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Mr. Canright is here, from the Continental Bank of Chicago, to be a witness this morning.

I am sorry to throw a discordant note into this picture. All these gentlemen have worked in a very friendly way with the Securities and Exchange Commission. But the Continental Bank of Chicago believes that there is a serious fundamental problem to be explored in this bill. Strangely enough, we are in disagreement with our good friends, the bankers in New York. We are in disagreement with our good friends the Prudential Life Insurance Co., and other big institutions; and it is not a pleasant thing to be in such disagreement. So I want to assure you that it is a serious conviction that leads us to take this position.

Mr. Brown, our president, wants to come here personally to testify.

Our thought, briefly, is this. The old practice has been that after a default the trustee represented the bondholders. This bill purports to take away from the bondholders the control of their own destiny, and the trustee is to become an active trustee. There are some qualifications in the bill, although the official responsible is the trustee

The CHAIRMAN. You are now testifying.
Mr. AMBERG. I am sorry.

The CHAIRMAN. Would you like to make a statement in behalf of your institution today?

Mr. AMBERG. No, Mr. Chairman. Mr. Brown wants to do that.
The CHAIRMAN. Is he here?
Mr. AMBERG. No.
The CHAIRMAN. I did not want any duplication.

Mr. AMBERG. I just wanted to ask that Mr. Brown be given an opportunity to be heard.

The CHAIRMAN. I am sure the committee will give him an opportunity to be heard. Perhaps we can fix it now.

Mr. AMBERG. Mr. Brown can be here tomorrow. But he will hold himself at the convenience of your committee.

Senator TOWNSEND. Tomorrow morning?
Mr. AMBERG. Yes.
The CHAIRMAN. Is there anybody else here who desires to be heard?

Mr. Page. I have been asked by the bankers of Philadelphia to request a further week's postponement so that they may study the bill further.

The CHAIRMAN. I think, under the circumstances, we ought to do that.

Senator TOWNSEND. Yes. There is a lot of new material in the bill.

The CHAIRMAN. This committee has always had the attitude that everyone interested should be heard. The committee has always adopted that policy, so long as we are not delayed too long so that we will be unable to go on with the legislation. We had better make it a week from today, because there is a request now from Mr. Page to hear others. The committee can probably hear you in 1 day, next week.

Senator TOWNSEND. Is Mr. Brown coming for the purpose of testifying?

Mr. AMBERG. Solely for the purpose of testifying.
Senator TOWNSEND. Is he on his way?
Mr. AMBERG. No, sir.

Senator TOWNSEND. Next week will do as well, then.
Mr. POSNER. I can return next week, Mr. Chairman.
The CHAIRMAN. The committee would like to recess at 12 o'clock.

Mr. POSNER. I saw you looking at the clock, and I did not want to impose myself on the committee.

The CHAIRMAN. There is some important legislation coming up this afternoon. Would it be all right with you if the committee hears you next week?

Mr. POSNER. Yes; I think so. Will I be heard quite promptly?

The CHAIRMAN. Yes. We will consider the fact that you were ready to be heard.

Senator BARKLEY. We will make your statement the "unfinished business."

The CHAIRMAN. We will adjourn until a week from today, at which time Mr. Posner, Mr. Page, Mr. Brown, and the representatives from Philadelphia will be heard. We will adjourn now until next Tuesday at 10:30 a. m.

(Whereupon, at 12 noon, an adjournment was taken until Tuesday, June 22, 1937, at 10:30 a. m.)

REGULATION OF SALE OF SECURITIES

TUESDAY, JUNE 22, 1937

UNITED STATES SENATE,
SUBCOMMITTEE OF THE BANKING
AND CURRENCY COMMITTEE,

Washington, D. C. The subcommittee met, pursuant to adjournment on Tuesday, June 15, 1937, in the Banking and Currency Committee room, Senate Office Building, at 10:30 a. m., Senator Robert F. Wagner (chairman of the committee) presiding.

Present: Senators Wagner (chairman), Bulkley, Hughes, Herring, and Townsend.

