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this measure would provide another delay and another item of expense.

It is true that there have been some bad cases that have come through the 77 (b) mill, if I may put it that way. But the Federal courts are now getting under way and functioning under 77 (b). It took time in the first instance to get under way. It came on them suddenly, and the volume of it was tremendous at first.

If another delay is to be involved, I can foresee considerable damage to what is now a budding real-estate situation in Chicago.

I have figures with me that involve the various types of cases that have gone into the Federal courts under 77 (b)—unfurnished apartment buildings, cooperative apartment buildings, business blocks, hotels, and downtown office buildings.

One hundred issues picked at random showed an average price as of December 1934 on the bonds that were outstanding of 1612. As of December 1935 an increase of 5212 percent had occurred, and they show an average price of 251/2 on the same bonds over a period of time, indicating a strengthening of the situation in the Chicago market.

It is our fear as an organization that in the event a further pause and delay is about to be developed in permitting these properties to reorganize, further damage will be done, not only to the properties; but I think many of them will not come through under 77 (b), but will go

back to the other courts. We think that it will have that effect on our local market.

We want to see a fine situation enhanced so that it will develop to the point where it can be brought into greater increases. In some of the instances where the buildings have been reorganized, the benefits of the reorganization are just now becoming apparent. To create a further delay, in our judgment, endangers that process and that turn just about the corner.

We would like to have consideration given to our views on the subject. We believe that, after everything is said and done, a strengthening in the bond market and a strengthening in the realestate market will be of more benefit to the bondholders than any other force that we can conceive.

Mr. BENNITT. The next speaker is Mr. Robins, president of the American Title Insurance Association, of Philadelphia.

STATEMENT OF HENRY R. ROBINS, PRESIDENT OF THE AMERICAN

TITLE INSURANCE ASSOCIATION, PHILADELPHIA, PA. Mr. ROBINS. Mr. Chairman, I am president of the American Title Association, a title company of Philadelphia. I happen to be a member of the Philadelphia bar.

I am not speaking officially for the title association. I have been requested by several of the directors to come down here and express my views. So that they will be personal views and not the views of the association.

As I have sat here today listening to this argument and talk, it looks to me as though the thing to do is to find a remedy for an abuse which may or may not have existed. I think probably there has been considerable abuse in the way some of these reorganiza

tions have taken effect, and I think Judge Sabath has found out that fact.

In stating the losses which have been sustained, however, I don't think he drew quite clearly the distinction between the losses which the bondholders would have suffered anyway by reason of the collapse of real-estate values and the losses that they sustained by reason of the operations of these protective committees. They are two distinct losses. When they quote a bond as purchased at 100 and selling for 16 a large proportion of that loss resulted from the depreciation of real-estate values.

I personally object to this bill for the simple reason that I think that an amendment to the bankruptcy law on 77 (b) can be enacted which will clear up and provide a remedy to help abolish the alleged abuses.

My particular objections to this bill, after having had experience with quite a number of these Government agencies that have the power to make rules and regulations in regard to our business, is due to the fact that we have found that the delays have been tremendous and the expense has been terrific. All those agencies are requesting the business people of the United States to furnish them with information and certificates and other things at less than the actual cost to the corporations. If we don't do it we are called chiselers.

Here is another organization which will be vast. As was pointed out this morning, there are 4,000 counties in this country. Even if we get it down to the Federal districts, I think that there are about 2,360 of them. Multiply that by the number of employees which you would have to have in each, and that makes a tremendous organization all over the country, which will have to be paid for by somebody.

Then, this ex post facto provision, allowing the Conservator to go back to 1934 and at his mere whim open up matters that are closed, where rights of persons and property have been established. Properties have been purchased by them in perfect good faith. They had nothing to do with the failure of the transaction. Now that can all be upset at the whim of a Conservator. If there is any ex post facto power given to him, it ought to be confined to cases where there is fraud or some real reason for it.

I am not going to take you gentlemen's time any further, because those are the two objections that I had. But I do endorse the objections presented by some of the others almost in full. Thank you.

