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Mr. WOODHOUSE. No. I have made the statements from an outline. I have had the bill only overnight and I have studied it.

I believe, Mr. Chairman, that under the constitutional clause Congress has the right, in fact it is a function, to regulate foreign commerce and also to regulate the value of foreign coin and establish its value. I believe there is the constitutional power on the part of Congress.

Senator McADOO. You mean in our domestic market, of course? Mr. WOODHOUSE. Yes.

Senator GORE. Mr. Chairman, if the witness is not to outline the subject now, I would be glad if he would be allowed leave to print a supplementary statement in the record of what he would care to say now.

Senator BYRNES. If the Senator wishes him to proceed I would not object to it.

Senator GORE. I would not want to take the time of other Senators. Senator COUZENS. I will say it is very interesting, because we do not have adequate information.

Senator GORE. Yes; it is.

Senator MCADOO. What you are saying is, of course, very interesting, but it has rather remote relevancy to the specific objects of this bill. Am I right in my conclusion that what you are trying to do is to have this bill amended so as to make certain that we get reports from private partnerships who engage in the banking business in the United States?

Mr. WOODHOUSE. Yes, first.

Senator MCADOO. I mean, primarily that is what you want?

Mr. WOODHOUSE. First, yes. Second, that it shall be specified that the fiscal agents of governments

Senator MCADO0 (interposing). Shall make these reports?

Mr. WOODHOUSE. Shall make these reports.

Senator MCADOO. Exactly.

Mr. WOODHOUSE. And shall not be excluded under the provision that foreign governments are excluded.

But foremost, all this regulation has only one purpose, and the purpose is the welfare of the people of the United States, which is where the balancing of the Budget comes first. How are you going to balance the Budget if you do not know what the national income is, if you do not know what money is available? That is why I have explained the basis for wanting to know the national income.

Senator MCADOO. What you are saying is immensely interesting, but the point is this: How can we accomplish that through this measure unless we write what is in effect an entirely different measure that is not germane to this particular subject?

Mr. WOODHOUSE. I believe you can arrive at it by making those two amendments.

Senator COUZENS. I might say to Senator McAdoo that it might not be entirely irrelevant while we are drafting the bill to collect certain statistics, but we might not collect all that we need under the same bill.

Senator GORE. We will not get anywhere if we do not get them. The CHAIRMAN. What is, precisely, the second amendment that you suggest?

Mr. WOODHOUSE. That the private banks, or all banks, if you like, that come under this act, but particularly the private banks, which do not seem to be included excepting by inference, shall make reports in the same style and for the same purpose that national banks and Federal reserve banks are made to report, one to the Federal Reserve Board and the other to the Comptroller of the Currency.

Senator MCADOO. You mean that on the call by the Comptroller of the Currency for the customary reports from national banks; and private bankers shall be required to make similar reports to the Comptroller?

Mr. WOODHOUSE. I do.

The CHAIRMAN. That, of course, reaches to amendment of the banking laws. We are not after that here.

Mr. WOODHOUSE. I knew that you had that in mind, and you could not amend the banking laws, I believe, to affect the private banks. But this act may be made to affect the private banks. They are to operate under this act hereafter. So why not make them report? They are operating under Federal supervision for the first time in the history of banks.

The CHAIRMAN. With regard to securities.

Mr. WOODHOUSE. Yes.

Senator MCADOO. But his idea is, Mr. Chairman, as I understand it, that we might incorporate in this bill also additional regulation of private bankers to compel them to make reports similar to those made by national banks upon call of the Comptroller of the Currency.

Senator BARKLEY. I will say to you that the things required to be sent out in these reports filed with the Commission under this bill do not require on the part of anybody the information that you are attempting to induce us to write language in here to require.

Mr. WOODHOUSE. I believe it would be wise to do it.

Senator BARKLEY. There is no requirement here that the income shall be reported.

Senator ADAMS. Might I make this inquiry-I do not mean to interrupt Senator Barkley.

Senator BARKLEY. Go ahead.

Senator ADAMS. The point in my mind is, as I understood, our purpose at this time is to protect the people of the United States through legislation from the sale of unsound and fraudulent securities. It occurs to me that you might have a banking house, private or incorporated, with very little financial stability selling sound securities.

Mr. WOODHOUSE. Yes. That is the great problem, unless you amend the bill to require all dealers of securities to file reports periodically, as national banks are required to do.

Senator ADAMS. You might have the biggest banking house in the country and we have seen some of that-selling unsound certificates. Mr. WOODHOUSE. Certainly.

Senator ADAMS. That is, we are not accomplishing the purpose we have in mind by merely investigating the financial stability of the institutions putting the securities out. That is one of the purposes of this bill, to investigate the securities which are being put out, rather than those who are putting them out.

Mr. WOODHOUSE. And may I suggest to the Member that in connection with that, supposing securities come out, and supposing a

firm comes up for consideration by the Commission, and supposing there is of record year in and year out the financial statement of its assets and liabilities, as all banks are required to have under the National Bank Act.

Now, you would have something valuable on hand, instead of every time going afresh and trying to investigate the firm.

Senator ADAMS. I think it has very little relevancy to the question of the validity and propriety of the sale and transportation in interstate commerce of the particular security whether or not the bank's statement is satisfactory or unsatisfactory, whether a bank makes a statement or whether it does not make a statement.

Mr. WOODHOUSE. I would agree with the Member as to that if it were not that if you have such a statement you will know for all other purposes that there is such a private bank and that it has assets amounting to so much and liabilities amounting to so much.

