William K. Divers Oral History Interview, April 2, 1970

Notice
This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

Numbers appearing in square brackets (ex. [45]) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.

RESTRICTIONS
This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened September 1971
Harry S. Truman Library
Independence, Missouri

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HESS: All right, Mr. Divers, in our last interview you said that even though you had not discussed housing matters with Mr. Truman, that you always had the impression that he wanted to do everything possible through private financing and private enterprise, and that he only wanted the Government to come in where there was some major problem or some major purpose that could be accomplished by going in. What gave you that impression?

DIVERS: I don't know. I suppose it was the speeches that I heard him make, the comments and remarks that he had made before the committees, when I was present. He did not tell me that directly. The only message he ever gave me directly was, that he wanted me to do everything in the public interest, that he and he wanted me to run the

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Federal Home Loan Bank Board with the interest of the public as the prime objective that the Board should have. And as a matter of fact, that was the only overall direction that he ever gave me. And it may be because of this that I interjected my own philosophy about doing everything that was possible with private financing and only using public financing, or public assistance, where I felt that private financing was not meeting the needs of the public.

HESS: Approximately how many times did you meet Mr. Truman and do you recall the occasions?

DIVERS: I'd say approximately a dozen times.

HESS: Any particular occasions come to mind?

DIVERS: Oh, there were several--no, I--there were gatherings, there were small gatherings and large

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gatherings. There were meetings at the White House. I went over with Ray Foley who was head of Housing. I took the Federal Savings and Loan Advisory Council over to meet with him, really just to introduce them to him. I took the Federal Home Loan Bank presidents over to meet him, I took my family over to meet him, and these were the only occasions I came in contact really with him, because I don't recall ever having spoken to him on the telephone. And I also recall only one telephone call from the White House.

HESS: What was that about?

DIVERS: Well, I don't remember.

HESS: Who was it from?

DIVERS: I don't remember the gentleman's name, but--maybe I do. I think it was a Colonel Vaughan,

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or General Vaughan.

HESS: General Harry H. Vaughan?

DIVERS: General Harry H. Vaughan.

HESS: What was the nature of his phone call?

DIVERS: He gave the impression that the President would like to see a particular action taken with reference to a pending application before the Federal Home Loan Bank Board.

HESS: What action?

DIVERS: I don't remember whether it was the approval of a charter, or the approval of a branch, and I don't even remember the association that was involved. I do recall that it involved one here in the District of Columbia.

HESS: Was this something in the nature of pressure from the White House?

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DIVERS: It was supposed to be, but I didn't believe General Vaughan, and I told him that Mr. Truman had never interfered in my operations in any way, or intervened in them, and that as far as I was concerned I would want to see it in writing from the President of the United States before I assumed that it was his action.

HESS: What did General Vaughan say to that?

DIVERS: Well, he blew his top a little bit, but he didn't argue with me and I just let him talk.

HESS: What was the outcome of that action?

DIVERS: The outcome of the action was that our Board took an action that was contrary to the view of General Vaughan.

HESS: Were there any other times that you received any calls from the White House, ox did you have any dealings with members of the White House staff?

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DIVERS: No.

HESS: Are the names familiar: Clark Clifford, Charles Murphy, Matthew Connelly?

DIVERS: No, the only one that I--the only one that recall was Matt Connelly.

HESS: In what context?

DIVERS: Who called me only in connection with social matters and never in connection with any business matters.

HESS: Regarding Mr. Wilson Wyatt, do you recall if there were any disagreements between Mr. Wyatt and John Snyder who, during the period of time from July '45 to June '46, headed the Office of War Mobilization and Reconversion?

DIVERS: No, I don't recall now. I mean I had the general impression that Wyatt was pushing for

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things which Snyder wouldn't give, but I would suspect that it was just in a framework where Snyder had to look at the overall situation, and Wyatt was pushing housing and trying to get priority for housing over other matters.

HESS: Some people thought that the public housing program was an effort to socialize the country. Did you ever run across very much criticism of that type, of that nature?

DIVERS: Yes I have. I think that there's some merit to the charge. I think that the people who were really responsible for the promotion of public housing would not have been adverse to having all housing controlled by the Government. I think that we must also recognize that there were a lot of people who were interested in promoting public housing who had no such idea and to whom the idea would have been abhorrent. But

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the people who were at the--I shouldn't say the people, I should say some of the people who were interested in promoting public housing were people who thought that the Government could run things better than private business could, and I would have generally characterized them as Socialists.

