and general legal effect of deeds, mortgages, land contracts of sale, and leases, a general and fair understanding of the obligations between principal and agent, as well as of the provisions of this act."

It is not believed that this requirement is too restrictive in view of the responsibility of the work of a broker. The requirement last mentioned does not apply to an applicant for a salesman's license.

By the first paragraph on page 7 of S. 1716, license was denied to any firm, person, and so forth, whose application has been rejected in the District or any State within six months previously, or whose license has been revoked within two years previously. In the draft bill these periods have been cut down to three months and one year, so that there may be no charge of harshness or severity, or undue restriction of licenses.

Section 7 (pp. 12 and 13) of S. 1716 has been changed in the draft bill by the elimination of the requirement for a "pocket card" to be carried by brokers and salesmen. It is not unlikely that such card might do more harm than good by giving a standing with customers which might not be deserved by some of the possessors of the cards, including mere finders of a card. Furthermore, the pocket card feature involves "bookkeeping" which serves no really useful

purpose.

S. 1716 provided a fee of $10 for a real-estate broker's license. This is in accordance with the laws of some States, but the New York fee of $15 for cities of the second class does not seem exorbitant or prohibitive in the case of a realestate broker, particularly as the prtsent license fee in the District is now $50 a year.

No change has been made in the fee for salesman's license, amounting to $5 a year, which corresponds with the fee in other States.

It seems likely that under the provisions of the bill, S. 1716, a real-estate salesman would have to pay for a new license each time he changed employers. In the draft bill the following provision has been incorporated:

"There shall be no additional fee for the reissuance of a salesman's license necessitated by the change of employers, nor shall such change work a revocation or require a renewal of the salesman's bonds."

The causes for suspension or revocation of license incorporated in the bill, S. 1716, correspond with those in the laws of other States and only slight changes have been made in the wording of most of them in the interest of clarity.

In the cause for suspension or revocation, designated "J," the word "improper" has been eliminated in its reference to dealing so that the clause in the draft bill reads:

"(J) heen guilty of any other conduct whether of the same or different character from that hereinbefore specified, which constitutes fraudulent or dishonest dealing."

It is believed that "improper dealing" would be too broad a ground for the denial of the right to engage in the real estate business; it might be used as a means of arbitrary or unwarranted action on the part of the commission, to satisfy personal animosity, etc.

Three provisions, or paragraphs, appear on pages 18 and 19 of the bill, S. 1716, the effect of which is to relieve real estate brokers, members of real estate firms, corporations, etc., from revocation or suspension of their own licenses or the licenses of their firm or company unless "it shall appear to the satisfaction of the commission that such brokers, members, or officers had guilty knowledge" of the violation.

These are unusual provisions, not found in the laws of the great majority of States having a real estate licensing act. They have been eliminated from the draft bill, because they are, in fact, an invitation to perpetrate fraud by indirect means, without liability.

In section 9 of the bill S. 1716 provision is made for a hearing before denial of an application for license or before suspension or revocation of a license. In the draft bill, this provision has been amended by providing that the hearing shall be public. It is believed that this will not only serve as a deterrent to conduct which might result in a hearing and unprofitable publicity for violators of the law but deter the commission from taking any unwarranted or unjust action.

The enforcement section of the draft bill has been materially strengthened, as compared with the bill S. 1716 by empowering the commission to require the production of books, records, and documents, and giving the Supreme Court of the District power to punish for contempt if a subpoena of the commission is disregarded.

In the draft bill, as a protection to dealers and salesmen, provision has been made that will allow appeal to the Supreme Court of the District for a review or other relief if the commission fails to take action within 60 days after formal request by an applicant or licensee. It might be possible for the commission, by mere failure to act, to do a great injustice.

Provision has also been made in the draft bill for an appeal from the Supreme Court of the District to the Court of Appeals.

The provision as to nonresident brokers and salesmen is especially important in the District of Columbia because of the close proximity of Maryland and Virginia. Thousands of people who do business in the District of Columbia daily live in the adjoining States. In the draft bill a change has been made so that it is not necessary for a nonresident applicant for a license to have the recommendation of District property owners, provided he has the recommendation of property owners in his own State; nor is it necessary for a broker from another State to maintain an active place of business in that State.

Section 11 of S. 1716 has been modified in the draft bill so that the commission will not have blanket authority to public "such other information relative to the enforcement of the provisions of this act as it may deem of interest to the public." Instead the draft bill provides for the publication of a succinct report yearly. Inasmuch as the commission's records are published, the provision of S. 1716 that a list of licensees and those whose licenses have been suspended or revoked, shall be filed with the Supreme Court of the District of Columbia and held there as a public record, is useless. In the draft bill this provision has been eliminated.

The draft bill includes a provision empowering the commission to administer oaths to witnesses. This, of course, would make the witnesses subject to the penalty of perjury.

