What started as a summertime book club for children has bound an entire Southeast Washington neighborhood.

It began three summers ago when neighbors Marcio Duffles and Ann Bay drew together the children on their street, got some donated books and a little money and formed the "E Street Book Club." They paid children a dollar for each book they read, and at the end of the summer gave cash prizes to the top three readers.

A dozen children came each Saturday, sat cross-legged on the floor of Duffles' living room at 1600 E St. SE and learned to read with expression, taking on the voices of ghosts and dinosaurs, and laughing at colorful illustrations.

From their porches, neighbors watched the children carry books from the house each week. Word of the club circulated.

"I felt bad for them taking money out of their pockets," neighbor Lubelle Richardson said of Duffles and Bay.

So last summer when the two founders decided to hold a fund-raising block party, neighbors pitched in. On Saturday, they held the second annual "E Street Book Club Block Party."

Neighbors pulled out their old clothes and housewares and gave them to the young readers to sell. The first customer was a police officer who paid $15 for a turntable. Tom and Sonia Falletti painted young faces and registered children for the club. Rene Smit baked chocolate chip, coconut shortbread and peanut butter cookies to be sold. Richardson sent a $6 donation in an envelope.

Young book club members sat proudly at one table, quoting prices, counting money and selling cookies and hamburgers to passersby.

When the party was over, the children, in "E Street Book Club" T-shirts, counted up the money. Then Duffles and Bay called to order the year's first meeting of the book club.

In a weak, halting voice, Candance Johnson, 10, read to friends about a wolf that had beautiful fangs but refused to use them. Bay, sitting next to her, encouraged her gently. By the second page, the little girl's voice picked up and enraptured listeners.

Candance had missed last summer's session because her family moved to another community. On Saturday, she returned.

"I wanted to come back. I had lots of fun and read lots of books," she said. Her sister Jasmine, 5, and brother Lawrence, 12, also club members, were at her side.

Candance was the club's first winner, in the summer of '88. She read 19 books and won a $10 prize.

Her mother, Phyllis Johnson, said all of her children have improved academically since joining the book club. "My son's reading skills have improved and Candance made A's in reading this year . . . "

In addition to reading, the 26 children enrolled in "E Street" are required to write book reports. Children too young to write are asked to answer a few simple questions about each book.

"We want to give kids an opportunity to forward their lives through literacy. That's what we've written down as our goal," said Duffles, an aerospace engineer.

Bay, a Smithsonian Institution director with a daughter, 24, said: "We wanted to do something to keep the kids occupied during the summer. We thought about reading because it's one skill no one can do without.

"We try to select books relative to their lives, something contemporary. We talk about what we read, we take turns reading aloud, trying to get into reading with expression," Bay said.

She and Duffles also let the children decide what subjects they want to read about. Bay has found that "They like anything dealing with ghosts, dinosaurs, mysteries and humorous stories."

"When I was growing up, my older brother created a book club with neighborhood children," Duffles recalled. "I was 12. We got a dollar for each book we read. It was my best summer. I never forgot the fun."

Now Duffles tries to pass along a bit of that fun to boys such as 9-year-old Wilson Whitaker. Smiling and sporting his "E Street" shirt, Wilson rattled off this: "Last year a boy named Earl won the contest. I read 10 books. If I read a book over 100 pages, I got $2. Every summer we will have this book club."

James Gaither, 10, called the club "fun" and said: "I used to say I couldn't read out loud. But now that I'm in E Street Club it's fun. I had a C in reading and now I have a B-plus."