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PART 6.

SOLDIERS' ADJUSTED COMPENSATION.

COMMITTEE ON WAYS AND MEANS,
HOUSE OF REPRESENTATIVES,

Tuesday, March 9, 1920.

The committee met, pursuant to adjournment, at 10 o'clock a. m. in the room of the committee, room 321 House Office Building.

The committee was called to order by the chairman.

The CHAIRMAN. I suggest that the committee hear Mr. Morgan at this time. Mr. Morgan, would you prefer to make a full statement before the committee without interruption?

Mr. MORGAN. I would like, Mr. Chairman, to make a full statement first.

Mr. TREADWAY. How much time will it take?

Mr. MORGAN. I expect to speak extemporaneously, and I think it will take me about an hour.

Mr. KITCHIN. Are you in favor of a bonus, with your bill in addition thereto, or is your bill a substitute for other bills?

Mr. MORGAN. I think my bill, if passed,, will be sufficient in itself. I have no objection to the bonus proposition, either alone or in combination with my proposition.

Mr. KITCHIN. But you are in favor of the bonus and your proposition?

Mr. MORGAN. Well, I want to discuss my proposition on its merits. Mr. KITCHIN. You do not oppose a bonus?

Mr. MORGAN. I do not, either alone or in combination with my bill. * Mr. GARNER. In connection with your bill, are you going to tell us where you are going to get the money to handle your proposition? Mr. MORGAN. Yes; I am going to do that very thing.

STATEMENT OF HON. DICK T. MORGAN, MEMBER OF CONGRESS FROM THE STATE OF OKLAHOMA.

Mr. MORGAN. On the 11th day of June, 1919, I introduced H. R. 5545, entitled "A bill to provide homes for soldiers, seamen, and marines, and for other purposes."

The chief provisions of H. R. 5545 may be summarized as follows: The administration of the bill is placed under the general supervision of the Secretary of the Interior.

It creates a Government corporation to be known as the Soldiers' and Seamen's Federal Home Founding Corporation. The Secretary of the Interior and four other persons, to be appointed by the President and confirmed by the Senate, are to be the directors and managers of the corporation.

The capital stock of the corporation is to be $100,000,000, all of which is to be subscribed by the United States of America.

A county board is provided, consisting of three persons, namely, the postmaster of the county seat of each county, and the county

agent of the Department of Agriculture of each county, and one other person appointed by the corporation. An additional board is provided in cities having 20,000 or more population.

The soldiers and seamen are to be provided with homes through a system of loans made by the corporation.

Two kinds of loans are provided for. Long-term loans to run for a period of not less than 5 years nor for more than 60 years, and short-term loans to run for a period of not exceeding 5 years.

Every honorably discharged soldier, seaman, and marine is entitled to obtain a loan of not more than $4,000, with which to purchase a farm homestead or a home in a town or city. Loans are to be made up to the appraised value of the homestead. Short-term loans not exceeding $1,200 are authorized, to enable the purchasers of farm homesteads to supply themselves with the proper live stock and farm equipment. Short-term loans are to be made up to the appraised value of the live stock and equipment purchased.

The $100,000,000 capital provided is made a revolving or operating fund to enable the corporation to conduct its business. To obtain additional capital, the corporation is authorized to issue long-term bonds in an amount not in excess of the total amount of mortgages held on urban or farm homesteads. Short-term bonds are authorized to be issued in an amount not exceeding the loans and chattel mortgages held for short-term loans. To insure the sale of these bonds in large quantities and at a low rate of interest, the Government guarantees the payment when due of both the principal and interest of the bonds. The bonds are made exempt from taxation.

In view of the fact that loans are authorized up to the appraised value of the property mortgaged, it must be assumed that there will be some losses to the corporation. To provide against such losses, the corporation will have the income from it endowment capital and in addition a guaranty fund is created. The interest charged on the long-term loans is to be one-half of 1 per cent per annum higher than the interest rate on the bonds, and the interest on the shortterm loans is to be 1 per cent annually higher than the interest on short-term bonds. The one-half of 1 per cent on long-term loans and the 1 per cent on short-term loans is to be set aside as a separate fund to make good any losses which the corporation may incur. In addition to this, the corporation will have the entire interest received. on its capital of $100,000,000 to apply on any losses it may sustain. The payments into the guaranty fund and the annual interest on the endowment capital of $100,000,000 will exceed any possible losses the corporation will sustain.

