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MONEY TRUST INVESTIGATION
INVESTIGATION
OF

FINANCIAL AND MONETARY CONDITIONS
IN THE UNITED STATES
UNDER

HOUSE RESOLUTIONS NOS. 429 AND 504
BEFORE A

SUBCOMMITTEE OF THE COMMITTEE OX
BANKING AND CURRENCY




PART 11

WASHINGTON
GOVERNMENT PRINTING OJTIOE
1918

SUBCOMMITTEE OF THE COMMITTEE ON BANKING AND CURKENCY.
HOUSE OF REPRESENTATIVES.
ARStNE P. PDJO, Louisiana, Chairman.
WILLIAM G. BROWN, West Virginia.
GEORGE A. NEELEY, Kansas.
ROBERT L. DOUGHTON, North Carolina.
HENRY McMOKRAN, Michigan.
HUBERT D. STEPHENS, Mississippi.
EVERIS A. HAYES, California.
JAMES A. DAUGHERTY, Missouri.
FRANK E. GUERNSEY, Maine.
JAMES F. BYRNES, South Carolina.
WILLIAM H. HEALD, Delaware.
R. W. FONTBNOT, Cleric.
A. M. MCDIBMOTT, Assistant Clerk.




MONEY TRUST INVESTIGATION.
SUBCOMMITTEE or THE
COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C, Friday, December 13,1912.
The subcommittee met at 11 o'clock a. m.
Present, Messrs. Pujo (chairman), Stephens, Daugherty, Byrnes,
McMorran, Hayes, Guernsey, and Heald.
Present also, Samuel Untermyer Esq., of New York, counsel for
the committee.
TESTIMONY OF FRANK KNIGHT

STTJEGIS—Continued.

Mr. UNTERJIYER. In your testimony yesterday, Mr. Sturgis, you
referred to the question of membership and the limitation of membership and the reasons for it. Do you know the average annual amount
of dealings in stock that are conducted on the New York Stock
Exchange ?
Mr. STURGIS. NO; Mr. Untermyer.
Mr. UNTERMYER. By way of illustration, where it appears in the
day's quotations that 100,000 shares of stock have been dealt in, that
means, does it not, that 100,000 shares have been sold and 100,000
bought ?
Mr. STURGIS. That is correct.
Mr. UNTERMYER. Did your committee supply the Hughes Commission with a statement of the dealings in stock on the stock exchange?
Mr. STURGIS. I do not remember. We gave them quite a number
of data of different kinds. Whether that was among it or not I
could not say.
Mr. UNTERMYER. Let me call your attention to the following in
that report:
Iu the past decade the average stunual sales of shares have been 196,000,000.
Kimd transactions average about $800,000,000.

That is about right, I suppose, is it not ?
Mr. STURGIS. I really could not tell. Those figures may have been
taken from the Financial Chronicle.
Mr. UNTERMYER. The Financial Chronicle is a reliable authority,
is it not?
Mr. STURGIS. We so regard it.
Mr. UNTERMYER. Assuming the correctness of the statement that
there are 196,000,000 shares a year dealt in—that is, 196,000,000
shares a year bought and 196,000,000 shares a year sold—that would
involve the payment, would it not, of 25 cents a shares to the stockexchange brokers?




825

826

JIOXJSI" TRUST.

Mr. STURGIS. Twenty-five cents a share ?
Mr. UNTERMYER. Yes; 12| cents on each side of the transaction?
Mr. STURGIS. I do not think I quite understand.
Mr. UNTERMYER. The commission ?
Mr. STURGIS. It is not 25 cents a share, because a vast amount of
that stock is bought and sold by the broker himself where there is no
commission whatsoever.
Mr. UNTERMYER. DO you mean that the broker himself speculates
in it?
Mr. STURGIS. I do. He does, unquestionably.
Mr. UNTER3IYER. What proportion, then, of the speculation on the
stock exchange is done by the members or brokers of the stock exchange ?
Mr. STURGIS. That varies with the general conditions. When the
commission business is valuable and active, the speculative interests
or operations are smaller in proportion. When it is extremely inactive, the speculative proportion would be greater. It would be difficult to say, offhand, what proportion one bears to the other.
Mr. UNTERMYER. Can you give no conception of the proportion?
Would the speculative transactions average one-quarter of all the
transactions ?
Mr. STURGIS. It might range from a quarter up to a half. I could
only make a rough guess.
Mr. UNTERMYER. Somewhere between a quarter and a half?
Mr. STURGIS. We will assume that.
Mr. UNTERMYER. DO you want to have the committee understand
that these 1,100 brokers speculate to the extent of from one-quarter
to one-half of all the dealings on the stock exchange ?
Mr. STURGIS. In the first place, Mr. Untermyer, many firms have
two members of the stock exchange, some have three, and some have
even four. Then there are probably over 150 nonresident members
of the exchange who own memberships and who live all the way
from New York to California and from Canada down to Florida.
It is impossible to judge whether those persons are operating for
their own account or whether they are transacting a commission misiness. We have no knowledge of that whatsoever.
Mr. UNTERMYER. That is not the point just now. You say sometimes a single firm has two or three or four members of the stock
exchange?
Mr. STURGIS. Yes.
Mr. UNTERMYEB. And

that there are 150 nonresident members included in this 1,100?
Mr. STURGIS. About 150, my recollection is.
Mr. UNTERMYER. HOW many active stock exchange members are
there ?
Mr. STURGIS. On a busy day the attendance upon the floor of the
exchange, I should say, would be from 400 to 500 men. Of a dull
day it sometimes drops down to not over 200 men.
Mr. UNTERMYER. But that small number of brokers, then, acting
for themselves and their brokerage firms, in your judgment dealt in
from one-quarter to one-half of this 196,000,000?
Mr. STURGIS. In the course of the year I should think about from
one-quarter to one-half; yes.



MONEY TRUST.

827

Mr. UNTERMYER. Suppose we say one-third. Would that be fair?
Mr. STURGIS. We will make it that. then.
Mr. UNTERMYER. That would be a fair average? That would
leave 131,000,000 shares on which a commission is paid?
Mr. STTJRGIS. I do not remember the figures. You have them there.
Mr. UNTERMYER. The commission on each one of these transactions
is 25 cents a share, is it not?
Mr. STURGIS. NO; A very large amount of that business pays but
$2 per 100 shares.
Mr. UNTERMYER. IS that what they call " floor business " ?
Mr. STURGIS. That is what they call floor business; yes. A very
lame proportion of it pays but $3.12-J per 100 shares.
Mr. UNTERMYER. What proportion of the business is that?
Mr. STURGIS. That varies very much by conditions. Then there is
a very large amount of the business, all of what is known as the outof-town wire business, that pays half commissions onlv. which is
$6.25.
Mr. UNTERMYER. YOU mean, between members?
Mr. STURGIS. Between members; yes. Between the nonresident
members of whom I have just spoken and the members of the New
York Stock Exchange resident in New York, who carry the accounts
and make advances to the nonresident members who may be anywhere from Chicago westward pr southward.
Mr. UNTERMYER. The nonresident member, though, has to have a
full membership?
Mr. STURGIS. He has to have a full membership; yes, sir.
Mr. UNTERMYER. His obligations are the same as those of the resident member?
Mr. STUKGIS. The obligations are the same.
Mr. UNTERMYER. And his interest in the exchange is the same ?
Mr. STURGIS. His interest in the exchange is the same.
Mr. UNTERMYER. There are no different classes of membership?
Mr. STURGIS. There are none.
Mr. UNTERMYER. These various prices of $2 paid by a stock
exchange member to another stock exchange member who is what
they call a floor trader, $3.25 to another stock exchange member, and
another price to another, are all arrangements regulated by the exchange, are they not, by rule ?
Mr. STUROIS. They are regulated by rule.
Mr. UNTERMYER. And they do not apply to any outside purchaser?
Mr. STURGIS. Only to the members of this exchange.
Mr. UNTERMYER. Every purchase made and every ^ale made by a
nonmember involves the full commission of 12i cents a share, does it
not?
Mr. STURGIS. It does.
Mr. UNTERMYER. And it involves, does it not, a tax or charge of
25 cents on every share that is dealt in ?
Mr. STURGIS. NO; because many of those shares of stock are taken
up and paid for, and that is only one commission.
Mr. UNTERMYER. I do not think I understand. Let me see. If a
broken representing a customer sells to another broker representing
another customer, the two customers together pay 25 cents on that
transaction, do they not?



828

MONEY TRUST.

Mr. STURGIS. Yes; but there are a great many members of the stock
exchange, men of large wealth, who sell their own securities, and thus
pay back the commission to the buyer.
Mr. UNTERMYER. That I understand: but I am speaking now of
transactions affecting the outside public on both sides of the transaction.
Mr. STITRGIS. On both sides of the transaction, yes; where they are
on both sides of the transaction.
Mr. UNTERMYER. Then the commission on each share that is reported as dealt in for the day is 25 cents a share ?
Mr. STURGIS. Wherever the outside public is on both sides of the
transaction; yes.
Mr. UNTERMYER. That charge applies, does it not. whether the
price of the share is $10 or $11. or whether the price is $200?
Mr. STURGIS. If the par value of railroad stocks is $100 a share,
the charge is the same no matter what the market value of the stock
may be at the time.
Mr. UNTERMYER. I am not referring to railroad stocks, Mr. Sturgis.
I am referring to all classes of securities listed on the exchange.
Is it or not the fact that as to all those securities, except as to mining
stocks that are quoted at less than $10 a share, the commission is
uniform ?
Mr. STURGIS. YOU refer to par value stock*?
Mr. UNTERMYER. NO; I do not. I refer to the price paid for the
stock on the exchange.
Mr. STURGIS. Yes; but you must remember that Reading, Delaware, Lackawanna & Western, and Pennsylvania Railroad are what
they call $50 par value.
Mr. UNTERMYER. Yes.
Mr. STURGIS. Of course,

the commission is only one-half there of
what it would be if the par value were $100.
Mr. UNTERMYER. Yes; but apart from that; take a mining stock,
for instance, like the Utah Copper Co. That has a par value of $5,
has it not?
Mr. STURGIS. There are special
Mr. UNTERMYER. Will you not answer my question ?
Mr. STURGIS. *I beg pardon; what is your question ?
Mr. UNTERMYER. Has not that stock a par value of $5 ?
Mr. STURGIS. I do not know. I never dealt in it.
Mr. UNTERMYER. And do you not know that it is selling at about
$50 to $60'(
Mr. STURGIS. I do not know what the selling price is.
Mr. UNTERMYER. YOU do not know as to Amalgamated Copper,
for instance?
Mr. STURGIS. Amalgamated Copper I know something about.
Mr. UNTERMYER. DO you know what the par value of that is?
Mr. STURGIS. Frankly. T always thought it was $100 a share.
Mr. UNTERMYER. And it is selling around $80 or $00?
Mr. STURGIS. I think so.
Mr. UNTERMYER. IS it or not the fact that the price at which a stock
sells on the exchange has nothing to do with the commission that is
payable on it?
Mr. STURGIS. Will you except mining stocks from your question?



MONEY TEUST.

829

Mr. UNTERMYER. Yes; except mining stocks that sell at under $10.
Is not that right?
Mr. STURGIS. That is correct.
Mr. UNTERMYER. SO that as to the ordinary stock that is selling at,
say, $5 or $6, the commission that has to be paid by the outside public
is the same, is it not, as it is on the stock that is selling at $200 a
share ?
Mr. STURGIS. Precisely the same.
Mr. UNTERMYER. What do you understand by " short selling ?"
Mr. STURGIS. I should answer that question by saying that there
are different kinds of short selling. For instance, you take securities that are arriving from Europe; they are sold snort temporarily
in the New York market. They may be delivered in two weeks
after they get over here. Temporarily that is a short sale. There
is a short sale where a purely speculative transaction is made with
the expectation of the market breaking and there being an opportunity to repurchase at a profit. That is the common acceptance of
a short sale.
Mr. UNTERMYER. YOU know, do you not, that where securities are
sold that are on the other side—to be delivered from Europe—that
is not considered short selling where the securities are owned by the
person who is selling them ?
Mr. STURGIS. It is a short sale in this sense, Mr. Untermyer, that
frequently those sales are bought back on this side of the water and
not on the other.
Mr. UNTERMYER. Then, as 1 understand you, in those cases a man
is selling something that he has not got, and he is covering over
here.
Mr. STURGIS. Sometimes.
Mr. UNTERMYER. That is the same kind of short selling as the
other, then, is it not ?
Mr. STURGIS. Not necessarily, because he may change his mind if
the market breaks badly and not ship his long securities.
Mr. UNTERMYER. YOU understand what I mean by short selling?
Mr. STURGIS. Yes. I qualified by saying there were two kinds of
short selling. What you probably refer to is the selling short for the
purpose of making a profit on a transaction where you do not own the
stock originally.
Mr. UNTERMYER. NO; I want to go a little further. I want to
understand whether you mean to say there are two kinds of short
selling. Let us take, for instance, the selling of securities that are
in Europe. If the man owns the securities that he is selling, even
though they are to arrive from Europe, do you understand that is
short selling?
Mr. STURGIS. The New York broker
Mr. UNTERMYER. Will you not answer ?
Mr. STURGIS. I will. I was going to answer you. The New York
broker is short of it until he gets the certificates from London.
Mr. UNTERMYER. Yes; but the certificates can be put into his possession by cable, can they not?
Mr. STURGIS. In the first place, those certificates are all in 10share lots.
Mr. UNTERMYER. Will you not answer my question?



830

MONEY TEUST.

Mr. STUKGIS. They can not be put into his possession by cable.
Mr. UHTERMYER. The 10-share certificates can be put into his possession by cable, can they not?
Mr. STUKGIS. Not necessarily.
Mr. UNTERMYER. If the man who is selling the stock owns it
Mr. STUBGIS. Suppose
Mr. UNTERMYER. Just one moment. Can he not direct that the
broker's representative in London shall have the certificates transferred to the broker ?
Mr. STURGIS. They have got to be transferred in New York.
Mr. UNTERMYEE. That amounts to nothing in the way of transactions on the exchange, does it?
Mr. STURGIS. It amounts to a great many thousands of shares in
the course of a year.
Mr. UNTERMYER. What proportion of the short selling of the
other kind does that amount to?
Mr. STURGIS. Mr. Untermyer, I can not give you those proportions. It would be quite impossible.
Mr. UNTERMYER. Would it amount to 1 per cent?
Mr. STURGIS. I could not even venture to make a suggestion as
to that.
Mr. UNTERMYER. The vast amount of short selling is of the
second class you have described?
Mr. STURGIS. Yes.
Mr. UNTERMYER. IS that a
Mr. STURGIS. In the main.
Mr. UNTERMYER. YOU say

purely speculative transaction?

"in the main." In what respect is it
not a speculative transaction ?
Mr. STURGIS. Sometimes short sales are made where the condition is such that an individual may have some long stocks that are
not of a quick market.
Mr. UNTERMYER. YOU mean if a man sells a stock that he does
not own, because he happens to have some other stocks of a different
kind that he does own his selling the stock that he does not own is
not of a speculative kind ?
Mr. STURGIS. NO. It is of a speculative kind, but it is on the
principle of a hedge, which is not an unusual thing.
Mr. UNTERMYER. The principle of a hedge?
Mr. STURGIS. Yes; it is.
Mr. UNTERMYER. But do

you contend that it is not a purely speculative transaction?
Mr. STURGIS. It is a purely speculative transaction.
Mr. UNTERMYER. Certainly. What is the purpose of short selling?
Mr. STURGIS. Generally speaking, to make a profit
Mr. UNTERMYER. TO make a profit by what process ?
Mr. STURGIS. By repurchasing the short sale at a declining price.
Mr. UNTERMYER. That is, by selling a security that you have not
got, and gambling on the proposition that you can get it cheaper
and deliver the thing that is sold? Is not that it?
Mr. STURGIS. That is the usual process—selling when you think
the price is too high and repurchasing when you think it has reached
the proper level.
Mr. UNTERMYER. But is it or not the process of selling a thing
you have not got?




MONEY TRUST.

831

Mr. STUEGIS. It is.
Mr. UNTERMYER. And

is it or not with the idea that it will go
lower, or can be depressed lower, and bought cheaper, and delivered?
Mr. STUEGIS. Truly.
Mr. UNTERMYER. DO I understand that you regard that as legitimate and defensible?
Mr. STURGIS. DO you wish my personal expression of opinion ?
Mr. UNTERMYER. Yes.
Mr. STUEGIS. I think it depends entirely upon circumstances.
Mr. UNTERMYER. Under what circumstances would you regard

that
sort of short selling as legitimate and proper ?
Mr. STURGIS. I would regard it so if there was a panic raging over
the country and it was desirable to protect interests which could not
be sold. I think it would be a perfectly legitimate thing to do.
Mr. UNTERMYER. Let us see about that. If there was a panic raging
over the country and a man sold stocks short, would not that simply
add to the panic?
Mr. STUBGIS. It might. Self-preservation is the first law of nature.
Mr. UNTERMYER. Hold on—self-preservation?
Mr. STUKGIS. Yes.
Mr. UNTERMYER. But,

as I understand it, if there is a panic raging
over the country, you think it is defensible for a man to depress
stocks by selling stocks he has not got, with the idea of adding to
the panic?
Mr. STUEGIS. Mr. Untermyer, if a person has property which is
absolutely unsalable, and he can, so to speak, protect his position by
selling something for which there is a broad market
Mr. UNTERMYER. That he has not got?
Mr. STURGIS (continuing). I do not consider it wrong.
Mr. UNTERMYER. Mr. Sturgis, let us just analyze that, because I
do not think I understand you. You do not want to be misunderstood, do you ?
Mr. STURGIS. It is not my wish.
Mr. UNTERMYEB. And I do not want you to be misunderstood. Do
you mean to say that if there is a panic raging it is a defensible thing
for a man, under any circumstances, to sell stock that he has not got,
with the idea of getting it back cheaper?
Mr. STUEGIS. I do think it is defensible. I certainly think it is
defensible.
Mr. UNTEEMYEE. For what purposes does he do that except to try
to make money ?
Mr. STURGIS. TO try to save his credit, perhaps.
Mr. UNTERMYER. HOW does he save his credit in a panic by selling
stocks that he has not got, with the idea of adding to the panic and
getting them cheaper?
Mr. STUEGIS. Because if he can make a profit on that sale it may
repair the losses that he has made on stocks he can not sell.
Mr. UNTEBMYER. I see. You know that that would simply accentuate thefiercenessof the panic, do you not?
Mr. STUEGIS. It could not be otherwise.
Mr. UNTEBMYEE. Certainly. And his only purpose in doing a
thing of that kind in time of panic would be to make money, would
it not?
Mr. STURGIS. TO protect himself.




832

MONEY TBUST.

Mr. UNTEBMYEB. It would be to make money, would it not ?
Mr. STTJEGIS. Yes; and that would protect him.
Mr. UNTEBMYEB. Of course it always protects a man to make
money, no matter how he makes it, does it not ?
Mr. STUKGIS. Yes, sir.
Mr. UNTEBMTEB. And that, you think, is justifiable?
Mr. STUBGIS. I think under those circumstances it is.
Mr. UNTEBMYEB. YOU do not want to make any further

tion of that proposition, do you?

explana-

Mr. STUBGIS. I do not.
Mr. UNTEBMYEH. IS it any

more justifiable for a man to sell short
in a panic than in a normal market ?
Mr. STUBGIS. It depends very much upon his financial necessities.
Mr. UNTEBMYER. DO you regard it as justifiable in a normal market
for a man to sell a thing he has not got, with the idea of depressing
prices in order to buy in the stock at a lower level ?
Mr. STUBGIS. I think it is a question between a man and his own
conscience, Mr. Untermyer.
Mr. UNTERMYER. I am asking for your judgment. You have been
many years in the exchange, and you are a careful observer, and I
would like to know your judgment.
Mr. STUBGIS. I think a great many people deprecate it. Others
approve it.
Mr. UNTERMYER. DO you approve of it?
Mr. STUBGIS. YOU ask me personally?
Mr. UNTERMYER. Yes.
Mr. STURGIS. I never sold a share of stock short in my life.
Mr. UNTERMYER. Then you do not approve of it, do you ?
Mr. STUBGIS. I just happen not to have done it. My private

business, if you please, I beg you to omit.
Mr. UNTERMYER. I have not asked you your private business.
Mr. STUBGIS. Yes, you asked me what I did myself.
Mr. UNTERMYER. I did not ask you that, sir. I asked you what
you thought about it.
At this point, by request, the stenographer read from the foregoing testimony as follows:
Mr. UNTEBMYEB. DO you approve of it?
Mr. STTJBGIS. Yon ask me personally?
Mr. TJNTEBMYEB. Yes.