STATEMENT OF CLYDE W. SAVERY, REPRESENTING THE ASSOCIA

TION OF LIFE INSURANCE PRESIDENTS, NEW YORK CITY Mr. SAVERY. I represent the Association of Life Insurance Presidents, with headquarters in New York City.

Mr. CHANDLER. Where do you live?
Mr. SAVERY. Scarsville, N. Y.

We are interested in this bill primarily because of certain changes that it proposes to make in section 74 of the present Bankruptcy Act, which is the so-called individual debtors' section,

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Specifically, those changes are the ones provided at page 17 of the bill under section 3 of the bill, being that a proviso would appear in this bill if it became enacted into law, as follows: that except as hereinafter provided, no extension or composition shall reduce the amount of or impair the lien of a secured creditor, but shall affect only the time and method of liquidation.

Following that sentence as changed, the following sentence would appear:

A composition or extension of the debts of an individual debtor may reduce the amount of or impair the lien of secured creditors if the proposal for such composition or extension shall have been approved by the Conservator.

We received word of this hearing at such a late hour yesterday that I did not have time to prepare any memorandum definitely expressing our position on this particular point. But I do want to call it to your attention and ask if it would be satisfactory with your committee if we would be allowed reasonable time within which to put our thoughts into a more specific form in the shape of a memorandum and get that into your committee's hands.

Mr. CHANDLER. If you do it promptly, it would be agreeable.
Mr. MICHENER. How long will it take you?

Mr. SAVERY. Tuesday or Wednesday of next week would be satisfactory with us, if it is all right with you.

Mr. CHANDLER. That is satisfactory.

Mr. BENNITT. Mr. Chairman, that concludes, as far as I know, those that wish to be heard in opposition to the bill.

I have been asked by my organization, the National Association of Credit Men, if it is in order, in connection with our position about this bill as it has been expressed by Mr. Montgomery-our business friends are very anxious to see if there is some way to meet this situation merely by amendments—to have you consider H. R. 10382, in which we have considered it possible to remedy some of the problems that have been brought out by Mr. Sabath's committee and others. They wish me to bring that expression before the committee here today and say that, if the committee in its comprehensive treatment of the act can accomplish its ends in the form of a bill such as is now introduced as 10382, we would appreciate it very much.

Mr. CHANDLER. If there is any other gentleman who wishes to be heard, who does not happen to be under the jurisdiction of this special committee, we would be glad to hear from him if he wishes to speak in opposition to this bill.

(No response.)
I suppose that nobody wants to be heard.

STATEMENT OF HON ADOLPH J. SABATH—Resumed

Mr. SABATH. Mr. Chairman and gentlemen of the committee, I am not going into this bill except to reiterate what it is desired to do.

By this bill that our committee has drafted we are trying to pass a fair law without doing any violence to the courts or to anyone interested.

We have requested all the judges all over the United States, and the bar associations wherever possible, and the outstanding lawyers, to give us their advice and their suggestions. We have embodied in our bill the recommendations of men of experience, who have no selfish reasons or motives in the legislation.

Mr. McLAUGHLIN. Pardon me right there. Did you receive any replies from these organizations?

Mr. SABATH. Yes. We have received and I have letters here from many judges.

Before I say anything else, I want to thank these gentlemen who have opposed some of the provisions of the bill for actually, giving the committee some credit for its labor and its efforts to eliminate these many existing abuses.

Mr. CHANDLER. That seems to be general.

Mr. SABATH. It is general. There is not a day when I go upon the floor when there is not a dozen or two dozen people who ask me when we are going to report the bill out, so that they can report to their unfortunate people at home, who are asking what will be done and in what way they can be aided and assisted.

Some of these gentlemen, of course, are lawyers, and they represent certain interests. I do not. I represent the committee that has been working on this thing, and the House and more or less the people who are vitally interested.

