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74th Annual Convention, U.S. Savings and Loan League, New York, NY, November 21, 1966
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74th Annual Convention, U.S. Savings and Loan League, New York, NY, November 21, 1966
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This file contains material relating to William Widnall.
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Gerald R. Ford Congressional Papers
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The original documents are located in Box D21, folder "74th Annual Convention, U.S.
Savings and Loan League, New York, NY, November 21, 1966" of the Ford Congressional
Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. The Council donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
"Antentime Memorati ANNUAL them CONVENTION follows
move
SPEECH BEFORE 74TH OF U.S. SAVINGS & LOAN
"Please to not write here"
MONDAY, NOV. 21, 1966 - 11AM
THANK YOU FOR THAT KIND INTRODUCTION.
IT IS A GREAT
PLEASURE TO ATTEND THE 74TH ANNUAL CONVENTION OF THE UNITED
STATES SAVINGS AND LOAN LEAGUE. AS YOU KNOW, I APPEAR HERE
AS MINORITY LEADER OF THE HOUSE OF REPRESENTATIVES. LET ME
recent
SAY I AM DELIGHTED THAT AS A RESULT OF LAST WEEK'S ELECTIONS
I AM NOW MORE OF A "LEADER" AND LESS OF A "MINORITY."
In a few with
House
NEXT YEAR, WHEN WE REPUBLICANS CAUCUS. WE CAN FORGET ABOUT
with the help 56 million water
MEETING IN A PHONE BOOTH. WE CANvRESERVE A ROOM INSTEAD.
now
YOU MAY KNOW THAT SENATOR DIRKSEN HAD BEEN ORIGINALLY
on behilf ofthe Republicans
SCHEDULED TO MAKE THIS APPEARANCE, BUT IS UNDERGOING
FURTHER WORK ON HIS BROKEN HIP. I CAN ASSURE YOU THAT
FORD i LIBRARY GERALD
NOTHING MAKES ME PROUDER THAN BEING ABLE TO STAND IN FOR
Digitized from Box D21 of The Ford Congressional Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library
-2-
THAT GREAT AMERICAN AND THAT GREAT LEADER OF OUR PARTY IN
THE SENATE who with limited torpa has carried on sb effecturely.
I AM PROUD TO BE HERE. BUT I MUST ADMIT IT MAKES ME
A BIT NERVOUS TO BE IN THE PRESENCE OF MEN AND WOMEN WHO
CONTROL $130 BILLION IN ASSETS. DO YOU REALIZE THAT EVEN
A DEMOCRATIC ADMINISTRATION HAS A HARD TIME SPENDING THAT
44%
MUCH IN A YEAR? OF COURSE, THEY TRY. OH, HOW THEY TRY!
and will protably try again but
in the nett two years we intend
to net a few
WHEN IT COMES TO HOUSING AND BANKING LEGISLATION, A voudble
REPUBLICAN'S ROLE IS NOT TOO DIFFICULT. WE RELY HEAVILY
ON THE JUDGMENT OF THE RANKING REPUBLICAN MEMBER OF THE
HOUSE BANKING COMMITTEE, CONGRESSMAN WILLIAM WIDNALL OF
able
NEW JERSEY, AND THE OTHER, REPUBLICAN MEMBERS OF THAT
COMMITTEE. BILL WIDNALL HAS ATTENDED MANY OF YOUR MEETINGS.
i
FORD
GERALD
HE IS RECOGNIZED AND RESPECTED ON BOTH SIDES OF THE AISLE
ABV
-3-
AS A TRUE EXPERT ON HOUSING AND FINANCIAL LEGISLATION.
BILL IS A REAL FIGHTER, BUT THERE HAVE BEEN MANY OCCASIONS
WHEN HE HAS WORKED WITH THE ADMINISTRATION AND THE OTHER
SIDE TO DEVELOP LEGISLATION WHICH THE ENTIRE CONGRESS CAN
SUPPORT. A CASE IN POINT IS THE RECENT INCREASE IN THE
CEILING ON THE INSURANCE OF SAVINGS ACCOUNTS AND DEPOSITS.
WHEN BILL WIDNALL ANNOUNCED THAT HE HAD STUDIED THE MATTER
AND WAS IN FAVOR OF THE INCREASE, OTHER REPUBLICAN HOUSE
MEMBERS SAID, "THAT'S GOOD ENOUGH FOR ME."
WE NEVER LOSE OUR PRIDE IN OUR HOME STATE. MY GOOD
FRIEND OF THE MICHIGAN LEAGUE, DON WALL, TELLS ME THAT
BERALD FORD LIBRARY
MICHIGAN'S 71 SAVINGS AND LOAN ASSOCIATIONS HAVE TOTAL
ASSETS OF $3.4 BILLION. THAT IS A 400 PERCENT INCREASE IN
JUST THE PAST DECADE. SUCH SPECTACULAR GROWTH IS A REAL
TRIBUTE TO THE SERVICES THAT SAVINGS AND LOAN ASSOCIATIONS
-4-
ARE OFFERING TO THE PUBLIC, AND IT IS FIRM EVIDENCE THAT
THE PEOPLE IN MICHIGAN BELIEVE IN YOUR INSTITUTIONS. BUT
THE FIGURE I AM PROUDEST OF--AND THIS, TOO, IS A GREAT
REFLECTION ON THE MICHIGAN ASSOCIATIONS--IS THAT IN THE
1960 CENSUS MICHIGAN LED THE NATION IN HOME OWNERSHIP WITH
74 PERCENT OF OUR CITIZENS LIVING IN THEIR OWN HOMES.
Despirating This
2
I AM DELIGHTED THAT ONE OF OUR OUTSTANDING DETROIT
high
home
CITIZENS, HANS GEHRKE (HAWNS GER-KEY), HAS JUST BEEN
am
deeply
INSTALLED AS VICE PRESIDENT OF THIS GREAT NATIONAL ORGANI-
as
about
ZATION. I KNOW HE WILL PROVIDE YOU WITH GREAT LEADERSHIP,
are,
AS YOU RECEIVED FROM ANOTHER FINE DETROIT LEADER WHO
the
AS YOUR PRESIDENT IN 1951--WALTER RAY.
starts, nw latest hmong YOU monthly
Imp
YOUR OFFICE IN WASHINGTON ALSO DOES A GREAT JOB FOR
The fromen and
AND WITH THAT, I WILL QUIT TOSSING OUT BOUQUETS.
undrave,000 900, 100
GERALD GERALD R FORD
-5-
I MAY TOSS SOME BRICKBATS TODAY, DESPITE THE FACT THE
CAMPAIGN IS OVER. BUT IF I DO, IT WILL BE IN THE NATIONAL
INTEREST AND IN THE INTEREST OF ALL OF AMERICA'S HOMEOWNERS
AND TAXPAYERS. Property the for have had on your program administration spokerman - 2
will present a different verport. BUT, as you know COMPETITION is good.
YOU PEOPLE ARE IN THE BUSINESS OF LENDING MONEY, AND
THOSE LOANS ARE USED TO BUILD HOMES. THEREFORE THE TOPIC
OF GREATEST INTEREST TO YOU IS TIGHT MONEY. WHERE IS MONEY
TIGHTEST? IN THE HOME MORTGAGE FIELD, BECAUSE IT HAS BEEN
SIPHONED OFF FOR A MULTITUDE OF OTHER USES.
UNFORTUNATELY, AND TRAGICALLY, ONE OF THE FORCES WHICH
PRODUCED THE TIGHT MONEY SITUATION IS THE FEDERAL GOVERNMENT.
