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Objections to the proposed permanent consolidation in whatever manner it might be effected are twofold:

Under the proposed merger, a single administrator would have authority over the home-financing functions of the Federal Home Loan Bank Administration, the mortgage-insuring functions of the Federal Housing Administration, and the loan and grant functions of the Federal Public Housing Authority. The commissioners of these several constituent agencies would be reduced to the status of deputy administrators. The politically appointed top Administrator would thus exercise a power over housing finance as great as, or even greater than the power of the Federal Reserve Board over the commercial banking system. Critics of the title I proposal urge strongly that in any such consolidation the policy-making function should reside in a governing board; it has been suggested that such board should include the heads of the several constituent agencies of the National Housing Agency and representatives of the Veterans' Administration and the Department of Agriculture—both of which agencies have important home-financing functions or other set-ups that have been suggested, but agreeing on the idea that a policy-making board is very desirable.

A second objection is to the consolidation of the Federal Public Housing Authority, which functions in the field of subsidized public housing, with the other two agencies which have to do with facilitating private housing finance. Many people consider it preferable that the Federal Home Loan Bank Administration and the Federal Housing Administration be restored to their former status as constituent parts of the Federal Loan Agency, and that the Federal Public Housing Authority be made a part of the Federal Security Agency.

Summarizing the position of the Commerce and Industry Association of New York, I would state that:

1. We believe that a concurrent resolution should be adopted by both Houses of Congress, disapproving of Reorganization Plan No. 1 of 1946 as it relates to the establishment of the National Housing Agency as a permanent body because

First, there is no justification for creation of a permanent body to treat with a temporary condition; and next, the various component units of the National Housing Agency, when permanently reassigned, should not be incorporated in the same agency because the Federal Housing Administration and the Federal Home Loan Bank Administration are engaged in activities entirely unrelated to those of the Federal Public Housing Authority.

Third, no one administrator should have the tremendous permanent powers which this reorganization plan would confer.

Finally, if Congress vetoes by joint resolution this consolidation feature of Reorganization Plan No. 1, the consolidation proposal can be considered by the House of Representatives as title I of the proposed General Housing Act of 1946 (the Wagner-Ellender-Taft bill). This bill has been referred to the House Committee on Banking and Currency, which committee could take ample time to consider the objections to the proposed consolidation in connection with the long-range measures proposed in the other 10 titles of that bill.

• On behalf of the Commerce and Industry Association of New York, I wish to thank Chairman Manasco and the members of this committee for the courteous consideration accorded me.

The CHAIRMAN. Mr. Holden, you have made studies, I presume, as to the legality of the reorganization plan submitted by the President?

Mr. HOLDEN. I am not a lawyer, sir. As a lay reader of it, I would not question the legality; I question the wisdom of it. I would say that to a layman's understanding the intent of the Reorganizaion Act was to enable the President to put agencies together for purposes of economy and efficiency.

It seems to me that this consolidation would go beyond that and create a concentration of financial power which was probably not the intent of Congress in the Reorganization Act. That is a lay opinion on a legal matter and it may not have any validity.

The CHAIRMAN. In section 2 of title I of the Reorganization Act, subparagraph 4, the President is directed to examine the organization of all agencies of the Government, and shall determine what changes therein are necessary to accomplish, among other things, the grouping, coordinating, and consolidation of agencies and functions of the Government as nearly as may be, according to major purposes.

Would you say that this plan would not accomplish that result? · Mr. HOLDEN. My belief is that it goes somewhat beyond that, that in creating a consolidation of organizations which deal with financetwo of them dealing with private-home financing and one dealing with Government finance, there is the added question of how much concentration of Government financial power you are creating. It seems to me when you have a large aggregation of financial power we feel it will be administered wisely if it is under the direction of a wellconstituted board rather than an individual.

I would say that I believe that the head of the Home Loan Bank System should be a member of such a board. I feel certainly that the head of the Federal Housing Administration should be on such a board and other qualified persons. Our commercial banking system is organized under the Federal Reserve System, and in the top body there is a board. It is not some sort of a consolidation that might be desirable, but I think when it is made of organizations functioning so importantly in the general field of finance, dealing with people's savings and the financing of people's homes, and so on, I think you want the best possible administration of the policy functions.

