Without Teeth?

Important members of the New York Stock Exchange have been going to Washington quite frequently in the last two years. One day last week Washington went to the Stock Exchange. On a self-financed week-end junket "to inspect the different things in New York we Legislators are legislating about," 100 Congressmen & wives trooped into the visitors' gallery, eyed the brokers' antics with astonishment. President Richard Whitney tried to explain what was going on but the junketing Congressmen soon left to see 90 tons of gold in the Federal Reserve vaults, to visit Ellis Island on fireboats.

Meantime in Washington last week it became clear that the rolling barrage of protest against the bill to control stock and exchanges was beginning to tell. For the first time since the bristling measure was introduced last February, Congressional comment was offered without the tired phrase, "with teeth in it." The people's representatives reported that on some days they received literally sacks of objecting mail, not all from brokers and businessmen but even from schoolteachers and pastors. In the Senate Banking Committee such innocuous sections of the bill as the declaration of public policy (with which even President Whitney of the Stock Exchange found no fault) were centres of rousing wrangles. Alert to the wind's way, Senate Majority Leader Robinson last week called the bill "very extreme," adding: "I believe we will pass a stockmarket bill which will not damage anyone excessively and still be effective." Speaker of the House Rainey said: "I haven't talked with many Committee members but I understand there is an awful demand for revision. . . . There is considerable talk of liberalization and I think this can be done without destroying the efficacy of the plan.''*

Most widely condemned features of the bill are those sections which deal not with stock exchanges but with corporate affairs. Such provisions as those handing the Federal Trade Commission broad authority over financial reports and regulating stock transactions of officials and. large (5% or more) stockholders have been tempered but little in the revised drafts (TIME, March 19). But the most important feature dealing solely with the brokerage business--margin requirements --was last week officially slated for revision. The man who turned the margin tide was the Stock Exchange's oldest and ablest foe--Lawyer Samuel Untermyer.

The counsel to the pre-War Pujo money trust investigation, had spoken of the bill's original draft as "impossible, impracticable." Testifying before the Senate Committee last week, the aging attorney criticized many provisions as deflationary and indiscriminate, found numerous glaring omissions. Roundly he denounced a fixed formula for margin requirements, urged instead discretionary power in the hands of the central credit body, the Federal Reserve Board. The Senators and their counsel, Ferdinand Pecora, were impressed.

But the Senators were worried by one thing: the public might interpret Mr. Untermyer's attitude as hostile to the entire bill. During the lunch recess they mentioned this to Mr. Untermyer. When he returned to the witness stand after lunch, he declared: "I should consider it nothing short of a national catastrophe if this Congress should fail to enact stock exchange regulation at this time. I would take the bill as it is rather than see it passed by. I should like to see it modified, of course, but if it can't be, why then it should be passed. The time is for control."

Neither Mr. Untermyer nor Mr. Pecora had reckoned on Senator Carter Glass, who was loth to see his ward, the Federal Reserve Board, in the role of margin clerk to the nation. Few days later the peppery little Virginia Senator marched into the Banking & Currency Committee, whose headlined sessions he is usually too busy to attend, and jammed through an amendment creating a separate stock exchange commission to administer the whole bill-- just what President Whitney has been demanding. A thumping victory for the bill's opponents. Senator Glass's revolt cleared the way for thoroughgoing revision.

*Not to be outdone by this apparent spirit of compromise, the New York Stock Exchange last week launched a severe investigation into 15 stocks which have lately skyrocketed amid showers of tips. The Curb Exchange followed with a probe of certain stocks on its list.

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