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that there have been a lot of issues put out that never ought to have been put out.
Mr. HAAS. Yes.
Senator BROOKHART. Don't you think that is the situation?
Mr. HAAS. Well, I can not imagine that any reputable house would knowingly and willingly put out anything that did not have fair prospects. Something might happen later on that would change the picture, as it does happen.
Senator BROOKHART. You as a banker advise your clients about buying stocks and bonds from time to time, do you not?
Mr. HAAS. Well, let me say this, Senator: Many times they come in and ask you for your opinion, and they do not want your opinion at all; they just want you to agree with them.
Senator BROOKHART. And you agree with them, do you, as a matter of course?
Mr. HAAS. I do not.
Senator GLASS. Unhappily, some bankers do.
Mr. HAAS. I do not.
Senator BROOKHART. In 1929 you would advise the buying of those stocks and bonds at those high prices, would you not, before the panic?
Mr. HAAS. Senator, I do not know anyone that I advised at that time to buy any securities.
Senator BROOKHART. Did you warn them that a panic was ahead and that they were overinflated?
Mr. HAAS. I did not say on such and such a day there was going to be a panic or anything of that sort.
Senator BROOKHART. Well, you did not say there would be at any time, did you?
Mr. HAAS. But there are a lot of people that we advised to lighten their loads.
Senator BROOKHART. You know that everything practically was overinflated at that time, do you not-or did you see that?
Mr. HAAS. There are enough statistical services that pointed that out, but you know the
Senator BROOKHART (interposing). Most of the statistical services said that we had reached a new economic era, a new economic level, and most of the financial experts sized it up that way, did they not? Mr. HAAS. Yes; they said with our Federal reserve system we were never going to allow a panic like we had before.
Senator GLASS. Well, you never have?
Mr. HAAS. No money panic.
Senator GLASS. Oh, well, then. The reserve system did not undertake to guarantee good bank management to prevent the failure of banks that engaged in wild speculation.
Senator BROOKHART. Wasn't this enormous inflation due to the advice of the banks and investment companies for the marketing of those inflated securities?
Mr. HAAS. I would not want to say, Senator. I would not want to go on record as making that statement.
Senator BROOKHART. You do not want the banks to take their share of the blame, then, for that?
Mr. HAAS. I think anybody who made a mistake ought to take a share of the blame, but I would not want to make a broad statement of that kind.
Senator BROOKHART. Further, are not those values still inflated? Are they not still too high?
Mr. HAAS. I do not want to be a prophet or the son of a prophet and say what is going to happen to these securities.
Senator BROOKHART. If they are some 40 per cent above 1914 and commodity prices are below, there is still something out of joint, is there not?
Mr. HAAS. There is quite an economic question there that is quite a difficult question to answer.
Senator COUZENS. Has that anything to do with this bill that we have before us, Senator?
Senator BROOK HART. I do not know whether it has or not, and I do not know whether any of these questions have.
Mr. HAAS. The suggestion has been made to me regarding page 43, section-oh, this is a different one. [After a pause:] Mr. Chairman, it has been suggested to me that on line 18, page 36, of the March reprint of the act, after the word " securities " there be added, "of any one obligor."
Senator GLASS. What section?
Mr. HAAS. This is section 15, Senator, on page 36 of the March issue, line 18.
The amount of the securities so purchased-the amount of the securities of any one obligor so purchased and held for its own account at any one time exceed 15 per cent of the amount of the capital.
The CHAIRMAN. Mr. Haas, it is possible you have the older print. Mr. HAAS. I have; yes, sir. In the latest print, it is line 15, page
Senator FLETCHER. Line 15, after the word "securities," "of any one obligor."
Mr. HAAS. That is line 15, "the amount of the securities of any one obligor so purchased and held for its own account." That is a little more enlightening.
Senator GLASS. Well, that is what it means.
Senator BROOKHART. If that is put in, do you still insist, as you did in the conclusion of the statement, that it is going to restrict business and injure the production and development?
Mr. HAAS. The amount of any one obligor?
Senator BROOKHART. Yes.
Mr. HAAS. I have not given enough consideration, Senator, to just how much they ought to loan. Personally, I want to keep pretty close to shore on the amount that I would want to loan to any one obligor.
Senator GLASS. How can it depress business, or have any effect upon existing holdings, when the bill states explicitly that hereafter this may happen?
Mr. HAAS. Speaking of the "one obligor "?
Senator GLASS. You say this thing would depress business and cause banks to unload their securities on the market at a loss. It does not require that at all. It says, "Hereafter."
Mr. HAAS. Where is that?
Senator GLASS. "The business of purchasing and selling investment securities shall hereafter be limited to purchasing and selling such securities."
Senator COUZENS. At the top of page 6, line 3.
Mr. HAAS. What I have in mind is this: It says "hereafter." But a business is growing, and how are they going to regulate the future volume of their business, by a new restriction, or by the old system? If they are just a stationary
Senator GLASS (interposing). If that bill becomes a law, they regulate their banking activities by the requirements of this act.
Mr. HAAS. If their business was stationary, and they had this ratio all right, but their business probably is going to grow and develop; I am speaking of collateral loans, now, Senator.
Senator COUZENS. Is there any difficulty in dividing up the business between different banking interests, if what you say would be
Mr. HAAS. No.
Senator COUZENS. Why is this such an obstacle?
Mr. HAAS. I do not say it is, Senator. I really haven't any definite percentage in mind.
Senator COUZENS. That is what I understood you said, that this bill was an obstacle. I do not see any objection, if business expands in the future, to dividing up the business between several banking institutions, and still live within the law.
