man's reply in the affirmative, this same bank official, on being told that the young man had changed his mind and the reply came that he would be held responsible and his money taken away from him, as the order had been entered. The money was lost. The securities were worthless. When he appealed to a higher officer of the institution, he was told that his experience in the bank, in the very same bank, should have taught him to the contrary. And his experience was that of a boy 12 years old, working as a runner in the bank. That is what this man referred to.

Now, the bill itself, as proposed, is a proper one, with the elimination of those two suggestions contained in the bill that I have called your attention to. It is needless for me to say to you, as you know, that which has occurred throughout especially the State of New York, if you have ever seen the original advertisement of some of the bonds, upon the second issue of the Peruvian bonds. I have a copy of that advertisement with me, and I will be glad to leave it with you, that is, if you desire it, Mr. Chairman.

Mr. PETTENGILL. We would like to see it.

Mr. NEUBERGER. I beg your pardon?

Mr. PETTENGILL. We would like to see it.

The CHAIRMAN. We would be very glad to have it.

Mr. NEUBERGER. However, upon examination you will find the distorted figures. Perhaps it is a true statement of the things as they were presented to them.

Mr. LEA. Would you point out the pertinent figures, pertinent features of that advertisement, in reference to the Peruvian bonds?

Mr. NEUBERGER. The advertisement was published in the New York Times of December 21, 1927. It contains a conglomeration of figures that the ordinary man will know nothing about and will not appreciate. If they are not true, there is civil liability. If they are reckless with regard to the truth or falsity, there is civil liability, but under this bill, as proposed, you will find the distinction as to whether or not "willful" as it is, whether or not the expression of "a willful violation" of the act covers and includes a reckless statement, regardless of truth or falsity.

Mr. LEA. You take it, then, as the bill stands, that it does not include a representation made with reckless disregard of whether it is true or false?

Mr. NEUBERGER. It would not be willful under some constructions, and there are some decisions in the State of New York that absolutely and unquestionably state that the reckless statement of and disregard of truth is not a false representation.

Mr. LEA. Do you have specific language that you would suggest should be included in the bill?

Mr. NEUBERGER. Sir?

Mr. LEA. Do you have specific language which you think should be included in the bill?

Mr. NEUBERGER. Do you not think that if I would suggest such a thing to you gentlemen of the committee, that it would be rather an assumption on my part?

Mr. LEA. I think it might be helpful.

Mr. NEUBERGER. Well, if you will give me an opportunity I will submit that within a day or two. I did not desire to undertake to state to you gentlemen that I would do a certain thing, because I

felt that it might be considered by you as an assumption on my part for invading your premises.

Now, may I, in conclusion-and you gentlemen know just as much, and probably more of that which has been going on that I do—Í could go on and tell you of a number of cases, of old men whose lifetime of savings have been taken from them, and who are candidates for the poor asylum. I could tell you of old women where the same thing has been done in case after case, but may I not present this view to you now. It would take me a long time to tell you of all of

those cases.

But, with your permission, in as much as you gentlemen comprise the Committee on Interstate Commerce, may I not submit the view without incurring your unfavorable opinion, that this is the time and these are the moments when a Federal trade director should exist in order to curb that which is going on in all of the large metropolitan cities of this country; where drug stores are invading, and invading upon trade that they never have had a right to invade upon; where, in a circumscribed area, where retail merchants have existed for years, and eked out a fair living, that are driven into the poor house by numbers of other retailers who come in and overload every trade of every kind. Why should a cigar store be permitted to be a candy store, a library, a hardware store, and drive other people out of business? Why should a drug store become a trader in that material of merchandise which would drive one in another part of the same block into the poor house?

I am not a representative of any organization that has anything to do with any particular political party or economic principle, except one which does not refer to trade.

.

The CHAIRMAN. We are very much obliged to you, Mr. Neuberger. Mr. NEUBERGER. I thank you, sir.

The CHAIRMAN. We will hear Mr. Fletcher next.

Mr. MAPES. I would like to ask about that advertisement.

The CHAIRMAN. Yes; we would be very glad to have that.

Mr. NEUBERGER. Yes, Mr. Chairman, I will give you a copy of the advertisement.

Mr. MAPES. Mr. Chairman, will that go in the record?
The CHAIRMAN. I think that we had better look it over.

We will

look it over and see whether we want to put it in the record or not. It will go in the record at this point.

(The advertisement referred to is as follows:)

[York Times, Wednesday, Dec. 21, 1927, financial, p. 33]

REPUBLIC OF PERU, $50,000,000 PERUVIAN NATIONAL LOAN, 6 PERCENT EXTERNAL SINKING FUND GOLD BONDS, FIRST SERIES

A substantial amount of this issue has been reserved for sale in Europe, through Seligman Brothers, London, through Pierson & Co., the Netherlands Trading Society, and Mendelssohn & Co., Amsterdam, and through the Credit Suisse, Switzerland. Dated December 1, 1927. Due December 1, 1960.

