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NATIONAL SECURITIES EXCHANGES REGULATION

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FRIDAY, MARCH 23, 1934

HOUSE OF REPRESENTATIVES,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

, The committee met, pursuant to adjournment, at 10 a.m., in the committee room, New House Office Building, Hon. Sam Rayburn (chairman) presiding:

The CHAIRMAN. The committee will come to order.
Is a Mr. Rand in the room?
Mr. RAND. Yes, sir.

STATEMENT OF JAMES H. RAND, JR., NEW YORK CITY, CHAIRMAN

OF THE COMMITTEE FOR THE NATION, AND CHAIRMAN OF THE BOARD OF REMINGTON-RAND, INC.

The CHAIRMAN. Mr. Rand, the committee would like to hear your qualifications.

Mr. RAND. James H. Rand, Jr., 205 East Forty-second Street, New York City.

The CHAIRMAN. The Committee would like to hear your qualifications.

Mr. RAND. Chairman of the Committee for the Nation, and chairman of the Board of the Remington-Rand, Inc.

The CHAIRMAN. Mr. Rand, if it would suit you just as well, it would suit the committee much better if you would stand, because we can hear you better and see you better.

Mr. RAND. Mr. Chairman and gentlemen of the committee: I am not here in opposition to the avowed and legitimate objectives of this bill. Securities markets are a vital part of our economic mechanism. Their integrity and effectiveness mean much more to industry and to 10 million security owners than to brokers. Therefore, I appear to ask your consideration for the viewpoint of business men on this measure.

No industrialist loyal to the obligations of his position wants the securities of his company manipulated away from their true value. If depressed by bear raids his company's standing may be affected, his stockholders' values suffer, and his chances for obtaining new capital when needed are impaired. If the securities are inflated to a valuation in excess of earning power, the new buyer expects the management to earn impossible dividends. The reputation of the management suffers. It should be recognized that the managers of sound corporations whose securities comprise the great bulk of those listed on exchanges have a primary interest in correcting abuses that have been injurious to their own as well as the public's interests. I am appearing before you as chairman of the Committee for the Nation. This is a volunteer organization of some 1,500 business men and industrial leaders with membership in every State. In our directing committee is a representative and spokesman for five of the major farm organizations.

Following months of previous investigation by individuals in an endeavor to chart a way out of the depression, our committee was formed in December 1932. Its research disclosed the impending bank collapse and traced the cause of deflation and collapse of property and commodity values to a change in the purchasing power of the gold dollar. This committee recommended going off gold and vigorously supported the President's monetary policies in opposition to the deflationary banking viewpoint.

Our interest in the National Securities Exchange Act arises from the fact that this bill vitally affects the business and credit structure of the country. This fact became evident to business men as soon as the first draft was published. Our committee was asked for its opinion.

As has been our practice, we withheld judgment pending a thorough, unprejudiced investigation. This we employed the National Industrial Conference Board to make for us.

The conference board went to work under the guidance of its chief economist, Dr. F. Spencer Baldwin, in a most intensive effort to study the bill. Last Saturday, under the strain of this work, Dr. Baldwin collapsed, was taken to a hospital, and his obituary notice appeared in yesterday's papers.

I cite that to show you the pressure and strain under which the members of the conference board staff have been working to try to prepare a report and an analysis of this bill before the bill had been rushed through.

The CHAIRMAN. You say that was last Saturday?
Mr. Rand. That was last Saturday.
The CHAIRMAN. Well, this bill was not introduced until Monday.
Mr. RAND. The new bill. This was working on the other bill

, and immediately the new bill was introduced, the conference board started study of the revised bill.

The conference board, working with its regular staff and specialists called in to cooperate, has given us four extensive preliminary reports, each showing different and far-reaching ways in which this bill would affect our economic and political life.

Despite utmost efforts, the conference board has not had time to entirely complete its summary and conclusions.

It should be remembered that the complexities of this problem are so great that the Government's committee formed by Secretary of Commerce Roper at the request of President Roosevelt, early last spring, was unable to complete and make public the results of its studies until January 23 of this year, in the so-called “Dickinson report."

Now, after 10 days of careful analysis, a committee of business men that have studied this bill have found that the bill before you is almost totally at variance with the recommendations of the so-called “Dickinson report."

In one of these sessions with business men studying this bill, I saw a cable from London, England, urging support for this bill as it

was originally placed before your committee and introduced into Congress. This opened my eyes and the eyes of other business men to the mysterious back-stage influence at work.

