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ary 19, 1927, which contains the rules which show just what may be filed with the Commission by the carriers before they are permitted to issue any kind of securities, and they file there with the Government, not only everything requested by section 5, but much more besides.

Mr. HUDDLESTON. May I ask a question?
Mr. FLETCHER. Yes, Mr. Huddleston.

Mr. HUDDLESTON. Let us assume that the Interstate Commerce Commission now requires the railroads to file with them a statement covering all of this matter in section 5. What further then would be required of the carriers by this bill?

Mr. FLETCHER. Well, I am not at all sure, Mr. Huddleston, what would be necessary to file, or whether it would be necessary to file that again or not.

Mr. HUDDLESTON. It would seem to me that would pretty nearly cover them.

Mr. FLETCHER. I know that it is open to that construction.

Mr. HUDDLESTON. All that this bill requires of the carriers is that if they have not already filed statements carrying this information with the Interstate Commerce Commission, that they shall do so. It is only to the extent that section 5 adds to the information they are now

required to give that they are affected by this bill. Mr. FLETCHER. I see no reason at all why there should be, or what good reason there is for the Congress at this time to say that the information which the Commission requires before it permits the issuance of the securities should in any way supplement

Mr. HUDDLESTON. Let me suggest that the purpose of the information required by the Interstate Commerce Act relates to the issuance of securities, and the propriety of issuing them, while the purpose of this bill, is to secure to an investor information upon which he might decide whether to buy-an entirely different purpose-so that if the information now required to be filed is not sufficient to give an investor the information that he ought to have and needs, in order to form an adequate judgment, then they should comply with the provisions of this bill.

Mr. FLETCHER. Well, I see the point that you make there, but I would like to ask what the value is, or the interpretation is, of subsection (d), section 5, on page 12, which requires “the applicant to pay to the Commission”—I wonder what commission—"a fee of one one-hundredth of 1 percent of the aggregate par value of the securities to be sold."

Now, I take it that that provision at least ought not to stay in the bill, so far as railroad securities are concerned.

Mr. HUDDLESTON. My reaction is that there should be no charge for the filing of this information.

Mr. FLETCHER. Well, in the place of railroads, your Honor, there is nothing of that kind that is now required.

Mr. HUDDLESTON. I have not yet, in my mind, assented to the proposal that payment should be exacted from the applicants. This information filed is not for the benefit of the issuers of securities. It is for the benefit of the public in buying the issues.

Mr. FLETCHER. I am aware of the fact, but will you bear in mind the meticulous care with which the Interstate Commerce Commission inquires into every feature of the proposition; the assets of the company; what lies behind the securities; what is the purpose for which the money will be used; the character of the underwriting syndicates, if there are any, handling the securities; the prices at which they are to be sold; and the conditions that will be placed upon them. It only is necessary for any investor to investigate and see what the Interstate Commerce Commission has done in order to receive the fullest possible information as to this, the proposed securities.

Mr. HUDDLESTON. If those statements are as broad as those required by section 5, then the carrier has no need to pay any attention to this whatever.

Mr. FLETCHER. Well, is it clear to the members of the committee that the reports under section 5 are to be made to the Interstate Commerce Commission?

Mr. HUDDLESTON. It is, to me. I cannot speak for the other members of the committee.

Mr. FLETCHER. If there be some question, I think that should be clarified.

The CHAIRMAN. I think it would be the disposition of the committee, Mr. Fletcher, to write this bill so that there would be no duplication. I do not think that the committee would deem it necessary to put anything into this bill that would duplicate any work that the Interstate Commerce Commission does.

Mr. FLETCHER. I thank you.
Mr. Mapes. Mr. Chairman, may I ask a question?
The CHAIRMAN. Mr. Mapes.

Mr. MAPES. To what extent is the information required now to be furnished to the Interstate Commerce Commission before an issue of securities is made, made available to the public? Is it just as accessible to the investor as the information which corporations and others will be required to furnish the Federal Trade Commission under the provisions of this act?

Mr. FLETCHER. Why, it is a public record, Mr. Mapes, and the public record is available to those who desire to make inquiry with reference to it.

