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Mr. Dunton. Well, as I understand it, there is no specific statutory requirement in the act, title III, that imposes upon the Veterans' Administration the necessity to make inspections, but there is certainly an implied obligation there to see that a good standard of construction is maintained, and I think they have that authority.

Senator JENNER. How about the veterans' homestead bill?

Mr. DuNton. That carries section 515, which is so restrictive that it will leave no incentive for a lending institution to continue. That is the act which the Veterans' Administration is particularly interested in, and as I understand it they sent a copy almost identical to this section to your office shortly after this bill was introduced.

Senator JENNER. That is right. Mr. DuNton. Now may I add there-here is another paragraph: Further, there is no restriction upon the number of loans nor the dollar amount which any lender can offer to the proposed market. This might operate as an invitation to lenders to become merely disbursing agents for Government funds since there would be nothing to prevent the lender from making loans to the full extent of his available capital, selling such loans to the secondary market, and using the capital thus acquired to make more loans.

Certainly not. That is exactly the intention of the market. That is what the market is for. There is no criticism of that. The market is constructed exactly for that purpose. Unless the small banks and savings and loan associations throughout this country do it that was, they are frozen. That is exactly where it stands. Now it goes on to say:

This cycle could be continued indefinitely.
Well, certainly it could. That is the intent.

The lender would profit from such an operation in that he would be entitled to receive a servicing charge on such loans at a rate not to exceed 1 percent of the unpaid balance as may be agreed upon with the Administrator.

Well, how does business operate except on a profit? Is there anything wrong about making a profit? How can we operate the business without making a profit?

And a word about the 1 percent. You can't make a nickel on 8 1 percent per annum charge unless it might be in the case of an ertremely large life insurance company that had hundreds of millions of dollars in volume. We couldn't make a cept. Our institution could not make one cent on a 1 percent per annum charge. It would merely reimburse us for the expense involved in making the colleetions, contacting the borrowers, taking care of the numerous complaints that come in from borrowers. There isn't a nickel in a 1 percent charge.

It is believed that the committee will wish to consider the desirability of a restriction as to the percentage of the dollar amount of loans which may be 1 purchased by the market from any one lender. If the market was created on a restricted basis, lenders would be required to retain in their portfolios, or seek non-Government channels for disposition of, a portion of the loans which they originate. This would tend to produce a sounder line of credit resulting from more prudent investment by lenders.

Well, that is just simply not true. It indicates an ignorance of how lenders operate. After all, lenders have an obligation to their investors, you know, and they examine these loans with great care.

There again an attempt is made to smear the intent of the lending institutions upon whom we are calling to carry out this program, by destroying their incentives, by impugning their intents.

Senator JENNER. Institutions that have carried out the program and did not dump.

Mr. DuNton. And did not dump.

And a word about this $102,000,000. A large part of that was the result of dumping occasioned by the fact that the men who dumped it knew that this action was coming in advance, and they hurried to get those loans sold before the deadline.

I imagine that had that not been true, you would not have even $102,000,000. I know that the percentage of FHA loans which were sold to the family man during all the years was absolutely at a decimal fraction of 1 percent of the total of loans originated, and that the principal value of Government-sponsored secondary market is the psychological value of support at par.

Senator JENNER. That's right.

Mr. DUNTON. I want to point that out. I want to comment again on the peculiar attitude and the wording and the devices apparently used by someone in the Veterans' Administration in opposition to this bill. I just want to remark about that again.

I don't see anything else here. I will comment on this report, Mr. Chairman, which appears to state the case very well. The Veterans' Affairs Committee, which wrote this report, did a very fine job.

Senator MORSE. Thank you.
Mr. DUNTON. Thank you, gentlemen.

Senator MORSE. Are there any further comments? If not, the hearing will be closed, and the subcommittee will go into executive session.

(Whereupon, at 10:50 a. m., the subcommittee went into executive session, at the conclusion of which the subcommittee adjourned.)

X

RAILROAD RULES AND WAGE DISPUTES

HEARING

BEFORE A

SUBCOMMITTEE OF THE COMMITTEE ON LABOR AND PUBLIC WELFARE

UNITED STATES SENATE

EIGHTIETH CONGRESS

SECOND SESSION

ON

RAILROAD RULES AND WAGE DISPUTES

JUNE 15, 1948

Printed for the use of the Committee on Labor and Public Welfare

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COMMITTEE ON LABOR AND PUBLIC WELFARE

ROBERT A. TAFT, Ohio, Chairman GEORGE D. AIKEN, Vermont

ELBERT D. THOMAS, Utah JOSEPH H. BALL, Minnesota

JAMES E. MURRAY, Montana H. ALEXANDER SMITH, New Jersey CLAUDE PEPPER, Florida WAYNE MORSE, Oregon

ALLEN J. ELLENDER, Louisiana FORREST C. DONNELL, Missouri

LISTER HILL, Alabama
WILLIAM E. JENNER, Indiana
IRVING M. IVES, New York

PHILIP R. RODGERS, Clerk

SUBCOMMITTEE ON LABOR

JOSEPH H. BALL, Minnesota, Chairman FORREST C. DONNELL, Missouri

JAMES E. MURRAY, Montana WILLIAM E. JENNER, Indiana

ALLEN J. ELLENDER, Louisiana

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