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Mr. SMITH. Loans at the post.
Mr. MAPES (continuing). Independent of the banks.

Mr. Smith. We went through that section and it did not arouse, or bring forth any suggestions on our part.

Mr. MAPES. What is the purpose of that particular provision?
Mr. Smith. I will read it over. I cannot remember it.

The CHAIRMAN. I might say the purpose of that, in bringing the Federal Reserve in there, is because it does have to do with lending,

Mr. SMITH. It is the lending of the issuer.

The CHAIRMAN. And there was expressed here, especially by the opponents to the bill, and by those favorable to it, that upon anything that had to do with banks or bank credits and Government financing in anywise, before the Commission should make a final order, that they should at least have the approval of the Treasury and/or the Federal Reserve Board.

Mr. KENNEY. Mr. Chairman.

Mr. MAPES. That seems to me to say that an issuer, before borrowing money from a broker, even on the floor of the exchange, must comply with the regulations of the Federal Reserve Board.

Mr. Smith. As I recall now, that provision of the bill was to prevent dumping outside money in the call market.

Mr. MAPES. Yes.

Mr. SMITH. And met with our approval. This is a long bill, and sometimes we do not recall all of its provisions.

Mr. Mapes. Yes; I appreciate that, Mr. Smith. Did you examine the provisions with regard to proxies?

Mr. Smith. We have no suggestions to offer concerning that. That is a part of the regulatory powers of the bill about which we were not supposed to offer an opinion.

Mr MAPES. That is all I want to ask.
The CHAIRMAN. Mr. Wolverton.

Mr. WOLVERTON. Mr. Smith, does the Treasury Department approve this bill or not?

Mr. SMITH. That, I thought-I should say that has been covered by previous questions.

Mr. WOLVERTON. Well, is your answer that it does or does not, in whole or in part?

Mr. Smith. The Treasury approves the part of the bill that was submitted for our consideration. We were not asked to

Mr. WOLVERTON. Did the Treasury see this bill before it had been completed in final draft as it now appears before this committee as H.R. 8720?

Mr. Smith. Did I?
Mr. WOLVERTON. Yes.
Mr. SMITH. Yes, sir.
Mr. WOLVERTON. Did you have an opportunity to read it?
Mr. Smith. Yes, sir.
Mr. WOLVERTON. Do you favor it or not?

Mr. Smith. As I have explained before, I am not in a position to answer that question at all.

Mr. WOLVERTON. Why not?

Mr. SMITH. I represent the Treasury here, and in that capacity I am answering questions as to things that have been submitted to us.

Mr. WOLVERTON. You mean you were sent here with instructions not to give an opinion on this bill?

Mr. Smith. No, sir.
Mr. WOLVERTON. Except as to certain particulars?

Mr. Smith. No, sir; but I prefer not to, because I am representing the Treasury. Mr. WOLVERTON. Well, this bill has a very wide scope.

Mr. Smith. That does not mean one thing or another. It simply means that I am voicing the opinion of the Treasury as approved by the Secretary of the Treasury, and that is what we are saying.

Mr. WOLVERTON. Then, there is no misunderstanding upon my part that the Treasury does not wish to be considered here today as approving this bill?

Mr. Smith. Now, wait a minute, or as disapproving it.
Mr. WOLVERTON. Then, what was the use of coming?

Mr. Smith. Well, we were invited by your chairman to answer certain questions as to things that were submitted to us.

Mr. WOLVERTON. You do not mean that you were asked to come here to answer only certain questions?

Mr. Smith. About certain sections, parts of the bill, matters that have been submitted to us.

Mr. WOLVERTON. So that, notwithstanding the fact that you have read this bill through and have asked that you be given a further opportunity to present your views, you do not wish today to do so?

Mr. Smith. We have been asked to come here to answer your questions, about certain parts of the bill that were submitted for our consideration, and about those I shall be glad to attempt to answer your questions, for the Treasury. I am sorry that I cannot answer anything else.

Mr. WOLVERTON. You have stated that the major objectives of this National Securities Exchange Act are:

(1) To establish Federal supervision over securities exchanges.
(2) To prevent manipulation of security prices, etc.
(3) To prevent excessive fluctuations in security prices, etc.
(4) To discourage the use of credit-
And so forth.

