similar public policy, supereminent over the public policy of any State, in regard to any sort or kind of corporation which the public policy of the State may choose to create.

As was well said by Mr. Justice Bradley, in the case of Stockton v. Baltimore R. R. (32 Fed. Rep., 9), speaking of the extent of the power of the Congress over interstate and foreign commerce: "It is over the whole subject, unimpeded and unembarrassed by State lines, or State laws, and in this matter the country is one, and the work to be accomplished is national; State interests, State jealousies, and State prejudices do not require to be consulted. In matters of foreign and interstate commerce there are no States."

Nor is this new doctrine, because in Gibbons v. Ogden (9 Wheat.), Chief Justice Marshall said of the same regulative power: "It is a power vested in Congress as absolutely as it would be in a single government having in its constitution the same restrictions in the exercise of the power as are found in the Constitution of the United States."

Therefore, the Congress can drive out of interstate and foreign commerce all corporations with fictitious or watered stocks, all corporations whose capital stock is so great as to constitute them practical monopolists or suspects of being such, all holding companies, and all companies whose stocks are owned and controlled by holding companies or by other corporations.

If it should become necessary for the Congress to adopt a corporation regulative act, that act should be drawn so as to destroy the existing evils, and so as to promote and not to hamper legitimate trade and commerce; and to this end the constructive statesmanship of all parties should cooperate. The demand of the people is for that degree of industrial peace which is not incompatible with fair and healthy commercial competition; not a peace of Warsaw made by desolating legislation; nor yet the Pax Romana of the all-conquering imperial trust. Nor do they intend to heed the plaintive voice of the spokesman for the modern Cyclops, "monstrum horrendum informe, ingens," asking the Federal Government to take it in its arms and coddle it, tell it what to do, and "to fix prices."

Verily extremes meet, and the monopolist and the socialist reach a common ground! For government to fix the prices of merchandise bought and sold in commerce is utterly beyond the power of any legislative body in America; and our free democratic society, based on the independence of the individual and the development and protection of individual rights, would have to be shattered to its foundations and a new social order built up, before any such proposition could be maintained.

Such a power necessarily implies the right to fix the price of human labor, not only because the price of the products of labor can not be fixed without indirectly fixing the proportion of the price that labor shall receive, but also because, as the liberty of the merchant, the producer, and the manufacturer is as great as the liberty of the laborer, a power great enough directly to shackle their liberty is great enough directly to shackle his liberty. No free people will never submit to any such doctrine. It is the socialism of Marx and Engel pure and simple, and may find its justification in their celebrated manifesto, but not in any of the records or documents that consecrate the rights and the political beliefs of the American citizen, undefiled by the social leprosy engendered in the Ghettos of an oppressed race, and in the hovels of a peasantry whose ancestors were adstricti glebis for a thousand years, and who themselves are still the hewers of wood and drawers of water for an overbearing class of oligarchic land monopolists.

May not we now add to the description of the modern Cyclops from which has come this cry for the Government "to fix prices." the balance of the Virgilian hexameter just quoted, and say of it eui lumen ademptum"? For surely the light of American liberty does not shine for it.

It is no answer to this argument to point to the regulation by law of the charges made for gas, water, electric lighting, telephones, telegraph, express charges, transportation, and grain elevator rates. These businesses are public, or quasi public in their nature, and most of them enjoy what has been well described as a natural monopoly. Nor can modern legislation regulating prices be supported by the precedents of the despotic governments of the Middle Ages, which pursued the butcher to his stall, the weaver to his loom, and the baker to his oven. The police power may still touch the butcher and the baker in the interest of public health, but it can not fix the price of the commodities they sell. The ancient assize of bread was the last of these medieval tyrannies, and still keeps its place by immemorial custom in some cities in foreign countries.

As a matter of history it persisted in my own home city of New Orleans up to 30 years ago, which may be explained by the fact that for the first 85 years of her existence she was a foreign city, and it took a long time to change her municipal habits and traditions.

Of course the States, by no agreement among themselves, could protect their citizens against any evils arising out of the national banking laws of the United States. The establishment of a money trust among the national banks can only be prevented by the Federal power.

I have already stated that there is no limitation on the capital stock of such banks, no prohibition against the holding and voting of their stock by other corporations, and no prohibition against the identity of the boards of directors of banks situated in the same locality. Consolidation is not expressly permitted, but it has been practiced in roundabout ways, and has resulted in the creation, both in New York and Chicago, of banks of enormous capital and deposits which run into the hundreds of millions. One national bank can not hold such stock in another national bank, but this results from want of power in such a bank to hold stock, except temporarily, in any corporation.

