The rent stabilization program is of great importance to landlords and to tenants, as well as to organizations which represent or are interested in the welfare of these groups. Accordingly we have always accepted the cooperation of such organizations, but we have laid down the same rule for everyone- we welcome your cooperation, but if you believe that you have found anything that requires official action you must bring it to us and it is our job to check it and to take action if action is required.

Criticism

Rent stabilization has been prolonged for reasons which bear no relation to its proper purpose. The cities of Minneapolis and Pittsburgh are cited as ex

amples.

Reply

In 1940, according to the United States Census Bureau, the gross vacancy ratio in Minneapolis and Pittsburgh were 3.26 and 2.62 respectively. In 1950 the gross vacancy ratios were only 1.62 and 1.42. More recent information is

not available for Pittsburgh, but a complete survey of rental vacancies was made by the Office of Rent Stabilization in Minneapolis in April 1952. Queries were addressed to 13 leading realtors and property managers, and all classified advertisements in the Minneapolis "Star" and "Tribune" were tabulated for the period April 13 through April 19. In this city of 521,718 people there were only 127 family dwelling units that were vacant and available for immediate occupancy. Of this group, all but 37 were one- and two-room units, and in 10 of the 37 units children were prohibited. Of the remaining 27 family-size units, four rented for $73 per month, 12 rented between $85 and $100 and 7 rented at more than $100.1 RE RIGHT OF A LANDLORD TO A JURY TRIAL IN AN ACTION UNDER THE HOUSING AND RENT ACT OF 1947, AS AMENDED, FOR INJUNCTION, RESTITUTION, AND STATUTORY DAMAGES

1. The seventh amendment creates no right of trial by jury. In suits at common law, where the value in controversy exceeds $20, the amendment provides that "the right of trial by jury shall be preserved." The seventh amendment to the Constitution thus restricts or preserves the right of trial by jury "in suits at common law," and rule 38 of the Federal Rules of Civil Procedure preserves such right to jury trial "as declared by the seventh amendment or as given by a statute of the United States."

Construing the seventh amendment, it has been held that a landlord has no right to a jury trial in an action under the Housing and Rent Act as amended for injunction and restitution since these are equitable remedies, and since a defendant at common law had no right to a trial by jury in an equitable suit (McCoy v. Woods, 177 F. 2d 354 (C. A. 4); Orenstein v. U. S., 191 F. 2d 184 (C. A. 1); Tanimura v. U. S., F. 2d (C. A. 9), decided March 6, 1952, not yet reported; see, too, Block v. Hirsch, 246 U. S. 135, 158.)

Moreover, it has been held that the seventh amendment has no application to cases where recovery of money damages was an incident to equitable relief (National Labor Relations Board v. Jones & Laughlin Steel Corp., 301 U. S. 1, 48). In view of these decisions, it is clear that a landlord has no right to trial by jury in an action for injunctive relief and restitution of rental overcharges under the act. 2. The next question that arises is whether a landlord has a right to a trial by jury, and, if so, to what extent, where he is sued for injunction, restitution, and statutory damages. Recently the Court of Appeals for the First Circuit gave extended consideration to this problem in a decision for the Court by Chief Judge Magruder in Orenstein v. U. S. (191 F.2d 184 (C. A. 1)). In that case the Court held as follows: (1) that there was no right to a trial by jury on the equitable claim of the Government for injunction and restitution; (2) that the landlord had a right to a trial by jury so far as the statutory damage claim was concerned; and (3) where the Government joined in one action a claim for injunction and restitution, together with its claim for statutory damages, it was within the discretion of the trial court to try first either the equitable claim or the legal claim for statutory damages. If the trial court decided to try the equitable claim first, then its findings as to whether there was a violation and the amount of the overcharge would be binding upon the trial of the Government's claim for statutory damages, leaving for the jury solely the question as to whether the defendant had willfully violated the act so that damages may be multiplied. More recently the Court of 1 Rents could not be ascertained for two units, and two units lacked private bath and toilet facilities. 97026-52-pt. 2——36