HESS: Who held that view?

DIVERS: Oh, it was not an unpopular view in 1933 and '34 and '35. There were many people who didn't particularly like socialism, but who were disappointed with the product of our capitalistic, or private enterprise system, and they were searching for something else. And I don't know that I could even, almost forty years later, put my finger on any one, two or three people, but generally I would say that a substantial sector of the people who were interested in public housing, including the staff of the Public

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Housing Agency, were people who sincerely thought that the Government should move into the housing field and they didn't care how far in the Government moved. If it was--and as far as they were concerned the Government could continue to move in and dominate the field, if not taking it over exclusively.

HESS: And do you think that some of the feeling of this nature say in '33, '34 and '35 was--wasn't that more or less a natural reaction to the depression?

DIVERS: Yes. And the further away we got from the depression, why the more they declined, although as a result, I think there was general acceptance over the course of the next fifteen or twenty years and perhaps even today there is general acceptance of the theory or philosophy that public housing was needed in order to fill out

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the whole spectrum of housing needs, that private enterprise could not take care of the lowest income people.

My own views were that in 1935 I thought that it was necessary for public housing to do part of the job for the lowest income group. By 1955 I would say that my views were that private enterprise could take care of the great bulk of the housing, and that if public housing were needed, it was needed only for a small segment of the population, and by now I'm inclined to think that the country would be much better off if they had no public housing, and maybe even if they had had no public housing.

HESS: None at all?

DIVERS: None at all, because the tenants in the public housing project--public housing projects in many cities have been the organizers of trouble,

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and it was because there was a concentration of people in certain income groups and even with certain political beliefs, that created a lot of problems in our cities I think. This would not have happened probably if we had followed the same pattern which we had in the years before public housing when private enterprise furnished the housing and the people found housing in the community based upon their income. I don't know that I can add anything to that now.

HESS: A11 right. In your scrapbooks I've found an indication, I believe, along during the wartime when you saw the danger of moving a high concentration of public housing people into the units, and not having them interspersed with people who were not on welfare.

DIVERS: Well, I--yes, some of us who were administering the public housing and setting the policies for it

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saw the danger of just having welfare people in there which, in other words, that we were for taking the lowest income people, but there are two types of low income people. There are the people who work for a living and there are the people who don't work for a living. We didn't object to taking a percentage of the tenants from welfare and usually what we did was, we let them take the same percentage that there was in the population of the city or the population of that area even, which might have meant 10, 15, 20 percent from welfare and the other percentage from people who were earning their income.

HESS: In some areas today, the percentage of welfare people would probably be higher than that, would it not?

DIVERS: It would be 100 percent probably in some

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cases, New York City for example.

HESS: O.K. . . .

DIVERS: As a matter of fact, what they do there is if the people make a living of their own, why, they move them out.

HESS: A11 right, on December the 20th, 1946.you were appointed to the position of Assistant Administrator, I believe this was still for the National Housing Agency back in 1946, and you were Assistant Administrator for both of the Divisions of General Program and the Division of the Lanham Act Functions, and as Adviser on Industrial Relations.

DIVERS: Was that in '45?

HESS: '46 I believe. All right?

DIVERS: No, I think . . .

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HESS: Well, we can check that date, but what were your duties, just what were your duties in that position?

DIVERS: This is the National Housing Agency?

HESS: That's right. As Administrator for the Divisions of General Program and the Division of the Lanham Act Functions.

DIVERS: Well, my recollection is that it was the end of 1945. The war was over and they asked me to come back to Washington and take over as Assistant Administrator to succeed Coleman Woodbury who was resigning and we came--I came in, and generally speaking, I was John Blandford's assistant for all the functions except legal and housekeeping.

The reference to programming was that the war was over, there was a big demand for housing from veterans, and from non-veterans, there was a rising interest in the housing on the part of

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Congress and this was--the main responsibility was to work with Mr. Blandford and Mr. Keyserling on preparation of legislation which would assist in furthering the housing effort.

