Wolfe's Investment Directory of Insurance Companies for 1906 shows that the 339 insurance companies covered by that directory alone held in June of that year $1,189,677,000 of the par value of railroad stocks and bonds. The last report of the New York Life Insurance Co. shows an investment of $271,000,000 in such securities. The statistics for other institutions are not available to me at this time, if at all. An educational institution of whch I am an admin- * istrator has more than $2,000,000 so invested. A high official of the Atchison system has assured me that their stock records show that the average holdings of their preferred stock is 80 shares, and of their common stock 150 shares. The records of the other regular dividend payers will doubtless show similar results. I suggest that complete statistics on this subject might be gathered by the Census Department, and that their dissemination might tend to produce conservatism in quarters where it is needed.

Great abuses have arisen in the issuance and manipulation of the stocks and bonds of these great transportation companies. Other great abuses have arisen in the treatment of the public by these companies; and other abuses equally great have arisen in the treatment of these companies by the public.

The American people want all these abuses stopped, and by some means short of Government ownership, which some of them favor, but which most of them justly repel. I believe, and I think most of them believe, that the united strength of the whole Nation is alone competent to effect the desired results, and therefore that any plan that can be devised, consistent with the Constitution of our country as interpreted by its lawful expounders, which will bring all transportation by land and water under the strong arm and the vigilant eye of the Federal Government, is a "consummation devoutly to be wished."

Senator NEWLANDS. Now, with reference to the holding companies, would you have your prohibition apply only to companies that are organized in the future, or would you have it apply to those already organized and now existing?

Mr. FARRAR. I would fix the law so as to give them a certain time within which to dissolve to get out.

Senator NEWLANDS. What time would you fix?

Mr. FARRAR. Certainly not over three years. I would make them adjust themselves to the conditions.

Senator NEWLANDS. You would also put in a provision requiring a new adjustment of securities to conform to the law where the stock had been watered, would you?

Mr. FARRAR. I would.

Senator NEWLANDS. Would apply that to corporations organized and now existing or only to corporations organized in the future?

Mr. FARRAR. That is a very difficult question. There are so many innocent people all over this country who have been loaded up with those securities by the high financiers and other methods of putting them on the market that I am afraid you would do more harm than you would good if you undertook to readjust the stocks and securi ties of the existing corporations. If any case can be found where it can be done, if you could draw the line of demarcation between securities held by the original holders and securities that have been put off on the public, it would be a Cæsarian operation to be performed on existing corporations to require them to readjust all their stocks and securities.

Senator NEWLANDS. Are there any other conditions that you would attach to the permission to existing companies to continue in interstate commerce?

Mr. FARRAR. I think that those corporations that are formed by consolidation-six or seven corporations engaged in the same business-are on their face palpable agreements in restraint of trade;

that is, where they control a certain percentage--say 25 per cent or 40 per cent of the business in which they are engaged.

Senator NEWLANDS. And you would compel a readjustment of those corporations to meet the requirements of this law as a condition of their continuing in interstate commerce?

Mr. FARRAR. If the consolidation had proceeded to that extent that they controlled a very large proportion of the business-yes. If it was a small consolidation that affected only a small proportion of the business-no.

Senator NEWLANDS. What proportion of the business would you make lawful and what proportion unlawful?

Mr. FARRAR. I think it ought to equal or exceed 50 per cent of the business.

Senator NEWLANDS. Is not that a very large proportion when you consider the business affecting 90.000.000 of people, as respects a single corporation?

Mr. FARRAR. The great trusts and combinations in this country all control more than 50 per cent of the business, and I think if you examine

Senator NEWLANDS. Now, assuming that you would compel the readjustment to that extent as to corporations organized in the past, what rule would you fix as to corporations organized in the future; that is, as to the proportion of business or particular industry they could control?

Mr. FARRAR. As far as that is concerned, I think the better way would be to limit the capital stock of corporations engaged in interstate commerce-have a limit on the capital stock of the corporation, prohibit it from owning stock in other corporations, and confine it to its own business, and provide that it can not acquire more than its legitimate share of commerce. But if you let a corporation have an unlimited capital stock and go into a business with other corporations with limited capital stock, the inevitable tendency of that is to create a monopoly and to get control of the business.

