business, and banks, to furnish to the Commission all of the information which is required in sections 11 and 12, and what would be the effect on business if they have to do it?

Mr. DICKINSON. Mr. Cooper, it seems to me that the regulations should go, so far as necessary, in order to meet the evils that are intended to be cured by the regulations.

Now, I would like, therefore, to refer again to that provision of the Roper report which I summarized at the beginning of my testimony here this morning, namely, the listing requirements. We there propose, roughly, that the statute should provide that as a condition of being listed on a licensed stock exchange, every corporation should submit certain information and make it public; it should submit annual balance sheets and income accounts certified to by independent public accountants, and it should file these papers with the stock exchange authorities and transmit them to the security holders; that it should publish quarterly reports; that it should not engage in pool operations in its own stock; that it should require its officers not to engage in pool operations in its own stock or to sell short; that it should make available to the stock exchange within 48 hours after the granting of any option upon its stock, the terms of that option; that it should also make available within 48 hours the terms of any agreement looking toward the pegging of the price of its securities; and that it should file at the close of each quarter a statement of the operations of its officers in its own securities, which statement should be available to every stockholder.

Mr. COOPER. With whom would you have them file that report? Mr. DICKINSON. In the first instance, these reports would be filed with the governing board of the stock exchange. There is provision that some of them should be made public and that all of them should be made available to public inspection, and that means, of course, they would also be available to the inspection of the Federal regulatory authority.

Mr. COOPER. I do not know whether it is a fair question to ask you or not, but I would like to inquire if your committee would be willing to submit to this committee a draft of the bill or what you think ought to be in the bill along the lines that you have been speaking about for the last 2 days.

Mr. DICKINSON. Well, sir, speaking only for myself, I would say that our committee would hold itself out to perform whatever services the committee, acting as a committee, might think would be of assistance to it and might care to ask us to perform; but that is another

matter.

Mr. COOPER. That is all.

Mr. PETTENGILL. Mr. Chairman

The CHAIRMAN. Mr. Pettengill.

Mr. PETTENGILL. You stated yesterday, Mr. Secretary, as I recall your testimony, that the enactment of this bill as written would cause the liquidation of $350,000,000 of securities now unlisted and about $650,000,000 of other securities to meet the margin requirements over the existing requirements.

Mr. DICKINSON. The figure as to the margin requirement was, in my recollection, about $500,000,000, rather than $600,000,000-it was $550,000,000.

Mr. PETTENGILL. $550,000,000.

Mr. DICKINSON. Yes, sir.

Mr. PETTENGILL. That makes a total of $900,000,000.

Mr. DICKINSON. Yes, sir.

Mr. PETTENGILL. If we had 100 percent margins, what additional liquidation would we have to have?

Mr. DICKINSON. If we had 100 percent margins, it would mean wiping out the entire debit balance. Now, the debit balance of all of the New York Stock Exchange houses at the present time is $1,400,000,000, and that is just in New York. Of course, I may say also, that these figures I gave you yesterday just related to New York.

Mr. PETTENGILL. To the New York Stock Exchange.

Mr. DICKINSON. To New York only.

Mr. PETTENGILL. New York only.

Mr. DICKINSON. New York only; yes, sir.

Mr. PETTENGILL. Yes.

Mr. DICKINSON. There are no figures available for making anv estimates for the exchanges outside of New York.

Mr. PETTENGILL. I asked that question, with reference to testimony given before another committee yesterday, in favor of 100 percent margins.

Mr. DICKINSON. Well, the New York debit balance is one billion four hundred and some odd million. Now, that would have to be put up, if you are going to have 100 percent margins, and, of course, the people might have that amount in their banks and be able to put it up. I do not know.

Mr. PETTENGILL. Do you agree, Mr. Secretary, to prevent another great speculative boom that it would be desirable for the regulatory body, in cooperation with the governing board of the exchange, to gradually step up margin requirements on the stocks most actively traded in and which, are being bulled up the fastest?

Mr. DICKINSON. In a general way; yes.

Mr. PETTENGILL. It seems to me that would be highly desirable as a practical matter tending to prevent expensive speculation. Mr. DICKINSON. Yes, sir.

Mr. PETTENGILL. Now, when the margin is based on a market price, a speculation grows on its own wind, in a way.