Mr. HAAS. I probably did not make myself clear on that. My thought is this, that a bill of this kind that makes so many changes in the bank act and in the Federal reserve act and shifts additional powers to the Federal Reserve Board and additional powers to the Federal reserve bank and more detailed regulation of the Federal bank, would be most unfortunate at a time like this, when business is trying to get under way. There are certain plans, large plans, of large organizations that are willing to spend considerable money to endeavor to build up business, and start the wheels going.
Senator BULKLEY. Will you name some one plan as an example that you think will be interfered with by this bill?
Mr. HAAS. Well, I might say that certain lines would feel uncertain about the future.
Senator BULKLEY. What one would be?
Mr. HAAS. I might say the automotive business. I am just throwing that up in the air.
Senator COUZENS. That is where it is already.
Mr. HAAS. I saw an editorial this morning in a Washington paper which mentioned
Senator COUZENS (interposing). Which said, "Kill the bill." Mr. HAAS. That the automotive industry had certain plans to progress.
Senator COUZENS. Yes; but I think that they are well within their facilities, though.
Senator BLAINE. I might say that there is always danger of quoting an editorial from the Washington Post.
Mr. HAAS. Yes; well, I was not initiated.
Senator BULKLEY. Did that really make an impression on your mind, Mr. Haas?
Mr. HAAS. I read it, yes; but I had a report of the automotive industry before that.
Senator BULKLEY. Will you tell us just how this would disturb the automotive industry?
Mr. HAAS. I think any industry that contemplates spending a lot of money for development and trying to sell their product, would want to see stable conditions.
Senator BULKLEY. You do not think this bill tends toward stabilizing conditions?
Mr. HAAS. I would not think right now. I think it disturbs them. We have had a terrific wallop over this period of the mental attitude of people.
Senator BULKLEY. You think any effort to avoid a recurrence of it would be disheartening?
Mr. HAAS. No; I would not say any effort to avoid a repetition of it.
Senator COUZENS. What would you suggest to avoid it, then?
Senator COUZENS. A repetition of what Senator Bulkley is talking about. If you do not want this, what do you suggest?
Mr. HAAS. I would say if we were given a rest for a while, it would help a lot.
Senator GLASS. Do nothing?
Mr. HAAS. We have had the National Credit Corporation, which temporarily had a very fine effect on the banks. It stopped bank failures for a while, and then they started in again.
Senator GORE. Which do you refer to now, this voluntary
Mr. HAAS (interposing). The National Credit Corporation. That was the 1st of October last.
Senator GORE. How long did it stop those suspensions?
Mr. HAAS. I do not just recall, but immediately there was a reduction in the number of bank failures. I do not have the figures.
Senator GLASS. I would be glad to have you point out any single, solitary provision of the Federal reserve act as it exists in this bill, that would discourage General Motors or any other industrial enterprise, or any other commercial or agricultural enterprise from doing business. I have had the conception that the Federal reserve act. as it exists, and particularly under this bill, as an addendum to it, offers every safe, and almost every conceivable, opportunity to business. Business paper may be rediscounted without any limitation.
Mr. HAAS. Well, perhaps people in a different period, where their mind was more at ease and more at rest and had not gone through an experience like they have gone through in the last couple of years, might look at things more calmly.
Senator GLASS. We want to avoid a repetition of that experience. That is what we are trying to do.
Senator BARKLEY. When is the best time to treat a patient, when he is sick, or wait till he gets well again?
Mr. HAAS. It all depends on whether you want to operate, or give him medicine.
Senator BARKLEY. Regardless of whether it is an operation, or whether it is a medical treatment, you know that old couplet about "When the devil is sick he is a saint; and when the devil is well, he is a devil.”
Mr. HAAS. No; I had forgotten about that.
Senator BARKLEY. If we wait until we get back to our prosperous times, we will forget all about this, and we will not want to do anything because it will put us back where we are now. So when do we want to operate?
Mr. HAAS. Well, I say it would be an ideal situation if we could level the peaks of prosperity and fill up the valleys of depression, but I do not know the saint that could do it.
Senator GLASS. We are extending increased opportunities to business here, and we authorize national banks to engage in all forms of banking business and undertake all types of banking transactions that under the laws of the State in which that bank is situated may be permitted, that are not contrary to the existing laws, and I would be obliged to you, Mr. Haas, before you conclude, if you would indicate what provisions of this bill specifically or incidentally restrict the operations of the Reconstruction Finance Corporation or of the banks under the so-called Glass-Steagall bill.
Mr. HAAS. What I have in mind, Senator, is this, that if there is anything to depress the values of the assets of banks under their present value we are going to have more trouble.
Senator GLASS. Do you think that anything could possibly happen that would disturb the situation any more than the things that have happened and which we are now seeking to prevent happening again?
Mr. HAAS. Well, I should hope that they would not be as bad as they have been, and with all the reconstruction propositions, and rehabilitation of this, that, and the other thing, it certainly has improved the situation, and we have not had the bank failures. But if something is going to depress the security market, the bonds of banks, and the investiments of banks, they are going to have to have help again.
Senator BULKLEY. Do you suppose that it could be possible that there would be a bank depositor in the United States that thinks there is something wrong with banking practice and that something, perhaps, should be done to correct it?
Mr. HAAS. Well, you have 48 States-48 different State laws. You have the national bank act; Federal reserve act, for the national banking business. I think to a large extent you have to know each banker and the type of banker you are doing business with. If he is a good banker you will have a good bank. If he is not a good banker you will no have a good bank, no matter what your law is. Senator BROOKHART. Do you think all of these banks that have failed, the failures were due to the fact that the bankers were not good bankers?
Mr. HAAS. Well, now, I would not want to go on record on that. Senator BULKLEY. I certainly know lots of bankers that I regard as good bankers and I am very much afraid of the state of mind of their depositors to-day.