EXHIBIT I.-Loan values of four common stocks compared with market values F. W. WOOLWORTH COMMON • Based on lowest price for preceding three years, adjusted for changes in capitalization. POSSIBLE PYRAMIDING IN ONE YEAR UNDER SECTION 6 (C) OF FLETCHER-RAYBURN BILL. (ASSUMING LOANS OF 75 %% OF MARKET VALUE) Original 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th. Purchase Mo. Mo. Mo. Mo. Mo. Mo. Mo. Mo. Mo. Mo. Mo. Mo. EXHIBIT II.-Possible pyramiding in one year under section 6 (0) of FletcherRayburn bill (assuming loans of 75 per cent of market value) STATEMENT OF EVANS CLARK, EXECUTIVE DIRECTOR TWENTIETH CENTURY FUND, NEW YORK CITY The CHAIRMAN. Mr. Clark, you are secretary of this Twentieth Century Fund? Mr. CLARK. Executive director is my title. Mr. PECORA. Could you tell the committee very briefly, Mr. Clark, the circumstances under which the survey that has been referred to by Mr. Bernheim was undertaken and carried out by the fund or on behalf of the fund? Mr. CLARK. Yes; I will be glad to. The project was originally suggested by an executive committee of the fund, and the outline of the research we had in mind was then suggested to the executive committee and to the full board, and was approved, and the money necessary to carry it on was appropriated by vote of the board. Since then, as Mr. Bernheim said, the trustees have not taken any action one way or the other on the findings. Just as he said, they have in the past and they do now have the same relationship to the findings of the technical staff as a board of college trustees do. They do not interfere in any way. The CHAIRMAN. So the board has not acted on this report made by Mr. Bernheim? Mr. CLARK. That is correct, Senator. The CHAIRMAN. That is all, then. We will take a recess until half past two. (Accordingly, at 1:08 p.m., a recess was taken until 2:30 p.m. of the same day.) AFTERNOON SESSION The committee resumed at 2:30 p.m. on the expiration of the recess. The CHAIRMAN. The committee will now come to order, please. Mr. Butcher, we will hear you. Mr. BUTCHER. Thank you, Mr. Chairman. STATEMENT OF HOWARD BUTCHER, JR., PHILADELPHIA, PA., VICE PRESIDENT OF THE PHILADELPHIA STOCK EXCHANGE The CHAIRMAN. You may proceed. State your name, residence, and occupation. Mr. BUTCHER. My name is Howard Butcher, Jr., Philadelphia. I am vice president of the Philadelphia Stock Exchange. The CHAIRMAN. Do you wish to be heard on this bill, S. 2693, Mr. Butcher? Mr. BUTCHER. If you please, sir. The CHAIRMAN. Very well. You may proceed in your own way. Mr. BUTCHER. Mr. Chairman and gentlemen of the committee, the Philadelphia Stock Exchange desires to cooperate to the fullest degree in any proper effort to prevent any abuses affecting the stock market and to restrain unwise or excessive speculation. Its governing committee believes, however, that this proposed legislation imposes regulations, restrictions, and prohibitions, which vitally affect the existence of exchanges throughout the country, which gravely injure the business of a vast number of brokerage houses in every section of the country, which impair the credit facilities of individuals and of industry everywhere, and which tend by reason of their severity and the limitations placed upon Federal authority, to defeat many of the purposes of the Act. The act as drawn gives to the Federal Trade Commission complete domination of every stock exchange in the country, through powers of management affecting every single activity of a stock exchange, including the admission, supervision, and expulsion of its members, the election of its officers, the appointment of its committees, its rules for the conduct of business, and all its brokerage practices. The domination the act gives to the Commission, the manner in which the regulatory power of the Commission is made effective and the penalties imposed by the act upon an exchange, its officers and its members for violations of the rules and regulations of the Commission must inevitably weaken the authority of the governing bodies of security exchanges, discourages all initiative and substantially impair the functioning of an exchange in the marketing of securities. The requirements of the act with respect to accounts, records, reports, and examinations of members of national securities exchanges impose undue burdens, including the exercise of inquisitorial powers which are capable of grave abuse. The requirements with respect to registering of securities upon a national security exchange, the obligations imposed upon the issuer of a registered security and the penalties imposed upon officers and directors of corporations whose securities are registered on a national security exchange, make registration prohibitive in the case of many corporations, and unduly burdensome in respect of all issuers of securities. The prohibition upon members of an exchange with respect to the extension or maintenance of credit to or for a customer on any securities not registered upon a national securities exchange, making all unlisted securities ineligible as collateral in margin accounts is an unreasonable limitation upon investors in connection with their |