Mr. STUBGIS. I never sold a share of stock short in my life.
Mr. UNTERMYER. Did I ask you
Mr. STURGIS. I asked you whether

you asked me personally, and
you said yes.
Mr. UNTEBMYEE. Mr. Sturgis, do you not understand that I asked
you whether you approved of short selling?
Mr. STUBGIS. NO, Mr. Untermyer. I did not understand the question that way.
Mr. UNTEBMYEB. DO you not understand it now?
Mr. STUBGIS. NOW that you correct it, yes.
Mr. UNTEBMYEB. I did not ask you whether yon
Mr. STURGIS. I asked you whether you referred to me personally,
and you said yes.
Mr. UNTERMYER. NO. What I meant to ask was whether you personally
 approved of short selling.


MONEY TBUST.

833

Mr. STURGIS. It sounded differently to my ears.
Mr. UNTERMYER. DO you, Mr. Sturgis?
Mr. STURGIS. I told you I never sold a share of stock short in mv
life.
"
Mr. UNTERMYER. That has nothing to do with the question.
Mr. STURGIS. That has everything to do with the question.
Mr. UNTERMYER. DO you approve of short selling in others?
Mr. STURGIS. Under what conditions?
Mr. UNTERMYER. Under any conditions.
Mr. STURGIS. Yes; under some conditions.
Mr. UNTERMYER. DO you approve of short selling in a normal
market.
Mr. STURGIS. I will answer that question by saying it is a moral
question with the individual himself. It is not up to me to express
my opinion upon it.
Mr. UNTERMYER. DO you personally approve of short selling in a
normal market ?
Mr. STURGIS. Not I, personally; no.
Mr. UNTERMYER. YOU do not. And is it or not the fact that the
bulk of the short selling is done in a normal market ?
Mr. STURGIS. I should say no; more often on an excited market.
Mr. UNTERMYER. It is done every day, is it not ?
Mr. STURGIS. Oh, yes; to some extent.
Mr. UNTERMYER. And it is done in large volume, is it not?
Mr. STURGIS. At times.
Mr. UNTERMYER. The stock exchange does not discourage it,
does it ?
Mr. STURGIS. The stock exchange does not enter into it at all.
Mr. UNTERMYER. The stock, exchange does not discourage short
selling, does it?
Mr. STURGIS. The stock exchange takes no position in the matter
at all.
Mr. UNTERMYER. Has the stock exchange any rule or regulation
against short selling?
Mr. STURGIS. None.
Mr. UNTERMYER. Why is it not just as simple a matter for them
to have a regulation against short selling as to have a regulation
against a broker splitting his commissions?
Mr. STURGIS. There is no regulation against short selling; that is
all I can say to you about it.
Mr. UNTERMYER. But I say it is just as practicable, is it not, to
have a regulation against short selling as against a broker splitting
commissions ?
Mr. STURGIS. NO ; it is not as practicable, because it is quite impossible to tell, when the stocks are sold, whether they are sold for long
account or short account.
Mr. UNTERMYER. Let us see about that. The books of the broker
would show, would they not?
Mr STURGIS. Not necessarily.
Mr. UNTERMYER. Would not the books of a broker necessarily
show whether, when he sold a thousand shares of a given stock, he
had that stock on his books?
Mr. STURGIS. Certainly not. The stock might be in Chicago.



834

MONEY TRUST.

Mr. UNTERMYER. Never mind where the stock was. Would not
his books show what securities he owned ?
Mr. STUHGIS. They might be in Chicago.
Mr. UNTERMYER. I do not care where they are. The question is,
Would not the broker's books show whether he owned that particular
stock or not ?
Mr. STURGIS. Xot the individual broker in New York who made
the transaction; certainly not.
Mr. UNTERMYER. We are speaking of transactions that are made
by members of your exchange in the way of short selling. Would
not their books show whether or not they were selling short?
Mr. STURGIS. If the broker is operating for his own account; yes.
Mr. UNTERMYER. And you say from a quarter to a half of the
transactions on the exchange are for the broker's own account?
Mr. STURGIS. We agreed upon a third, I think.
Mr. UNTERMYER. Yes. Would not the broker's books show
whether he was operating for a customer in the selling of short
stocks or not ?
Mr. STURGIS. Not necessarily; no.
Mr. UNTEHMYER. Let us see if they would not. Does not the
broker immediately send the customer a statement?
Mr. STURGIS. Yes: in the main.
Mr. UNTERMYER. When the broker sells a stock has he not got to
deliver it ?
Mr. STURGIS. Yes.
Mr. UNTERMYER. The same evening, has he not ?
Mr. STURGIS. NO ; it goes through the clearing house.
Mr. UNTERMYER. I mean he has got to deliver it at

the clearing
house the same evening, has he not ?
Mr. STURGIS. He has got to make his clearances.
Mr. UNTERMYER. And if the customer has not sot the stock that
he has sold, then the broker borrows it, does he not?
Mr. STURGIS. Yes.
Mr. UNTERMYER. This

business of borrowing for delivery is a
very common business, is it not ?
Mr. STURGIS. Yes.
Mr. UNTERMYER. There is a regular price paid for it, is there not ?
Mr. STURGIS. I do not know about that.
Mr. UNTERMYEH. DO you not know that a given price is paid for

the use of short stock ?
Mr. STURGIS. Very rarely is there any premium on short stocks.
Mr. UNTERMYER. There are times when there is a premium, are
there not?
Mr. STURGIS. Very seldom.
Mr. UNTERMYER. At any rate, when the broker sells for a customer
and the customer has not got the stock, the broken has to borrow it,
does he not ?
Mr. STURGIS. Yes.
Mr. UNTERMYER. And

when he borrows that stock he has got to
pay interest, has he not, to the commission house from which he
borrows it ?
Mr. STURGIS. He pays interest on the market value.
Mr. UNTERMYER. Of the stock that is borrowed ?
Mr. STOIGIS. Of the stock that is borrowed.




MONEY TRUST.

835

Mr. UNTERMYER. And be charges that against the customer, does
he not?
Mr. STUKGIS. NO; he does not.
Mr. UNTERMYER. He credits the customer who is a short seller, does
he not?
Mr. STURGIS. It depends entirely—that is a matter of agreement
between the customer and the broker.
Mr. UNTERMYER. But when the broker delivers his statement of
account to the customer it appears whether the customer is short of
that stock or whether he is not, does it not ?
Mr. STURGIS. The stock may be
Mr. UNTERMYER. Oh, Mr. Sturgis——
Mr. STURGIS. Wait a minute. Let me answer the question as it
should be answered. The stock may be in the course of transit; it may
be coming from California; it may be in the transfer office; it may
not be a good delivery; it may have been sold for an estate, and you
may have to wait until you can get an order of court. There are
many cases where stocks are apparently sold short on a broker's
books when it is not really a short sale at all.
Mr. UNTERMYER. Those are very exceptional instances, are they
not?
Mr. STURGIS. I want to give you a perfectly full answer.
Mr. UNTERMYER. I say, those are very exceptional instances, are
they not, in the ordinary course of business ?
Mr. STURGIS. Not with the enormous wire business done in the
city of New York through the western houses
Mr. UNTERMYER. It is a very exceptional instance, is it not ?
Mr. STURGIS. NO ; there are very frequent instances.
Mr. UNTERMYER. Let us assume that to be so. A time comes after
the sale some time, does it not. when the books of the broker show
whether that stock has been delivered to him by the customer ?
Mr. STURGIS. Ultimately; yes.
Mr. UNTERMYER. Ultimately, when you go to examine that broker's
books as to the transaction that has been closed, you can tell whether
it is a short sale or not ?
Mr. STURGIS. Truly.
Mr. UNTERMYER. SO that an examination of the broker's books in
the city of New York would show clearly, would it not, the stock on
closed transactions that had been sold short?
Mr. STURGIS. If you go over a sufficient length of time.
Mr. UNTERMYER. And it would also disclose the fact, would it not,
when the broker himself had sold short ?
Mr. STURGIS. Yes.
Mr. UNTERMYER. IS

it or not the fact, then, that the stock exchange
by periodic examinations could find out the instances in which brokers
were selling stocks short?
Mr. STURGIS. I think they could, Mr. Untermyer.
Mr. UNTERMYER. IS it not also the fact that by an examination of
the books of the stockbrokers, members of your exchange, every
case of manipulation could be readily discovered and pointed out?
Mr. STURGIS. YOU ask me the question ?
Mr. UNTERMYER. Yes.
Mr. STURGIS. I should



think it would be very much more difficult.

836

MONEY TRUST.

Mr. UNTERMYER. DO you not know that it is done, and proven in
lawsuits, and proven otherwise?
Mr. STUBGIS. It has been done.
Mr. UNTERMYER. It can be done, can it not ?
Mr. STURGIS. It can be done.
Mr. UNTERMYEB. If the stock exchange, therefore, wanted to put
an end to manipulation or to short selling it could do so by auditing
the books of the brokers, could it not ?
Mr. STURGIS. YOU mean to forbid short selling by making a constitutional amendment?
Mr. UNTERMYER. If they wanted to do so, yes. You do not think
they would do so?
Mr. STURGIS. They never have met that issue.
Mr. UNTERMYER. Have you pressed it on them ?
Mr. STURGIS. I have not.
Mr. UNTERMYER. YOU say you have been for how many years a
member of the board of governors?
Mr. STURGIS. I told you I had been a member of the board of
governors for 36 years.
Mr. UNTERMYER. And president of the exchange ?
Mr. STURGIS. And president of the exchange.
Mr. UNTERMYER. And during all that time, with the views you
now say you hold with respect to short selling, have you urged them
upon the board of governors or upon the exchange?
Mr. STURGIS. It is not a part of my duty to give moral lessons to
other members of the community.
Mr. UNTERMYER. I did not ask that.
Mr. STURGIS. That is the answer I make to your question.
Mr. UNTERMYER. The question is, have you done so?
Mr. STURGIS. I have not.
Mr. UNTERMYER. Have you expressed your views to your colleagues ?
Mr. STURGIS. At times.
Mr. UNTERMYER. And the views you have expressed are the views
you now state?
Mr. STURGIS. They are.
Mr. UNTERMYER. There is a certain justification offered for short
selling, is there not ?
Mr. STUROIS. Many people think so, Mr. Untermyer.
Mr. UNTERMYER. And the justification offered is, is it not, that it
tends to prevent, we will say, undue inflation of prices, and also
supports the market when there is undue depression, in covering short
sales ?
Mr. STURGIS. It has been found very useful in the sustaining of
a weak market to have a short interest existing in it.
Mr. UNTERMYER. IS it claimed also that it has been found very
useful in putting a brake upon a very rapidly ascending market?
Mr. STUBGIS. I think so.
Mr. UNTERMYER. I think that in fairness to the exchange those
ought to be stated as the arguments offered in its defense.
Mr. STURGIS. Yes. I think there is generally a difference of
opinion on almost all subjects.
Mr. UNTERMYER. YOU do not think those arguments are sufficient
to outweigh the moral obloquy of the transaction?




MONEY TRUST.

837

Mr. STUHGIS. Personally, no.
Mr. UNTERMYER. It is gambling, pure and simple, is it not ?
Mr. STURGIS. Very largely.
Mr. UNTERMYER. DO you regard the New York Stock Exchange
and its relations to the public or the country and to foreign countries
as a purely private affair, or do you believe it has public functions
and duties to perform?
Mr. STURGIS. I think the members have their respective duties.
The exchange has no particular duty to the public, as an exchange,
more than to provide a proper place and surround business with
proper restrictions.
Mr. UNTERMYER. But do you not recognize, Mr. Sturgis, that the
exchange as such has important duties to the public ?
Mr. STURGIS. We believe those duties are safeguarded by the constitution of the exchange.
Mr. UNTERMYER. That is not the question I asked, Mr. Sturgis,
nor anywhere near it.
By request, the stenographer repeated the question, as follows:
Mr. UNTBBMTEB. But do you not recognize, Mr. Sturgis, that the exchange as
such has important duties to the public?

Mr.
Mr.

STURGIS. The exchange as a body?
UNTERMYER. The exchange as an institution.
Mr. STURGIS. Yes.
Mr. UNTERMYER. What relation does it bear to the banks ?
Mr. STURGIS. The exchange as an institution has practically

no
relation directly with the banks.
Mr. UNTERMYER. Let us see. Is it or not the fact that the banks
lend upon the market quotations as recorded by the exchange ?
Mr. STURGIS. Yes; that is true.
Mr. UNTERMYER. And if those quotations do not represent actual
transactions, but represent manipulation or a washing, the banks of
the country as misled to that extent, are they not ?
Mr. STURGIS. They have their market price for their securities.
Mr. UNTERMYER. NO ; that is not the question.
Mr. STURGIS. I do not think they are misled.
Mr. UNTERMYER. I say, if the price is made by manipulation and
is artificial and the banks are lending on the basis of that quoted
price, the banks are misled?
Mr. STURGIS. It does not follow that it is artificial. It is made in
open market between buyer and seller.
Mr. UNTERMYER. If the prices are manipulated, are not the banks
misled to that extent?
Mr. STURGIS. I do not think so.
Mr. UNTERMYER. SO that you think that a manipulated price of a
security is as fair an indication of its value as if the market were
left free to the real buyers and sellers ?
Mr. STURGIS. In the majority of instances; yes.
Mr. UNTERMYER. Why do you say " in a majority of instances "?
Mr. STURGIS. Because there are exceptions to all rules.
Mr. UNTERMYER. TO the extent of those exceptions, I believe, you
will admit that the banks are misled ?
Mr. STURGIS. It might take place; yes.



838

MONEV TRUST.

Mr. UNTERMYER. Does not that, in jour judgment, impose upon
the stock exchange the duty of preventing transactions by which the
bands are misled?
Mr. STURGIS. Where the transactions are dangerous, to the best of
its ability; yes.
Mr. UNTERMYER. DO you think it is able to differentiate so nicely
with respect to what is regarded as dangerous or not ?
Mr. STURGIS. I think it is a very difficult thing to do.
Mr. UNTERMYER. Suppose we take a transaction that you probably
have in mind. You remember the Rock Island manipulation of
December, 1909?
Mr. STURGIS. Perfectly.
Mr. UNTERMYER. YOU remember it very well ?
Mr. STURGIS. I do.
Mr. UNTERMYER. In what did that consist?
Mr. STURGIS. YOU want me to tell you the story as it took place?
Mr. UNTERMYER. Yes.
Mr. STURGIS. The firm of S. B. Chapin & Co., a very reputable,

very wealthy firm, received from a very influential operator, a man
of iarge wealth, an order to buy 20 different lots of 2,000 shares each
of Eock Island, making an aggregate of 40,000 shares. The orders
went in simultaneously. The stock was unduly excited, and rose.
Mr. UNTERMYER. From where to where?
Mr. STURGIS. I do not remember the figures exactly, but it rose
abnormally.
Mr. UNTERMYER. Did it not go from $39 to $81 in two hours.
Mr. STURGIS. I said I do not remember the figures.
Mr. UNTERMYER. But does not that refresh your recollection ?
Mr. STURGIS. NO ; it does not. We will say, approximately.
Mr. UNTERMYER. Those are the approximate figures?
Mr. STURGIS. Yes.
Mr. UNTERMYER. Yes. Then what happened?
Mr. STURGIS. The collapse followed.
Mr. UNTERMYER. Within three hours the stock came

down to what
price ?
Mr. STURGIS. The stock fell back practically to where it started.
Mr. UNTERMYER. It fell to below where it started, did it not?
Mr. STURGIS. I do not remember that point.
Mr. UNTERMYER. What was the purpose of that operator in instructing that broker to buy 40,000 snares, I think it was, in 20 different lots, instead of buying the 40,000 shares in the normal course of
business ?
Mr. STURGIS. I could not answer your question.
Mr. UNTERMYER. AS an experienced man in the stock exchange,
you know what the effect of it would be ?
Mr. STURGIS. I do.
Mr. UNTERMYER. Did

not the operator instruct the broker to place
those orders with 20 different stock-exchange houses ?
Mr. STURGIS. He did.
Mr. UNTERMYER. SO that

time?

Mr. STURGIS. Yes.
Mr. UNTERMYER. And

they would all be executed at the same

the purpose of that was to get those 20
houses bidding against one another for that stock?




MONEY TRUST.

839

Mr. STUEGIS. I do not know what the purpose was. I know what
the result was.
Mr. UNTERMYER. The result was the natural result of such a transaction ?
Mr. STUEGIS. Yes.
Mr. UNTERMYER. What was the
Mr. STUEGIS. The result I have

result ?
just told you. The stock rose abnormally and fell back again practically to where it started.
Mr. UNTERMYER. It fell back as soon as the orders had been executed ?
Mr. STUEGIS. Yes.
Mr. UNTERMYER. During

that time do you know how many shares
of stock were traded in on the exchange ?
Mr. STUEGIS. I do not.
Mr. UNTEBMYEB. Were there not
Mr. STURGIS. I have no idea.
Mr. UNTERMYER. YOU remember

217,563 shares ?

that it was over 200,000. do vou
not?
Mr. STCRGIS. I do not remember the figures at all. I remember the
incident, but not the figures.
Mr. UNTERMYER. DO you not remember
Mr. STFRGIS (interposing). I do not remember the figures, Mr.
Untermyer.
Mr. UNTERMYER. YOU must have some idea about it.
Mr. STUEGIS. I have a very vague idea.
Mr. UNTERMYER. Was it on the 27th day of December, 1909 ?
Mr. STURGIS. I could not tell you that.
Mr. UNTERMYER. We will put in the record at this stage the fact
that it was the 27th of December.
When there is a movement of that kind on, stock becomes very
active, does it not, Mr. Sturgis?
Mr. STURGIS. Temporarily; yes.
Mr. UNTEEMYEB. I mean during the movement ?
Mr. STUEGIS. Yes.
Mr. UNTERMYEE. What

is the effect of that activity in drawing in
the public and in drawing in other brokers into the maelstrom?
Mr. STURGIS. It varies. Sometimes it has no influence and sometimes it has a marked influence.
Mr. UNTEBMYEB. The purpose of it is to have an influence, is it
not?
Mr. STUEGIS. Not necessarily.
Mr. UNTEEMYEE. What is the purpose of it?
Mr. STUEGIS. I do not know what the gentleman's purpose was
who gave that order. I have no idea. I have not the slightest idea
why he gave such an order. I can tell you, if you will let me go on,
what the result of it was as far as the governors of the stock exchange
were concerned.
Mr. UNTERMYEE. Yes; go on, please.
Mr. STUEGIS. They sent for Messrs. Chapin & Co., and after listening to their story they preferred charges against them for transacting business in a manner by which the good repute of the exchange
should suffer. I think that is the nature of the charge.
Mr. UNTEEMYER.

Yes.

71352—PT 11—13

2




840

MONEY TEUSI.

Mr. STURGIS. And they disciplined them.
Mr. UNTEEMYER. Tell us how severely they disciplined them.
Mr. STURGIS. I think that they suspended Mr. Countis for 30
days, and Mr. Chapin, I think, for 60 days.
Mr. UNTERMYER. NO. It was 30 days as to each, was it not ?
Mr. STURGIS. Thirty and sixty, I think.
Mr. UNTERMYER. Was it not 30 days only as to Mr. Chapin ?
Mr. STURGIS. NO.
Mr. UNTERMYER. DO

you remember whether the 30 days was as
to one or two of them?
Mr. STURGIS. YOU have the record there, Mr. Untermyer.
Mr. UNTERMYER. Have you that record here, Mr. Taylor ?
Mr. TAYLOR. NO. It has been furnished to you.
Mr. UNTERMYER. At any rate, we will put it in the record.
Mr. STURGIS. YOU have it in the record which the stock exchange
sent you.
Mr. UNTERMYER. I will put it in the record.
That was the most glaring case of manipulation ever presented on
the stock exchange, was it not ?
Mr. STURGIS. That is hardly a fair criticism to pass upon it, Mr.
Untermyer. It was a legitimate order given. The results of it were
very unfortunate, and the governors of the exchange thought that
Mr. Chapin was very unwise to have executed the order in the way he
did, and they disciplined him therefor. I do not consider, necessarily, that that was an evidence of manipulation.
Mr. UNTERMYER. DO you mean to say, Mr. Sturgis, that you regarded the act of Mr. Chapin or the instructions of his principal in
distributing that order to 20 brokerage houses as a legitimate thing ?
Mr. STURGIS. NO. We punished Mr. Chapin for that.
Mr. UNTERMYER. But vou stated that it was legitimate, did vou
not ?
Mr. STURGIS. YOU misunderstood me, Mr. Untermyer. I said that
the purchase of 40,000 shares, the actual buying of the stock, was
legitimate, but the manner in which it was done was what we punished Mr. Chapin for.
Mr. UNTERMYER. That was illegitimate ?
Mr. STURGIS. We regarded it as subversive of good decorum and
discipline in the exchange.
Mr. UNTERMYER. DO you not think there is rather a disproportion
between suspending a man for 30 days for engaging in that sort of a
transaction as against expelling him or suspending him for five years
for giving away part of his commissions?
Mr. STURGIS. I will answer that in this way. Mr. Untermyer: Mr.
Chapin's firm violated no fixed rule of the exchange, except in so far
as his conduct was subversive of good order and decorum and was
conduct by which the good repute and welfare of the exchange might
suffer. The violation of the commission law we regard as one of
the most infamous crimes that a man can commit against his fellow
members in the exchange, and as a gross breach of good faith, and
wrongdoing of the most serious nature, and we consider it a crime
that we should punish as severely as. in the judgment of the governing committee, the constitution permits.
Mr. UNTERMYER. Have you ever considered what the enforcement
of the commission rule means?