YOU AND I KNOW THAT THE GOVERNMENT COMPETES WITH YOU
or
AND OTHERS FOR PRIVATE MONEY - the savings 8 and people
-6-
ALL THE MONEY THE GOVERNMENT USES COMES FROM PRIVATE
SOURCES, WHETHER IT IS TAX REVENUE OR BORROWED MONEY.
THE QUESTION OF HOW THAT MONEY IS TO BE OBTAINED INVOLVES
DEEP POLICY CONSIDERATIONS, AND THE METHODS USED HAVE GREAT
AND VARYING IMPACT ON THE NATION'S ECONOMY.
CURRENTLY WE ARE LOOKING AHEAD TO THE 90TH CONGRESS.
AND WE HOPE TO CORRECT SOME OF THE MISTAKES OF THE 89TH
AND TO AVOID ANY FRESH ERRORS IN THE UPCOMING TWO YEARS.
SOMETIMES WE SEE MORE CLEARLY INTO THE FUTURE IF WE
FIRST LOOK BACK AND SEE WHERE WE HAVE BEEN--ANALYZE WHAT
WE HAVE DONE.
THE AMERICAN PEOPLE HEARD MUCH TALK IN THE LAST
ELECTION CAMPAIGN ABOUT THE RUBBER STAMP 89TH CONGRESS
NOW HOW DID SUCH A TERM ORIGINATE?
FORD & LIBRARY
[PAUSE]
-7-
LET'S REVIEW FOR A MINUTE THE PASSAGE OF WHAT'S KNOWN
new + very contraversial
AS THE PARTICIPATION SALES ACT OF 1966. THIS MEASURE
TRAVERSED THE DISTANCE FROM PRESIDENTIAL RECOMMENDATION TO
LAW IN JUST 34 DAYS.
IN JUST THE BRIEF PERIOD FROM APRIL 20 TO MAY 23 THIS
HIGHLY IMPORTANT PIECE OF LEGISLATION CLEARED BOTH HOUSES
OF CONGRESS DESPITE THE FACT THAT THIS LEGISLATION CARRIED
WITH IT GRAVE CONSEQUENCES FOR THE ECONOMY AND FOR SUCH
BUSINESSES AS YOUR OWN.
DEMOCRATS ON THE HOUSE BANKING AND CURRENCY COMMITTEE
ALLOTED THIS MAJOR LEGISLATION ONLY THREE HOURS OF HEARINGS
AND CONDUCTED THOSE HEARINGS IMMEDIATELY AFTER RECEIVING
THE ADMINISTRATION BILL. REPUBLICAN MEMBERS OF THE
COMMITTEE PROTESTED BUT WERE OVERRIDDEN. NO OPPOSITION
GERALD FORD
WITNESSES WERE PERMITTED TO TESTIFY.
-8-
THIS, OF COURSE, IS A TRAVESTY ON THE LEGISLATIVE
PROCESS. BUT MORE SERIOUS THAN THAT ARE THE EVIL CONSE-
QUENCES OF PARTICIPATION SALES AT A PARTICULAR JUNCTURE
IN OUR NATION'S ECONOMIC AFFAIRS AND THE FURTHER POTENTIAL
FOR EVIL IN KEEPING THIS LAW ON THE BOOKS.
I DEMANDED REPEAL OF THE PARTICIPATION SALES ACT
DURING THE LAST SESSION OF CONGRESS, AND I DO SO AGAIN--
HERE AND NOW.
of many others
WHY DO 'n SAY THIS? I RENEW MY CALL FOR REPEAL BECAUSE
IN JUST THE FEW MONTHS THAT HAVE ELAPSED SINCE PASSAGE OF
THE PARTICIPATION SALES ACT, EXPERIENCE HAS SHOWN THIS TO
BE A DANGEROUS DEVICE WHICH TENDS TO INJURE THENATION'S
ECONOMIC HEALTH. IT ALSO IS A MEANS OF GOVERNMENT FINANCING
WHICH IS extremely COSTLY TO THE TAXPAYER.
GERALD LIBRARY
-9-
THE PARTICIPATION SALES ACT OF 1966 AUTHORIZED SIX
FEDERAL CREDIT AGENCIES TO SELL PRIVATE INVESTORS A MULTI-
BILLION-DOLLAR TOTAL OF PARTICIPATION CERTIFICATES--A
"BENEFICIAL INTEREST" IN AN EARMARKED POOL OF FEDERAL
AGENCY ASSETS SUCH AS A GROUPING OF MORTGAGES OR LOANS.
THE INVESTORS DON'T BUY THE ASSETS. THEY MAKE THEIR
MONEY AVAILABLE TO THE GOVERNMENT IN EXCHANGE FOR A FULL-
FAITH-AND-CREDIT PROMISE THAT THE FEDERAL GOVERNMENT WILL
REPAY THEM THEIR PRINCIPAL PLUS A LIBERAL RETURN ON THEIR
MONEY. WHAT MAKES PARTICIPATION CERTIFICATES ATTRACTIVE
TO INVESTORS IS THAT THE INTEREST RATE IS CONSIDERABLY
HIGHER THAN THAT ON GOVERNMENT BONDS. YET THERE IS NO
RISK, SINCE THE TREASURY STANDS BEHIND THIS PAPER.
GERALD FORD LIBRARY
THE ADMINISTRATION WAS ENTHRALLED WITH THE PARTICIPATION
-10-
CERTIFICATES PLAN BECAUSE THIS KIND OF GOVERNMENT FINANCING
IS NOT REFLECTED IN THE ADMINISTRATIVE BUDGET. THIS HAPPENS
BECAUSE FUNDS RAISED BY THE AGENCIES IN CAPITAL MARKETS
ARE COUNTED AS AN OFFSET AGAINST FUNDS DRAWN OUT OF THE
TREASURY BY THESE AGENCIES.
ANOTHER WAY TO PUT IT IS THAT PRESIDENT JOHNSON WOULD
HAVE HAD TO CONFESS TO A PROJECTED FISCAL 1967 BUDGET
DEFICIT OF $6 BILLION LAST JANUARY IF HE HAD NOT COME UP
WITH HIS SCHEME TO SELL $4.2 BILLION WORTH OF PARTICIPATION
CERTIFICATES.
IN RETROSPECT, THE PARTICIPATION CERTIFICATES TECHNIQUE
OF RAISING FEDERAL MONEY HAS BEEN FOUND TO HURT THE ECONOMY
AT A TIME WHEN THERE IS EXCEPTIONALLY HEAVY BORROWING BY
OTHERS.
FORD LIBRARY GERALD
-11-
THERE SEEMS LITTLE QUESTION THAT PARTICIPATION SALES
CONTRIBUTED TO THE TIGHTNESS OF MONEY THIS YEAR AND HELPED
FORCE UP INTEREST RATES.
THE PRESIDENT IN EFFECT ADMITTED THIS WHEN, ON SEPT. 8,
HE CALLED OFF PARTICIPATION SALES FOR THE REST OF THIS
CALENDAR YEAR AND UNTIL MARKET CONDITIONS IMPROVE MATERIALLY.
BUT IT IS unfortunately CLEAR THAT ADMINISTRATION OFFICIALS PLAN
TO RESUME PARTICIPATION SALES AS SOON AS THEY BELIEVE II
FEASIBLE TO DO SO.
FORD i LIBRARY GERALD
THEREFORE THE QUESTION OF WHETHER PARTICIPATION
CERTIFICATES ARE A SOUND WAY TO FINANCE ACTIVITIES OF THE
FEDERAL CREDIT AGENCIES IS STILL VERY MUCH ALIVE. I
CONTEND THE EVIDENCE REQUIRES THAT THE PARTICIPATION SALES
ACT OF 1966 BE REPEALED IN THE BEST INTERESTS OF THENATION.