Appeals for the Ninth Circuit followed the decision and reasoning of the Orenstein case, in holding that the "trial judge wisely decided to go immediately to the equitable issues." (See Tanimura v. U. S., F. 2d - (C. A. 9), decided March 6, 1952, not yet reported.) In the Tanimura case the trial court had found that the defendant had violated the act by accepting overcharges, but had concluded that the landlord's conduct was free from willfullness and negligence. Since the trial court found that neither willfullness nor negligence was present, it limited the recovery to the precise amount of the overcharges unlawfully exacted from the tenants. Under the principles of the Orenstein decision there was, therefore, no issue remaining for a jury. Accordingly, the Court of Appeals held that denial of a jury under the particular facts of the case was harmless error. This was so, because the defendant could not have fared any better with a jury than he had at the hands of the trial court, and possibly the defendant might have fared worse if the jury had brought in a verdict that the defendant was either willful or negligent in violating the act.

It is our opinion that the Orenstein and Tanimura decisions correctly state the prevailing law and the policy of the agency. There are no decisions of appellate courts to the contrary.

DEFENSE PRODUCTION ACT AMENDMENTS

WEDNESDAY, MAY 21, 1952

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met at 10 a. m., the Honorable Brent Spence, chairman of the committee, presiding.

Present: Chairman Spence, Messrs. Brown, Patman, Fugate, Barrett, Wolcott, Kilburn, Cole, Nicholson, Widnall, and Betts. The CHAIRMAN. The committee will be in order.

We have with us this morning Mr. Martin, Chairman of the Federal Reserve Board, along with Mr. Evans and Mr. Noyes.

We are always glad to have your views, gentlemen, on these important questions affecting the Federal Reserve. We are very glad to have you with us this morning.

Mr. Chairman, and gentlemen, you may proceed as you please. If you have a prepared statement, you may insert it in the record.

STATEMENT OF WILLIAM MCCHESNEY MARTIN, JR., CHAIRMAN, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, ACCOMPANIED BY R. M. EVANS, MEMBER, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, AND GUY E. NOYES, DIRECTOR, DIVISION OF SELECTIVE CREDIT REGULATION, FEDERAL RESERVE SYSTEM

Mr. MARTIN. No, Mr. Chairman, I have no prepared statement. I am willing to proceed any way you wish. I can give you, in a general way, what our thinking is at the moment. I do not want to appear to be satisfied with the picture, I do not think we can ever be completely satisfied, but we do have, at the present time, high levels of production, high levels of consumption, and generally speaking our economy is in balance and there has been no undue pressure on the price level. The purchasing power of the dollar has been maintained reasonably stable for the past year.

Therefore, I feel that we have made real progress, because our armament program has expanded and shortages in civilian goods have diminished to the point that we felt justified in removing the voluntary credit restraint program and suspending regulation W.

We are at the present time studying very carefully regulation X. The Board, as you know, works very closely with Mr. Foley, of the Housing Administration, in that matter, and we have not yet reached a decision on what we think ought to be done. We are surveying the real estate credit situation from every angle and will make as wise a decision as we can.

I have nothing really to add to that, Mr. Chairman, and would be glad to have you question me as you see fit.

The CHAIRMAN. What effects have resulted from the suspension of the voluntary credit controls, and the suspension of regulation W? Mr. MARTIN. We feel it is too early to be confident of what the ultimate effect of the suspension of the VCR program and regulation W will be, but there has been some increase in financing, some loans made that probably would not have been made if the voluntary creditrestraint program were still in existence. We have not yet received any figures that indicate that there has been a marked upswing in lending resulting from the suspension of the voluntary credit-restraining program.

Regulation W was suspended the afternoon of May 7, and this is May 21. Two weeks is hardly a sufficient time to gage it, but we have not yet seen any indication that it is going to result in a wild splurge of purchasing, and I have been rather pleased that several of the suppliers have taken a very constructive attitude toward this and have been running advertisements pointing out that easy terms are not always what they appear to be, that after all, this merchandise is not being given away and that you have to pay for it ultimately. If you pay more than you can afford, it is a burden to you, but if you pay less than you can afford, you are paying more in financing charges. That type of advertising, and that type of appraisal of the situation has, I think, been very salutary.

