Now, that was an excessive movement, and the great activity downward after the depression, after 1929, was excessive, and we have seen the unfortunate episode since the spring, although the market now is at perhaps a higher level than then.

I think those excesses, sir, can be prevented by the control of the credit to which I have just referred.

Mr. HUDDLESTON. When does speculation become excessive?
Mr. WHITNEY. That I cannot tell you.

Mr. HUDDLESTON. The expression "excessive" seems to be so very elastic that it does not mean much to me.

Mr. WHITNEY. I am quite confident, so far as an exchange is concerned, we are willing to leave that and that interpretation in the hands of those who control he credit system of the country.

Mr. HUDDLESTON. Short selling, of course, is a way of speculation. Mr. WHITNEY Absolutely.

Mr. HUDDLESTON. You would not prohibit it because it would have a detrimental effect on the stabilizing influence of speculation? Mr. WHITNEY. Yes, sir; I would not prohibit it.

Mr. WOLVERTON. Mr. Chairman

The CHAIRMAN. Mr. Wolverton.

Mr. WOLVERTON. I was very much impressed with a statement you made just a moment ago, that on September 21, 1931, because of information you had received from England, three members of the stock exchange gathered together and took action.

Mr. WHITNEY. I did not say that, sir; if I may be so bold. I said three gentlemen were together at my house that evening and decided to suggest the action which was taken the next morning by the governing committee.

Mr. WOLVERTON. Yes. How many were present the next morning when the action was taken?

Mr. WHITNEY. I think around 36 to 40 members out of 42.

Mr. WOLVERTON. You felt justified in taking that action to control or protect the market, did you not?

Mr. WHITNEY. To control or protect the people of the United States; yes, sir.

Mr. WOLVERTON. Do you think that control such as you were able to exercise on that occasion should be vested in individuals rather than in a Government agency?

Mr. WHITNEY. Yes, sir. I asked the Government to give me an opinion. I asked every prominent government official down, to give me an opinion as to what we should do, and not one would take the responsibility and placed it upon the New York Stock Exchange at that time exactly as it was placed on the New York Stock Exchange to close in 1914. No one else would take the responsibility except its

governors.

Mr. WOLVERTON. I hope that my questions do not create in your mind the thought that there is any criticism on my part toward you for the action that was taken; but I am making inquiry of you as to the matter of policy.

Mr. WHITNEY. I understood that to be so.

Mr. WOLVERTON. Do you feel that power should be lodged in individuals without responsibility other than that which they are willing to assume, or should it be placed in an authority that has responsibility to the people?

Mr. WHITNEY. Why, Mr. Wolverton, I thought I had answered you. To my way

Mr. WOLVERTON. You answered, Mr. Whitney, to the extent of saying that you believed it should be left just as it is; but I would appreciate very much having the reasons that led you to that conclusion.

Mr. WHITNEY. Yes, sir. I would like to give it if I know how to answer you.

As I see it, that responsibility lies on the heads of those that take it in the first place, and lies on the heads of the individuals in control of an operation such as an exchange, who have a far graver responsibility, to my mind, than if it lies upon the heads of a commission appointed under an act.

I cannot conceive by any stretch of the imigination how any commission could have been informed of the facts, could have had time to have gone into the details; in particular, in the technical matter in which I do not believe any administrative body could have the information, or experience, as compared with what members of the governing committee have in order to take such action with the promptness that such action warrants.

As I said, in referring to the close of the exchange in 1914, war was declared, if you remember, at midnight. No one would take the responsibility. We wanted advice. We wanted the advice of someone else and we asked someone else to take it. The same thing happened then as has happened, sir, many other times.

I cited the delayed opening of the exchange the other morning. We had an explosion in 1921. One governor went up to the rostrum and rang the bell in order that hundreds of men, perhaps thousands, including telephone clerks, and pages, should not be killed. He did not know what was going on. But, surely, one could not wait in an emergency like that for an administrative body to act.

Mr. WOLVERTON. Then it is your thought that it would be impossible for any Government agency to be set up that to be as keenly appreciative of their responsibility or have the knowledge that you, as a private member of the stock exchange might have, and that would enable them to act as you acted in that case?