The Lanham Functions are a reference to the administration of housing which had been built for war workers, and was still being occupied by these people, but the war plants, the contracts at the war plants, were terminated. War production had come almost to a stop. We had a problem of disposing of surpluses rather than producing more and we had to think in terms of the best use to which this housing could be put after a war instead of during a war. So, these were the principal functions.

HESS: And . . .

DIVERS: One of the earliest actions we took was to give a priority for vacancies which occurred in the Lanham Act housing, war workers housing.

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We gave a priority to returning veterans.

And we also had a lot of temporary housing that was movable, and in this we gave priority to the schools and colleges so that they could move it to their campuses and set it up and use it for housing for returning veterans, many of whom were taking advantages under the GI Bill of Rights to go back to college.

HESS: And then shortly after, you started working for Mr. Raymond Foley. Is that correct, as his first assistant administrator?

DIVERS: Yeah, right, at the National Housing Agency. No. No, after that interlude I went with Wyatt, and then after Wyatt with Mr. Foley.

HESS: O.K. When did you start with Mr. Foley?

DIVERS: Mr. Foley must have been appointed in either the end of '46 or the beginning of '47, and I

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went with him immediately when he was appointed, and we had offices in the Social Security building down on independence Avenue and then later we moved up to K Street and had some nice new offices fixed up, which I never got to occupy.

HESS: That's when you moved on to the . . .

DIVERS: That's when I went on to the Federal Home Loan Bank Board in '47.

HESS: All right, fine. Before we move on, I would like to get your opinion, this is a contrast between Raymond Foley and Wilson Wyatt, this is from the book Housing Reform During the Truman Administration, by Richard 0. Davies, and this is on page 60:

Foley's quiet demeanor and his concept of the role of the federal government in housing typified the Truman Administration's endeavor to achieve rapprochement with the business community. While Wyatt had assumed that the housing industry had failed and that only the employment of strict federal regulations would produce favorable results,

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Foley praised the past record of private housing and encouraged better production in the future; while Wyatt had antagonized the real estate and construction groups, Foley openly solicited their friendship.

Do you think that's a fair appraisal of the two men?

DIVERS: Well, I think it's a fair appraisal as far as Foley goes, I think it's very, very accurate. I mean that he had been the FHA commissioner in Michigan which was one of the principal housing production states, you might say, along with New York, California, Ohio and Michigan, and had been close to the builders, recognized their weaknesses, but also saw the many fine men who were in this field.

I think that secretly that Wyatt also admired the production of the builders, but that he thought that he could get more out of the builders by beating them with a club, and Foley thought he could get more by patting them

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on the back, I mean I think that this was more the difference between the two men. Wyatt did things to antagonize the builders and I should know because, as you recall, I was the contact between Wyatt and the builders.

HESS: What did he do that would antagonize them?

DIVERS: Well, he listened to some of the professors on this staff and adopted regulations which they immediately recognized as being undesirable, unenforceable, and unworthy of a big operation.

HESS: You mentioned the one where the--about the regulation of where there would only be three doors for each house; front door, back door and a bathroom door.

DIVERS: Yes, there were others. I don't remember them at the present time, but there were others.

HESS: O.K. Now Reorganization Plan #3 of 1947 . . .

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DIVERS: They also, I might add, the builders have had a lot of blame for it, the cracker boxes that they built immediately after the war, but these were largely designed as a result of Federal regulations which were adopted in order to save material, and as I recall, there were regulations that only a certain percentage of the houses that they built could be three bedrooms and have a certain number of square feet, and that the great bulk of the houses were one or two bedrooms and were limited to maybe a thousand square feet of floor space so that the builders couldn't build bigger and better houses even if they wanted to. As a matter of fact, for some time we had a price limit on as well as a limit for the area that the house could cover.

HESS: Do you think it was unwise to have those regulations?

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DIVERS: Oh, I wouldn't quarrel with them. I think they could be defended as regulations which were adopted for the benefit of the whole society. But I think that the unfair part was that many of the same people who enthusiastically adopted these regulations then criticized the homebuilders for building a lot of cracker boxes and putting them--stringing them along on gridiron patterns where they could save on utilities and everything when the Government was probably the one who was responsible for a good part of the design.

HESS: Now, Reorganization Plan #3 of 1947 transferred you in your position to the Housing and Home Finance Agency on July 27, 1947, where you were still Assistant Administrator, is that correct?

DIVERS: That is correct.

