Remarks at the Signing of a Bill To Stimulate Mortgage Credit for Residential Construction
Chairman Robertson, Chairman Patman, Secretary Weaver, distinguished Members of Congress, my friends, members of the FNMA Board, ladies and gentlemen:
History's verdict on any society will ultimately rest on how its people lived.
The verdict will measure the quality of life of all the people--the rich people and the poor people, the advantaged and the disadvantaged.
Today, the vast majority of our people are working steadily. And we are reaching for a new and a better standard of living for all of them.
However, the very prosperity that should really enable more people to have better housing has created a situation that denies some of them a chance for home ownership.
Many of our citizens who really want better housing have been thwarted, not by their inability to pay, but by the abnormally high cost of money.
Other demands on our credit markets have soaked up a very large portion of the funds that are usually available for mortgages that go into building homes to house people. And, as a result, this demand for money, particularly in plant investment, has raised the cost of our money beyond all reasonable bounds.
Along with the homebuyer, the homebuilder has now become the victim of the rapid growth of other elements in our economy.
So to help meet this problem, I am today signing S. 3688. This measure will increase the amount of money that is available for home mortgages. This measure will help to finance some new home construction.
In this legislation the Congress has provided a $1 billion special assistance program. It has expanded the FNMA secondary market purchase authority by $3.75 billion. Together, these funds could finance 300,000 homes for needy Americans.
Through this legislation, many families-many Americans of very modest means-will now be able to complete their home purchases. Again, we proudly say, our great homebuilding industry will benefit as well.
Let us be clear about one thing. This action that we are taking today alone does not go to the root of the problem. The basic difficulty that all of us really face is this-and the quicker we understand it the better we will be--that the demand for credit from all sources is too large relative to the supply. If all demands for credit were met, the resulting spending would place too much pressure on our economy.
We cannot accept a solution to this problem that squeezes out one single segment of credit-financed purchases--that single segment being mainly the purchase of homes.
That is why the steps I announced earlier this week, and the proposals that I made to the Congress, I think will go straight to the fundamental problem that faces us.
That will reduce two other types of credit-financed spending: by the Federal Government--and the Secretary of the Treasury is having a press conference today at 12 o'clock that will outline in some specific detail the reservations that we are making concerning the sale of Federal securities in other fields for the balance of this year, or at least until the demand lessens and the market improves--and, second, by the free enterprise system, by business itself, for the investment that they are making in new machinery, in new equipment, and in new buildings.
I asked the leading investors in plant equipment and machinery to come to the White House last March. I pointed out to them then that their rough figures, the rough survey, showed that their demands for investment in the plant field for this year indicated a very, very substantial increase over the last year, from $48 billion to $61 billion.
I asked them to try to exercise caution, prudence, and restraint.
I received many commitments from many large investors. I am confident that a good many of those commitments were kept.
But, again this week, before we sent the message to Congress, we checked on that $60.8 billion figure. Instead of it being reduced in accordance with our request, with our plea, with our urging, it had actually held its own if not really--the estimate indicated it increased by $100 million.
Now that is why it is necessary for us to take some of the actions that we are taking now.
Those people that are making those investments are now getting a 7 percent bonus for doing it. And we don't want to pay them 7 percent to do something that is causing us trouble, that we don't want done.
Those people have a backlog of machine tools, in some instances a 15-month backlog. The average is 10 months. So they can't get deliveries here.
The increase in importations of those tools, coming in from foreign countries, is up 46 percent.
We find ourselves in a rather ludicrous position this morning of paying one of our good, patriotic citizens 7 percent to import machinery from abroad, to send our dollars and our gold out of the country, giving him a bonus to do so, a premium, a salute, and almost a certificate.
Now we asked the Congress some time ago to take action on a bill that the House passed this week in connection with our monetary system.
The Senate is going to consider that bill next Tuesday. I hope they will act promptly.
One of the problems of our democracy sometimes is that we take adequate time, and plenty of delay. By the time we finally get around to acting, the problem that we had a solution for has grown until we have to take some other action.
I am pleading with the Senate to act as promptly as it can on that legislation. I am very hopeful that next week we can have hearings on the most recent recommendations on accelerated depreciation and investment credit that will permit us to make some real dents in the problem that confronts us.
When and if these recommendations are acted upon, the pressures on interest rates I think should decline. More money should be available for mortgage credit.
This will bring new opportunities for home ownership to thousands of Americans. I think it will stem the decline that is taking place in housing starts. I think it will really make great strides toward reducing the pressures on the homebuilding industry.
Owning a home is one of the basic strengths of this country. And because this bill can help many Americans to attain this goal, I am pleased to sign it into law.
We find ourselves in the very unusual position this morning of having achieved what we sought: fuller employment at a better wage, with a higher standard of living.
But along with full employment, with high wages, with a higher standard of living, with a higher income for our farmers, for our service people in laundries and the lower paid positions where we have had great increases, transportation, hospital services, when we improve those we create a problem of prosperity.
That is what we have. We are trying to deal with that problem by asking people to be prudent and to be restrained.
I hope in the days ahead it will not be too long when I can call some of the same people back to this room, certainly some of the same committee chairmen, and we can be signing other bills that I think are badly needed in America, and which I think are really long overdue.
Note: The President spoke at 11:36 a.m. in the Cabinet Room at the White House. In his opening words he referred to Senator A. Willis Robertson of Virginia, Chairman of the Senate Banking and Currency Committee, Representative Wright Patman of Texas, Chairman of the House Banking and Currency Committee, and Secretary of Housing and Urban Development Robert C. Weaver.
As enacted, S. 3688 is Public Law 89-566 (80 Stat. 738).
For the President's proposals on credit and fiscal policy sent to Congress earlier in the week, see Item 444. The President also referred to a bill "to provide for the more flexible regulation of maximum rates of interest . . ." passed by the House on September 8, and approved September 21 (Public Law 89-597; 80 Stat. 823).
Lyndon B. Johnson, Remarks at the Signing of a Bill To Stimulate Mortgage Credit for Residential Construction Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/238647