prosecutions. I have also talked with men connected with these industrial corporations and with eminent economists, and I have found everywhere a general acquiescence in the view that something in the way of supplemental legislation was required.

It will be impossible to administer this great and necessary system of regulation through the courts. We all know that just as soon as these corporations are reorganized under these decisions they will, for a time at least, take the form of a large number of corporations, limited either in the character of the commodity with which they deal or in the area over which they operate. The management of these corporations is generally satisfactory to the stockholders; they have confidence in the existing management, and in the great financial interests and institutions that usually control that management. These stockholders will, by their proxies, practically give to those. controlling interests their votes on anything they desire. So that we will eventually have, in these industrial corporations, just as we have with railroads, the practical control of all these subdivided corporations in the hands of a few great financial institutions or groups in New York, and they will dictate the membership of the boards and the general policy of all these corporations. There will be an effective unity of policy, and it will take such a form as to defeat the law officers in reaching it as a combination in restraint of trade. A mere nod, a mere suggestion, will accomplish what is desired.

The question is, Shall we wait until the courts shall go through their slow processes in the existing cases and re-create and reorganize these corporations and others against which undecided suits are now pending, and also in the numerous suits that will be brought? Or shall we organize an administrative tribunal which, vested with the powers of investigation, publicity, and correction, will, by continuous supervision, prevent the growth of these abuses which the courts are now called upon sporadically and intermittently to correct by their slow processes?

Certain fundamental considerations are thus raised, which I will present seriatim.

(1) The first question is: Shall an interstate trade commission of some kind be organized? I imagine that there can hardly be any difference of opinion on the point that there should be an administrative tribunal of high character, nonpartisan, or, rather, bipartisan, and independent of any department of the Government. I assume also that there should be a commission rather than one executive official, because there are powers of judgment and powers of discretion to be exercised. The organization should be quasi judicial in character. We want traditions; we want a fixed policy; we want trained experts; we want precedents; we want a body of administrative law built up. This can not be well done by the single occupant of an office, subject to constant changes in its incumbency and subject to higher executive authority. Such work must be done by a board or commission of dignity, permanence, and ability, independent of executive authority, except in its selection, and independent in char

acter.

Of course, in performing any purely executive work one man is preferable to a commission. If only powers of investigation and publicity are given, a single-headed organization, like the Bureau of Corporations, might be the best for the work; but if judgment and

discretion are to be exercised, or if we have in contemplation the exercise of any corrective power hereafter, or if the broad ends above outlined are to be attained, it seems to me that a commission is required.

(2) The next question is, What shall be done with the Bureau of Corporations, with its 120 experts who are full of interest in their duties, who have had long training in just this sort of work, and who have shown their capacity to do good work? Shall that bureau be entirely done away with, or shall it be merged in this new organization? And then what shall become of the chief of that bureau and his deputy, both of whom have acquired a large experience and both of whom have the confidence of the country? The Bureau of Corporations would hardly be necessary, as a separate organization, if such a commission should be created. But shall we lose the momentum, the long experience, and trained personnel that this bureau has acquired? To avoid this loss it is obviously desirable that we merge the Bureau of Corporations as this bill does-with all its officials, funds, and powers, in this commission, and that we make, for the first two years, the Commissioner of Corporations one of the new commissioners, and make him, for the first year, the chairman of the commission, afterwards giving the power to the commission to select its own chairman. Thus the executive work as at present organized would go on without a break, and the difficulties usual to the period of early organization would be largely obviated. My idea, also, is to utilize the Deputy Commissioner of Corporations as the secretary of the commission.

(3) The term of office of the commissioners is to be 10 years. The salary is to be $10,000. I should favor a much larger salary than that, but I do not know whether Congress would look with favor upon it.

(4) The next question is, What shall be the test of the applicability of the act to corporations engaged in interstate trade? Shall it be size, as indicated, say, by its capital or its gross annual receipts, or shall it be the character of the business in which the corporations are engaged, namely, the production of certain great staple articles?