HESS: Were there any changes in your duties?

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DIVERS: No.

HESS: All right, now just a short time after that on December 20, 1947, President Truman appointed you as Chairman of the Home Loan Bank Board, correct?

DIVERS: That's right.

HESS: O.K., now this brings us into--this was your top position that you held in housing, correct?

DIVERS: Right.

HESS: All right, what were the main duties? Could you tell me how the Home Loan Bank Board was set up and just what were its functions, and what were your duties?

DIVERS: Well, the Federal Home Loan Bank Board was established in 1932 as a result of a housing conference which had been called by President Hoover. At that time the Federal Reserve system had been in effect since 1913 in order to act as a means of liquidity for commercial banks, and the savings and loan business was

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successful in getting President Hoover to help create a Federal Home Loan Bank Board which would serve a similar purpose fox savings and loan associations.

The principal functions of the Federal Home Loan Bank Board were really added by subsequent legislation. In 1933 they passed legislation--1934 I ,guess it was they passed legislation which authorized the insurance of savings accounts in savings and loan associations by the Federal Savings and Loan Insurance Corporation.

The Federal Savings and Loan Insurance Corporation was set up with funds provided by the Federal Home Loan Bank system and it was administered by the Federal Home Loan Bank Board.

The subsequent legislation also authorized the Federal Home Loan Bank Board to charter, regulate, and supervise, the Federal savings and

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loan system.

Congress set up a Federal savings and loan system with the idea that it would incorporate all the best features of the state chartered savings and loan associations and we would have a uniform, recognizable system throughout the United States. And, in addition, they think that the use of the word "Federal" in connection with savings and loan associations had much to do with re establishing the confidence of the people in the financial institutions, the same way as National banks were considered safer than state chartered banks by some portion of the population.

There were also other duties that were placed on the Board. The members of the Home Loan Bank Board not only served as trustees of the Federal Savings and Loan Insurance Corporation, but also as directors of the Home Owners Loan Corporation which had been the largest Government housing

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undertaking up to that time. I also found that we were the officers of the War Housing Corporation which had been set up in World War I and was still operating several housing projects at shipyards in the eastern part of the United States.

HESS: Were there enough hours in the day to effectively administer all of the different duties that you found?

DIVERS: Well, it took about twelve hours a day for six and a half days a week to familiarize myself with the duties. I was not totally unfamiliar with them for several reasons. One of them was that the Federal Home Loan Bank Board was under the overall jurisdiction of the Administrator of Housing and Home Finance Agency, and before that, under the National Housing Agency so that I was generally aware of their functions; responsibilities. And a second one was that

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when Reorganization Plan #3 became effective in July of, or June of 1947, President Truman had appointed John Fahey as chairman and J. Alston Adams and Nathaniel Dyke as the other members of the Federal Home Loan Bank Board. The three members began to argue so vociferously with each other that they, instead of calling it the "Board Room" down there, they called it the "Rumpus Room" and

HESS: They didn't see eye-to-eye.

DIVERS: They didn't see eye-to=eye, and Messrs. Adams and Dyke began to make life miserable for John Fahey who had been there since 1932 and who was--or '33 I guess, and who was--had a few autocratic ways, shall I say.

One of the matters that came before this board involved the sale by an Arkansas savings and loan association of more mortgage loans than

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they were permitted by regulations of the Federal Savings and Loan Association, the Federal Savings and Loan Insurance Corporation. This Arkansas association was operated by a brother of Nat Dyke's, and Mr. Fahey voted against permission to violate the regulation, or to exceed the regulation, and Mr. Adams and Mr. Dyke voted to permit the association to exceed their quota, and Mr. Fahey complained to Mr. Foley and Mr. Foley asked me to look into it.

