Mr. TEAGUE. Mr. King, take for example the loan applications in Texas since May 18. How long would it take that information to filter up here to you so that you would know what is happening there? The point that I am trying to make is, do we know yet the effect of your May 18 order? Has it come up from Houston, or that area?

Mr. KING. Mr. Teague, we do not know at all at this date the effect of the May 18 order on June loan origination volume.

Mr. TEAGUE. That is what I want to know. I did not think that it would get up here that quickly.

Mr. RUSSELL. May I further answer the question? The United States Savings & Loan League, with 4,000 members and with about $20 billion, has taken the trouble to poll its membership on what is happening with the 41⁄2 percent rate, and I would like for Mr. Slipher, who conducted that poll, to make a short statement.

Mr. TEAGUE. Will you yield for just a second?

Mr. King, before tomorrow would you make some spot checks by long-distance telephone to your offices around the country and tell us what is happening?

Mr. KING. Mr. Teague, I was in Denver yesterday at a meeting of some 20 or 22 loan guaranty officers representing practically everything west of Chicago with the exception of the great State of Texas. Mr. TEAGUE. You made a big mistake.

Mr. KING. I believe on a show of hands that 14 were of the opinion that the GI loan volume in their respective bailiwicks would increase over the next 60 or 90 days.

Mr. TEAGUE. Specifically, will you check with the loan guaranty officer in Houston and Waco before you appear here and see what they tell you about what is happening, and while you are resting there at the table, would you look at about 40 telegrams that I have placed in the record saying that they cannot place any of this paper? Mr. KING. If it would better suit your convenience, I can better tell you now what they will tell me.

Mr. TEAGUE. I thought a moment ago you said that the information had not filtered up here and you did not know what was happening.

Mr. KING. I say that I can approximately give you what they will tell me, and that is that in Houston, for example, there is considerable confusion among builders who are now endeavoring to get financing for future building. The market is very unsettled.

Mr. TEAGUE. What about the next 2 weeks or months?

Mr. KING. The market will hardly change in so short a period.
Mr. TEAGUE. It will still be confused?

Mr. KING. Yes.

Mr. TEAGUE. How about 6 months from now?

Mr. KING. I beg off. I am not a predictor.

Mr. TEAGUE. Then, actually, what you think is your May 18 order is going to continue to cause confusion from now on; is that what you are saying?

Mr. KING. No; that is not what I am saying. But there are any number of qualified men in this room, all of whom I feel confident will endorse my statement that it would be foolish to predict what will happen 6 months from now.

Mr. TEAGUE. It seems that in your position you would have some sort of idea of what is going to happen to GI housing in the next 5 or 6

months. The builders tell me they cannot build any more GI homes in Texas. Do you believe that?

Mr. KING. I do not believe that, Mr. Congressman.

Mr. TEAGUE. Do you believe that the building will continue at about the level it has for the last 4 or 5 months, or do you believe there will be a radical change one way or the other?

Mr. KING. I think that the builders of Texas under the practices for financing which are prevalent there today will probably have considerable difficulty in getting financing for their future planning. That difficulty is considerably accentuated because of the widespread conviction that the Veterans' Administration rule against discounts will be broken. Quite naturally, in that setting, money will not come out until lenders know where they stand.

Mr. EDMONDSON. Mr. King, I have had a number of telegrams from Oklahoma builders along the same lines as Mr. Teague's, and I just wonder if it is your observation that this is a regional thing and that Oklahoma and Texas are unique in the situation that seems to be confronting the GI home-building program right at this time.

Mr. KING. Congressman Edmondson, your appreciation of the area factor in this problem is correct. The area factor in relation to the supply of mortgage money in this country is always of essential importance, and there is a very widespread disparity in the availability of money from one locality to another. The Southwest is notoriously an area in which local money is scarce. Its very considerable expansion over the past few years has pointed that up further. The builders of the Southwest largely have to get their money for project building out of New York. New York is moving very cautiously at the present time in their willingness to supply money for projects which will not eventuate in loans for some 6 months or more to come. Mr. EDMONDSON. Did your May 18 statement, which you issued to the various field offices, state any rules or regulations that had not prior to that time been in force or effect, or did it merely restate existing rules and regulations?

Mr. KING. A brief answer to that question, Congressman, can be given by the statement that our May 18 rule was more restrictive than the rules theretofore in effect.