-12-
YOU WILL AGREE THAT FEDERAL CREDIT DEVICES SHOULD BE
USED TO SUPPLEMENT PRIVATE LENDING, NOT SUBSTITUTE FOR IT.
FEDERAL CREDIT SHOULD BE EMPLOYED TO STIMULATE AND ENCOURAGE
PRIVATE LENDING ACTIVITY, NOT COMPETE WITH IT.
WHAT HAS HAPPENED AS A RESULT OF THE JOHNSON ADMINIS-
TRATION'S USE OF PARTICIPATION CERTIFICATES?
IT SEEMS UNDEBATABLE THAT SOME SAVINGS WHICH NORMALLY
WOULD HAVE FLOWED INTO SAVINGS AND LOAN ASSOCIATIONS AND
MUTUAL SAVINGS BANKS WERE DIVERTED INTO PC'S. IN FACT,
FINANCIAL INSTITUTIONS THEMSELVES FOUND THE INTEREST RATES
ON PC'S SO ATTRACTIVE THAT THEY BOUGHT PC'S WITH FUNDS
THAT OTHERWISE MIGHT HAVE BEEN USED TO FINANCE NEW HOUSING.
WE NOT ONLY HAVE THE GOVERNMENT DISRUPTING NORMAL
GERALD R.FORD LIBRARY
SAVING AND LENDING ACTIVITIES WITH THIS NEW KIND OF CREDIT
-13-
ANIMAL, THE PC; WE NOW HAVE THE GOVERNMENT ABOUT TO OFFER
A 5 PERCENT INTEREST RETURN ON U.S. SAVINGS CERTIFICATES.
AGAIN, OF COURSE, SAVINGS AND LOAN ASSOCIATIONS AND MUTUAL
SAVINGS BANKS WILL BE PLACED AT A COMPETITIVE DISADVANTAGE.
THE SALE OF TREASURY SAVINGS CERTIFICATES THROUGH
PAYROLL SAVINGS PLANS AT INTEREST RATES GENERALLY COMPETI- -
TIVE WITH THOSE OFFERED BY SAVINGS INSTITUTIONS IS AN ALARMING
DEVELOPMENT.
TWO NEW FACTORS STAND OUT: ONE, THESE SAVINGS CERTI-
FICATES WILL HAVE SPECIAL APPEAL FOR THE MIDDLE-INCOME WAGE
EARNER-THE BACKBONE OF THE SAVINGS AND LOAN INDUSTRY;
SECOND, UNLESS THE TENTATIVE GROUND RULES ARE CHANGED, THESE
CERTIFICATES WILL COMPETE FOR FUNDS IN THE SHORT-TERM
GERALD LIBRARY
MARKET, AN ENTIRELY NEW FORM OF GOVERNMENT COMPETITION WITH
THE PRIVATE SAVINGS INDUSTRY.
-14-
THIS DEVELOPMENT POINTS UP THE NEED FOR A FRESH LOOK
AT THE 4-1/4 PERCENT CEILING ON LONGTERM GOVERNMENT MATURITIES,
WHICH HAS FORCED SO MUCH OF OUR TREASURY REFINANCING INTO
THE SHORT-TERM MARKET. IF, AS SOME ECONOMISTS WARN, THE
PERIOD OF HIGH INTEREST RATES CONTINUES FOR A LONGER PERIOD
THAN AT FIRST ANTICIPATED, THE NEED FOR MOVING A PORTION
OF TREASURY REFINANCING INTO THE LONGER-TERM MARKET BECOMES
THAT MUCH MORE ACUTE.
THE TREASURY DEPARTMENT NO DOUBT WILL EMPLOY FREE
"PUBLIC SERVICE" RADIO, TV AND NEWSPAPER ADVERTISING IN
PROMOTING ITS NEW SAVINGS CERTIFICATES. UNDER THE IMPACT
OF SUCH A TREMENDOUS ADVERTISING CAMPAIGN, SAVERS--THOSE
ELIGIBLE TO BUY THE SAVINGS CERTIFICATES--COULD SHIFT THEIR
ENTIRE EMPHASIS FROM SAVINGS AND LOANS TO GOVERNMENT
GERALD LISRARY
SAVINGS CERTIFICATES.
-15-
SPEAKING FOR HOUSE REPUBLICANS, I CAN ASSURE YOU THAT
EVERY EFFORT WILL BE MADE TO GUARD AGAINST ANY SEVERE
DISLOCATIONS IN PERSONAL SAVINGS FLOW. AT THIS CRITICAL
TIME IN OUR NATION'S ECONOMIC AFFAIRS, WE CANNOT AFFORD
TO DO ANYTHING LESS.
THE UNFORTUNATE DEVELOPMENTS I HAVE DESCRIBED--HEAVY
EXPERIMENTATION WITH PARTICIPATION CERTIFICATES, AND THE
UPCOMING SALE OF 5 PERCENT SAVINGS CERTIFICATES--CONSTITUTE
EVENTS OF GRAVE CONSEQUENCE FOR THE SAVINGS INDUSTRY. THEY
ADD UP TO GOVERNMENT INTERFERENCE AND COMPETITION WITH THE
FREE FLOW OF COMMERCE AND FINANCE, AND EXPERIMENTS IN
DEBT MANAGEMENT WHICH ARE DANGEROUS FOR THE FUTURE OF THE
NATION.
GERALD LIDRARY
IN ADDITION, THE PC SCHEME IS A BLOW TO THE TAXPAYER.
LF THE FEDERAL CREDIT AGENCIES KEEP SELLING PC'S UNTIL
-16-
ABOUT $10 BILLION WORTH ARE OUTSTANDING, THIS WOULD COST
THE TAXPAYERS ABOUT $250 MILLION MORE IN INTEREST OUTLAYS
IN 10 YEARS. THIS WOULD BE ADDED TO THE STEADILY RISING
INTEREST CHARGES--NOW IN EXCESS OF $13 BILLION A YEAR--
ON THE CURRENT FEDERAL DEBT.
I
VE MENTIONED THAT PC'S DISTORT THE FEDERAL GOVERNMENTS
ADMINISTRATIVE BUDGET. THE DANGER IN THIS IS NOT ONLY THAT
THE PEOPLE ARE DECEIVED; WE ALSO COULD HAVE A SITUATION
IN WHICH THE CONGRESS ITSELF WOULD BE MISLED--MISLED INTO
VIEWING THE FEDERAL BUDGET AS BALANCED IN TIMES WHEN BILLIONS
OF DOLLARS WORTH OF PC'S ARE OUTSTANDING, WITH THE FULL
FAITH AND CREDIT OF THE FEDERAL GOVERNMENT BEHIND THEM.
THERE IS DANGER, Too, THAT FEDERAL CREDIT AGENCIES
FORD & LIBRARY OFRALD
MAY FIND IT EASY TO EXPAND THEIR LENDING PROGRAMS REGARDLESS
-17-
OF MERIT. THAT IS HARDLY GOOD BUSINESS.
THE LAST FEDERAL NATIONAL MORTGAGE ASSOCIATION SALE
OF PC'S TOOK PLACE IN JUNE. THE AMOUNT: $530 MILLION.
strongly
1, URGE THAT THE JOHNSON ADMINISTRATION ABANDON ITS
LARGESCALE EXPERIMENT WITH PC'S AND RELY ON SALE OF REGULAR
TREASURY ISSUES, WITH AN INCREASE IN THE 4-1/4 PERCENT
INTEREST RATE ON LONGTERM MATURITIES TO EASE THE SHIFT
IN POLICY.
