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were just torn apart from wall to wall. Everything, all the contents were taken.

I don't know whether you gentlemen know it or not, but we have never been able to get insurance on property that has been pledged with us. We get insurance for the property that is owned by the pawnbroker.

Now, after the problem that occurred here about 4 years ago, we have been unable to get insurance except at three times manual rates and some of our members have not been able to get it at even three or four times the manual rates.

So our principal problem, of course, is insurance.

Now, there is now a placement bureau that is controlled by the insurance industry, as I think you gentlemen know. But their rates are exorbitant and we have lost, as I said to you, 60 percent of our members primarily because of insurance.

Now, a great number of our members have gone out of business voluntarily. Some of them have been forced out of business; a number of them have merged; some of them have moved from the south and west sides to the Loop area. So as a matter of fact, on the great west side, we have one pawnbroker which services an entire area, and it is wholly black. When I say wholly, I think 95 percent black where at one time we had 17 pawnbrokers in that same area.

We have lost approximately 12 shops on the south side. We only have three pawn shops on the north side. That is no more nor no less. We have had no problems on the north side at all.

Now, that is our situation. I have also taken the liberty, Mr. Congressman and gentlemen, to invite the president of the association here for any statement or any interrogation you would like to have so far as he is concerned.

Thank you.

Mr. KLUCZYNSKI. Thank you, Mr. Marovitz.

Can your members get any insurance on items they hold?

Mr. MAROVITZ. No, we never have been able to.

Mr. KLUCZYNSKI. Never have. Do street gangs prey on pawnbrokers? Mr. MAROVITZ. We have had very little problem with that. We have had the cooperation of the police department, so we have had very little problem.

But as far as the Black Panthers are concerned, or of that ilk, we have had very little problem with them at all.

Mr. KLUCZYNSKI. Mr. Horton, do you have any questions of the witness?

Mr. HORTON. I do want to thank you for bringing the problem to our attention. Maybe I should ask you this: Do you feel that the problem of crime is the reason for the businesses closing or are there other factors that are involved outside of this?

Mr. MAROVITZ. Not particularly in our industry.

Mr. HORTON. Is there still a demand for pawnbroker facilities? Mr. MAROVITZ. Very little.

Mr. HORTON. What reasons would you give for the closing of pawnbroker shops? The lack of demand or because of the failure to get insurance?

Mr. MAROVITZ. One of the principal reasons is the failure to get insurance. You have an investment of $100,000 and $200,000 in inventory and you are unable to get insurance. And the man gets up in the morning and doesn't know if he is going to be in business or out of business so he is going to liquidate that business as rapidly a he can. Mr. HORTON. I guess you misunderstood my question earlier. I asked you if the reason for the closing of the pawnshops is that there isn't any need for them. I thought you said "Yes."

Mr. MAROVITZ. There is a great need for pawnshops. They have always been the poor man's banker, from time immemorial. The city of Chicago had 56, 58 licensed pawnbrokers not more than 4 years ago, but the average pawnbroker doesn't feel he would like to invest $150,000, $200,000 in a business he has no insurance for.

Mr. HORTON. You did mention the president of the association is here. Did you want to introduce him to the committee?

Mr. KLUCZYNSKI. Come forward and give your name and whom you represent to the reporter so we can have it for the record.

Mr. FELDSTEIN. My name is Harold Feldstein. I represent the Greater Chicago Association of Pawnbrokers and I am the owner of the Lincoln Loan Bank and Jewelers at 19 West Van Buren Street. Gentlemen, not only is there a need for the pawnshops, but Lincoln Loan Bank has been in business for 70 years.

I am the only white man on the executive committee of the NAACP, and for the last 17 years I was the assistant to the senior Baptist chaplain at the county jail. I had to leave 47th Street because I had no insurance. And I want to point out this situation to you.

Many of the insurance companies throughout America would cancel us out, those of us who were fortunate enough to have insurance, and tell us to go to the pool. For instance, if that policy had a premium, hypothetical thing, of $100,000, we, then, go to the pool and we get that same policy for $3,000.

Now, this is something you gentlemen must step in and investigate because this is one of the main reasons that a great number-not only of pawnshops-but a great number of the economic flood of the black communities is eroding. They can't get insurance.

That is not only a white problem, that is a black problem.