MUXE1' TKL'ST.

841

Mr. STL KCJIS. I have considered the commission rule from all standpoints.
Mr. U>'TEKMYER. Have you considered the righteousness of a rule
that forbids the brokers to compete with one another for business by
offering inducements to the public ?
Mr. STURGIS. When they join the stock exchange they join it with
the knowledge that that rule exists. If they do not want to join the
exchange they need not come there.
Mr. UNTERMYER. Have you ever considered whether such a rule
violates the law?
Mr. STURGIS. I have never considered that.
Mr. UNTERMYER. YOU have not ? But the breach of that rule by a
broker you consider the most heinous crime he can commit?
Mr. STURGIS. It is absolute bad faith to his fellow men.
Mr. UNTERMYER. The record shows that Mr. Chapin was suspended
for 60 days and Mr. Countis for 30 days. In the course of the taking
of evidence in that case—the Rock Island case—by the committee,
did you ascertain whether or not this occurrence took place by reason
of the failure of Chapin to give the selling orders at the same time he
gave the buying orders ?
Mr. STORGIS. NO. Mr. Untermyer. You have the stenographic
notes here, and I would submit those in evidence
Mr. UNTERMYER. If this had been the ordinary manipulation, the
selling orders of Chapin would have accompanied the buying orders?
Mr. STURGIS. I know nothing about the object of giving that order.
I have already testified that I am absolutely ignorant of why it was
given.
Mr. UNTERMYER. And with all your experience you can not conceive of any reason ?
Mr. STURGIS. I do not have to conceive; I know nothing about it.
Mr. UNTERMYER. We want your judgment.
Mr. STUKGIS. I can not give you my judgment.
Mr. UNTERMYER. YOU are an expert and we are laymen.
Mr. STURGIS. Mr. Untermyer, I have told you that that order was
given, and I do not know any more about why it was given than if I
were not a member of the exchange. I have not the slightest knowledge.
Mr. UNTERMYER. That brings us back to the discussion of the duties
and obligations of the exchange to the public. Is it not its first obligation, in your judgment, to see that the quotations are the honest representation and reflection of the actual values on the stock exchange?
Mr. STURGIS. The values at which stocks can be bought and sold
at the times those quotations were made in an open market.
Mr. UNTERMYER. But do you not think they should represent
something a little more than the prices at which they can be bought
and sold?
Mr. STURGIS. The stock exchange position is that they furnish a
place where others make quotations, and as long as those quotations
are made in accordance with the rules of the exchange it is not the
business of the exchange to know the motive of the individual.
Mr. UNTERMYER. NO; we are not inquiring about the motive of
the indiviidual; but does not the stock exchange do something more
than merely supply a place ? Does it not supply quotations throughout the world?



842

MONEV XKUSX.

Mr. STURGIS. The exchange makes no quotations. The individuals
make the quotations.
Mr. UNTERMYER. Answer the question. Does not the exchange
supply the quotations all over the world?
Mr. STURGIS. The individuals make the quotations, and they go
out over the wires of the Western Union Telegraph Co. The exchange is not responsible for them, and does not buy nor sell a
share of stock.
Mr. UNTERMYER. If you will answer my questions, perhaps we
will get along better. You do answer them generally, but occasionally you do not. The question is, Does or does not the exchange
distribute those quotations throughout the world, through the quotation company?
Mr. STURGIS. Through the medium of the Western Union Quotation Co.
Mr. UNTERMYER. Now, does it not do so through the medium of
the quotation company owned by the exchange?
Mr. STURGIS. It distributes those to the members of the stock
exchange only.
Mr. UNTERMYER. Yes; but does it not also deliver them to the
Western Union Telegraph Co. for distribution all over the world ?
Mr. STURGIS. I have ]ust so stated.
Mr. UNTERMYER. Yes; so would you regard it as accurate to say
that all the exchange does is to supply a place to deal in ?
Mr. STURGIS. Those are not the official records of the exchange.
The exchange does not even publish them. Those records are made
by the individual members of the exchange acting for themselves,
or others, and the exchange passes them out for precisely what they
are.
Mr. UNTERMYER. HOW much does the exchange get from the
Western Union for selling those quotations to them ?
Mr. STURGIS. YOU have the contract here. I would rather you
would refer to it.
Mr. UNTERMYER. XO ; the amount is not stated.
Mr. STURGIS. In the contract?
Mr. UNTERMYER. What is the revenue to the New York Stock
Exchange from the sale of those quotations?
Mr. STURGIS. I think the Western Union Telegraph Co. pays
$100,000 a year.
Mr. UNTERMYER. For those quotations?
Mr. STURGIS. Yes.
Mr. UNTERMYER.

That brings me back to the question as to
whether, in vour judgment, the New York Stock Exchange is not
under an obligation to enforce such rules as would make it reasonably certain that those quotations represent actual, bona fide dealings as against manipulations?
Mr. STURGIS. We endeavor to do so.
Mr. UNTERMYER. But do you not think it is your duty ?
Mr. STURGIS. We do it to the best of our ability.
Mr. UNTERMYER. But you have told us that manipulation is legitimate.
Mr. STURGIS. Certainly it is. where the commissions are paid on
both sides and the transaction is in good faith.



MONEY TBUST.

843

Mr. UNTERMYER. DO you not think it is the duty of the stock exchange to stop manipulation so as to see to it that those quotations
represent actual, bona fide dealings other than manipulations ?
Mr. STURGIS. Those transactions
Mr. UNTERMYER. Will you not answer the question?
Mr. STURGIS. I will not answer it "yes" or "no," because I can
not answer it justly in that way.
Mr. UNTERMYER. Answer it in some way, please.
Mr. STURGIS. I have told you already, Mr. Untermyer, that what
the stock exchange regarded as legitimate transactions were where
they paid the commissions on both sides, and the transaction was in
accordance with the rules of the exchange. We can not carry parentalism too far. We can not go into a man's motives and methods
and ascertain exactly whom he does business for and how much business he does and where he does it and how he does it. We do the
best we can. When the transactions are upon the floor of the exchange it is an open matter, and any man who is a member of the
exchange can go in there and buy or sell those stocks. If he does not
think the market is a fair market, he need not make use of it. But
if he does think it is a fair market3 and does make use of it, then it
becomes a legitimate matter in so far as the quotations are concerned.
Mr. UNTERMYER. DO you think you have answered my question?
Mr. STURGIS. I do.
Mr. UNTERMYER. I

will have it read to you.
(The stenographer read as follows:)

Mr. UNTEBMTEB. DO you not think it is the duty of the stock exchange to stop
manipulation so as to see to it that those quotations represent actual, bona fide
dealings other than manipulations?
Mr. STURGIS. Not the manipulation which we consider legitimate.

I do not consider it is our business to stop it.
Mr. UNTERMYER. That is an answer; the other was not. You could
stop it if you wanted to, could you not?
Mr. STURGIS. I think not.
Mr. UNTERMYER. Did you not tell me a few minutes ago that you
could, by going into the broker's books?
Mr. STURGIS. In some glaring instances; yes.
Mr. UNTERMYER. DO you mean to say that you can not in every
instance by looking at the books?
Mr. STURGIS. I do not think we would have the human time, in the
course of a year, to go over the books of every member of the stock
exchange.
Mr. UNTERMYER. Could you not employ accountants?
Mr. STURGIS. HOW many accountants would it take?
Mr. UNTERMYER. I say could you not employ accountants?
Mr. STURGIS. I suppose we could employ a mass of accountants.
Mr. UNTERMYER. DO you mean to tell us, Mr. Sturgis, in all seriousness, that you can not run your eye over the transactions of a
month on the stock exchange and point out, by the amount of dealings as compared with the capital, the securities in which there have
been glaring manipulations?
Mr. STURGIS. NO ; I can not.
Mr. UNTERMYER. Take, for instance,

a security like the Beading,
that has a million shares outstanding, and that deals in 43,000,000
shares in a vear.




844

MONEY TRUST.

Mr. STURGIS. Yes.
Mr. UNTERMYER. Would

you consider that a glaring case in which
there had been manipulation ?
Mr. STURGIS. I can not answer that question. It might be legitimate ; it might not.
Mr. UNTBRMYER. YOU think it might be perfectly legitimate public
buying?
Mr. STURGIS. I think it might.
Mr. UNTERMYER. For the capital of a company to be exchanged
43 times over in a year ?
Mr. STURGIS. I do.
Mr. UNTERMYER. DO

you not think that by looking at the transfer books of a company and comparing them with the transactions
in the exchange, you would get any light on the subject ?
Mr. STURGIS. Very little; because the certificates of Reading pass
current in the names of stock-exchange firms, and you could get very
little light on those matters from those certificates.
Mr. UNTERMYER. The Reading is a dividend-paving stock, is it
not?
Mr. STURGIS. Yes.
Mr. UNTERMTER. And

do the certificates of Reading pass curent
in the hands of investors who want the dividends?
Mr. STURGIS. Frequently.
Mr. UNTERMYER. One moment—and stay there in the names of
stock-exchange firms?
Mr. STURGIS. Frequently.
Mr. UNTERMYER. That is the rule, is it?
Mr. STURGIS. I said " frequently."
Mr. UNTERMYER. But is that the rule?
Mr. STURGIS. There is no rule.
Mr. UXTERMYEK. Do you not know that when people buy stocks, as
a rule, for investment—dividend-paying stocks—they nave them
put into their own names so that the dividends will be paid to them ?
Mr. STURGIS. On ihe contrary, a great many people prefer to leave
them in the name of their banker so that their dividends go to the
banker and are put to their credit on the banker's books.
Mr. UNTERMYER. IS that so as to the small investors all over the
country ?
Mr. STURGIS. That is so as regards a great many of the small
investors.
Mr. UNTERMYER. Then, as I understand you, it is your opinion that
the investments all over this country in railroad securities held by
the small investor are not held by him at all, but are in the hands
of bankers?
Mr. STURGIS. On the contrary, they belong to him, but they are
deposited with bankers for the purpose of collecting the dividends,
in many instances.
Mr. UNTERMYEH. But your experience is, then, is it, that the bulk
of investment securities held by the small investors are not in
their names, and that the dividends do not come to them as a rule,
but that they go to some banker or broker?
Mr. STURGIS. I said "frequently." I never said " the bulk."
Mr. UNTERMYER. DO you say the bulk?
Mr. STURGIS. No; I do not.




MONEY TRUST.

845

Mr. UNTERMYER. What proportion of them do you say ?
Mr. STUEGIS. It is impossible to answer such a question.
Mr. UNTERMYER. It is a very small proportion, is it not ?
Mr. STURGIS. I am unable to answer your question.
Mr. UNTEHMYER. In your judgment, what is the effect on foreign
confidence in our financial institutions of these manipulative transactions such as those in Hocking and Reading that have been introduced in evidence here?
Mr. STURGIS. I think it is undesirable.
Mr. UNTERMYER. YOU think it shakes foreign confidence in us?
Mr. STURGIS. Yes, Mr. Untermyer.
Mr. UNTERMYER. It hurts our financial credit and standing?
Mr. STURGIS. It does.
Mr. UNTERMYER. Viewed in that aspect, are you of the opinion
that the stock exchange does not perform a public function, so that
its affairs ought to be subject to any public regulation whatever?
Mr. STURGIS. Mr. Untermyer, you have instanced Hocking coal.
Will you let me tell you something about Hocking coal ?
Mr. UNTERMYER. Why, yes; certainly, if you like.
Mr. STURGIS. At the time the movement began in Hocking coal,
the firm that was more prominently buying the stock upon the floor
being a very respectable house of moderate capital, the president on
two occasions, by the request of the law committee, sent for that firm
and said: " You seem to be doing a business which is beyond your
ordinary rate." They produced their balance sheets as regards their
capital which was unimpaired and quite reasonable. They also
showed that they had a very moderate amount—that they had not,
in proportion to their capital, overbought at that time. They were
then sent for a second time; and when the crisis finally came that firm
was promptly disciplined by the governors of the exchange, declared
forever ineligible for reelection, and their membership was sold.
Mr. UNTERMYER. That was after they failed, was it not ?
Mr. STURGIS. We had them twice cautioned.
Mr. UNTERMYEH. But, Mr. Sturgis, they went bankrupt, did they
not, first?
Mr. STURGIS. Not before we cautioned them.
Mr. UNTERMYER. But they went bankrupt?
Mr. STURGIS. Ultimately.
Mr. UNTERMYER. Yes; they ultimately went bankrupt?
Mr. STUEGIS. They did.
Mr. UNTERMYER. DO you not think it is a very easy thing for the
stock exchange to expel a firm that is bankrupt and out of business ?
Mr. STURGIS. Sometimes we reinstate bankrupts.
Mr. UNTERMYER. Yes; but what good does it do to expel a firm
after it has become bankrupt?
Mr. STURGIS. Because it puts the seal of disapproval of the stock
exchange upon the irregularity of their transactions. You asked me
what effect these matters had in foreign countries.
Mr. UNTERMYER. What happened to Mr. Keene? Did anything
happen to him?
Mr. STURGIS. Mr. Keene is not a member of the stock exchange
and never has been.
Mr. UNTERMYER. Was it not generally known that he was conducting this pool ?




846

MONEY TEUST.

Mr. STDRGIS. We have no access to Mr. Keene's books.
Mr. UNTERMYER. It was known that he was conducting it, though,
was it not ?
Mr. STDRGIS. I can not answer that question.
Mr. UNTERMYER. Have you not seen the pool agreement with eight
or nine stock exchange houses ?
Mr. STDRGIS. NO ; I have not seen the pool agreement.
Mr. UNTERMYER. It was in evidence here.
Mr. STDRGIS. I have not seen it.
Mr. UNTERMYER. YOU knew, did you not, that besides Mr. Keene
there were eight or nine stock exchange houses in that pool ?
Mr. STDRGIS. And two of them were declared forever ineligible for
reelection.
Mr. UNTERMYER. Those were the ones that failed, were they not ?
Mr. STDRGIS. Those were the ones that failed.
Mr. UNTERMYER. The seven others that did not fail were not disciplined at all, were they ?
Mr. STDKGIS. They were. They were criticized and cautioned, and
a vote of censure passed upon them.
Mr. UNTERMYER. Were they disciplined ?
Mr. STDRGIS. Yes; I told you a vote of censure was passed by the
governing committee.
Mr. UNTERMYER. A vote of censure?
Mr. STDRGIS. Yes.
Mr. UNTERMYER. Were they suspended or
Mr. STDRGIS. They were not insolvent.
Mr. UNTERMYER. Oh. These others were

expelled?

expelled for insolvency,
were they ?
Mr. STDRGIS. They were expelled because they were insolvent and
because of the manner in which they became insolvent, both.
Mr. UNTERMYER. I see. Those who did the same thing, but did not
become insolvent were neither suspended nor expelled were they ?
Mr. STDRGIS. They were censured.
Mr. UNTERMYER. Yes; but I say they were neither suspended nor
expelled ?
Mr. STDRGIS. They were not.
Mr. UNTERMYER. I should like to know why you should expel two
members of a pool out of seven stock exchange firms for doing the
same thing that the other five did, simply because those two happened
to fail at it ?
Mr. STDRGIS. Because they went away beyond their means.
Mr. UNTERMYER. Oh, I see. Then, what these men who failed were
expelled for was for going beyond their means, but not for the character of the transaction ?
Mr. STDRGIS. Eeckless dealing—dealing recklessly.
Mr. UNTERMYER. The others, you thought, did not deal recklessly ?
Mr. STURGIS. Yes; they did. and they were censured for it; but they
were not insolvent, and they were not rendered amenable to the constitution under those conditions.
Mr. UNTERMYER. DO you mean to say that the things these seven
firms did were not punishable under the constitution ?
Mr. STTRGIS. NO ; they were not punishable.
Mr. UNTERMYER. DO you not think they ought to be ?
Mr. STURGIS. We have not thought so heretofore.




MONEY TRUST.

847

Mr. UNTERMYER. DO you not think so ?
Mr. STURGIS. I do not think so; no.
Mr. UNTERMYER. YOU have not amended your constitution, have
you?
Mr. STURGIS. XO.
Mr. UNTERMYER. DO

you think that that kind of action on the part
of the exchange tends to increase public confidence ?
Mr. STURGIS. Mr. Untermyer, men will always do wrong as long
as the world lives, and we punish them when we find it out. We can.
not always anticipate it.
Mr. UNTERMYER. YOU have brought up this Hocking transaction.
Will you tell me why you did not punish the others when they did
the same thing?
Mr. STURGIS. Because they did not do the same thing. The two
firms that were put out of the exchange were put out because of
reckless deaings. The other firms were well inside their means.
They could take care of the stocks they bought and pay for them.
Mr. UNTERMYEK. Then the rigging of the market was not the
thing that you punished in those that failed, but it was the rigging
of the market because they were not as well able to pay?
Mr. STURGIS. I am not conversant
Mr. UNTERMYER. I do not exactly understand
Mr. STURGIS. I do not understand, either.
Mr. UNTERMYER (continuing). I do not exactly understand your
moral distinction. I wish you would make it plain.
Mr. STURGIS. I have nothing more to say about it, Mr. Untermyer.
Mr. UNTERMYER. Would you not like to say something more
about it?
Mr. STURGIS. XO. I have told you the exact facts as far as I
know them.
Mr. UNTERMYER. HOW long before this collapse in the pool was it
that you sent for these gentlemen and they presented you with a
statement of the affairs of the Hocking Coal & Iron Co. ?
Mr. STURGIS. I can not tell you exactly. Mr. Thomas, the then
president of the exchange, sent for them.
Mr. UNTERMYER. About how long?
Mr. STURGIS. I could not tell you that exactly.
Mr. UNTERMYER. Just a few weeks?
Mr. STURGIS. Yes.
Mr. UNTERMYER. Did you see the statement they presented?
Mr. STURGIS. I did not.
Mr. UNTERMYER. YOU never have seen it ?
Mr. STURGIS. Never.
Mr. UNTERMYER. They had seven millions of stock out, did

they
not?
Mr. STURGIS. The company ?
Mr. UNTERMYER. The company.
Mr. STURGIS. Seventy thousand shares, yes.
Mr. UNTERMYER. DO you know how much money they had ever
earned ?
Mr. STURGIS. I am not conversant with the affairs of the Hocking
Coal & Iron Co.



848

MONEY TRUST.

Mr. UNTERMYER. T have here a statement of their profits year by
year. Will you look at it [handing paper to witness] ? Do you see
anything in that that would justify the price at which the stock
was being "boosted"? You notice that they had a bonded debt,
did they not? Did you notice that?
Mr. STURGIS. Yes,
Mr. UNTERMYER.

observed that ?

Mr. STUKGIS. Yes,
Mr. UNTERMYER.

sir.

They had a bonded debt of $1,400,000. You
sir.

And did you notice what their highest profits
had been in any one year ?
Mr. STURGIS. Mr. Untermyer, I have just told you I never had
paid any attention to that.
Mr. UNTERMYER. It appears there to have been $47,000. That was
after paying their interest on their bonds, according to this statement, was it not?
Mr. STURGIS. Yes.
Mr. UNTERMYER. What per cent would that be on
Mr. STURGIS. Mr. Untermyer, I never have looked

$7,000,000?
into the state-

ment.
Mr. UNTERMYER. $47,000 would be, on $7,000,000, about one-half
of 1 per cent of earnings a year, would it not ?
Mr. STURGIS. Possibly.
Mr. UNTERMYER. And this stock was put up to how much ?
Mr. STURGIS. It rose to eighty something, I think.
Mr. UNTERMYER. Ninety-two, was it not?
Mr. STURGIS. Ninety-two?
Mr. UNTERMYER. There was nothing in the statement that they
ever showed you, or that was ever showed the exchange, that justified
»ny such price, was there?
Mr. STURGIS. I think they made a very bad investment when they
bought it.
Mr. UNTERMYER. Investment? Who made the investment?
Mr. STURGIS. A very bad purchase, then. We will correct it, and
call it that.
Mr. UNTERMYER. The public rushes in when these excitements are
created, does it not?
Mr. STURGIS. The public rushed out on this occasion, and sold
40,000 shares of stock.
Mr. UNTERMYER. But the public has got to rush in in order to
rush out, has it not ?
Mr. STURGIS. The public might have been in a long time before
this purchase.
Mr. UNTERMYER. I say as a rule the public must rush in before it
can rush out?
Mr. STURGIS. Sometimes the public have been in many, many years.
Mr. UNTERMYER. But ordinarily when excitement and activity is
created in a stock, it is for the purpose of getting the public in, is it
not?
Mr. STURGIS. NO; not necessarily.
Mr. UNTERMYER. Why do these people pay commissions in order
to make a stock active, except to get the public in ?



