The President's News Conference
THE PRESIDENT. I haven't seen you for a few weeks. I have been fairly busy, and I think you have been well supplied with news.
FEDERAL HOME LOAN BANK ACT
I have today signed the home loan bank bill. That institution was created on the lines of the statement I sent out to the press on the 13th of November last, and was the outcome of the national conference on homeownership 1 which represented every part of the country. You will recall that its purpose is to establish a series of discount banks for home mortgages, performing a function for homeowners somewhat similar to that performed in the commercial field by the Federal Reserve banks through their discount facilities.
1 White House Conference on Home Building and Home Ownership.
There are to be 8 to 12 such banks, established in different parts of the country, with a total capital of $125 million to be initially subscribed by the Reconstruction Finance Corporation. Building and loan associations, savings banks, and the insurance companies are eligible for membership in the system. Member institutions are required to subscribe for stock of the home loan banks and to absorb gradually the capital, and they may in turn borrow from the banks on their notes to be secured by the collateral of sound home mortgages.
The home loan banks are in turn to obtain their resources, required by them in excess of their capital, by the use of debentures and notes. These notes have back of them the obligations of the members, the mortgages pledged as collateral, and the capital of the home loan banks themselves, so that the debentures and notes thus have a triple security.
The creation of these institutions does not involve the Government in business except in the initial work of the Reconstruction Corporation, and the setting up of a board in Washington to organize and determine standards of practice. Even the cost of this board is to be borne by the home loan banks themselves, and the management of the banks is to devolve upon the members. In effect, it is using the good offices of the Government and the Reconstruction Finance Corporation to set up cooperative action amongst these member institutions to mobilize their credit and resources. There are several thousand institutions eligible for membership.
The purpose of the system is to meet both the present emergency and to build up homeownership on more favorable terms for the future than exist today. The immediate credit situation has for a long time in many parts of the country restricted the activities of the building and loan associations, savings banks, and other institutions making loans for home purposes in such fashion that they are not only unable to extend credit for the acquirement of new homes but in thousands of instances they have been unable to renew existing mortgages with resultant foreclosures and great hardships.
A considerable part of our unemployment is due to stagnation in. residential construction. There was overbuilding during the period of the boom, but in the 3 years since the building has not kept pace with the growth of population, so that we have a great reserve of construction possible the moment that there is the first step toward recovery, and thereby a cessation of the huddling which comes on in times of depression. But the Department of Commerce in a survey discovered that there are somewhere between $300 million and $500 million of home construction that would be undertaken tomorrow if the credit facilities were available. That is in localities which have actually fallen down in housing facilities. There are certain localities, particularly the large cities, where there has been overbuilding but in smaller localities there is a very large amount of construction actually awaiting action.
In the long view we need to encourage homeownership, and for such encouragement it must be possible for homeowners to obtain long-term credit, payable in installments, and the whole of the organization gives a special premium for that type of mortgage in the rediscount privilege which it has.
Now, there was attached to the bill a rider by the Congress for limited extension of the old national bank currency. I am advised by the Treasury that in practical working of the provision it will not result in inflation. I have a note from the Comptroller of the Currency who informs me that:
"This section of the bill runs counter to the general plan established through the Federal Reserve Act intended gradually to do away with an inflexible bond secured currency and represents a backward step in currency and banking legislation, but in view of the fact that the provisions are limited to a 3-year period I do not feel justified in recommending that the bill be vetoed, more especially as it is a rider to an important and constructive piece of legislation to which it bears no relation."
So, I myself do not feel that the amendment is such as to warrant refusal to approve the measure which means so much to homeowners, is such a contribution to their relief; such a contribution to establishment of home ownership; and such an aid to immediate increase of employment.
Otherwise than that I have nothing today. And I hope to meet you again next Tuesday.
Note: President Hoover's two hundred and fifty-fourth news conference was held in the White House at 4 p.m. on Friday, July 22, 1932.
On the same day, the White House issued a text of the President's statement about signing the Federal Home Loan Bank Act (see Item 239).
Herbert Hoover, The President's News Conference Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/207245