It is strange that these organizations who have known of our activities for these nearly 2 years, and who have admitted today that there is a need for some changes at least in the bankruptcy act, as well as in 74 and 77 (b), that they never have come forward and suggested or requested or recommended any changes in 77 (b) or 74.

The bar associations have not taken any active part, nor have the real-estate boards. Unfortunately, many of the real-estate boards and the officers of the real-estate boards were found by this committee to be vitally interested, because they have been appointed in many instances as receivers and as trustees; and many of the attorneys of the bar, the most important ones, have been the attorneys for these committees, and have prepared these deposit agreements, in which these gentlemen here today say unfortunately these people have given away the rights and interests, whatever interest they did have, in these bonds. These deposit agreements have been formulated and prepared by the outstanding firms in all localities, firms that some of these gentlemen here are members of.

And this is nothing new. We had this years ago with the protective committees as to railroads; and you know what was done in many instances where these committees had not protected the rights of the stockholders or bondholders.

I concede that there may be some provisions in this act that should be perhaps modified or changed. Neither I as chairman of the committee nor any member of this committee is wedded to the very words of this bill. If some of these gentlemen feel that we should also provide that before a reopening is permitted, fraud should be shown, and you come to the conclusion that that should be done, well and good. We are going to give you reasons why that should not be done, because it will be the hardest thing in the world perhaps to prove that there was fraud or collusion.

If I had the time and if I had the nerve to ask you to read the hearings, you would come to the conclusion the same as I that there was collusion between these committees and these outstanding firms,

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where they have misled the courts, the courts having no assistance, no time, and no experience. Many of these big firms and these

, committees have imposed upon the judges to such an extent that the judges have thanked this committee, many of them, for the aid that we have been able to give them to eliminate some of these collusions and the fraudulent compositions and reorganizations.

I am not a constitutional lawyer myself, and I am not a youngster; and I do not have the ability nor the force any more that is required and that should be mine to cope with all of these abuses and to cope with the best brains of the United States. The brainiest lawyers and manipulators have been behind this movement and are interested in these reorganizations and in these committees.

Do you know that under the deposit agreements, where they started to charge 5 percent, and later on they cut it to four and then

5 three, that the fees that run to these committees, even cutting it down to 3 percent, would amount to close to 500 million dollars, to say nothing about the attorneys' fees and depositaries' fees and appraisers' fees, and many other fees? Why, this goes into millions and millions; and it all comes out of these unfortunate bondholders.

These are facts that I am giving you. Each and every gentleman that appeared here admits that there is a need for change in our present law, especially in 77 (b).

Under 77 (b), at the end of all these years, as they did from the very beginning, the moment they see the State courts start to be fearful of investigating their conduct, and they start to rule in the interest of the bondholders, many of these gentlemen jumped in over night and incorporated in the evening, and the next morning filed under 77 (b); not only in one case, but in many, many cases.

And then they went out of the jurisdiction. In the State of Illinois they have filed from 60 to 75 cases in Danville, which is about 100 miles from Chicago, because they thought that they had taken these cases out of the State courts. Then the Federal judges started to view with alarm what has been going on in the State courts, and the State courts have been imposed upon.

There is one great, big ring in every city. Mr. Fuller has called attention to the court conditions.

We have the same thing in Chicago to a greater degree. There is one firm alone, the Chicago Title & Trust Co., that is acting in thousands of cases as trustees and as receivers and managers and as the attorneys and as depositaries; and that firm controls nearly 77 of these companies in the city of Chicago, and most of them are under their control and guidance.

Before I forget, I will say this to you gentlemen: We have accomplished a great deal. We have forced some of these committees to give up, and we have given the bondholders the right to appoint their own members to their own committees. In many instances, where it was believed that the bondholders could not recover anything at all, they now have the property in their own possession and control; and it is worth 100 cents on the dollar.

Many of these bondholders' committees are guilty of fraud, guilty of perjury, against these bondholders whom they made originally to believe that they were going to protect their interests. It is the greatest crime, to my mind, that has been permitted in our country.

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