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CONTENTS

Pago
Backus, Edward W., Minneapolis, Minn--

7615
Black, Eugene R., Hon., Governor of the Federal Reserve Board, Wash-
ington, D.C.--

7415
Butcher, Howard, Jr., president of the Philadelphia Stock Exchange,
Philadelphia, Pa---

7455
Ohinlund, Edwin F., representing Controllers Institute of America, New
York City, N.Y---

7491

Cotton, H. H., Los Angeles, Calif., representing the Investment Bank

of Los Angeles.

7413

Gibbons, George B., president George B. Gibbons & Co., Inc., municipal
bond dealers, New York, N.Y.--

7441

Healy, Robert E., chief counsel Federal Trade Commission, Washington,

D.C..

7587

Redmond, Roland L., attorney for the New York Stock Exchange-

7539

Roosevelt, Archibald B., president of Roosevelt & Weifold, Inc., dealers

in municipal securities, New York, N.Y., and George B. Gibbons, presi-

dent George B. Gibbons & Co., Inc., municipal bond dealers, New

York, NY

7441

Smith, Tom K., Assistant to the Secretary of the Treasury, Washington,

D.C---

7470

Thompson, Eugene E., president of the Associated Stock Exchanges,

Washington, D.C.-

7524

Untermeyer, Samuel, attorney at law, New York City-

7703, 7731
Whitney, Richard, president of the New York Stock Exchange_- 7479, 7537

EXHIBITS

IJI

STOCK EXCHANGE PRACTICES

FRIDAY, MARCH 23, 1934

UNITED STATES SENATE,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C. The committee met at 10:30 a.m., pursuant to call of the chairman following adjournment on Friday, March 16, 1934, in room 301 of the Senate Office Building, Senator Duncan U. Fletcher presiding.

Present: Senators Fletcher (chairman), Bulkley, Gore, Costigan, McAdoo, Adams, Goldsborough, Townsend, Carey, Couzens, Steiwer, and Kean.

Present also: Senator King, of Utah.

Present also: Ferdinand Pecora, counsel to the committee; Julius Silver and David Saperstein, associate counsel to the committee; Frank J. Meehan, statistician to the committee; Roland L. Redmond, counsel to the New York Stock Exchange.

The CHAIRMAN. The committee will come to order, please.

Senator McAdoo. Mr. Chairman, before you start the hearing may I present some telegrams received from California in regard to the bill now under consideration, and ask that they may be made a part of the record and returned to me?

The CHAIRMAN. The committee reporter will make them a part of the record and return the original telegrams to you for your purposes. (The telegrams are as follows:)

LOS ANGELES, March 22, 1934. WILLIAM GIBBS MCADOO,

Senate Office Building, Washington, D.C.: Amended Fletcher-Rayburn bill is improvement over the original. Still think it ambiguously worded and little thought given to margin provisions which ahe inflexible and unworkable and places all stocks in same category regardless of earnings, dividends record, and market history. Present bill continues to vest potential power in Federal Trade Commission to control and dominate industry and business which is fundamentally un-American. Sections relating to odd-lot dealers, specialists, and segregating functions of broker and dealer poorly worded, and present wording would destroy functions of stock exchanges and hinder marketability of odd lots of stock held by small investors, who comprise the majority of investors. Bill so technical only you in Washington can comprehend. Public continues to be misled in the belief that only excessive speculation and brokers affected. You must know this is not the case; on the contrary, think bill in present form would be extremely deflationary.

FREDERICK A. SPEIK,
810 Roosevelt Building,
Los Angeles, Calif.

SAN FRANCISCO, CALIF., March 22, 1934. Hon. WILLIAM GIBBS MCADOO,

United States Senate, Washington, D.C.: I am a stockbroker and taxpayer in San Francisco. I ask nothing for myself, but I have 102 loyal employees here to whom I am attached by ties of friendship. Many of them have been with me for 15 years. If the FletcherRayburn bill becomes a law in anything like its present form, no recourse is open to me and to all other stockbrokers but to discharge 80 percent of these excellent men and women. On their account I appeal to you to defeat this measure or at least to secure its modification.

W. C. VAN ANTWERP.

Los ANGELES, CALIF, March 22, 193.7. WILLIAM GIBBS MCADOO,

Senate Office Building, Washington, D.C. Ask that you reconsider redrafted Fletcher-Rayburn bill and urge revision to bill such as that introduced by Congressman Bulwinkle along lines suggested by Dickinson report. Also urge clarification of language and that Federal Reserve Board be given more discretionary power in establishing marginal requirements. Believe amended bill may have unforseeable effects and consequences and this will certainly be true unless language simplified and clarified. Urge your reconsideration.