And you have stated that with these general objectives, the Treasury is in full accord?

Mr. Smith. Yes, sir.

Mr. WOLVERTON. Are you in accord with the means that have been provided in this bill to carry out those general objectives?

Mr. Smith. The parts that have been submitted to us are satisfactory.

Mr. WOLVERTON. Well, notwithstanding the fact that you are in full accord with the objectives of the bill, do you mean to say that you are not interested in that

Mr. Smith. Your committee has not submitted those things for our consideration.

Mr. WOLVERTON. I beg your pardon?

Mr. Smith. Your committee did not submit those things for our consideration.

Mr. WOLVERTON. Well

Mr. Smith. How can we pass on them until they ask us about them? It cannot be done.

Mr. WOLVERTON. That is what I am attempting to do now.

Mr. Smith. Well, I cannot. Are you submitting those, asking them now?

Mr. WOLVERTON. I am asking you, very frankly, Mr. Smith. It is my thought that this bill is so wide in its scope and in its effect that I think this committee is entitled to have the unqualified opinion, yes or no, of the Treasury, of the Comptroller of the Currency, of the Federal Reserve Board, and of the Reconstruction Finance Corporation, and I confess that it is very disappointing to me that a department of the Government as important as the Treasury is should come here, by its representative, this morning and state that "we cannot say yes or no

Mr. Smith. Because you did no ask us.
Mr. WOLVERTON (continuing). In respect to certain questions..
Mr. Smith. I think that is a bit unfair, Mr. Wolverton.
Mr. WOLVERTON. I do not mean to be.
Mr. Smith (continuing). In you questions.

Mr. WOLVERTON. I am intensely interested, I do not have the responsibility that the Treasury has, and yet I feel a responsibility.

Mr. Smith. You asked us certain questions. We are willing to answer as to those things about which you have inquired. Now, if we are not answering them, it is not our fault. The chairman of your committee has explained that we were asked to do certain things.

Mr. WOLVERTON. I do not understand that there is any limitation, so far as this committee is concerned, as to what you may testify to. If there is any such limitation, I am not aware of it. You came here as the representative of probably the most important department of our Government at this time, prepared to give, as I thought, your opinion with respect to this important legislation, and it would have been very helpful to us to have had it.

Mr. Smith. I am very anxious not to have a misunderstanding on that point with you, Mr. Wolverton. I am just as anxious as you are.

Mr. WOLVERTON. Would you briefly, then

Mr. SMITH (interposing). The President asked us to consider, as the chairman of your committee has stated, a few moments ago, certain portions of the bill. Mr. WOLVERTON. Would you prefer

Mr. Smith (continuing). And for that reason, this interrogation must be confined to the subject of our study.

Mr. WOLVERTON. Would you prefer that the questioning should be wide in scope, or confined to the particular questions you have referred to?

Mr. Smith. That is for the Secretary of the Treasury to answer: I have no preference. I am just in this war to do what I can to help out.

Mr. WOLVERTON. I am, too, although I am of the minority party, and I am particularly anxious, in this important legislation to do the thing that will attain the objectives which you have referred to in your statement, and to do it in an effectual way and to do it in a way that will not unduly upset business, and I know of no department of the Government, in my opinion, that should be more qualified, more ready, more willing, to give advice to this committee than the Department of the Treasury.

Mr. Smith. You understand the limitations under which the study was made, Mr. Wolverton?

Mr. WOLVERTON. No; I cannot understand the reasons for it.
Mr. Smith. I do not know the reasons.

Mr. WOLVERTON. I understand from your statement that there was a limitation. Am I correct?

Mr. SMITH. The chairman of your committee explained what we were asked to do, a few moments, ago.

Mr. WOLVERTON. Yes. I appreciate that.
Mr. SMITH. And that is what we have done.

Mr. WOLVERTON. Who requested the Treasury Department to study the bill and give their views?

Mr. SMITH. The President of the United States.
Mr. WOLVERTON. Did he limit you?

Mr. Smith. Yes, sir. The Chairman of your committee made that statement a few moments ago.

Mr. WOLVERTON. As to particular sections.

