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c 0 p Y 2317 South Jackson St. Denver, Colorado March 10, 19U5 Mr. Marriner S. Eccles Chairman, Board of Governors Federal Reserve Bank Washington, D. C. Dear Sir: In your search for practices which lead to inflation and particularly with reference to your desire to curb "margin" trading, please do not overlook the extreme example offered by real estate dealers and builders at the present time. It is common practice in Denver and I am sure elsewhere, for a builder to obtain permits to construct "war housing", obtain a 90$ loan from the F3IA and then rent the property for an amount which brings an extraordinarily large return on the equity. After renting for a few months, many of these housing units are sold at profits which must run from 100% to 500$ or 600%. In buying stocks on the Stock Exchange, a loan from a broker can be obtained equal to about 50/* of the value of the stocks. Likewise, collateral loans can be arranged at banks at around the same level. But in buying "war housing", a loan of 90/° caii D e obtained, and the ironical part of it is that the money is actually put up by a governmental agency and at a very low rate of interest. In fact, builders many times include an exorbitant wage for themselves in determining the cost of the property, so that the loan is closer to 95/° of the true cost. You can readily see that this leads to ownership of real estate on a very thin margin of equity and is a great inducement to speculate wildly in the construction of large housing units. If you are truly interested in curbing inflationary practices, the housing industry offers a far more flagrant situation than the stock market. Perhaps it would be wise to investigate these situations in the order of their importance. Very truly yours, (Signed) David F. Lawrence March H , 1945. Mr. David F. Lawrence, 2317 kouth Jackson btreet, Denver, Colorado. Dear Mr. Lawrence: This is to acknowledge your letter of March 10 which deals with FRh. practices or procedures, and I am, accordingly, referring it to Mr. John B. Blandford, Jr., Administrator of the National Housing Agency, for his information and such reply as he may care to make, I appreciate your interest and courtesy in writing. Sincerely yours, [. S. Eccles, Chairman. ET:b March lU, 19U5- Honorable John B. Blandford, Jr., Admi ni s trator , National Housing Administration, Washington 2*?, D. C. Dear John: Enclosed is a letter I received from Mr* David P. Lawrence of Denver, Colorado, whloh cites alleged practices in regard to EHA financing operations. I am not familiar with the situation to which he refers and thought possibly you would be interested to see it and sight care to reply. Accordingly, I have advised Mr» Lawrence that I was referring his letter to you* In case you feel that some reply is appropriate, I would appreciate having a copy for ay oura information. With kindest personal regards, Enclosure ET:b NATIONAL HOUSING AGENCY WASHINGTON 25, D. C. March 21, 1945 OFFICE OF THE ADMINISTRATOR Marriner S. Eccles, Chairman Board of Governors Federal Reserve Bank Washington, D. C. # Dear Marriner: I think Mr. Lawrence misunderstands the entire 3PHA financing operations, so I suggested that he visit W. M. Bennett, IRk State Director in Denver. Attached is a copy of my letter to Mr. Lawrence. Sincerely, VICTORY BUY r MAR 211945 Mr. Barid 1, La-wroaojo 231? South imdmm, 8tre#t Colorado Bear Mr. Lawrencej M&rriner S. Iccles, Chairman of the Board of of the federal &o3*r?o Bsak, has aakod s* la roply to your latter af Mar oh 10. lo one questions that thoro has b-?*n a re&l estate i»— flatl<m aad v« all are trytag to @3««at it. lo«9vorv t)io practicoi jom. otto la your lot tor to Mr. loeloo do not exiot oo far MM I know. In the flrot pl*C6, tko JFedor&l Mooaliag Admlnistratloa do«s aot lo«aftayaoney. 411 It can. do It l»»ur« a mortg&go loan sado oy a privato loading instlttttioii. tho pr^tiuarotion Is that tho private loading instltutioa »««tea to aako a sound loan —and tho H A ekoeko «#o& that loaa for ito ovn protection. la the toeoftd place, if warfcouaingio boiag oold at tho profit you mention. It is a eaoo for court action aad vo vould appreciate oo*o evidence. It is true th&t ISA Title TI vas paoood by Coagreos in order to protect builders under w&rtiae condition*. Bat as close a choek as possible under euch coaditieaa 1ms been Bade throt^iout the war program. I suggest you pay & vioit to W. K. Bennett, MA Stato Director, 203-211 Boston Building, Denrer. Ho xay be able to explain oo&o of the situations which trouble you* Sincorely, John 1* Blandford, Adsinistrator ©OS Mr,
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