IT'S TIME IT OCCURRED TO THE JOHNSON ADMINISTRATION,
TOO, THAT HOLDING DOWN FEDERAL SPENDING IS A BIG HELP IN
HANDLING FEDERAL CREDIT. issential, non mething
I ASSURE YOU THAT THE JOHNSON ADMINISTRATION WILL GET
ALL POSSIBLE GUIDANCE FROM REPUBLICANS IN THE 90TH CONGRESS
GERAD
LIBRARY
-18-
We did our best in
187 STRONG--IN BEATING A PATH TO FISCAL SANITY.
THIS IS
A GIANT STRIDE ALONG THE PATH OF PROGRESS
more Troops we will win some
The last Congress but with
victoris nebt year
NO NATION HAS EVER SOLVED ITS ECONOMIC ILLS THROUGH
CHRONIC DEFICIT SPENDING--AND THIS NATION HAS SEEN SIX
CONSECUTIVE YEARS OF FEDERAL RED INK.
TALK OF AN INCREASE IN PERSONAL AND CORPORATE INCOME
TAXES AS A WEAPON AGAINST INFLATION CONTINUES IN THE
JOHNSON ADMINISTRATION.
YOU MAY BE SURE THAT REPUBLICANS WILL INSIST ON DEEP
FEDERAL SPENDING CUTS AS THE BEST WAY TO AVOID A TAX
INCREASE. ACTUALLY, THE JOHNSON ADMINISTRATION SHOULD
HAVE PUI THIS NATION ON A WARTIME FINANCIAL FOOTING IN
FORD i LIBRARY GERALD
JANUARY, 1966 WITH, FIRST, SHARP REDUCTIONS IN DOMESTIC
EXPENDITURES AND, SECOND, A TAX INCREASE IF SPENDING CUTS
-19-
FAILED TO DO THE JOB.
some
NOW THERE IS DANGER THAT A TAX INCREASE WILL BE TOO
GREAT A JOLT TO THE ECONOMY. THERE ARE SIGNS THAT THE
ECONOMY IS SLOWING DOWN AND THAT A TAX INCREASE AT THIS
POINT IN TIME COULD BE THE WRONG MEDICINE.
THE SAFEST COURSE, AND I BELIEVE THE ADVISABLE COURSE,
T 2 mean dup
IS TO MAKE NOW THE DEEP SPENDING CUTS THAT SHOULD HAVE BEEN
ORDERED IN EARLY 1966.
A TAX INCREASE IN 1967 COULD BE A TRAGIC MISTAKE.
FROM THE BUSINESS POINT OF VIEW, A TAX INCREASE COULD
HAVE ITS GREATEST IMPACT PRECISELY WHEN BUSINESS DOES NOT
NEED A DEPRESSANT BUT MAYBE EVEN A PEP PILL. FROM THE
POINT OF VIEW OF THE WORKER, IT WOULD TAKE AN ADDITIONAL
GERA FORD LIBRARY
-20-
SLICE OUT OF THE PAYCHECKS OF WAGE-EARNERS ALREADY HURT
BY SHARP PRICE INCREASES.
FROM YOUR POINT OF VIEW, IT WOULD BE A BLOW TO THE
SAVINGS INSTITUTIONS BECAUSE IT WOULD REDUCE THE EARNINGS
RESIDUE THAT WORKERS MIGHT BE EXPECTED TO DEPOSIT IN
SAVINGS ACCOUNTS.
YOU NO DOUBT ARE AWARE THAT SAVINGS AS A PERCENTAGE
OF GROSS DISPOSABLE INCOME DROPPED TO 4.8 PERCENT IN THE
THIRD QUARTER OF THIS YEAR FROM 5.3 IN THE SECOND QUARTER.
IN FACT, ON A PERCENTAGE BASIS, THIS IS THE LOWEST QUARTERLY
SHOWING FOR SAVINGS IN THREE YEARS.
IF PERSONAL INCOME TAXES WERE INCREASED, AMERICANS
FORD is LIBRARY 93RALD
WOULD HAVE LESS DISPOSABLE INCOME. THEY PROBABLY WOULD
SAVE LESS. THAT CERTAINLY WOULD NOT HELP THE TIGHT MONEY
-21-
SITUATION, PARTICULARLY WHERE THE SAVINGS AND LOANS ARE
CONCERNED.
THERE IS LITTLE DOUBT IN MY MIND THAT A TAX INCREASE
WOULD FURTHER COMPLICATE LIFE FOR YOU PEOPLE IN THE SAVINGS
AND LOAN BUSINESS AND WOULD PUT A FRESH SQUEEZE ON THE
HOME BUILDING INDUSTRY BY RESTRICTING THE SAVINGS THAT
CREATE MORTGAGE MONEY. THIS CERTAINLY IS NOT HEALTHY AT
A TIME WHEN HOUSING STARTS HAVE FALLEN TO A 20-YEAR LOW.
IN APPRAISING THE ADVISABILITY OF AN INCOME TAX INCREASE
WE MUST REMEMBER, TOO, THAT A $1 BILLION INCREASE IN THE
SOCIAL SECURITY PAYROLL TAX WILL TAKE EFFECT ON JANUARY 1,
1967. THIS IN ITSELF WILL LIFT A BIG CHUNK OF DISPOSABLE
INCOME OUT OF THE HANDS OF THE CONSUMER AND SAVER.
GERALD, FORD GERALDIRE
A BETTER COURSE THAN A TAX INCREASE IN 1967 WOULD BE
-22-
TO STIMULATE A SPIRIT OF THRIFT IN THE AMERICAN PEOPLE--
TO ENCOURAGE THEM TO SAVE MORE MONEY, PLUNK IT DOWN IN A
SAVINGS ACCOUNT. II CURRENTLY AM CONSIDERING A PROPOSAL
TO DO JUST THIS, BUT I HAVE NOT YET DECIDED WHETHER IT
IS FEASIBLE.
In This current crow
THIS I PROMISE YOU. REPUBLICANS WILL DO EVERYTHING
IN THEIR POWER TO CUT UNNECESSARY FEDERAL SPENDING IN A
BONA FIDE EFFORT TO PREVENT A TAX INCREASE NEXT YEAR AND
TO DAMPEN THE FIRES OF INFLATION.
OF COURSE, REPUBLICANS ARE NOT YET IN THE MAJORITY IN
THE HOUSE, AND SO I CANNOT MAKE A FIRM PLEDGE THAT TAXES
WILL NOT BE RAISED. WE WILL NEED, SHALL WE SAY, SOME SMALL
MEASURE OF COOPERATION FROM THE/JOHNSON ADMINISTRATION AND
FROM DEMOCRATS IN THE HOUSE.
SERALD R.FORD LIBRARY
-23-
WE ARE ENTERING UPON A MOST CRUCIAL PERIOD FOR OUR
NATION. IT IS A TESTING TIME, A TIME WHICH DEMANDS THAT
THE NEW CONGRESS WEIGH MOST CAREFULLY EACH OF THE ECONOMIC
DECISIONS REQUIRED OF IT IN 1967.
MEN OF MODERATE PERSUASION WILL HAVE A MAJOR VOICE
IN THE NEXT CONGRESS AS A RESULT OF THE 1966 ELECTIONS.
I THINK YOU CAN RELY UPON THEM TO ACT WISELY, TO MAKE
JUDGMENTS IN THE BEST INTERESTS OF ALL THE PEOPLE.
IN THE NOVEMBER 8 ELECTION THE PEOPLE FLASHED A
YELLOW CAUTION LIGHT. THEY SAID, "SLOW DOWN; WE WANT
PROGRESS, BUT WE WANT PROGRESS AT A PACE WE CAN AFFORD."