Mr. HORTON. Have you taken the problem to the State?

Mr. FELDSTEIN. Yes.

Mr. HORTON. You do have, as in New York, I am sure, some sort of State organization that controls the insurance programs?

Mr. FELDSTEIN. We had a meeting with his honor the mayor and he was very, very well informed of our problem. He went right out at this time-this was right at the time Dr. King got killed-he had Mr. Bogan, who I believe was the head of the insurance department at that time-I think as far as the officials, they have done everything humanly possible. They can't force the insurance companies to charge the same rate away from the pool.

I had to move. I came downtown. I have no problem with insurance, I have jewelers block. You cannot get jewelers block in a community such as 43d Street, 47th Street, 63d Street, Madison Street, no insurance company in interested.

Mr. HORTON. I was thinking of the State. Don't you have some sort of a State body that regulates insurance?

Mr. FELDSTEIN. Sure.

Mr. HORTON. Have you been before them?

Mr. FELDSTEIN. We talked to-at that time there was a jumblethere were riots throughout the country.

I went to New York and talked to the Home Insurers. They were selling the company and they weren't interested in our problem.

I said we were going before the State; they informed me of the wonderful job they have always involved them in, in the large in

surance areas.

I told them they were well paid for it at the time. They were the next larger insurers outside of Lloyds. We go to the pool; the same thing.

Mr. HORTON. Thank you, Mr. Chairman.

Mr. KLUCZYNSKI. This is the FAIR plan you are talking about? Mr. ROE. Have you talked with them recently?

Mr. FELDSTEIN. No.

Mr. ROE. Do you know of any experiences with the FAIR plan? Mr. FELDSTEIN. I haven't had the problem because I moved my business. I shouldn't have to move after servicing the community for 70 years, but I moved my business downtown for insurance purposes, more than anything else.

Mr. HORTON. I realize you are talking in terms of your own experience, but you are also testifying here today in a representative capacity as president of the association.

Perhaps you can testify as to the experience of the other members. Mr. FELDSTEIN. Those that are left have been canceled out by insurance companies; canceled part of their fire.

Say you have $100,000 fire insurance policy. You might have 15 underwriters. So they were canceled out.

They say you go to the pool for that same identical coverage. Well, you go to the pool and you are paying three, four times the premium. Mr. MAROVITZ. They pay double the insurance premium.

Mr. HORTON. Have the other people in the State tried to present this problem to the State agency that regulates insurance to get them to take some action to try to help you?

Mr. MAROVITZ. May I answer that question?

The answer is no. In the last several years we have not, because our turnover of mergers or pawnshops going out of business has been so great that we haven't had occasion to go to the State.

Mr. KLUCZYNSKI. Mr. Hungate.

Mr. HUNGATE. Do you have any black pawnbrokers in the city?

Mr. FELDSTEIN. Incidentally, I tried to sell our business, Lincoln Loan Banks was 40 years on 47th Street. I tried to sell to black people. My answer was, "Not on your life, I am not going there and invest my money."

We had a group of people interested. When they got in the community and saw it, they backed out. I had two men who wanted to go in the business. They had 20-some thousand dollars and I advised them to take it and throw it out in the street and told them they might as well, that is what would happen to it. I told them, "You haven't got the wherewithal."

I thought sure this would be a business black people would be very interested in going into, due to the conditions within the black com

munity they are not interested, on 43d Street, 55th Street, 47th Street, West Madison Street, they are not interested, period.

Mr. KLUCZYNSKI. Mr. Roe.

Mr. ROE. Mr. Feldstein, you said you didn't have insurance on the contents of the stock which you hold for your customers? Hasn't that always been true?

Mr. MAROVITZ. No; no insurance carrier would ever give insurance on the pledges, except to the amount of money loaned by the pawnbroker.

In other words, if the item is worth $100 and we loaned $10, the total amount would be the $10 and the owner of the pledge gets nothing.

Mr. ROE. So you, in essence pawnbrokers, never have had burglary insurance for any of the valuables?

Mr. MAROVITZ. Never. We are not even able to get a block policy for fire insurance.

Mr. ROE. What kind of crime experience do you have with your businesses?

Mr. MAROVITZ. Very little.

Mr. ROE. But yet you still cannot obtain insurance?