Also present: Senators Alben W. Barkley and William H. Smathers; Mr. Ronald Ransom, vice president, Board of Governors of the Federal Reserve System; Mr. William 0. Douglas, a Commissioner of the Securities and Exchange Commission, Washington, D. C.

The CHAIRMAN. The committee will come to order. Mr. Ransom, I believe, wished to read into the record a certain letter.

STATEMENT OF RONALD RANSOM, VICE CHAIRMAN, BOARD

OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D. C.

Mr. RANSOM. Mr. Chairman, this letter is addressed to you as chairman of the committee, signed by me as vice chairman of the Board of Governors of the Federal Reserve System. It is dated yesterday. [Reading:)

References appearing in the press this morning give the impression that a report prepared by the Federal advisory council relative to the trust indenture bill had been submitted to the Banking and Currency Committee of the Senate at my suggestion or with my advice.

The facts are that the report emanates entirely from the council, which is a statutory group composed of as many members as there are Federal Reserve districts. The directors of each Federal Reserve bank annually select one member. The council

is empowered to confer with and to make oral or written representations to the Board of Governors of the Federal Reserve System concerning matters within the Board's jurisdiction.

As a matter of courtesy, the council asked the Board whether there was any objection to the submission of this report to your committee and the Board replied that it had no objection. The views expressed in this report, however, are those of the council.

I desired to make this clear in order that there might be no impression that the report is an expression of my own views or those of the Board of Governors.

Senator BARKLEY. What is the date of that so-called report? I have never seen it.

The CHAIRMAN. It just came in today; that is the reason you have not seen it.

Mr. RANSOM. It is dated June 17.

Senator BARKLEY. Is this a report to the committee or to the Wall Street Journal? It seems they got it first.

Mr. Ransom. They frequently do.
Senator TOWNSEND. Is it a critical report?
The CHAIRMAN. We shall have it read to the committee later on.

Mr. Ransom. I simply wanted the position of the board to be clearly before the committee.

The CHAIRMAN. Thank you very much.

STATEMENT OF LOUIS S. POSNER, MEMBER OF THE MORTGAGE

COMMISSION OF THE STATE OF NEW YORK, NEW YORK CITY

The CHAIRMAN. We shall hear from Mr. Posner. Mr. Posner is a commissioner of the Mortgage Commission of the State of New York. Perhaps, Mr. Posner, you will state your position and connections yourself. And will you give a brief statement of your background for the purposes of the committee?

Mr. POSNER. You referred to the Mortgage Commission of the State of New York. I am a member of that commission. Some 2 years ago, when it commenced operations in New York, we took into our jurisdiction nearly 700 millions of defaulted guaranteed mortgages-probably the largest private trust ever administered by a public office, if not indeed by a private group.

Senator TOWNSEND. How is the commission constituted?

Mr. POSNER. It is constituted of three members appointed by the Governor.

Senator TOWNSEND. They are appointed by the Governor, you say?
Mr. POSNER. Yes.
Senator TOWNSEND. For what purpose?

Mr. POSNER. For the purpose of administering and conserving these properties covered by mortgages. These are mortgages whose payment is guaranteed by mortgage guaranty companies, all of which defaulted in their guaranties. The mortgagors themselves defaulted. Some 250,000 holders, distributed throughout the country-and mainly in New York-hold these shares or participations in mortgages. Nobody seemed to have the authority adequately to handle the situation; and after perhaps a year of agitation this body, for the first time, I think, created under the laws of any State, was created in New York. We administered the property. We foreclosed and took care of management and saw that the property was put in proper shape, reorganized the mortgages and terms, and studied what the properties could produce, and the like. Of course, in many of those situations we found the equivalent of what you had here, in the way of trustees under mortgage indentures.

My own appearance here, I should say, has nothing to do with that; because I speak wholly in a personal way, and with no relation to the mortgage commissioners. The subject of trust indentures for more than 30 years in New York has interested me very greatly; and some 10 years ago, my practice having been largely in the financial field until then, I decided to write upon the subject of indenture trustees having found that there had not been any legal writing on that subject in this country.

Senator TOWNSEND. What you may say has the approval of the other commissioners?

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