Administering the internal machinery, that is a matter for an executive, and a single administrator possibly coordinating administrative activities, but I think coordination of policy needs more than one individual point of view.

The CHAIRMAN. As I understand, your objection is more toward the policy than the legality.

Mr. HOLDEN. I say I am not competent to pass on the legality of it, sir. I object to the procedure for this reason, that I think the question of consolidation in the Wagner-Ellender-Taft bill tied in with other proposed changes in the existing housing laws, and some new proposals some of which, in my opinion, are good and some of which I think are bad.

I think if this were considered perhaps more deliberately than this reorganization plan contemplates that we would arrive at a better

result and I think possibly the House could arrive at a better version of the Wagner-Ellender-Taft bill than the way it stands at present.

My objection this morning is to the hurried action on this thing which I believe will effect something that is undesirable and when there is ample time to do it more deliberately and arrive at a sounder result.

Mr. Henry. Mr. Holden, I take it you concentrate your objection to that portion of plan No. 1 dealing with housing and the housing situation only?

Mr. HOLDEN. That is right, sir.

Mr. HENRY. Can you see where there would be any saving effected at all through this reorganization plan?

Mr. HOLDEN. I do not know of any.

Mr. HENRY. As I understand it, too, you feel that to mix subsidized housing with private financed housing it is unwise!

Mr. HOLDEN. I think so. I do not think they are completely unrelated, but at the same time, I think in one case you are dealing with the investment of private funds on an investment basis. On the other, you are dealing with a welfare project. The basic financing and the financing concepts are different and I think, therefore, as a matter of financial management they do not belong together.

Now, as to building a subsidized housing project in one place and a private housing project in the vicinity thereof, they become related in the whole locality but that is a different thing from the basic concepts of your financial procedure. These are financial institutions, in fact, so I think the principle of sound finance should be our starting point in setting

the proper kind of organization. Mr. Henry. Do you not feel there is some danger and possibility of a single head as proposed by this plan lacking the sympathetic approach when this head is dealing with both subsidized housing and privately financed housing? He would lack a sympathetic approach that perhaps a board composed of more minds would have.

Mr. HOLDEN. That is exactly my view, sir. Any one person is going to be biased, no matter how honest and fair he wishes to be. He is going to have a certain slant based upon his background and previous experience and is apt to go one way or another. I should, if I were going to be appointed Administrator, I would want a board of advisers with a broad experience to help me to do it to keep me from making serious mistakes. The possibilities of making mistakes is very great in organizations such as this that run into billions of dollars. I should think that the man heading that would very much want a board to advise him and share the responsibility in a policy-making responsibility.

Certainly in nearly all private business excepting some wholly owned by individuals have that. You have it in private financial institutions. I think the board is a safeguard to the Administrator as well as to the public and the constituent members of the Home Loan Bank System and all other people concerned.

Mr. HENRY. In passing the reorganization bill, Congress expressed a desire to effect a saving in any reorganization that the President might suggest. Do you feel there is any saving whatsoever in this plan?

178

REORGANIZATION PLANS NOS. 1, 2, AND 3 OF 1946,

Mr. HOLDEN. I know of none, sir. One would have to go into the plans of the National Housing Administration to get that. I would say the other 10 titles of the Wagner-Ellender-Taft bill, if they are an indication of the future program of the National Housing Agency they would involve Congress in considerable long-term commitments for expenditures, grants, contributions, and so on, and for other activities which were involved with a considerable amount of money.

It seems to me the tendency in Government agencies is for each one, whether it is a company type of thing like this, or whether it is a separate agency, it is to build up a staff, build up functions, and build up budgets as much as they can. I would expect that there would not be only no saving in this, it would probably lead to more expenditures. Mr. HENRY. That is all, Mr. Chairman. The CHAIRMAN. We thank you very much, Mr. Holden.

The next witness will be Mr. Frank Kirkpatrick, of Milwaukee, Wis., of the Milwaukee Home Builders' Association.