Mr. AYRES. I think we will get into that tomorrow, if it is all right with you.

Thank you, Mr. King.

Mr. BONIN. I beg to differ with the statement made by Mr. King that this is concentrated in a particular area. I have been receiving the telegrams also from my area, and that is northeastern Pennsylvania. The complaints have been coming in ever since this directive was issued.

Mr. AYRES. The same thing is true for Ohio.

Mr. KING. May I interpose here. I am sorry that I left Congressman Bonin with a misimpression. I did not say that this was characteristic only of a single area.

Mr. BONIN. You were implying it was 'concentrated in Texas and the Southwest.

Mr. KING. I meant to say that the situation you view in Pennsylvania is even more crucial in the Southwest.

Mr. AYRES. I might add, Mr. King, neither of us is very good predictors, and I am glad that you, like myself, have seen the light, be

cause on April 29 you predicted that the 41⁄2 percent would overgun the building market.

Mr. KING. Mr. Congressman, I was not aware that I predicted that. I said it was a result to be feared. If you would like, I could produce the similar comments of extremely competent authorities, because you see, Congressman, we are concerned with a fast-changing situation, and things which have developed since you received assurances in February, March, and April there would be an abundance of money at 41⁄2 percent, have disaffected that situation. Some of those developments were foreseen by very few indeed.

Mr. AYRES. Thank you, Mr. King.

We will get our guns loaded tonight and sleep over it and discuss the situation with you tomorrow.

Mr. KING. I will do my best to get a good night's sleep by way of assembling my ammunition.

Mr. RUSSELL. If I may endeavor to answer the question by giving the results of a poll of what we may expect as to future loans, Mr. Slipher is here.

STATEMENT OF STEPHEN SLIPHER, STAFF VICE PRESIDENT, UNITED STATES SAVINGS & LOAN LEAGUE

Mr. SLIPHER. We took a poll of about 200 savings and loan institutions and asked them-and this is after May 18 and after the rate went up-what their plans were for the latter half of this year as compared to last year, and the sum result was that those associations expect to make 76 percent more GI loans the last half of this year than in the last half of 1952.

Now, keep in mind, as Mr. Russell said, we make only about 27 percent of the GI loans. So, if we increase our participation, it is not going to flood the market with GI loans if the other three-quarters of the lenders drop down drastically. So, because we tell you that the savings and loan associations are going to make GI loans, it does not mean there will be more GI loans generally, because we are only a part of the lending market.

Mr. AYRES. How long will it take for this increase to show up with more veterans getting into homes?

Mr. SLIPHER. I think more veterans will get GI loans from savings and loans as of right now, but if they are not getting as many loans from other lending institutions, your mail is not going to reflect it at all.

Mr. AYRES. Could you provide us with a list of these savings and loans that are anxious to make GI loans so that we in turn, as a committee and these requests are funneled into us from all over the country-can refer to it and, say, have veteran John Jones call the Fall Savings & Loan and they will be very happy to discuss the loan with you. That would be most helpful if we had someone to send

them to.

If

Mr. SLIPHER. It isn't very practical. I can tell you the name of the association that is going to make $1 million worth of loans. they are the only ones in the area making the loans, they will be swamped.

Mr. AYRES. That is the problem with which we are faced. We get the testimony that there will be a lot of loans made.

Mr. SLIPHER. I said savings and loans will make more loans.

Mr. EDMONSON. With regard to the savings and loan associations field, have they been, to your knowledge, following this discount practice that this specific regulation was directed against?

Mr. SLIPHER. As Mr. Russell pointed out, we generally make and hold loans and do not sell or buy, and that has not been important. Mr. EDMONDSON. That would not be a field likely to be dried up or adversely affected?

us.

Mr. SLIPHER. The impact of the discount ruling is not so much on
You will hear witnesses who can tell you more about that.
Mr. KING. When was your survey made?

Mr. SLIPHER. It was made about the weekend of Memorial Day. We compiled it on June 7.

Mr. AYRES. When we originally scheduled the hearings we did not have knowledge of the fact that the House would be meeting at 10 o'clock. It will be necessary for the members of this committee to be on the floor at 11.

We will recess the hearing until 1 o'clock.

(Whereupon at 10:45 a. m., the committee recessed to reconvene at 1 p. m.)

