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they are secured by insured refrigerated or frozen readily marketable staples.

2. Increase from 10 percent to 25 percent of capital and surplus the amount of obligations which may be acquired by a national bank from a single borrower arising out of the sale of dairy cattle when the obligations bear the full recourse endorsement or unconditional guarantee of the seller and are secured by the dairy cattle being sold.

3. Permit any obligations, whether or not in the form of notes, secured by U.S. Government obligations to be acquired up to 25 percent of the national bank's capital and surplus.

4. Set a limit of 25 percent of capital and surplus on the total amount of consumer installment paper, whether negotiable or nonnegotiable, which may be acquired from a single dealer. This limit will not apply to obligations where the bank relies on the credit of the original borrower, if a bank officer executes a written certificate to that effect. In that case, the usual limit of 10 percent of capital and surplus would apply on all loans to that particular borrower. Under present law there is no limitation on the amount of negotiable consumer installment paper which could be acquired from a dealer. Nonnegotiable consumer paper could only be acquired under present

law up to 10 percent of capital and surplus. These changes in some measure meet the growing demands of business for improved banking services, which over the past have been limited by outmoded laws.

Further, the National Chamber approves of the addition of a fourth and fifth Deputy Comptroller of the Currency, if in the judgment of the Comptroller, one or both of these two positions are essential to the adequate discharge of his responsibilities. The Comptroller's staff is paid out of the assessments on national banks and Government appropriations or expenditures would not be required.

The workload of the Comptroller's office has increased greatly during the past several years. New methods of doing business and new ways of serving customers are constantly sought by national banks and this leads to an additional workload. An additional two deputies would permit more time to be spent on the important problems of banking supervision, which develop as competition within the banking industry mounts.

The National Chamber urges the Congress to recodify and remove obsolete and ambiguous provisions, and otherwise to revise the laws in an effort to modernize and update existing rules and regulations. Enactment of H.R. 6093 would accomplish, in part, this congressional task and would serve to simplify and make clear the laws pertaining to the banking industry,

In summary, the National Chamber supports the two bills before this subcommittee, H.R. 6092 and H.R. 6093.

STATEMENT OF ROBERT A. HOLLOWAY, CHAIRMAN, REALTORS' WASHINGTON

COMMITTEE OF THE NATIONAL AssOCIATION OF REAL ESTATE BOARDS

Mr. Chairman and members of the subcommittee, I appreciate this opportunity to testify on behalf of the National Association of Real Estate Boards with respect to section 4 of H.R. 6092, introduced by the chairman of this subcommittee, Congressman Paul Brown.

Section 4 makes several changes in the present authority of national banks to make real estate loans. I shall discuss them in the order in which they appear in the bill.

1. Subsection (a) of section 4 of the bill would permit national banks to make real estate loans secured by leaseholds where such leaseholds would run at least 10 years beyond the maturity of the loan. This is a desirable change in the light of experience of many builders in metropolitan areas who are finding choice sites for apartment house construction but on leaseholds rather than on fees. The proposal certainly poses no danger to the bank's security and is far more realistic than the present requirement that the lease run for 99 years and be renewable or have a period of not less than 50 years to run from the date the loan is made.

2. Section 4(b) (1) increases from 662 percent to 75 percent the ratio of loan to value of real estate loans made by national banks. This is a commendable proposal and certainly consistent with similar increases in such ratios to 90 percent by federally chartered savings and loan associations. Also, the New York State Legislature has recently enacted a measure authorizing Statechartered savings banks, and savings and loan associations, to make real estate loans anywhere in the State up to 90 percent of value, and last year insurance companies in that State were permitted to lend up to 75 percent on conventional single-family homes.

In the light of these changes, reflecting a growing confidence in low-downpayment home financing—the legacy of 25 years of experience with FHAit would seem most desirable to permit national banks to make real estate loans at least up to 75 percent of value. Greater participation by national banks in lower downpayment financing will increase home ownership opportunities, an objective which all of us share.

3. We also endorse the proposal in section 4(b) (2) that the limitations and restrictions on real estate loans set forth in section 24 of the Federal Reserve Act shall not apply to loans fully guaranteed or insured by a State or a State authority.

We note that many States have organized, or are in the process of organizing, State industrial authorities with the statutory power to make guarantees which have equal dignity with general obligations. Under these circumstances it would appear desirable to remove the limitations of the Federal Reserve Act as to ratios of loan to value and the percentage of a bank's time and savings deposits which may be lent on the security of real estate.

4. Section 4(c) of the bill would permit national banks to make construction loans up to 18 months instead of the present 9 months where there is a binding valid agreement for the permanent financing by a responsible lender. Our association endorses this proposal as a sound means for increasing the flow of capital into commercial and industrial construction.