Tataprice
THE 90TH CONGRESS WILL TAKE A CLOSE LOOK AT THE JOHNSON
ADMINISTRATION PROGRAMS RAMMED THROUGH THE LEGISLATIVE
FUNNEL IN THE PAST TWO YEARS. WHERE FRESH EXAMINATION
FORD & LIBRARY GERALD
-24-
SHOWS A NEW PROGRAM TO BE ILL-ADVISED, ON OUR SIDE OF THE
AISLE WE WILL MARSHALL ALL THENOTES WE CAN ASSEMBLE TO SHUT
OFF FUNDS.
THERE WILL BE A FERMENT OF IDEAS IN THE NEW CONGRESS.
of constructions
THIS FERMENT WILL BE PARTICULARLY PRODUCTIVE ON THE
REPUBLICAN SIDE.
WE WILL REVIEW; WE WILL REAPPRAISE; WE WILL TAKE STOCK.
WE WILL EXAMINE WHAT WE HAVE DONE AND DECIDE WHAT IS GOOD
AND WHAT IS NOT. WE WILL MOVE AHEAD. WE WILL NOT STAND STILL
IN THE NEXT CONGRESS REPUBLICANS WILL BE A FORCE TO
BE RECKONED WITH. WE WILL DEVELOP OUR OWN POSITIONS ON
THE MAJOR ISSUES OF THE DAY-VIETNAM INFLATION,
TIGHT
MONEY
AND CRIME.
GERALD FORD LIBRARY
-25-
WITH GREATER STRENGTH COMES GREATER RESPONSIBILITY.
THIS IS GOOD FOR THE REPUBLICAN PARTY AND THIS IS GOOD
FOR THE NATION.
THE PEOPLE WERE THE REAL WINNERS IN THE 1966 ELECTIONS.
THEY GAVE NEW MEANING TO DEMOCRACY. THEY REVIVED THE
TWO-PARTY SYSTEM. THEY REESTABLISHED THE CONGRESS AS AN
INDEPENDENT BRANCH OF GOVERNMENT.
ONCE AGAIN THE AMERICAN PEOPLE HAVE DEMONSTRATED
THEIR GREAT GOOD SENSE. AND FOR THAT WE CAN ALL BE GRATEFUL.
THANK YOU
Winston Charchell once said ) emouncy is the worst been form of
govt, except it is yetter Than anything else that's ever Tred
---END---
May memembered what Ben Franklen once said - He
FORD i LIBRARY GERALD
FOR RELEASE ON DELIVERY AT 11 A.M., MON., NOV. 21, 1966
ADDRESS BY REP. GERALD R. FORD, R-MICH.
at
74TH ANNUAL CONVENTION OF THE U.S. SAVINGS & LOAN LEAGUE, N.Y.C., N. Y.
Thank you for that kind introduction. It is a great pleasure to attend the 74th
Annual Convention of the United States Savings and Loan League. As you know, I appear
here as Minority Leader of the House of Representatives. Let me say I am delighted
that as a result of last week's elections I am now more of à "leader" and less of a
"minority." Next year, when we Republicans caucus, we can forget about meeting in a
phone booth. We can reserve a room instead.
You may know that Senator Dirksen had been originally scheduled to make this
appearance, but is undergoing further work on his broken hip. I can assure you that
nothing makes me prouder than being able to stand in for that great American and that
great leader of our Party in the Senate.
I am proud to be here. But I must admit it makes me a bit nervous to be in the
presence of men and women who control $130 billion in assets. Do you realize that
even a Democratic Administration has a hard time spending that much in a year? Of
course, they try. Oh, how they try!
When it comes to housing and banking legislation, a Republican's role is not too
difficult. We rely heavily on the judgment of the ranking Republican member of the
House Banking Committee, Congressman William Widnall of New Jersey, and the other
Republican members of that committee. Bill Widnall has attended many of your meetings.
He is recognized and respected on both sides of the aisle as a true expert on housing
and financial legislation. Bill is a real fighter, but there have been many occasions
when he has worked with the Administration and the other side to develop legislation
which the entire Congress can support. A case in point is the recent increase in the
ceiling on the insurance of savings accounts and deposits. When Bill Widnall
announced that he had studied the matter and was in favor of the increase, other
Republican House members said, "That's good enough for me."
We never lose our pride in our home state. My good friend of the Michigan League,
Don Wall, tells me that Michigan's 71 savings and loan associations have total assets
of $3.4 billion. That is a 400 percent increase in just the past decade. Such
spectacular growth is a real tribute to the services that savings and loan associa-
tions are offering to the public, and it is firm evidence that the people in Michigan
believe in your institutions. But the figure I am proudest of--and this, too, is a
great reflection on the Michigan associations--1s that in the 1960 census Michigan
FORD
led the nation in home ownership with 74 percent of our citizens living in their own
homes.
I am delighted that one of our outstanding Detroit citizens, Hans Gehrke, has
-2-
just been installed as Vice President of this great national organization. I know
he will provide you with great leadership, just as you received from another fine
Detroit leader who was your President in 1951--Walter Ray.
Your office in Washington also does a great job for you. And with that, I will
quit tossing out bouquets.
I may toss some brickbats today, despite the fact the campaign is over. But if
I do, it will be in the national interest and in the interest of all of America's
homeowners and taxpayers.
You people are in the business of lending money, and those loans are used to
build homes. Therefore the topic of greatest interest to you is tight money. Where
is money tightest? In the home mortgage field, because it has been siphoned off for
a multitude of other uses.
Unfortunately, and tragically, one of the forces which produced the tight money.
situation is the federal government.
You and I know that the government competes with you and others for private money.
All the money the government uses comes from private sources, whether it is tax
revenue or borrowed money.
The question of how that money is to be obtained involves deep policy considera-
tions, and the methods used have great and varying impact on the nation's economy.
Currently we are looking ahead to the 90th Congress, and we hope to correct some
of the mistakes of the 89th and to avoid any fresh errors in the upcoming two years.
Sometimes we see more clearly into the future if we first look back and see
where we have been--analyze what we have done.
The American people heard much talk in the last election campaign about the
rubber stamp 89th Congress. Now how did such a term originate?
Let's review for a minute the passage of what's known as the Participation Sales
Act of 1966. This measure traversed the distance from Presidential recommendation
to law in just 34 days.
In just the brief period from April 20 to May 23 this highly important piece of
legislation cleared both Houses of Congress and was signed into law. It was literally
whisked through the Congress despite the fact that this legislation carried with it
grave consequences for the economy and for such businesses as your own.
Democrats on the House Banking and Currency Committee allotted this major legis-
lation only three hours of hearings and conducted those hearings immediately after
receiving the Administration bill. Republican members of the committee protested
but were overridden. No opposition witnesses were permitted to testify.
This, of course, is a travesty on the legislative process. But more serious
than that are the evil consequences of Participation Sales at a particular juncture
(More)
-3-
in our nation's economic affairs and the further potential for evil in keeping this
law on the books.
I demanded repeal of the Participation Sales Act during the last session of
Congress, and I do so again--here and now.
Why do I say this? I renew my call for repeal because in just the few months
that have elapsed since passage of the Participation Sales Act, experience has shown
this to be a dangerous device which tends to injure the nation's economic health.
It also is a means of government financing which is costly to the taxpayer.
The Participation Sales Act of 1966 authorized six federal credit agencies to
sell private investors a multi-billion-dollar total of participation certificates--a
"beneficial interest" in an earmarked pool of federal agency assets such as a grouping
of mortgages or loans.
