house is built, we take the reproduction cost of the building, and we add the land value to the reproduction cost. We find out its maintenance cost and what it cost to run the place and we allow that maintenance charge. Then we allow him a rate of interest based on the service and conditions of his apartment.

Representative BLANTON. I know exactly what you do, but you are taking up

Mr. WHALEY. The minute you fix the value and fix the net return, no matter how many trusts you put on there they are no good. Representative BLANTON. But the point I make is

Mr. WHALEY. That is the only way you are going to be able to regulate it.

Representative BLANTON. The point I make is that I am wanting to help Senator Copeland and the committee enact a law that will put these pyramiding sharks in the penitentiary. You can not punish them in a penal way for pyramiding under your bill.

Mr. WHALEY. We have not attempted to do that.

Representative BLANTON. Don't you think it would be possible to do that?

Mr. WHALEY. No. I am trying to show you how they can not pyramid under those provisions. They will not pyramid unless there is a profit. If there is a profit they will pyramid, but if you take out the profits there will not be any more pyramiding. We take out the profit from the pyramiding trusts, and then the trusts are no good.

Representative BLANTON. I ask the committee's permission to read a letter received this morning from Miss Flora McDonald Thompson, chairman of the fact-finding committee on women's economic relations, representing 35,000,000 of the women of the United States. Representative STALKER. We have all had a copy of that letter. Representative BLANTON. It is so pertinent and covers the situation so thoroughly that I would like to read it in the record. Representative HAMMER. I do not object to having it in the record, but I do object to your reading it.

Representative BLANTON. I would like to read it.

Senator JONES of Washington. I have read it myself.

Representative BLANTON. All right; I will ask to have it included in the record.

(The letter referred to is as follows:)

Hon. T. L. BLANTON,

2506 CLIFFBOURNE PLACE, Washington, D. C., January 10, 1925.

House of Representatives, Washington, D. C.

DEAR SIR: Will you permit me please to bring to your attention how the rent bill before Congress assails the most cherished interests of women?

This bill would establish a commission to control rents and fix the value of all housing property in the District of Columbia. It is based on the assumption made by its backers that Federal employees are a permanent tenant class and stands on the argument that to diminish alleged ills of this assumed unfortunate class, to destroy constitutional rights of owners of housing property is justified. Such legislation with the rest would destroy the economic basis of homemaking.

The rent bill before Congress is not a mere matter of business affecting only real estate dealers on the one hand and tenants on the other. It involves all property held as homes in the District of Columbia.

In no particular is the proposed rent bill so faulty in its construction of economic relations as when it arbitrarily distinguishes between property used

for business and property used for housing, and applies its terms to the latter with no regard to value operating in the conduct of family affairs. Not only property rented for housing but property occupied as home is as much a matter of business as property occupied for stores and factories. It figures in household economy and cost of living and thus affects the purchasing power of salary and of price.

That the proposed rent law now before Congress destroying constitutional rights of property owners would likewise destroy the economic basis of homemaking is not a subject for sentimental consideration. It is an important consideration of business, and the rent bill, making no account of this, does injury alike to business interests and to homemakers who are logically inseparable allies to oppose the bill.

Justice Field in the Munn case has said, "There is indeed no protection of any kind under constitutional provision which does not extend to the use and income of the property as well as to its title and possession." Commenting on the foregoing, Prof. John R. Commons, in Legal Foundations of Capitalism, says, "The title of ownership or the possession of physical property is empty as a business asset if the owner is deprived of his liberty to fix a price on the calue of the product of that property." The sale of the product of home ownership is rent. Depriving householders of liberty in this regard, backers of the proposed legislation evoke the police power of Congress. As to that, Justice Blatch, Minnesota Rate case, for the majority wrote, "The power to regulate (police power) is not the power to destroy and limitation is not the equivalent of confiscation."

The proposed rent bill for all business purposes confiscates the property ac quired in a home of one's own. The profits of the wageless work of wives and the economies of homemakers normally find an ideal investment in home ownership. In the past, Federal employees no less than others of moderate income have been able to raise families in the enjoyment of means economically adjusted to acquiring homes of their own. But investment in home ownership to be sound must be negotiable on terms of equality with other investments or persons of small means, least of all women, dare not touch it. The home maker whose life energy has gone into the ownership of a home, for the protection of herself and family in need, on occasion of illness or death of the husband, must be able freely to contract as to the disposition of her home property which must be valued like other economic goods according to market conditions or home ownership becomes a liability that only the wealthy may safely assume. The rent bill now before Congress proposes to create a commission empowered arbitrarily to fix the value of the widow's home property and to fix the income she may derive from it regardless of her necessities. Moreover, the aged widow dependent on the rent of her home to live, by the terms of the proposed rent law virtually loses possession of her property for the tenant is empowered to occupy rental property as long as he likes, also to make all the trouble he likes, the proposed rent law being ingeniously devised to stimulate endless demands on the part of tenants which the owner must meet or suffer endless expense going into the courts for protection.