AFTERNOON SESSION

Mr. AYRES. The committee will come to order.

Having received permission from the Speaker of the House to continue the hearings this afternoon, even though they are having general debate in the House, we will call Mr. Russell back to the stand.

Before we recessed, Mr. Russell, I believe that Mr. Slipher had gone into the survey that you had made. He stated that 27 percent of all the loans made were made through your organization. Is that correct?

Mr. SLIPHER. That is approximately the figure.

Mr. AYRES. I wonder if you have any breakdown as to what percentage of those loans were on new construction and what percentage were on existing structures.

Mr. SLIPHER. No; I do not believe that we have that information. I believe it runs about roughly, ordinary loans about a third on new housing and two-thirds on existing housing, and I believe that the ratio for us would be about the same. Maybe it would be a little more on GI loans.

Mr. AYRES. More on new construction?

Mr. SLIPHER. Probably more on new construction.

Mr. BONIN. You stated in your testimony earlier in the day your organization loaned approximately 27 percent of the current GI loans. Mr. SLIPHER. We have been doing about a fourth of it.

Mr. RUSSELL. On a cumulative basis to date the savings and loan people have made $5.4 billion worth of loans, and that is about 27 percent, on a cumulative basis, of all the GI loans made and guaranteed. Mr. BONIN. I do not recall what your anticipated loans would be. Would they increase, or would they remain stable, or decrease?

Mr. RUSSELL. A poll taken since the interest increase and the new schedule of fees, charges and discounts, taken at about the end of May and published about the 7th of June indicated that our people would do 76 percent more GI lending in the latter half of 1953 than they did in the latter half of 1952.

Mr. BONIN. At the time the poll was taken was this regulation taken into consideration?

Mr. RUSSELL. It was.

Mr. BONIN. Was there sufficient news coverage and publication? Mr. SLIPHER. We mailed it out to all our people.

Mr. RUSSELL. We mailed them notices of the interest rate increase, and they received notice from the newspapers of that also. It has been mailed from the Veterans' Administration, this May 18 schedule, and the United States Savings and Loan League also mailed that to its membership, so our membership, 4,000 institutions, lending institutions, had notice of the increase and notice of the new schedule and fees, charges, and dscounts. The survey was made for the purpose of finding out what the result of that situation would be, and the result comes up to the statement that they will lend 76 percent more money in the latter half of 1953 than they did in the latter half of 1952.

Mr. BONIN. I do not believe we received an answer from you to the question that Mr. Ayres asked, the chairman of this committee, about whether or not you would be willing to release the names of the institutions that you represent. Would you be willing to do that?

Mr. RUSSELL. We publish a list of our membership in a directory of the United States Savings and Loan League, which is quite generally available.

Mr. AYRES. Are all these 4,000 institutions that you represent engaged in the GI guaranty program?

Mr. RUSSELL. They are all engaged exclusively in the financing of loans locally where they operate. Not every one of them would make a GI loan today. Some of them would and some of them would not.

Mr. AYRES. Could we arrive at an average?

Mr. RUSSELL. No; there would be no reliable estimate that I could give you as to the percentage of institutions that would actually be engaged in GI loans, or what percentage of their loans they would make GI. There is prevailing in the business a general purpose among a great many institutions to put anywhere from 10 to 50 percent of their new market loans money into veteran loans. That is quite a general proposition. If you look at their statements you can find the mortgage loan holdings will vary from around 10 percent up to 50 percent in GI loans.

Mr. TEAGUE. Mr. Russell, you are familiar with section 504?
Mr. RUSSELL. I am.

Mr. TEAGUE. This order that was put out on May 18, do you think that carries out the intent of section 504?

Mr. RUSSELL. It is my opinion it does.

Mr. TEAGUE. You think the law would have to be changed, or should be changed?

Mr. RUSSELL. In my opinion, the law should be changed if you do not wish to regulate initial charges and discounts. I would like to point this out, gentlemen of the committee, in connection with 504. The people that I represent do not ask for that amendment of 504 which directed the Administrator of Veterans' Affairs to undertake to regulate initial charges and fees, but the Congress chose to amend the statute in that respect. The first regulation regulated charges and fees. Right away, there developed a system of discounts and charges and other devices to get out of the builder more than the amount permitted as a charge or fee.

Mr. TEAGUE. Do you believe that would be a violation of the law?