Mr. DICKINSON. Yes.

Mr. PETTENGILL. And pyramids, or pyramiding is permitted without any brake.

Mr. DICKINSON. Yes.

Mr. PETTENGILL. Do you think it would be possible to prepare a workable formula on margin requirements that would be based not only on market price, but average earnings and book value, taking those into consideration as factors in arriving at the margin?

Mr. DICKINSON. Certainly, I think that dominant weight should be given to those factors. I would hesitate to write a provision of that kind into the statute itself, because it is one of those things that would have to be worked out, I should think, by experience; and, therefore, it was our proposal that sufficiently broad powers be given to the regulatory authority acting in conjunction with the Federal Reserve Board, to work out some such scheme of regulation as would accomplish the purposes that you have in mind

Mr. PETTENGILL. Well, I simply offer it as a thought that margins based on market price not only pyramid, as I say, but are driven forward on their own wind.

Mr. DICKINSON. Yes.

Mr. PETTENGILL. Do you think, Mr. Secretary, to prevent in and out, daily transactions of members of the exchange on a great bull movement, or to restrain them, put a brake on them-that it would be practical to reach that sort of a transaction through a provision of the income-tax law placing a surtax upon gains made, either long or short, on transactions if opened and closed within a 30-day period? Mr. DICKINSON. Mr. Pettengill, I am not sure that in-and-out trading is of itself an evil. It seems to me that if these people go in in an orderly way, not in the form of speculative pools or by resorting to practices of that kind, but if they go in in an orderly way and are always there in the market, buying and selling, that there is one of the things which makes a market, and that if you attempt to treat that thing as an evil in itself, why, you are not hitting at one of the sources of overspeculation, but you are hitting at one of the normal instrumentalities of the market.

Mr. PETTENGILL. I made the suggestion only because it came to me in a letter from the president of a corporation that is known throughout the United States, as a suggestion to prevent expensive speculation by in-and-out traders. I do not know anything about its merits, and that is the reason I did not use it.

Mr. WADSWORTH. Mr. Chairman

The CHAIRMAN. Mr. Pettengill, have you finished?
Mr. PETTENGILL. Yes, Mr. Chairman.

The CHAIRMAN. Mr. Wadsworth.

Mr. WADSWORTH. Mr. Secretary, you presented in a very interesting manner the matter of psychology of the public in a period of what is termed the "bull market." And in reply to some questions, especially by Mr. Mapes, of Michigan, you discussed the suggestions contained in some volume that has been presented here, which I have not read, concerning educating the public to be earnings-minded, with special reference to the attitude to be pursued during a boom, and you have discussed the difficulty of writing into a statute, or the impossibility, perhaps, of writing into a statute any formula governing margin requirements. Most of that discussion has been directed toward the fixing of a formula on margin requirements during a boom, in order to put a brake or a check upon it.

Have you anything to say when the public psychology is running in the opposite direction, such as has been the case during recent years? Mr. DICKINSON. Mr. Wadsworth, I think we have seen the necessity during this downward period for what may be called reverse action, particularly in connection with the banks and the insurance companies. It has been necessary, perhaps, in the interest of preventing too violent a downward movement to adopt a somewhat more liberal attitude toward valuations of the assets of banks and insurance companies than would have been desirable in a boom period. If a very strict attitude had been adopted toward those valuations, why, the deepness of the descent would have been increased, and I should say that the same principles would apply to margin requirements.

Mr. WADSWORTH. The difficulties are just about as great when the market is running in that direction as when it is running in the other?

Mr. DICKINSON. They are in the opposite direction, however. If you want to keep to the middle of the road when the market is moving in one direction, you have to go one way, and when the market is moving another way, you have to lean your back against the wind in the other.

Mr. WADSWORTH. Then, you think that we had better leave the formula out of this bill?

Mr. DICKINSON. Certainly, that is my own position.

Mr. WADSWORTH. And embody a greater degree of flexibility?
Mr. DICKINSON. Yes, sir.

Mr. BULWINKLE. Mr. Chairman

The CHAIRMAN. Mr. Bulwinkle.