I have inquired with great particularity of the Commissioner of Corporations and of the Solicitor General regarding this, and they say that they think the best test would be, for the present, the gross receipts of the corporations. If this test, provided in the bill, were applied, the jurisdiction of the commission would be probably confined to between 300 and 500 corporations.

Senator POMERENE. You mentioned, I believe, that the gross receipts should be $5,000,000 or more?

Senator NEWLANDS. Yes. This would cover between 325 and 500 corporations, I am informed by the Commissioner of Corporations. This is his best estimate, but he states that it is a very rough one, based on very incomplete data.

Both the Solicitor General and the Commissioner of Corporations have very carefully considered this question of a test based on the character of the production of the corporation, or of the commerce or commodity in which it deals, and they came to the conclusion that it would be very difficult to do that; that it would necessitate refinements and subrefinements with reference to the different articles.

One suggestion was made which I think would improve the bill, that all corporations whose gross receipts exceed $1,000,000 should

make certain reports to be called for by the commission, which reports can be classified by the commission for the purpose of statistical information, and that these reports shall be given with a view largely to determining what are the corporations that have $5,000,000 of gross receipts; but that only the corporations that have $5,000,000 of gross receipts or above that shall be subject to the general provisions of the bill.

Senator BRANDEGEE. Will you pardon an interruption at this point? I won't do it again. In estimating these 300 to 500 corporations, showing gross receipts of at least $5,000,000, did the commissioner of corporations consider banks?

Senator NEWLANDS. No; he did not consider banks.

(5) The next question is: What shall be the powers of the commission? Shall they be confined to investigation, requirement of statements, publicity, and recommendation to the President and to Congress, or shall they go further?

I would deem it very beneficial even if we could get a bill that would go no further than that, because we would then have five men of high ability and character who would immediately start upon this as their life work-not the kind of work that we do, broken up by thousands of other considerations and by other duties, but whose specialty it would be to ascertain the facts and the abuses requiring correction, and to give publicity regarding them and then to make their recommendation to Congress.

(6) The next question is: Shall we provide the additional requirement of registration, granting to the commission the accompanying power of denying or cancelling registration for certain prescribed offenses, or for violation of the regulations of the commission? And shall the punishment of a recalcitrant corporation be confined simply to a cancellation of registration?

I had a provision in the bill which I originally drew, that for disobeying the law or the regulations made in pursuance thereof a recalcitrant corporation could be prevented from engaging in interstate commerce. I am inclined to think that this is a rather extreme power and had better be left out for the present.

We must also consider as to the preciseness with which the grounds for denial or cancellation should be stated in the law and whether the commission shall have the power to make regulations, lack of compliance with which will result either in a denial of registration or a cancellation. Registration being compulsory, the denial of registration or the cancellation of registration would have simply a moral effect. The Solicitor General and the Commissioner of Corporations insist that that moral effect would be very great, though it involves no substantial right of property, but that all these corporations will be able to secure public confidence by securing the confidence of the commission itself.

Senator POMERENE. May I ask this question: What particular rights or privileges would you give to a registered corporation over one that was not registered?

Senator NEWLANDS. None.

Senator POMERENE. Then what would be accomplished by the fact of registration?

Senator NEWLANDS. Only those corporations having such registration would be allowed to claim and advertise that fact. The conten

tion is-and it is a very practical one-that it would be of immense advantage to these corporations in all their financial undertakings to have the visé of the United States Government; to be able to say, "We have complied with all the requirements of law and of the commission regarding our financial organization, the issue of our securities, etc., and therefore we are entitled to the confidence of the public.' Such Federal registration, or the lack of it, would inevitably have a substantial effect on the market value and standing of the corporation's securities at home and abroad. It would probably make a difference of one-half a per cent or perhaps 1 per cent in the rate of interest at which they could place their bonded securities, etc. Both the Solicitor General and the commissioner tell me that corporations are becoming exceedingly sensitive to public opinion. You will observe the careful manner in which Mr. Gary is feeling his way continually in public opinion. The Sugar Trust, for instance, has utterly abandoned its defiant attitude.

Senator BRANDEGEE. I think they are both genuine reforms.

