here again I am glad to that the New York Stock Exchange is a living institution and the rules and regulations may only be adopted for that final end, the protection of the customers of our firms, by evolution and time, as we learn. I do not honestly know of any other way that the proper safeguards can be put around the business, except as experience shows and this may seem unnecessary to state, but selfishly, the only people that we are interested in, because they are the people that give us our business, are the public, and that does not seem to be understood. If the public does not do business with the New York Stock Exchange, or other exchanges, such exchanges cannot exist, and I say, selfishly, if for no other reason, we must put such safeguards around their transactions as we may, and being a human institution it is only by such efforts, and honesty that we can get to the highest point of safeguard for those very persons about whom you speak.

Mr. MARLAND. You do not know then of any change at this time in your rules and regulations that are desirable?

Mr. WHITNEY. Mr. Marland, we are forever discussing rules and regulations, and their changes, or their possible changes. We believe that those things have to be carefully considered. There are many, as I have said here, many different types of business indulged in by the members. We must see the ramifications. We must take into consideration the public in connection with any new rules and regulations and whether the rules, in their final analysis will be beneficial. We would not say that there were not new regulations and rules that are needed, because we have under consideration any future changes shall also have to be abided in by those corporations. Specifically, I would say no, although it is our effort and an accomplishment, with regard to corporations now listed, to follow the present rules.

Mr. MARLAND. You need legal authority to compel some corporations that are listed on the exchanges at this time to make quarterly reports, do you not?

Mr. WHITNEY. It may be so, but there would be nothing to prevent them from retiring as listed corporations in case they thought our rules, or any legal authority was too stringent.

Mr. MARLAND. Can you see any objection to requiring a corporation making quarterly reports to show the number of shares held by each of its officers and directors at the end of the quarter?

Mr. WHITNEY. That is a different question, and I think I can only answer by saying, Mr. Marland, that I thoroughly believe in the prevention of corporation officials speculating in their own stock, but that you cr I, as an officer of a corporation, to which we are giving all of our efforts, should be forced to give public the purchases out of our income and with the sweat of our brow, the shares of corporations that we are working for and in, I think there is a grave question, whether that is proper and fair, because there might be the consideration therein of working against the incentive that a man may have in buying outright. I am talking only of the shares of the company he is primarily working for.

Mr. MARLAND. Do you not think that the public is entitled to that information for the purpose of showing how much of its stock is held by the officers and directors of the corporation, how much stock they own, and what their changes are in that ownership quarterly?

Mr. WHITNEY. If the public is to really gain any benefit by such. information, my answer would be yes. I do not truthfully conceive wherein the public would gain any benefit.

Mr. MARLAND. Can you conceive of the public benefiting if it knew that the officers of the corporation were selling or had sold their interest in the corporation?

Mr. WHITNEY. I think, sir, that might work, at times, to the great detriment of the public.

Mr. MARLAND. HOW?

Mr. WHITNEY. By such a case. And, I know of plenty of such cases. A death occurs in the family and the individual was a large owner of stock, a director, perhaps an officer of a particular corporation. The son inherited the money and shares, and might have to liquidate a large proportion of his father's estate in order to pay taxes. Then it came out that he was a seller, it might have a very distinct bearing on the price of that stock, and the point of view of other investors in that stock, and certainly I cannot believe that a man has got to give at the time of selling his reasons for so doing. He might be in a position where it was necessary to raise money. He might have bought that stock at a long period prior to that time, and then later he wanted to sell it. The fact that that action took place, I think, might work real detriment to the other investors. I think it might be used to the detriment of the public, and I cannot believe in such instances that the personal reasons for so selling or buying would be proper as a public record. I do not think that that is material. That is one of the reasons why I said it.

Mr. MARLAND. You have cited a very rare instance.

Mr. WHITNEY. I know a great many of them, sir.

Mr. MARLAND. You know a great many more instances of officers and directors selling shares of their own company in advance of a favorable or unfavorable report, or favorable or unfavorable infor

mation.

Mr. WHITNEY. That is improper.

Mr. MARLAND. Would not it tend to stop that practice if the officer or director was required to show quarterly a statement as to how many shares he owned in this corporation, whether he had increased or decreased his holdings, and would not his stockholders be able to see that he had increased or decreased his holdings with advance knowledge of the state of the company?

