May I now finish this bread matter? We have another bread case which involved Mr. Bryan, Burns Baking Co. v. Charles W. Bryan, Governor of the State of Nebraska. It says;

Undoubtedly the police power of a State may be exerted to protect purchasers from imposition by sale of short-weight loaves. Schmidinger v. Chicago (226 U.S.).

I quote this case because it is the last case and the only case which cites, with reference to the authority of the State, the Schmidinger case, which I have already read, and especially calls attention to the fact it made no attempt to fix prices whatever:

Many laws have been passed for that purpose that a State may not under the guise of protecting the public arbitrarily interfere with private business

I will call the Senator's attention to that language—

or prohibit lawful occupation or impose unreasonable or unnecessary restrictions upon them. Constitutional protection having been invoked, it is the duty of the court to determine whether the challenged provision has reasonable relation to protection of purchases of bread against fraud by short weight and really tends to accomplish the purpose for which it was enacted.

This was a so-called shrinkage law with reference to bread, and the Supreme Court of the United States held that it must retain its weight after it was on the shelves of the purchaser, and the court. held that it was not sufficiently related to the end sought and therefore was unconstitutional, and that is the last word of the court on the question of bread.

Senator COPELAND. Does the Munn case come next?

Mr. MACCHESNEY. Would you like to take up that case next? Representative BLANTON. I believe you said that bread was just as important as housing.

Mr. MACCHESNEY. I am not telling the committee what is most important, but I suppose bread comes first.

Senator COPELAND. You know, General, the last word on bread will never be said.

Mr. MACCHESNEY. I do not quite know what that remark means. Senator COPELAND. It does not mean anything.

Mr. MACCHESNEY. I hope the Senator will bear in mind I did not seek this discussion to-night, but was asked to come here to do the best I could on it.

Senator COPELAND. I was shooting at another man, General.

Mr. MACCHESNEY. The case of Munn v. Illinois, of course, was a case in which those of us who come from the Illinois bar have always taken a special interest because it made new law and enlarged the powers of the Government to control public enterprises of all kinds.

The opinion was delivered by Mr. Chief Justice Waite, and it was argued on both sides very ably. There appeared against it from our State two of the ablest lawyers we ever had at our bar; but there are certain things with reference to that case which I desire to call to the attention of the committee, and I will read from time to time from the decision, but first I want to call your attention to the fact that whereas your rental law proposes to put all property to be built or now in existence for rent within the terms of the bill and prevents anybody from withdrawing their property from it, so that it impinges this law upon the owner without any redress, the Munn case lays great stress upon the fact that all they need to do to get out from under its regulatory provisions is to withdraw their property from the public use.

In other words, the owners of these warehouses advertised and held out to the public that they were public warehouses, seeking the deposit of grain there, and under conditions of monopoly and facilities otherwise which could not be duplicated, and the court held that having held themselves out as public warehouses they were subject to regulation as such, but all they needed to do was to withdraw from that position in order to be freed from the legislation.

Now, you may say that their mere existence as a warehouse, just like the mere existence of the house or building sought to be regulated, would constitute an offer to the public. In other words, if a man puts up a house and offers it for rent, you might say that that was an offer to the public as a public use. That would occur to you naturally, perhaps; but there is a very interesting case on that which went up, I believe, from the District of Columbia, the Terminal Taxicab Co. v. Kutz, in the October term of 1915, in 241 United States, page 255.

This was a case where a concern had taxicabs upon the streets of the city and offered them for public use and it was sought to subject them to the public regulation. They also had a lot of cars or taxicabs in their garage which would go to your house or to mine upon call, and it was sought to control those rates as well as the rates upon the public highway. They advertised extensively. They solicited trade. They urged the public to patronize them, and the court says with reference to that matter:

The rest of the plaintiff's business, amounting to four-tenths, consisted mainly in furnishing automobiles from its central garages on orders, generally by telephone. It asserts the right to refuse the service and no doubt would do so if the pay were uncertain, but it advertises extensively and we must assume generally accepts any seemingly solvent customer. Still the bargains are individual.

