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Mr. WHITNEY. I would be delighted. I have told you, sir, this morning, I think it was, that I believed that the information submitted on questionnaires, whatever they might be, from our members, were truthful. I granted that there had been false statements occasionally, which resulted in our finding insolvencies, but that in the main I believed the questionnaires submitted by our members were honest and truthful.

There is nothing, sir, in the reports made by our members, to the þest of my knowledge and belief, with regard to the alcohol stocks last spring, that has been proven to be untruthful in any way, shape or form

Mr. WOLVERTON. That is part

Mr. WHITNEY (continuing). Due to a tip given to the investigating staff, certain facts were found out with regard to operations, but not made by members of the exchange, and unknown, insofar as we know, to the members of the exchange.

Mr. WOLVERTON. What I am seeking is information concerning this: Is it true that in the last week or so that facts have been revealed as a result of the investigations being made by the Senate committee that were unknown to you at the time you made your report last summer?

Mr. WHITNEY. With relation to nonmembers; yes, sir.
Mr. WOLVERTON. Now, what about members?

Mr. WHITNEY. That I cannot say definitely here, without going over the report, sir, and without going over the testimony at the Senate committee.

Mr. WOLVERTON. As a result of your questionnaire, were you able to ascertain whether there has been a pool in that particular stock?

Mr. WHITNEY. As I remember it, we were not.

Mr. WOLVERTON. Then, the questionnaire system of itself is not productive of full information, is it?

Mr. WHITNEY. I have said here, many times, that the rules and regulations of the exchange or rules and regulations imposed by any congressional act upon the members of the exchange, or the exchange, will not be all-inclusive of facts.

Mr. WOLVERTON. Then, the facts that came out as a result of the investigation would not have come out if it had depended on your questionnaires ?

Mr. WHITNEY. That is true, sir, because the members of the exchange, to the best of my knowledge and belief, reported truthfully the facts, and that discovery was through a tip given of conditions which were outside of the control or knowledge of members of the exchange, sir.

Mr. WOLVERTON. Then, what do you suggest in the way of legislation that will prevent that in the future?

Mr. WHITNEY. I surely do not know, sir.
Mr. WOLVERTON. Should there be any?
Mr. WHITNEY. I will try to answer you,
Mr. WOLVERTON. I beg your pardon.

Mr. Whitney. I will try to answer you. I do not know of any legislation that would control-and I believe we are talking about certain operations of corporate officials-except the imposition of a Federal corporation law in that regard.

The CHAIRMAN. All right, Mr. Whitney, you may proceed.
Mr. LEA. Mr. Chairman-
The CHAIRMAN. Mr. Lea.

Mr. LEA. Is it your understanding that this bill, if enacted, would prevent the stock exchange from taking the action it did in preventing the short selling when England was about to go off of the gold standard or the closing of the stock exchange?

Mr. WHITNEY. Yes, sir; and if I may speak for myself—I cannot speak for the other governors of the exchange—I would not serve under any such bill. I could not. I could not take the responsibilities in one regard, or in a thousand regards, where that responsibility might be so taken or the taking of that responsibility might be so regarded as to be an act not in conformity with the bill, and that I myself might be suspended or the exchange might be suspended from its registration as a result of that. I would not believe that any body of human beings could take that responsibility. I cannot imagine that if I wanted to. It would not be fair to ask it. They have no right of review, as I understand it, under this bill.

Mr. LEA. But, as this bill stands, do you understand that it wou'd prevent the board of governors of the exchange exercising discretion that you did exercise at that time?

Mr. WHITNEY. As I understand, they could exercise such discreat their peril.

Mr. LEA. What did you say, at their peril?

Mr. WHITNEY. At their peril. From just what I have said, just prior to that, it might be so considered as inconsistent with the provisions of the bill, and might result in not only heavy penalties to themselves, but to the exchange which they represented.

Mr. LEA. That, I presume, would not be true unless the Commission bad adopted rules and regulations that are not included in the bill, would it?

Mr. Whitney. I am not positive of that, sir.

Mr. LEA. Your fear would be of regulations that might be drawn that would accomplish that purpose?

Mr. WHITNEY. No. No, I am not so sure at all that they are not all contained in the provisions of the bill.

