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we make no public statements. We do not attempt to defend ourselves, but when they get to the point where they are making false statements or we think they are false, we like to answer them.
Mr. FERNANDEZ. Will the gentleman yield for an observation? Mr. CANFIELD. Certainly.
Mr. FERNANDEZ. As I read that editorial, it is not directed at the RFC. It is directed against the law.
LUSTRON CASE Mr. CANFIELD. No, it is directed against policy. That leads me to another inquiry, Mr. Hise, and it is about the much publicized Lustron case. Now, briefly, will you give us the picture on that?
Mr. HISE. The Lustron case is a prefabricated housing deal where we have $37,500,000 invested. The first loan was made on June 30, 1947, in the amount of $15,500,000. That was under the Veterans Emergency Housing Act. Subsequently we made a $10,000,000 loan for the same purpose for the expansion of this company. That loan was made on July 9, 1948. Then we made additional advances of $7,000,000 on February 14, 1949; $1,000,000 on June 30, 1949; $1,000,000 on July 11, 1949; $1,000,000 on July 28, 1949, and $2,000,000 on August 29, 1949. We subsequently had an application for $17,000,000—and I do not have the exact figure, but it is approximately $17,000,000—and we recently refused to make any further advances.
We have had engineering reports made on this project. Everybody agrees that the present management has proven that they can build a good house. They can build it in mass-production quantities, but they cannot build it in sufficient volume at a price so that they can operate without a loss. It is our feeling that we are not authorized to grant subsidies to the housing business, as much as we would like to have additional houses produced.
This is an exceptionally good house, but it costs too much money to get it into the hands of the consumer. We are hopeful that private enterprise will enter this field soon and continue to provide additional funds and possibly have the company make other things in addition to housing so as to balance out the operations so they can at least go forward without incurring any further loss.
We have not actually taken action as yet to foreclose on the properties or to put them into receivership. That may be an immediate step. I do not know.
The last five advances have been under section 102 of the Housing Act which provides for the money to be used specifically for prefabricated houses, component parts thereof, or on-site construction of houses, so that does not come under the heading of a business loan as such. It is entirely outside of our business loan functions and has nothing to do with our regular operations.
The first loan was pursuant to the Veterans Emergency Housing Act and not under our business-loan authority.
Mr. YOUNG. The more recent loans, of course, have been made under section 102 of the Housing Act which provided $50,000,000 would be authorized for loans to prefabricated housing manufacturers on such terms and conditions as the Corporation should determine and without limitation as to securities.
Mr. Gary. A provision which I voted against in the Congress because I thought it was a pretty bad provision.
Mr. CANFIELD. Mr. Hise, how far back were your first prefabricated housing loans made?
Mr. HISE. Do you mean in connection with this case? Mr. CANFIELD. No, the very first. Mr. Young. I do not know whether we made any of those before the Veterans Emergency Housing Act or not. We may have made some under our regular business authority.
Mr. CANFIELD. I believe you did make some before the Veterans Emergency Housing Act.
Mr. Young. Those would have been made under our regular businessloan authority, and we would have required collateral. Our law says that we must have our loans so secured as to reasonably secure repayment. We were authorized at one time, immediately after the war, to guarantee a market to manufacturers of prefabricated houses. That was under this Veterans Housing Act.
Mr. CANFIELD. Now, Mr. Hise, in foreclosing in the Lustron case, what is the Government going to realize out of this debacle?
Mr. HISE. I imagine your guess would probably be better than mine on that. I do not know. We are hopeful that private enterprise will come in here. We have had a number of inquiries from a substantial group of people in that connection.
Mr. CANFIELD. Do you mean the people who are interested in going along with Lustron?
Mr. HISE. They are from people who are interested in getting into the picture. A surprising number of very substantial people have inquired, and I am hoping that something may come out of those inquiries. Up to date, we have necessarily had to refer all of those inquiries to the present management, and we have not been able to follow through on them. If and when we reach a decision as to foreclosure or receivership, then we will pursue those inquiries ourselves so as to get the maximum return out of it that we possibly can get for the Government. Now, anything I might say to you as to what we would get back would be purely a guess, and I would not like to hazard a guess on that.
Mr. CANFIELD. That is all, Mr. Chairman.
OBLIGATIONS Mr. Gary. What were your obligations to December 31, 1949, on administrative expenses?
Mr. CONSIDINE. We are operating at approximately $13,000,000 as of December 31, 1949, which includes the pay raises up to that date.
Mr. GARY. All right, gentlemen, that is all. Thank you. Mr. HISE. Thank you, Mr. Chairman and gentlemen of the committee.
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