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Washington, D. C. The subcommittee met, pursuant to call, in the caucus room 318, Senate Office Building, at 10:30 a. m., Senator O'Mahoney presiding.

Present: Senators O'Mahoney (presiding), King, McCarran, Van Nuys, Norris, and Austin.

Present also: Hon. James C. Hughes, a Senator from the State of Delaware.

STATEMENT OF CHARLES A. BEARD, ESQ. Senator O’MAHONEY. Dr. Beard, are you prepared to make a statement to this committee?

Mr. BEARD. Yes, sir.

Senator O’MAHONEY. Will you please give the committee your full name?

Mr. BEARD. Charles A. Beard, New London, Conn.
Senator O’MAHONEY. What is your background?

Mr. BEARD. I am now retired. I was for many years a professor in Columbia University.

Senator O'MAHONEY. Professor of what?
Mr. BEARD. American history and government.

Senator O’MAHONEY. You say you were a professor of American history and government for many years. How many years!

Mr. BEARD. Perhaps I should say I was a teacher of American history and government for many years, and a professor for about 10 years.

Senator O'MAHONEY. Where were you educated?

Mr. BEARD. My undergraduate college was De Pauw University in Indiana. I took my graduate work at Cornell, my doctor's degree at Columbia University, and I also studied abroad.

Senator O'MAHONEY. You have published several books, have you not?

Mr. BEARD. Too many, I fear, sir.

Senator OʻMAHONEY. Will you name one or two of those which are more nearly related to the subject matter of this bill?

Mr. BEARD. I published American Government and Politics, American Municipal Government, Economic Interpretation of the Constitution, and Economic Origin of Jeffersonian Democracy, and with my wife The Rise of American Civilization.

Senator O'MAHONEY. Now, Dr. Beard, are you familiar with the general provisions of and purposes of S. 10, the bill which is before this subcommittee?

Mr. BEARD. I am familiar with it. I hope I understand it.

Senator O’MAHONEY. Will you be good enough to make your statement ?

Mr. BEARD. After reading this bill, I came to the conclusion that it is the only proposal now pending in Congress, with which I am familiar, at least, that really begins to come to grips with our corporate economy in all its national ramifications. It does not impose more penalties upon gigantic and irresponsible corporations created by irresponsible State governments. It does not order a half a dozen lawyers and college graduates to regulate or prosecute these illusive and irresponsible giants let loose upon the country by the States. This bill, as I understand it, prescribes the conditions under which corporations engaged in interstate commerce may come into existence, and the conditions under which they may operate throughout the country. In other words, it begins at the beginning, and in this respect it differs from all the other acts of Congress, touching corporations and interstate commerce, with which I am familiar.

For nearly 50 years our governments, Federal and State, have been legislating against trusts and combinations. They have filled the air with the dust and din of prosecutions. What has been the result? A far greater concentration of wealth and corporate power than prevailed in 1890, the year of the Sherman Antitrust Act.

For 50 years Congress has been trying to regulate railways engaged in interstate commerce. But it has not required such companies to take out Federal charters. It has left the control over railways in the hands of State corporations, holding companies, and other devices of modern law, State laws. Whenever the Interstate Commerce Commission and Congress start to close in on any particular type of objectionable railway financing, the concerns affected can create a holding company or escape behind the screen of some agency called into being under State authority.

What has been the result of the attempt to regulate corporations in this field? Again and again the Interstate Commerce Commission has been baffled and defeated, its efforts rendered futile, and the public money wasted by the millions in efforts that get nowhere. This is not ancient history. All you have to do is to read the testimony presented to Senator Wheeler's subcommittee now engaged in investigating railway financing. There you can see that, in spite of all the big talk about moving the Government from Wall Street to Washington, in spite of all the banking, holding company, security, and exchange legislation enacted during the past 4 years, the old game of corporate jugglery is now being played just exactly as it was before the New Deal was ever heard of.

In that testimony before that committee you see two irresponsible and reckless real estate and railway speculators forming corporations right and left-corporations endowed, under State authority, with power to do almost anything that strikes the imagination of the incorporators. There you see these speculators borrow $30,000,000 of the people's money through a New York financial agency, rush over to a stock broker's office and use the money, not in

the railroad business, but in pushing up and down stocks in which they are interested. There you see a group of New York bankers, headed by the Morgans, bail out these mighty gamblers with about 40 millions. There you see a “railway empire” once worth 3 millions handed over to a brand new corporation for about $275,000. There you see this brand new company turning over the empire to one of the speculators for a mere option to pay $8,250 sometime in 10 years. Only his death prevented the consummation of this deal-a deal which Baron Munchausen could never have imagined in his palmiest davs.

