Pag May, George O., member of Price, Waterhouse & Co., certified public Moore, Harry H., partner in firm of Hallgarten & Co., New York, N.Y. 717 679 674 Potter, William C., chairman of the board, Guaranty Trust Co. of New 722 Rippel, J. S., of J. S. Rippel & Co., investment securities, Newark, N.J__ Roosevelt, Archibald B., president of Roosevelt & Weigold, Inc., dealers in municipal securities, New York, N. Y., and George B. Gibbons, presi- dent George B. Gibbons & Co., Inc., municipal bond dealers, New York, Weicker, Theodore, Jr., member, New York Stock Exchange, New York, Wetsel, A. W., Wetsel Advisory Service, Inc., and J. J. Mitchell, attorney for Wetsel Advisory Service, Inc., New York, N.Y. Whitney, Richard, president of the New York Stock Exchange, New York, 6582, 6600, 6657, 6709, 6779, 6844, 6870, 7211, 7405 Witter, Dean, member, Dean Witter & Co., San Francisco, Calif 6748 LIST OF STATEMENTS INSERTED Gay, Thomas B., counsel, Hunton, Williams, Anderson, Gay & Moore, 6647 McCann, Gene... 7408 May, George O., member of Price, Waterhouse & Co., certified public 7183 EXHIBITS AND COMMUNICATION'S Richard Whitney, exhibit no. 1, price and earnings index. 67-10 Letter to Senator Duncan U. Fletcher from the United Fruit Co---- 6850, 6851, 6852, 6853 Memorandum submitted by Starkweather & Co---- Letter of D. E. Fritz to Senator Duncan U. Fletcher, Mar. 1, 1934. Communications received by Senate Banking and Currency Committee 7089, 7090, 7091, 7092 Letter to Senator Phillips Lee Goldsborough from the Baltimore Chamber Pamphlet entitled "German Regulation of Stock Exchanges, 1896-1908 Telegram from Leland Lyon, president Atlas Powder Co., to Hon. John Letter from J. P. Morgan & Co. to Hon. Duncan U. Fletcher, March 8, 7204 Several volumes of original replies submitted, being answers received from members of the New York Stock Exchange in response to its question- Compilation for the United Aircraft & Transport Corporation stock- Report of the committee on publicity of the New York Stock Exchange, Minute book of the committee on business conduct of the New York Stock Exchange from December 29, 1930, to September 21, 1931. Minute book of the committee on business conduct of the New York Stock Exchange for the period from September 22, 1931, to June 30, 1933---- Minute book of the committee on business conduct of the New York Stock Exchange for the period from February 2, 1933, to February 21, 1934-- Financial report of the New York Stock Exchange for 1931 and 1932. Financial report of the New York Stock Exchange for the year ending Financial statement of the Stock Clearing Corporation, a subsidiary of the New York Stock Exchange for the year ended December 31, 1931--- Financial statement of the Stock Clearing Corporation, a subsidiary of the New York Stock Exchange, for the year 1932– Financial statement of the Stock Clearing Corporation, a subsidiary of the New York Stock Exchange, for the year ended December 31, 1933__ 7217 Financial statement of the New York Quotation Co., and affiliate of the New York Stock Exchange, for the year ended December 31, 1931. Financial statement of the New York Quotation Co., and affiliate of the New York Stock Exchange, for the year ended December 31, 1932_. Financial statement of the New York Quotation Co., an affiliate of the New York Stock Exchange, for the year ended December 31, 1933___ Financial statement of the New York Stock Exchange Safe Deposit Co., an affiliate of the New York Stock Exchange, for the year ended De- Financial statement of the New York Stock Exchange Safe Deposit Co., an affiliate of the New York Stock Exchange, for the year ended De- Financial statement of the New York Stock Exchange Safe Deposit Co., an affiliate of the New York Stock Exchange, for the year ended De Letter to the New York Stock Exchange from J. P. Morgan & Co., March 7259 Letter to Banking and Currency Committee of Senate from Richard Letter to the presidents of all listed corporations from Richard Whitney Momorandum in regard to effect of National Securities Exchange Act on persons or firms not members of an exchange and on corporations whose securities are not listed on any exchange___ Answers submitted by New York Stock Exchange to the questions asked of it by counsel for the United States Committee on Banking and Letters from J. R. Edwards & Co. to Senator Duncan U. Fletcher- 7260-7263 STOCK EXCHANGE PRACTICES MONDAY, FEBRUARY 26, 1934 UNITED STATES SENATE; COMMITTEE ON BANKING AND CURRENCY, Washington, D.C. The committee met at 2:50 p.m., pursuant to call, in room 301 of the Senate Office Building, Senator Duncan U. Fletcher presiding. Present: Senators Fletcher (chairman), Wagner, Barkley, Bulkley, Gore, Costigan, Adams, Carey, and Kean. Present also: Ferdinand Pecora, counsel to the committee; Julius Silver and David Saperstein, associate counsel to the committee, and Frank J. Meehan, chief statistician to the committee. The CHAIRMAN. The committee will come to order. The matter now coming before the committee for consideration is S. 2693, a bill, which if enacted into law will be entitled "National Securities Exchange Act of 1934." These hearings now being begun will continue day after day, except Saturdays and Sundays, until we conclude, and those who wish to be heard, either for or against the bill, will please signify their intention to Mr. Sparkman, the acting clerk of the committee, give their names, and generally if you will, the subject which you wish to