Senator NEWLANDS. Are you not aware that a capitalization, say of $200,000,000, might involve a control by a corporation of only onetenth of the given industry, while the capitalization of $10,000,000 in some other industries might involve the control of 90 per cent of that industry?

Mr. FARRAR. That is true, and therefore you have got to arrange that question with reference to the industry and the amount of capital that is involved in the industry, if it can be done? For instance, you take a great steel plant. You might have $150,000,000 to $200,000,000 in a steel plant. Now, the steel industry in this country is so great that one corporation with a capital stock of $200,000,000 could not control the steel business, but there are plenty of other industries with a capital stock of $10,000,000 that would control a business.

Senator NEWLANDS. Would not the better standard then be the proportion of the business that is controlled rather than the amount of capital invested in the enterprise?

Mr. FARRAR. I think you may fairly say that the proportion of the business controlled bears some fair relation to the amount of the capital stock of each corporation engaged in the business. Take, for instance, a certain business. You can find out from the Census

Bureau how much capital is involved generally in this country in that business. Say it is $200,000,000. Now, you could regulate the capital stock of the corporations engaged in that business.

Senator NEWLANDS. Would you have a different standard, for instance, for the steel industry as contrasted with the wool industry or the cotton industry or the sugar industry or the leather industry? Mr. FARRAR. Yes, sir.

Senator NEWLANDS. You think it would be easier to provide a capitalization for each that would prevent it from obtaining an undue proportion of the entire industry?

Mr. FARRAR. I think that would be the only way you could arrange it: that is, to ascertain the amount of capital stock engaged in the business, and then to provide that no corporation engaged in that business whose capital stock exceeds a certain amount could engage in interstate commerce.

Senator NEWLANDS. Is there any other condition that you would attach to the right of an existing corporation to engage in interstate commerce?

Mr. FARRAR. Any condition ought to be imposed to prevent these corporations from committing frauds on the public. I think it is the duty of the Congress of the United States to use its power in interstate commerce to prevent fraudulent corporations of all sorts and kinds from operating in interstate commerce, no matter by what device it is operated.

Senator NEWLANDS. Would it be difficult to frame such a provision? Mr. FARRAR. I do not think so. I think it would take time and thought to examine all the evils involved and draw such a statute. Senator NEWLANDS. I am sure the committee would regard it as an act of great public spirit on your part if you would shape for us such a statute.

Mr. FARRAR. I will try my apprentice hand on it--and it is only an apprentice hand.

Senator NEWLANDS. Is there any other condition which you would attach?

The ACTING CHAIRMAN. I would suggest that you let us have that, Mr. Farrar. You can send it to the chairman of the committee, so that it may appear in the record.

Mr. FARRAR. I will be glad to do so. I will say, Senator Newlands, generally, all provisions which would prevent monopoly, undue restraint of trade, and fraud on the public.

Senator NEWLANDS. You think the effect of such a Federal statute would be a helpful one in reforming the morals of State corporations, do you?

Mr. FARRAR. I think if the States can not be gotten together to reform their own laws with relation to each other, then Congress has got to act. Whether the States will ever get together for such purpose or not, I do not know. They ought to. It is their duty to do so. They are responsible for all of these creatures which have come into commerce and created all this trouble. They have created them, and they ought to destroy them.

Senator NEWLANDS. They have been in competition with each other, have they not, in the process of enlarging the powers and diminishing the restrictions?

Mr. FARRAR. I so stated in my address, and I think the facts prove that there actually has been, of late years particularly, a competition. between the States as to which of them could draw the most liberal and most unrestricted corporation laws, following, in that respect, the State of New Jersey, which does not put a dollar of taxes upon her people, taxes on land, or anything else, but which leaves all taxes on corporations organized under the laws of the State of New Jersey. I do not think you would ever be able to have the State of New Jersey give up that fat source of revenue by giving up the industries that support it. Therefore, I am afraid that it is going to be necessary for Congress to act in this matter itself.

Senator NEWLANDS. Almost all of those corporations are organized, are they not, for the purpose of doing business outside of the State of New Jersey?

Mr. FARRAR. Most of them are. A very few of them have any business in the State of New Jersey except to hold a stockholders' meeting there. There are seven other States that have now adjusted their laws in such way that you can do the same thing there.