So, I interviewed Mr. Fahey, Mr. Dyke, and Mr. Adams and the only thing that the three of them were agreed on was that I should keep my nose out of it. But as a result I made a report. I felt that Nat Dyke should not have voted on the matter, that he should have excused himself, in which case there would have been two votes, and since one was on one side and one was on the other, the association would still have been in violation of the regulations, and

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supervisory action could have been taken if the Board still wanted to do it. I felt that Nat Dyke did not have a proper sense of the .responsibilities that went with the position, and I also felt that it would be impossible for Mr. Fahey and Mr. Dyke to work together. Mr. Foley asked me for my recommendations, and I recommended that successors be appointed for Mr. Fahey and Mr. Dyke because they had not been confirmed by the Senate, and that Mr. Adams be continued as a member. And apparently, Mr. Foley took my recommendations over to Mr. Truman, Mr. Truman concurred in them, and the next thing I knew I was out in Cincinnati and got a call from Mr. Foley saying that Mr. Truman wanted me to be chairman of the Federal Home Loan Bank Board, and I demurred and said I would be glad to serve as a member, but I thought he ought to get somebody else maybe for chairman. And Mr. Foley

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called me back a day later and said, "You're going to be the chairman." And they had an FBI check in 24 hours, which was customary, and I was appointed the next day. So, it all happened very sudden like.

HESS: Now, was this the time that Mr. O.K. [Oscar] LaRoque was brought into . . .

DIVERS: No.

HESS: Was that a little bit later?

DIVERS: That was later. I was appointed and designated chairman and J. Alston Adams was reappointed as a member and within a week after Adams was reappointed he had a very serious operation on his stomach and was laid up for a couple of months, which meant that I was the only member of the Federal Home Loan Bank Board and I ran it by myself.

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My recollection is that we didn't find a third member for the Board until, oh, at least six months later, maybe nine months later when Oscar K. LaRoque was appointed.

LaRoque was president of the Federal Home Loan Bank of--it wasn't Raleigh, it wasn't Durham--oh, Winston-Salem. He was president of the Federal Home Loan Bank of Winston Salem, and prior to that time he had been a supervisor for the state--supervisor for the State of North Carolina, so that he had experience as a supervisor both in the Federal law and of the state laws. And Adams had been the manager of a savings and loan association under a state charter and also his association had converted to Federal charter, so he had experience operating under Federal charter, and he also had been elected to, and had served a couple of terms, on the Federal Home Loan Bank in New York on

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their board of directors, and I was familiar with the operations of the bureaucracy in Washington, both the executive branch and the legislative branch, so that together the three of us had pretty good knowledge of--had a pretty useful pot of knowledge that we could use in administering the affairs of the Federal Home Loan Bank Board.

HESS: What kind of men were they? Were they cooperative and easy to work with or not?

DIVERS: Generally speaking, yes. I mean that we were the friendship among us grew steadily and we were always very good and close friends and we met together socially on frequent occasions. I was probably the most deliberate one of the three and tried to see that all viewpoints were given consideration, and that all the factors were taken into consideration, that we had the

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views of the industry and that we had the views of our staff, we had the views of the Federal Home Loan Bank presidents, the views of the Federal Savings and Loan Advisory Council, before we acted on any policy matters or any important matters.

J. Alston Adams was a very strong Republican; LaRoque and I were Democrats.

Adams, his nickname was "Buck" and the reason was that he was always "bucking" the establishment and he had some views that were different than mine from time to time, and we had a few sessions in which we screamed at each other, but we always respected each other's opinions, and we never got into any personalities or anything which would prevent us from continuing to work together, so that--and we needed each other really.

LaRoque was a southern gentleman who was

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twenty-five years older than either of us and he really took a--he didn't play quite as important a part in the deliberations although he was--his views were asked on everything. He was quite agreeable to go along with anything that the two of us decided.

I think that I was--I tried to get unanimous decision on every major question that came up, you know, and on the minor ones we never had any differences, I might add. And it wasn't it wouldn't be important, I mean it wouldn't be sufficient, I mean on minor questions, I mean, why raise a fuss or raise an issue. On major questions I tried to get a unanimous opinion because there were only three and it wasn't a matter of getting a consensus, it was more a matter of trying to, get a position that all of us could support, which might require some compromising. And, in all the time we met,

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I don't think that there were more than two or three cases where we didn't agree and those were not particularly important.

HESS: What were some of the major decisions that you had to make?

DIVERS: Well, most of the financing that was done by the Bank Board was so-called open market operations where the bank system borrowed from people, generally, financial institutions and so on, large amounts of money, billions of dollars, and we had the last word, the last word on what interest rate would be placed on these obligations and we wanted to fix a rate which would raise the money but not be any more than enough to raise the money. We had the advice of a fiscal agent who the banks maintained in New York, and also the advice of the Treasury. Generally speaking, we accepted the advice of the Treasury

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which was usually the same as that of our fiscal agent.

