HOUSING: Monster Machine

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From the hat of Congress in 1933 President Roosevelt magically pulled out two mighty measures for recovery—National Industrial Recovery Act and Agricultural Adjustment Act. Last week just as Congress was putting on its hat to go home the President extracted his biggest piece of 1934 recovery legislation—the National Housing Act. Of the 9,500,000 persons in the U. S. still out of jobs, more than half used to work in the capital goods industries (machinery, structural steel, lumber, ships, cement, locomotives, stone). PWA was to have provided relief for the heavy industries but it turned out to be too costly, too slow. NRA tended to decrease the demand for capital goods by raising prices and limiting production. The Securities Act discouraged industry from borrowing money to buy capital goods. With the construction of homes down to 10% of the pre-Depression average, President Roosevelt decided to rush a housing program into the economic breach. That it would be nice if U. S. citizens had better houses was a pious afterthought of the Administration. The National Housing bill had just one purpose: to sluice money into the building trades and the industries that supply building materials, money from private bank accounts rather than from the public treasury. As with many another recovery measure, the National Housing Act looked invincible on paper. To attain its objective, attacks were aimed along three lines: 1) As a stopgap until the rest of the program could be started, citizens were to be encouraged to remodel and repair their houses. This was to bring out perhaps $1,000,000,000 of private capital. The Government was to set up a Home Credit Insurance Corp. to insure banks and other accredited lenders against 20% of any loss they may have from making loans to remodelers. 2) New building was to be stimulated by making it easy to sell mortgages, old and new. Projected was mutual insurance of amortized first mortgages on owners' homes, mortgages of not more than $20,000 not more than 20 years duration. 3) Because building and loan associations were fearful lest the new law take away much of their business, a Federal Savings and Loan Insurance Corp. was to be set up. This agency like Federal Deposit Insurance Corp. would guarantee building and loan deposits as bank deposits are guaranteed. To get this monster mechanism working would take $410,000,000 from the treasury.