Mr. Mapes. Has the commission any facilities for making it public?

Mr. FLETCHER. I suppose that you would have to go there and make inquiry of the commission. I do not think that they give anything out now to the public, except the reports.

I would like to call the committee's attention, if I may, to a certain report which I picked up, almost at random, and which may be referred to as the reorganization and extension of the Georgia & Florida Railway (117 I.C.C. Repts., 473), in which they take 20 pages in the published report to show just exactly what is involved in that transaction. It covers the issuance of stock and also the issuance of some bonds, and anybody reading that report would certainly have full information as to the whole proposition; more so, I think, than they could get from the files of the Federal Trade Commission under the provisions of this bill.

Mr. BULWINKLE. Mr. Fletcher, was that report issued prior to the time that the stocks and bonds were sold; before or afterwards?

Mr. FLETCHER. Before they were issued; before they were permitted to be issued.

Mr. BULWINKLE. Was that a matter that was made public?

Mr. FLETCHER. It was made public before they were permitted to be issued.

I just mention that as a typical case.
Mr. Chairman, do not let me run over my time.
The CHAIRMAN. We are very much obliged to you, Mr. Fletcher.

Mr. FLETCHER. I want to say one further thing, with reference to section 8. Section 8 was one of the matters that I wanted to touch on. I have not had time to do that. That is the section, of course, which deals with advertisements, so called, and various things which might be put in there, and it seems to me that that is another feature which will burden the carriers unnecessarily, and accomplish no useful purpose insofar as the carriers, and those purchasing their securities, are concerned.

The CHAIRMAN. We are very much obliged to you, Mr. Fletcher.

I thank you.



on it.

before you

The CHAIRMAN. Mr. Sabath, of Illinois, a Member of the House, is very much interested in this subject. He has introduced a bill

Mr. Sabath, we will give you 15 minutes.

Mr. SABATH. Mr. Chairman and gentlemen of the committee, I regret that I have been so busy that I have not had very much time to prepare myself and present the matters that I feel should be brought

Before I proceed with my remarks as they concern the bill let me first answer the gentleman who just appeared and who said that the reports that have been issued in connection with railroad securitiesreports 20 pages long and containing all of the information that is required of the railroads, were so wonderful that anyone who read them would understand them and obtain all of the information that he would need to protect his investment.

The great trouble in the past with the reports that were issued was that they were so involved that not even a Philadelphia lawyer could understand them.

What we need is to bring the facts home to the people as simply as possible, so that they will know what these securities are.

Mr. Chairman, and gentlemen, for three years and a half-yes, as far back as November 1929 I realized the seriousness of conditions and I endeavored to correct them; and I wired and pleaded that something be done to protect the Nation. It was rather late to protect the investors, because they had already sustained terrific losses to their investments; but I thought at least that we could have some helpful declaration and save the country from this panic and destruction.

At that time I telegraphed and wrote several letters to President Hoover, to the Secretary of the Treasury, and to the President of the Federal Reserve Board, asking for their cooperation.

I appealed and appealed, by letters and telegrams, to the New York Stock Exchange, as well as to all of the other important exchanges, to desist in their persistent issuance of misinformation and in trying to unload the balance of the stocks and bonds-stocks and bonds that they were unable to dispose of in the good days of 1928 and 1929; yet

notwithstanding my pleas they failed to act, and they continued in their racketeering way of preying upon and robbing the American people, and bringing about the conditions from which the country now suffers.

Now, as to those that object to this bill: If you will investigate those who come before you and object to this legislation, you will always find that these men somewhere and somehow are the representatives of the very men, the very interests, that brought about the existing conditions.

You have a duty to perform, and I know that it will be performed. I know that it is a hard task to formulate a bill that will protect the country and the people in the future. It may require a few days, it may require a few weeks, but it can be done. If you cannot agree upon a perfect bill, gentlemen, report a bill that will reach as far as it possibly can, but don't delay.

We must have legislation to protect the public and bring about, if possible, some confidence.