MONEY TBUST.

849

Mr. STURGIS. These gentlemen might have really believed that if
they went at it properly they could work it up into something very
valuable; I do not know.
Mr. UNTERMYER. But even if they had. what would be the advantage of their operating on the stock market and paying commissions ?
Mr. STURGIS. I do not know how much they did operate on the
stock market. I never considered that side of it.
Mr. UNTERMYER. The question I ask you is whether or not this
artificial activity is not made for the purpose of getting the public in ?
Mr. STURGIS. I think it varies.
Mr. UNTERMYER. What other purpose can it have?
Mr. STURGIS. I told you yesterday that sometimes it is done for
purposes of advertising, making a stock active.
Mr. UNTERMYER. Advertising in order to attract the public ?
Mr. STURGIS. Not necessarily.
Mr. UNTERMYER. Whom do they want to attract by advertising ?
Mr. STURGIS. They want to get business.
Mr. UNTERMYER. Oh, I see—business for the company ?
Mr. STURGIS. Not necessarily. Business for the broker, perhaps.
Mr. UNTERMYER. Let us see what you mean. You did not mean,
did you, if a company was engaged in manufacturing locomotives,
we will say. that by making the stock active on the stock exchange
it would get orders for locomotives?
Mr. STURGIS. Certainly not.
Mr.'UNTERMYER. You did not mean that kind of advertising?
Mr. STURGIS. Certainly not.
Mr. UNTERMYER. I am asking you what kind of advertising you
meant.
Mr. STURGIS. I explained to you yesterday that they made the
stock popular, and that brought business to the Street.
Mr. UNTERMYER. NO ; I do not understand you yet.
Mr. STURGIS. I can not make myself any plainer.
Mr. UNTERMYER. Let us see. Let us be patient with one another,
and perhaps we can. Advertising is generally resorted to for the
purpose of attracting business, is it not?
Mr. STURGIS. Yes.
Mr. UNTERMYER. Who

are the people who are sought to be attracted by advertising, as you say, by making the stock active ?
Mr. STURGIS. People who operate in stocks, Mr. Untermyer, of
whom, as you knpw, there are very many in the community that buy
and sell stocks with the hope of making a profit.
Mr. UNTERMYER. Speculating?
Mr. STURGIS. A speculative profit. They are much more likely to
be interested in a stock that is active than in one that is inactive.
That is what I mean by the advertising of the stock.
Mr. UNTERMYER. I think I understand you, then. What you
mean is that the purpose of making stocks active is to get the speculators to trade in them ?
Mr. STURGIS. Frequently.
Mr. UNTERMYER. And it costs the pool or syndicate 25 cents a
share to do that, does it not ?



850

MONEY TBUST.

Mr. STURGIS. Not if they are members of the exchange.
Mr. UNTERMYER. Then the opportunities for members of the exchange to speculate and manipulate are far more numerous and advantageous than the opportunities of the outsider, are they not?
Mr. STDBGIS. Unquestionably.
Mr. UNTERMYER. Because they do not have to pay the commissions ?
Mr. STURGIS. Quite true.
Mr. UNTERMYER. SO that is an inducement to the members to speculate, is it not?
Mr. STURGIS. It might be so regarded.
Mr. UNTERMYER. In this process of advertising bv making a stock
active, in the light of your experience, Mr. Sturgis, does not that
attract the public as well as the lprokers?
Mr. STURGIS. Sometimes it fails to attract the public; sometimes
it does attract the public.
Mr. UNTERMYER. But it is done for the purpose of attracting the
public, is it not?
Mr. STURGIS. It varies.
Mr. UNTERMYER. It is done for that purpose, is it not ?
Mr. STURGIS. Not always.
Mr. UNTERMYER. For what other purpose could it be done?
Mr. STURGIS. I have just told you it is done to make the stock
active for the brokers themselves.
Mr. UNTEEMYEH. But when the brokers deal in stocks, do the,y not
advise their customers to deal in them, too ?
Mr. STURGIS. Sometimes. Sometimes they want to deal in them
personally.
Mr. UNTERMYER. Sometimes they want the whole thing for themselves: is that it?
Mr. STURGIS. They try to, but they do not always succeed.
Mr. UNTEBMYEE. Until the market gets high, and then they invite
their customers to buy; is that it?
Mr. STURGIS. Not necessarily; some of them have no customers.
Mr. UNTERMYER. IS there anything else you would like to say about
this subject of manipulation?
Mr. STURGIS. Nothing.
Mr. UNTEBMYEB. Or as to advertising virtues?
Mr. STURGIS. Nothing.
Mr. UNTERMYER. I think I asked you yesterday, did I not, whether
Rock Island common had ever paid a dividend ?
Mr. STURGIS. NO ; you did not ask me. I could not tell you.
Mr. UNTERMYER. YOU have told us, Mr. Sturgis, that the"members
of the stock exchange are prohibited from doing business with the
active members of the Consolidated Exchange for the reasons you
have stated?
Mr. STURGIS. Yes; Mr. Untermyer.
Mr. UNTERMYER. Why is it not equally feasible to prohibit members of the stock exchange from executing orders for big operators
who have been known officially to your exchange to be rigging and
manipulating the market, as in the two instances to which you have
referred ?
Mr. STURGIS. I do not think you can possibly control nonmembers
of the exchange.




MONEY TRUST.

851

Mr. U>"TER3IYEB. But you are controlling your members and prohibiting them from dealing with Consolidated members. Tell me
why you can not prohibit them from dealing with the men who are
bringing the exchange into discredit in the respects to which you
have referred?
Mr. STURGIS. The Consolidated Exchange has a regular list of its
members published. We know who they are. We have not the
faintest idea, oftentimes, whom our members have as customers.
Mr. UNTERMYER. But when you have cases before you such as the
two to which we have referred, and you learn the names of the men
who have been promoting those transactions, why is it not feasible to
prohibit your members from taking orders of this character from
them—quite as feasible as to prohibit your members dealing with
members of the Consolidated Stock Exchange?
Mr. STURGIS. DO you ask me my opinion?
Mr. UNTERMYER. Yes; certainly.
Mr. STURGIS. I do not think that we could possibly control persons
who are not affiliated in any manner whatsoever. They are independent citizens. They have a right to do as they please.
Mr. UNTERMYER. Are not the members of the Consolidated Exchange independent citizens?
Mr. STURGIS. Yes; but they are reported members of an opposing
institution.
Mr. UNTERMYER. But they are independent of your exchange, are
they not?
Mr. STURGIS. Yes; and they are constantly combatting us upon
our own ground.
Mr. UNTERMTER. I do not understand how they are any more difficult to reach, as you do reach them under your rules, than would be
one of these men when he is discovered by you.
Mr. STURGIS. I can not explain it to you.
Mr. UNTEHMYER. Why do you not?
Mr. STURGIS. Because you know, just as well as I do, the nature of
the whole transaction.
Mr. UNTERMYER. NO. YOU have told us of the case of Mr. Keene.
Mr. STURGIS. Yes.
Mr. UNTERMYER. He
Mr. STURGIS. I am

was very culpable?
not expressing an opinion regarding Mr.

Keene.
Mr. UNTERMYER. DO you not think he was?
Mr. STURGIS. I do not know enough about it to express my opinion.
He is not a member of the exchange.
Mr. UNTERMYER. DO you not know he has been engaged in that
sort of business all his life—the same sort of business as the Hocking
matter ?
Mr. STURGIS. We all know that Mr. Keene has been a large operator in securities.
Mr. UNTERMYER. Why is it that the exchange, then, does not prevent its members from engaging in transactions of that kind for Mr.
Keene, after what you discovered of his operations?
Mr. STURGIS. I doubt very much if the exchange would be justified
in going as far as that.
Mr. UNTERMYER. IS that all you care to say ?
Mr. STURGIS. That is all I care to say.



852

MONEY TRUST.

Mr. UNTERMYER. And you do not care to explain why it is not as
easy to do that as to go after a Consolidated Exchange member?
Mr. STURGIS. It is not necessary, I think.
Mr. UNTERMYER. It is not necessary to do that ?
Mr. STURGIS. NO. I thought I had explained it. It is not necessary for me to say any more about it.
Mr. UNTERMYER. I think that is all. unless your counsel wants me
to ask you any questions. 1 asked him last evening to go over the
record and see if there were any questions he desired to have me
ask you.
Mr. STURGIS. Yes. You were very courteous about it, Mr. Untermyer.
Mr. UNTERMYER. And you have been over the record, have you not ?
Mr. STUEGIS. TO some extent.
Mr. UNTERMYER. IS there anything you would like to sav, or you,
Mr. Milburn?
Mr. STURGIS. I would like to ask, Mr. Chairman, if you will allow
me to read half a page, one paragraph, of my opening address delivered at the time of the Hughes commission investigation, and I
would like to have it read into the record.
The CHAIRMAN. Let us look at it. please, to see if it is germane.
(An informal colloquy followed.)
Mr. UNTERMYER. We will let it be read into the record, Mr. Chairman?
The CHAIRMAN. Certainly. The committee accedes to your request,
Mr. Sturgis.
Mr. STURGIS. Thank you. It reads as follows:
The constitution and rules of the stock exchange, formed and framed from
year to year, have been the growth of experience, frequently derived through
bitter and distressing conditions. They represent the best effort possible by
men who have given their lives to this subject to protect not only themselves
but those who have done them the honor to intrust to them their business
affairs. The exchange has always stood for the best and most upright methods
of doing business, respecting its own laws and striving earnestly to obey not
only those of the State of New York but the articles which, from time to time,
have been adopted by the New York banks, trust companies, and clearing house.
While we recognize that self-preservation is the first law of nature, and that
we must surround ourselves with all the protections which honorable men may
resort to, it has been our consistent and constant endeavor to deal justly between
one another, as well as to deal justly with the world at large. The laws of the
stock exchange are founded on simple business justice, and with them are combined punishments severe in their nature for wrongs which have been committed, and the daily transactions are so regulated by distinct and accurate
rules that there should be no' reason for disloyalty on the part of members or
misunderstanding on the part of their clients.

I am much obliged to you. gentlemen.
Mr. UNTERMYER. IS that allyou would like to say ?
Mr. STURGIS. Everything.
Mr. UXTERMYER. That is all, then.
Witness excused.
TESTIMONY OF KUDOLPH KEPPLEK.
The witness was sworn by the chairman.
Mr. UNTERMYER. Where do you reside, Mr. Keppler ?
Mr. KEPPLER. New York City.
Mr. UNTERMYER. Are you a member of the Xew York Stock
Exchange ?



MONEY TRUST.
Mr. KEPPLEK. I am.
Mr. UNTERMYER. And a member of the board
Mr. KEPPLER. Yes, sir.
Mr. UNTERMYER. HOW long have you been a

853

of governors?

member of the Xew
York Stock Exchange?
Mr. KEPPLER. Upward of 35 years.
Mr. UNTERMYER. HOW long have you been a member of the board
of governors?
Mr. KEPPLER. Perhaps upward of 30 years.
Mr. UNTERMYER. YOU and Mr. Sturgis are the deans of the board,
are you not?
Mr. KEPPLER. I did not so realize it until you put it that way.
Mr. UNTERMYER. That is the fact, is it not ?
Mr. KEPPLER. I do not know.
Mr. UNTERMYER. IS the board of governors, as now constituted,
largely composed of men who have been for many years acting ia
that capacity ?
Mr. KEPPLER. Only in part. There are new members elected to
the governing committee every year.
Mr. UNTERMYER. What is yourfirm?
Mr. KEPPLEK. Eudolph Keppler & Co.
Mr. UNTEHMYER. And what has been the particular character of
your business? Has it been mostly investment business?
Mr. KEPPLER. Not mostly.
Mr. UNTERMYER. Has it been mostly stock business or bond business?
Mr. KEPPLER. The ordinary stock business; stock exchange business,
so called.
Mr. UNTERMYER. YOU are still active on the exchange?
Mr. KEPPLER. Personally not.
Mr. UNTERMYER. Did you take part in the formulating of the
answers to questions to the Hughes Commission ?
Mr. KEPPLER. I did, sir.
Mr. UNTERMYER. And they

were formulated in the manner described by Mr. Sturgis, at a meeting of the governors, with their
counsel present?
Mr. KEPPLER. Not at a meeting of the governors, but merely a
meeting of the law committee, who represent the governors.
Mr. UNTERMYER. Yes. How long did you take to formulate these
answers? You were some weeks in doing it?
Mr. KEPPLER. Oh, yes; I think so, altogether. There were successive series of questions put.
Mr. UNTERMYER. I am speaking of the first series.
Mr. KEPPLER. I could not say just how long that took. It took
some time.
Mr. UNTERMYER. They were framed and reframed, were they, and
polished up and put in shape finally?
Mr. KEPPLER. They were duly considered.
Mr. UNTERMYER. Did you have a great deal of trouble with answering this question about manipulation?
Mr. KEPPLER. I do not know that we had any trouble with it.
Mr. UNTERMYER. YOU do not think vou had any trouble answering it?
Mr. KEPPLER. Well, not more than with any other question.




854

MONEY TRUSI.

Mr. UNTERMYER. YOU think not?
Mr. KEPPLER. I do not know that it gave us any special trouble.
Mr. UNTERMYER. DO you approve of the statement on that subject
as made in the answer?
Mr. KEPPLER. I approve of the answer that was made.
Mr. UNTERMYER. You do? You signed it, did you not?
Mr. KEPPLER. I did.
Mr. UNTERMYER. All

the members of the governing committee
were unanimous in these answers, were they ?
Mr. KEPPLER. All the members of the committee who had that
duty put upon them.
Mr. UNTERMYER. It was signed by the law committee only, was it ?
Mr. KEPPLER. Yes.
Mr. UNTERMYER. HOW many
Mr. KEPPLER. Five.
Mr. UNTERMYER. And they

members has the law committee ?

were all of the same opinion as to
these answers?
Mr. KEPPLER. Apparently so. They all signed the answers.
Mr. UNTERMYER. I will read this answer to you, also, as I read it
to Mr. Sturgis:
There is a class of business, however, which is legitimate upon the exchange,
and may be described briefly as follows: If a member in good faith gives to a
broker an order to buy a certain amount of stock, and the said member gives to
another broker in equally good faith, and with no collusion between the two
parties, an order to sell a certain amount of the same stock, and those two
orders are executed upon the floor of the exchange, a commission paid, and
every requirement of the law met, such a transaction is not illegitimate.

Do you approve of that?
Mr. KEPPLER. I do.
Mr. UXTERMYER. What

is the purpose of a member giving, in good
faith, to a member an order to buy, we will say, 1,000 shares of stock
and at the same time an order to sell 1,000 shares of the same stock ?
Mr. KEPPLER. I really can not answer what may be in the mind of
another person.
Mr. UNTERMYER. What could be his purpose?
Mr. KEPPLER. What could be his purpose?
Mr. UNTERMYER. Yes.
Mr. KEPPLER. Well, he

might have to transfer some stock from one
account to another.
Mr. UNTERMYER. Why can he not do that without selling it and
buying it on the exchange.
Mr. KEPPLER. That is what you are asking me. By giving orders
on the exchange.
Mr. UNTERMYER. Why can he not do that, if he wants to transfer
1,000 shares from one account to another, without any transaction
on the exchange?
Mr. KEPPLER. I believe it has been held illegal to do that.
Mr. UNTERMYER. YOU mean for a man to transfer ?
Mr. KEPPLER. For a matter of record, if a broker sells for one
party and buys for another.
Mr. UNTERMYER. N O ; I do not think I understand. What is the
purpose of these transactions that are dealt in every day and all day,
such as are described here in this answer? You know the purpose,
Mr. Keppler, do you not?



MONEY TBUST.

855

Mr. KEPPLEB. In the first place, I do not know that it is done every
day.
Mr. UNTERMYER. DO you not know that stocks are manipulated
every day, and many times in the day ?
Mr. KEPPLER. I do not know anything about it, personally, myself.
Mr. UNTERMYER. But you have been 30 or 40 years on the exchange,
and you must have some experience about it.
Mr. KEPPLER. I have never been engaged in what you have repeatedly described here as manipulation.
Mr. UNTERMYER. IS there manipulation?
Mr. KEPPLER. I assume that there is. I do not know.
Mr. UNTERMYER. And you think it is legitimate, do you not ?
Mr. KEPPLER. If it is done honestly, simply buying and selling
without any collusion, or without what may be called wash sales,
or matched orders, I see no objection to it.
Mr. UNTERMYER. What is its purpose?
Mr. KEPPLER. I could not answer that.
Mr. UNTERMYER. DO you mean to say you can not tell us why
manipulation is resorted to, of the character you have just described %
Mr. KEPPLER. I have no knowledge.
Mr. UNTERMYER. But. Mr. Keppler, you can give us the reasons,
can you not ?
Mr. KEPPLER. I can not. I should be very glad to do so if I could.
Mr. UNTERMYER. IS it not at times to get higher prices for securities ?
Mr. KEPPLER. It might be.
Mr. UNTERMYER. And at times to get a lower level ?
Mr. KEPPLER. It might be.
Mr. UNTERMYER. And is it not to make a security appear active?
Mr. KEPPLER. It might do that.
Mr. UNTERMYER. Those are the three things that it would do, or
could do?
Mr. KEPPLER. It might have that effect, or would have that effect.
Mr. UNTERMYER. And those you think would be legitimate purposes ?
Mr. KEPPLER. If done in the open market.
Mr. UNTERMYER. We are talking about things that are done in the
open market, certainly. You consider that is legitimate?
Mr. KEPPLER. I do.
Mr. UNTERMYER. Why

is it legitimate to make a stock appear
active when it is not active?
Mr. KEPPLER. It may be that for a reason satisfactory to the party
who gives the order he may wish to acquire stock in the market,
which, in a dull and lifeless market, he can not do.
Mr. UNTERMYER. HOW does it help him to acquire stock in the
market to be operating on both sides of the market, buying and
selling at the same time?
Mr. KEPPLER. Because in making the market active it might, and
possibly does attract other people who may be interested in the same
stock.
Mr. UNTERMYER. Attract them to do what?
Mr. KEPPLER. TO either buy or sell.
Mr. UNTERMYER. Then he is holding out a false sign, is he not?
71352—FT 11—13




3

856

MONEY TBUSI.

Mr. KEPPLEB. I do not consider that a false sign.
Mr. UNTEBMYER. When he is buying and selling both at the same
time, and making it appear that the stock is active when it is not
active, in order to get it active and to induce people to come in and
deal in it, is not that holding out a false sign ?
Mr. KEPPLER. I would say no.
Mr. UNTEEMYEK. That is the only answer you want to make to that
question ?
Mr. KEPPLER. That is all I care to make to it.
Mr. UNTEBMYER. If he resorts to this process of buying and selling
at the same time in order to put the stock to a higher level of prices,
to make it appear higher in the market, what is his purpose in doing
that?
Mr. KEPPLEE. I could not answer that question.
Mr. UNTERMYER. That is what is done; and you say it is legitimate, do you not?
Mr. KEPPLEE. In a reasonable way, to a reasonable extent; yes.
Mr. UNTEBMYEB. When would you say it was reasonable to do that,
and when would it be unreasonable ? ft would depend on the means
of the man ?
Mr. KEPPLER. TO some extent.
Mr. UNTERMYER. It would depend on his financial responsibility?
Mr. KEPPLER. TO some extent.
Mr. UNTERMYER. SO that if he is a very rich man, it would be
reasonable for him to manipulate the market up to higher prices
to almost any extent, would it?
Mr. KEPPLER. That does not follow, in my opinion.
Mr. UNTERMYER. HOW far could he go if his means were limitless, and still be considered as reasonable?
Mr. KEPPLER. I could not draw the line. That would depend
upon circumstances entirely.
Mr. UNTERMYEB. If he was a poor man, then he ought not to do
it at all?
Mr. KEPPLER. Quite so.
Mr. UNTERMYER. But where you draw the line you do not know ?
Mr. KEPPLER. I could not draw the line.
Mr. UNTERMYER. YOU say you can not tell us what his purpose is?
Mr. KEPPLER. I can not.
Mr. UNTERMYEB. He has

to pay brokerage commissions of 25 cents
a share, does he not?
Mr. KEPPLER. Whatever the outsider buys and sells he has to pay
commisisons on.
Mr. UNTEBMYEB. But I mean the operator who gives these buying
and selling orders in order to manipulate up to a Tiigher price. He
has to pay 25 cents a share on every share that is manipulated ip
that way, does he not?
Mr. KEPPLER. The operator has to pay on every share that he buys
and sells.
Mr. UNTEBMYEB. Unless he is a member of the exchange ?
Mr. KEPPLER. Whatever his purpose may be.
Mr. UNTERMYER. That is. if he is not a member of the exchange ?
Mr. KEPPLER. If he is not a member of the exchange.
Mr. UNTERMYER. And if he is a member of the exchange, he can
indulge in that pastime without expense?
Mr.
 KEPPLEB. If he does it for himself, yes.