HESS: Who did you work with at the Department of the Treasury?

DIVERS: We usually didn't work directly. You see Mr. Bob [Robert Reyburn] Burklin, who was on our staff and was in charge of the operations of the Federal Home Loan Bank system for the Federal Home Loan Bank Board, he had the contacts in the Treasury and the man whom he contacted most frequently, his name was [William T.] Heffelfinger, who was an assistant secretary I think.

So, we--but we did do some innovating, for example, when we needed some money around year end and the Treasury didn't want us to go into the open market, we reminded the Treasury that the Treasury could use the Federal Home

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Loan Banks as depositories for United States Government funds, for Treasury funds, and as a result, they deposited twenty-five million dollars in the Federal Home Loan Banks, which was the amount we needed at the particular time, which was a precedent, I mean it had never been done before.

I might--I'd like to mention a few of the things that I consider accomplishments of our Board.

Following Mr. Truman's policy (which he may not have heard about), that everything should be done with private money wherever possible, our Board started on a procedure of trying to recover, for the United States Treasury, monies that the Treasury had invested in the Federal Home Loan Bank system, the Federal Savings and Loan Insurance Corporation, the HOLC, War Housing Corporation, and savings and loan associations.

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The first thing we undertook to do was to dispose of the assets of the War Housing Corporation which were managed by HOLC and we. got an offer. Part of the property was taken over by other Government agencies for their particular uses in connection with the shipyards, and part of it we sold after advertising fox bids, and we liquidated that World War I corporation.

At the time our Board was appointed, the United States Government owned about 97 percent of the stock in the Federal Home Loan Banks. It originally put up a hundred and thirty-two million dollars, I believe it was, to finance the banks, and the legislation contemplated that the Government's investment in the stock of the Federal Home Loan Banks would be replaced by stock purchased by the members of the Federal Home Loan Bank system and the individual savings and loan associations. And very little had been

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done up to that time by the Federal Home Loan Banks toward retiring the Government stock, and we encouraged all of the Federal Home Loan Banks to voluntarily prepay the Government for the stocks they put in to retire that stock and, as a result, by the time I left, as I recall, all of the Government stock, the 132 million, had been repaid into the Treasury, either all or all except a minor part. I know that at least some of the banks had retired all their stock and a good strong program of reduction was on the way.

The Federal Government had also put up a hundred million dollars to start the Federal Savings and Loan Insurance Corporation and we succeeded in getting legislation through Congress which provided for the retirement of that stock, and by the time I left the Board over half of that stock had been paid back into the Treasury and a

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good strong program for the retirement of all of it was under way.

We also directed our attention to the HOLC and the HOLC still had money invested in savings and loan associations, which were members of our bank system, and members of the insurance corporation. And the savings and loan associations, some of them, were not anxious to retire these loans because they thought it inspired more confidence on the part of the country if they could say that they had loans from the United States Treasury and--but we urged them and encouraged them in every way that we could to pay these loans back and we gradually got them paid back so that they were all paid back.

Then we looked at the portfolio of the HOLC, and as I recall, when I was appointed chairman they still had a hundred thousand loans on their books out of the one million a hundred thousand that they had originally made, and out

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of the three million--more than three million--applications they'd received immediately. We first did some peripheral liquidating. We closed up the regional offices of the HOLC and consolidated their operations in New York where, incidentally, they really had one of the early forerunners of the computer. They had a device which recorded all of their loan payments and kept current records on each of their more than one hundred thousand mortgages. It was all done by automatic bookkeeping and I don't know that it would be any different than the records and reporting would be on a computer today. They were very advanced. They were recognized as one of the, as the most efficient mortgage servicing operation in the United States, the lowest cost. And this was done before we were in the picture so we can't claim the credit for this. It was a very well managed operation.