The investors don't buy the assets. They make their money available to the
government in exchange for a full-faith-and-credit promise that the federal govern-
ment will repay them their principal plus a liberal return on their money. What makes
Participation Certificates attractive to investors is that the interest rate is
considerably higher than that on government bonds. Yet there is no risk, since the
Treasury stands behind this paper.
The Administration was enthralled with the Participation Certificates plan
because this kind of government financing is not reflected in the administrative
budget. This happens because funds raised by the agencies in capital markets are
counted as an offset against funds drawn out of the Treasury by these agencies.
Another way to put it is that President Johnson would have had to confess to a
projected fiscal 1967 budget deficit of $6 billion last January if he had not come up
with his scheme to sell $4.2 billion worth of Participation Certificates.
In retrospect, the Participation Certificates technique of raising federal money
has been found to hurt the economy at a time when there is exceptionally heavy
borrowing by others.
There seems little question that Participation Sales contributed to the tightness
of money this year and helped force up interest rates.
The President in effect admitted this when, on September 8, he called off
Participation Sales for the rest of this calendar year and until market conditions
improve materially.
But it is clear that Administration officials plan to resume Participation Sales
as soon as they believe it feasible to do so.
Therefore the question of whether Participation Certificates are a sound way to
finance activities of the federal credit agencies is still very much alive. I contend
the evidence requires that the Participation Sales Act of 1966 be repealed in the
best interests of the nation.
(More)
-4-
You will agree that federal credit devices should be used to supplement private
lending, not substitute for it. Federal credit should be employed to stimulate and
encourage private lending activity, not compete with it.
What has happened as a result of the Johnson Administration's use of Participa-
tion Certificates?
It seems undebatable that some savings which normally would have flowed into
savings and loan associations and mutual savings banks were diverted into PC's. In
fact, financial institutions themselves found the interest rates on PC's so attractive
that they bought PC's with funds that otherwise might have been used to finance new
housing.
We not only have the government disrupting normal saving and lending activities
with this new kind of credit animal, the PC; we now have the government about to
offer a 5 percent interest return on U.S. savings certificates. Again, of course,
savings and loan associations and mutual savings banks will be placed at a competitive
disadvantage.
The sale of Treasury savings certificates through payroll savings plans at
interest rates generally competitive with those offered by savings institutions is
an alarming development.
Two new factors stand out: One, these savings certificates will have special
appeal for the middle-income wage earner--the backbone of the savings and loan
industry; second, unless the tentative ground rules are changed, these certificates
will compete for funds in the short-term market, an entirely new form of government
competition with the private savings industry.
This development points up the need for a fresh look at the 4½ percent ceiling
on longterm government maturities, which has forced so much of our Treasury
refinancing into the short-term market. If, as some economists warn, the period of
high interest rates continues for a longer period than at first anticipated, the
need for moving a portion of Treasury refinancing into the longer-term market becomes
that much more acute.
The Treasury Department no doubt will employ free "public service" radio, TV and
newspaper advertising in promoting its new savings certificates. Under the impact of
such a tremendous advertising campaign, savers--those eligible to buy the savings
certificates--could shift their entire emphasis from savings and loans to government
savings certificates.
Speaking for House Republicans, I can assure you that every effort will be made
to guard against any severe dislocations in personal savings flow. At this critical
time in our nation's economic affairs, we cannot afford to do anything less.
The unfortunate developments I have described--heavy experimentation with
(More)
-5-
Participation Certificates, and the upcoming sale of 5 percent savings certificates--
constitute events of grave consequence for the savings industry. They add up to
government interference and competition with the free flow of commerce and finance,
and experiments in debt management which are dangerous for the future of the nation.
In addition, the PC scheme is a blow to the taxpayer. If the federal credit
agencies keep selling PC's until about $10 billion worth are outstanding, this would
cost the taxpayers about $250 million more in interest outlays in 10 years. This
would be added to the steadily rising interest charges--now in excess of $13 billion
a year--on the current federal debt.
I've mentioned that PC's distort the federal government's administrative budget.
The danger in this is not only that the people are deceived. We also could have a
situation in which the Congress itself would be misled--misled into viewing the
federal budget as balanced in times when billions of dollars worth of PC's are out-
standing, with the full faith and credit of the federal government behind them.
There is danger, too, that federal credit agencies may find it easy to expand
their lending programs regardless of merit. That is hardly good business.
The last Federal National Mortgage Association sale of PC's took place in June.
The amount: $530 million.
I urge that the Johnson Administration abandon its largescale experiment with
PC's and rely on sale of regular Treasury issues, with an increase in the 4½ percent
interest rate on longterm maturities to ease the shift in policy.
It's time it occurred to the Johnson Administration, too, that holding down
federal spending is a big help in handling federal credit.
I assure you that the Johnson Administration will get all possible guidance from
Republicans in the 90th Congress--187 strong--in beating a path to fiscal sanity.
This is a giant stride along the path of progress.
No nation has ever solved its economic ills through chronic deficit spending--
and this nation has seen six consecutive years of federal red ink.
Talk of an increase in personal and corporate income taxes as a weapon against
inflation continues in the Johnson Administration.
You may be sure that Republicans will insist on deep federal spending cuts as
the best way to avoid a tax increase. Acutally, the Johnson Administration should
have put this nation on a wartime financial footing in January 1966 with, first,
sharp reductions in domestic expenditures and, second, a tax increase if spending
cuts failed to do the job.
Now there is danger that a tax increase will be too great a jolt to the economy.
There are signs that the economy is slowing down and that a tax increase at this
point in time could be the wrong medicine.
(More)
-6-
The safest course, and I believe the advisable course, is to make now the deep
spending cuts that should have been ordered in early 1966.
A tax increase in 1967 could be a tragic mistake.
From the business point of view, a tax increase could have its greatest impact
precisely when business does not need a depressant but maybe even a pep pill. From
the point of view of the worker, it would take an additional slice out of the pay-
checks of wage earners already hurt by sharp price increases.
From your point of view, it would be a blow to the savings institutions because
it would reduce the earnings residue that workers might be expected to deposit in
savings accounts.
You no doubt are aware that savings as a percentage of gross disposable income
dropped to 4.8 percent in the third quarter of this year from 5.3 percent in the
second quarter. In fact, on a percentage basis, this is the lowest quarterly showing
for savings in three years.
If personal income taxes were increased, Americans would have less disposable
income. They probably would save less. That certainly would not help the tight
money situation, particularly where the savings and loans are concerned.
There is little doubt in my mind that a tax increase would further complicate
life for you people in the savings and loan business and would put a fresh squeeze
on the home building industry by restricting the savings that create mortgage money.
This certainly is not healthy at a time when housing starts have fallen to a 20-year
low.
In appraising the advisability of an income tax increase, we must remember, too,
that a $1 billion increase in the Social Security payroll tax will take effect on
January 1, 1967. This in itself will lift a big chunk of disposable income out of
the hands of the consumer and saver.
A better course than a tax increase in 1967 would be to stimulate a spirit of
thrift in the American people--to encourage them to save more money, plunk it down
in a savings account. I currently am considering a proposal to do just this, but I
have not yet decided whether it is feasible.
This I promise you. Republicans will do everything in their power to cut
unnecessary federal spending in a bona fide effort to prevent a tax increase next
year and to dampen the fires of inflation.
Of course, Republicans are not yet in the majority in the House, and so I cannot
make a firm pledge that taxes will not be raised. We will need, shall we say, some
small measure of cooperation from the Johnson Administration and from Democrats in
FORD
the House.
We are entering upon a most crucial period for our Nation. It is a testing time,
(More)
-7-
a time which demands that the new Congress weigh most carefully each of the economic
decisions required of it in 1967.