MONEY TRUST.

857

Mr. UNTERMYER. SO that it is a much more expensive thing for the
outside operator to manipulate on the stock market than it is for a
member ?
Mr. KEPPLER. Yes.
Mr. UNTERMYEB. Let

us take the other end of manipulation. Suppose it is a manipulation for a decline instead of a manipulation for
a higher level. Suppose it is a manipulation to bring about a lower
level of prices. Can you tell us what the purpose of that is?
Mr. KEPPLEB. My answers would be the same as they are if the
alleged purpose is for advancing the prices.
Mr. UNTERMYER. What do you mean by the '' alleged purpose " ?
I have not alleged any purposes, have I? I have asked you to tell
me the purposes.
Mr. KEPPLER. I can not tell them.
Mr. UNTEEMYEE. DO you not know that the purpose of a transaction of that kind, of manipulation for a decline, paying the commissions incident to it, is in order to bring about a lower level of prices,
so as to either cover short sales or to buy stocks cheaper for a rise ?
Mr. KEPPLER. I should assume that would be the object.
Mr. UNTEBMYER. That is the only conceivable object that a stockexchange man could see in it, is it not?
Mr. KEPPLER. Yes.
Mr. UNTERMYER. The

same is true on the other end, of manipulating for a higher level, is it not ? That is, is it not true that the purpose of that is, and it is the only conceivable object, to unload stocks
that have been bought at a lower price ?
Mr. KEPPLEB. I can not change my position. I can not tell you
what the purpose of another man is in buying and selling and giving
orders to that effect.
Mr. UNTEBMYER. But I am asking for what you, as a stock-exchange man, would regard as the reasonable purpose of paying commissions and conducting transactions of that kind. Would it not be
in order to get a higher level of prices in which to unload stocks
that have been acquired at a lower level ?
Mr. KEPPLEB. I can conceive of another purpose, and that is to
create a higher level of prices for the particular security, and to
maintain it there.
Mr. UNTEBMYER. For whose benefit is the higher leved to be created;
for the benefit of the public, to bring them in?
Mr. KEPPLER. Not necessarily.
Mr. UNTERMYER. But when you spend money in getting a higher
level of prices, is it not in order to get people to buy stock at those
prices ?
Mr. KEPPLER. If you spend money for that purpose, it might be.
Mr. UNTERMYER/Do you not have to spend money, in order to
bring it about, on a manipulative transaction such as we are discussing ?
Mr. KEPPLEE. Yes; you have to pay commissions.
Mr. UNTERMYER. YOU can not maintain the stock at the higher
level unless people buy, can you?
Mr. KEPPLER. Why not?
Mr. UNTEBMYER. Because, suppose people sell: suppose some sell;
unless there are people there to buy. how can you maintain it at a
higher level?



858

MONEY TBUST.

Mr. KEPPLEE. 1 could not say what would happen if certain things
take place. I can not answer for that. Suppose a man wants to sell.
He may find a buyer, and he may not.
Mr. UNTERMYER. But you know that in order to maintain stock at
this high level you have to have purchasers ?
Mr. KEPPLER. I guess there are a great many stocks that maintain
a level with very few transactions in the stocks.
Mr. UNTERMYER. But they are protected, are they not?
Mr. KEPPLER. Not so. Not necessarily so.
Mr. UNTERMYER. Then they are old and stable and inactive stocks ?
Mr. KEPPLER. Not even that.
Mr. UNTERMYER. HOW do they stay there?
Mr. KEPPLER. Because there are very few dealings in the stock;
or if the dealings do occur, they are practically on the same level.
Mr. UNTERMYER. YOU understand we are discussing manipulative
transactions, do you not, Mr. Keppler; and you do not mean to say
that any of these answers that you have made apply to such transactions ?
Mr. KEPPLER. Not the last answers; no, sir.
Mr. UNTERMYER. Not the last few answers?
Mr. KEPPLER. NO, sir.
Mr. UNTERMYER. Have

you told us, in answer to my questions, all
that you know about the general custom and effect of stock manipulation?
Mr. KEPPLER. I think I have.
Mr. UNTERMYER. There is nothing you desire to add, is there ?
Mr. KEPPLER. Nothing.
Mr. UNTERMYER. IS the curb kept in the street by the act of the
stock exchange ?
Mr. KEPPLER. It is not.
Mr. UNTERMYER. Let us

see if that is so. Do you not know that
your rules prohibit your members from dealing on any other exchange
that deals m securities in the city of New York?
Mr. KEPPLER. That deals in securities which are listed on the New
York Stock Exchange?
Mr. UNTERMYER. NO; that deals in any securities?
Mr. KEPPLER. Yes.

Mr. UNTERMYER. That is right; is it not ?
Mr. KEPPLER. Yes.
Mr. UNTERMYER. SO

that if the curb were under a roof your members could not deal on it, could they ? Let me call your attention, in
that connection, to the Hughes report, because that, I think, sums it
up. I call your attention to this statement on page 13 of the Hughes
report
Mr. KEPPLER. Will you pardon me for a moment ?
Mr. UNTERMYER. Certainly.
Mr. KEPPLER. In regard to the statement made a moment ago in
regard to dealings on other exchanges, if you will permit me, I would
like to have this read out of the constitution of the exchange.
Mr. UNTERMYER (after examination of page 45 of constitution). I
think this is already in the record in the case.
Mr. KEPPLER. It is different from what has been said just now.
Mr. UNTERMYER. That is not the only article bearing on the subject, is it?




MONEY TRUST.

859

Mr. KEPPLER. The one at the top of page 45, on dealings in other
exchanges, is the one I refer to.
Mr. UNTERMYER. Yes.
Mr. KEPPLER. I stated

that it applied to exchanges dealing in
securities that are listed or quoted on the New York Stock Exchange.
Mr. UNTERMYER. DO you not know that you have some resolutions
that have extended that?
Let me call your attention to the Hughes report, page 13.
Mr. KEPPLER. Yes.
Mr. UNTERMYER (reading):
The exchange itself keeps the curb market in the street, since it forbids its
own members engaging in any transaction in any other security exchange in
New York. If the curb were put under a roof and organized this trading could
not be maintained.

Do you remember that?
Mr. KEPPLER. YOU are reading this from the report of the Hughes
Commission ?
Mr. UNTERMYER. Yes; from the report of the Hughes Commission. That was based on the data you furnished them f
Mr. KEPPLER. That is the conclusion of those gentlemen at that
time.
Mr. UNTERMYER. DO you remember also this statement:
The stock exchange should compel the formulation and enforcement of such
rules as may seem proper for the regulation of business on the curb, the
conduct of those dealing thereon, and, particularly, for the admission of securities and quotations. If the curb brokers were notified that failure to comply
with such requirements would be followed by an application of the rule of
nonintercourse, there is little doubt that the orders of the exchange would be
obeyed.

Do you remember that?
Mr. KEPPLER. I do.
Mr. UNTERMYER. Did you carry out that
Mr. KEPPLER. We did not.
Mr. UNTERMYER. Did you not have some

idea ?

transactions or some conferences and negotiations with the curb ?
Mr. KEPLER. We had not, sir. One man, who called himself,
I think, the agent of the curb, appeared once, by his own request,
before the law committee, and made some statements to the committee. It was in no sense a negotiation or conference.
Mr. UNTERMYER. What was the result of the conference or the
meeting, or whatever you may choose to call it ?
Mr. KEPPLER. That the stock exchange continued to maintain the
position that it had always held, that it had no control, and desired
no control, over the curb market.
Mr. UNTERMYER. Let me see about that. What is the commission
that is paid on transactions on the curb ?
Mr. KEPPLER. I believe that varies very much. I am not personally very familiar with it.
Mr. UXTERMYER. It is less than on the stock exchange, is it not?
Mr. KEPPLER. I take that for granted.
Mr. UXTERMYER. Is there any given security dealt in on the curb
to-day that is listed or quoted on the New York Stock Exchange?
Mr. KEPPLER. I understand that there is not. I have no personal
knowledge of it.
Mr. UNTERMYER. DO you not know there never has been?



860

ALO2JJE1: T R U S T .

Mr. KEPPLER. I think that is true.
Mr. UNTERMYER. What happens to a quotation or a security that
has been dealt in on the curb when the stock exchange takes it on
the list?
Mr. KEPPLER. That is impossible for me to say.
Mr. UNTERMYER. It disappears from the curb, does it not?
Mr. KEPPLER. Yes; it is supposed to.
Mr. UNTERMYER. And yet it is the fact, is it not, that it can be
dealt in at a less rate of commission on the curb ?
Mr. KEPPLER. It could have been before it was listed on the stock
exchange.
Mr. UNTERMTER. Well, and after it is listed on the stock exchange, then why is it, since their rate of commissions is lower, that
it does not appear on the curb any longer ?
Mr. KEPPLER. That is for the curb man to answer. I could not
tell you that.
Mr. UNTERMYER. DO you not know it is because the stock exchange
has notified them that the stock exchange members will not be
permitter to deal with the curb if the curb deals in stock exchange
securities?
Mr. KEPPLER. I beg your bardon, Mr. Untermyer; the curb has
never been notified, in any sense, on anything.
Mr. UNTERMYER. Never mind about officially, but is not that the
fact? Is not that the reason?
Mr. KEPPLER. I believe it is inferred or believed by the members
of the so-called curb that it would result that way.
Mr. UNTERMYER. Yes; and if they should undertake to deal in a security that was listed on the stock exchange the exchange members
would not be permitted to deal with the curb ? That is right I
Mr. KEPPLER. I think they would draw that conclusion.
Mr. UNTERMYER. YOU think they would draw a very wise and correct conclusion, do you not?
Mr. KEPPLEH. Yes; I think so.
Mr. UNTERMYER. That is the reason your members can not deal
with the members of the Consolidated Exchange, is it not?
Mr. KEPPLER. Yes.
Mr. UNTERMYER. The

removal of these securities that have been
dealt in on the curb to the stock exchange list, does that deprive the
curb of a great deal of business?
Mr. KEPPLER. I can not answer. I do not know.
Mr. UNTERMYER. DO you not know anything about it?
Mr. KEPPLER. I do not know. I have never kept track of the transactions on the curb.
Mr. UNTERMYER. DO you not know that all the large issues of securities, bonds and stocks, are dealt in on the curb when they are
issued, up to the time that they are ready for listing on the Xew
York Stock Exchange?
Mr. KEPPLER. I should not say all. Some, but not by any means
all securities that are listed on the exchange.
Mr. UNTERMYER. Well, all prominent issues.
Mr. KEPPLER. Well, I hardly think so. I do not think so.
Mr. UNTERMYER. Does your firm deal on the curb ?
Mr. KEPPLER. NO, sir.



MONEY TEUST.

861

Mr. UNTERMYER. DO not any of your members deal with curb
brokers—buy securities on the curb?
Mr. KEPPLEE. Any of our members; members of the exchange ?
Mr. UNTEBMYEB. NO ; members of your firm ?
Mr. KEPPLER. I think it is very rare.
Mr. UNTEEMYEE. Suppose you want to buy Standard Oil stock
for a customer, where do you go?
Mr. KEPPLEE. I say it is very rare. We have very little business
of that kind.
Mr. UNTERMYER. That is not the question. Suppose you want to
buy Standard Oil stock, where do you go to buy it?
Mr. KEPPLEE. I suppose we would inquire of those who make a
business of dealing in that stock.
Mr. UNTERMYEB. Where is it listed?
Mr. KEPPLER. I do not know.
Mr. UNTERMYER. IS it not listed on the curb?
Mr. KEPPLER. I do not know.
Mr. UNTEEMYER. DO you not know that all the Standard Oil stocks
are listed only on the curb?
Mr. KEPPLER. I have absolutely no knowledge as to what is listed
on the curb.
Mr. UNTERMYER. DO you read the newspapers?
Mr. KEPPLER. I do.
Mr. UNTERMYER. DO you ever read the quotations?
Mr. KEPPLER. Quotations where?
Mr. UNTEEMYER. The stock quotations; the stock

market quotations.
Mr. KEPPLER. AS a general thing I do; yes, sir.
Mr. UNTEEMTEH. And you find in the papers a column devoted
to outside securities that are dealt in on the curb ?
Mr. KEPPLEE. I very rarely give myself the entertainment of reading quotations for things in which I have no interest or of which I
have no knowledge—in which my firm has no interest.
Mr. UNTERMYEE. Then you do not take any interest in the general
market quotations?
Mr. KEPPLER. I do; but not in the curb quotations.
Mr. UNTERMYER. Are not tobacco stocks important stocks ?
Mr. KEPPLER. Tobacco stocks?
Mr. UNTERMYER. Yes; stocks of the Tobacco Co. ?
Mr. KEPPLER. I think they are.
Mr. UNTERMYER. Are they not dealt in on the curb?
Mr. KEPPLER. I suppose they are. I do not know, sir.
Mr. UNTEEMYER. The curb association has now formulated a set
of by-laws and regulations, has it not?
Mr. KEPPLEE. I am so informed.
Mr. UNTERMYER. AS a member of the law committee, do you not
know it?
Mr. KEPPLER. NO, sir; the law committee has absolutely no knowledge of matters of that kind.
Mr. UNTERMYER. NO; but personally—rather than officially—you
have knowledge, have you not?
Mr. KEPPLEE. Only by seeing reference to it in the newspapers.
Mr. UNTEEMYER. Have you read them? Have you read the regulations of the curb ?




862

MONEY TKXJST.

Mr. KEPPLEK. NO, sir.

Mr. UNTERMYER. IS there anybody on the stock exchange who has
charge of that subject ?
Mr. KEPPLEK. NO committee of the stock exchange, sir, has charge
of that subject.
Mr. UNTERMYER. Suppose an operator wants to form a pool or a
syndicate to operate in a given stock so as to make profits for himself
and his associates out of it. How does he go about it ?
Mr. KEPPLER. Well, I must ask you to excuse me from answering
questions along that line. I can not say. It may seem very strange
to you that, in an experience of 30 or 40 years in Wall Street, I can
not answer these questions directly; but I never have had anything
to do with that kind of business or with pools of any sort. I have
no knowledge.
Mr. UNTERMYER. DO you not recognize that you are a very shining exception?
Mr. KEPPLER. I do not flatter myself in any way as being shining
or otherwise.
Mr. UNTERMYER. But you have been down in the Street, and have
known of these pools all around you, have you not ?
Mr. KEPPLER. I have heard of them; yes, sir.
Mr. UNTERMYER. And you have seen the effects of their operations
in the stock market, have you not—of the vast dealings in a given
stock?
Mr. KEPPLER. I like to be very exact in my answers. I may have
an impression at a given time that my attention is called to a certain
important change in a price, but I have no knowledge. I can not
tell you. I do not know how it was done—how it was brought
about—and it is merely hearsay or gossip.
Mr. UNTERMYER. YOU mean that you have never represented one
of these pools on the stock market ?
Mr. KEPPLER. I have never been interested directly or indirectly
in anything of the kind.
Mr. UNTERMYER. HOW long is it since you have been especially
active on the stock market ?
Mr. KEPPLER. Thirty-odd years.
Mr. UNTERMYER. NO; but how long is it since you have been
active ?
Mr. KEPPLER. I do not believe that I have been on the floor of the
stock exchange for two years or more.
Mr. UNTERMYER. Prior to that were you active?
Mr. KEPPLER. Quite familiar and active; not active in the modern
sense of the term.
Mr. UNTERMYER. YOU mean not active in the sense of buying and
selling?
Mr. KEPPLER. Not in the sense of dealing.
Mr. UNTERMYER. Not in the modern swim—is that what you
mean—of stock brokerage business ?
Mr. KEPPLER. The present idea of large business seems to be somewhat different from what it was 10, 20, or 30 years ago.
Mr. UNTERMYER. Are you competent to speak with respect to the
operations of the stock exchange clearing house, or is there somebody here who is better able to do that ?



MONEY TBUST.

863

Mr. KEPPLEE. Only in a general way. We have brought Mr.
Streit. •who is on the clearing house committee, who can give you
every phase of that operation.
Mr. UNTERMYER. DO you agree with that statement of the Hughes
report that a substantial part of the transactions on the exchange
are gambling? I will read it to you, so that we will not have any
question about it. It reads as follows:
It is unquestionable that only a small part of the transactions upon the
exchange are of an investment character. A substantial part would be characterized as virtually gambling.

Do you agree with that conclusion ?
Mr. KEPPLER. I should have to ask what they meant by a substantial part; what percentage that might be ?
Mr. UNTERMYER. YOU would not have any idea about it ?
Mr. KEPPLER. I would not deny that some transactions in stocks
are of a somewhat gambling nature. That is as far as I would go.
Mr. UNTERMYER. Should you say that 80 per cent of the dealings
on the stock exchange were plain gambling?
Mr. KEPPLER. Oh, I could not begin to answer that question.
Mr. UNTERMYER. That is all, Mr. Keppler. I think I have asked
you everything. Would you like to say something?
Mr. KEPPLER. NO, sir.

Witness excused.
At 1 o'clock p. m. the committee took a recess until 2 o'clock p. m.
AFTER RECESS.

The committee met pursuant to the taking of the recess.
TESTIMONY OF ME. SAMUEL F. STEEIT.

The witness was sworn by the chairman.
Mr. UNTERMYER. Where do you reside?
Mr. STREIT. City of New York.
Mr. UNTERMYER. What is your occupation?
Mr. STREET. Member of the New York Stock Exchange; banker
and broker.
Mr. UNTERMYER. What is yourfirm?
Mr. STREIT. H. T. Carey & Co.
Mr. UNTERMYER. HOW long have you been a member of the New
York Stock Exchange ?
Mr. STREIT. Since April 5, 1899.
Mr. UNTERMYER. Are you a member of the board of governors?
Mr. STREIT. I am.

Mr. UNTERMYER. Are you a member of any committee of the
board ?
Mr. STREIT. I am.
Mr. UNTERMYER. Of what committee?
Mr. STREIT. Of the committee on arbitration

and the committee
on clearing house.
Mr. UNTERMYER. When was the committee on clearing house established ?



864

MONEY TKUST.

Mr. STREIT. Approximately 1892, in May, when the clearing house
was established.
Mr. UNTEBMYER. Has the stock exchange clearing house been in
existence since 1892 ?
Mr. STHEIT. It had its twentieth anniversary in May of this year.
Mr. UNTERMYER. Pies se explain, if you will, the character of business at the clearing house and the way in which operations are conducted ther*
Mr. STREIT. In the first place, I would read the constitution.
Mr. UNTERMYER. Oh,
Mr. STREIT. Just in

status is explained:

my!

regard to the clearing house, in which its

[Art. 27, sec. 1, of the constitution.]
There shall be a clearing house for the purpose of acting as a common agent
of the members of the exchange in receiving and delivering such securities as
may from time to time be designated by the clearing-house committee.

Mr. UNTERMYER. I thought you were threatening to read the whole
constitution.
Mr. STREIT. Oh, no, indeed.
Mr. UNTERMYER. GO on, if you will, and explain the constitution
and the working of the clearing house.
Mr. STREIT. May I read from this memorandum, which is very
much more definite ?
Mr. UNTERMTER. Yes; if it is concise and not too long.
Mr. STREIT. Each individual or firm, members of the New York
Stock Exchange in _good standing, having adequate facilities for
transacting their business, is entitled to the privilege of the clearing
house after making a written application addressed to the chairman
of the clearing-house committee, which must -be approved by that
committee. The clearing house acts as agent for its members in
the settlement of all contracts in those stocks designated by the
clearing-house committee to be cleared, known as clearing-house
stocks. The clearing house, in acting as agent for its members, is
not only a labor-saying device by which a large proportion of the
work of the office is done, but through its receipt of a statement
each business day—except Friday, unless the Saturday following
becomes a holiday, when sheets will be presented on Friday—of afl
the transactions in cleared stocks to be received or delivered the next
delivery day—all days except Saturdays, Sundays, and holidays—
which is thoroughly examined in every respect as to its accuracy
and checked with the orders a clearing-house ticket (exchange
ticket) on which it accepts delivery, and which should be issued for
each transaction and exchanged between contracting parties, showing that they are correctly entered on the sheet, and if not, making
the entry in accordance with the orders issued to the clearing house.
It acts as auditing department for the members of the stock exchange
in their transactions.
Mr. UNTEKMYER. By way of practical illustration, suppose a
brokerage house has bought during the day 10,000 shares of Union
Pacific and has sold 8,000 shares of Union Pacific, how many shares
are delivered at the clearing house?
Mr. STREIT. Actual stocks?
Mr. UNTERMYER. Yes.



MONEY TRUST.

