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the prime rate was lowered by several major banks, and some financial analysts say that while this top rate will rise and fall throughout ’79, it has peaked already. There is an additional problem with the complaint about the usury ceiling: it only applies to mortgages on single-family homes. Savings and loan associations can charge up to 18 percent, interest for loans to housing developers, apartment builders, businesses, farmers, and others. So if they are so squeezed by the national money that is costing them 10 percent to get, they can put it into investments that pay more than 10 percent. Finally, what about the last-ditch argument of the S&Ls that if the Legislature doesn’t raise rates they’ll abandon Texas? It is not a credible threat—Texas housing demand is so strong and the outlook for the lending industry so bright that they’re not about to give it up, as any reading of their own company literature makes clear. There is much, much money to be made in Texas on 10 percent housing loans and, assuming some faith in Accounts receivable 1979 Legislature The current lobbying effort to raise interest rates began last year, and an integral part of it was money that savings and loan groups, bankers, realtors, builders and allied organizations put into the election efforts of Texas House and Senate candidates. Through such political action committees as SALPAC, BAL LOT, Big 50 and TREPAC, as well as through individual contri butions by their members, these homebuilding interests gave hundreds of thousands of dollars to members of the 1979 Legislature. Listed below are their contributions to the key members who have a direct say in the passage of the lenders’ interest-rate bill this year. Of the nine members of the House committee, Doug McLeod is the only one who got no money from these interests, and he’s a builder. The big winner was Fort Worth Sen. Bill Meier, who unsurprisingly turned up as the Senate sponsor of their legislation. Then there’s Lt. Gov. Bill Hobby, who had only token opposition in ’78 yet drew $15,000 from those trying to raise rates, and Speaker Billy Clayton, who was unopposed for re-election, drew $9,000 from them. Bear in mind that in a legislative race $500 is a memorable contribution, and members listed below received as much as 25 percent of their total cam paign budget from the people now asking them for help. Account Invested in 1978 $ House financial institutions committee: Nub Donaldson, chairman $1,700 Frank Hartung, vice chairman 3,350 Stan Schlueter, vice chairman 1,500 Bill Messer 2,250 Lynn Nabers 1,100 Ralph Wallace 2,000 Bob Ware 550 Ron Wilson 3,350 Subtotal $15,800 Senate economic development committee: Peyton McKnight 500 Bob Price 1,000 Ed Howard 13,350 Subtotal .4.’514,850 Miscellaneous accounts: Sen. Bill Meier 21,550 Lt. Gov. Bill Hobby 15,590 Speaker Bill Clayton 9,000. Subtotal $46,140 Total principal $76,790 the free market, if the guys pushing this abandon-Texas line really won’t meet the demand, there are plenty of enterprising lenders who stand ready to fill the void. Besides, not many S&Ls are going to want to tell the people of Baytown or Abilene or anywhere else that their deposits are being carted off to California. One can see the competition’s ads in response to such a move: “This is one hometown savings and loan that believes in Texans, and we’re putting your savings to work right here in Poteet! Mortgage money? We’ve got it. Come in now and get yourself one of our little ten-percenters.” Who gets hurt? Industry lobbyists maintain that Texs’ usury law is an anachronism and that its elimination would not benefit lenders so much as it would construction workers and consumersa line of logic based on their spurious contention that lenders will make no mortgage loans if the usury limit is retained. Actually, the best evidence suggests that, far from making anything better for anyone, a legalized jump in interest rates would have a devastating effect on homebuyers, the housing industry, and the economy generally. Despite what legislators are being told by the lending lobby, consumers are not going to be grateful if SB 134 passes. The going price for a house in Austin already averages $50,000. In Dallas it’s $60,000 and in Houston it’s $70,000. These prices have more than doubled in the last decade, and interest rates have led this inflationary surgein 1967, consumers made $24 billion in interest payments; ten years later, the lenders were exacting $95 billion in interest. That’s a 293 percent increase, a buying a house. It is ironic that in a time when business leaders are demanding that government get tough on inflation \(even if that means ecoleaders will put their credibility on the line for a 20 percent rise in interest rates. Not only does that do gross damage to the inflation guidelines of the Carter administration \(restricting bound to spur greater inflation throughout the economy. At least one member of the banking establishment has been willing to bell the cat on this pointspeaking to a Houston Chronicle reporter in January, the chief economist of the U.S. Trust Company of New York, Dr. James O’Leary, said he considers it both unwise and unnecessary to eliminate the Texas usury limit, because to do so would confirm the inflationary expectations of homebuyers and speculators which have led to higher prices and higher interest rates in the first place. Savings and loans stipulate that a borrower spend no more than 25 percent of his or her income on a home mortgage. Already, with interest rates right at 10 percent and with housing prices severely inflated, most Texans cannot buy a home because they do not earn enough to get a loan. This is not a matter of a small percentage of low-income people being denied homeownershipit affects .the majority of the people of Texas. To get a 10 percent loan to buy a $50,000 home, a family must have an income of $21,000; the 2 percent jump in interest rates that the S&Ls want the Legislature to approve will require families to show another $4,000 in annual income in order to qualify for financing. The median family income in Texas is $12,672, and only 8 percent of Texas families make $25,000 or more a year. The fortunes of a realtor are linked directly to maintaining good relationships with S&Ls, so it is not surprising that the realtors’ lobby is helping the lenders push SB 134, but several off-the-record calls around the state to independent realtors who deal primarily in sales of middle-income family homes found them overwhelmingly opposed to a rate increase. They say it definitely would shrink the number of potential buyers and dry up much of their business. 6 FEBRUARY 16, 1979 01.11.111011.411:00011111.1-ffsse`_ ,>:!%1.