Now, that is also true in the rentals, unlike the innkeeper or the railroad

Still the bargains are individual, and however much they may tend toward uniformity in price, probably have not quite the mechanical fixity of charges that attends the use of taxicabs from stations and hotels. There is no contract in the third person to serve the public generally. The question whether as to this part of its business it is an agency for public use within the meaning of the statute is more difficult. Whether it is or not, the jurisdiction of the commission is established by what we have said, and it would not be necessary to decide the question if the bill, in addition to an injunction against taking jurisdiction, did not pray that Order No. 44 of the commission be declared void. Although I have not been able to free my mind from doubt the court is of opinion that this part of the business is not to be reagrded as a public utility. It is true that all business, and for the matter of that, every life in all its details, has a public aspect, some bearing upon the welfare of the community in which it is passed.

This is true of housing.

But, however it may have been in earlier days as to the common callings, it is assumed in our time that an invitation to the public to buy does not necessarily entail an obligation to sell. It is assumed that an ordinary shopkeeper may refuse his wears arbitrarily to a customer who he dislikes, and although that consideration is not conclusive, it is assumed that such a calling is not public as the word is used. In the absence of clear language to the contrary it would be assumed that an ordinary livery stable stood on the same footing as a common shop, and there seems to be no difference between the plaintiff's service from its garage and that of a livery stable. It follows that the plaintiff is not bound to give information as to its garage rates.

Now, that is a pretty clear case that solicitation of the public on the part of the business does not affect it with such a public use as

to justify regulation, and seems to me to be a fair case in point upon this question which we are discussing as to whether the mere building of buildings and offering them for rent constitutes an offer to the public under the Munn case, because the Munn case holds that you may withdraw from the public use. That is, the Munn case lays considerable stress upon the question of monopoly. It calls attention to the fact that the nature of the business is such as to constitute a monopoly.

I want to call attention to another fact, and that is that under the Munn case, and the cases cited and discussed there, there is a uniformity of service. That is to say, if you go to a warehouse and deposit your grain it is graded, it is put together, and so long as it is of a certain test and standard it makes no difference, whose grain it is. It all goes together and is handled alike telephone service, railroad transportation, and everything to which regulation is applied. That element of individuality is not present that you have in the rental of houses. You can not mix people up indiscriminately in hoppers and have tests made as to their character and intentions and health and social prestige and manners and all that, all of which go into the values of property, as you can in a warehouse. In other words, it is not capable of standardization in the way that all these businesses are which are discussed in the Munn case.

Senator COPELAND. But, General, you remember that in the Munn case great emphasis was placed on the fact that upon Chicago converged all these great western lines bringing in grain, and that in consequence it had become the greatest grain market in the world. Mr. MACCHESNEY. Yes; I remember that very well.

Senator COPELAND. Here we have a very peculiar condition. All the lines of government concentrate here. We have a section of the country given over practically exclusively to government and Government employees, 68,000 of them. Is it not very like the situation discussed in the Munn case?

Mr. MACCHESNEY. Does the Senator remember that that language was used in the Munn case to sustain the finding of the court that a monopoly of facilities existed for that reason? That was the purpose

of all that discussion.

Senator COPELAND. You know, I had in mind exactly there, General, that in a sense these gentlemen in the real estate business here have a monopoly of warehousing the employees of this Government. Mr. MACCHESNEY. But have they?

Mr. WHITEFORD. The Government has a lot of hotels that it can not fill.

Senator COPELAND. You know, I am very friendly in my discussion here, because I have an open mind. I warned the committee in the first place that I had a very serious question about the constitutional right of Congress to enact legislation along this line, and I am not sure but that the General has confirmed that suspicion in my mind. I am not going to say as to that, but while he is here, since you have brought him, I am anxious that he shall give the committee the full benefit of his wide knowledge, and I am sure you feel that way, too.

Representative BLANTON. If the Senator is through, there is one suggestion I want to make in connection with his statement. While

there are between 60,000 and 70,000 Government employees here, many of them live over in Maryland and over in Virginia; so many of them that last year we had 2,500 children in the schools of Washington from Maryland and Virginia, indicating that quite a number of Government employees live in those two States, across the river over in Virginia, across beyond Anacostia, and out through Chevy Chase into Maryland.

Senator COPELAND. What do you think, Mr. Chairman, about the proportion of the population in Washington of Government employees and their dependents? Is half the population here of that type? The CHAIRMAN. I should not think half the population were Government employees.

Senator COPELAND. No, but Government employees and their dependents.

The CHAIRMAN. I think a very large part of the population of Washington is employed in the Government and supplying Government families with the necessaries of life.