Mr. MAROVITZ. That is correct, sir, because when a riot occurs they take pawnshops, liquor stores, and sporting goods shops immediately. And when they destroy them, they completely destroy them-similar to the Watts situation. When I say they have torn apart shops, they have literally taken over and torn the walls down in the shops.

They are still vacant on the west side, plain ordinary lots. There has been no rebuilding in these areas at all or other shops going in there or any other kind of business going in there. So it is a tremendous problem.

Mr. KLUCZYNSKI. Any other further comments or questions by the members?

There being none, I want to thank you, Marovitz, and thank you Mr. Feldstein for the splendid testimony.

As I said before, it will be very helpful when we write legislation. Mr. MAROVITZ. Thank you.

Mr. KLUCZYNSKI. Is Mr. Bruce Sagan here, the publisher of the Southtown Economist?

(No response.)

Mr. KLUCZYNSKI. Mr. Bob Dwyer, regional director of the SBA. Mr. FINN. He just stepped out for a minute.

Mr. KLUCZYNSKI. He just stepped out for a minute, so we will take a 2- or 3-minute recess; the seventh inning stretch.

(Short recess.)

Mr. KLUCZYNSKI. Miss Louise Ryan, editor of the Southtown Economist, was scheduled to testify this morning, but she called and said. she was ill.

I see that our very good friend is here, a gentleman doing a marvelous job, the regional director of the Small Business Administration, Mr. Robert Dwyer.

Will you take the witness stand.

Mr. DWYER. Thank you.

Mr. KLUCZYNSKI. If his associates from the Small Business Administration would like to join Mr. Dwyer

TESTIMONY OF ROBERT A. DWYER, REGIONAL DIRECTOR, REGION

V, SMALL BUSINESS ADMINISTRATION,

ROBERT WEIR

ACCOMPANIED BY

Mr. DWYER. We have a number of our staff in the room.

Mr. KLUCZYNSKI. All right, some of the members would like to know something from your top men, from the top brass.

Mr. DWYER. Could I introduce them?

Mr. KLUCZYNSKI. You introduce them.

Mr. DWYER. Mr. Lewis F. Matuszewich, who is deputy regional director.

Mr. Al Harness, Chief of Procurement and Management Assistance. Mr. Robert Weir, who is in charge of our management assistance program in the State of Illinois.

Mr. Lloyd O. Kaldor, Chief of Financing Division.

Mr. Joseph Rooney, Chief of the Loan Administration Division. Mr. John Biggio, Chief of the Administrative Division.

Mr. Daniel S. Powell, Regional Counsel.

Mr. Joseph Clermont, Chief of the Community Economic Develop

ment.

Mr. Ted Lockhart, equal opportunity officer.

Mr. Bernard S. Moust, Assistant Chief of Financing.

And we have two very distinguished members of our Washington staff with us today, Congressman, Mr. William McGloon, Legislative Representative, representing our Administrator, Mr. Sandoval, for the purposes of this meeting.

Mr. KLUCZYNSKI. I am very well acquainted with the gentlemen from Washington. They are doing a marvelous job. I want you to know that.

Mr. DWYER. And Mr. Murray Kramer, of our staff and part of the Washington office.

Mr. KLUCZYNSKI. Do you have a prepared statement, Mr. Dwyer? Mr. DWYER. I do.

Mr. KLUCZYNSKI. You may proceed as you wish.

Mr. DWYER. Thank you, Mr. Chairman.

This is a long statement, Mr. Chairman, and I am only going to read part of it and I will produce a statement for the record.

Mr. KLUCZYNSKI. Without objection your prepared statement will be made a part of the record in its entirety, and you may state the highlights.

(The statement follows:)

STATEMENT OF ROBERT A. DWYER, REGIONAL DIRECTOR, REGION V,

SMALL BUSINESS ADMINISTRATION

Mr. Chairman and other distinguished members of the Subcommittee; it is indeed an honor for me to appear before you today as Regional Director of Region V of the Small Business Administration. Region V includes the states of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. Within this Midwestern Region, we find a number of our greatest cities with all of the challenges and problems the larger cities of our nation face today. We are also blessed with a strong rural economy in these six states. This region includes approximately one-fourth of the population of our nation; one-fourth of the business population; and one-third of its gross national product.

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