5. We also endorse section 4(d) which would permit national banks to make working capital loans to industrial establishments secured by liens on personal and plant real estate, or in reliance upon the borrower's general credit standing, without such loans being considered real estate loans and therefore subject to the limitations and restrictions governing such loans secured by real estate.

This concludes our statement with respect to H.R. 6092, and we commend its provisions and these observations to your sympathetic consideration.

STATEMENT OF CARL T. MITNICK, PRESIDENT, NATIONAL ASSOCIATION

OF HOME BUILDERS Mr. Chairman and members of the committee. I welcome this opportunity to discuss with you the revision of the national banking statutes. First, may I introduce myself. I am Carl T. Mitnick, a home builder from Merchantville, N.J., and I presently have the honor to hold the office of president of the Na. tional Association of Home Builders, the trade association of the home building industry comprised of some 40,000 members across the country.

I appear before you today in support of H.R. 6092 which provides some badly needed amendments to section 24 of the Federal Reserve Act.

These would (1) increase the maximum loan-to-value ratio on fully amortized 20-year real estate loans from 6643 percent to 75 percent, and (2) exempt from real estate loan limitations those real estate loans which are fully guaranteed or insured by a State or by a State authority.

This bill will make available an increased amount of mortgage money which will be badly needed in the months ahead. We are very much concerned that we are entering another period of mortgage shortage. Within the last week several significant events have occurred which indicate vital changes in the money market.

These changes only add up to one thing—that there will be less investment money available for mortgages in the period ahead.

These changes are as follows:

1. Only last week announcement was made that five of the Federal Reserve banks were upping their rediscount rate from 3 percent to 342 percent. It is expected that the others will follow suit shortly.

Coupled with this are other events which point toward scarcity of investment funds.

2. An AA rated issue was marketed at the highest price in more than 25 years when Consolidated Edison offered a $75 million, 30-year bond at a coupon rate of 5.105 (to yield 5.05 percent).

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3. $104 million worth of tax exempt public housing bonds were sold at 3.78 percent. This is the highest interest since the Public Housing Administration began to issue such bonds.

4. On May 29, FNMA dropped its price approximately one point across the board. This was due to several things.

(a) FNMA issued $150 million in 9-month debentures priced at 412 percent. Proceeds were used to pay off a 1958 issue with a 2 percent rate.

(b) Offerings to FNMA have risen very sharply in recent weeks. After running at an average of about 900 mortgages, for about $10 million, weekly through the first 4 months, here is what has happened since:

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1 Preliminary. This high level of offerings reflects real difficulties in the private markets.

5. Very recently the prime rate for commercial bank lending increased from 4 percent to 412 percent.

All of this adds up to real difficulties in the future in the mortgage market, and this coupled with a steady demand for new housing, means the pressure will continue to mount for a fairer share of investment money for home building. H.R. 6092 offers ways to help meet some of the problems created by a tight money supply.

STATE OF MAINE,
OFFICE OF THE GOVERNOR,

Augusta, April 21, 1959.
Hon. PAUL BROWN,
House Committee on Banking and Currency,
House Office Building,
Washington, D.C.

DEAR REPRESENTATIVE BROWN: I would like this letter to be considered in strong support of your bill, H.R. 6092, understanding that hearings will be held on this measure the latter part of April.

Early in 1958 the State of Maine established a Main Industrial Building Authority following action taken late in 1957 at a special session of our legislature. Through this vehicle the full faith and credit of the State of Maine is pledged on certain first mortgages for industrial buildings, and our experience has proven that national banks in Maine have been operating at a disadvantage inasmuch as the Federal Reserve Act (12 U.S.C. 371) section 24 eliminates their participation in this type of loan.

Since the activation of the Maine Industrial Building Authority, the State of Rhode Island has activated a similar authority and legislation is currently in progress in the State of Michigan for a third such authority. National banks in these other two areas are going to be at the same disadvantage as they are currently in Maine, and these States are going to feel the lack of investment capital due to the ineligibility of the national banks to participate in their program.

For these reasons I strongly recommend to the committee passage of your amendment to section 24 of the Federal Reserve Act. With kindest regards, I am Sincerely,

CLINTON A. CLAUSON,

Governor.

MAINE INDUSTRIAL BUILDING AUTHORITY,

OFFICE OF THE CHAIRMAN,

Portland, Maine, April 22, 1959. Re: H.R. 6092 Section 4(b) (2) Hon. PAUL Brown, House of Representatives, Washington, D.C.

MY DEAR MR. Brown: The Maine Industrial Building Authority was created by a special session of the legislature in October 1957 following a referendum on an enabling constitutional amendment. At that time this method of helping finance industrial expansion was an unique idea. Since then, Rhode Island has followed our pattern exactly and other States such as Michigan are considering legislation of a very similar nature.