865

Mr. STREIT. It does not deliver any actual stocks to the clearing
house.
Mr. UNTERMYER. It gets 2.000 shares?
Mr. STREIT. Not from the clearing house.
Mr. UNTERMYER. What does it get from the clearing house?
Mr. STREIT. It gets from the clearing house an order to deliver
2,000 shares to the other brokers named by the clearing house who are
entitled to receive that 2,000 shares. If I may give a concrete illustration
Mr. UNTERMYER. Yes.
Mr. STREIT. If A sells

100 shares of stock to B, and B sells 100
shares of stock to C, A sends to B a ticket or memorandum stating
that he owes B 100 shares of stock. That ticket goes to the clearing
house. B sends to C a ticket or due bill (or whatever word you want
to use; it is a ticket, as we call it) showing that he is entitled to deliver to C and owes to C 100 shares of stock. Through the operations
of the clearing house simplified, they give an order to A to deliver
the stock to C.
Mr. UNTERMYER. I understand that.
Mr. STREIT. That is all.
Mr. UNTERMYER. That is not the transaction about which I am
inquiring.
Mr. STREIT. I misunderstood you.
Mr. UNTERMYER. If it appears from the sheet delivered by broker
A that he has sold 8,000 shares of a given stock and has bought 10,000
shares of a given stock, for what amount of stock does he get a
ticket?
Mr. STREIT. He gives a ticket, and receives a ticket, for the total
amount, and receives an order from the clearing house
Mr. UNTERMYER. For 2.000 shares ?
Mr. STREIT. TO receive 2,000 shares from the party mentioned and
stated by the clearing house.
Mr. UNTERMYER. A does not present the certificates for the 8,000
shares he has sold, does he ?
Mr. STREIT. He does not present the actual certificates.
Mr. UNTERMYER. Nobody presents any certificates to the clearing
house, do they ?
Mr. STREIT. Not to the clearing house itself; no, sir.
Mr. UNTERMYER. That is all left to be adjusted between the brokers
who hold these various slips ?
Mr. STREIT. On the orders from the clearing house; yes, sir.
Mr. UNTERMYER. On those slips?
Mr. STREIT. Yes,

sir.

Mr. UNTERMYER. If A, having sold 8,000 shares and having bought
10,000 shares, were required to present the certificates for his 8,000
shares at the clearing house, or the numbers of those certificates, if
you please, and to get the 10,000 shares that he bought
Mr. STREIT. Pardon me for interrupting you
Mr. UNTERMYER (continuing). If he were required to present the
8,000 shares sold, that would reduce the speculation very much,
would it not?
Mr. STREIT. I am not prepared to say.
Mr. UXTERMYER. Can vou not see it would?



866

MONEY TBXJST.

Mr. STREIT. Anything that increases the facilities of the exchange
may be conducive to speculation, but the clearing house is simply
Mr. UNTERMYER (interrupting). I do not want to have a general
discussion of the subject, and I have not asked for it. You "understand that, do you not?
Mr. STREIT. I do now, that you say so.
Mr. UNTERMYER. DO you not understand that if every broker who
sold stock were required to deliver his stock at the clearing house,
or the certificates for it, it would materially lessen speculation ?
Mr. STKEIT. I do not know that.
Mr. UNTERMYER. YOU do not think so?
Mr. STREIT. I do not know that.
Mr. UNTERMYER. What is your opinion ?
Mr. STREIT. My opinion is that the clearing house makes it easier
to transact the business in stocks.
Mr. UNTERMYER. The question will be repeated' to you.
Upon request the stenographer repeated the pending question, as
follows:
Do you not understand that if every broker who sold stock were required to
deliver his stock at the clearing house, or the certificates for it, it would materially lessen stock speculation?
Mr. STREIT. I do not know that.
Mr. UNTERMYER. What is your opinion?
Mr. STREIT. I have not any opinion.
Mr. UNTERMYER. HOW long have you been a broker?
Mr. STREIT. Since 1899; about 14 years.
Mr. UNTERMYER. DO you not know that short selling would be

very much curtailed if the broker had to deliver the numbers of the
certificates sold?
Mr. STREIT. I do not know that.
Mr. UNTERMYER. What is your opinion?
Mr. STREIT. I have not any opinion on it.
Mr. UNTERMYER. YOU can not grasp the situation, or you do not
want to, or what is the idea about it, that you have no opinion on
such a proposition?
Mr. STREIT. Because a great many different things might enter
into it—other methods that would make it easier or more difficult.
Mr. UNTERMYER. We are not speaking of any other method than
the simple fact of the broker presenting his certificates at the stock
exchange clearing house and showing that he is dealing in actual
stock, and if he has sold the stock for a customer or for himself that
he did not own, his being required to go and buy the stock. Do you
not know that would reduce speculation and speculative transactions ?
Mr. STREIT. That has nothing to do with the clearing house.
Mr. UNTERMYER. I did not ask you that. Do you not know if that
were required to be done it would* reduce speculative transaction? ?
Mr. STREIT. I do not know that.
Mr. UNTERMYER. YOU have no opinion on the subject?
Mr. STREIT. I do not know that.
Mr. UNTERMYER. YOU have no opinion on the subject?
Mr. STREIT. NO.
Mr. UNTERMYER. DO




you consider short selling legitimate?

MONEY TBUST.

Mr.
Mr.
Mr.
Mr.
Mr.

Mr.
Mr.

Mr.
Mr.

Mr.
Mr.
Mr.
Mr.

Mr.
Mr.

867

STREIT. I do not think about it one way or the other?
UXTERMYER. You never thought about it ?
STREIT. I have thought of it.
UXTERMYER. You have never reached a conclusion?
STREIT. NO.
UXTERMYER. YOU never reached a conclusion?
STREIT. NO.
UXTERMYER. YOU know what it is, do you not?
STREIT. Yes.
UXTERMYER. Your customers know what it is, do they not?
STREIT. I presume so; some of them.
UXTERMYER. YOU have done it for them, have you not?
STREIT. Yes.
UXTERMYER. And for yourself?
STKEIT. NO.
UXTERMYER. Only for other people?
STREIT. Only for other people.
UXTERMYER. But you have not made up your mind as to its

Mr.
Mr.
Mr.
moral slant, then?

Mr. STREIT. Yes.
Mr. UXTERMYER. YOU have?
Mr. STREIT. I have.
Mr. UXTERMYER. Then do you think it is legitimate ?
Mr. STREIT. I think it is legitimate.
Mr. UXTERMYER. Then you have reached a conclusion

since you
have been testifying?
Mr. STREIT. I think I misunderstood the question. That is my
answer; I think it is legitimate.
Mr. UXTERMYER. What is the purpose of short selling ?
Mr. STREIT. Different purposes with different people. I can not
read their minds.
Mr. UNTERMYER. Not their minds; why should any man want to
sell short?
Mr. STREIT. I am not prepared to answer that question.
Mr. UNTERMYEB. Might I suggest that the general reason would
be in order to buy the stock that he had sold and did not have, at
a lower level of prices ?
Mr. STREIT. TLOU might.
Mr. UNTERMYER. That is right, is it not?
Mr. STREIT. Presumably. The gentlemen on the stand previous
to me have had various operations in which short selling is necessary.
There are so many different kinds I have nothing to say on it.
Those gentlemen referred to transactions where they were buying
against stock that was to arrive.
Mr. UXTERMYER. YOU know that the occasion when short selling
is done against stock that is to arrive is not what is called short selling, do you not ?
Mr. STREIT. The effect is the same.
Mr. UNTERMYEB. I did not ask that. It is not what we know as
short selling, when a man goes in and is selling something that he
has, but that has not yet been delivered; that is not known as short
selling, is it?
Mr. STREIT. It is technically known as short selling against long
stock.



868

MONEY TEUST.

Mr. UNTERMYEB. That is a different transaction; short selling
against long stock?
Mr. STEEIT. It might be.
Mr. UNTEKMYEH. It is, is it not?
Mr. STEEIT. It is if the circumstances are absolutely known.
Mr. UNTERMYER. Are there not two different transactions, one
known as short selling, when the man who sells has not got the stock,
and the other known as short selling against long stock, when a man
sells the stock and has it?
Mr. STREIT. Yes.
Mr. UNTERMYER.

We are talking about short selling, and my question was directed to ascertaining what can be the reason for short
selling.
Mr. STREIT. I do not consider that is germane to the clearing
house.
Mr. UNTERMYER. Did you understand you were only called as to
the clearing house?
Mr. STREIT. I so understood; yes, sir; purely for that. I understood you asked for a clearing-house official.
Mr. UNTERMYER. YOU would rather not be examined on the general subject?
Mr. STREIT. I would rather not.
Mr. UNTERMYER. YOU have been listening here for two days, have
you not?
Mr. STREIT. Yes, sir.
Mr. UNTERMYER. YOU have

heard questions put to Mr. Sturgis and
Mr. Keppler, and you have had some ideas formed on this question,
have you not?
Mr. STREIT. Sometimes I did and sometimes I did not. It was a
matter I was not interested in as regards myself.
Mr. UNTERMYER. And you were not paying any attention to it ?
Air. STREIT. I will not say that.
Mr. UNTERMYER. I think that is all, Mr. Streit, since you would
rather not be examined.
Witness excused.
TESTIMONY OF HAEEY CONTENT.
The witness was sworn by the chairman.
Mr. UNTERMYER. Where do you reside?
Mr. CONTENT. New York City.
Mr. UNTEBMYEH. What is your business?
Mr. CONTENT. Stock broker. •
Mr. UNTERMYER. What is your firm?
Mr. CONTENT. H. Content & Co.
Mr. UNTERMYER. HOW long have you been a member of the New
York Stock Exchange?
Mr. CONTENT. Since 1885.
Mr. UNTERMYER. YOU are a very active broker, are yon not?
Mr. CONTENT. Sometimes.
Mr. UNTERMYER. Your firm is one of the most active in the business on the stock exchange, is it not ?
Mr. CONTENT. At times.
Mr. UNTERMYER. YOU are familiar with the business on the floor?




MONEY TBTJST.

869

Mr. CONTENT. I am.
Mr. UNTERMYER. DO

you know what is meant by manipulation of
stocks?
Mr. CONTEXT. I know how the term is used.
Mr. UNTERMTER. YOU know how the thing is done, do you not?
Mr. CONTENT. I may guess a lot.
Mr. UNTERMYER. XO ; I would not like to have you guess. I would
like to have you tell the committee if you do not know how it is done.
Mr. CONTEXT. XO; I can not say how it is done. Every case is
different.
Mr. UNTERMYER. It is done differently in different cases ?
Mr. CONTENT. Every one. I do not know of two similar ones.
Mr. UNTERMYER. HOW many kinds of manipulation are you able
to describe to the committee?
Mr. CONTENT. I can not describe any from my own personal
knowledge.
Mr. UNTERMYER. HOW many forms of it are there?
Mr. CONTENT. Innumerable. I suppose.
Mr. UNTERMYER. But all on one general principle, are they not ?
Mr. CONTENT. NO.
Mr. UXTERMYER. How many principles
Mr. CONTENT. A great many.
Mr. UNTERMYER. Just tell us a few of

are there in manipulation?

them. Is one of them the
principle of higher level of prices?
Mr. CONTENT. And higher level of dividends.
Mr. UNTERMYER. And another principle is lower level of prices ?
Mr. CONTENT. With lower level of dividends or bad earnings.
You will find, if I may tell you, that to-day and for a great many
years the prices are reached in the stock exchange by supply and
demand, and manipulation is exaggerated.
Mr. UNTERMYER. YOU will have to excuse me, but we are very much
pressed for time and we do not want any general dissertation. We
simply want the principles of manipulation.
You say manipulation is for a higher or a lower level of prices?
Mr. CONTENT. Yes. sir.
Mr. UNTERMYER. YOU say

it is for a higher level of prices with
increased dividends?
Mr. CONTENT. Or with reduced dividends.
Mr. UNTERMYER. IS it not frequently for a higher level when there
are no increased dividends?
Mr. CONTENT. XO ; I do not think so.
Mr. UNTERMYER. YOU do not think nondividend stock is manipulated, like Rock Island or Reading?
Mr. CONTENT. Very little, if any. There is not any at the present
time.
Mr. UNTERMYER. I do not mean a manipulation that took place
yesterday.
Mr. CONTENT. Oh!
Mr. UNTERMYER. I

am speaking of the general operations of the
business.
Mr. CONTENT. I think it has been manipulated.
Mr. UNTERMYER. It is manipulated from time to time ?
Mr. CONTENT. It has been; yes, sir.
Mr. UNTERMYER. Are not stocks manipulated regardless of whether
they
 are dividend-paying stocks or not dividend-paying stocks?


870

MONEY TBUST.

Mr. CONTENT. No; I do not think so.
Mr. UNTEBMYEB. Have not the nondividend-paying stocks been
manipulated quite as frequently as the dividend-paying stocks ?
Mr. CONTENT. I do not think they have.
Mr. UNTEEMTEE. TO what greater extent should you say that dividend-paying stocks are manipulated on the exchange than nondividend-paying stocks ?
Mr. CONTENT. The percentage I could not give you. That is
impossible.
Mr. UNTEBMYEB. But you think it is greater in respect to dividendpaying stocks ?
Mr. CONTENT. I think it works up and down.
Mr. UNTEBMYEB. DO you not know that a prolific source of speculation is on nondividend-paying stocks on rumors of coming
dividends ?
Mr. CONTENT. Yes.
Mr. UNTEBMYEB. IS it on rumors of dividends that do come ?
Mr. CONTENT. Probably.
Mr. UNTERMYEE. Sometimes they do not materialize ?
Mr. CONTENT.' That happens.
Mr. UNTERMYEE. DO you know whether or not manipulation

of
stocks by the insiders is made at times on the rumors of dividends
that do not come?
Mr. CONTENT. I have heard of it. I do not know it.
Mr. UNTERMYER. Have you not conducted a number of these manipulations at different times in the past ?
Mr. CONTENT. I have not.
Mr. UNTEEMYEE. What?
Mr. CONTENT. I have not.
Mr. UNTEBMYER. YOU give out orders, do you not, on the exchange ?
Mr. CONTENT. NO.
Mr. UNTEBMYEB. YOU

want the committee to understand that you
personally have never been engaged in giving buying and selling
orders?
Mr. CONTENT. No; I do not.
Mr. UNTEBMYER. YOU do not

want them to understand that, do
you?
Mr. CONTENT. NO ; I have given orders to buy and sell stock—only
when I have had orders.
Mr. UNTEBMYEB. Yes; I understand that. You mean you do not
do it on your own account ?
Mr. CONTENT. I trade on my own account at times.
Mr. UNTEEMYEB. YOU manipulate on your own account at times
do you not ?
Mr. CONTENT. NO; I do not manipulate, because I have no object
in it.
Mr. UNTEBMYEB. IS there not an object in manipulating; for instance, if you want to depress a stock, selling more than you buy ?
Mr. CONTENT. I do not understand that ?
Mr. UNTEEMYEB. I S there not money to be made, and is not money
made, on the exchange by members by manipulating a given stock to
a lower level or a higher level ?
Mr. CONTENT. Well, I do not think so. Wait a minute; let me
have that question.




MONEY TBUST.

871

The question was read by the stenographer.
Mr. CONTENT. Does that mean for themselves?
Mr. UNTERMYEB. Sometimes.
Mr. CONTENT. I do not think so.
Mr. UNTEEMYEE. Only for customers?
Mr. CONTENT. I think so.
Mr. UNTERMYEB. Did you hear Mr. Sturgis testify this morning on
the witness stand?
Mr. CONTENT. Yes.
Mr. UNTEBMYEB. Did

you hear him say that a very large proportion of the dealings of that kind were by the members themselves?
Mr. CONTENT. I heard him say that a large part of the dealings
were for members, but not manipulations.
Mr. UNTEBMYEB. NO; but did you not hear him say that a large
part of the manipulated dealings were for themselves ?
Mr. CONTENT. NO, sir; I did not.
Mr. UNTERMYEB. Did you not hear

him say that it was easier for
them to do it, because they did not have to pay commissions?
Mr. CONTENT. Easier for them to trade, but that is not manipulation.
Mr. UNTEBMYEB. I want to know if you did not hear him say that
it was easier for them to manipulate the stocks?
Mr. CONTENT. NO, sir; I did
Mr. UNTEBMYEB. YOU heard
Mr. CONTENT. Yes.
Mr. UNTEBMYEB. Please go

not.

him testify?

on and tell the committee how you
trade in a stock , when you are given, by an operator, orders to buy
and sell that stock, either to get a higher level or a lower one. Take
first the case of an order to trade in stock to put up the price. How
would you go about it?
Mr. CONTENT. I do not know that I ever had an order
Mr. UNTERMYEB. What do you do ?
Mr. CONTENT. I do not know that I ever had an order of that kind.
Mr. UNTERMYBE. YOU never had an order to put stock up to a
higher level?
Mr. CONTENT. TO manipulate it? You said manipulate it to a
higher level.
Mr. UNTERMYER. YOU never had an order, did you, to put a stock
to a higher level, through buying and selling orders in that stock?
Mr. CONTENT. NO; I do not think I ever did. I have had orders
to buy a stock to a price, not knowing who I was going to get it from,
but your term " manipulation " does not meet with my idea of that.
Mr. UNTEBMYER. Have you had orders at the same time to sell the
stock from the same person?
Mr. CONTENT. I have had orders to sell—from the same person ?
Mr. UNTERMYEB. Yes; certainly. At the same time. To distribute
orders to buy and sell stock; to deal in it in that way ?
Mr. CONTENT. Not to any extent; no, sir.
Mr. UNTEBMYEB. The question did not call for the extent.
Mr. CONTENT. I did not mean that. What I mean is this
Mr. UNTERMYER. YOU mean, not very many transactions ?
Mr. CONTENT. NO; not so many.
Mr. UNTEHMYEB. Let us take any of the transactions you have had.
 71352—PT 11—13


i

872

MONEY TRUST.

Mr. CONTENT. If you can just tell me what you mean by manipulation orders, I can testify better.
Mr. UNTERMYER. YOU do not know what that means ?
Mr. CONTENT. NO, sir; I think some of the answers were not just
what I would have given. If you will divide for me what you mean
by manipulation orders, if you will divide those two questions, I can
answer.
Mr. UNTERMYER. I will divide it for you.
Mr. CONTENT. All right.
Mr. UNTERMTER. Suppose an operator wants to depress the market
in the stock, what does he do?
Mr. CONTENT. He gives out selling orders.
Mr. UNTERMYER. He sells it short, does he not ?
Mr. CONTENT. He may have it, and may want to buy more stock.
Mr. UNTERMYER. If he has not got it, what does he do ?
Mr. CONTENT. He sells it short.
Mr. UNTERMYER. He does that for the purpose of getting a lower
level of prices?
Mr. CONTENT. Yes.
Mr. UNTERMYER. And

when the stock has gone down far enough,
what does he do? He buys it in again?
Mr. CONTENT. Buys it in again if he wants it. Sometimes he sells
more.
Mr. UNTERMYER. Sometimes he sells more, to depress it further?
Mr. CONTENT. Yes, sir.
Mr. UNTERMYEB. And he

keeps on selling it until he thinks it is
down as far as it will go; is that right?
Mr. CONTENT. Yes.
Mr. UNTERMYER. And then he covers, does he not ?
Mr. CONTENT. Sometimes. Sometimes he does not.
Mr. UNTERMYEB. Does he ever cover?
Mr. CONTENT. Oh, yes.
Mr. UNTERMYER. He has got to cover, has he not?
Mr. CONTENT. Yes; but not always at a profit.
Mr. UNTERMYER. I did not ask you that.
Mr. CONTENT. Oh. yes; you said when it gets to

the bottom he
covers.
Mr. UNTERMYER. He covers sometime, does he not?
Mr. CONTENT. Yes: he covers at sometime.
Mr. UNTERMYER. That you consider perfectly legitimate?
Mr. CONTENT. I do.
Mr. UNTERMYER. It makes plenty of commissions, does it
Mr. CONTENT. Well, it makes just as many buying.
Mr. UNTERMYER. YOU think that the selling of a security

not?

that a
ir.an has not got, for the purpose of depressing the market so that he
can make a profit out of buying it at a lower level, is legitimate?
Mr. CONTENT. I take exception to that. A man does not always
sell to depress the market.
Mr. UNTERMYER. I am speaking of the people who sell short.
Mr. CONTENT. Yes; all right.
Mr. UNTERMYER. DO they not sell for that purpose ?
Mr. CONTENT. Merchants sell short, very often.
Mr. UNTERMYER. Does not the man who sells short do so to depress the market ?




MONEY TEUST.

