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You are, or the New York Stock Exchange is, in accord with that?
Mr. WHITNEY. Yes, sir.
Mr. MARLAND. With the four principles he enumerated?

Mr. WHITNEY. Well, if you will read them. Number 1 was supervision or regulation.

Mr. MARLAND (reading). “(1) To establish Federal supervision over securities exchanges.

Mr. WHITNEY. We advocate that.

Mr. MARLAND (reading). “(2) To prevent manipulation of security prices, and to protect the public against unfair practices."

Mr. WHITNEY. Where that is unfair; yes, sir.

Mr. MARLAND (reading). “(3) To prevent excessive fluctuations in security prices due to speculative influences.”

Mr. WHITNEY. Yes, sir; if it can be done.

Mr. MARLAND (reading). “(4) To discourage the use of credit in the financing of excessive speculation in securities.'

Mr. WHITNEY. Absolutely.
Mr. MARLAND. That is all.
The CHAIRMAN. We are much obliged to you, Mr. Whitney.
Mr. WHITNEY. Thank you, Mr. Chairman and gentlemen.
The CHAIRMAN. We will hear Mr. Lothrop Withington.

STATEMENT OF LOTHROP WITHINGTON, REPRESENTING A COM

MITTEE OF NEW ENGLAND SECURITY DEALERS, BROKERS, AND DEALER-BROKERS

Mr. WITHINGTON. Mr. Chairman and members of the committee, my name is Lothrop Withington. I am not a security dealer or broker, but I am an attorney representing a committee of New England security dealers, brokers, and dealer-brokers.

In that respect, I think New England is perhaps unique in its representation, by a committee that has all of the different phases of security interests in its membership.

I speak this morning through the courtesy of this committee, not only for New England but by the courtesy and permission of the Chicago Exchange, for Chicago, because the principal matters in which Boston and Chicago are interested are fundamentally the same.

Chicago is the largest exchange outside of New York City, and Boston has the largest exchange, next to Chicago, outside of New York City.

The consideration which most vitally concerns us from the New England and the Chicago aspect is the fact that we believe there is a general misapprehension with regard to the real and sincere desire of exchanges for regulation. I have yet to find any exchange that has not only reached the conclusion that they are going to be regulated, but welcomes regulation, if it is a regulation which will make them better market places and will eliminate practices which have brought down a national condemnation upon exchanges-abuses which should be corrected.

In this connection, I believe, and I want to approach this matter with the belief that this committee is not interested in unduly restricting exchanges or interferring with their legitimate functions, but is interested solely in the regulation of exchanges by laws which will permit the widest, freest, and fairest market for securities.

And, gentlemen, in that respect, may I say that in New England we are fearful that the only liquid form of wealth that is left, the security wealth of this Nation, may be by unfortunate legislation put in the same category that real estate is at the present time.

I understand that there are at the present time some 372 to 4 billion dollars loaned by banks in the United States upon securities. We are not so much concerned with the fear that banks will lose by enforced liquidation of those security loans, as we in New England and Chicago, are concerned with the fear that individuals who own securities throughout this country will become affected by the fact that banks cannot liquidate those loans, and therefore the values of those securities will disappear.

The CHAIRMAN. Just what specific provision of this bill will force that liquidation?

Mr. WITHINGTON. Mr. Chairman, the first provision of the bill which I think forces that liquidation, is the provision with regard to margins, with regard to the suggestion that it be placed

The CHAIRMAN. You are talking about loans that are already in existence?

Mr. WITHINGTON. Mr. Chairman, I am talking about loans that are in existence as affected by the values of securities as they appear in the quotations of the markets of this country.

Unless those loans are so far under water that there is no use of liquidation, if there is not, and adequate market to absorb the liquidation of those securities, then those loans cease to be good loans and the values of the securities generally are certainly affected, because the loan values have disappeared.

The CHAIRMAN. What is there in this bill that will force the banker to call that loan?

Mr. WITHINGTON. If the values of securities disappear in quotations on the exchanges, those loans would have to be liquidated by banks, and as they saw the values decrease

Thé CHAIRMAN. They would have to be?
Mr. WITHINGTON. Well, if they could be liquidated.

The CHAIRMAN. I am not talking about that. We are not running the banks. We have nothing to do with when a bank can call its loan or tells a fellow that he has got to pay, or who is to tell them when; but is there anything in this bill that forces a man out who is in now, who has a loan now?