Mr. WHITNEY. No, sir; I think that they would be fully as appreciative of their responsibility; and in the second place I have referred to the governors of the exchange, 42 men, as a whole, and not to myself individually.

Mr. WOLVERTON. I did not mean to indicate you personally. I mean you, representing that particular group.

Mr. WHITNEY. That is my opinion; yes, sir.

Mr. WOLVERTON. You do not think, and cannot conceive of any manner in which a Government agency could be set up to exercise that responsibility on an occasion such as you have referred to?

Mr. WHITNEY. Not unless they were at all times resident in the stock exchange and had their representatives resident in there and in all other exchanges of the country.

Mr. WOLVERTON. Suppose you folks had not taken that action? Mr. WHITNEY. I can assure you that we had rather

Mr. WOLVERTON (continuing). Then, there would have been no one to whom those who should have been protected could have looked?

Mr. WHITNEY. We would have had to have taken either 1 of 2 actions, other than what we did, the closing of the exchange that morning.

Mr. WOLVERTON. Now, if there had been a governmental agency in Washington, we will say, and information came to you such as did come on that particular night, would it not have been possible for you to have communicated that information to those who composed the membership of the agency and requested them to take the action which you took?

Mr. WHITNEY. I cannot imagine there would have been time or they would have had the actual, intimate knowledge of what the constitution is, the working of the stock exchange, to give an opinion in that time.

Mr. WOLVERTON. So then the people of the nation, then, are absolutely dependent on the good faith of the individuals who control the stock exchange?

Mr. WHITNEY. In such matters; yes, sir.

Mr. WOLVERTON. And there will be no way in which their rights could be preserved except by them depending upon the good intentions and conscience of those who happen to occupy those particular positions?

Mr. WHITNEY. If I understand what you mean by their rights; yes, sir.

Mr. WOLVERTON. Now, may I just for a moment direct your attention to this further thought, in answer to my questions this morning, I rather gathered that you still had faith in the efficacy of your questionnaire system of obtaining important information from those who are members of the stock exchange, or with reference to the securities listed or to be listed.

Now, I read with some interest this morning Senator Fletcher's statement. I suppose you did likewise. If not, may I direct your attention to the fact that in the statement he said this:

When the Senate committee last summer asked the stock exchange to investigate the collapse of 1933, the stock-exchange authorities conducted an investigation of several months and they reported to us that nothing of importance had been found.

And, continuing:

It was not until we continued our hearing on the subject last week that the stock-exchange authorities, according to their own statement, learned about the price gambling, manipulation, rigging, which took place in 1933, and which our own agents were able to uncover without the aid of and against the assurance of the stock-exchange authorities.

Would you care to make any explanation of that situation, and is it true that the report submitted by the stock exchange authorities last summer in answer to the request of the Senate committee gave to the speculators a clean bill of health, and then last week had conditions revealed to them that the officers of the stock exchange did not know had existed when they made their report to the committee last summer?

Mr. WHITNEY. I would prefer, unless you desire it, and it is the desire of the committee, not to make reference specifically to what Senator Fletcher said.

Mr. WOLVERTON. Then, as to the situation which I have read to you.

Mr. WHITNEY. I would be delighted. I have told you, sir, this morning, I think it was, that I believed that the information submitted on questionnaires, whatever they might be, from our members, were truthful. I granted that there had been false statements occasionally, which resulted in our finding insolvencies, but that in the main I believed the questionnaires submitted by our members were honest and truthful.

There is nothing, sir, in the reports made by our members, to the best of my knowledge and belief, with regard to the alcohol stocks last spring, that has been proven to be untruthful in any way, shape or form

Mr. WOLVERTON. That is part

Mr. WHITNEY (continuing). Due to a tip given to the investigating staff, certain facts were found out with regard to operations, but not made by members of the exchange, and unknown, insofar as we know, to the members of the exchange.

Mr. WOLVERTON. What I am seeking is information concerning this: Is it true that in the last week or so that facts have been revealed as a result of the investigations being made by the Senate committee that were unknown to you at the time you made your report last

summer?