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However, the manager of the HOLC thought that, as Mr. Fahey, my predecessor, did, savings and loan associations and other lending institutions in the post-World War II era were making loans that were too high, had too high expenses, were paying too high salaries, that we were going to have another depression, and needed to keep the HOLC organization. However, the Board members were of the opinion if we had a need for another HOLC in the future that it would be a lot better to start in with entirely new personnel, younger people, people who would be current, have current thinking and that we wouldn't be waterlogged with people who had an excellent reputation but were really still thinking in terms of the 1933 depression. So, we tried to diplomatically encourage them to work themselves out of a job and we told them that--we almost had to force them into doing it, but we insisted

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that they liquidate the assets of the corporation. Before we did it we recognized that there might be some political repercussions because there were a lot of people who had 4-1/2, 5 percent loans from the Government and they felt confident that as long as they were in the Government's hands, these loans were made by the Government, that they need never worry about foreclosure or harsh treatment or anything of this kind. On the other hand, we felt that most of these loans were about twenty years old, the houses, a lot of them, needed substantial repairs and no refinancing could be done, rehabilitation, remodeling, as long as these loans were outstanding. We were selling the loans on a basis that the same interest rate would apply in the future that applied, and the purchasers had to agree that they would only charge the same interest rate. But we recognized that some of the people,

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some of the public, would probably complain to their Congressman and the Congressman would indulge in their favorite pastime of belaboring some of the agencies of the executive branch.

So, before we did anything, Mr. Foley and I went over to the White House, told the President what we wanted to do, and he gave us his blessing, and we told him we couldn't do it until after we had clearance with the appropriate congressional committees. So, Mr. Foley and I went to the Senate Appropriations Committee, the House Appropriations Committee, and the Senate Banking and Currency Committee, and the House Banking and Currency Committee, and told the chairmen of each one of these. And I don't recall, I think that we discussed it with the chairman and he in turn probably discussed it with the staff and some of the top committee members, but in any event they

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said it was perfectly all right to go ahead. We also talked to the Bureau of the Budget about it, the Treasury, we conferred with everybody in the Government that we thought might be interested, everybody in the executive branch as well as the legislative branch. And then we had them package up the mortgages for one state (I believe it was Pennsylvania), and we advertised them at public sale, we let all of the potential bidders come in and examine the records of the HOLC, and look at the mortgages, and they usually went out and looked at a sample of the properties that were secured by the mortgages. We gave ample time, we set a date six weeks ahead, maybe, when the bids would be received and we asked for bids, cash, for the Government. And we got bids for a premium, over and above the face amount of the mortgages, and we accepted the bid and went on to having sales in other states. And

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there were one or two states where the portfolio was so large that we split up the state and took two ox three sections of the state and advertised the mortgages.

The staff of HOLC did a magnificent job because there was a tremendous amount of clerical work involved in transferring these mortgages, but we were successful in getting bids of premiums on almost all the states. As I recall the only ones where we had to sell the mortgages at a substantial discount were in Puerto Rico and Maine, and overall we sold the entire portfolio at a premium, returned all the money to the United States Treasury, and paid off all the money that HQLC had borrowed, paid all their administrative expenses, and returned a profit of about thirteen million dollars to the Treasury. There axe a couple of things I would like to comment on. One of them is that--I forget the total

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amount of the portfolio, but say, I think it was on the order of two hundred million dollars.

HESS: Exactly.

DIVERS: Pretty good. And after we had advertised and sold the first the mortgages in the first state we received an offer from Philadelphia, I think it was a man named [Albert Monroe] Greenfield, who was the biggest real estate operator in the eastern part of the United States. He came to us and made an offer to take off take the entire remaining portfolio at a, I believe, a premium of around one eighth of one percent. This was a fabulous offer, a fantastic offer, we told him we thought it a fair offer, but we didn't see how we could dispose of two hundred million dollars of Government property at a private sale and that we had already told the White House and the congressional committees that we were going to

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sell at a public sale and that we would have to refuse his offer, but we would be happy to see him bid on the mortgages at any of these sales that were coming up and hoped he'd get them. I think that was a wise decision because the best way to do it was to sell it at public sale after advertising and so on.

There was never any question raised about any favoritism, any kick-backs or anything of this kind in the whole operation. As a matter of fact, the whole question was never raised in connection with any members of our Board at the time that I was on the Federal Home Loan Bank Board.

We were not wealthy people, the Board members, all of us were people with modest circumstances. When I was appointed chairman, the salary was $10,000 a year and I didn't even use a car as my--a Government car, as my predecessor

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had and as my successors have. I rode the bus back and forth to work and didn't use a Government automobile for that purpose.

I didn't accept any favors from anybody in the savings and loan business.

HESS: Were they offered?

