation.

We believe that the financing operations of the Federal Government as carried on by the Federal Housing Administration and the Federal Home Loan Bank Board should be returned to the Federal Loan Agency, and that the public housing and welfare functions of the Federal Government should be returned to the Federal Works Agency.

If it is desired to coordinate the policies of these two distinct types of operations to achieve a unified housing program, we believe that that coordination can and should be accomplished and our organization will be glad to offer suggestions as to the manner in which this can be accomplished whenever

we are invited and given an opportunity to do so.

While we are not so didactic as to say that our ideas along this line are the only correct solution to this problem, we are definitely sure of one thing—that the proposed plan is not the correct one.

There is one further but significant item. You will not find anywhere in the proposed plan any reference to the home financing functions of the Veterans Administration. We are not sure of the reasons why the President's plan does not include this material feature.

We are sure, however, that without some reference to the lending functions of the Veterans Administration, no proposed reorganization plan can be said to be complete or well thought out.

How can it be, when during the next few years it is universally agreed that the Veterans Administration will be the most important single Federal agency in the mortgage field.

Look at the facts and figures. The Veterans' Administration has already handled over $272,000,000 of home loans. During the next 10 years it is estimated that it will handle over $15,000,000,000 when the total mortgage debt in the United States as of December 31, 1944, was only $31,500,000,000. It must be clear that with this omission the proposed plan is not really what it claims to be.

The CHAIRMAN. Thank you very much, Mr. Hollyday, for your statement.

If there are no questions, the committee will stand adjourned until 10 tomorrow morning.

(Whereupon, at 12:30 p. m., the committee adjourned to reconvene at 10 a. m., Thursday, June 6, 1946.)

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