The proposed rent law aiming to fix Federal employees in the economically degraded category of a permanent tennat class would legislate a large increase of that class by making individual home ownership an investment that no person of moderate means reasonably could undertake. Eliminate the reasonable aim of home ownership and the main screw of American household economy is gone. The proposed rent law tends also to frighten persons of small means from investing their economies in small income producing rental property which in the past has been a favorite investment of honest men and women in Washington. This class of property owners has even now greatly diminished under the operation of the existing rent law to the increased hardship of tenants. The very ills of tenants which the rent law before Congress is advertised to remedy largely result from the existing rent law which has so hampered individual ownership of housing property as to clear the real estate investment field of individual small owners for the wider operation of powerful corporate interests that promote extensive building operations not for housing purposes, but to the end of the profits to be realized in the pyramiding of loans. This matter was reported to the last session of Congress and no remedial action has since been taken. The anomaly of many vacant apartments existing at the same time that tenants desperately seek shelter for their heads is explained in that wealthy corporations speculating in the Washington housing field find it to their profit to figure loss on these intentionally vacant

apartments in making their income-tax returns. Some one has said, "The greatest discovery in modern times is that debts may be bought and sold." But that was before income-tax laws revealed the profit to be derived from losses.

The ills which tenants in Washington suffer under present conditions admit of no uncertain remedy. Congress in the past found means to rescue families and homes from the avarice of chattel mortgage sharks. Honest intention in regard to the existing housing situation would stir Congress to deal directly with the real estate loan shark. For the relief of the particular housing difficulties of Federal employees the obvious remedy is for Congress to vote increase of salaries adjusted to pervailing cost of living. Not only have prices of the necessaries of life vastly increased the past ten years, but increased employment of married women in wage earning compelled by inadequate salaries such as many Federal employees receive (an average of $1,500 per year) unquestionably increases cost of living in consequence of a disordered household economy resulting in such case. President Coolidge is reported in the press as backing the proposed rent bill "for the protection of Government employees against the need of increased salaries." What is meant no doubt is that the President views with alarm the reaction upon taxpayers of any proposed increased cost of Government. But what of the cost of the projected rent law? Taxpayers should know that it provides nearly $50,000 annually in specified salaries with additional salaries unspecified, and besides carries an omnibus provision that the Comptroller General of the United States shall pay any and all vouchers for expenditures for the Rent Commission on the approval of the chairman of the commission, whose signature "shall be a sufficient warrant and authority." However, the cost perhaps most to be dreaded by the taxpayer in his role of maintaining American institutions and liberties is the intangible cost resulting from the death blow that the rent bill before Congress would deliver against the American ideal of home ownership, for home ownership is the economic guarantee of the home maker's activities and the sustaining principle of American family life, in which connection also must be taken into account the reduced purchasing power of salary that the proposed rent law would effect by the confusion of household economy to result from destroying the economic basis of homemaking.

There are over 35,000,000 women in the country by profession home makers. These women want a law which will put the real estate loan shark out of business in the National Capital, they want the ownership of homes removed from the incubus of a rent law that is destructive of constitutional rights, they want Federal employees redeemed from the enforced inferiority of a permanent tenant class and assured the reasonable hope of achieving the American ideal of home ownership.

The majority leader of the House, Representative Longworth, after conferring with the President is reported to have pledged a vote on the rent law in Congress. That vote will be carefully studied with regard to the economic interests of home makers, and Congressmen looking ahead two years to their own interests may wisely now reflect that after all the vote of 35,000,000 women counts.

Very truly yours,

FLORA MCDONALD THOMPSON,

Chairman Fact Finding Committee on Women's Economic Relations.

Representative HAMMER. Mr. Blanton, speaking of the power of the tenant being taken away from him and the landlord being able to compel him to pay a higher price, I call your attention to the fact that we have a Federal Trade Commission whose chief purpose is to do the very thing we are trying to do here. According to your theory, the first thing we should do would be to abolish not only the Federal Trade Commission, but also the Interstate Commerce Commission, because that is what they deal with.

Mr. WHALEY. The only way you can enforce a law is to put a penalty for its violation in the law. That is the only thing I know of that can be done. If you are going to have a law and provide that a man can not do a thing and there is no penalty for him doing it

and that is the case with the rent act-you are getting nowhere. You say that a man shall not do a thing, that there is no penalty if he does it. All we say in this bill is that if he does it it is a misdemeanor, and he shall be punished accordingly. If you take a man's money when you are not entitled to it and take it under false pretenses with no performance of service, then it is a misdemeanor and you shall be punished accordingly.