The draft bill, like the Wisconsin law, exempts from licensing provision "any bank, trust company, building and loan association, or any land mortgage or farm loan association organized under the laws of the United States, when engaged in the transaction of business within the scope of its corporate powers provided by law."

Certain provisions of the Pennsylvania law have been incorporated in the draft bill. These provide for revocation forthwith of the licenses of persons convicted in the courts of forgery, embezzlement, and so forth; the suspension of a license in the discretion of the commission in the case of licensees indicted for similar crime; the revocation of a partnership or corporation license in the event of revocation or suspension of the license of an officer or member unless such officer's or member's connection with the business be severed; and a specific prohibition against issuance of a license to any person who at any time within five years has been convicted of forgery, embezzlement, or a similar crime, or to any association or corporation with which such person may be connected in a controlling way.

To meet the situation, which has become a public scandal in the District of Columbia during recent years, a provision has been incorporated in the draft bill making it unlawful for any person, firm, or corporation to execute deeds or deeds of trust of exaggerated amounts not representing the value of the property or the amount of an actual loan, where such instruments are executed for the purpose of misleading and defrauding others, and results in the detriment of others.

The need for such a provision was fully demonstrated in Senate Report 530, Sixty-eighth Congress. It has been further demonstrated in the investigation by the grand jury of the operation of the Smith Co., now under indictment, and specific facts to prove the need are given in section 1 of this report, pertaining to the sale of securities in the District of Columbia.

There has also been considerable complaint in the District of Columbia concerning what are known as "straw man" contracts but I believe that existing laws are sufficient for protection in this respect if the person who deals with a broker or salesman uses ordinarily good business judgment.

In the draft bill the words "director and employee" have been added to the penalty section as compared with the bill, S. 1716, so that not only an officer or agent of a corporation or member or agent of a firm participating in a violation of the act, but the others designated also, shall be subject to the penalties prescribed.

The provision of S. 1716 stating, the penalties "shall insure to the real estate commission" has been eliminated from the draft bill.

S. 1716 provides, "this act shall not be construed to release any person from civil liability or criminal prosecution under the general laws of the District of Columbia."

In the draft bill the provision has been made to apply also to partnerships, associations, or corporations. From a technical standpoint, there are no "laws of the District of Columbia," but only laws of the United States applying to the District of Columbia. Changes have been made accordingly in the draft bill. S. 1716 provides in section 12 that "the corporation counsel of the District of Columbia * * shall advise the commission and at its request attend any and all hearings which it may hold." The corporation counsel has a multitude of other duties and the draft bill is worded so that his assistants may advise and attend hearings in his stead.

CONCLUSION

There is admitted and demonstrated the need for licensing of real-estate brokers and salesmen to protect the public from fraud, misrepresentation, and dishonest practices generally. The draft bill herewith submitted and hereby recommended to the consideration of the subcommittee is in general accord with laws which have been in effect in various states for a number of years, whose constitutionality has been upheld by the United States Supreme Court as well as State Supreme Courts, which have fulfilled their purpose of public protection, and which have not imposed any real hardships on those legitimately engaged in the realestate business.

The bill will not prevent or correct all abuses or wrongs arising in the course of or out of real-estate transactions, but it will serve a very useful purpose. In a separate and supplementary communication to the chairman of the subcommittee I have recommended action on a certain phase of the situation which it is not necessary or advisable to discuss in this section of the report.

Additional information on the several matters discussed in this section of the report is available.

Respectfully submitted.

O. H. BRINKMAN.

Senator BLAINE. Now I would like to hear from the local representative of the real estate brokers' board, Mr. Petty.

STATEMENT OF JOHN A. PETTY, EXECUTIVE SECRETARY WASHINGTON REAL ESTATE BOARD

Mr. PETTY. Mr. Chairman, I care to make only a very brief statement. The bill introduced by Senator Capper was introduced at my request and it followed the provision of the model license act that was prepared by the general counsel of the National Association of Real Estate Boards about 10 years ago. In its general principles, the bill follows similar laws that now exist in 25 States, those States being the following: Arkansas, Colorado, Florida, Idaho, Iowa, Montana, New Jersey, North Carolina, Pennsylvania, Virginia, Wisconsin, Alabama, Illinois, Louisiana, Ohio, Michigan, Arizona, Georgia, New York, California, Delaware, Washington, Utah, Wyoming, and Oregon.

When the matter came up in the House committee, a similar bill had been introduced at our request. Mr. Brinkman appeared before the committee and presented your bill, which Mr. McLeod introduced. Then we had several hearings on it and the amendments that Mr. Brinkman and I worked out clarified some of the points.

There was some difference between the bill that Mr. Brinkman prepared and the one that we offered, but they were more or less minor, with the exception of one section, to which the board offers no objection. I refer to the section with respect to simulated loans and simulated sales.

