Mr. BULWINKLE. I want you, if you can, just to tell me offhand, because you came down here prepared to go before this committee.

Mr. RAND (interposing). In the first place, I would like to see the Federal regulatory authority established, set up for this purpose, because this is only one factor in the control of margins, in effecting the expansion or contraction of credit, or cash, in the country.

Mr. BULWINKLE. Now, we have got that much. You want a commission established for that purpose?

Mr. RAND. Yes; that is right.

Mr. BULWINKLE. And we are able to go that far together.

Mr. RAND. The cash and its equivalent in this country, which represents our business activities, and our prosperity or adversity, to such large extent, consists of $100,000,000,000 of securities, about $36,000,000,000 of bank deposits and about five and a half or six billion dollars cash.

Those three elements should be under one centralized control, in our opinion.

Mr. BULWINKLE. Well, all right

Mr. RAND. Now, the regulation of stock exchanges, investment houses, is a very important lever of control in the expansion or contraction of credit, cash, and its equivalent, and therefore if Congress is going to carry out the dictates of the Constitution to regulate the money of this country, and the value thereof, it must have a regulatory authority responsible to Congress.

Mr. BULWINKLE. Now, we have got to the point where we have got to have a regulatory authority. We want to know now what you are going to do about it after you get it.

Mr. RAND. This regulatory authority?

Mr. BULWINKLE. What will you do about it?

Mr. RAND. First, to regulate, first to limit the amount of loans by banks, operating on Federal and State laws, and, second, they should be limited in the percentage of loans to the market value of the collateral, by classes of securities.

The members of the group of business men that are called the "Business Advisory and Planning Council of the Department of Commerce" felt very strongly about this

Mr. BULWINKLE (interposing). Just a minute.

Mr. RAND (continuing). And, we concur in that recommendation, that it should not be less than

Mr. BULWINKLE. Just a minute. Let me ask you questions, and see if I can get answers to them, and I think that we will get along a little bit faster than we do this way.

Now, what is the difference between your plan and the plan proposed under the Rayburn bill?

Mr. RAND. That plan would fix the margins at not less than 30 percent of the debit balance of the customer and the security given as collateral should not be taken as for marginal purposes at more than 70 percent of the market value, and then there is a change, and this is on the basis of value, and value is the most important thing; that no commission should be allowed to change or no regulatory body should be allowed to change a margin requirement suddenly, and shockingly, by a change of more than 3 percent in any one month, and then only after 30 days advance notice in writing.

Mr. BULWINKLE. So, we have got to this point, that you and the brain trusters agree upon regulation together.

Mr. RAND. I said in the beginning, that I believe in certain regulation, that certain regulation should be applied.

Mr. BULWINKLE. All right, let me ask you this.
Mr. LEA. Mr. Chairman-

Mr. RAND. Might I continue and answer that question, and thenMr. LEA. I would like to go back to that statement by Professor Wirt. You have quoted Professor Wirt in a way that reflects upon the members of the so-called "brain trust" whose names are undisclosed, in a shocking statement attributed to those men; if true, the statements are damnable, and traitorous. This committee should not be put in a position of cutting off a full disclosure of that statement by Professor Wirt. The full matter should be disclosed and investigated, in my judgment.

So, I suggest that the witness be requested to complete reading the communication from Dr. Wirt.

The CHAIRMAN. That is agreeable to me.

Mr. RAND. I will say

Mr. MAPES. Mr. Chairman

The CHAIRMAN. You want that information?

Mr. MAPES. Mr. Rand, in view of your criticism of the "brain trust", I wonder if you and the other members of the committee for the Nation now have any compunction of conscience for having aided and abetted the "brain trust" in its monetary program.

Mr. RAND. The monetary program, I believe, has been opposed by many of the members of the "brain trust", for this reason, that once you correct the monetary problem of this country, you will have a revival of business and employment and no opportunity to regiment. Your regimentation is ended, and they know it, and the moment that you provide adequate currency and credit for the circulation of goods and merchandise, and service in this country

Mr. MONAGHAN. Mr. Chairman, he is certainly diverting from the issues of the bill; but since he has, I would like to ask a question. What do you consider adequate credit, Mr. Rand?

Mr. RAND. I consider

Mr. MONAGHAN. And adequate currency, and credit?