DIVERS: They were offered, and I would say that I would give the benefit of the doubt to the people who offered them. Some of them were things that they customarily distributed at Christmas time, and if it was a bottle of liquor or a ham or something like that, why, we took it and thanked them for it. If it was a piece of silver or a set of silver, something like that, we sent it back with our thanks.

We all followed the same policy. We turned down the trips to be their, guests on cruises or at Mardi Gras or things of this kind. We didn't

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accept any gifts from individual associations, but where the trade associations came in at Christmas with a bottle or something, why, we usually accepted it and then gave them a bottle which made us even and under no obligation. So, we were never under--we never took anything where we'd be under any obligation.

In connection with the HOLC there is another interesting factor and that is this: When we took over, they had a warehouse over in Brooklyn that was filled with their files, and I forget, it was nine or ten stories, and they had guards, and they had telephones in all the file rooms and so on, and so forth. Part of the material that was filed there was the applications for loans which had been made in 1933 and 1934 and had been turned down, and this was twenty years later, and they said oh, they got inquiries about the title, and they

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had abstracts of title in some of them, and sometimes the Congressmen inquired and so on and so forth. And we said we'd take the responsibility for telling them we destroyed the files. You bundle up all these files and get rid of them.

Well, these files were thick, and they immediately then disposed of three million files and they disposed of the--they sold the paper, which was then selling at a good price. They sold the filing cabinets which were also selling at a good price; they were able to get rid of the telephones in all these file rooms; they were able to get rid of the guards; they didn't have to pay rent; and it was a telescoping--it had a telescoping effect, so that the costs were being cut right and left. And then as the files were closed on the cases where we sold the mortgages, we turned over the files to the purchasers of

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the mortgage so that they had the files. We got rid of all the files of the HOLC that way.

We also closed up the regional offices. We cut the staff as the amount of work that they had to do was reduced, and at the end they had about, I think, about a hundred and thirty-five employees left out of the more than a thousand that they'd had a couple years before.

At that time I took it upon myself to establish a terminal leave policy for the Federal Government which they did not have, which Civil Service has never, would not approve of, because it was not in the legislation and they didn't want to go in and ask for legislation. And I told each one of the remaining employees of HOLC that they could take one week to look for a job, without reporting to the office, for each year that they had been with the .HOLC. Some of them had been there twenty years which

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meant that they got twenty weeks to go out and look for another job if they wanted to, or if they were retiring they took twenty weeks and then took their retirement.

We helped people get located with other Government agencies and the largest number of employees went with a large mortgage company in New York who bought the New York mortgages. This company not only bought the mortgages at a premium, but also took over enough HOLC employees to service these mortgages and on their permanent staff, which was a good recommendation for the employees who were there that a private company would take them over at the same salaries or better. And, when it came down to a final analysis, I think there were only ten to thirteen employees who were either not relocated or retired, which was pretty good. And during the course of our

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closing down the HOLC, a few of the New York Congressmen became concerned and got in touch with us and didn't want us to let certain employees go or give up a lease on a certain warehouse or something of this kind, and we were able to tell them because of our preliminary work that we had cleared this operation with the Bureau of the Budget, with the White House, with the congressional--appropriate congressional committees, that they told us to go ahead, we had reported to them regularly and so forth, so that we--there was--we forestalled any congressional complaints, investigations or anything of this kind, which all proved to us that we thought all along that by putting in more time, longer hours, to pave the way for something like this, why, it could be accomplished, it could be accomplished under existing law. There was no specific authorization by Congress

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to do this, they didn't direct us to do it, we used our own judgment and we never got in trouble, even though in some cases we maybe even violated the law.

HESS: In what cases?

DIVERS: In some cases we violated the law by giving these people terminal leave for example. We had no authorization for it, but we took the responsibility for it. We thought it was an intelligent policy and we were willing to defend it if anybody raised any questions about it.

HESS: Did anyone ever give you any flare back on that?

DIVERS: Not that I know of. As a matter of fact, the Government subsequently adopted some policy like that.

HESS: We're about to run out of tape and it's ten minutes after 12, shall we shut it off?

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DIVERS: Are we through?

HESS: No.

DIVERS: Do you think it will take another session?

HESS: I think so.

DIVERS: All right, yeah, I'd like to quit.

HESS: A11 right.