Mr. WHITNEY. Mr. Marland, such men should not be in control of corporations or companies, if they are going to work for their own private interests as against that of their shareholders, and I agree with you; but that would be after the fact, and I think that any man who was willing to do that sort of thing would do it anyway, and the unfortunate thing has been that the shareholders are not articulate enough in their action, as to their corporate heads or officers and directors if they are found to do such a thing. It is unfortunate,

but I wonder

Mr. MARLAND (interposing). I am seeking to give them the information that might make them articulate.

Mr. WHITNEY. After the fact, sir.

Mr. MARLAND. Probably.

Mr. WHITNEY. You said quarterly?
Mr. MARLAND. Yes.

Mr. WHITNEY. I do not mean, if you please, to quibble, but I am afraid always it would be after the fact.

Mr. MARLAND. Yes; but in advance of the next stockholders' meeting.

Mr. WHITNEY. Yes; I agree with you, if it is to be a benefit, if we can get a benefit, not a detriment, I see no reason against it.

I am merely trying to point out to you the possible pros and cons. Mr. MARLAND. I see the argument from both sides of it. If it were deemed advisable to require such publication of the facts, is it within the authority of the New York Stock Exchange, under existing law, to require that statement to be included in the reports? Mr. WHITNEY. No, sir.

Mr. MARLAND. You need legislation, then, for that purpose?

Mr. WHITNEY. Not necessarily, Mr. Marland. If that were thought to be necessary, we could impose it with regard to our listing requirements.

Mr. MARLAND. On stock listed in the futures.

Mr. WHITNEY. I think that public opinion would impose that upon stocks listed in the past, if it was felt definitely that more good than bad could result.

Mr. MARLAND. Another question along that line. Do you believe it would be in the interest of the public to require all corporations engaged in similar lines of business to adopt a uniform system of accounting?

Mt. WHITNEY. Yes, sir.

Mr. MARLAND. Do your rules permit you to insist upon that? Mr. WHITNEY. I think we have worked in that direction, Mr. Marland

Mr. MARLAND. But you have not the legal authority to do it now?

Mr. WHITNEY. Again, as I said, it is only through cooperation and public opinion and sincere effort that we are working toward that, and I think we have very nearly arrived, recently. There are exceptions in all cases, naturally.

Mr. MARLAND. Mr. Whitney, I understood you to say that you would submit a suggestion to this committee in writing in regard to the changes in the law which you deem necessary.

Mr. WHITNEY. Yes, sir.

Mr. MARLAND. Thank you.

Mr. PETTENGILL. Mr. Chairman

The CHAIRMAN. Mr. Pettengill.

Mr. PETTENGILL. One more question, Mr. Whitney. I read with great interest your article in the current number of Today, in which you say:

The effect of governmental regulation of stock exchanges is clearly demonstrated by the experience of Germany in the nineties. Following the panic of 1893 an elaborate system of regulatory laws affecting the Berlin Bourse was adopted. The immediate result was that a large part of the German security business left the country and was transacted on the London and Amsterdam exchanges. Another large portion left the exchange and went over to "overthe-counter" market in Berlin. Attempts to regulate these unorganized markets proved absolutely fruitless, and, after a few years of expercience, these laws were repealed.

Can you direct me to any discussion in the English language on that matter, on which I could direct my study as to any portion of the bill?

Mr. WHITNEY. Yes, sir.

Mr. PETTENGILL. I think that might be very illuminating, if it could be found, as to what that actual experience was. I would like to read it, myself.

Mr. WHITNEY. Yes, sir.

Mr. PETTENGILL. I do not mean propaganda. I mean something written contemporaneously.

Mr. WHITNEY. We will be pleased to send it to you.

Mr. PETTENGILL. I would be glad to have it.

Mr. WHITNEY. We will be very glad to do that. I think that it is in the Congressional Library. There is a book written by an American consul general. But we have it in our economist's office, and we also have a general study of that entire study, if you would like to have it.

Mr. PETTENGILL. I would like to have it.

Mr. COLE. Mr. Chairman, I would like to ask a question.
The CHAIRMAN. Mr. Cole-

Mr. COLE. Mr. Whitney, returning to section 6, which you were discussing an hour ago.

