The Windfall Profits

After 43 days of hearings in seven cities, the Senate's Banking and Currency Committee last week issued its report on the "windfall" scandals within the Federal Housing Administration (TIME, July 12). Committee Chairman Homer Capehart flatly called it "the biggest scandal in the history of our Government." The Democrats on the committee argued that there were comparatively few culprits among the thousands of honest builders. But the report was enough to shame many a U.S. builder.

Said the report: "The organized home-building and financing industries must share with the FHA responsibility for abuses and irregularities under the National Housing Act. While only a relatively few members of the industry were involved . . . the national [industry] associations consistently acted to protect this minority . . . Instead of giving us their wholehearted support . . . these associations devoted themselves to justifying the activities of an unscrupulous few. "Among the abuses cited:

P: Of 543 rental projects investigated, 437 had mortgages totaling $75.8 million more than costs. The excess amount of mortgage money was pocketed by builders as windfall profits. In the remaining 106 projects, costs to builders were $6,800,000 more than mortgages. However, according to the law, builders should have invested more than twice as much ($14.2 million) of their own money as they did. P: In FHA applications, many builders valued land at five times its actual cost; architect's fees were put as high as ten times their cost.

P: FHA officials, 16 of whom were cited for offenses ranging from incompetence to fraud, had "wholly ignored" congressional admonitions to base mortgages strictly on actual cost estimates. Some had actually worked for builders on the side, were wined and dined, given "girl parties," and outright bribes. Worst culprit: Assistant FHA Commissioner Clyde L. Powell, 58, boss of the rental-housing program since 1942, who is now serving a one-year jail sentence for refusing to answer a grand jury's questions. One architect said that he paid Powell a $10,000 bribe, and Powell's bank statements showed deposits of $218,330 between 1945 and 1954 while his Government income was only $8,265 during that period.

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