873

Mr. CONTENT. He expects to buy cheaper.
Mr. UNTEBMYER. Does he not do so in order to depress the market
so that he can buy cheaper?
Mr. CONTENT. He tries to depress the market, but he does not
always do it.
Mr. UNTEBMYER. That is what I say. His purpose is to depress
the market, is it?
Mr. CONTENT. I do not think his purpose is always to depress the
market.
Mr. UNTERMYER. When he sells short, what can be his purpose
except to depress the market in order to get the stock back cheaper?
Mr. CONTENT. He may think it is going down.
Mr. UNTERMYER. Yes; and he likes to join in while it is going
down?
Mr. CONTENT. Yes; he likes to join in. But that does not say that
he depresses the market.
Mr. UNTEBMYER. YOU consider that perfectly legitimate?
Mr. CONTENT. I do.
Mr. UNTERMYER. Let

me come back to the question of manipulation. Suppose an operator or a pool has got stock on hand, you
understand
Mr. CONTENT. Yes.
Mr. UNTERMYER. AS

stock.

I believe the brokers call it, accumulated

Mr. CONTENT. Yes.
Mr. UNTERMYER. IS that the word?
Mr. CONTENT. Well, I would not use it.
Mr. UNTERMYER. IS that the word?
Mr. CONTENT. YOU mean that a pool has accumulated stock ?
Mr. UNTERMYEB. Yes.
Mr. CONTENT. I suppose so.
Mr. UNTERMYER. DO you not know so, Mr. Content? [After

a
pause.] Why do you not answer ?
Mr. CONTENT. NO ; I would not say it is accumulated stock.
Mr. UNTERMYER. YOU never heard of a pool accumulating stock?
Mr. CONTENT. Not very often.
Mr. UNTERMYEB. What?
Mr. CONTENT. Not very often have I heard the words " accumulated
stock."
Mr. UNTERMYEB. YOU never heard that a pool was accumulating
stock ?
Mr. CONTENT. Oh, jres. I thought you said " accumulated."
Mr. UNTERMYER. Did you really think so ?
Mr. CONTENT. Yes.
Mr. UNTEBMYER. The

common thing, is it not?
Mr. CONTENT. Yes.
Mr. UNTERMYEB. It

accumulation of stock by a pool is a very

is easier to accumulate it than to get rid of it ?
[After a pause.] You may answer.
Mr. CONTENT. I do not know. I can not answer.
Mr. UNTERMYER. What is your experience?
Mr. CONTENT. My experience is that pools have got rid of their
stocks very well, at times. I have heard of it. I have never been
in one.




874

MONEY TRUST.

Mr. UNTERMTER. But you have sold for them, have you not ?
Mr. CONTENT. I have sold when I had orders; I do not know
whether it was
Mr. UNTERMTER. YOU have sold and bought for them, have you
not?
Mr. CONTENT. NO; not for a pool. I have sold for individual firms;
I do not know whether it was pool stock or whose it was.
Mr. UNTERMTEH. YOU have never heard of any such thing as a
pool in Wall Street, have you ?
Mr. CONTENT. Yes; I have heard of a pool.
Mr. UNTERMTER. YOU have never acted for a pool, have you ?
Mr. CONTENT. NO.
Mr. UNTERMTER. What was it when you acted for it ?
Mr. CONTENT. I have acted for some individual or firm.
Mr. UNTERMTER. Who was operating for the pool ?
Mr. CONTENT. Or for some house.
Mr. UNTERMTER. Some house that was managing a pool ?
Mr. CONTENT. Yes.
Mr. UNTERMTER. That is the way it is done ?
Mr. CONTENT. That is the way it is done.
Mr. UNTERMTER. The brokerage house gets together a pool,

is given to some one house or to some one man to manage f

and it

Mr. CONTENT. Yes.
Mr. UNTERMTER. And he buys and sells for the pool ?
Mr. CONTENT. Yes.
Mr. UNTERMTER. On account of the pool ?
Mr. CONTENT. Yes.
Mr. UNTERMTER. IS that often done in order to make a stock active ?
Mr. CONTENT. It is not done now as much as it used to be. It is

done very little now.
Mr. UNTERMTER. YOU mean not yesterday ?
Mr. CONTENT. I mean in the last two years.
Mr. UNTERMTER. YOU mean there is no money in it?
Mr. CONTENT. There is no money in it.
Mr. UNTERMTER. Why is that?
Mr. CONTENT. It used to be the old-fashioned idea, to get a pool.
Mr. UNTERMTER. What is the modern way of doing i t !
Mr. CONTENT. Of everybody for themselves.
Mr. UNTERMTER. Each man a pool in himself?
Mr. CONTENT. Each man a pool in himself.
Mr. UNTERMYER. YOU mean there are a number of big operators
now?
Mr. CONTENT. There are a number of big operators to-day. They
do not get together.
Mr. UNTERMTER. YOU mean that nowadays the big operators undertake this operation that was usually formerly undertaken by a
pool?
Mr. CONTENT. Yes.
Mr. UNTERMTER. Does

one of these big operators associate other
people with him?
Mr. CONTENT. Not very often.
Mr. UNTERMTER. What has led to the change ?
Mr. CONTENT. I do not know.



MONEY TBUST.

875

Mr. UNTERMYER. DO you think it is because they find it is safer
not to trust others?
Mr. CONTENT. Not to have partners.
Mr. UNTERMTEB. Safer not to trust the information to any associates, is that it?
Mr. CONTENT. Yes; I think so.
Mr. UNTERMYER. That has been the result of bitter experience, has
it not?
Mr. CONTENT. I think so.
Mr. UNTERMYER. IS that because a good many partners in the old
pools used to sell each other out?
Mr. CONTENT. Yes; that is where the short selling came in.
Mr. UNTERMYER. That is where a good deal of short selling came
in, is it?
Mr. CONTENT. Yes.
Mr. UNTERMYER. Does

it often happen that a banking house or
brokerage house—a banking house in charge of a stock, a new security—wants to make it active ?
Mr. CONTENT. Yes.
Mr. UNTERMYER. That

is, the stock is listed on the exchange, and
then what happens?
Mr. CONTENT. Sometimes it is active, and sometimes it is active
at first. It varies.
Mr. UNTERMYER. HOW is it made active—a new security, for instance ?
Mr. CONTENT. By distributing orders.
Mr. UNTERMYER. A new security that is to be introduced ?
Mr. CONTENT. I should imagine, by distributing orders.
Mr. UNTERMYER. YOU say you should imagine. Have you not
done that kind of business ?
Mr. CONTENT. I may have •
Mr. UNTERMYER. What?
Mr. CONTENT. I may have had some orders to buy and sell, but
I never had any orders to distribute in a new security.
Mr. UNTERMYER. YOU did not distribute them?
Mr. CONTENT. NO, sir.
Mr. UNTERMYER. What

houses do most of that business of distributing orders?
Mr. CONTENT. The houses that bring the securities out.
Mr. UNTERMYER. A banking house does its own distribution of
orders many times, does it not?
Mr. CONTENT. Usually.
Mr. UNTERMYER. IS it not a fact that it is usually intrusted to
some one broker to distribute orders ?
Mr. CONTENT. NO, sir; I do not think so.
Mr. UNTERMYER. YOU have known of that thing, have you not ?
Mr. CONTENT. NO, sir; I have not.
Mr. UNTERMYER. Suppose a corporation wants to make its securities active. Does it employ a broker?
Mr. CONTENT. What do you mean by a corporation?
Mr. UNTERMYER. Some company, the people in the company—the
main stockholders. Suppose they want to introduce a security on



876

MONEY TEU3T.

the exchange, and want to make it an active security. Do they employ a broker to create that activity?
Mr. CONTENT. I do not know. I have never been employed by
them.
Mr. UNTEBMYEB. YOU do not know what goes on around you, do
you?
Mr. CONTENT. I do not. I may guess; but I do not want to testify
to my own guess—because it is very often bad.
Mr. UNTEEMTEE. TO what extent do you deal in such securities
on the exchange?
Mr. CONTENT. I do not know.
Mr. UNTEBMYEB. YOU can not give us any idea of it ?
Mr. CONTENT. NO.
Mr. UNTERMYEB. I mean you are a large trader—that
Mr. CONTENT. I trade myself, and I have customers.
Mr. UNTEBMYEB. DO you not know that a brokerage

is the point ?

house is tht
usual medium through which these orders are given out—these
orders to make a stock active?
Mr. CONTENT. NO, sir; I do not think so. I think the banking
houses are generally the ones that distribute their own orders.
Mr. UNTEEMYEB. YOU think they distribute these orders?
Mr. CONTENT. They give them to brokers.
Mr. UNTEBMYEB. They give out orders to brokers to buy, and to
brokers to sell?
Mr. CONTENT. I should imagine so.
Mr. UNTERMYER. What?
Mr. CONTENT. I should imagine so. The reason orders are given
out to sell is simply to see that things do not occur that have occurred
two or three times—that the market does not get away. You list
a new security, and there might be a great many buyers, and to prevent that wild excitement they place orders in on the scale up and on
the scale down, for bad news or anything like that.
Mr. UNTERMYER. That is, when the orders to buy are placed the
orders to sell are placed with other brokers, are they not ?
Mr. CONTENT. Yes, sir.
Mr. UNTERMYEE. And are
Mr. CONTENT. Those are:

the orders to buy placed on the scale ?
but if they want to buy they give mar
ket orders. They do not know whose stock they are going to get.
Mr. UNTEBMYEB. Never mind about that. Let us keep to the
point.
Mr. CONTENT. Well, that is the point.
Mr. UNTERMYER. The orders to buy are given on a scale up?
Mr. CONTENT. I should imagine so.
Mr. UNTERMYER. And then the orders to sell are given at the same
time on a scale down ?
Mr. CONTENT. On a scale down.
Mr. UNTEBMYEE. If they want to introduce the security, do they
give orders to sell as much stock as they give orders to buy ?
Mr. CONTENT. Every case is different.
Mr. UNTEBMYEB. Each case is different ?
Mr. CONTENT. Yes, sir.
Mr. UNTEBMYER. And that
Mr. CONTENT. I do.



you consider entirely legitimate?

MONEY TBUST.

877

Mr. UNTERSIYER. Do you not undersand that where that is done in
order to get a higher range of prices the public is deceived?
Mr. CONTENT. I do not think so.
Mr. UNTERMYER. Suppose through the manipulation of buying
and selling orders such as you have described and the execution of
those orders the stock is put up, is it not put up artificially?
Mr. CONTENT. NO.
Mr. UNTERMYEE. YOU think that is perfectly natural ?
Mr. CONTENT. I do. Your question supposes that when

they give
an order to put a stock up or put a stock down it is accomplished?
Mr. UNTERMYER. NO ; I do not suppose it is accomplished.
Mr. CONTENT. But from your questions
Mr. UNTERMYER. Let us see if it is accomplished or not.
Mr. CONTENT. There are other influences that come in between.
Mr. UNTERMYER. The public comes in between, does it not ?
Mr. CONTENT. Very often.
Mr. UNTERMYER. Yes; and sometimes one of these orders matched
against the other does not work out?
Mr. CONTENT. They are not matched. I take exception to that,
too.
Mr. UNTERMYER. In that sense they are. If an order to sell is
given and an order is given to buy at a quarter higher than the order
to sell, they are in a sense matched, are they not?
Mr. CONTENT. NO ; I take exception to that.
Mr. UNTERMYER. YOU say they do not always work out, anyway?
Mr. CONTENT. They do not always work out absolutely.
Mr. UNTERMYER. But ordinarily they do?
Mr. CONTENT. NO; they do not, for this reason: When a stock is
listed on the stock exchange a majority of that stock can not be held
by any one group of men before it is listed, and when it is listed
there are probably 50 other interests, if the stock is large enough,
who all have stock, and who might want to buy or who might want
to sell.
Mr. UNTERMYER. DO you not know that when a new stock is issued—say a syndicate issues a new security; do you understand?
Mr. CONTENT. Yes.
Mr. UNTERMYER. And puts it on the market ?
Mr. CONTENT. Yes.
Mr. UNTERMYER. DO you not know that in such

cases the syndicate
participations are frequently delivered under an understanding that
they are not to be disposed of for a given time—six months or a year
or whatever it may be—so that while the stock is in the hands of
people nominally, they are under commitment not to part with it?
Mr. CONTENT. NO : that is what I
Mr. UNTERMYER. YOU do not know that that is the way marketrare made for new securities?
Mr. CONTENT. I do not think that is done any more. I have not
heard of its being done in years.
Mr. UNTERMYER. In how"many years?
Mr. CONTENT. In years. I have not heard of that being done in
five years.
Mr. UNTERMYER. YOU have not ?
Mr. CONTENT. NO.



878

MONEY TEUST.

Mr. UNTERMYER. YOU have not heard of its being done within six
months ?
Mr. CONTENT. NO; I have not.
Mr. UNTERMYER. Why should not anybody who wants to make a
stock active, and wants to get a higher level of prices, simply go in
and buy the stock without putting in selling orders ?
Mr. CONTENT. If they want to make a higher level of prices they
generally do take what stock is in the market.
Mr. UNTERMYER. What is the purpose of putting in the selling
orders ?
Mr. CONTENT. Theydo not do it if they want to buy the stock.
Mr. UNTERMYER. What is it they want to do when they put in
buying and selling orders? That is when they want to make it
active without buying, is it not?
Mr. CONTENT. That is when they do not want to buy the stock.
Mr. UNTERMYER. They do not want to buy the stock, and yet they
want to have it appear that the stock is being actively traded in.
Is that right?
Mr. CONTENT. That is right.
Mr. UNTERMYER. And that you consider perfectly justifiable ?
Mr. CONTENT. I do.
Mr. UNTERMYER. DO

you not think that that rather attracts the
public and leads them to Delieve that the stock is being actively traded
in, when in fact it is not?
Mr. CONTENT. No; I do not think it deceives the public.
Mr. UNTEKMYEH. YOU do not? Do you think the public knows
what is going on behind the scenes?
Mr. CONTENT. I think the public have all benefited by it.
Mr. UNTERMYER. Oh! You think they have benefited by it, do
you?
Mr. CONTENT. Yes.
Mr. UNTERMYER. What do you mean by that?
Mr. CONTENT. I mean I think that people who

have gone in—you
can mention a few cases in the stock exchange
Mr. UNTERMYER. NO; but on the whole?
Mr. CONTENT. On the whole, I think that people who have gone
into stocks on the stock exchange have all been benefited by it.
Mr. UNTEBMYER. YOU think that, as a rule, people who buy stocks
on the stock exchange make money? Is that it?
Mr. CONTENT. Those that keep them; yes.
Mr. UNTERMYER. YOU think they make money. What about the
people who buy on margin? Do they benefit, too?
Mr. CONTENT. Sometimes.
Mr. UNTERMYER. I mean do you think the rule is that it is a good
thing for them, too ?
Mr. CONTENT. NO ; because I think they
Mr. UNTERMYER. DO you think it is a good thing for them?
Mr. CONTENT. I like it myself. I can only answer for myself.
Mr. UXTERMYER. That is not the question. We are speaking of
your consideration for the public. Mr. Content. Do you think it is
a good thing for the public, and that the public has been benefited b;r
buying stocks on margins?
Mr. CONTENT. If they do not buy too many.



MONEY TEUST.

879

Mr. UNTERMYER. Take the last occurrence of a few days ago. Do
you think the people who had stocks on margins during that flurry
were benefited f
Mr. CONTENT. NO: I know they were not benefited.
Mr. UNTERMYER. They were wiped out, were they not ?
Mr. CONTENT. Oh, I do not know about that; if they had sufficient
margin they were not wiped out.
Mr. UNTERMYER. YOU do not know that people were wiped out
when there were declines such as we had in the last week ?
Mr. CONTENT. I suppose there were some wiped out. I know
there were some wiped out.
Mr. UNTERMYER. Yes; but on the whole you think it is a good
thing for the public to speculate in stocks?
Mr. CONTENT. I do, if they want to speculate.
Mr. UNTERMYER. That is all. Is there anything you would like
to say?
Mr. CONTENT. NO, indeed.
Witness excused.
TESTIMONY OF J. P. GEIEE.
The witness was sworn by the chairman.
Mr. UNTEHMYER. Mr. Grier, you live in New York, do you not ?
Mr. GRIER. I do; yes.
Mr. UNTERMYER. And

Exchange?

are you a member of the New York Stock

Mr. GRIER. Yes.
Mr. UNTERMYER. Of what firm are you a member?
Mr. GRIER. C. D. Barney & Co.
Mr. UNTERMYER. Are you the floor member ?
Mr. GRIER. Yes; one of the floor members.
Mr. UNTERMYER. HOW many members of your firm

of the exchange?

are members

Mr. GRIER. TWO.
Mr. UNTERMYER. HOW

long have you been connected with the
New York Stock Exchange?
Mr. GRIER. Either 9 or 10 years. I do not know whether it was
in 1902 or 1903 that I joined.
Mr. UNTERMYER. C. D. Barney & Co. do a very extensive brokerage
business, do they not?
Mr. GRIER. More of an investment business.
Mr. UNTERMYER. DO they do a very extensive speculative business
for customers?
Mr. GRIER. I should not say very extensive; no.
Mr. UNTERMYER. DO they act for numerous syndicates in the
marketing of securities?
Mr. GRIER. NO; I should say not.
Mr. UNTERMYER. Have they, from time to time, so acted for
syndicates ?
' Mr. GRIER. In marketing stocks on the New York Stock Exchange?
Mr. UNTERMYER. Yes.
Mr. GRIER. I should say

with the firm.




not. Not since I have been connected

880

MONEY TEUST.

Mr. UNTEBMYEE. They do not market stocks for any pool ?
Mr. GRIEE. I do not think there has been a pool on the books since
I was a member of the firm.
Mr. UNTEBMYER. That is not your class of business, is it ?
Mr. GRIER. NO, sir.
Mr. UNTEBMYEB. Are you familiar with that kind of business ?
Mr. GRIEE. NO.
Mr. UNTERMYER. YOU know it is done, do you not?
Mr. GEIEE. I take it for granted it is done. I have heard so.
Mr. UXTERMYER. Do you deal for large operators?
Mr. GRIEE. We have some large operators on our books; yes.
Mr. UNTERMYER. Those are speculators, are they not ?
Mr. GRIER. NO, they are nearly all investors. I should not say all,

but a good portion of them are.
Mr. UNTERMYEB. YOU know, do you not, that there are half a
dozen or a dozen big speculative operators in New York?
Mr. GEEEE. Yes.
Mr. UNTEBMYEB.

And that they conduct these speculative and
manipulative accounts on the exchange. Do you represent any of
them?
Mr. GEIEE. None.
Mr. UNTEEMYEE. DO you know the mode of procedure by which
that sort of business is conducted?
Mr. GRIEB. NO. I have learned more by listening to Mr. Content
than I ever knew before in my life.
Mr. UNTEEMYEE. Then I do not think we will trouble you any
further.
Mr. GRIEE. Thank you.
Witness excused.
Mr. George A. Field was called and sworn as a witness by the
chairman, and was then temporarily excused from the witness stand
to permit the examination of other witnesses at this time.
TESTIMONY OF JOHN C. 0TTES0N.
The witness was sworn by the chairman.
Mr. UNTEEMYEE. Where do you reside?
Mr. OTTESON. Plainfield, N. J.
Mr. UNTERMYER. What is your business?
Mr. OTTESON. Secretary of the Wabash Railroad Co.
Mr. UNTERMYEB. HOW long has that been your official position?
Mr. OTTESON. Since 1889.
Mr. UNTERMYEE. Has the Wabash Road had occasion for years
past to have engraving done?
Mr. OTTESON. Yes.
Mr. UNTEEMYER. The engraving of securities?
Mr. OTTESON. Yes, sir; stocks and bonds.
Mr. UNTERMYER. Through whom has that engraving been done ?
Mr. OTTESON. The first work was done by the New York Bank

Note Co. in 1889; four issues.
Mr. UNTEEMYEB. HOW many issues?
Mr. OTTESON. Four issues; three bonds and the stock issues.
Mr. UNTEBMYEB. What was the extent of those bond issues ?




MONEY TRUST.