STATEMENT OF FRANK KIRKPATRICK, FORMER DIRECTOR OF WAR HOUSING IN AND ABOUT MILWAUKEE, WIS., AND A FORMER EMPLOYEE OF THE NATIONAL HOUSING AGENCY

The CHAIRMAN. You may proceed Mr. Kirkpatrick. Mr. KIRKPATRICK. Mr. Chairman, unfortunately I am not accustomed to such appearances, and I do not have copies of my address for members of the committee. In fact as you know, from the recency of my telegram asking for permission to appear here, I had a very short time to prepare. However, since I arrived in Washington this morning at 9 o'clock, I have turned this statement over to mimeographers and it will be ready for the committee at a later time.

My name is Frank Kirkpatrick. I am a citizen residing in Milwaukee, engaged in the business of housing. During the war I was director of war housing in the Milwaukee area, and an employee of NHA.

I appear in opposition to making National Housing Agency a permanent bureau because I am convinced by factual knowledge that the Agency is and will be an instrument for exercising authoritarian controls over the shelter and the lives of citizens. In making this statement I do not wish to impute to the present head of NHA authoritarian aims. I have a high regard for the moral integrity of Wilson Wyatt but I do not believe he can or will change the complexion of his Agency or change the philosophy on which it is based.

It is proper that I define my own politico-economic thinking. In a small school, in a small community in Tennessee, I learned the basic principles of Americanism. That is, we have a government of laws, with the laws made by representatives chosen by democratic processes under constitutional guaranties of individual freedom. In the many years and through the many experiences which an active yet studious life has afforded, I have found no justification for changing our form of government. In work with unemployed and organized workers, I have known the temptation to ask for power to do what seems so obviously the right and good things for men. But IL that there is no way by which we may identify i to whom such power can be entrusted.

[graphic]

When I have seen the results of ruthless exploitation of men by other men, it has been tempting to dream of a world in which the economic powers of some industrialists and capitalists are taken away. But there is always the necessity for power to get things done and if the power is taken away from men who have earned it in our competitive economy, it can only be given to men in government. And when governmental powers as well as economic powers are in the same hands we have a slave economy under a union of economic and political powers. The people then are powerless to resist any action their rulers may take. Mr. Ickes probably was a better administrator of the oil industry than Mr. Rockefeller, but if Mr. Ickes as government misused his power there was no recourse. When Mr. Rockefeller misused his power, the people through their Government could curtail his power. Without the separation of economic and governmental powers we have feudalism.

It is impossible for me to believe that there is any man in America more anxious than myself to see our economy, and the industry of which I am a part, emerge from the semianarchy which complete freedom of contract implies. But you gentlemen know better than I that serious impairment of freedom of contract of the individual means a destruction of the very base on which all our freedoms rest.

The President in a recent speech emphasized his understanding of the importance of the freedom of the individual. If the individual is not free there is no freedom, because so-called collective freedom is the freedom of a herd of cattle, free only to graze within a certain meadow and free within the prescribed limitations set by and enforced by the master of the grange.

Cattle were domesticated by power. So were the slaves we brought from Africa. But in a country where men have the right of selfgovernment they lose their freedoms through the creation of agencies which offer to trade security for votes—and men trade freedom for security.

The NHA was established as this kind of an authoritarian agency, under the excuse of war. That it aimed at permanence was evident from the beginning. Its policy-making personnel was chosen from men who long before had committed themselves to a war against free enterprise. The top policymaking men were, and are, Keyserling and Woodbury. Keyserling in USHA had lost his battle with Congress in 1939 to create a huge Government housing program, but as soon as NHA was created, he moved in, to interpret wartime housing legislation toward what I believe to be his authoritarian objectives. It was Coleman Woodbury, however, who had long before spoken the philosophy which has dominated NHA policies. I quote from Mr. Woodbury's paper on the integration of private and public enterprise, written in 1937, delivered to the Academy of Political and Social Science. He says a housing shortage emphasizes the need for a practicable working arrangement between private and public enterprise in the production and control of housing space. Then, he goes on to say: Although such a policy in respect to private and public enterprise in housing seems most desirable from many points of view, it does not follow necessarily that it can be made under our present scheme of economic organization. It is entirely possible that private and public enterprise in housing cannot enjoy a vigorous life at the same time. Many persons dislike to face the fact that a

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