Mr. BULWINKLE. Mr. Secretary, after reading the Roper report and after hearing the proponents of this bill, and with some study on my part, I have this idea, and I want to see what you think of it: Assuming that, for the purpose of this question, that we have a constitutional right to pass this type of legislation, what could you think of the creation of a Federal board just for the purpose of licensing stock exchanges, and requiring, before that license is issued, that the exchange have its rules and regulations approved by this board, and that in the event of any violation then of any rules or regulations, they would, of course, forfeit their license, because, as set forth in the report, you stated that we should go not very far at this time on any legislation. What do you think about that?

Mr. DICKINSON. That certainly, Mr. Bulwinkle, represents the skeleton of the idea on which the Roper report was based. Whether we want to or have to go a little bit further than that in order to accomplish our purposes, I should have some feeling that we might have to.

Mr. BULWINKLE. Well, then, if we are to assume that we are to go a little further, now, what board would you say should have this supervisory or regulatory power?

Mr. DICKINSON. This body that you are describing?

Mr. BULWINKLE. Well, who should it consist of? To my mind, I had the Secretary of the Treasury, the Comptroller of the Currency, the Governor of the Federal Reserve Board, in mind.

Mr. DICKINSON. I should think it should include some persons skilled in exchange practices, as well, appointed by the President. Mr. BULWINKLE. How about the Secretary of Commerce? Mr. DICKINSON. He might very well be included, also.

Mr. BULWINKLE. And then you would suggest someone skilled in exchanges?

Mr. DICKINSON. Yes, sir.

The CHAIRMAN. Mr. Secretary, may I ask you this? Do you not think it would be rather unwise to put upon a Cabinet officer duties of this sort, that as busy as you have found them since you have been around here, you know it would have to be given to somebody else? Mr. DICKINSON. Yes, sir.

The CHAIRMAN. I was wondering if we admitted an assumption, upon which I think we might go at this time, without further conversation with those that have more control of this than I, if we are to as

sume that there is not going to be a separate board or commission set up to administer this law, in what board or in what commission in the Government would it most likely fall? Certainly not the Interstate Commerce Commission; doubtful if within the Federal Reserve Board, or in this Communications Commission we hope to set up, and in all probability the administration of the Securities Act will not be taken from the Federal Trade Commission, and I was wondering if, that being true, if a division in that Commission appointed by the President, after the act, with its sole duty to supervise this enactment, would not be about the best place we can put it, if we are going to assume there is not going to be a separate commission or board set up. Mr. DICKINSON. Mr. Chairman, the duties of the Federal Trade Commission at the present time are, I suppose, about as multifarious as those of any agency of the Government. That Commission was set up primarily with a view to aiding in the enforcement, along somewhat different lines, of the Anti-Trust Act, and there were added to it certain functions over unfair competition, which related to misbranding and false advertising, and in addition it has certain indefinite inquisitorial powers for assisting the Congress.

There has now been added to it the function of administering the Securities Act.

If a separate division of the Federal Trade Commission could be set up which would in substance, be a separate body, relieved from the burden of assisting in the enforcement of the unfair competition provisions of the Clayton Act and the Federal Trade Commission Act, why, I should think that so far as such a separate division was concerned, that would in substance take the place of a separate agency, that would be a method of providing for the administration of this act.

I am not sure, for myself, that I would differ as strongly as you do on the advisability of giving it to the Federal Reserve Board. It seems to me that in some respects, insofar as one of the central evils that you are dealing with here is the question of overexpansion of credit, that that is a function that cannot be separated from the Federal Reserve Board. If you do attempt to separate it from the Federal Reserve Board, you will build up a division of authority in a field where regulation is admitted to be necessary.

Mr. BULWINKLE. And under each, the idea as to who controls, who supervises, as to all intents and purposes, a separate bureau is going to have to be set up to a certain extent.

Mr. DICKINSON. Yes, sir; undoubtedly.

The CHAIRMAN. That is all.

Mr. WOLVERTON. Mr. Chairman

The CHAIRMAN. Mr. Wolverton.

Mr. WOLVERTON. Is it your thought that this new agency should likewise have supervision of the Securities Act?

Mr. DICKINSON. That is a question that did not fall within the purview of our committee.

Mr. WOLVERTON. You would not care, then, to express any opinion on that?

Mr. DICKINSON. I have not given that question sufficient thought to be willing to express any opinion whatever.

Mr. HOLMES. Mr. Chairman, may I ask another question?
The CHAIRMAN. Mr. Holmes.