Mr. LEA. Do you have in mind any particular provision of the bill?

Mr. WHITNEY. Only with regard to what it says, that the powers of the Federal Trade Commission, and any review in connection with any of the provisions, shall, if substantiated by the facts, be final.

Mr. LEA. But, that would limit their power to provisions of this bill, would it not?

Mr. WHITNEY. Well, it might, sir; but there, also, section 18 gives a pretty unlimited power for any further rules or regulations which might be made today, and we might act tomorrow and hardly know about them.

I am fearful. I really meant what I said from my personal point of view, as I read this bill, and I assure you that I have read it many, many, many times.

. Mr. LEA. If there is anything in this bill that will have the effect of depriving the board of governors of the exchange of the exercise of discretion, that you did exercise, I would be glad to know whether it is. Mr. WHITNEY. Well, I will be delighted to try to go into that and advise you sir in detail; but I am trying to give you my impressions of the reactions I have to the entire provisions in that regard of the bill.

The reaction I get as to my personal responsibilities, or what my responsibilities and that of the other governors would be under this bill as now written, are as I have stated.

Mr. LEA. Of course, as a member of this committee, I recognize the necessity, the benefit, and the legitimate purpose of the exchanges, and I do not want to interfere or injure any legitimate functions of the exchanges; but, on the other hand, recognizing what I believe to be evils, we need all of the help we can get

from you, who are familiar, with the operation of the exchanges, with what those evils are, and any suggestions you can give as to how they might be remedied in a regulatory measure.

Mr. WHITNEY. And I assure you, sir, that we stand ready, with everything we have, and at your command to give such cooperation.

Mr. LEA. Do you have in mind any particular suggestions as to what might be done through a regulatory provision to guarantee or produce more stability in stock prices?

Mr. WHITNEY. No, sir; frankly, I have not. That is a mighty hard question.

Mr. LEA. This extreme fluctuation, I presume, you would regard as undesirable from the standpoint of business stability in the country, would you not?

Mr. WHITNEY. Yes, sir; from every point of view; but how we can control or influence the minds of men who make up the supply and demand in the market, I just do not know.

Mr. CROSSER. Mr. Chairman-
The CHAIRMAN. Mr. Crosser.

Mr. CROSSER. You may have answered this while I was out answering the roll call of the House. If you have, I will not insist further. But, you made some reference as to what happened in 1929.

Mr. WHITNEY. Yes, sir.

Mr. CROSSER. Do you think that the stock exchanges as institutions, or the membership had anything of a definite nature to do with that situation, and if so, what?

Mr. WHITNEY. Why, there is no question but that the stock exchanges and every other agency I know of, from the Government down, had a part in the 1929 conditions. I think that the country as a whole lost its head and I certainly believe that on the stock exchange were reflected prices showing that losing of the head, and I believe that if the control of credit had been exercised at that time instead of loosening it to a tremendous extent, as I have just said to Mr. Pettengill, I think it could have been stopped, but, I truly do not know-I wish I did-how the exchange itself can stop other unwarranted rising of prices or unwarranted depressions in prices. That lies in the hands of the people of this country.

Mr. KENNEY. Mr. Chairman
The CHAIRMAN. Mr. Kenney.

Mr. KENNEY. In referring to the excessive speculative prices, did you mean that the little fellows throughout the country went into the market?

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Mr. WHITNEY. I think that the little fellows throughout the country, sir, not only went into the market, but went into real estate; they went into everything:

Mr. KENNEY. Did they not go into the stock market to an inordinate degree in your opinion?

Mr. WHITNEY. I think that would be true.

Mr. KENNEY. And, of course, that had the effect of unstabilizing the market?

Mr. WHITNEY. Yes, sir.

Mr. KENNEY. Do you think you could get along without the little fellow in your operations in the stock market?

Mr. WHITNEY. I think it might be possible. We would like to see a lot of little fellows, so called, out of the market; but, may I say this

Mr. KENNEY (interposing). If you could divert the little fellow from the market, would there be any objection on your part?

Mr. WHITNEY. That was what I was going to try to say.
Mr. KENNEY. I would like to have an answer to that,"yes" or“no."
Mr. WHITNEY. I do not think that is quite fair. I will-

Mr. KENNEY (interposing). I want to be fair, and you may be just as bold as you want with me.