I say to you that I have faith in the reestablishment of confidence. There are some people who have not been robbed; there are some people in this country who have some money and who will, if they can feel that they are protected, invest their money. Get their money from their boxes, from their mattresses, or from wherever it is, and they will start to invest.

Everyone is afraid now. There is hardly a person in the United States who has confidence in anything that is on the stock exchange today, whether it be gold bonds, or first mortgage bonds, or whether it be stocks of any kind. They know that all of these issues—I will not say this—all, but a great number-have been fraudulently issued, and allowed to be listed, when the stock exchange officials should have known that it was practicing fraud upon the public.

I have demanded, in my humble way, for three years and a half that they stop selling “against the box” and the so-called “match sales"; but notwithstanding the fact that I threatened them with criminal prosecution and appealed to the Attorney General, the President, and everyone that I thought would listen to me, they have failed to act, and the fraud has continued; in fact, so much so, that even today you will find in the newspapers of many cities statements from these brokers, these leeches, who do not produce anything, who have been feeding upon the Nation for all of these years, and who are rolling in wealth, which state of affairs has brought about the destruction, as I said, to the Nation.

Now, we should have this legislation. We should not permit that to continue.

Mr. WOLVERTON. Will the gentleman permit an interruption?

Mr. Sabath (continuing). Something should be done to curb this situation.

I have been here for a long time. I know that we cannot get a perfect bill. Mr. WOLVERTON. Will the gentleman answer a question? Mr. CHAIRMAN. Mr. Wolverton has a question. Mr. SABATH. Yes, sir. Mr. WOLVERTON. Will you permit an interruption? Mr. SABATH. Yes, sir.

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Mr. WOLVERTON. I saw in a newspaper this morning, that an organization from Chicago has telegraphed to the President its opposition to this bill. Do you know of that organization whom it represents, or what objection it has to the bill?

Mr. SABATH. I presume that it is the Association of Commerce. I venture to say that 98 percent of the members of that organization do not know anything about the bill; however, they have agents who act for them and who invariably work in accordance with their views.

Mr. WOLVERTON. Well then, you are not familiar with who they are or who made the objection?

Mr. SABATH. If you will give me their names, I will tell you who they are.

The United States Commerce Association, 272 years ago, went on record for legislation similar to this, before they were taken in, and before they heard Mr. Silas Strawn, the attorney for the Board of Trade, and for the stock exchange, and before a few attorneys got busy with them; later on they rescinded their action. That bas been done, year in and year out.

year out. They are so powerful that they can control and influence any organization or any association.

Mr. WOLVERTON. Well, I am sorry I can not give you just now the names from memory. It was quite a long article in the New York Times.

Mr. SABATH. I have not seen it this morning, but I know where it comes from.


Mr. SABATH. As I told you, from the members of the Chicago Board of Trade and Stock Exchange. There is no question about that.

Of course, they may have a couple of gentlemen who may not be directly interested, but whom they use invariably for their purposes.

Now, I have so much that I would like to bring home to you that I really do not know where to start. I have only the 15 minutes' time that you have allotted to me. May I, in those 15 minutes, make a plea? You have a bill here which is a bill in the right direction. The Chairman may remember that 2 years ago I endeavored to secure action on a similar bill. I have not had time to compare the two bills, but my aim then was to prevent this fraud upon the public and to bring about a condition that would reestablish confidence. Incidentally, at that time, those in power were not desirous of having any such legislation, and, therefore, the committee thought the time would be wasted in reporting the bill or taking any time in having hearings on it. But you are here today. You will have plenty of time. I hope that you will take some of the provisions of my bill, some of the provisions of the other bills that may be of greater value than those in mine, and embody them in the bill that will give rise to real and beneficial legislation.

Please do not pay any attention to the agents and representatives of the very men who are responsible for the existing conditions. They will not, and Mr. Whitney will not, appear here personally. He did appear before the other committee. Why, he laughed at me. He ridiculed me; and all of his publicity men, his paid henchmen, thought that I was a fool, that I did not know what I was talking about, when I was trying to protect the interests of the American people, when I knew what they were doing.

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