all of these loans myself.

of those two institutions.

There is not a loss of a dollar on any one
That is on something like, you might say,

$1,400,000 of loans. If you had it in Government bonds you would

have lost 16 per cent on some of them.

Senator WATSON. That is temporary, let us hope.
Mr. HILL. Yes; we hope it is temporary.

I shall be glad to answer any other questions about the bill. I have been in this business for 28 years. I have never drawn a salary from any of these institutions. I have made a specialty of trying to provide money for 28 years to people desiring to own and build small homes; and I know from my own experience, though I can not speak for the other fellows, the soundness of those loans.

The two essential things in this whole land mortgage business, home mortgage business, are sound appraisal and ability to sell your bonds. If some wild-cat mortgage company comes in and appraises property at twice its value, and makes a loan to my knowledge in thousands of cases of from 90 to 125 per cent of the value of the property as appraised by our people, you may expect trouble.

Senator MORRISON. But you do not think banks and trust companies and building and loan associations have made appraisals of that character on loans, and will not in the future?

Mr. HILL. No, sir; not only that, but they have helped to prosecute those people and run them out.

Senator MORRISON. Do you not know, Mr. Hill, as a fact that those other people you refer to have made loans all over our section of the country, and so amortized the payments that they are paying rates of interest away above the legal limitation?

Mr. HILL. Yes, sir; and as high as 13 per cent. It is not a question of per cent; it is a question of a scheming man of small means unloading his house on a wild-cat company.

Senator TOWNSEND. What is your legal rate of interest?

Mr. HILL. Six per cent.

Senator MORRISON. And they have made these mortgages all over the State and so arranged the payments that they appear to pay 6 per cent, and they really pay 13 per cent.

Senator TOWNSEND. What is the penalty for that sort of thing? Senator MORRISON. Nothing. There is no criminal statute prohibiting it. There is a provision that the man paying it can bring a civil action and recover back the amount he pays double, which nobody will do, because they are forever damned in commercial life, of course, if they do; so they pay it, or their homes are sold out under it; and this bill will help provide some place to which worthy home owners can go, through proper channels, to get accommodations which a sound banking system ought to give them.

Mr. HILL. If there are any questions about the bill that you gentlemen have any doubts about, it has been my life's business, and I ought to know about it. If anybody has any doubt about the soundness of the general proposition, I should be glad to answer questions in regard to it. I do not know about the little details that may be worked around in the bill.

Senator WATSON. We regard it as a sound proposition, so far as that is concerned, but there are a good many details that have to be worked out and, of course, there is much information which we would like to have before we finally act on it; but we will dig that out during the progress of this hearing.

Senator MORRISON. I think you have helped us a whole lot.
Mr. HILL. Thank you.

Senator WATSON. We are very much obliged to you, Mr. Hill.

I promised some gentlemen from Baltimore that they might be heard at this time.

STATEMENT OF HARRY E. KARR, BALTIMORE, MD.

Senator WATSON. What is your name?

Mr. KARR. Harry E. Karr.

Senator WATSON. Where do you live, Mr. Karr?

Mr. KARR. Baltimore.

Senator WATSON. What is your business?

Mr. KARR. Lawyer.

Senator WATSON. Are you familiar with the provisions of this bill in a general way?

Mr. KARR. In a general way. I listened this morning to the reading and explanations that were made of the bill.

Senator WATSON. Whom do you represent?

Mr. KARR. I represent the Real Estate Board of Baltimore City and also the Maryland League of Building Associations.

Senator WATSON. Tell us what those institutions are and what their business is.

Mr. KARR. The Real Estate Board of Baltimore is just a general real estate organization, consisting of men who are engaged in the business of real estate, as well as associate members made up of the general business men of the city. The Maryland League of Building Associations is a league the members of which are the various building associations throughout the State of Maryland.

Senator WATSON. Are those voluntary associations?

Mr. KARR. Entirely voluntary associations.

Senator WATSON. Not organized under any State statute?