Mr. Smith. That statement by the chairman of your committee was made just a few moments ago.

Mr. WOLVERTON. Now, you have stated here this morning that you have submitted to the committee's counsel numerous suggestions and changes, most of which have been incorporated in this bill which has been introduced.

Have you with you, or are you able to testify from memory, what the suggestions were that you submitted to the committee's counsel; what ones were adopted and what ones were not, and why not?

Mr. Smith. There is no record of that, because the bill was studied, section by section, with the committee's counsel, and we sat around the table day after day and night after night discussing these sections with them.

Mr. WOLVERTON. Do you have any memoranda of that?
Mr. Smith. No, sir.

Mr. WOLVERTON. That will enable you to refresh your mind as to the suggestions and changes that were made by you with respect to this bill?

Mr. Smith. No, sir.

Mr. WOLVERTON. Do you have in mind the suggestions you made which were not incorporated in the bill?

Mr. Smith. No, sir. None of any consequence.

Mr. WOLVERTON. You mean, then, that every suggestion you made which was of consequence was adopted?

Mr. Smith. Yes, sir; that is true.

Mr. WOLVERTON. Then, why did you, in your statement, say that you hoped to have the privilege of submitting to the committee further suggestions that may occur to you after you have had more time to study the bill?

Mr. Smith. Well, in a measure as broad as this, new questions arise constantly. We found a disposition on the part of counsel for the committee to consider the various angles of this measure in the light of existing practices and relations, and if we think of anything later on we would like the privilege of suggesting it.

Mr. WOLVERTON. Well, you said that you had an opportunity to read this bill, as it was finally drafted.

Mr. Smith. Yes, sir.

Mr. WOLVERTON. And you stated that you might wish to submit further suggestions after you have had more time to study the bill.

Mr. SMITH. Yes, sir.

Mr. WOLVERTON. What are they? Do you have anything in mind now that indicated then that there might be the possibility that you would want to submit different suggestions? In other words, what was there in the bill that you read that made you feel it might be necessary to make other or different suggestions?

Mr. Smith. We hear something that has come up since then. The question concerns the odd-lot dealer on the small exchanges throughout the country. I am not quite sure that the bill in its provisions gives the protection to the small exchanges that they should have. We are studying that. And if we can arrive at a conclusion, we wanted to submit it. We wanted to maintain this distribution system throughout the country, and it might be that we might have a small change to suggest in connection with that, for instance.

Mr. WOLVERTON. Do any others occur to you? Mr. Smith. I just happened to think about that. We might not We are studying that.

Mr. Wolverton. Did you, in your studies, give consideration to the provisions in this bill dealing with "pools”?

Mr. Smith. What part of the bill?
Mr. WOLVERTON. Any part of it that deals with pools.

Mr. Smith. Only in a very indirect way. That has to do with regulation of speculation, about which we were instructed not to concern ourselves.

Mr. WOLVERTON. Will this bill, in your opinion, be effective in restricting the operation of pools?

Mr. SMITH. I cannot answer that question.
Mr. WOLVERTON. Are you in accord with the margin provisions?
Mr. Smith. I have stated, so far as-
Mr. WOLVERTON (continuing). As set forth in the bill?
Mr. SMITH. That was definitely withdrawn from our consideration.
Mr. WOLVERTON. So, you have not given any consideration to it?
Mr. SMITH. You mean, in the rates?
Mr. WOLVERTON. The basis of margin requirements.
Mr. Smith. Which a broker may loan on the purchase price?
Mr. WOLVERTON. Yes.

Mr. Smith. It is not a margin arrangement. No; we have no opinion on that.

Mr. WOLVERTON. What is your opinion with respect to the provisions in the bill dealing with short selling?

Mr. Smith. About the same as they are about the pools.

Mr. WOLVERTON. What is your opinion with respect to the provisions of the bill as to listing requirements?

Mr. Smith. Same answer.
Mr. WOLVERTON. What is that?

The CHAIRMAN. I remember in our conversation Sunday night in reference to consideration of the liability sections

Mr. Smith (interposing). He did not ask about that, Mr. Chairman.

The CHAIRMAN. I know. You did have some opinions as to what effect the liability sections in the original bill would have upon listings, or withdrawal of listings.

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