Interest payable June 1 and December 1. Redeemable in whole or in part, at the option of the Republic, on any interest date, on 60 days' published notice, at principal amount and accrued interest. Principal and interest payable in United States gold coin of the standard of weight and fineness existing December 1, 1927, in New York City, at the principal office of either of the fiscal agents, J. & W. Seligman & Co. and The National City Bank of New York; without deduction for any Peruvian taxes present or future; also payable, at the option of

the holder, in pounds sterling in London, in Dutch guilders in Amsterdam, or in Swiss francs in Zurich or Basle, in each case at the offices of the respective paying agents in such cities at the bankers' buying rate for dollar sight exchange on New York at the time of payment. Bonds in coupon bearer form in denominations of $1,000 and $500. First series limited to $50,000,000 principal amount.

A cumulative sinking fund will be provided, calculated to retire all these bonds by maturity through semiannual drawings by lot for redemption at their principal amount and accrued interest.

His Excellency, Señor don Manuel G. Masias, Minister of Finance of the Republic of Peru, has summarized his letter to us as follows:

Purpose of the loan.-These bonds will constitute the first series of a Peruvian national loan which has been authorized for the purpose, among others, of refunding the entire external secured debt of the Republic. The proceeds of this first series will be used primarily for retiring by purchase or redemption certain of the external secured loans or obligations of the Republic the service charges on which are comparatively high. The remainder of the proceeds of this first series will be used for (1) the repayment of short-term interim indebtedness of the Republic contracted for objects included within the purposes of the loan; (2) the establishment of a gold exchange fund to be utilized to assist the stabilization of the Peruvian national currency; (3) the payment of the Republic's share of the capital of the Mortgage Bank of Peru, soon to be created; (4) the construction and improvement of dock and shipping facilities in the harbor of Callao; and (5) the carrying forward of public works now under construction. The bonds will be issued under a fiscal agency and loan agreement which will provide for the issue of additional series of the loan under specified restrictions.

Security. These bonds will be direct obligations of the Republic of Peru, which will pledge its full faith and credit for the payment thereof and which will covenant, among other things, so long as any bonds of the Peruvian national loan are outstanding, (1) not to issue or guarantee any loan or obligations secured by a lien on specific revenues nor, without the consent of the fiscal agents, on specific assets, unless prior thereto bonds of the Peruvian national loan of all series shall be given a lien on such revenues or assets, subject only to existing liens, if any; and (2) if it shall issue or guarantee any funded debt, secured or unsecured, whereby the maximum annual service charges on the entire funded debt, external and internal, and not repurchased and held for retirement, are increased to more than one third of the average annual gross revenues for the three fiscal years next preceding the date of such issue or guaranty, then all revenues collected by or deposited with the Caja de Depositos y Consignaciones (referred to below) shall automatically become subject to a lien in favor of the bonds of the Peruvian national loan, subject only to already existing liens, if any. The Republic has made provision by law for the collection by or deposit with the Caja de Depositos y Consignaciones, effective January 1, 1928, of a substantial part of its revenues, and the Caja has covenanted to apply the available revenues received by it each month to the payment to the fiscal agents of the monthly service charges for all bonds of the Peruvian national loan of all series outstanding before paying over any sums to the Republic. Pursuant to such provision, it is contemplated that the Caja will shortly commence to collect or receive the deposit of revenues which averaged, for the 3-year period 1924, 1925, and 1926, $17,126,376 per annum, of which there will be available for the service of the first series bonds revenues which averaged annually for this 3-year period $14,224,155, or 4.06 times, and in 1926 amounted to $17,180,660, or 4.90 times, the annual service charge of $3,500,000 on the first series bonds.

General. The Republic of Peru is the third largest country in South America and has a population estimated at 6,000,000. It is rich in mineral and agricultural resources. It is the world's third largest producer of silver and for many years it has exported large quantities of low-cost copper. Its petroleum resources, considered of great potential value, are being rapidly developed by capital from the United States and other foreign countries. A wide range of climatic conditions results in diversified agricultural production.

The total public debt of the Republic as of June 30, 1927, was $82,174,967 (exclusive of $1,500,000 municipal debt, guaranteed by the Republic), or about $14 per capita, of which $63,161,605 was external debt and $19,013,362 internal debt (conversion of Peruvian pounds made at the average rate of exchange for the first six months of 1927). The total annual service charges on the external debt were, before this issue, approximately $6,620,417, or about 17 percent of the Republic's revenues for 1926, and on the entire funded debt $8,056,992, or less than 21 percent of the 1926 revenues. The plan tentatively agreed upon

by the Republic and fiscal agents for the retirement of external loans and obligations with part of the proceeds of this first series results in an increase of less than $215,000 in the annual debt service of the Republic by reason of this issue. Total expenditures of the Republic for 1923, 1924, 1925, and 1926, including both ordinary and extraordinary expenditures but excluding expenditures for capital purposes, averaged annually $37,048,991, (conversions made at the average rates of exchange for the respective years), and total revenues, excluding the proceeds of loans, averaged for the same years $36,745,954.