Mr. WHITNEY. May I answer that I would like to see what I interpret to be your terminology of the little fellow not in the market.

Mr. KENNEY. Yes.

Mr. WHITNEY, But I add, after saying that word "not", it has been the effort of the stock exchange for a period of years to offer facilities to the little fellow so he will not go into a bucket shop, and I think the New York Stock Exchange is more responsible than any other place of trying, through an organized market, to give the small man a place to buy and sell securities in less than 100-share lots. The bucket shop is growing up again, and if it is deemed wise to put the so-called little fellow in the clutches of the bucket shops, we think that is going to be detrimental to him, but I do think that he should not probably speculate at all.

Mr. KENNEY. Well, you cannot prevent him from speculating, can you?

Mr. WHITNEY. I presume it could be prevented, so far as stocks are concerned; yes, sir.

Mr. KENNEY. And, if that is done, of course, what you have just said would probably be true that he would be inclined to go to the bucket shops or some other form of speculation or gambling.

Mr. WHITNEY. Yes, sir.
Mr. KENNEY. Are you familiar with the Roper committee's report?
Mr. WHITNEY. Sir?

Mr. KENNEY. You remember that part which said that it might be well if something new or less harmful could be found to give a legal outlet to the speculative urge or instinct of the great masses of the people?

Mr. WHITNEY. Yes, sir; I have got it right here. I do not know just where it is. I remember that; yes.

Mr. KENNEY. Now, if the Federal Government should enact a law inaugurating a national lottery, that would not unduly interfere with the usual business of the stock exchanges would it?

Mr. WHITNEY. No, sir.

Mr. KENNEY. And it might take care of the little fellow and keep him out of a lot of trouble.

Mr. WHITNEY. It might.
Mr. MARLAND. Mr. Chairman-
The CHAIRMAN. Mr. Marland.

Mr. MARLAND. Mr. Whitney, if I have understood you correctly today, you do not object to reasonable Federal control over the rules of the exchanges, and reasonable supervision over the operation of those rules, speaking as a member of the exchange and board of governors, and not speaking as president of the exchange, you do not object to reasonable Federal control over the rules of the exchange?

Mr. WHITNEY. I do not believe that Federal control and regulation of the exchanges, except when it is very reasonable, and understood, would be wise. If I can have my definition of what is reasonable, then I agree with you; but not as under this bill, sir.

Mr. MARLAND. Would not it be reasonable legislation to enlarge the authority of the board of governors in connection with the issuance of rules and regulations governing the conduct of members; would that not be reasonable?

Mr. WHITNEY. In what regard, sir? I do not quite understand the thought?

Mr. MARLAND. There appears to be inability on the part of the board of governors to control the activities of the members of the exchange, mainly due to existing law.

Mr. WHITNEY. Well, if that is so, I am deeply regretful. I would say that insofar as its members are concenred, the members of the exchange, and their activities are concerned, they are pretty well controlled insofar as any human agency is.

We are going to be a human agency, whether we have Federal Government or State government control, and I am just wondering whether such control can possibly be as intimate and have as much knowledge of what the members are doing as those who are working beside them day by day, and know the intricacies and the delicacies, and the technicalities of the business.

Mr. MARLAND. Would it not be proper for some Federal authority to say whether the rules of the New York Stock Exchange are reasonable or are not?

Mr. WHITNEY. We would be glad to have advice in that regard, but I do not think I quite follow you.

Mr. MARLAND. Would you not be willing to give the Federal Government authority to say whether your rules are reasonable or not?

Mr. WHITNEY. Under certain conditions; yes. Again referring to whether that authority was reasonable or not. As I have told you, I have some suggestions in that general regard which I wish to present later.

Mr. MARLAND. That is all.
The CHAIRMAN. Proceed, Mr. Whitney.
Mr. WHITNEY. I have some suggestions.
The CHAIRMAN. How many are there of those suggestions?
Mr. MARLAND. I beg your pardon.

The CHAIRMAN. There are not many of those suggestions that will come out of this proposal?

Mr. WHITNEY. I beg your pardon.

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