All of these plans are based on high-ratio loans (up to 90 percent of value in the case of Maine) for long terms (up to 25 years for Maine) to be made by regular institutional and other lenders with required payments guaranteed or insured by the State. Thus loans of this type become in essence obligations of the State relying for their quality rating not on the real estate securing them or on the lease rentals which provide originally for their repayment but rather upon the credit of the State which guarantees or insures the fulfillment of their provisions including the repayment over a period of time of principal and interest.

Under these circumstances there would seem no question but that such credit instruments from a quality standpoint should be eligible for investment by national banks as well as other customary lending institutions. Under present provisions of the Federal Reserve Act, however, any such loans in amounts exceeding 6643 percent of appraised value of the real estate securing them is not eligible for national banks. Most, if not all, loans written under this plan will probably come close to the 90 percent maximum allowed.

In view of the quality of the obligations created under such programs as the Maine Industrial Building Authority and because national banks, in our communities at least, are most anxious to participate in this manner in our industrial development program, the members of our authority are very hopeful that this amendment to the Federal Reserve Act will be favorably received and ultimately adopted. Your consideration of our thoughts in this matter is greatly appreciated. Sincerely yours,

CARLETON G. LANE,

Chairman.

CONGRESS OF THE UNITED STATES,

HOUSE OF REPRESENTATIVES,

Washington, D.C., April 27, 1959. Hon. PAUL BROWN, Chairman, Subcommittee No. 2, House Committee on Banking and Currency House Office Building, Washington, D.C.

DEAR COLLEAGUE: I am enclosing a copy of a letter which was sent to me by the Commissioner of the Department of Economic Development for the State of Maine in support of section 4 of H.R. 6092. I would appreciate it if this letter could be included in the record of hearings on this legislation at the appropriate time.

There is considerable interest in section 4 of your bill within the State of Maine, and from time to time through the hearings, I anticipate that we shall have considerable support presented for the legislation. If there is anything I can do to be of further assistance, please do not hesitate to call on Sincerely,

FRANK M. COFFIN,
Member of Congress.

me.

MAINE DEPARTMENT OF ECONOMIC DEVELOPMENT,

Augusta, Maine, April 16, 1959. Hon. PAUL BROWN, House Committee on Banking and Currency, House Office Building, Washington, D.C.

DEAR REPRESENTATIVE BROWN: I would like this letter considered in support of your bill, H.R. 6092, understanding that hearings on this bill will be conducted the latter part of April.

With the advent of the Maine Industrial Building Authority early in 1958, through which the full faith and credit of the State of Maine is peldged on certain first mortgages for industrial buildings, national banks within the State have been operating at a disadvantage inasmuch as the Federal Reserve Act (12 U.S.C. 371) section 24 eliminates their participation in this type of loan.

I believe that it is both to the best interests of the State of Maine in its effort to stimulate industrial real estate loans within the State and to stimulate additional industry in general and of the national banks which desire to participate in this program and take advantage of these fully guaranteed loans, that the Federal Act be amended to so permit.

Since the activation of the Maine Industrial Building Authority, the State of Rhode Island has activated a similar authority and legislation is currently in progress in the State of Michigan for a third such authority. National banks in these other two areas are going to be at the same disadvantage as they are currently in Maine, and these States are going to feel the lack of investment capital due to the ineligibility of the national banks to participate in their program. Sincerely yours,

FRED A. CLOUGH, JR.,

Commissioner.

NEW ORLEANS, LA., May 13, 1959. Representative T. HALE Boggs, Member of Congress, House of Representatives, Washington, D.C.

DEAR HALE: Representative Paul Brown of Georgia in H.R. 6092 is sponsoring some badly needed amendments to section 24 of the Federal Reserve Act to provide needed authority for certain types of bank loans, however, he incorporates no provision authorizing national banks to make loans for off-site improvements on unimproved real estate.

The lack of specific authority for this category of loans forces national banks to either refuse to make off-site development loans in conjunction with subdivision and FHA building, or forces them into making the loans in a roundabout manner.

The following paragraph if added to section 24 of the Federal Reserve Act would bridge a most difficult gap in financing the development of raw land to completed homes :

To authorize national banks to make loans secured by mortgage or deed of mortgage on unimproved real estate, in connection with which a subdivision plan has been approved by the proper local authorities, where the proceeds of the loans are to be used to provide laying of streets, sidewalks, and for furnishing necessary fill, grading, and utilities; provided that, upon completion of such improvements, owners proceed to place the property thus improved on the market and out of the proceeds of the sales of lots liquidate the amounts borrowed for the purposes above set forth.

I would appreciate your passing this along to Representative Brown.
With kindest personal regards, I remain
Yours very truly,

ROBERT F. MORROW.
Mr. Brown. Are there any other witnesses now?
The CLERK. No, Mr. Chairman, there are no other witnesses.

Mr. Brown. Gentlemen, we are delighted to have your testimony. Thank you very much.

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