Mr. Withington. Yes, Mr. Chairman. If the value of the securities which are held in the portfolio of the bank as collateral for loans, values, as they appear on the market places and exchanges of the country, if they show a downward tendency, it is bound to result in the liquidation of loans on securities, and the throwing on the market of additional securities is going to further force the market down.

Mr. LEA. That statement, I take it, is based upon the assumption that the enactment of this bill would reduce the market prices of securities. Is that the idea?

Mr. WITHINGTON. Yes, Mr. Lea.

Mr. LEA. Well, why would this margin requirement force a decrease in the market prices of stocks?

Mr. WITHINGTON. Because, I am informed I will have to take the statement of gentlemen who are more and better informed on those matters than 1—that unless there is a certain amount of specu

You are, or the New York Stock Exchange is, in accord with that?
Mr. WHITNEY. Yes, sir.
Mr. MARLAND. With the four principles he enumerated?

Mr. WHITNEY. Well, if you will read them. Number 1 was supervision or regulation.

Mr. MARLAND (reading). "(1) To establish Federal supervision over securities exchanges.

Mr. WHITNEY. We advocate that.

Mr. MARLAND (reading). “(2) To prevent manipulation of security prices, and to protect the public against unfair practices.

Mr. WHITNEY. Where that is unfair; yes, sir.

Mr. MARLAND (reading). "(3) To prevent excessive fluctuations in security prices due to speculative influences."

Mr. WHITNEY. Yes, sir; if it can be done.

Mr. MARLAND (reading). “(4) To discourage the use of credit in the financing of excessive speculation in securities.”

Mr. WHITNEY. Absolutely.
Mr. MARLAND. That is all.
The CHAIRMAN. We are much obliged to you, Mr. Whitney.
Mr. WHITNEY. Thank you, Mr. Chairman and gentlemen.
The CHAIRMAN. We will hear Mr. Lothrop Withington.

STATEMENT OF LOTHROP WITHINGTON, REPRESENTING A COM

MITTEE OF NEW ENGLAND SECURITY DEALERS, BROKERS, AND DEALER-BROKERS

Mr. WITHINGTON. Mr. Chairman and members of the committee, my name is Lothrop Withington. I am not a security dealer or broker, but I am an attorney representing a committee of New England security dealers, brokers, and dealer-brokers.

In that respect, I think New England is perhaps unique in its representation, by a committee that has all of the different phases of security interests in its membership.

I speak this morning through the courtesy of this committee, not only for New England but by the courtesy and permission of the Chicago Exchange, for Chicago, because the principal matters in which Boston and Chicago are interested are fundamentally the same.

Chicago is the largest exchange outside of New York City, and Boston has the largest exchange, next to Chicago, outside of New York City.

The consideration which most vitally concerns us from the New England and the Chicago aspect is the fact that we believe there is a general misapprehension with regard to the real and sincere desire of exchanges for regulation. I have yet to find any exchange that has not only reached the conclusion that they are going to be regulated, but welcomes regulation, if it is a regulation which will make them better market places and will eliminate practices which have brought down a national condemnation upon exchanges-abuses which should be corrected.

In this connection, I believe, and I want to approach this matter with the belief that this committee is not interested in unduly restricting exchanges or interferring with their legitimate functions, but is interested solely in the regulation of exchanges by laws which will permit the widest, freest, and fairest market for securities.

And, gentlemen, in that respect, may I say that in New England we are fearful that the only liquid form of wealth that is left, the security wealth of this Nation, may be by unfortunate legislation put in the same category that real estate is at the present time.

I understand that there are at the present time some 372 to 4 billion dollars loaned by banks in the United States upon securities. We are not so much concerned with the fear that banks will lose by enforced liquidation of those security loans, as we in New England and Chicago, are concerned with the fear that individuals who own securities throughout this country will become affected by the fact that banks cannot liquidate those loans, and therefore the values of those securities will disappear.

The CHAIRMAN. Just what specific provision of this bill will force that liquidation?

Mr. WITHINGTON. Mr. Chairman, the first provision of the bill which I think forces that liquidation, is the provision with regard to margins, with regard to the suggestion that it be placed

The CHAIRMAN. You are talking about loans that are already in existence?

