Mr. WOLVERTON. That is what I am attempting to do now.
Mr. SMITH. Well, I cannot. Are you submitting those, asking

them now?

Mr. WOLVERTON. I am asking you, very frankly, Mr. Smith. It is my thought that this bill is so wide in its scope and in its effect. that I think this committee is entitled to have the unqualified opinion, yes or no, of the Treasury, of the Comptroller of the Currency, of the Federal Reserve Board, and of the Reconstruction Finance Corporation, and I confess that it is very disappointing to me that a department of the Government as important as the Treasury is should come here, by its representative, this morning and state that "we cannot say yes or no'

Mr. SMITH. Because you did no ask us.

Mr. WOLVERTON (continuing). In respect to certain questions.
Mr. SMITH. I think that is a bit unfair, Mr. Wolverton.

Mr. WOLVERTON. I do not mean to be.

Mr. SMITH (Continuing). In you questions.

Mr. WOLVERTON. I am intensely interested, I do not have the responsibility that the Treasury has, and yet I feel a responsibility. Mr. SMITH. You asked us certain questions. We are willing to answer as to those things about which you have inquired. Now, if we are not answering them, it is not our fault. The chairman of your committee has explained that we were asked to do certain things.

Mr. WOLVERTON. I do not understand that there is any limitation, so far as this committee is concerned, as to what you may testify to. If there is any such limitation, I am not aware of it. You came here as the representative of probably the most important department of our Government at this time, prepared to give, as I thought, your opinion with respect to this important legislation, and it would have been very helpful to us to have had it.

Mr. SMITH. I am very anxious not to have a misunderstanding on that point with you, Mr. Wolverton. I am just as anxious as you are. Mr. WOLVERTON. Would you briefly, then

Mr. SMITH (interposing). The President asked us to consider, as the chairman of your committee has stated, a few moments ago, certain portions of the bill.

Mr. WOLVERTON. Would you prefer

Mr. SMITH (Continuing). And for that reason, this interrogation must be confined to the subject of our study.

Mr. WOLVERTON. Would you prefer that the questioning should be wide in scope, or confined to the particular questions you have referred to?

Mr. SMITH. That is for the Secretary of the Treasury to answer. I have no preference. I am just in this war to do what I can to help

out.

Mr. WOLVERTON. I am, too, although I am of the minority party, and I am particularly anxious, in this important legislation to do the thing that will attain the objectives which you have referred to in your statement, and to do it in an effectual way and to do it in a way that will not unduly upset business, and I know of no department of the Government, in my opinion, that should be more qualified, more ready, more willing, to give advice to this committee than the Department of the Treasury.

Mr. SMITH. You understand the limitations under which the study was made, Mr. Wolverton?

Mr. WOLVERTON. No; I cannot understand the reasons for it.
Mr. SMITH. I do not know the reasons.

Mr. WOLVERTON. I understand from your statement that there was a limitation. Am I correct?

Mr. SMITH. The chairman of your committee explained what we were asked to do, a few moments ago.

Mr. WOLVERTON. Yes. I appreciate that.

Mr. SMITH. And that is what we have done.

Mr. WOLVERTON. Who requested the Treasury Department to study the bill and give their views?

Mr. SMITH. The President of the United States.

Mr. WOLVERTON. Did he limit you?

Mr. SMITH. Yes, sir. The Chairman of your committee made that statement a few moments ago.

Mr. WOLVERTON. As to particular sections.

Mr. SMITH. That statement by the chairman of your committee was made just a few moments ago.

Mr. WOLVERTON. Now, you have stated here this morning that you have submitted to the committee's counsel numerous suggestions and changes, most of which have been incorporated in this bill which has been introduced.

Have you with you, or are you able to testify from memory, what the suggestions were that you submitted to the committee's counsel; what ones were adopted and what ones were not, and why not?

Mr. SMITH. There is no record of that, because the bill was studied, section by section, with the committee's counsel, and we sat around the table day after day and night after night discussing these sections with them.

Mr. WOLVERTON. Do you have any memoranda of that?

Mr. SMITH. No, sir.

Mr. WOLVERTON. That will enable you to refresh your mind as to the suggestions and changes that were made by you with respect to this bill?

Mr. SMITH. No, sir.

Mr. WOLVERTON. Do you have in mind the suggestions you made which were not incorporated in the bill?

