That

Half of the trouble that we have had has been due to secrecy. would be impossible, in my judgment, or greatly retarded, in any event, if there were such a regulatory authority with broad general powers, unrestrictedly specific provisions of law saying that this or that must be done or must not be done.

The CHAIRMAN. Your objections then to the bill, as drawn, would go to the rigidity of it?

Mr. HARRIMAN. To the rigidity of it, very largely.

The CHAIRMAN. And in

Mr. HARRIMAN (interposing). And in including in the terms of the bill provisions which seem to me are not subjects connected with stock exchange regulations per se. I believe that such a bill as I have outlined could be drafted in 4 or 5 pages and could be so simple and so clear that there would be no difficulty in understanding the exact purpose or intent of it.

The CHAIRMAN. We are so much attacked, Mr. Harriman, in our actions, that we have to be rather meticulous in drawing a measure. I will assure you that in bringing into existence a board or an authority like this, I doubt if it should be done in a bill of four or five pages. We also wish that it could be, but it is pretty hard to do it. Mr. KENNEY. Mr. Chairman

The CHAIRMAN. Mr. Kenney.

Mr. KENNEY. You referred to the regulation of retail methods? Would you stop high-pressure salesmanship of stocks and bonds? Mr. HARRIMAN. Mr. Kenney, I do not know whether that can be done or not. I think

Mr. KENNEY. Would you stop constant telephone calls by people who have stocks to sell; would you stop the incessant calling by representatives of houses at the homes and offices of people to get them to purchase stock?

Mr. HARRIMAN. Mr. Chairman, I should think it would be unwise to attempt anything of that nature as a hard and fast provision of the bill, but I should think it would come well within the scope of the rules of the exchange.

Mr. KENNEY. Do you regard the business of a broker as a profession, or in the nature of a profession?

Mr. HARRIMAN. I think that a dealer is dealing as a principal with the man on the other side. I think that a broker is largely dealing in a fiduciary capacity.

Mr. KENNEY. Most of them deal in that double capacity, do they not?

Mr. HARRIMAN. Probably a great many of them do.

Mr. KENNEY. Would any great harm come to the banks and brokers, if we should consider the question of preventing the solicitation of the purchase of stocks and bonds?

Mr. HARRIMAN. I think if you went so far as that, Mr. Kenney, it would probably be harmful. I can conceive of circumstances where it would be very desirable for brokers to say, "I think there is going to be a movement and for your own protection, you should either sell or buy.

Mr. KENNEY. That is all very well to say to a regular customer, but how about the propriety in the case of one whose account the broker does not have. A lawyer may not solicit business.

Mr. HARRIMAN. I beg your pardon.

Mr. KENNEY. A lawyer may not solicit business, is not that so? Mr. HARRIMAN. Why, the ethics of the profession very properly prohibits that, but it is done.

Mr. KENNEY. Should not the ethics of banking and brokerage be just as high?

Mr. HARRIMAN. Yes, they should.

The CHAIRMAN. We are very much obliged to you, Mr. Harriman. You have made some constructive suggestions, and we appreciate it very much.

STATEMENT OF HON. JOHN FITZGERALD, OF BOSTON, MASS.

The CHAIRMAN. Mr. Fitzgerald, we will be glad to hear you a little while. We are running overtime and we want to hear you. Mr. FITZGERALD. Mr. Chairman and gentlemen: I thank the committee for this opportunity to appear before them and say something on this legislation.

I came into Washington last night to see my good friend and Representative, John McCormack. I had no particular intention of appearing before the committee, but when I found out that the hearings were going on, I thought it my duty to come down here and express some of the thoughts that I have in mind, after considerable contact with stock exchanges, and stock-exchange houses, for 20 years or more.

I think it very important that this legislation be considered most carefully, because I know of nothing in the lives of the people of the country today that would have a greater effect upon the rehabilitation of the resources of the country than unwise legislation in the stock exchanges.

