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This letter, dated February 28, 1932, and in fairness to Mr. Landis I want to read that part of his letter of transmittal of the opinion. It is as follows:

I have confined myself to a consideration of the constitutionality of the LaGuardia bill, for I am as yet unconvinced that a bill could not be drafted to regulate securities transactions on stock exchanges which would be constitutional. The LaGuardia bill, however, bottoms itself upon a theory and conception of interstate commerce that I am not prepared to accept.

Now, I want to use this opinion very briefly, if I may, to demonstrate that the reasons which Mr. Landis gave for entertaining the view that the LaGuardia bill was not constitutional are equally applicable and may be urged with equal force, and it seems to me convincing force, in sustaining the view that this bill is equally unconstitutional.

Speaking on this effect, of the effect of the insurance cases upon the constitutionality of the LaGuardia bill, Mr. Landis said, speaking of the long line of decisions in the Supreme Court of the United States beginning with Paul v. Virginia, 8 Wall., 168, running through to the New York Life Insurance Co. v. Deer Lodge County, 231 U.S., 594, decided by Chief Justice Taft, reported in 251 U.S., he says:

These cases, of course, only establish that the business of issurance is not immune from State regulation as being interstate commerce. The corollary that the business of insurance cannot be regulated by the Federal Government on the ground that it is not interstate commerce would seem to follow. The question has, however, never been judicially tested. But, a Senate Judiciary Committee unanimously reported that insurance was not interstate commerce so as to permit Federal regulation of it.

In the course of his testimony before this committee, he made the statement that the fact that Congress had not attempted to regulate insurance was no guarantee that it could not do so, and he cited instances of the Federal employees liability act in relation to activities of railroads which prior to its enactment had been free from any Federal regulation as to the rights of employees with railroads and stated that as an illustration of the fact that Congress might exercise its power now over insurance.

I respectfully submit that that argument is not sound for the reason that as instrumentalities of interstate commerce, the railroads are admittedly engaged in interstate commerce and the act that Congress had not exercised a power that it might subsequently exercise in relation to them is by no means an argument to support the view that as to a subject as to which there is at least of the gravest doubt whether there exists Federal Power to regulate at all. Absence of regulation implies or makes possible future legislation.

Now, we have, and I shall submit in my brief, a great many decisions from the United States Supreme Court, and I will merely undertake to state the doctrine which they announce that trading upon securities, upon local exchanges, is subject to complete and absolute regulation by local State law, licensing, taxing, regulatory provisions of every kind and character, and they have applied them specifically to transactions of the New York Cotton Exchange and many other exchange activities through the country.

I am not going therefore to detain you to quote from those decisions. I merely want you to know that we rely upon them as establishing the proposition that the activity of the exchange and that of its

members is 30 necessarily intrastate in its nature as to be solely subject to State control.

Mr. WOLVERTON. Mr. Chairman.
The CHAIRMAN. Mr. Wolverton.

Mr. WOLVERTON. Are you familiar with the suggested bill which has been presented by Mr. Whitney, with the approval of the New York Stock Exchange?

Mr. Gay. I do not understand that any suggested bill has been presented by Mr. Whitney. He made certain suggestions, but he qualified or rather prefaced those suggestions by the statement that they were made, of course, subject to the question of the constitutional power of Congress to enact any bill that might even embody those suggestions.

Mr. WOLVERTON. The argument you are now making is that the bill before this committee, in your opinion, is unconstitutional.

Mr. Gay. There was some noise in the room and I did not hear you.

Mr. WOLVERTON. I say, the argument that you are now making is to the affect that the bill before this committee, in your opinion, is unconstitutional.

Mr. Gay. I would like to answer that, if I may, in this manner, and hope it is sufficiently direct to answer you. The law is not an exact science, as most lawyers too frequently know. It is subject, in a great measure, to the conditions and restrictions of the process of reasoning and conditions of judgment. I do not think anyone would be bold enough to dogmatically assert that any measure before this august body was unconstitutional where there was a reasonable ground for saying more properly that it was of very grave doubt whether it is unconstitutional, and I rather have my views considered in the latter aspect, Mr. Wolverton, than the former, and I do not want to take the position.

Mr. WOLVERTON. Then it seems to me you agree with the thought I have in mind. The mere fact that there may be a difference of opinion as to the legality or the constitutionality of this proposed act should not preclude this committee from reporting a bill which in our opinion would tend to correct a situation regarding which legislation is sought.