In the present condition of the law, it would legally be possible to create a holding company in one of the States that permit and even encourage such organizations, to purchase, own, and vote the majority of the capital stock of every national bank in the United States, and such a corporation would bear the same relation to the finances of the country that the United States Steel Corporation bears to the iron and steel industry. Indeed, some of the large banks are now operating a device which partakes of the nature of a holding company, accompanied by the establishment of an indissoluble tie between the stock of the bank and the stock of the so-called “securities company." The attention of the officers of the Government was called to this subject by the organization of the National City Co., in New York. Investigation by the Secretary of the Treasury, it is publicly stated, shows that there are three great holding companies of national bank and other stocks, and hundreds of smaller ones. The general plan adopted to carry out one of these schemes is for one of the great banks to declare a special dividend to stockholders. This dividend, by arrangement with the stockholders, is applied to the organization of a securities or a trust company in which the stockholders are the same as those of the bank. The capital stock of the securities company is then invested in the stock of other banks and corporations, and, if necessary, more funds are borrowed from the parent bank on the security of the stocks purchased. Both the stock certificates of the parent bank and of the securities company are stamped in such a way that the transfer of stock in either company carries with it a transfer of a proportionate amount of stock in the other, so that the stockholders in the parent bank and its connected securities company remain always the same and in the same proportion, thus establishing a community of management between the parent bank, the securities company, and all the banks or corporations whose stocks are controlled by the securities company.

In view of the Knight case, which has never been expressly overruled, it is doubtful whether schemes of this kind are within the purview of the Federal antitrust act, but there is no doubt that they are an ingenious subterfuge, intended to circumvent the settled rule that one national bank can not own stock in another corporation. Between the lawbreaker and the expounder of the law there has been since the first statute was promulgated a perpetual contest, the one inventing plans to do indirectly what he is prohibited from doing directly, and the other extending and developing the elemental principles of justice so as to circumvent all evasions, no matter how ingeniously devised. It is therefore not probable in this matter that either the Attorney General of the United States or the courts will conclude that the ingenuity of the lawbreaker is greater than the law."1

The difference between this plan and that of the simple holding company is the linking together the stock of the parent bank and the stock of the securities company, and the furnishing of the capital of the securities company by the subterfuge of a dividend. If, however, one or two of the great capitalists of the nation should, in their own individual names and for their own individual

1 This prediction of what the Attorney General of the United States would decide in this matter was written and printed before his opinion was published. Then happened a most remarkable thing. The Secretary of the Treasury refused to accept and act upon the opinion of the law officer of the Government, and the question was referred to the President. His conclusion is still in petto.

purposes acquire the majority of the stock in the majority of the national banks of the United States, or even of those in any of the financial centers, it is difficult to see how, in the present state of the law, they could be prevented from organizing a holding company to own and vote such stocks.

A money trust controlling the liquid capital-the lifeblood of the commerce of the Nation, is doubtless the dream of the dominant financial magnets. If such a calamity does befall us, there will surely rise up another Andrew Jackson, with the power and the good will of the people behind him, who will throttle this new perversion of the financial laws, just as the old Andrew Jackson strangled the bank of the United States. But the simplest and the surest way is for the Congress now to limit the capital stock of national banks, to prohibit consolidation directly or indirectly, to prohibit directors in one national bank from being directors in any other bank, State or national, to prohibit any corporation from owning directly, or through trustees or interposed persons, any of the stock of a national bank, and to prohibit the coupling of the stock of a national bank with the stock of any other company, or vice versa.

The African wizard doctor's method of casting out devils is said to be the filling of the victim with other and different devils. On the analogy of this principle, it is proposed in some quarters that the Federal Government shall create private business corporations to engage in interstate commerce. Assuming for the moment that the Government has the power to create such private business corporations, and that the object and purpose of such creation is so to control interstate commerce as to prevent all interstate commercial iniquity committed by corporations, it would be necessary to couple this creation with a prohibition against any State corporation engaging in that commerce; because in the absence of such a prohibition no capital would seek investment under a stringent Federal corporation law when it could incorporate itself under the liberal laws of the various States and have full right to engage in interstate commerce. Particularly would that capital which needs supervision and control fail to invest itself in a Federal corporation.