Representative HAMMER. Do you fix a time for the term of the commissioners?

Mr. WHALEY. Yes, sir; it is all regulated. They are to be appointed for one, two, three, four, and five years, respectively.

Representative HAMMER. Some one told me that they were to be appointed indefinitely.

Mr. WHALEY. Oh, no; there is nothing at all like that. If you read the newspapers and hear on the street what is in the bill, you will find that it is an awfully vicious, drastic bill; but if you will read the bill you will find there is nothing drastic or vicious in it. That section repealing all other acts or ports of acts inconsistent with the provisions of this bill is one of the vicious sections you may have read about in the newspapers.

Representative STALKER. I do not quite understand how your bill as drawn would eliminate pyramiding. In other wards, you establish a value, but it might be after the third or fourth or fifth or sixth or seventh trusts have already been sold. It would not protect the investor.

Mr. WHALEY. We do not take into consideration the trusts at all. We have nothing to do with the trusts. We take from the evidence the reproduction value of the building less depreciation and the value of the land. We give the landlord all of his maintenance costs that he proves, and then we give him a net rate of interest on the value found by us for the land and the building, a certain rate according to the service he renders and the condition of the property. The trust does not make any difference to us at all.

Representative HAMMER. Is there not abundant authority under the law for the matter?

Mr. WHALEY. You will find Supreme Court cases by the dozen. There are half a dozen cases within the last two years that show that is the proper way to do it. The District Court of Appeals in two or three rent cases say that is the proper way, and that is what we do. The percentage depends entirely upon the condition of the property and the service rendered. I have rendered a decision involving less than 6 per cent. As I said to the committee last year, upon an inspection of the building I found at 11 o'clock in the day you could see the blue sky between the wall and the ceiling. I found the rain pouring into the place and there had been no improvements for years. The place was not rentable. It was occupied merely because the poor people could not find any other place to live. I allowed an amount for occupancy, but not anything for rental of the property and I think my percentage was something like 412. The result of that was what? When I allowed them 412 per cent they did not appeal the case-that is, they took an appeal, but dropped it. They went in and reconditioned the property and came before the commission with a petition to refix the rates. They had

the property in decent condition and the rain is not pouring through

any more.

There are some cases where we found what you would call double depreciation. There is one building here in town, a modern apartment house. They built another apartment house within a foot or two of it, and the result is the beautiful apartments on that side have all the light cut off. In one apartment at 11 o'clock in the morning you could barely see your hand before your face. I inspected it myself. They had to have a light there at 11 o'clock in the morning on a bright, sunny day. They were magnificent apartments, but they built this other apartment house so close that it cut off all the light and let in just a dim twilight there, and they had just damp air coming between the two buildings. If you looked at the floor space and the number of rooms you would say that on paper it was a fine apartment, but when you go in there you find that the people never get a ray of sun in their apartment. All they got was this cold air flowing in all the time, and they had to keep lamps burning at midday. In my judgment, it was not an ordinary depreciation on that building, but there was a double depreciation in there. There was a depreciation that came in due to the fact that another building had been allowed to be built so close to it, cutting off the light from those windows.

Representative HAMMER. I do not want to be understood that I oppose the amendment. I would like to see that amendment in the bill, but not as a substitute for it.

Representative BLANTON. It ought to be in the bill if there should be any such bill passed.

Representative HAMMER. I think they have ample law to cover these matters, but the amendment was introduced as a substitute for our bill, in which the pyramiding is made an indictable offense.

Mr. WHALEY. That is the only solution we could find. It is the only solution we could find with the railroads. The railroads were watering their stocks all the time and they tried everything to stop it. The only way they could stop it was by the Interstate Commerce Commission fixing the amount of bonds and the amount of stocks that might be issued for new construction. You know, Mr. Hammer, that you went through it down in North Carolina. Representative HAMMER. Yes.

Representative BLANTON. You provide for bringing a suit against the landlord in behalf of the tenant to collect any amount which you may hold is due the tenant. The landlord's property is always there responsible for the debts of the landlord, but if the proposition is to be just, should you not at the same time bring suits for the landlord against the tenant?

Mr. WHALEY. I agree with you about that.

Representative BLANTON. There is no way of collecting from the tenants, is there?

Mr. WHALEY. I have had an amendment prepared which is to be suggested to the committee to make that apply to both sides.

Representative BLANTON. But you bill covers only the one side.

now?

Mr. WHALEY. That is the old law. It is not the new law. I have that amendment prepared here providing that in case there is a decrease for the tenant the landlord should pay the amount