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Sin and Section 608: II

Brass Tacks

By Harry K. Schwartz

(This is the second of two articles on the current "scandals" in Federal Housing Administration.)

Probes as politically volatile as the one that cracked open the Federal Housing Administration two weeks ago rarely come about by accident. While Washington picks up the pieces, observers are faced with a troubling, but crucial question: What made the Republican Administration choose this time to open up the FHA "scandals?"

Part of the reason is clear from the way the investigation was first handled. The chief target was to be Section 608, and 608 is Democratic "dirt." Expiring conveniently in 1950, it leaves the present Administration without sin and free to cast stones as it sees fit.

But the home repair provision, Title I, although easily as "dirty" as Section 608, is still in effect. Linked together, they incriminate both administrations. On this count, the political effects seem to cancel out. And it must have been obvious that as a smear, the FHA probe would certainly backfire.

On another level, the expose does make political sense. Civil Service has had the effect of freezing a host of Democratic appointees in desirable government jobs. Coming into office after a twenty year famine, the Republicans found themselves faced with a block of civil servants who were, for all practical purposes, irremovable. The FHA probe has served to jar a number of them loose, enabling the Republicans to gain effective control over the agency and pay some pressing patronage debts as well.

The initial shock of the scandal had a devastating effect on the agency's top-level personnel. By the end of the first week, the scoreboard read: Commissioner Guy T. Hollyday, resigned under force; Assistant Commissioner Clyde L. Powell, resignation "withheld" pending further investigation; General Counsel Burton C. Bovard, placed "on leave"; and Deputy Commissioner Walter L. Greene, request for retirement granted.

As the intensity of the attack on-the FHA mounted, a boomerang effect appeared as a dangerous possibility. Many sensed that if the political moralizing were allowed to get out of hand, the agency might be completely destroyed. To complicate matters, the savings and loan associations, long-time enemies of FHA, seemed anxious to cash in on the public indignation and press for abolition of the service. As competitors of the federal government in the mortgage insurance business, they have every reason to hasten FHA's end.

The building trades view this situation with understandable dismay. FHA has been a great stabilizing force in the industry, and both bank and builder have come to rely on it. It is the builder's FDIC; its loss could mean the same kind of chaos and demoralization that would occur if the government suddenly stopped insuring bank deposits.

Despite these dark implications, the general tone of the investigations has been disappointing. Senators have launched into the probe with an enthusiasm more appropriate to the traditional Easter egg roll on the White House lawn. Two separate inquiries have been started in the Senate alone. Squabbles over who is to get the juicier witnesses seemed to be developing between Senator Harry F. Byrd (Joint Committee on the Reduction of Non-Essential Federal Expenditures) and Senator Homer E. Capehart (Senate Banking Committee). Capehart claimed the probe as within his group's legitimate jurisdiction; Byrd countered that his committee had been quietly looking into the matter for several months.

At the end of the first week, Senator Caprhart seemed to have gained a decided advantage. He had succeeded in grabbing off the stars of the scandal--Hollyday, Powell, Greene and Cole--as witnesses. Top billing went to Powell who raised Capital Hill eyebrows by invoking the Fifth Amendment. Capehart was optimistic about the proceedings. He announced that he was going to ask for $250,000 to carry on the work and predicted that a thorough investigation might take as long as a year.

Senator Byrd appeared to be slipping badly. Against Capehart's all-star cast, Byrd offered only T. Coleman Andrews, Commissioner of Internal Revenue. But as if to prove that his Joint Committee on the Reduction of Non-Essential Federal Expenditures was as good as its name, Byrd announced that he could run the inquiry without additional costs. The Senate evidently favored Capehart, and awarded $150,000 to the Banking Committee for operational expenses.

The picture, as it developed last week, seemed remarkably cloudy. Three separate probes of the FHA were in progress: Capehart's, Byrd's, and another run by the Administration itself. Eased off the front pages by the McCarthy-Army proceedings, all three were left on the fire at a slow boil. It was evident that the Administration's housing bills would be held up, and might undergo serious revisions. Outside of this, not even the boldest of political prophets would be willing to conjecture on what the ultimate effects of the FHA scandals will be.

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