Mr. KARR. Not organized under any State statute and are simply for the purpose of promoting the best interests of their respective avocations.

Senator WATSON. You may now proceed with any statement you care to make, Mr. Karr.

Mr. KARR. Generally speaking, the bill as proposed we are in hearty sympathy with.

Senator WATSON. Tell us why.

Mr. KARR. I may state probably my own viewpoint, which I believe would reflect what most of us feel, and that is that you are undertaking in this bill to set up, so far as teal-estate mortgages and real estate itself are concerned, an institution similar to the Federal Reserve Bank in its relation to the general banking business.

Senator WATSON. Your real-estate mortgages are on city property altogether?

Mr. KARR. City, county, farms. Well, the building associations are scattered all through the State.

Senator WATSON. Yes.

Mr. KARR. But we realize, as practically every man must realize, that the time is here now when the ordinary banking institution does not care to take as collateral real-estate mortgages. Real estate finds itself, if it needs to get assistance from a bank, that what it has to

offer is not what they call liquid security, and under present conditions you have the slowing up generally of all real-estate business and a very serious question for the future, and for perhaps for some time to come, after the depression is over is what is going to be the attitude of the banking world toward real estate, whether or not real estate is going to be accepted as collateral, or whether mortgages can be accepted as collateral.

Just as the gentleman who preceded me stated in connection with building associations, there are times when they must have accommodations. At the present time, because of the slowing up of general business and real estate and that sort of thing, there has not been much request at our banks to advance funds to building associations. Most of them have been able to carry on themselves.

However, many people find themselves to-day in our section, where there is not any particular distress, that it is necessary for them to get a loan, and it is rather difficult to get, because many of the building associations are not able to get accommodations at the banks and find they must conserve what cash they have on hand to meet any withdrawals by reason of the fact, as has been explained by Mr. Hill, you have two classes of people in a building association, those making deposits, who never borrow, and those who are borrowers. When times of this sort come, those who have made their deposits, of course, want to go and withdraw for the purpose of their use, in the same manner as they would withdraw from any ordinary savings bank.

Senator WATSON. Do your loans on real estate in Baltimore consist of lands and residential properties, hotels, business property or what?

ture.

Mr. KARR. None of our building associations, Senator, make loans of very large amounts. The loans practically all are on small homes, residences. It is practically all confined to that character of strucIt is very seldom that any building association, except in times. when money piles up, takes loans of any large size. But I should say 99 per cent of all the loans we make would probably average around $5,000. I don't think they would exceed that.

Senator TOWNSEND. Are your building and loan associations supervised by the State?

Mr. KARR. That is the point I am coming to and that is the reason I am here to-day. We have two peculiar conditions in Maryland. I do not think any State on the Union has a better reputation, or the building associations have a better reputation in any State than they have in Maryland. The Maryland building associations are strictly mutual, and for many, many years we have enjoyed the highest confidence of the public. We have never been under any State supervision. Maybe it is because of the building associations that have grown up with us have originally come out of the small localities. However that is, a building association would be started in a certain locality in the city and draw its strength entirely from the people surrounding that given section. So they have grown up until to-day we have a number of building associations in our city with large deposits; the highest has somewhere around five millions on deposit. We have many that have two or three millions. We have quite a number of over a million and a great many that run around half a million. I imagine that the

lowest that we have possibly runs around a hundred or one hundred and fifty thousand.

Senator WATSON. How many building and loan associations have you?

Mr. KARR. Between eight and nine hundred in Baltimore City. Senator COUZENS. And you have no supervision from any source. Mr. KARR. From any source, no.

Senator TOWNSEND. What is your judgment about that?

Mr. KARR. My experience is that on every occasion that we have introduced a bill in the legislature to provide for supervision of building associations, which has been done a number of times in the past 10 years, we have failed. There have been attempts to effect supervision. There have always been objections to that. In the first place, there was quite some feeling on the part of the building association men that banks desired the supervision, which would be drastic, thereby effecting this building association in favor of the banks. I do not give that very much credence. But, certainly, our own record has shown up so much better under no supervision as compared with any other State that has supervision, that we think it a mistake to undertake to be supervised. That is the plain, unadulterated fact.