You know, when you deal with such large firms as J. P. Morgan, and Kuhn-Loeb, you are dealing with something like 5 billion to 10 billion dollars. You recall that during the war and since, J. P. Morgan was able to loan 400 million dollars to England alone. They are enormous figures, those.

Senator KEAN. It does not make any difference about the value of the securities, though, does it?

Mr. WOODHOUSE. No; but you have in the bill a provision that the buyer may sue the seller of the securities, and may recover.

Senator KEAN. But it is of no value to know whether they are sound or whether they are simply exchanged around and sold.

Senator BARKLEY. That theory may be wrong, but it is based upon the theory that at the time of the issue of the stock of any corporation this statement shall be filed with the Commission. It does not require a statement on the part of any banker or any bond agent or any salesman who is putting that stock on the market, but it is the stock itself about which information shall be produced. Senator MCADOO. A statement from them.

Senator BARKLEY. Yes.

Mr. WOODHOUSE. But it does not require a statement of the financial condition of the issuing house after the issue of the securities. Senator BARKLEY. No; and it does not require a financial statement or any statement from the agent, whether it is a bank or an individual house trying to sell that stock to the public.

Senator MCADOO. It does with respect to what the stock is.

Senator BARKLEY. It requires a statement from the officers or agents of the company issuing the stock, but it does not require a statement from me if I am trying to sell that stock as an employee or as an agent of the company.

The CHAIRMAN. It contains certain provisions that makes one, who under certain circumstances makes certain representations, liable to damages.

Senator BARKLEY. But I think that is for false representation on the part of the salesman.

Senator McADOO. The bank as a salesman.

Senator BARKLEY. Yes; but as I understand this, it does not require the bank to make a statement of its affairs.

Senator MCADOO. A requirement to make a statement about the nature and character of the securities that they issue and try to sell,

and that is based upon the statement of the corporation which is registered.

Senator BARKLEY. Of course, the corporation itself is required to file a statement originally. Well, all right; go ahead.

The CHAIRMAN. Is there anything else, Mr. Woodhouse?

Mr. WOODHOUSE. Yes. Mr. Chairman, there is a provision in the bill that provides, I believe, that dealers in foreign securities shall mention the defaults made by the different countries as to their bonds or securities. Now, I wonder if it would not come within the purposes of this committee at this time to straighten something which, if it had been done at the time of the funding of the war debt, would have gotten a better deal for the people of the United States.

I have in mind this, Mr. Chairman: I have before me the surveys I have prepared of the growing prosperity since the World War of all the nations that owe money to the United States. I will show here, for instance, that the deposits in the commercial banks of France have increased from, say, 1923 to 1930, by large amounts. Those are the commercial bank deposits of France. In other words, France could give a check for what she owes, out of the increase in bank deposits in her banks, if you please. That is not in accordance with the statement that was made at the time of the funding of the French debt. It was stated that France was poorer than before the war.

Senator BARKLEY. You mean a check for all she owes or for the annual payment?

Mr. WOODHOUSE. For all she owes. It is as large as that.
Senatcr MCADOO. The principal?

Mr. WOODHOUSE. The principal and the interest.

Senator MCADOO. Will you incorporate your tables there in the record?

Mr. WOODHOUSE. I shall be very glad to.

(The data presented by Mr. Woodhouse is as follows:)

FRANCE'S GROWING PROSPERITY SINCE THE WORLD WAR, AS REPRESENTED BY THE INCREASE OF BANK DEPOSITS

The deposits in the commercial banks of France since the World War indicate a marvelous growth of prosperity.

First of all, France had at the end of the World War, like all the Allied and several of the Central Powers, bank deposits more than twice the amount of the deposits of 1912-13.

It is not, however, necessary to consider the increase of bank deposits before the war to find the extent of increase of France's prosperity.

The increase of the deposits of the French people and industries after the war, year after year from 1922 on, is almost incredible. Taking only the deposits in the commercial banks and not including the Bank of France, the deposits by years were as follows:

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1924

19251926

1927

1928

Volume of French Government notes in circulation, by years

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Senator BARKLEY. Does it show also for England, their debts?
Mr. WOODHOUSE. I have prepared such a survey to cover England,
I will give the English. I shall be very glad to.

too.

(The data submitted by Mr. Woodhouse on England is as follows:) Annual loans and capital financing amounting to upward of $5,000,000,000 over and above the pre-war loans and financing are disclosed by an examination of the reports of the British financial houses and commercial banks of England and Wales.

That huge sum, which is $400,000,000 in excess of Britain's total debt to the United States at the time of the funding, does not include the loans of the Bank of England and the commercial banks of Scotland and North Ireland. Their inclusion would add an additional billion dollars or so to the total even in the poorest years.

The discounting and loaning power of the joint banks of England and Wales alone jumped from £515,902,000 in 1912 to £1,280,000,000 in 1921. It has kept well above the billion pound sterling mark since.

The public issues of new capital underwritten in London in 1913 amounted to £196,537,300. The following show the increase after the war:

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In other words, the underwritings in the years 1925-28 were all higher than in 1913, and they aggregated a total larger than the total debt of Britain to the United States.

The foregoing do not include the financial operations of the British Treasury or the Bank of England. These last have been omitted from consideration so as to present only assets which were not considered as the time of the negotiation of the funding of Britain's $4,600,000,000 debt to the United States.

No reference was made to these huge capital assets by Stanley Baldwin, the British Chancellor of the Exchequer, and Montegu C. Norman, the Governor of the Bank of England, when they presented Britain's economic conditions to the Anglo-American Debt Commission in 1923, or after.

The status of the joint-stock banks of England and Wales (which do not include the Bank of England, private banks, and the joint-stock banks of Scotland and

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