Senator NEWLANDS. And the operations of those corporations are mainly in interstate commerce, are they not?

Mr. FARRAR. Either in interstate commerce or in both interstate commerce and intrastate commerce, but generally for the purpose of creating a unit of control-centralization and combination.

Senator NEWLANDS. Therefore, the very purpose of these acts appears to be to defeat the operation of the Sherman Antitrust Act? Mr. FARRAR. Either that or to defeat the operation of their own antitrust laws, because most of the States to-day have either adopted the Sherman antitrust statute in forma verbis, or some of them have gone a great deal further and have adopted the most drastic statutes. Senator NEWLANDS. As a State-rights Democrat, therefore, you would not have much hesitation about dealing with that kind of a question?

Senator BRANDEGEE. How did you guess that?

Senator NEWLANDS. The judge announced that he belonged to the strict school of State-rights Democracy.

Mr. FARRAR. Where a State undertakes to thrust its own power and its own creatures into the commerce of another State, I do not think State-rights Democracy has anything to do with it. I think it is a violation of the common bond of union for a State to organize its corporation laws or any of its laws in such way as to interfere with the business affairs and peace and quiet of neighboring States.

Senator NEWLAND. I wish some of your southern brethren in the Senate could hear you upon that subject, Judge.

The ACTING CHAIRMAN. They will perhaps read it in this record. Senator NEWLANDS. You will observe that the securities commission has recently rendered its report.

Mr. FARRAR. I have not had an opportunity to read it. It was sent to me, but it was sent at a time when I could not turn aside and look at it.

Senator NEWLANDS. In that report, whilst it indicates, as far as the railways are concerned, an inclination toward national incorporation, it thinks the time has not yet come, and as to the control of the securities of corporations engaged in interstate transportation it indicates its view that that had better not be attempted, but that the valuation

of the railway properties should be substituted for it. Do your views regarding the control of the securities of corporations engaged in interstate commerce apply also to the railways!

Mr. FARRAR. Senator, my views are now, and have been ever since the outburst of the antirailway legislation began in the various. States, that we never can have any peace in dealing with the transportation problem in this country until the Government of the United States gets absolute and entire control of the whole transportation problem. Now, that is why I went to work and studied the matter up. I came to the conclusion that the Government under its post-road power had the authority practically to get control of transportation by organizing all its Federal corporations at post roads and by permitting all the State corporations to come in and take advantage of this Federal corporation, just exactly as State banks were permitted under the original national-banking law to give up their State banking charters and come in and make themselves national banks, a provision of the statute which the Supreme Court of the United States decided was unconstitutional.

Now, the post-road power has no limitations. There are no State lines. It extends from any point in the Unted States to every other point. It is a very much broader power than the interstate-commerce power, because if you were to organize corporations strictly under the interstate-commerce power the State could prohibit those corporations from engaging in intrastate business. But if this Congress exercises that absolute and uncontrollable power to establish post roads which the Constitution grants it, and permits those post roads to be built from any point to any point, and makes them Federal instrumentalities of the Federal Government, it can not be touched by State legislation in any shape, manner, or form. Then you have got control of the question of transportation in this Government, and every State corporation would immediately take out such a charter, except those corporations controlled by people who want to manipulate their stocks and bonds, and you will find that the objection to the passage of such a statute comes from the professional manipulators of the stocks and securities of corporations, because under the Federal charter-under the control of the Governmentthese corporations being creatures of the Government, the Government could do what it pleased. It could provide how they should live in every particular; how they should issue their stock, and how they should issue their securities, etc.; provide for the control of their methods and of their business, just as absolutely as you do in the control of a national bank. That is the kind of control that the manipulators of stocks and bonds do not want. They want the loose laws of the various States where they can do what they pleaseissue fictitious stock and fictitious bonds, like this rascally Alton business and others of a similar nature.

Senator NEWLANDS. Judge Farrar, you spoke of selling agents— common selling agents. Would you permit corporations to have a common selling agent?

Mr. FARRAR. No, sir; not where it was established by contract, for instance.

Senator NEWLANDS. The case was presented to us of small coal companies in West Virginia engaged in extracting coal in competition with very large companies whose transactions in the different