Mr. WHITNEY. Yes, sir.

Mr. COLE. What effect, in your judgment, will the provisions of section 6 have upon the eligibility for credit of municipal bonds, and national-bank stocks?

Mr. WHITNEY. Well, as written, they will only be allowed, if listed, and many of them are not. They will only be allowed credit to the same extent as other stock exchange listed stock securities.

Mr. COLE. Those that are not listed would not be eligible?

Mr. WHITNEY. No, sir; not for brokers or for that class, coming under the law.

Mr. COLE. How about the banks?

Mr. WHITNEY. They would not for banks if, as I have referred, they are to be held as doing business as brokers, as agents, and therefore under the law.

Mr. COLE. We have been told that the language of section 6 applies to banks, members of the Federal Reserve System. Is it your idea that if that is true, that municipal bonds would not be eligible for credit with such banks?

Mr. WHITNEY. If listed.

Mr. COLE. No; if unlisted.

Mr. WHITNEY. If unlisted, and the banks made a practice of buying and selling securities through a broker, on a national securities exchange, it is my understanding that those unlisted municipal and State securities would not be eligible.

Mr. COLE. That would apply, of course, in the case of renewal of existing notes, would it not?

Mr. WHITNET. Yes, sir; as I see it. It is my personal interpretation. Naturally, there may be others.

Mr. COLE. Well, it is easy to see the very serious effect that would have upon our banks.

Mr. WHITNEY. Very serious. I touch upon that later in my state

ment.

Mr. KENNEY. Mr. Chairman

The CHAIRMAN. Mr. Kenney.

Mr. KENNEY. You said that you would submit a draft of a law which the committee ought to consider with a view to its enactment into law. I take it from that you do not object to Federal regulation of the stock exchanges?

Mr. WHITNEY. Under certain conditions.

Mr. KENNEY. Are you prepared to tell us now, briefly, just what form that regulation ought to take and how far it should go?

Mr. WHITNEY. I should prefer, if I may, to finish my statement which has a bearing on the point that I wish to make, before so doing. Mr. KENNEY. Very well.

The CHAIRMAN. Just a moment. I will ask everybody to keep seated, please. It is the intention of the Chair to ask consent of the House when we meet at noon, which I think will be granted, to permit us to sit during sessions of the House this afternoon and probably tomorrow. Is there any objection? There was no objection.

Mr. PETTENGILL. How early?

The CHAIRMAN. I think that we can get started at 2 o'clock.
Mr. MAPES. That is just for today and tomorrow?

The CHAIRMAN. Then, we will take a recess and come back at 2 o'clock, when you will resume the stand, Mr. Whitney.

(Thereupon, at 11:46 a.m., a recess was taken until 2 p.m., of the same day.)

AFTERNOON SESSION

The committee reassembled, pursuant to the taking of the recess, at 2 p.m., Hon. Sam Rayburn (chairman) presiding.

The CHAIRMAN. The committee will come to order.

STATEMENT OF RICHARD WHITNEY, PRESIDENT NEW YORK STOCK EXCHANGE, NEW YORK, N.Y.-Resumed

The CHAIRMAN. You may proceed, Mr. Whitney.

Mr. BULWINKLE. Mr. Chairman

The CHAIRMAN. Mr. Bulwinkle.

Mr. BULWINKLE. Mr. Whitney, the chairman of this committee, and each member of this committee, is in receipt of a telegram from a man named Gene McCann, 25 William Street, New York City.

That telegram states that the New York Stock Exchange is sending $2,000,000 to Washington to Mr. John P. Ryan, and Mr. Roland Redmond, counsel for the exchange, to be spent in Washington, and elsewhere, to stop legislation.

I will ask you, is there any truth to the allegation contained in this telegram?

Mr. WHITNEY. There is no truth, sir.

Mr. BULWINKLE. Who is Gene McCann? Do you know him? Mr. WHITNEY. I have met him, sir, I believe. He is by way of being a dealer in securities.

He has sued the New York Stock Exchange twice. The first complaint on his part, I believe was ended but not in his favor; was just stopped.

He is now suing us, the governors, and all members, collectively and individually for $60,000,000, on what plea, none of us have any idea.