NOTE.-Conversions of Peruvian pounds into dollars have, unless otherwise stated, been made at the rate of $3,94 per Peruvian pound, the average rate for 1924, 1925, and 1926. The present value of the Peruvian pound is about $3.94. Conversions of pounds sterling have been made at the rate of $4.8665 per pound sterling.

These bonds are offered when, as, and if issued and received by us, subject to allotment and to the approval of our counsel, Messrs. Cravath, Henderson & de Gorsdorff and associate Peruvian counsel. It is expected that delivery, in the form of interim receipts or temporary bonds, will be made about December 30, 1927.

These bonds have been admitted to dealings on a "When issued" basis on the New York Stock Exchange. Price 911⁄2 and accrued interest. Average yield, 6.80 percent.

J. & W. SELIGMAN & Co.

BLYTH, WITTER & Co.

CONTINENTAL NATIONAL CO.

E. H. ROLLINS & SONS.
F. L. LISMAN & Co.

THE NATIONAL CITY Co.

J. HENRY SCHRODER BANKING COR

PORATION.

GRAHAM, PARSONS & Co.
AMES, EMERICH & CO., INC.

The above statements are based on information received, partly by cable, from official and other sources. While not guaranteed, we believe them to be reliable, but they are in no event to be construed as representations by us. The CHAIRMAN. We will hear Mr. Fletcher.

STATEMENT OF R. V. FLETCHER, GENERAL COUNSEL ASSOCIATION OF RAILWAY EXECUTIVES, WASHINGTON, D. C.

The CHAIRMAN. Will you qualify, Judge, so that the whole committee may hear you?

Mr. FLETCHER. My name is R. V. Fletcher. I live in Washington and I am the general counsel of the Association of Railway Executives.

I think, Mr. Chairman, I will not need the 10 minutes which you have kindly allotted to me. The only thing

Mr. BULWINKLE. Whom do you represent, Mr. Fletcher?

Mr. FLETCHER. The Association of Railway Executives. I may say, if you will pardon a personal reference, that I have only been in this position about two days, and I appear here for the sole purpose of making some reference to the provisions of this bill as applied to railroad securities.

I have no interest in the bill, except as a citizen, in any other aspect except as it deals with railroad securities, and I call particular attention to the provisions of section 11 of the bill, on pages 20 and 21, in which that particular class of securities is mentioned.

Section 11 of the bill provides that the provisions of the bill shall not apply to

(b) Any security issued by and representing an interest in or a direct obligation of any common carrier or other public utility subject to regulation or supervision as to the issue of its securities by a commission

And so forth.

But, there are two provisos in that act which apply to railroad securities.

In the first place, it is provided that nothing in the act

That nothing in this act shall relieve any of the organizations—

Meaning railroads, of course

mentioned in this subsection from submitting to the respective supervisory units of the Government of the United States, in such manner and form as may be required by the respective units, all information, reports, or other documents that are required under the provisions of section 5 of this act

And there is a further proviso to the effect:

That all such organizations mentioned in this subsection shall nevertheless be required to comply with the provisions of section 8 of this act.

Now, my only purpose in appearing here, Mr. Chairman, is to say that, after some consideration of the provisions of this bill, and some consideration of the existing law which deals with the issuance of railroad securities, it seems to us unnecessary to suggest railroad securities in any part or any portion of this bill at all, and for this reason, which I shall state very briefly.

As I understand, the purpose of the act is for the purpose of regulating the issuance of securities, general securities, other than railroad securities. There is no provision here by which the issuance of those securities are regulated, and no inquiry is made previous to this, to their being issued, and the whole purpose of the bill, as I understand it, is to make sure that those who are called upon to purchase these securities have correct information as to their nature, and to the assets that lie behind them, and to the amount, value, and property attached to them; but in the case of railroad securities, under the provisions of the existing law, they are issued only under authority of the Interstate Commerce Commission in accordance with most elaborate provisions in the present law, which cover every form of railroad securities, and which provide for the most careful and thorough examination by the Interstate Commerce Commission of the proposals submitted to them.

And, it seems to us, therefore, that so far as section 5 is concernedsection 5 deals with a series of reports and records which might be filed-that is a mere duplication of what the Interstate Commerce Commission requires of the carriers before the carriers are permitted to issue the securities at all.

Now, there seems to be some difference of opinion-I do not say among the committee, but among those with whom I have discussed the matter as to whether, under the provisions of this section 11, the reports required by section 5 shall be made to the Federal Trade Commission, or whether they shall be made to the Interstate Commerce Commission. I construe the act to mean, the language to mean that the reports are to be made to the Interstate Commerce Commission in the case of railroads, since apparently the Interstate Commerce Commission is the supervisory unit of the Government with which the railroads are called upon to deal.

But if you turn to section 5 and examine its provisions, with special reference to the character of information which must be filed with the proper supervisory unit, you will find that all that information is required by the Commission, and before the securities are issued at all, and may I make a part of the record, by reference, or possibly by handing to the clerk of the committee, to the secretary of the committee, the order of the Interstate Commerce Commission, of Febru