Mr. SMITH. No, sir. None of any consequence.

Mr. WOLVERTON. You mean, then, that every suggestion you made which was of consequence was adopted?

Mr. SMITH. Yes, sir; that is true.

Mr. WOLVERTON. Then, why did you, in your statement, say that you hoped to have the privilege of submitting to the committee further suggestions that may occur to you after you have had more time to study the bill?

Mr. SMITH. Well, in a measure as broad as this, new questions arise constantly. We found a disposition on the part of counsel for the committee to consider the various angles of this measure in the light of existing practices and relations, and if we think of anything later on we would like the privilege of suggesting it.

Mr. WOLVERTON. Well, you said that you had an opportunity to read this bill, as it was finally drafted.

Mr. SMITH. Yes, sir.

Mr. WOLVERTON. And you stated that you might wish to submit further suggestions after you have had more time to study the bill. Mr. SMITH. Yes, sir.

Mr. WOLVERTON. What are they? Do you have anything in mind now that indicated then that there might be the possibility that you would want to submit different suggestions? In other words, what was there in the bill that you read that made you feel it might be necessary to make other or different suggestions?

Mr. SMITH. We hear something that has come up since then. The question concerns the odd-lot dealer on the small exchanges throughout the country. I am not quite sure that the bill in its provisions gives the protection to the small exchanges that they should have. We are studying that. And if we can arrive at a conclusion, we wanted to submit it. We wanted to maintain this distribution system throughout the country, and it might be that we might have a small change to suggest in connection with that, for instance. Mr. WOLVERTON. Do any others occur to you? Mr. SMITH. I just happened to think about that. We are studying that.

We might not

Mr. WOLVERTON. Did you, in your studies, give consideration to the provisions in this bill dealing with "pools"?

Mr. SMITH. What part of the bill?

Mr. WOLVERTON. Any part of it that deals with pools.

Mr. SMITH. Only in a very indirect way. That has to do with regulation of speculation, about which we were instructed not to concern ourselves.

Mr. WOLVERTON. Will this bill, in your opinion, be effective in restricting the operation of pools?

Mr. SMITH. I cannot answer that question.

Mr. WOLVERTON. Are you in accord with the margin provisions? Mr. SMITH. I have stated, so far as——

Mr. WOLVERTON (continuing). As set forth in the bill?

Mr. SMITH. That was definitely withdrawn from our consideration. Mr. WOLVERTON. So, you have not given any consideration to it? Mr. SMITH. You mean, in the rates?

Mr. WOLVERTON. The basis of margin requirements.

Mr. SMITH. Which a broker may loan on the purchase price?
Mr. WOLVERTON. Yes.

Mr. SMITH. It is not a margin arrangement. No; we have no opinion on that.

Mr. WOLVERTON. What is your opinion with respect to the provisions in the bill dealing with short selling?

Mr. SMITH. About the same as they are about the pools.

Mr. WOLVERTON. What is your opinion with respect to the provisions of the bill as to listing requirements?

Mr. SMITH. Same answer.

Mr. WOLVERTON. What is that?

The CHAIRMAN. I remember in our conversation Sunday night in reference to consideration of the liability sections

Mr. SMITH (interposing). He did not ask about that, Mr. Chair

man.

The CHAIRMAN. I know. You did have some opinions as to what effect the liability sections in the original bill would have upon listings, or withdrawal of listings.

Mr. SMITH. We have on that subject; yes. That is not under the section that Congressman Wolverton was asking about.

Mr. WOLVERTON. What is the opinion of your department with respect to the reports and accounting methods required by this bill? Mr. SMITH. You are asking about the things that we were asked not to devote ourselves to.

Mr. WOLVERTON. Were you asked for an opinion as to whether the bill should be drawn on the theory that it should provide, by statute, rules, and regulations to govern the stock exchanges, or whether the stock exchanges should be permitted to regulate themselves with a reserve power in a Government agency to control?

Mr. SMITH. No, sir; we were not. We were asked to consider certain parts of this bill, and that, of course, is not in this bill. Mr. WOLVERTON. Well, Mr. Smith, your frankness

Mr. SMITH. My what?

Mr. WOLVERTON. I say, your frankness

Mr. SMITH. My frankness.