The corporation is authorized to use 25 per cent of its capital as a revolving fund in the purchase of land to be subdivided into farm homesteads of not less than 10 nor more than 40 acres, and land within or adjacent to any town or city to be subdivided, platted, and sold as urban homesteads.

The Secretary of the Interior is authorized to reserve from entry for a period of two years any public lands, during which time soldiers will have the preference right to enter land so reserved.

The corporation is further authorized, with the approval of the Secretary of the Interior, to use any part of the public domain to provide homes under the provision of the act, and any soldier making entry of public lands shall be entitled to secure a short-term loan

not exceeding $1,200 to provide the necessary live stock and farm equipment for the operation of the farm.

"Whatever shall be done by Congress in recognition of the services. rendered by our soldiers, seamen, and marines should meet the following requirements:

1. Whatever is done should be appropriate in character.

2. It should be general in its application.

3. It should be permanently useful and beneficial to the soldiers. 4. Its benefits should be equitably distributed to all the States and communities of the Nation.

5. It should serve some great national purpose.

6. It should be financially sound and should not endanger the national credit, interfere materially with the financial operations of the Government, or unduly burden the taxpayers of the country.

The plan proposed in my bill, H. R. 5545, to provide homes for soldiers has been exceedingly popular with the former service men. It has been received with favor in all portions of the United States. Prior to the convening of the national convention of the American Legion at Minneapolis, November 11, 1919, 10 of the State branches of the American Legion had indorsed my bill by name and number. These States are as follows: Colorado, Oklahoma, South Dakota, Rhode Island, Delaware, Iowa, Nebraska, Indiana, Washington, and Arkansas. The national convention of the American Legion indorsed my bill in principle. The resolutions adopted declare specifically in favor of national legislation to provide former service men with credit facilities to purchase either a farm home or a home in a town or city. In effect this is an indorsement of my proposition for, so far as I know, my bill has been the only one introduced which provides for the purchase of both homes in the town and city and in the country. In addition to this, the members of the committee will remember that the representative of soldiers' organization known as Veterans of Foreign Wars, representing a membership of about 600.000, in a statement before the committee stated that the organization which he represented was in favor of the "Morgan bill" in addition to some compensation in money. In addition to this, the bill has been indorsed by hundreds of local posts of the American Legion and other local soldiers' organizations, representing 42 States in the Union. Hundreds of individual soldiers have written me letters indorsing my bill in strongest terms possible. I have all of these resolutions and letters of indorsement in my possession, but taken together they would occupy too much space to be printed. I would be glad to submit them to the members of the committee for examination.

The object of the proposed legislation is to provide some appropriate recognition for the services rendered by our soldiers, sailors, and marines. For this purpose nothing more appropriate could be done than to place within the reach of these men a home, in which, throughout their lives, they may reside under the protection of the flag they honored and upheld. A home is the best pension a soldier can possess. It affords protection to the family; gives satisfaction, security, and contentment to the soldier; makes him a better citizen; and strengthens the very fabric of our Government. The best, wisest, and most practical way that a nation can show its gratitude to its soldiers is to provide them with homes. It is in line with the

long-established policy of the Government. In every war since the American Revolution the United States has offered our soldiers homes on the public domain. Twenty-seven of the States of the Union have erected homes for their disabled soldiers. The Federal Government founded the National Home for Disabled Volunteers and established branches thereof in 10 different States in the Union. In the District of Columbia the Government founded and supports the United States Soldiers' Home for disabled soldiers of the Regular Army. In the giving of public lands and the erection of these soldiers' homes, and in providing for their maintenance, the State and Federal Government have expended vast sums of money.