The CHAIRMAN. Will not the restraints on credit largely take care of those things? Bank credit?

Mr. MARTIN. In an over-all sense, we think that they are in a position to take care of it today. That is why we felt justified in relaxing both of those programs. The CHAIRMAN. It would be to and they know it.

their interest to take care of it,

Mr. MARTIN. That is correct, sir. We would, of course-and that has always been our position-like to see these business decisions made in accord with the dictates of the market as far as they reasonably can be made, and a return to normal business conditions.

The CHAIRMAN. Would not those same arguments apply to the suspension of regulation X largely?

Mr. MARTIN. In a very broad sense, they would, but we have felt that we should go very carefully with regulation X, because of the fact that it involves housing, where there can be speculative commitments in advance, and where at the present time there is no indication of a depression of any sort in the housing industry.

In the month of April the housing starts were between 105,000 and 110,000-almost a record month, and we feel that we should view that very carefully, particularly with respect to the impact on veterans housing and on liberalizing of terms through the Federal Housing Act, and that we should consult very carefully with Mr. Foley to see that we are not in any way sponsoring or stimulating building speculation.

That is the reason why we have gone slowly on that. We also went slowly, I might say, on suspending regulation W. We felt that we ought to be very careful about reaching a judgment on that type of thing, and apply as much common sense as we can to it.

I might just say parenthentically that I think all of us, Congress, the Federal Reserve Board, the people, everybody, have had a little bit of tendency to exaggerate the importance of these controls, one way or another. They are fire-fighting equipment-I am talking about the selective controls now, and they should be used judicially. They are not cure-alls for quality, production, and proper pricing, and the laws of supply and demand. They are just safeguards that you use in time of emergency and stringency, and we must not get the idea that if we take off controls, that we just automatically create business, and that that will solve all of our problems.

I think we have to keep a real perspective, real balance, and real judgment, on the use of these controls. And I only advocate them as fire-fighting equipment, as a stand-by force, and I think they ought to be administered with flexibility, very judicially and carefully, and they should only be used in time of emergency.

The CHAIRMAN. How well were the voluntary controls carried out? Were they adhered to?

Mr. MARTIN. We think that the voluntary credit restraint program was remarkably successful-more so than I thought it would be at its inception.

When I say that, I recognize that a lot of institutions and banks were loaned up at the time it started. We had increased reserve requirements. Some of the almost insatiable desire for goods had been satisfied, and the voluntary credit restraint program came in at a strategic time, just about the time of the Federal Reserve-Treasury accord. Even so, I think it was a remarkable achievement in coopera tion between the business financing community and the borrowers, and had a very real educational impact on the community. It resulted in deferring a lot of playgrounds and amusement enterprises and projects that we will want ultimately to have, but which were competing with the defense program at that time, and which I think should be deferred until a more appropriate time.

I believe that the program was, on the whole, quite successful. The CHAIRMAN. Thank you. Mr. Brown.

Mr. BROWN. I have no questions at this time.

The CHAIRMAN. Mr. Cole.

Mr. COLE. Mr. Martin, what were the prime considerations in placing regulation X and regulation W into effect? By that I mean, what were your first considerations? The control of inflation, or the control of speculation in commodities?

Mr. MARTIN. Well, I think those two could go together, Mr. Cole. But I see what you are driving at. I think our interest in it was in the credit control aspect, and not the trade practice aspect.

Mr. COLE. However, you do give some consideration to the supply of commodities in connection with regulation W?

Mr. MARTIN. We do indeed, because when we found that there were no important shortages we suspended the regulation. We might have been wiser to have taken regulation W off sooner, but we wanted to be sure that we had carefully evaluated the situation in all areas of the country before we did it-and when we found that there were no items covered by regulation W that we thought were seriously in short supply, that was one of the factors in taking it off.