Mr. WOLVERTON. Your frankness in answering my questions encourages me to suggest, and with the hope, that the Department will be asked its opinion on the other important matters in the bill, so that we can have your opinion as frankly on all that is in the bill, as we have had your opinion, frankly, about some of the provisions that are in the bill.

Mr. MILLIGAN. Mr. Chairman.

The CHAIRMAN. Mr. Milligan.

Mr. MILLIGAN. Mr. Smith, as I understand, the President of the United States has asked you to consider certain sections of this bill that apply to banking and the sale of Government securities and you did that under the direction of the President of the United States. Mr. SMITH. Yes, sir.

Mr. MILLIGAN. And, you are here today prepared to answer any questions upon those sections that you have studied and are willing to give the opinions of the Treasury on those particular sections. Mr. SMITH. Yes, sir.

Mr. MILLIGAN. And I would suggest that you go through the bill and point out the sections that you were directed to study and give the opinions of the Treasury on those sections.

Mr. KENNEY. Mr. Chairman.

The CHAIRMAN. Mr. Smith, before you proceed Mr. Kenney has some questions.

Mr. KENNEY. Mr. Smith, I would like to clear up one matter in my mind. You stated that certain sections have the approval of the Treasury. I have marked these sections here.

Now, when you say that, do you mean that the Treasury approves of the sections so far as the interests of the Government are concerned, or do you mean that they have the approval of the Treasury as they affect business and financial interests of the country also?

Mr. SMITH. Well, what was the first alternative so far as what? Mr. KENNEY. So far as the interest of the Government is concerned, and by that I mean the market for Government securities. Mr. SMITH. Both elements were considered.

Mr. KENNEY. And you approve these sections, and when you say they were approved by the Treasury you approve them so far as the business and financial interests of the country were concerned; is that right?

Mr. SMITH. Yes, sir.

Mr. MARLAND. Mr. Chairman.

The CHAIRMAN. Mr. Marland wants to ask a question, Mr. Smith. Mr. SMITH. Yes; Mr. Marland.

Mr. MARLAND. If the effect of this bill should be to materially limit trading in securities on stock exchanges, how would that affect the sale of Government securities; what effect would that have?

Mr. SMITH. How would it affect the sale of Government securities?
Mr. MARLAND. Yes, sir.

Mr. SMITH. I do not understand the question.
Mr. MARLAND. Let us put it another way.

If as a result of the

passage of this bill there should be a decline in security prices, would that aid in the sale of Government securities?

Mr. SMITH. What do you mean; do you mean stock prices?

Mr. MARLAND. Yes, sir.

Mr. SMITH. I do not think it would.

Mr. MARLAND. If there were a general decline in security prices, would that help the sale of Government securities?

Mr. SMITH. No.

Mr. MARLAND. It would not have any effect on the sale of Government securities?

Mr. SMITH. I think that unfortunate, adverse conditions in the country would.

Now, here is what we have said. We have studied these sections of the bill to ascertain whether they would have a needless adverse effect upon Government finance operations. The portions of the bill we have studied met that test.

Mr. MARLAND. But there are other sections of the bill which you have not been called upon to study?

Mr. SMITH. I have no opinion on them. I have so stated.
Mr. MARLAND. They might have an effect.

Mr. SMITH. Of course they might. We have no opinion to express as to those things.

Mr. MARLAND. I am asking your opinion on what effect the general decline in the market would have on the sale of Government securities. Mr. SMITH. I think it would, of course, have an adverse effect. Mr. PETENGILL. Mr. Chairman.

The CHAIRMAN. Mr. Pettengill.

Mr. PETTENGILL. Mr. Smith, I know that you have worked under great pressure of time, and consequently you must not draw the inference of criticism, but it seems to me that even with respect to matters concerning which you say you particularly studied that your mimeographed statement is just filled with saving clauses. You say that you were directed particularly to study the provisions of the bill with regard to the governmental and financial structure of the Nation to ascertain whether certain of its provisions might have a needlessly adverse effect upon the Government's financing operations, or upon the financial structure of the country; and that you offered certain suggestions most of which have been incorporated. That implies. that some have not. Then indeed

Mr. SMITH. Well, may I answer your questions as you state them? Mr. PETTENGILL. Yes.

Mr. SMITH. Of course, when you are studying a bill, its intimate details, as we did these sections, there are many sections where op

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