I understand, sir, that an effort is being made to kill the Wheeler investigation by a rider attached to the appropriation bill that passed the House yesterday. I hope the honorable body which you represent will give close attention to that matter and see to it that the rider on the appropriation bill is defeated, and let the Wheeler committee go on and bring out the truth about this inside corporate financing

Senator O'MAHONEY. What is that rider!

Mr. BEARD. It is a rider attached to the appropriation bill that was passed yesterday by the House, to prevent the use of other Gov. ernment agencies in investigation work by committees of Congress. It is a rider.

Senator O’MAHONEY. Do you mean it is intended to prevent Congress from using executive agencies?

Mr. BEARD. Such as the Interstate Commerce Commission and other Federal agencies in any such investigation.

Senator O'MAHONEY. I think it will have attention.

Mr. BEARD. I say this Van Sweringen affair is one of the most preposterous things in all the history of American political economy. For such reckless and preposterous financing by corporations, which has cost the American people billions of dollars, the Government of the United States is largely responsible. What has our Government done! It has said in effect to the States and to professional gamblers in other people's money: “Create all the corporations you like. Give them blanket powers of marque and reprisal to rob the public and concentrate control over wealth. Go ahead, States. corporations. The Federal Government will do nothing except send a half dozen lawyers and college boys, armed with a writ or a bill, against such as may offend." I am speaking figuratively, sir, not in perhaps exact legal language, but that is the upshot of it.

For more than half a century the Federal Government has been peeking around like Alice in Wonderland. Meanwhile corporate control over industry has been increasing. Meanwhile the concentration of wealth has been proceeding.

Now, this bill proposes to start anew, at the right place. According to its terms, as I understand them, sir, corporations engaged in interstate commerce can come into existence only under Federal authority and can operate only on conditions prescribed by Federal authority.

Senator AUSTIN. Excuse me for interrupting you, but that is a very interesting point you are making. Can you without difficulty show where that appears in this bill?

Mr. BEARD. As I understand it, a corporation engaged in interstate commerce, or intending to engage in interstate commerce, must take out a Federal license and come under Federal authority. Do I misunderstand it?

Senator AUSTIN. I misunderstood your statement. I understood you to say that all corporations must have a Federal charter to engage in interstate commerce.

Mr. BEARD. Perhaps I did not state it quite correctly. It must come under a Federal license or Federal authority.

Senator AUSTIN. Thank you.

Mr. BEARD. Having watched this futile antitrust battle of dust and wind for 50 years, and having studied it with a good deal of care, I welcome the appearance of this bill and a desire to put behind it any force I can command.

I shall burden you with no figures showing the extent to which industry is now controlled by corporations. The general situation is a matter of common knowledge. I shall not try to state the exact figures showing the degree to which wealth and income have been concentrated in the United States during the growth of corporate enterprises. Figures setting forth this fact are available in many publications, Government and private. Nor shall I recite a list of abuses which have marked corporate practices in the United States. A whole library of volumes produced by legislative investigations is at the disposal of anyone who cares to inquire into this distressing subject. My argument is directed to other issues.

First of all I should like to emphasize the fact that our State and National Governments have a responsibility for the corporate abuses and the economic distress in which we now flounder. It is a matter of common knowledge that corporations are not natural persons. They are artificial persons. They are the creatures of government. Only on the authorization of government can they come into existence. Only with the sanction of government can they perform any acts, good or bad. The corporate abuses which have occurred, the concentration of wealth which has come about under their operations, all can be laid directly and immediately at the door of government. There is no escape from this responsibility. The States of the American Union and the Congress of the United States, by their actions and their inaction have made possible the situation and the calamities in which we now find ourselves.

That is the first point I want to make, that our Government is responsible for this situation, because only with the consent and under the authority of government can corporations come into existence.

In the second place I desire to direct your attention to the ways in which this responsibility has been met by the Federal Government and the States.

Under this head I shall at the outset charge the Government of the United States with neglecting its duty. Early in the history of our Government, under the Constitution, Congress asserted its power to charter corporations coming within the scope of authority delegated to Congress by the Constitution. It created the first United States bank. If it be said that this was an act of the Federalist Party, attention need only be drawn to the fact that the second

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