Men of moderate persuasion will have a major voice in the next Congress as a
result of the 1966 elections. I think you can rely upon them to act wisely, to make
judgments in the best interests of all the people.
In the November 8 election the people flashed a yellow caution light. They said,
"Slow down; we want progress, but we want progress at a pace we can afford."
The 90th Congress will take a close look at the Johnson Administration programs
rammed through the legislative funnel in the past two years. Where fresh examination
shows a new program to be ill-advised, on our side of the aisle we will marshall all
the votes we can assemble to shut off funds.
There will be a ferment of ideas in the new Congress.
This ferment will be particularly productive on the Republican side.
We will review; we will reappraise; we will take stock. We will examine what
we have done and decide what is good and what is not. We will move ahead. We will
not stand still.
In the next Congress Republicans will be a force to be reckoned with. We will
develop our own positions on the major issues of the day--Vietnam, inflation, tight
money, and crime.
With greater strength comes greater responsibility. This is good for the
Republican Party and this is good for the Nation.
The people were the real winners in the 1966 elections. They gave new meaning
to democracy. They revived the two-party system. They reestablished the Congress
as an independent branch of government.
Once again the American people have demonstrated their great good sense. And
for that we can all be grateful. Thank you.
# # #
FOR RELEASE ON DELIVERY AT 11 A.M., MON., NOV. 21, 1966
ADDRESS BY REP. GERALD R. FORD, R-MICH.
at
74TH ANNUAL CONVENTION OF THE U.S. SAVINGS & LOAN LEAGUE, N.Y.C., N. Y.
Thank you for that kind introduction. It is a great pleasure to attend the 74th
Annual Convention of the United States Savings and Loan League. As you know, I appear
here as Minority Leader, Hard of the House of Representatives. Let me say I am delighted
that as a result of
election I am now more of a "leader" and less of a
"minority." Next year, when we Republicans caucus, we can forget about meeting in a
phone booth. We can reserve a room instead.
You may know that Senator Dirksen had been originally scheduled to make this
appearance, but is undergoing further work on his broken hip. I can assure you that
nothing makes me prouder than being able to stand in for that great American and that
great leader of our Party in the Senate.
I am proud to be here. But I must admit it makes me a bit nervous to be in the
presence of men and women who control $130 billion in assets. Do you realize that
even a Democratic Administration has a hard time spending that much in a year? Of
course, they try. Oh, how they try!
When it comes to housing and banking legislation, a Republican's role is not too
difficult. We rely heavily on the judgment of the ranking Republican member of the
House Banking Committee, Congressman William Widnall of New Jersey, and the other
Republican members of that committee. Bill Widnall has attended many of your meetings,
He is recognized and respected on both sides of the aisle as a true expert on housing
and financial legislation. Bill is a real fighter, but there have been many occasions
when he has worked with the Administration and the other side to develop legislation
which the entire Congress can support. A case in point is the recent increase in the
ceiling on the insurance of savings accounts and deposits. When Bill Widnall
announced that he had studied the matter and was in favor of the increase, other
Republican House members said, "That's good enough for me."
We never lose our pride in our home state. My good friend of the Michigan League,
Don Wall, tells me that Michigan's 71 savings and loan associations have total assets
of $3.4 billion. That is a 400 percent increase in just the past decade. Such
spectacular growth is a real tribute to the services that savings and loan associa-
tions are offering to the public, and it is firm evidence that the people in Michigan
believe in your institutions. But the figure I am proudest of--and this, too, is a
great reflection on the Michigan associations--is that in the 1960 census Michigan
led the nation in home ownership with 74 percent of our citizens living in their RICORD
homes.
LIBRARK
I am delighted that one of our outstanding Detroit citizens, Hans Gehrke, has
-2-
just been installed as Vice President of this great national organization. I know
he will provide you with great leadership, just as you received from another fine
Detroit leader who was your President in 1951--Walter Ray.
Your office in Washington also does a great job for you. And with that, I will
quit tossing out bouquets.
I may toss some brickbats today, despite the fact the campaign is over. But if
I do, it will be in the national interest and in the interest of all of America's
homeowners and taxpayers.
You people are in the business of lending money, and those loans are used to
build homes. Therefore the topic of greatest interest to you is tight money. Where
is money tightest? In the home mortgage field, because it has been siphoned off for
a multitude of other uses.
Unfortunately, and tragically, one of the forces which produced the tight money
situation is the federal government.
You and I know that the government competes with you: and others for private money.
All the money the government uses comes from private sources, whether it is tax
revenue or borrowed money.
The question of how that money is to be obtained involves deep policy considera-
tions, and the methods used have great and varying impact on the nation's economy.
Currently we are looking ahead to the 90th Congress, and we hope to correct some
of the mistakes of the 89th and to avoid any fresh errors in the upcoming two years.
Sometimes we see more clearly into the future if we first look back and see
where we have been--analyze what we have done.
The American people heard much talk in the last election campaign about the
rubber stamp 89th Congress. Now how did such a term originate?
Let's review for a minute the passage of what's known as the Participation Sales
Act of 1966. This measure traversed the distance from Presidential recommendation
to law in just 34 days.
In just the brief period from April 20 to May 23 this highly important piece of
legislation cleared both Houses of Congress and was signed into law. It was literally
whisked through the Congress despite the fact that this legislation carried with it
grave consequences for the economy and for such businesses as your own.
Democrats on the House Banking and Currency Committee allotted this major legis-
lation only three hours of hearings and conducted those hearings immediately after
receiving the Administration bill. Republican members of the committee protested
but were overridden. No opposition witnesses were permitted to testify.
This, of course, is a travesty on the legislative process. But more serious
than that are the evil consequences of Participation Sales at a particular juncture
(More)
-3-
in our nation's economic affairs and the further potential for evil in keeping this
law on the books.
I demanded repeal of the Participation Sales Act during the last session of
Congress, and I do so again--here and now.
Why do I say this? I renew my call for repeal because in just the few months
that have elapsed since passage of the Participation Sales Act, experience has shown
this to be a dangerous device which tends to injure the nation's economic health.
It also is a means of government financing which is costly to the taxpayer.
The Participation Sales Act of 1966 authorized six federal credit agencies to
sell private investors a multi-billion-dollar total of participation certificates--a
"beneficial interest" in an earmarked pool of federal agency assets such as a grouping
of mortgages or loans.
The investors don't buy the assets. They make their money available to the
government in exchange for a full-faith-and-credit promise that the federal govern-
ment will repay them their principal plus a liberal return on their money. What makes
Participation Certificates attractive to investors is that the interest rate is
considerably higher than that on government bonds. Yet there is no risk, since the
Treasury stands behind this paper.
The Administration was enthralled with the Participation Certificates plan
because this kind of government financing is not reflected in the administrative
budget. This happens because funds raised by the agencies in capital markets are
counted as an offset against funds drawn out of the Treasury by these agencies.
Another way to put it is that President Johnson would have had to confess to a
projected fiscal 1967 budget deficit of $6 billion last January if he had not come up
with his scheme to sell $4.2 billion worth of Participation Certificates.
In retrospect, the Participation Certificates technique of raising federal money
has been found to hurt the economy at a time when there is exceptionally heavy
borrowing by others.
There seems little question that Participation Sales contributed to the tightness
of money this year and helped force up interest rates.
The President in effect admitted this when, on September 8, he called off
Participation Sales for the rest of this calendar year and until market conditions
improve materially.
But it is clear that Administration officials plan to resume Participation Sales
as soon as they believe it feasible to do so.
Therefore the question of whether Participation Certificates are a sound way to
finance activities of the federal credit agencies is still very much alive. I contend
the evidence requires that the Participation Sales Act of 1966 be repealed in the
best interests of the nation.