But such a prohibition would be an economic crime. Every business corporation in the land is more or less engaged in interstate commerce. It would act as an embargo on the commercial activities of tens of thousands of corporations, extending from the great department store down to the incorporated retail shop. It would arouse an antagonism among the States so hostile that in every State such corporations would be rigidly excluded from all internal commerce. Such a law would soon become the center of political attack, and the party which would attempt to justify or maintain it would be swept from power in a whirlwind of indignation. Without such a prohibition, such a law would simply be inserting into the body politic more devils, less harmless perhaps than those already existing, but certainly without the power of driving the old ones out.

But the Congress has, under the grant to regulate interstate and foreign commerce, no constitutional power to create a private business corporation to engage in interstate and foreign commerce, and the only person who, with any - seriousness, ever claimed it has such a power, so far as I know, is the former Commissioner of Corporations, Mr. Garfield. Prof. Willoughby, in his recent work on the Constitution, denies the power. That no such power exists clearly appears from the opinion of Chief Justice Marshall in Osborne v. The Bank of the United States (9 Wheat.), who said:

"The bank is not considered as a private corporation whose principal object is individual trade and individual profit, but as a public corporation created for public and national purposes. That the mere business of banking is of its own nature a private business and may be carried on by individuals and companies, having no political connection with the Government is admitted; but the bank is not such an individual or company. It was not created for its own sake or for private purposes. It has never been supposed that Congress could create such a corporation."

That the second bank of the United States, the validity of whose charter was in issue in the Osborne case, was an instrumentality of government, and that this was the ground upon which the court justified the charter was held in the Corporation Tax cases lately decided. The Supreme Court of the United States, in Farmer's Bank r. Dearing (91 U. S., 29) and in Davis v. Elmira Savings Bank (161 U. S., 283), has declared that the national banks are instrumentalities of the Federal Government created for a public purpose. The interstate railroads and bridges chartered by the Congress are all quasi public corporations, and the right to create them has been pitched by the Congress itself upon the interstate-commerce power, the military power, and the post-road power. They

too are instrumentalities of the Federal Government created for a public purpose, and authorized to do what the Government itself could do, and for that reason are not subject to State taxation or control, as was held in California v. Pacific Railroad Co. (127 U. S., 1). The Corporation Tax cases, cited as Flint v. Stone, Tracey & Co. (220 U. S., 152), make it clear that business corporations organized for private purposes are not governmental agencies in any sense. Nor can a State itself by descending to the conduct of business of a private character, as the State of South Carolina did in regard to the liquor traffic, make such traffic a governmental agency. (South Carolina v. U. S., 199 U. S., 437.)

The creation, therefore, of strictly private business corporations to engage in interstate commerce, which by no stretch of the imagination can be made instrumentalities of government, organized as an appropriate means to aid in the execution of a governmental function, can not be justified by the doctrine or the reasoning of any of the cases heretofore decided by the Supreme Court of the United States. To establish such a power would be practically to read into the Constitution the rejected motion of Madison in the convention of 1787, to give the United States power "to grant charters where the interests of the United States require and the legislative provisions of individual States may be incompetent."

But even if the radical doctrine of the new nationalism should prevail on this question, the scope of such Federal business corporations would be extremely narrow. They would be confined to conducting intercourse and traffic, the transportation and transit of persons and property, the purchase, sale, and exchange of commodities among the States and with foreign countries, with their inseparable incidents and concomitants. They could not engage in mining, manufacturing, or in production of any kind, with their inseparable incidents and concomitants, because these matters are not commerce and are absolutely be yond the power of the Congress. This proposition is too well settled for discussion. The jurisprudence of the Supreme Court of the United States on this subject is summed up by Mr. Justice Jackson in the Greene case (52 Fed., 113), as follows:

"Commerce among the States within the exclusive regulating power of Congress consists of intercourse and traffic between their citizens, and includes the transportation of persons and property as well as the purchase, sale, and exchange of commodities. In the application of that comprehensive definition, it is settled by the decisions of the Supreme Court that such commerce includes, not only the actual transportation of commodities and persons between the States, but also the instrumentalities and processes of such transportation; that it includes all the negotiations and contracts which have for their object, or involve as an element thereof, such transmission or passage from one State to another; that such commerce begins, and the regulating power of Congress attaches when the commodity, or thing traded in, commences its transportation from the State of its production or situs to some other State or foreign country, and terminates when the transportation is completed and the property in the State of its destination. When the commerce begins is determined not by the character of the commodity nor by the intention of the owner to transfer it to another State for sale, nor by his preparation of it for transportation, but by its actual delivery to a common carrier for transportation, or the actual commencement of its transfer to another State. At that time the power and regulating authority of the State ceases, and that of Congress attaches and continues until it has reached another State and becomes mingled with the general mass of property in the latter State: That neither the production or manufacture of articles or commodities which constitute subjects of commerce, and which are intended for trade and traffic with citizens of other States, nor the preparation for their transportation from the State where produced or manufactured prior to the commencement of the actual transfer or transmission thereof to another State, constitutes that interstate commerce which comes within the regulating power of Congress; and, further, that after the termination of the transportation of commodities or articles of traffic from one State to another, and the mingling or merging thereof in the general mass of property in the State of destination, the sole distribution and consumption thereof in the latter State forms no part of interstate commerce."

Manufacture and production end before commerce begins and form no part of it. They are completely under the control of the State where manufacture and production take place, and are therefore beyond the commercial power of

the Federal Government. As the court said, speaking through Mr. Justice Lamar, in Kidd v. Pearson (126 U. S., 22):

"No distinction is more popular to the common mind or more clearly expressed in economic and political literature than that between manufacture and commerce. Manufacture is transformation-the fashioning of raw materials into a change of form for use. The functions of commerce are different. The buying and selling and transportation incident thereto constitute commerce." The same statement applies to mining, lumbering, and agriculture.

If under its commercial power the Congress could charter corporations to mine, manufacture, and produce, then we should have Federal mines and Federal factories, Federal wheat farms, Federal cotton plantations, Federal truck gardens, and Federal poultry yards. These corporations could enter the States without their consent and acquire and hold their soil against their public policy and even against their prohibitory laws. And this is the reductio ad absurdum of the whole matter, because if there is any question beyond dispute it is that a State has absolute dominion over her own soil, and no part of it can be held or owned without her consent, except by the Federal Government, or its instrumentalities for public purposes, under its sovereign power of eminent domain. It will not be for a moment contended that under the fifth amendment or under any other power in the Constitution, express or implied, private prop erty can be taken for a private business use. Therefore the creation of corporations by Congress under the exclusive and unlimited power to regulate com merce, and the giving of such corporations faculties which they can not exercise except with the consent of the States, expressed or implied, is an absurdity, because the essence of the right to exercise an unlimited and exclusive power is that it shall be exclusive and shall not depend in any respect upon the consent or be liable to the prohibitions of any other authority whatever. The barrier which marks the boundary of an exclusive power lies at that point where other powers, strong enough to eviscerate the object of its action, begin to operate. A Federal private business corporation, with the power to manufacture and produce, existing outside of the District of Columbia, or a Territory, or an insular possession of the United States, is therefore as complete a legal absurdity as the fabled creature, woman above and fish below, is a physiological absurdity. Risum teneatis amici?

The Supreme Court of the United States has said that court is not the harbor in which the people can find a refuge from ill-advised, unequal, and oppressive State legislation; nor ought the people of the States, who are justly proud of their independence and justly jealous of their right of self-government, to look to the Congress as such a harbor as long as the remedial power lies with them. That the remedy for the corporation debauch from which the people of the States are now awakening lies in their own hands I have demonstrated, and it is only necessary that such remedy be worked out by them in that spirit of amity, fraternity, and consciousness of common interests and a common destiny without which the Republic can not endure.

The ACTING CHAIRMAN. The committee will take a recess until Monday morning at 10.30 o'clock, at which time the chairman is expected to be here.

(Thereupon, at 5 o'clock and 35 minutes p. m., the committee took a recess until Monday morning, January 8, 1912, at 10.30 o'clock a. m.)

MONDAY, JANUARY 8, 1912.

UNITED STATES SENATE,

COMMITTEE ON INTERSTATE COMMERCE,

Washington, D. C.

The commitee met, pursuant to recess, at 10.30 o'clock a. m., for the purpose of further considering the bill (S. 2941) entitled "A bill to create an interstate trade commission, to define its powers and duties, and for other purposes," introduced by Mr. Newlands July 5, 1911. Present: Senators Clapp (chairman), Brandegee, and Newlands.