Senator EDWARDS. They are all that.

The CHAIRMAN. I should think probably 75 or 80 per cent of all the stores and all the conveniences here are for the Government. and the revenue to keep up the city comes from the Government Representative BLANTON. I am sorry, but I can not agree with the chairman, because I have made some investigation into that subject. There are numerous people living in Washington, wealthy people, who have lived here for years, some of whom were born here and some of whom have moved here for various reasons, who have no connection whatever with the Government. They are not in business; they are just enjoying the Nation's Capital, quite a number of them. I think the Senator would be surprised if he investigated to find out just how many of that variety there are.

Senator EDWARDS. Some come here and can not get away.

Representative BLANTON. I call them tax dodgers, because the rate of taxation here is $1.20 on the $100 as compared with from $2.50 on up to $6 and $8 in other large cities.

Senator COPELAND. They will move to Florida now, will they not, as a result of the change in the law there?

Representative BLANTON. I doubt it.

The CHAIRMAN. Go ahead, General.

Mr. MACCHESNEY. With reference to the question of monopoly. let us not lose sight of what the courts mean when they say "monopoly." We sometimes think there is a monopoly of opportunity and a monopoly of a lot of other things, but that is not what we are talking about. The court, in Munn v. Illinois, in discussing monopoly, means that a given line of business has such a location and such a relation to the business that the facilities can not be duplicated by others. That is what it means. That is not true with reference to the real estate business.

Senator COPELAND. Why not, General?

Mr. MACCHESNEY. There is nothing to prevent you or me, if we can borrow the money, from building a building to-morrow in the city for rent. The reason why we do not do it is because you have rent-control legislation either in effect or impending. That is one reason which would prevent a man from doing that if he had due

regard for the safety and the earning of his capital. I should like to go into that somewhat in connection with the matter of financing. The CHAIRMAN. Do you think that has influenced building in Washington?

Mr. MACCHESNEY. I think it has, and I will tell you why, Senator. The CHAIRMAN. Does the record show that it has?

Mr. MACCHESNEY. I think it does. I am advised that the building in Washington, while it has gone ahead during the period of rentcontrol, has not violated what I am prepared to show before I quitand I want to give the committee the benefit of some of the opinions of the great economists of the country which I have brought here to-night-has not violated the general economic law. Apparently, the number of permits issued and the amount of building would indicate that it had; but an analysis of that, I am told, shows it to be true that the building has been in houses for sale, and not for rent. Consequently, when a man put up a house and offered to sell it, he was not subject to this control, and he put up a house or a few houses and held them and sold them. It did not improve your rental market at all, but it did not subject him to your rental regulations; or else they were these large apartment buildings, built at high cost, which did not meet the emergency at all for your Government employees.

The CHAIRMAN. That is the claim that this committee makes. If there is any claim whatever for the necessity of this bill, it is that they have not met the emergency, because they have built the expensive apartment houses and not the cheap ones.

Mr. MACCHESNEY. And they never will. I will go on record, as one who is fairly familiar with financial operations in that field, as saying that in my judgment as long as you have legislation of this character you are going to have a shortage, and I will tell you why.

The man who believes in stabilized investment, the man who is putting in his own money, the careful, conservative investor, will not come into Washington with this sort of agitation going on and put in his money; and what happens? This is what happens-and this statement may not be agreeable to my friends from Washington, but nevertheless I am going to say it: It happens that you are turned over, to an extent not common in cities free from this sort of legislation, to the hands of the speculators; and why? Because those men borrow the cost of the building; they borrow all they can on the first mortgage, and they borrow all they can on the second mortgage, and they expect to get large returns, and do. The building costs more, very much more, because they have to pay high rates, and if they do it by second-mortgage financing they have to pay a still higher rate. I notice that your rate here is away up-what is it; 12 or 15 per cent' The CHAIRMAN. In this city they have been going as far as fifth trusts.

Mr. MACCHESNEY. Yes; and one reason for it is this: The man without a dollar in the world, your gambler or speculator, would build on this market, because he would go to New York or Chicago and borrow all he could on the first mortgage, he would borrow his second-mortgage money at 10, 15, or 20 per cent, and he has not any of his own money in the enterprise; and that man, by the way, also puts up short-time construction. Our experience has been in Chicago, where I was counsel for the building commission, that those men put up short-time construction because they get their