(More)
-4-
You will agree that federal credit devices should be used to supplement private
lending, not substitute for it. Federal credit should be employed to stimulate and
encourage private lending activity, not compete with it.
What has happened as a result of the Johnson Administration's use of Participa-
tion Certificates?
It seems undebatable that some savings which normally would have flowed into
savings and loan associations and mutual savings banks were diverted into PC's. In
fact, financial institutions themselves found the interest rates on PC's so attractive
that they bought PC's with funds that otherwise might have been used to finance new
housing.
We not only have the government disrupting normal saving and lending activities
with this new kind of credit animal, the PC; we now have the government about to
offer a 5 percent interest return on U.S. savings certificates. Again, of course,
savings and loan associations and mutual savings banks will be placed at a competitive
disadvantage.
The sale of Treasury savings certificates through payroll savings plans at
interest rates generally competitive with those offered by savings institutions is
an alarming development.
Two new factors stand out: One, these savings certificates will have special
appeal for the middle-income wage earner--the backbone of the savings and loan
industry; second, unless the tentative ground rules are changed, these certificates
will compete for funds in the short-term market, an entirely new form of government
competition with the private savings industry.
This development points up the need for a fresh look at the 4½ percent ceiling
on longterm government maturities, which has forced so much of our Treasury
refinancing into the short-term market. If, as some economists warn, the period of
high interest rates continues for a longer period than at first anticipated, the
need for moving a portion of Treasury refinancing into the longer-term market becomes
that much more acute.
The Treasury Department no doubt will employ free "public service" radio, TV and
newspaper advertising in promoting its new savings certificates. Under the impact of
such a tremendous advertising campaign, savers--those eligible to buy the savings
certificates--could shift their entire emphasis from savings and loans to government
savings certificates.
Speaking for House Republicans, I can assure you that every effort will be made
to guard against any severe dislocations in personal savings flow. At this critical
time in our nation's economic affairs, we cannot afford to do anything less.
The unfortunate developments I have described--heavy experimentation with
(More)
-5-
Participation Certificates, and the upcoming sale of 5 percent savings certificates--
constitute events of grave consequence for the savings industry. They add up to
government interference and competition with the free flow of commerce and finance,
and experiments in debt management which are dangerous for the future of the nation.
In addition, the PC scheme is a blow to the taxpayer. If the federal credit
agencies keep selling PC's until about $10 billion worth are outstanding, this would
cost the taxpayers about $250 million more in interest outlays in 10 years. This
would be added to the steadily rising interest charges--now in excess of $13 billion
a year--on the current federal debt.
I've mentioned that PC's distort the federal government's administrative budget.
The danger in this is not only that the people are deceived. We also could have a
situation in which the Congress itself would be misled--misled into viewing the
federal budget as balanced in times when billions of dollars worth of PC's are out-
standing, with the full faith and credit of the federal government behind them.
There is danger, too, that federal credit agencies may find it easy to expand
their lending programs regardless of merit. That is hardly good business.
The last Federal National Mortgage Association sale of PC's took place in June.
The amount: $530 million.
I urge that the Johnson Administration abandon its largescale experiment with
PC's and rely on sale of regular Treasury issues, with an increase in the 4½ percent
interest rate on longterm maturities to ease the shift in policy.
It's time it occurred to the Johnson Administration, too, that holding down
federal spending is a big help in handling federal credit.
I assure you that the Johnson Administration will get all possible guidance from
Republicans in the 90th Congress--187 strong--in beating a path to fiscal sanity.
This is a giant stride along the path of progress.
No nation has ever solved its economic ills through chronic deficit spending--
and this nation has seen six consecutive years of federal red ink.
Talk of an increase in personal and corporate income taxes as a weapon against
inflation continues in the Johnson Administration.
You may be sure that Republicans will insist on deep federal spending cuts as
the best way to avoid a tax increase. Acutally, the Johnson Administration should
have put this nation on a wartime financial footing in January 1966 with, first,
sharp reductions in domestic expenditures and, second, a tax increase if spending
cuts failed to do the job.
Now there is danger that a tax increase will be too great a jolt to the economy.
There are signs that the economy is slowing down and that a tax increase at this
point in time could be the wrong medicine.
(More)
-6-
The safest course, and I believe the advisable course, is to make now the deep
spending cuts that should have been ordered in early 1966.
A tax increase in 1967 could be a tragic mistake.
From the business point of view, a tax increase could have its greatest impact
the economy
precisely when business does not need a depressant but maybe even a pep pill. From
the point of view of the worker, it would take an additional slice out of the pay-
checks of wage earners already hurt by sharp price increases.
From your point of view, it would be a blow to the savings institutions because
it would reduce the earnings residue that workers might be expected to deposit in
savings accounts.
You no doubt are aware that savings as a percentage of gross disposable income
dropped to 4.8 percent in the third quarter of this year from 5.3 percent in the
second quarter. In fact, on a percentage basis, this is the lowest quarterly showing
for savings in three years.
If personal income taxes were increased, Americans would have less disposable
income. They probably would save less. That certainly would not help the tight
money situation, particularly where the savings and loans are concerned.
There is little doubt in my mind that a tax increase would further complicate
life for you people in the savings and loan business and would put a fresh squeeze
on the home building industry by restricting the savings that create mortgage money.
This certainly is not healthy at a time when housing starts have fallen to a 20-year
low.
In appraising the advisability of an income tax increase, we must remember, too,
that a $1 billion increase in the Social Security payroll tax will take effect on
January 1, 1967. This in itself will lift a big chunk of disposable income out of
the hands of the consumer and saver.
A better course than a tax increase in 1967 would be to stimulate a spirit of
thrift in the American people--to encourage them to save more money, plunk it down
in a savings account. I currently am considering a proposal to do just this, but I
have not yet decided whether it is feasible.
This I promise you. Republicans will do everything in their power to cut
unnecessary federal spending in a bona fide effort to prevent a tax increase next
year and to dampen the fires of inflation.
Of course, Republicans are not yet in the majority in the House, and so I cannot
make a firm pledge that taxes will not be raised. We will need, shall we say, some
small measure of cooperation from the Johnson Administration and from Democrats in
the House.
We are entering upon a most crucial period for our Nation. It is a testing time,
LIBRARY
(More)
-7-
a time which demands that the new Congress weigh most carefully each of the economic
decisions required of it in 1967.
Men of moderate persuasion will have a major voice in the next Congress as a
result of the 1966 elections. I think you can rely upon them to act wisely, to make
judgments in the best interests of all the people.
In the November 8 election the people flashed a yellow caution light. They said,
"Slow down; we want progress, but we want progress at a pace we can afford."
The 90th Congress will take a close look at the Johnson Administration programs
rammed through the legislative funnel in the past two years. Where fresh examination
shows a new program to be ill-advised, on our side of the aisle we will marshall all
the votes we can assemble to shut off funds.
There will be a ferment of ideas in the new Congress.
This ferment will be particularly productive on the Republican side.
We will review; we will reappraise; we will take stock. We will examine what
we have done and decide what is good and what is not. We will move ahead. We will
not stand still.
In the next Congress Republicans will be a force to be reckoned with. We will
develop our own positions on the major issues of the day--Vietnam, inflation, tight
money, and crime.
With greater strength comes greater responsibility. This is good for the
Republican Party and this is good for the Nation.
The people were the real winners in the 1966 elections. They gave new meaning
to democracy. They revived the two-party system. They reestablished the Congress
as an independent branch of government.
Once again the American people have demonstrated their great good sense. And
for that we can all be grateful. Thank you.
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