No one now questions the propriety of what has been done in the past. No one will assert that the money appropriated has been wasted or unwisely expended. The American people have never complained about the money expended in providing for the comfort, the well-being, and the happiness of the men who have fought their battles. For 142 years it has been the policy of the American Government to provide homes for its soldiers. This policy should not now be abandoned, when we have more wealth both in the aggregate and in proportion to our population than we have ever had before; when we have more homeless people in proportion to our population than we have ever had at any previous time; and when the difficulties of acquiring a home were never before so great. There is no way now by which our soldiers, seamen, and marines may acquire homes except through the organization of proper and adequate credit facilities. Unless, therefore, my plan or something similar to it shall be adopted, a large proportion of our soldiers, sailors, and marines must make up their minds to live in a country where it is impossible for them to acquire a small tract of land which they and their families may call their own.

The plan which I present is universal in its application. It can be utilized by all. Under it homes may be acquired in the towns and cities as well as in the country. It is, so far as I know, the only home-aid plan which has been presented that is just and fair to the one-half of our soldiers who now reside and must continue to reside in our towns and cities.

Whatever we do for our service men should be something that will be permanently useful, helpful, and beneficial to them. In this respect a home is far preferable to a small bonus in money. As the years go by a home will grow more valuable and likewise more useful and helpful to the owner.

The plan which I present will distribute its benefits equitably throughout the country-to every State, county, city, town, village, and community. One great point in its favor is that it will serve at least three great national purposes. It will multiply the number of home owners and turn back the ever-growing menace of tenancy; it will encourage thrift and saving among both the soldiers who purchase homes and the citizens who will buy the gilt-edged securities of the corporation; and it will promote good citizenship, allay unrest, and stand as a mighty bulwark against I. W. W-ism, bolshevism, and every other radical and revolutionary movement.

Any long-time land-credit institution may be made absolutely safe and sound financially even though it loans up to 100 per cent of the appraised value of the land or home mortgaged. There are

a number of ways this may be done. Among these the following may be mentioned:

First. Through the income from an endowment capital.

Second. Through contributions from all borrowers into a guaranty or insurance fund.

These methods might be used separately or in combination. In my plan as presented in H. R. 5545, I have combined the first and second methods. I use the income from the endowment capital and the contribution from the borrowers into the guaranty fund.

First. It is self evident that a corporation may be endowed with sufficient capital to enable it to meet the losses sustained by reason of the fact that it loaned up to 100 per cent of the appraised value of the land mortgaged. It can only be a question how large an endowment is necessary. Under my bill the corporation would have $100,000,000 capital. At 4 per cent per annum interest the corporation would have an annual income of $4,500,000 from this endowment capital.

An endowed institution pays no dividends. The entire income from its capital may be used in paying losses. If this endowment should be increased, to $200,000,000, it would, of course, double the annual income which the corporation would have to meet the losses sustained. But the only question involved is what endowment would be necessary.

Second. As to the second method, it is also self-evident that any long time land credit institution can be made absolutely sound financially through annual contributions from the borrowers into a guaranty or insurance fund. Like the endowment, it is only a question of how much each borrower should contribute annually to this fund. Under the terms of H. R. 5545, the borrowers are required to contribute one-half of 1 per cent annually upon the face of the loans. If this amount should not be thought to be sufficient, the annual contribution from borrowers to the guaranty fund might be increased to three-fourths of 1 per cent annually or to 1 per cent annually on the face or their loans. But this is not the limit. Instead of fixing a certain percentage which each borrower should pay into the guaranty fund, the law might require each borrower to enter into a contract whereby he agrees to pay annually any assessment which may be made by the corporation upon him which might be necessary or required to meet the losses sustained by the corporation through the nonpayment of the amount due the corporation from any and all borrowers. This assessment could be enforced because the corporation would have a mortgage upon the property of each borrower and any failure to pay the assessment would subject the mortgage to foreclosure. While I do not think that such a requirement should be made, it is nevertheless something the borrowers could safely enter into. There would be some advantage in this arrangement. It would remove all doubt about the financial soundness of the corporation. It would not in practice increase the annual payments of the borrowers. Each borrower would then be deeply interested that every other borrower should meet all the payments due on his mortgage. I do not believe such a provision should be placed in the law, but I call attention to it here for the purpose of showing that there are ways to make a loan corporation absolutely safe and sound financially, notwithstanding the fact it makes loan'

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