I have noticed for a great many years, whether traveling on the train, or in a hotel, that invariably people turn to the stock-exchange reports, stock-exchange pages of the newspapers, and, of course, you men here know, as a result of the debacle of 1929, almost everyone in the land was affected and millions of people were on the borders of destitution, because of the fact that the prices of railroad stocks went from 100 percent in 1929, according to the figures of the New York Stock Exchange, to 8 percent, and inasmuch as a large portion of those railroad properties were real estate it is almost unbelievable to think that within 3 years that the railroad properties in the United States as shown in the New York Stock Exchange figures could go from 100 down to 8, and I think the average of the leading stocks, anyway, on the New York Stock Exchange went from 100 down to 11, and there is not any wonder, when you consider those figures, of the impoverishment of the people of the country and practically every section of it.

I know some very good men, 3 or 4 or 5 years ago, that said there was not any question about the worth of New York Central, that it would go to $300 a share and it was worth it. I remember men of the highest importance in the country, and supposed to have the best information, making that statement, and yet that stock went down to 18 or so, or less, 15 and 12, and I was just looking in the papers, and it is selling for 38 now, and some people who had the means to carry that through are hoping that it will go to 50 or 75, or 100, and they are hoping that some things will happen in the country to make the

prices that went down to 10 go to 30. They may be 30 now. I do not know the exact figures. And they are hoping that perhaps they will go to 50, and those figures will sell for around 50 percent of what they sold for in 1929, which I think would be a fair average of the real value of most of the stocks listed on the New York Stock Exchange.

Now, to do anything radical just now, as I told McCormack a while ago, that legislation that has been proposed here would be almost as radical as the prohibition law, where, as you know, they deliberately voted to poison liquor to kill men, and how drastic legislation that is now we can see; but that debate happened in the House of Representatives, you know, and within the last 3 or 4 or 5 years. Therefore, I think every encouragement ought to be given to people that have clung onto their stocks and their properties, rather than discouraging them, as a great many people were, to my personal knowledge, 3 or 4 weeks ago when this bill was brought out.

I am particularly concerned, I want to say, particularly concerned about the men and women employed in the brokerage houses, particularly in Boston, where I am very familiar with most of them, and their lives, and they were crucified during the last two or three years in reductions of force and reductions of their pay. It is almost unbelievable. A representative of one of the biggest houses in the country told me in New York yesterday, if this bill became a law, it would result in a cut of 66 percent of their force, which, in view of the fact that we are hoping, with borrowed money, so that the debt of the country is now approaching $32,000,000,000, to get out of the atmosphere of despair this spring.

It would be, in my opinion, very dangerous to do anything in regard to this stock market legislation that affects almost every home in the land, that would make the people fearful and release them from the courage which the great administration of Franklin D. Roosevelt has given the people of the country.

I was a candidate for the United States Senate against Henry Cabot Lodge in 1916 and one of the planks in my platform was the New York Stock Exchange and its compulsory control by the people of the United States, and I say that I cannot believe that, or that it is almost impossible to believe, that supposedly the most honorable brains in the United States would continue to operate that exchange without asking for the incorporation under the laws of the United States.

I think that that is an indictment against their fairness, and it cannot be said to be an unfair thing, and of course it was not done.

I talked with Mr. Untermeyer a great many years ago. He and I were very good friends, and I agreed with him that the New York Stock Exchange should be incorporated, and it was not done, and it is going to be done now.

I agree with many of the things Mr. Harriman has said. I think that the best principles ought to be laid down by the Congress of the United States and the control of, the direction of, the rules and regulations, carried out by a special board like the Interstate Commerce Commission, or the Federal Trade Commission, or a commission to be organized, so that the people would get the proper protection, and that there would be a free flow, a free flow of money in the stock exchanges of the country.

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We have got to get going so as to spend about $30,000,000,000 to $40,000,000,000 a year in this country to get anything approaching the prosperity or normal prosperity, and as I said a few moments ago, we have borrowed now $5,000,000,000 or $6,000,000,000 or $7,000,000,000, or $8,000,000,000. We are fairly happy up in Boston as compared with what we were a year ago when everybody was down in despair, but the people are watching out to see what is going to happen, and in my judgment there is a little fear now when the C.W.A. was ordered the other day to drop some thousands of men up our way, and I presume that that is true all over the country. And I think that the people of the country are in a mood now to invest and what kind of enterprise to put that money into, I do not know. I do not know. My own thought about the matter is that we ought to spend millions for housing.