The CHAIRMAN. From whom was that cablegram?
Mr. RAND. That cablegram was from Dr. Felix Frankfurter.
The CHAIRMAN. He is an American citizen, is he not?
Mr. RAND. Yes.
The CHAIRMAN. He is at Oxford.
Mr. RAND. He is in London at the present time.

The CHAIRMAN. He has been loaned to Oxford for a few months, I understand.

How does that make it appear that there are mysterious influences behind this bill?

Mr. Rand. Well, the atmosphere seems to be one in which influences from all over England, as far away as Great Britain

The CHAIRMAN. You do not intend to try to say because Felix Frankfurter sent a cablegram over here, a man who is an America citizen sojourning in England, to make a few lectures, that the English people are interested in this bill?

Mr. RAND. Personally, I believe that the debtor countries in Europe would prefer to have the recovery program in this country delaved and retarded.

The CHAIRMAN. What connection do you make with that and Mr. Felix Frankfurter sending a cablegram? What difference does it make whether it was sent from London or from Boston?

Mr. RAND. No particular difference.

The CHAIRMAN. Well, then, let us not leave the impression that there is some mysterious influence behind this bill, just because an American citizen is for it or for legislation along this line.

Mr. RAND. I have heard other persons, from the other side, in this country, also express the view.

The CHAIRMAN. Who are they?

Mr. RAND (continuing). That they hoped this bill would pass as it was. I have heard no comments since the bill was revised.

Mr. MILLIGAN. I wish you would state the names of these gentlemen from abroad who made those statements.

There has been a lot of insinuation at these hearings, and I would like to have the names of these people to go in the record.

Mr. Rand. I do not recall the names at the present time. I have had conversations at various times since the bill was introduced in company of men from foreign countries, and have heard comments passed that they thought the bill would be more or less of a calamity to this country, and would give free, open season to some interests in foreign countries.

Mr. MILLIGAN. You cannot give the names for the record, then? Mr. RAND. Not offhand.

Mr. MILLIGAN. Well, then, do you think that you could think it over and remember later and present the names for the record?

Mr. Rand. I will be glad to.
Mr. LEA. Let us see what they said. You

say that they want this bill passed, and they thought it would be a calamity to this country. Did they make that statement?

Mr. RAND. One man, in particular, stated to me that he thought that the passage of this bill would be so much more drastic than the British securities act that it would be very detrimental to American business, and I said to him, “Of course, you would not wish us any hard luck in this country.

“Well," he said, “Great Britain is the greatest, largest competitor of the United States."

And, he said, “Motives of nations are essentially selfish," and he said

Mr. MILLIGAN (interposing). Do you remember that name?
Mr. RAND. No.
Mr. MILLIGAN. You cannot remember?

Mr. RAND. He said, “You cannot blame us for being selfish in looking after our own interests."

He said, “Our competition with the United States in business is a question of life and death with Great Britain."

Mr. Milligan. Do you remember that gentleman's name? Did you submit his name for the record?

Mr. RAND. I do not recall.
Mr. MILLIGAN. You had a detailed conversation with him.

Mr. Rand. He is connected with a London newspaper and sojourning in this country.

Mr. WOLFENDEN. Was he a British subject?
Mr. Rand. Yes; I believe he was.
The CHAIRMAN. You may proceed.

Mr. Rand. Why was the Dickinson report laid aside? Why was the advice of 50 of the most experienced business men, who were invited by the administration to cooperate in the recovery program ignored in the drafting of this bill?

In the writing of this bill, vitally affecting the interests of industry and of every investor in the country, business had no voice.

The CHAIRMAN. You are getting your voice now. We are hearing you now.

Mr. Rand. Up to the present time. This bill was apparently drafted by a group of men, or was originally represented by, or in cooperation with young men, who hold no elective office. It represents an important step in their attempt, by indirection, to establish a “planned economy” is which politically selected bureaucrats will assume powers that have belonged to property owners, stockholders, and business management.

Never, even in war, have such far-reaching powers over private property been asked by any administration. This bill is so important that the demand for hasty, rubber-stamp action, without thorough investigation by Congress, and without ample time in which to consider all of its effects, cannot be justified, in my mind.

A tentative analysis by the Conference Board describes this bill as one of two measures for “Federal control of the private capital market."

Concerning this implication, their report says:

The Fletcher-Rayburn bill and the Securities Act of 1933, considered together, have three basic objectives, some of which are expressed, others of which are implied. These are, to wit:

(a) To protect purchasers of corporate securities from loss;

(b) To give the Federal Government comprehensive control over the acquisition and use of capital funds by corporate business;

(c) To provide the means for comprehensive Federal control over the management of business corporations.

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