Senator CUMMINS. In order that it shall have any influence upon public opinion, and in order that people may know that this corporation has been organized and is conducting itself properly in order to inspire confidence, you must have certain rules which cover the organization of the corporation, the issuance of its securities, etc. Senator NEWLANDS. Yes.

Senator CUMMINS. You do not propose any rules. The thing would have simply a moral effect if the board or commission did not have the power to determine how the corporation should be organized and how it should carry on its business.

Senator NEWLANDS. That raises the next question. If you desire to provide for registration of corporations, how far will you wish to define the powers?

As the power to regulate interstate commerce is a legislative power, the fundamental law requires that an act turning over the administration of such power to a commission or board shall prescribe the rules or standards under which the power is to be exercised. Would this apply to a mere registration in which no substantial property right is involved? For instance, would it be necessary for the law to define what are "unfair or oppressive methods of competition," what constitutes "overcapitalization" or "improper financial organization"; or could these matters be left to the judgment and discretion of the commissioners without precise legal definition?

Senator CUMMINS. What do you say about that?

Senator NEWLANDS. I am inclined to think that any general phrase intended to give them such powers as will prevent excessive capitalization or unfair or oppressive methods of competition would be upheld by the courts, particularly with reference to the denial or cancellation of the mere privilege of registration, which affects no substantial property right.

Senator CUMMINS. Without taking up the question of the constitutional power of Congress to do the thing that is suggested here, you know that there is the widest difference among Members of the Senate with regard to what constitutes proper capitalization. We debated that at some length in the railroad bill, and we could not agree even upon the subject as limited to the railways,

Senator BRANDEGEE. He proposes to leave all that to the commission.

Senator CUMMINS. The Senate would not be willing to do that. I do not believe that any Senator would be willing to leave to the commission an unqualified and unrestrained right to determine what was proper capitalization.

Senator NEWLANDS. Then we would have to have a simple vote of the Senate as to what constitutes overcapitalization, and it would determine whether capitalization covers simply the value of the property or the actual money invested, or whether it includes such things as promotion, good will, patent rights, etc.

Senator CUMMINS. That brings up the very question I suggest. Here we are in the closing days of the session, and it is a very great subject, the matter of capitalization of our corporations. It is utterly impossible, it seems to me, to pass a law which will be expressive of the views of the Congress upon that subject within the time that we have, and it will be hard at any time.

Senator NEWLANDS. For that very reason, it seems to me, the suggestion of our chairman, Senator Clapp, is a very reasonable one, that we should confine our present exercise of legislation at this extra session to the appointment of an interstate trade commission and the merger in such commission of the Bureau of Corporations, such commission to have simply powers of publicity, inquest, and recommendation; particularly in view of the fact that the Bureau of Corporations is not a bureau of complete publicity at present. On the contrary, it is instructed by the law to withhold from the public facts ascertained by public officers, unless the President gives his assent to publication.

Senator CUMMINS. I agree with you regarding the weakness in the organization of the Bureau of Corporations. But publicity is of no value unless the facts that are discovered can be compared with some rule of conduct which the law has laid down for the government of the corporations. It is bringing the force of public opinion to bear upon corporations to induce them or compel them to obey the law, and if you have no law, publicity is of minor importance. The facts which must underlie all this legislation are perfectly well knownwell known to every student of the subject or observer of the subject; that is, the facts that are necessary to declare the law or rule of conduct. A great many facts can be collected, as we have seen here all around, that are very curious and interesting, but they are not fundamental, they are not material, really, to the organization of the law. And it occurs to me that is my view only-that your plan, while it leads in the right direction and we must-have eventually, I think, some such tribunal, it would seem to me before we organize a commission we should be able to determine what kind of law it shall administer. You know the facts just as well now as you will then. You want to know just how every company is capitalized, how it is organized, and just how its business is done or has been done. These things are merely interesting as history; they are not essential to the conclusion that you want to reach as to how corporations should be organized and how they should conduct themselves.

Senator NEWLANDS. I agree with you as to that, that it is unnecessary in order to shape the law to have further investigation. We know to-day all the abuses that exist in corporate management.

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