Senator WATSON. I wish we could get the people of the United States to think that way about a lot of our institutions.

Mr. KARR. We are still old fashioned enough in Maryland, Senator, to think that the best supervision that you can give of any institution is the character of the men that are running it.

Senator TOWNSEND. Have you had any failures?

Mr. KARR. Senator, I don't think we have had any, outside of one or two minor associations, involving very small amounts.

Senator TOWNSEND. That is a very remarkable statement, I should

say.

Mr. KARR. And in practically every instance, I think, since I have been at the bar, which is a matter now of 35 years, except back some 25 years ago when we had one of these upheavals and crashes and panics I remember we had to put out scrip at that time; I think there were several building associations failed then.

Senator WATSON. How much

Mr. KARR. I would like to finish this one idea, Senator.

Senator WATSON. Go on.

Mr. KARR. But since that time every building association that has failed with us has only failed because of thievery, which, I do not care what supervision you have, you can not check.

Senator WATSON. I have understood that.

Mr. KARR. All of these years we have never had any major failure. Senator WATSON. To what extent has the borrowing from building and loan associations ceased in the last few years?

Mr. KARR. I do not quite get that, Senator.

Senator WATSON. The borrowing from building and loan associations?

Mr. KARR. You mean now?

Senator WATSON. Yes; or the last two or three or four years. Are you making fewer loans to-day?

Mr. KARR. We are making fewer loans to-day; yes. It has been gradually slowing up for the past two years.

Senator TOWNSEND. That is for the reason that building has ceased, is it not?

Mr. KARR. That is very likely for the reason that building has ceased. I would not say that Baltimore is overbuilt, but at the present time we can take care of practically all the housing that is I do not think it is underbuilt, but of course the building and loan associations have a great increase in applications for loans when building is active, because then people are buying new homes, and they are changing from one section to the other.

Senator WATSON. If you have a surplus, such as you have described, in your building and loan associations running up to as high as $5,000,000 in a single association, why do you not spend it at this time?

Mr. KARR. I didn't say we had a surplus. I said we had deposits. Senator WATSON. Oh, deposits.

Mr. KARR. Every building association with us has a certain amount of surplus. The surplus, I would say, averages around 4 to 5 per cent with the most of them. At the present time we have invested in mortgages, the building associations, something like $200,000,000 in the State of Maryland.

Senator TOWNSEND. Mr. Karr, you have read this bill. If you have no supervision in your State, can your associations get relief under the language of this bill?

Mr. KARR. We can not. That is why I am here. I think the bill is an admirable one and I think is one which can be of real value to the country. I think it has got to be flexible enough to meet the several conditions that exist in the various States. I think this bill ought to be amended so that the question of whether or not you have State supervision or you do not ought to be left entirely to the judgment of the State.

Senator TOWNSEND. You may or may not have knowledge of how many States there are, where there is no supervision by some commission or some officers of the State.

Mr. KARR. I have not, Senator, accurately, but I think there are only two.

Senator TOWNSEND. That is Maryland and what other?

Mr. KARR. I think Maryland and South Carolina. I think they are the only two States that have no supervision.

Mr. O'BRIEN. I might ask this: Do you propose to take Maryland and South Carolina under the same general language which will exclude from the benefits of this bill unregulated institutions in States where there is regulation?

Mr. KARR. What I propose is that you allow the institutions in every State to come under the laws that exist in that State. It has been suggested here that this bill be amended whereby we would be allowed to subscribe, if we have no power under our present laws by which our individual institutions can subscribe. You are allowing us 42 months within which we can subscribe. It has been suggested that a provision be put in whereby within 42 months we must comply with this law to have State supervision. I do not think that helps. I do not think it helps anything, because I think it comes back very much to the situation you have in every community.

Every community certainly does take care of itself. If it is thrifty, they know the character of law that they want. They know the thing