Mr. RAND. I consider, and the members of our group who have put a long time on studying this thing consider that if we are going to return to the conditions that existed in 1926 which were conditions which we thought were happy conditions, where we had no complaints about unemployment, and we had no poverty, and we had no inability to distribute the wealth of goods-in 1926 we had in this country a total of $62,000,000,000 of bank deposits. That was our real money. Those bank deposits were backed 90 percent by pieces of paper which I might call I.O.U.'s. Those I.O.U.'s were promises to pay and currency is no better than promises to pay, because there was only 10 cents cash for every dollar of that kind of cash and there was $52,000,000,000 of that currency in 1926.

Now, we had at that time, in money, in circulation, about $5,000,000,000, about the same as we have today-a little less-than in we had in securities, total securities

Mr. HUDDLESTON. Mr. Monaghan, do you want him to discuss that subject?

Mr. MONAGHAN. I merely wanted to know, if possible, in a sentence.

Mr. HUDDLESTON. I am tired of these digressions. We are not getting anywhere on this particular bill. We are getting nowhere, and I have gotten nothing whatever from what the witness has said. I would like to bring it to an end some way. I have stood it about as long as I can.

Mr. RAND. I am answering the questions as they are put.

Mr. HUDDLESTON. You are making insinuations and assertions.
Mr. RAND. I am answering the questions the best I can.
Mr. HUDDLESTON. And they are of no value whatever.

Mr. COOPER. Mr. Chairman

The CHAIRMAN. Mr. Cooper.

Mr. COOPER. I have no objection to the letter from Dr. Wirt being read and being put in the record; but I know that the chairman and the members of this committee have worked hard now for 3 or 4 weeks to try to come to some definite understanding in regard to this legislation which we are considering. I know how hard the chairman has worked on this.

Now, I thought that we were calling these hearings here for the last 2 or 3 days to try and get some expression on the part of the witnesses that came here regarding the legislation we are considering. I am wondering if the gentleman cannot tell us what he thinks about this bill that we have before us, and give some information instead of getting off of the track, as Mr. Huddleston has said, on other questions. I do not think that that has any bearing on this legislation which we are considering at the present time.

Mr. MONAGHAN. Mr. Chairman, since I asked the question, I want to suggest that he has not answered the question which I asked before about what his objections were to section 12 which he said should be stricken out of the bill. That has not been answered.

Mr. BULWINKLE. Mr. Chairman, Mr. Lea wants the letter read. I am perfectly willing for it to be put in the record.

Mr. RAND. I will put it in the record if you wish, without taking time to read it, because you will have copies of it.

Mr. LEA. I will ask that you read the letter. That letter involves a question of the integrity of Government. The charge is too serious to be ignored, and I think, due to the committee to have a full disclosure made of whatever the letter contains. I will ask the witness to proceed and read the letter.

Mr. RAND. I will file the letter, or I will read it if you think it should be read. I am reading it because it is a document which comes from such a well-known citizen, and before presenting it here, I took the trouble to call him on the telephone this morning and asked if I might have his permission to read the letter.

The CHAIRMAN. Begin where you quit, and read the remainder of the letter.

Mr. RAND. Do you want me to read the letter?

Mr. PETTENGILL. Dr. Wirt is a leading educator, in the public school system in Indiana. Outside of that, I know nothing about his statement.

The CHAIRMAN. Go ahead.

Mr. RAND (reading):

The most surprising statement made to me was the following

I will have to start here, or shall I start over; shall I start where I left off?

The CHAIRMAN. Go ahead.

Mr. RAND (reading):

Last summer I asked some of the individuals in this group what their concrete plan was for bringing on the proposed overthrow of the established American social order.

I was told that they believed that by thwarting our then evident recovery they would be able to prolong the country's destitution until they had demonstrated to the American people that the Government must operate industry and commerce. I was told that the Government must operate industry and commerce. I was told that of course commercial banks could not make long-time capital loans and that they would be able to destroy, by propaganda, the other institutions that had been making our capital loans. Then we can push Uncle Sam into the position where he must make these capital loans. And, of course, when Uncle Sam becomes our financier he must also follow his money with control and management.

The most surprising statement made to me was the fellowing: "We believe that we have Mr. Roosevelt in the middle of a swift stream and that the current is so strong that he cannot turn back or escape from it. We believe that we can keep Mr. Roosevelt there until we are ready to supplant him with a Stalin. We all think that Mr. Roosevelt is only the Kerensky of this revolution."

Mr. BULWINKLE. What is that, Mr. Roosevelt is the Kerensky of this revolution?

Mr. RAND. I am quoting Dr. Wirt's statement.