Mr. WIThington. Mr. Chairman, I am talking about loans that are in existence as affected by the values of securities as they appear in the quotations of the markets of this country.

Unless those loans are so far under water that there is no use of liquidation, if there is not, and adequate market to absorb the liquidation of those securities, then those loans cease to be good loans and the values of the securities generally are certainly affected, because the loan values have disappeared.

The CHAIRMAN. What is there in this bill that will force the banker to call that loan?

Mr. WITHINGTON. If the values of securities disappear in quotations on the exchanges, those loans would have to be liquidated by banks, and as they saw the values decrease

The CHAIRMAN. They would have to be?
Mr. WITHINGTON. Well, if they could be liquidated.

The CHAIRMAN. I am not talking about that. We are not running the banks. We have nothing to do with when a bank can call its loan or tells a fellow that he has got to pay, or who is to tell them when; but is there anything in this bill that forces a man out who is in now, who has a loan now?

Mr. WITHINGTON. Yes, Mr. Chairman. If the value of the securities which are held in the portfolio of the bank as collateral for loans, values, as they appear on the market places and exchanges of the country, if they show a downward tendency, it is bound to result in the liquidation of loans on securities, and the throwing on the market of additional securities is going to further force the market down.

Mr. LEA. That statement, I take it, is based upon the assumption that the enactment of this bill would reduce the market prices of securities. Is that the idea?

Mr. WITHINGTON. Yes, Mr. Lea.

Mr. LEA. Well, why would this margin requirement force a decrease in the market prices of stocks?

Mr. WITHINGTON. Because, I am informed I will have to take the statement of gentlemen who are more and better informed on those matters than 1—that unless there is a certain amount of specu

You are, or the New York Stock Exchange is, in accord with that?
Mr. WHITNEY. Yes, sir.
Mr. MARLAND. With the four principles he enumerated?

Mr. WHITNEY. Well, if you will read them. Number 1 was supervision or regulation.

Mr. MarlAND (reading). “(1) To establish Federal supervision over securities exchanges.

Mr. WHITNEY. We advocate that.

Mr. MARLAND (reading). “(2) To prevent manipulation of security prices, and to protect the public against unfair practices."

Mr. WHITNEY. Where that is unfair; yes, sir.

Mr. MARLAND (reading). “(3) To prevent excessive fluctuations in security prices due to speculative influences."

Mr. WHITNEY. Yes, sir; if it can be done.

Mr. MARLAND (reading). “(4) To discourage the use of credit in the financing of excessive speculation in securities.”

Mr. WHITNEY. Absolutely.
Mr. MARLAND. That is all.
The Chairman. We are much obliged to you, Mr. Whitney.
Mr. Whitney. Thank you, Mr. Chairman and gentlemen.
The CHAIRMAN. We will hear Mr. Lothrop Withington.

STATEMENT OF LOTHROP WITHINGTON, REPRESENTING A COM

MITTEE OF NEW ENGLAND SECURITY DEALERS, BROKERS, AND DEALER-BROKERS

Mr. WITHINGTON. Mr. Chairman and members of the committee, my name is Lothrop Withington. I am not a security dealer or broker, but I am an attorney representing a committee of New England security dealers, brokers, and dealer-brokers.

In that respect, I think New England is perhaps unique in its representation, by a committee that has all of the different phases of security interests in its membership.

I speak this morning through the courtesy of this committee, not only for New England but by the courtesy and permission of the Chicago Exchange, for Chicago, because the principal matters in which Boston and Chicago are interested are fundamentally the same.

Chicago is the largest exchange outside of New York City, and Boston has the largest exchange, next to Chicago, outside of New York City.

The consideration which most vitally concerns us from the New England and the Chicago aspect is the fact that we believe there is a general misapprehension with regard to the real and sincere desire of exchanges for regulation. I have yet to find any exchange that has not only reached the conclusion that they are going to be regulated, but welcomes regulation, if it is a regulation which will make them better market places and will eliminate practices which have brought down a national condemnation upon exchanges-abuses which should be corrected.

In this connection, I believe, and I want to approach this matter with the belief that this committee is not interested in unduly restricting exchanges or interferring with their legitimate functions, but is interested solely in the regulation of exchanges by laws which will permit the widest, freest, and fairest market for securities.

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