The Washington Real Estate Board indorses this resolution and has accepted the Blaine bill, known as the McLeod bill in the House,

and they sincerely urge that Congress enact this legislation, as we believe it will provide an unusual measure of protection to the people of Washington in their real estate dealings, and particularly that class of people who usually do not have contacts with bankers and lawyers and others from whom they can seek advice.

I would like to state for the record in connection with Mr. Brinkman's remark that the amendment to his bill over the Capper bill was that it eliminated the possibility of any "ring" and provided open hearings and ample protection so a man could not be denied his license.

There was nothing in the Capper bill that could be construed as creating a real estate ring. I will admit that the hearings designed to be held before a man's license was revoked did not have to be public hearings and in that respect I followed the exact language of the model act. But I know from experience that in no State of the country under the operation of this legislation are the hearings held in any way other than open and, of course, that was our intention. I would just like to make that correction in the record. We sincerely hope that Congress will enact this legislation.

Senator BLAINE. Is there anyone else who desires to speak in behalf of the proposed bill who might add any additional valuable information? If not, we will be glad to hear from anyone who is opposed to the bill, the general policy of the bill, or any special feature of the bill.

Usually objectors are very promptly on their feet, and I presume there are none here this morning.

Mr. PETTY. Might I say to the chairman that there were no objections at the hearing in the House to the bill on principle, but there was one man who objected to having any real-estate man on the commission.

Is that correct?

Mr. BRINKMAN. Except one as to the fraudulent-sale part.

Mr. PETTY. Yes; there was one objection to that from outside. Senator BLAINE. I think I have had a letter from someone objecting to any real-estate agent being a member of the board. As I understand it, in those States where they have created a separate realestate board one member must qualify as a real-estate agent or broker. Mr. BRINKMAN. In some States all the men are real estate men. In Wisconsin, I believe, and some other States all of the members are real estate men.

Mr. PETTY. Yes; and in some of the States the bill provides the governor shall appoint from a list of men who are members of the real estate organization.

Senator BLAINE. I personally feel that one representing the group which is being regulated ought to be on the board. It is not to protect those who are being regulated, but rather because of the public service he can render on account of his familiarity with the business. Mr. BRINKMAN. Mr. Chairman, here is a letter from the Comptroller General of the United States with reference to accounting for fees. I think the suggestion he makes might be worked out without much. difficulty.

Senator BLAINE. Let me state it, then, for the benefit of the record. Mr. BRINKMAN. I have not read it all myself.

Senator BLAINE. In accomplishing the purpose he has mentioned, on page 5, lines 22 to 25, and page 6, lines 1 to 6, section 3, referring to the House bill, the language in those lines should be stricken out and for it should be substituted the following:

All fees, charges, fines, and penalties collected by the commission under the provisions of this act shall be paid at least weekly to the collector of taxes in the District of Columbia for deposit in the Treasury of the United States to the credit of the District of Columbia.

The annual estimates for appropriations for the government of the District of Columbia for the fiscal year 1931 and succeeding fiscal years shall include estimates for the appropriation for the operation and maintenance of such office. (See act of April 24, 1926, supra.)

Of course that is purely a question of administering the financial end from the standpoint of the general laws that regulate governmental affairs.

Mr. PETTY. There would be no objection to anything of that character. One thought comes to my mind: Supposing an application was pending and it was pending for a long term this opinion says within a week. That is only a detail, but we could have no objection to working out the administrative features.

Senator BLAINE. Do I understand that the fee to be collected is paid at the time of the application?

Mr. PETTY. It is to accompany the application.

Senator BLAINE. Then, of course, that fee would go into the Treasury of the United States.

Mr. PETTY. That is the difficulty.

Senator BLAINE. And then there would have to be an application to have it refunded.

Mr. PETTY. An application may be filed and subsequent to the expiration of a week's time the application may be withdrawn or may be denied.

Senator BLAINE. Then that ought to be modified:

Paid in weekly to the collector of taxes for all licenses issued.

Mr. PETTY. Yes; I think so.

Senator BLAINE. The board holds the money until it is determined whether or not there is going to be a license issued.

Mr. PETTY. In other words, the bill provides 10 days' notice for a hearing before you deny the license, and it might complicate the return of the fee if the license were ultimately denied.

Mr. BRINKMAN. I think that can be worked out with the comptroller.

Mr. PETTY. I am satisfied of it.

Senator BLAINE. That is a very simple matter.

If Mr. Brinkman will consult the comptroller, the comptroller will want to prevent this wholly unnecessary procedure of paying it in and paying it out.

If there is no other person who desires to be heard, we will take up the bill relating to foreclosure of mortgages.

(The subcommittee then proceeded to the consideration of other business.)