Mr. Gay. Well, I should like to answer that by saying that to the extent that the process of reasoning which I advance, and the soundness of the conclusions or judgment I may be able to put forward, would influence your view, I would hope that it might be accepted. On the other hand, if you felt, as Mr. Landis and the proponents of the measure do, regard it as constitutional, and influencing your judgment, I feel that you should reach that conclusion

Mr. WOLVERTON. How far would the argument you are now making apply to a bill prepared along the lines suggested by Mr. Whitney, or by the stock exchange?

Mr. Gay. It would, in my opinion, have very equal force to any such proposed measure.

Mr. WOLVERTON. So that if this committee should prepare a bill along the lines suggested yesterday by Mr. Whitney in place of the bill now before us, it would still be open to the argument and attack that you are now making?

Mr. Gay. I do not see how there could be any answer to that question, but yes, because the exchange does not determine questions of constitutional law. I do not take it that it purports to.

Mr. WOLVERTON. So that whether we take the bill now before the committee, or the bill that has been suggested on behalf of the New York Stock Exchange, each would be open to the attack of being unconstitutional?

Mr. Gay. In my judgment, that is entirely true, Mr. Wolverton.

Mr. WOLVERTON. And therefore your argument applies to the stock exchange suggestions as well as the bill now before us?

Mr. Gay. That is equally true.

Mr. BULWINKLE. Mr. Gay, speaking as one lawyer to another, do I understand you to tell this committee that there is a doubt in your mind as to the unconstitutionality of this?

Mr. Gay. No, sir; not in my mind. My own opinion is definite, and if you ask for my individual judgment as a lawyer I unhesitatingly express it as being that this bill is not constitutional. I do not, however, wish to go so far, before this committee, in an argumentative way, to do more than present the reasons which justify my opinion, and let the committee accept them or reject them as in its judgment may seem wise and proper.

Mr. MERRITT. May I ask a question?
The CHAIRMAN. Mr. Merritt.

Mr. MERRITT. With regard to the questions put by Mr. Wolverton, I

suppose that it would be fair to say this, would it not, that if the bill were prepared on the basis of the suggestions made by the president of the New York Stock Exchange, and it should be constitutional, you would say that that legislation would be fair and advantageous, constitutionally, while the present bill would not be fair?

Mr. GAY. Precisely so; a measure which would have the wholehearted and fullest cooperation of the instrumentalities that would be subject to and affected by its provisions, which would be a very different thing from the enactment of a law such as that now before the committee.

Mr. WOLVERTON. Mr. Chairman, I think that the witness understood clearly that I was not speaking as to the relative merits of the two bills, but merely as to the constitutional features to which he is directing his arguments.

Mr. Gay. Yes.
Mr. PETTINGILL. Mr. Chairman, may I ask a question?
The CHAIRMAN. Mr. Pettengill.

Mr. PETTENGILL. I want to ask this question. Do you think that the bill prepared by the New York Stock Exchange, or rather the suggested bill, is less unconstitutional?

Mr. Gay. I can tell you a story that would very aptly illustrate that.

The Chairman. We would certainly like to hear you on the legal aspects of this bill, and you will have to do it pretty fast, as there are only about 5 minutes left.

Mr. Gay. Yes, sir. May I try to answer that question in what I am about to say, because my time is so short.

Mr. PETTENGILL. Yes.
Mr. Gay. The theory on which this bill is supported, as suggested by

Mr. Landis, is in the so-called "grain futures case”, and the "stockyards control cases." Mr. Landis said in discussing these decisions before the committee:

“I think it is upon the basis of conceptions of that type that the constitutionality of legislation such as is proposed here in H.R. 7852 must be sustained", the conception of those cases being that because grain and livestock were flowing through the Chicago Board of Trade, although at rest temporarily in the process of packing, processing, from one State to another, it was a matter within which the Congress might exert its power because this thing which moved was a commodity, and our view is that securities—and I think Mr. Landis shared that view at that time--are not commodities, I am justified in that statement, and I want to read from this opinion to which I have just referred, it seemed to me to be so conclusive. I quote from the opinion of Chief Justice Taft in the Board of Trade case when the Chief Justice made this statement:

The sales on the Chicago Board of Trade are just as indispensable to the continuity of the flow of wheat from the West to the mills and distributing points of the East and Europe, as are the Chicago sales of cattle to the flow of stock toward the feeding places and slaughter and packing houses on the East. (Board of Trade v. Olsen, 262, U.S. 1, at 36.)