Mr. WHITNEY. With relation to nonmembers; yes, sir.
Mr. WOLVERTON. Now, what about members?

Mr. WHITNEY. That I cannot say definitely here, without going over the report, sir, and without going over the testimony at the Senate committee.

Mr. WOLVERTON. As a result of your questionnaire, were you able to ascertain whether there has been a pool in that particular stock?

Mr. WHITNEY. As I remember it, we were not.

Mr. WOLVERTON. Then, the questionnaire system of itself is not productive of full information, is it?

Mr. WHITNEY. I have said here, many times, that the rules and regulations of the exchange or rules and regulations imposed by any congressional act upon the members of the exchange, or the exchange, will not be all-inclusive of facts.

Mr. WOLVERTON. Then, the facts that came out as a result of the investigation would not have come out if it had depended on your questionnaires?

Mr. WHITNEY. That is true, sir, because the members of the exchange, to the best of my knowledge and belief, reported truthfully the facts, and that discovery was through a tip given of conditions which were outside of the control or knowledge of members of the exchange, sir.

Mr. WOLVERTON. Then, what do you suggest in the way of legislation that will prevent that in the future?

Mr. WHITNEY. I surely do not know, sir. Mr. WOLVERTON. Should there be any? Mr. WHITNEY. I will try to answer you. Mr. WOLVERTON. I beg your pardon. Mr. WHITNEY. I will try to answer you. legislation that would control-and I believe we are talking about certain operations of corporate officials-except the imposition of a Federal corporation law in that regard.

I do not know of any

The CHAIRMAN. All right, Mr. Whitney, you may proceed.
Mr. LEA. Mr. Chairman-

The CHAIRMAN. Mr. Lea.

Mr. LEA. Is it your understanding that this bill, if enacted, would prevent the stock exchange from taking the action it did in preventing the short selling when England was about to go off of the gold standard or the closing of the stock exchange?

Mr. WHITNEY. Yes, sir; and if I may speak for myself-I cannot speak for the other governors of the exchange-I would not serve under any such bill. I could not. I could not take the responsibilities in one regard, or in a thousand regards, where that responsibility might be so taken or the taking of that responsibility might be so regarded as to be an act not in conformity with the bill, and that I myself might be suspended or the exchange might be suspended from its registration as a result of that. I would not believe that any body of human beings could take that responsibility. I cannot imagine that if I wanted to. It would not be fair to ask it. They have no right of review, as I understand it, under this bill.

Mr. LEA. But, as this bill stands, do you understand that it wou'd prevent the board of governors of the exchange exercising discretion that you did exercise at that time?

Mr. WHITNEY. As I understand, they could exercise such discreat their peril.

Mr. LEA. What did you say, at their peril?

Mr. WHITNEY. At their peril. From just what I have said, just prior to that, it might be so considered as inconsistent with the provisions of the bill, and might result in not only heavy penalties to themselves, but to the exchange which they represented.

Mr. LEA. That, I presume, would not be true unless the Commission had adopted rules and regulations that are not included in the bill, would it?

Mr. WHITNEY. I am not positive of that, sir.

Mr. LEA. Your fear would be of regulations that might be drawn that would accomplish that purpose?

Mr. WHITNEY. No. No, I am not so sure at all that they are not all contained in the provisions of the bill.

Mr. LEA. Do you have in mind any particular provision of the bill?

Mr. WHITNEY. Only with regard to what it says, that the powers of the Federal Trade Commission, and any review in connection with any of the provisions, shall, if substantiated by the facts, be final. Mr. LEA. But, that would limit their power to provisions of this bill, would it not?

Mr. WHITNEY. Well, it might, sir; but there, also, section 18 gives a pretty unlimited power for any further rules or regulations which might be made today, and we might act tomorrow and hardly know about them.

I am fearful. I really meant what I said from my personal point of view, as I read this bill, and I assure you that I have read it many, many, many times.

Mr. LEA. If there is anything in this bill that will have the effect of depriving the board of governors of the exchange of the exercise of discretion, that you did exercise, I would be glad to know whether it is.