discuss. In other words, there is no need of duplicating and repeating over and over again the same arguments and the same views on any particular subject. We want to speed the hearings as rapidly as we can, but we do not wish to deny anyone the opportunity to be heard if he signifies a wish to be heard. Those who are not insistent upon being heard orally may submit papers and the committee will insert such papers in the record as a part of our hearings. I think it proper to begin the hearings with the printing of the bill, and then to have some outline of the bill or explanation regarding certain provisions of the bill made so that the committee will understand fully just what we have before us; and perhaps we should begin with an appropriate reference to the economic background of the proposed legislation, and for that purpose we will first hear from Dr. E. A. Goldenweiser, director of the division of research and statistics, Federal Reserve Board. Now, Dr. Goldenweiser, you may take a seat where you are, opposite the microphone on the committee table, and we will be glad if you will give the members of the committee the benefit of your views regarding the economic background of the bill. I presume you have familiarized yourself with the bill and understand it, and we will now be very glad to hear from you. [S. 2693, Seventy-third Congress, second session] A BILL To provide for the registration of national securities exchanges operating in interstate and foreign commerce and through the mails and to prevent inequitable and unfair practices on such exchanges, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SHORT TITLE SECTION 1. This Act, may be cited as the "National Securities Exchange Act of 1934" REGULATION OF EXCHANGES USING THE CHANNELS OF INTERSTATE COMMERCE AND THE MAILS NECESSARY IN THE PUBLIC INTEREST SEC. 2. Transactions in securities as commonly conducted upon securities exchanges by means of the mails or instrumentalities of transportation or communication in interstate commerce are affected with a national public interest. Such transactions are carried on in large volume by the public generally and by persons engaged in the business of dealing in securities in interstate commerce. The prices established and offered in such transactions are generally quoted and disseminated throughout the United States and foreign countries as a basis for determining and establishing prices at which securities are bought and sold oy investors in interstate commerce and in the several States and as a basis for establishing and determining the value of securities for the purpose of calculating the amount of taxes owing to the United States and the several States by owners, buyers, and sellers of securities. Such transactions involve the use of credit and affect the financing of trade, industry, and transportation in interstate commerce. Such transactions give rise at times to a large volume of speculation in securities, a considerable proportion of which originates outside the States in which the exchanges are located. At times the prices of securities on such exchanges are susceptible to manipulation and control and the dissemination of such prices gives rise to excessive speculation. By reason of such manipulation and control and excessive speculation, sudden and unreasonable fluctuations in the prices of securities on such exchanges occur. Such sudden and unreasonable fluctuations in prices coupled with excessive speculation and manipulation cause alternately unreasonable expansion and unreasonable contraction of the volume of credit available for trade, transportation, and industry in interstate commerce and divert credits available from their proper channels. Such unreasonable fluctuations hinder the proper appraisal of the value of securities by investors in interstate commerce and in the several States and the fair calculation of taxes owing to the United States and the several States by owners, buyers, and sellers of securities. Such unreasonable fluctuations constitute obstruction to and a burden upon interstate commerce and upon the national banking and Federal Reserve System. Transactions in securities upon exchanges create a flow of securities in interstate commerce to and from the places where such exchanges are located. The national credit and the safety and stability of investment are intimately related to and affected by the prices for which securities are sold and offered for sale upon exchanges. National emergencies, which produce wide-spread unemployment and the dislocation of trade, transportation, and industry and which burden interstate commerce and adversely affect the public welfare are precipitated, intensified, and prolonged by manipulation and control of prices and excessive speculation on exchanges. Regulation of transactions in securities conducted upon exchanges by means or instrumentalities of transportation and communication in interstate commerce or of the mails is imperative in the public interest for the protection of interstate commerce, and the national banking and Federal Reserve System. DEFINITIONS SEC. 3. When used in this Act, unless the context otherwise requires-1. The term "exchange" means any board, market place, exchange, chamber of commerce, or association, whether organized or unorganized, however managed or conducted, and whether incorporated or unincorporated, where, or by means of any facility of which, contracts or offers for the purchase or sale of |