HARRY C. ALLEN,
450 N. Rosmorre,

Los Angeles, Calif.

LOS ANGELES, March 22, 1934. WILLIAM GIBBS MCADOO,

Senate Office Building, Washington, D.C. May I be permitted to earnestly say in past depressions the investment of private capital in industries has always helped to pull us out. The stock exchange bill appears to me and to others to whom I have talked to seriously threaten accesses of industries to capital markets. Cutting such industries' accesses could not increase the protection to either the investor or to national recovery.

C. L. BUNDY,
2153 Lamesa Drive,

Santa Monira, Calif.

Los ANGELES, CALIF., March 22, 1934. WILLIAM GIBBS MCADOO,

Senate Office Building, Washington, D.C.: Hear tremendous amount of criticism of revised Fletcher-Rayburn bill. First, excessive authority is granted Federal Trade Commission and fear is that commission will use its authority for regimentation of industry and for purposes foreign to intent of bill. This could be cured by a section stating rules and regulations of commission shall be reasonable and limited to provisions of bill as stated in section 2. Second, it imposes rigid regulation instead of supervision. They have provided margin provisions which are arbitrary, unreasonable, inflexible, and unworkable instead of giving Federal Reserve Board large authority. Also alters greatly present machinery of stock exchanges developed over many years and substituting something which may or may not work. Earnestly urge your reconsideration which is introduced by Bulwinkle along ideas suggested by Dickinson's committee.

LESLIE LUMLEY,
2563 Saluson Avenue,

Huntington Park, Calif. Senator GOLDSBOROUGH. Mr. Chairman, I have a telegram that I also should like to have made a part of the record.

The CHAIRMAN. The committee reporter will make it a part of the record and return the original to you for your purposes.

(The telegram is as follows:)

BALTIMORE, MD., March 21, 1934. Hon. PHILLIPS LEE GOLDSBOROUGH,

United States Senate: This bank representing thousands of depositors and stockholders earnestly requests your cooperation in opposing paragraph A, section 7, of the National Securities Exchange Act of 1934. This unfair and un-American discrimination against State banks is viewed with a deep concern by a large portion of the citizens of Maryland. Respectfully,

MERCANTILE TRUST CO. OF BALTIMORE,

A. H. S. Post, President. The CHAIRMAN. I understand that Mr. Cotton, of California, is here this morning and has only a word to say, Mr. Cotton, you may come forward. (A pause, without response.]

Senator McAdoo. Is Mr. H. H. Cotton here? [A pause, without response.]

The CHAIRMAN. Very well; we will go on with our hearings. Is Mr. Whitney here?

Mr. REDMOND. Mr. Chairman, Mr. Whitney will be here in a few minutes. He was informed that he would be wanted later on in the morning.

Senator Couzens. Mr. Chairman, why can't we go on now and hear Governor Black ?

Senator McADOO. Oh, Mr. Chairman, Mr. Cotton has now returned to the committee room. Will you hear him for just a moment?

The CHAIRMAN. Yes. Mr. Cotton, do you wish to make a statement to the committee in regard to municipal securities?

Mr. COTTON. Yes, Mr. Chairman.

The CHAIRMAN. All right. If it is to be very brief you may stand right there. Please state your name, residence, and whom you represent.

Mr. COTTON. My name is H. H. Cotton, of Los Angeles, Calif. I represent the Investment Bank, of Los Angeles.

The CHAIRMAN. You may proceed with your statement.

STATEMENT OF H. H. COTTON, LOS ANGELES, CALIF., REPRESENT

ING THE INVESTMENT BANK OF LOS ANGELES

Mr. COTTON. Mr. Chairman and gentlemen of the committee: I should just like to say that the bill as now drawn does not seem to protect securities of municipal and political subdivisions as exempted securities, the objection offered, as I understand it, being that some are now in default. It seems to us that this would unduly and without valid reason penalize the great majority of such securities which are now not in default, and that even as to those now in default they have a well-recognized market and collateral value. We respectfully submit that they ought to be kept in the bill as originally drawn as exempted securities.

Senator TOWNSEND. Have you any suggestions to make to the committee as to how we might remedy that situation and also improve the bill as drawn?

Mr. Cotton. I have only that one statement that I care to make in regard to the bill.

The CHAIRMAN. But you wanted exempted State, city, and municipal securities?

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