Conditions are disgraceful in all of the big cities of the United States, and impoverished Germany and England, with twice the debt per capita we have in the United States, has shown us the way, and yet nothing is being done, and I think billions of money could be spent all over the United States, in the city areas particularly, and in the country areas, in order that building labor could be put to work, and they constitute, I think, 28 percent, if I remember the figures correctly, of the industrial income of the United States, and yet, according to these figures that were printed a short time ago, we went from 109 in building in 1929 to 14 last year, and imagine it, 14 last year. So that we have got to get into the spending of money for capital goods, raised by private enterprise, because I think we are at the end of our row, or almost, in matters of borrowing money from the Government to keep the people of the United States living somewhat happily, freeing them from starvation, and therefore I want to say, as a man who has given practically all of his life to the public-it is 40 years ago since I was elected to Congress-I was the only Democratic Congressman from six New England States. I have dealt in securities but never sold a stock short in my lifetime. I never bought on the exchange, but have bought and sold a number. I know a good deal about the stock-exchange atmosphere.

There are some wonderful men, some wonderful people, in the business, like in New York, with whom I have done business for a great number of years, and like Hayden Stone, of Boston and New York, who did not lay off an employee in 1929 and has not since reduced their wages, and like my good friend, J. K. Bates, who is very honorable. I have found him to be one of the most honorable men I have ever known in business and, of course, there are some that are not so good, and as I said a moment ago, my interest in appearing here today is for the tens of thousands of men and women that have given their lives to this business and have got no place to look. They are not unionized and the order comes to discharge them, to discharge so and so, and out they go. The order comes to reduce their pay, and out they go. And you are going to add them to the white-collar club of unemployed, and we know that that is discouraging in every part of the country, because nobody is looking out for them.

The CHAIRMAN. Let me ask you a question.

Mr. FITZGERALD. Yes.

The CHAIRMAN. You want money to get into productive enterprises?

Mr. FITZGERALD. Yes.

The CHAIRMAN. Do you not think it would be helpful to the average American investor and helpful to the public in general if he believed that these places of trade and the things that they traded in are clean? Mr. FITZGERALD. Oh, positively; that is what I want; surely. The CHAIRMAN. That is what we are attempting.

Mr. FITZGERALD. As I said a moment ago, that is what I want. The CHAIRMAN. I again say, that is what we are attempting. Mr. FITZGERALD. As I said to you, I was for incorporating them back when I was a candidate for the United States Senate, and they ought to be regulated, and they ought to be held strictly accountable like every business, and as I said, I think that this body of men should report a bill, frame a bill that would properly regulate these exchanges so that these men would be compelled to keep an honest accounting of their business, and I would be glad to see that done, and they should be made to issue reports that are intelligible, and at times when they ought to be issued, and not wait a year, sometimes, and keep themselves hidden. They ought to be compelled by law to do the same thing that the railroads do now, only to issue the kind of report that is intelligible to the ordinary person.

There are tens of thousands of reports issued about the big companies, various companies in the United States today, and almost as many ways of writing them up. I believe that, Mr. Chairman, and I thank you for calling my attention to that fact. And, before I finish, I hope that the committee will do something.

I was glad to see publicity given the other day and glad to see the attitude taken about the large salaries, and their ought to be some way to get at those fellows that vote themselves $100,000 and $125,000 a year, and then vote themselves bonuses. There ought to be a list of public enemies, and they ought to be listed as public enemies no. 1, no. 2, and no. 3, and those men ought to be made unfit for decent society.

I thank you, Mr. Chairman.

The CHAIRMAN. The committee will stand adjourned until tomorrow morning at 10 o'clock.

(Thereupon, at 12:27 p.m., the committee adjourned to meet the following day, Friday, Mar. 2, 1934, at 10 a.m.)