That was the concept upon which the Grain Futures Act was supported. The flow of commodities through the bottle neck, so to speak, the Chicago Board of Trade.

Now, here is what Mr. Landis had to say in his letter to counsel for the stock exchange in respect to the LaGuardia bill, which sought to exercise the power as to the control of interstate commerce over those securities of those companies engaged in interstate commerce in the registration of their securities, and so forth:

The recognition that this is the basic principle underlying congressional control over sales for future delivery and other practices on commodity exchanges, in my opinion distinguishes these exchanges from stock exchanges. In the former type of exchange, the thing that is bought and sold is a commodity moving in interstate commerce.

The stock exchange, however, presents no such aspect. Other than a physical certificate representing a chose in action, no commodity is to move in interstate commerce as a consequence of a sale upon the stock exchange.

Dealings upon that market will effect no additions to the cost of moving these certificates from State to State.

Indeed the parallel between a commodity exchange and a stock exchange is 80 absent, that I cannot regard these decisions, (speaking of the decisions which he has suggested to the committee as a sole basis of the conception upon which this bill must rest from a constitutional aspect), I cannot regard these decisions as governing the stock-exchange situation nor as establishing a principle applicable to transactions upon the stock exchanges.

So, you have for whatever it may be worth, the opinion of Mr. Landis, the present Federal Trade Commissioner given to the stock exchange upon the precise question upon which his opinion before the committee rests in respect to the constitutionality of this bill, exactly contrary to what has been here expressed.

We respectfully submit, Mr. Chairman, and gentlemen of the committee, that however necessary the regulation of so-called "abuses" in the buying and selling of stocks upon organized exchanges may be, that they cannot, that that condition does not, afford a condition upon which the power of Congress over interstate commerce may be constitutionally exerted.

The other incident of this bill is a control of the mails. I have only time to briefly touch upon that. The power to establish post offices and post roads vested in Congress by the Constitution, gives it, of course, power to control the mails; but that power, I respectfully submit, with great earnestness, has never been exercised except in relation to the activity of carrying the mails and not as a medium of exerting congressional control over subjects over which Congress does not otherwise have control. It, of course, has the power to prohibit transmission through the mails of obscene or objectionable matter, lottery matters, and things mallum in se, if you please.

Mr. PETTENGILL. Mr. Gay

Mr. Gay (continuing). I am just going to say, also, against using the mails for purposes contrary to some object or purpose which Congress itself has the power to control. Otherwise, the power to control the mails would be free from that which no other congressional power is free from, the guarantee of the bill of rights.

We therefore respectfully submit that even this incidental power invoked in this bill, as a prop in support of the power to control interstate commerce, is equally ineffective.

Mr. WOLVERTON. Mr. Chairman

Mr. PETTENGILL. I do not understand the point of view you have expressed, if I understand you correctly. Does not Congress have power under their control over the mails to regulate everything that goes through the mails?

Mr. Gay. Yes, sir; I said that.
Mr. PETTENGILL. Then I misunderstood you.

Mr. Gay. I said it has the power to regulate everything that goes through the mails under the two headings, something that is obviously contrary to the public good, in the sense that it is malum in se or something that Congress may itself prohibit. Now, if I might read just one extract, from a decision in the Ninety-sixth United States, Reports, page 727, the court upheld the validity of an act under the power of Congress to establish post offices and postroads prohibiting the transmission of matter concerning lottery tickets, and so forth, and the court said this:

It must be said, if I may use the rather homely expression upon which-
Mr. KENNEY. Mr. Chairman-
The CHAIRMAN. Mr. Kenney-

Mr. KENNEY. Our courts have become somewhat progressive in recent years, have they not, in their decisions?

Mr. Gay. I would rather say, if that question were put to a court rather than to me, that they have not progressed beyond what was fairly said to be the spirit and letter as well of the Constitution.

Mr. KENNEY. Do you agree that they are not as reactionary as they used to be?

Mr. Gay. You are not laying a foundation for my disbarment, are you? (Laughter.]

Mr. KENNEY. No, indeed.

The CHAIRMAN. Let us have order. We would like to take time for you to complete just that.

Mr. Gay. In this case, which was the first to go before the Supreme Court in respect to the constitutional power to control the mails it was said:

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