When I asked why the President would not see through this scheme, they replied: "We are on the inside. We can control the avenues of influence. We can make the President believe that he is making decisions for himself." They said "A leader must appear to be a strong man of action. He must make decisions and many times make them quickly, whether good or bad. Soon he will feel a superhuman flow of power from the flow of the decisions themselves-good or bad. Eventually he can be easily displaced because of his bad decisions. With Mr. Roosevelt's background we do not expect him to see this revolution through." They said that such individuals can be induced to kindle the fires of revolution. But strong men must take their place when the country is once engulfed in flames. I asked how they would explain to the American people why their plans for retarding the recovery were not restoring recovery. "Oh", they said, "that would be easy." All that they would need to do would be to point the finger of scorn at the traitorous opposition. These traitors in the imaginary war against the depression would be made the goats. And the American people would agree that they, the brain trusters, should be more firm in dealing with the opposition. Thus they, the brain trusters, would soon be able to use the police power of the Government and "crack down on the opposition with a big stick. In the meantime they would extend the gloved hand and keep the "big stick" in the background.

Continuing Dr. Wirt's statement:

I was frankly told that I underestimated the power of propaganda. That since the World War, propaganda had been developed into a science. They that could make the newspapers and magazines beg for mercy by threatening to take away much of their advertising by a measure to compel only the unvarnished truth in advertising. That they could make the financiers be good by showing up at public investigations the crooks in the game. And that the power of public investigation in their own hands alone would make the cold chills run up and down the spines of the other business leaders and politicians-honest men as well as crooks.

They were sure that they could depend upon the psychology of empty stomachs and they would keep them empty. The masses would soon agree that anything should be done rather than nothing. Any escape from present miseries would be welcome even though it should turn out to be another misery.

They were sure that the leaders of industry and labor could be kept quiet by the hope of getting their own share of the government doles in the form of loans, and contracts for material and labor—provided they were subservient.

They were sure that the colleges and schools could be kept in line by the hope of Federal aid until the many new dealers in the schools and colleges had control of them.

They were sure that their propaganda could inflame the masses against the old social order and the honest men as well as the crooks that represent that order.

I asked what they would do when the Government could not longer dole out relief in the grand manner. By that time, it was answered, the oft-repeated exhortation to industry and commerce to make jobs out of confidence and to produce goods and pay wages out of psychology, together with their other propaganda, would have won the people to the idea that the only way out was for government itself to operate industry and commerce.

The CHAIRMAN. Mr. Cooper.

Mr. COOPER. Is Mr. Lea going to insist on reading this letter in record?

Mr. BULWINKLE. Yes, sir; we want it all read.

Mr. LEA. Yes, sir.

Mr. RAND (reading):

They were certain that they did not want to operate agriculture for a long time. But the farmers could be won by doles to support Government operation of industry and commerce. Farmers would be delighted to get their hands in the public trough for once in the history of the country. The farmers would be one with the masses-united for a redistribution of the wealth of the other fellow. All that they would need to do with the opposition would be to ask, "Well, what is your plan?"

There are a few paragraphs in the beginning which I will go back and read, which I have left out. I think it is very important that a statement of this kind, which is of a serious nature, should be taken up. Mr. BULWINKLE. Just let me ask a question right there. You are a very intelligent and patriotic citizen, are you not?

Mr. RAND. I think I try to be.

Mr. BULWINKLE. You try to be?

Mr. RAND. Yes, sir.

Mr. BULWINKLE. And, after you received this communication from Dr. Wirt, did you make any inquiry of him who these brain trusters were that were sending chills up your spine?

Mr. RAND. Yes.

Mr. BULWINKLE. Did he tell you?

Mr. RAND. He said everyone knows.

Mr. BULWINKLE. Did he tell you their names?

Mr. RAND. No; he did not.

Mr. BULWINKLE. And you talked to him over the telephone?
Mr. RAND. Yes, sir.

Mr. BULWINKLE. And you knew that you were coming here before the committee?

Mr. RAND. Yes.

Mr. BULWINKLE. And you knew you were going to attempt to get that letter in the record?

Mr. RAND. Yes, sir.

Mr. BULWINKLE. In this committee hearing?

Mr. RAND. Yes, sir.

Mr. BULWINKLE. That is part of the reason why you are here? Mr. RAND. Not part of the reason why.

Mr. BULWINKLE. The main reason why, then?

Mr. RAND. No; no.

Mr. BULWINKLE. And, notwithstanding all that, do you mean to tell this committee that you did not have curiosity enough to find out exactly who they were?