881

Mr. OTTESON. Thirty-four millions of first mortgage bonds, fourteen millions of seconds, thirty millions of incomes, and fifty-two
millions of stock.
Mr. UNTERMYER. All that engraving you say was done by the New
York Bank Note Co.?
Mr. OTTESON. By the New York Bank Note Co.
Mr. UNTEKMYER. DO you remember how large an order that was?
Mr. OTTESON. I have just stated.
Mr. UNTERMYER. NO; I mean
Mr. OTTESON. In dollars?
Mr. UNTEHMYER. In dollars; the cost of the engraving.
Mr. OTTESON. About $12,000 all together.
Mr. UNTERMYER. After those securities were engraved
Mr. OTTESOX. Oh. I beg your pardon; the income bonds were not
done by the New York Bank Note Co. They were done by the
American Bank Note Co.
Mr. UNTEHMYER. After those securities were engaved, were any
efforts made to have them listed on the New York Stock Exchange?
Mr. OTTESON. Yes, sir.
Mr. UNTERMYER. Will you not tell us what happened?
Mr. OTTESON. They were listed.
Mr. UNTERMYER. Oh! They were listed?
Mr. OTTESON. They were listed.
Mr. UNTERMYER. And then what happened?
Mr. OTTESON. Sometime after the New York Bank Note

Co. had
been ruled off the exchange, the secretary of the exchange called me
down to his office and told me that no longer would they take the
work of the New York Bank Note Co.. and directed me to have my
work done elsewhere for the stock certificates. Of course the bonds
were out. I took the position that we should not be subjected to
that expense: that we had a contract with them and had paid them
their fee for listing the securities; but the interview ended by Mr.
Ely, the secretary, very peremptorily directing me to have the work
done elsewhere. After consulting with our president, a letter was
written embodying my argument, and furthermore suggesting that
if they would agree to pay the expense of calling in the old certificates and make good to us the difference in cost of turning the work
over to the American Bank Note Co. the matter would be put up to
the board.
Mr. UNTERMYER. Have you the correspondence here?
Mr. OTTESON. NO, sir; I have not.
Mr. UNTERMYER. Was there any difference in price between the
work of the American Bank Note Co. and the work of the New York
Bank Note Co. ?
Mr. OTTESON Yes, sir; the work of the American company was
almost double. In fact, it is double at the present rates. We paid
the New York company $50 a thousand for certificates. The American company's price is $110 a thousand.
Mr. UNTERMY'EK. DO you have work done by the New York Bank
Note Co.. too?
Mr. OTTESON. Not work that is to be listed.
Mr. UNTERMYER. But do you have all work done by them with
respect to the engraving of unlisted securities ?



882

MONEY TBUST.

Mr. OTTESON. Yes, sir.
Mr. UNTERMYER. DO you

list securities on any stock exchange
other than the New York Stock Exchange ?
Mr. OTTESON. NO, sir.
Mr. UNTERMYEH. Has

there ever been any complaint, so far as you
know, of the New York Bank Note Co.'s work?
Mr. OTTESON. In the case of the issue of our first mortgage bonds
they made an error in the spelling of the word " twenty " ou the
coupons. That is the only thing.
Mr. UNTERMYER. What was the error?
Mr. OTTESON. They left out the second " t " in the word " twenty."
Mr. UNTERMYER. When was that ?
Mr. OTTESON. In 1889.
Mr. UNTERMYER. Have

you known of that happening to the
American Bank Note Co., too ?
Mr. OTTESON. Yes, sir; the same thing a few years ago.
Mr. UNTERMYEB. The same error ?
Mr. OTTESON. The same error, in a Chesapeake & Ohio issue.
Mr. UNTERMYER. Otherwise has the work been very satisfactory?
Mr. OTTESON. Thoroughly.
Mr. UNTERMYER. And of as good a grade as the other work?
Mr. OTTESON. Yes, sir.
Mr. UNTERMYER. What

reason did Mr. Ely, the secretary, assign
for requiring you to have your certificates engraved by the American
Bank Note Co., and for calling in those that had been engraved by
the New York Bank Note Co. ?
Mr. OTTESON. He did not request us to get the American Bank Note
Co. to do the work. He simply said that we would have to get some
other company to do it whose work was permitted to be listed.
Mr. UNTERMYER. Those who were permitted by the exchange to
do the work of engraving securities that were to be listed?
Mr. OTTESON. Yes, sir. Those were the American, I think, Homer
Lea, and the Franklin. I think they were the only ones at the time.
Mr. UNTERMYER. Were they all together?
Mr. OTTESON. It was generally understood that they were all the
American.
Mr. UNTERMYER. And afterwards they were all consolidated into
the American?
Mr. OTTESON. Yes, sir; so I understand.
Mr. UNTERMYER. They were formally consolidated into one company?
Mr. OTTESON. The American bought up their stock, I understand.
Mr. UNTERMYER. I think that is all. Mr. Otteson.
Witness excused.
TESTIMONY OF DAVID G. BAIRD.
The witness was sworn by the chairman.
Mr. UNTERMYER. DO you live in New York. Mr. Baird ?
Mr. BAIRD. I do not.
Mr. UNTERMYER. Where do you live?
Mr. BAIRD. In New Jersey.
Mr. UNTERMYER. What is your occupation?
Mr.
 BAIRD. Secretary of the Lehigh Valley Railroad


Co.

MONEY TBUST.

883

Mr. UNTERMYER. Have you been asked to come here in connection
with this difficulty of the New York Bank Note Co. with the New
York Stock Exchange?
Mr. BAIRD. I do not know why I was summoned at all.
Mr. UNTERMYER. Did your company have an experience with the
New York Stock Exchange in connection with the engraving of
securities ?
Mr. BAIRD. Yes,

sir.

Mr. UNTERMYER. When was that ?
Mr. BAIRD. Oh, perhaps 20 years ago.
Mr. UNTERMTER. And in connection with what was it?
Mr. BAIRD. In connection with an issue of bonds.
Mr. UNTERMYER. HOW large an issue?
Mr. BAIRD. Fifteen millions.
Mr. UNTERMYER. What happened?
Mr. BAIRD. In the application for listing the sample bond was
submitted, and the listing committee decided that it would not answer
their purposes—that it would have to be done over again. It was
done over again.
Mr. UNTERMYER. Had the bond been engraved ?
Mr. BAIRD. Yes, sir.
Mr. UNTERMYER. What

objection was made to the bond, if you
remember ?
Mr. BAIRD. Oh, I do not recall now; it is so long ago.
Mr. UNTERMYER. IS Mr. Alderson here?
Mr. BAIRD. He is; yes, sir.
Mr. UNTERMYER. What is, or

what was. his relation to the Lehigh
Valley?
Mr. BAIRD. He has been treasurer of the Lehigh Valley.
Mr. UNTERMYER. Was there any letter written at that time, if you
remember, by Mr. Alderson on this subject ?
Mr. BAIRD. NO ; I can not recall it, sir.
Mr. UNTERMYER. From that time have you had your securities
engraved by the New York Bank Note Co., or who does it?
Mr. BAIRD. It has been done by several people, I think.
Mr. UNTERMYER. Has the New York Bank Note Co. ever been
able to do any business for you since in the bonds or securities that
have been listed on the New York Stock Exchange ?
Mr. BAIRD. I think not.
Mr. UNTERMYER. By reason of any inferiority of its work?
Mr. BAIRD. I could not answer that.
Mr. UNTERMYER. Have you the giving out of those orders?
Mr. BAIRD. Not always.
Mr. UNTERMYER. YOU were informed that the work would not be
accepted ?
Mr. BAIRD. I was.
Mr. UNTERMYER. Have

they been submitting bids to compete for
it since then ?
Mr. BAIRD. They declined to bid for it.
Mr. UNTERMYER. On what ground?
Mr. BAIRD. Because they told me that their work would not be
accepted.
Mr. UNTERMYER. Are your securities listed on any other exchange?
Mr. BAIRD. Yes.



sir.

884

MONEY TRUST.

Mr. UNTERMYER. Where are they listed?
Mr. BAIRD. In Philadelphia.
Mr. UNTERMYER. They have done work for the bonds that were
listed there?
Mr. BAIBD. I think not.
Mr. UNTERMYER. DO you know that their work is accepted there?
Mr. BAIRD. That I do not know.
Mr. UNTERMTER. YOU do not remember whether you were offered
work as good as that of other companies ?
Mr. BAIBD. I would not like to say.
Mr. UNTERMYER. That is all. Is there anything else you care to
say about it?
Mr. BAIRD. Oh, no.

Witness excused.
TESTIMONY OF W. C. ALDEBSON.

The witness was sworn by the chairman.
Mr. UNTERMYER. Where do you live now ?
Mr. ALDERSON. At present in Pennsylvania, near Philadelphia.
Mr. UNTEBMYEB. Are you connected with the Lehigh Valley now ?
Mr. ALDEBSON. NO : I was up to about three years ago, when I was
retired on age.
Mr. UNTEBMYER. YOU were formerly assistant secretary, were you ?
Mr. ALDERSON. I was not assistant secretary. I was assistant treasurer, and treasurer.
Mr. UNTERMYER. DO you remember the occasion of difficulty over
these bonds of the Lehigh Valley that were engraved by the New
York Bank Note Co. ? If so, will you tell us briefly what you know
of it?
Mr. ALDERSON. I recollect that the work was done by the New
York Bank Note Co., because on a competitive bid they were the
lowest in price, and when it came to be listed or attempted to have
them listed, the stock exchange of New York refused to accept them.
I saw a good many of the influential gentlemen, as I supposed, in
connection with the stock exchange, but I could not get any help on
the matter, and finally the bonds had to be engraved over again.
Mr. UNTERMYER. At a cost of how much to the company ?
Mr. ALDERSON. That I could not tell you. It is too long ago. and
I can not remember.
Mr. UNTERMYER. That is all you know about it, is it not ?
Mr. ALDERSON. That is all I know about it.
Witness excused.
TESTIMONY OF GEOBGE A. FIELD.

This witness had been previously sworn by the chairman.
Mr. UNTERMYER. Where do you reside?
Mr. FIELD. New York.
Mr. UNTERMYER. What is your business ?
Mr. FIELD. I am at the present time vice president of the New
York Bank Note Co.
Mr. UNTERMYER. HOW long have you been with the New York
 Note Co. ?
Bank


MONEY TBUST.

885

Mr.
Mr.
Mr.
Mr.

FIELD. About 16 years.
UNTEEMYER. Who is its president?
FIELD. Mr. George H. Kendall.
UNTERMYEB. During all that time has he been president?
Mr. FIELD. Yes.
Mr. UNTERMYEE. Where is its place of business ?
Mr. FIELD. Seventy-five Sixth Avenue, New York.
Mr. UNTEEMYEB. Has it been there all these years ?
Mr. FIELD. During that time; yes.
Mr. UNTEEMYEE. Does the New York Bank Note Co. ever do any

business other than that of engraving bonds and stocks ?
Mr. FIELD. It does not—except, of course, stock certificates.
Mr. UNTEEMYER. It is the only company that confines itself to the
work of engraving, of all the companies that engrave securities ?
Mr. FIELD. I believe it is.
Mr. UNTEEMYEE. On what exchanges is its work received for
listing ?
Mr. FIELD. Every exchange except New York. It has about a
billion dollars' worth listed there.
Mr. UXTEBMYEB. About a billion dollars' worth of securities are
now on the New York list that have been engraved by the New
York Bank Note. Co.
Mr. FIELD. Have been accepted for listing.
Mr. UNTEEMYEE. That was before this trouble, was it?
Mr. FIELD. It was.
Mr. UNTEBMYEE. Can

you tell us the history of this trouble, without further questioning?
Mr. FIELD. I think so. May I relate the relations of the New
York Bank Note Co. in connection with the New York Stock Exchange ?
Mr. UNTEBMYEE. Yes.
Mr. FIELD. It was originally

formed as the Kendall Bank Note
Co. in about 1879. Its name later was changed to the New York
Bank Note Co., and during the time between 1879 and 1887 it made
repeated attempts to secure recognition by the exchange—that is,
the acceptance of work engraved by it. Up to 1887 it had never
succeeded, although it had made many changes in its plant to conform to unofficial, and in one of two instances official, suggestions.
Mr. UNTEEMYEE. May I interrupt there to ask this: At that time
what companies were recognized on the stock exchange ?
Mr. FIELD. The American Bank Note Co., the Homer Lea, and the
Franklin Bank Note Co.
Mr. UNTERMYEB. HOW were they related to one another? What
was their connection with one another?
Mr. FIELD. In those early years, I have no knowledge.
Mr. UNTERMYEE. GO on. Down to 1887 you received no recognition. Do you know how this trouble arose?
Mr. FIELD. What trouble do you refer to?
Mr. UNTEEMYEE. The trouble between the New York Stock Exchange and the New York Bank Note Co. prior to 1887.
Mr. FIELD. There had been no trouble, but they simply had been
unable to get their work accepted for listing.
In 1887 Mr. Jay Gould, who was president of the Western Union
and several other companies, a man who had placed a good many




886

MONEY TBUST.

orders for engraving, gave us an order, giving it to Mr. Kendall,
to reengrave or duplicate the certificates of the Western Union Co.
Mr. UNTERMYER. YOU mean by that that they had run out of
certificates and needed some more?
Mr. FIELD. Yes.
Mr. UNTEEMYER.

The Western Union had run out of certificates
and needed further books of certificates ?
Mr. FIELD. Yes, sir; that is what I mean; that is the idea.
Mr. UNTERMYER. And they gave to your company the order to
prepare those certificates?
Mr. FIELD. That was it; yes. Our company duplicated the same
design exactly, line for line, that had been furnished by the American Bank Note Co.
Mr. UNTERMYER. That was a very common occurance, was it not,
when a company's certificates or certificate books ran out to go
to another company and have more made of the same kind ?
Mr. FIELD. Not always another company, but sometimes.
The floating stock of the Western Union was practically taken up
in about something over a year's use of these certificates engraved
by the then Kendall Bank Note Co. About that time another application was made to have their work accepted by the New York Stock
Exchange engraved by the New York Bank Note Co.
Mr. UNTERMYER. When was that?
Mr. FIELD. In 1887. Among other securities which they gave
and as a criterion of workmanship
Mr. UNTERMYER. TO the stock exchange?
Mr. FIELD. The members of the stock exchange gave to Mr.
Kendall as a criterion of workmanship two certificates of the Western Union Telegraph Co. Mr. Kendall called attention to the fact
that the identical certificates that they were showing him as criterions of work were actually engraved by his company and bore
the imprint at the time of his company.
Mr. UNTERMYER. Let us see if we understand that. As I understand, when your company made application to the stock exchange
for leave to have your engraved certificates listed the stock exchange authorities gave you as a sample of the standard of work
they would require these certificates which your company had
engraved?
Mr. FIELD. Exactly.
Mr. UNTERMYER. What did Mr. Kendall tell them then ?
Mr. FIELD. He called attention to the fact that he had made that
identical certificate, and that therefore if he was able to do that
his workmanship was equal to that of the American Bank Note Co.
or other companies which were then admitted.
The result of that was that the stock exchange notified the Mercantile Trust Co., which was the registrar for the Western Union,
that after the next day at 12 o'clock no transfers would be accepted
or no deliveries accepted if made by the certificates of the New York
Bank Note Co.
When Mr. Gould found this out he notified the exchange that if
that order was not rescinded he would remove the Western Union
stock and other stocks which he controlled to the board of the consolidated exchange. The stock exchange then rescinded the order.



MOXEY XKUST.

887

and for upward of five vears accepted the work of the New York
Bank Note Co. to the extent of about $1,000,000,000, as I stated.
Mr. UNTERMYER. Its attempt to compel the Western Union or
Mr. Gould to withdraw these certificates engraved by your company
was based on what Mr. Kendall had told them as to his work?
Mr. FIELD. Yes; the fact that it was done by the Kendall Bank
Note Co.
Mr. UNTERMYER. Then what happened? You say they rescinded
the order on Mr. Gould's threat and continued to list the securities
for five years?
Mr. FIELD. Yes. But in that time they did everything they possibly could, apparently, to hinder the business ot the New York
Bank Note Co.
Mr. UNTEBMYER. DO not characterize it. What did they do?
Mr. FIELD. They found repeated fault with the work, or required that securities printed in one color and delivered to the
customer should be reprinted in some other colors. The colors were
usually selected by the customers, as is the custom. In connection
with that the bonds of the Lehigh Valley and the Missouri Pacific
were reengraved by the Xew York Bank Note Co. at very great
expense.
Mr. UNTEBMYER. That is, on account of the color ?
Mr. FIELD.

Yes.

This acceptance had gone on about five years, I think, when without any previous intimation of any kind they began refusing to pass
upon the work, sometimes holding it up for months and months, so
that it was impossible for the New York Bank Note Co. to guarantee
delivery to customers at any stated period, putting them to great
annoyance.
Finally, in 1892, after several different securities had been submitted by the New York Bank Note Co. for the stock-listing committee to pass upon, they returned all with a letter simply saying
they were not acceptable. It was impossible for the New York Bank
Note Co. to find out the reason why they were not acceptable,
although they inquired personally and through friends.
Mr. UNTERMYER. IS not all that embodied in correspondence with
the exchange?
Mr. FIELD. NO; practically very little of that was through correspondence. It was almost entirely through personal conversation.
In 1893, which was nearly a year after they had listed the last stock,
which was in March, 1892, another sample was submitted to them,
the Springfield Eailway Co.
Previously it had been unofficially intimated by the stock exchange that they would not answer any further correspondence from
the New York Bank Note Co., and might not have any samples returned which were submitted by it. This actually happened with
reference to the Springfield certificate samples. They were never returned and no word has ever been received by the New York Bank
Note Co. regarding them.
From 1893, for many, many years, different attempts at different
times were made to have the New York Stock Exchange accept the
New York Bank Note Co.'s work. Sometimes friends or Mr. Kendall
or customers who objected to paying the increased prices which they
 71352—PT 11—13


5

888

MONEY TRUST.

had to pay went before or saw different members of the exchange
in an effort to have the work accepted, but in every case without success.
In 1899 Mr. Lawson Purdy, who was then vice president of the
New York Bank Note Co., succeeded in appearing before the listing
committee. He appeared before them and stated the condition
of the New York Bank Note Co. I do not know whether he submitted samples or not a_s a matter of fact. The result of that hearing was a letter saying that they declined to accept the work.
I would like to look at a memorandum for some dates, if I may.
Mr. UNTERMYER. Yes.
Mr. FIELD. I would like

to state that about 1892. just prior to their
refusal to accept further work from the New York Bank Note Co.,
an attempt had been made to purchase the control of the New York
Bank Note Co. from Mr. Kendall and had failed.
Mr. UNTERMYER. By whom?
Mr. FIELD. Evidently the American Bank Note Co.
Mr. UNTERMYER. Were they competitors at that time?
Mr. FIELD. They were.
Mr. UNTERMYER. Was their work being accepted?
Mr. FIELD. It was.
Mr. UNTERMYEH. GO ahead with your statement.
Mr. FIELD. In 1905 the plant of the Franklin Bank

Note Co., which
was then one of the three or four companies admitted, was dismantled, and part went to the American Bank Note Co. and part to the
International, which in the meantime had been admitted.
In 1906 I appeared personally before the listing committee, after
having seen every member of the listing committee and many members of the governing committee and several of the more influential
members of the stock exchange, most of whom expressed themselves
against the engraving monopoly, but at the same time they said they
•would not like to mate official or public statements regarding it.
I appeared before the listing committee, and the result was that
we received a letter saying that the work would not be accepted.
Mr. UNTERMYER. Who owns the American Bank Note Co. ?
Mr. FIELD. The four largest stockholders and most influential men
are: J. P. Morgan, who owns over 6,000 shares; Joseph E. Delmar,
who owns nine thousand and odd shares; E. C. Converse, who owns
9,800 shares, and William Nelson Cromwell and his partner, who own
over 3,000 shares.
Mr. UNTERMYER. What is the total capital?
Mr. FIELD. The total capital of the company now is $10,000,000.
Mr. UNTERMYER. That is 100,000 shares?
Mr. FIELD. NO ; the shares are $50 each.
Mr. UNTERMYER. That would be 200,000?
Mr. FIELD. Yes.

Mr. UxTERMYER. These four gentlemen together own only how
much?
Mr. FIELD. Approximately $1,500,000, par value.
Mr. UNTERMYER. That is only 15 per cent of the company ?
Mr. FIELD. Yes; but the rest of the shares are very widely scattered, and no large amounts are in any one person's hands.
Mr. UNTERMYEH. Are any of them held by stock-exchange members?




MONEY TRUST.

889

Mr. FIELD. Over 50 members of the stock exchange were found to
be stockholders.
Mr. UNTERMYER. Where do you get this data with reference to the
stockholders ?
Mr. FIELD. This appears in the sworn complaint Mr. Kendall made
\n a suit.
Mr. UNTERMYEH. Where do you get it? Have you got a stock list?
Mr. FIELD. The stock list was obtained by a stockholder who got it
and made affidavit to that effect.
Mr. UNTERMYER. But is this statement you are making to us now
taken from an official stock list or merely from Mr. Kendall's statement in a lawsuit ?
Mr. FIELD. It was taken from the stock books of the American
Bank Note Co.
Mr. UNTERMYER. YOU are sure of that ?
Mr. FIELD. Yes, sir.
Mr. UNTERMYER. GO ahead, then.
Mr. FIELD. In 1909 the New York

Bank Note Co. complained to
Gov. Hughes regarding the engraving monopoly. The complaint
was referred to the Hughes investigating committee, which was sitting. I appeared before that committee in 1909. As a result of our
complaint, the Hughes investigating committee made a report concerning the engraving monopoly.
Mr. UNTERMYER. Have you that report?
Mr. FIELD. I have; yes.
Mr. UNTERMYER. Was that the commission of which Mr. Horace
White was the chairman?
Mr. FIELD. Yes.
Mr. UNTERMYER. About which we have been speaking here?
Mr. FIELD. Yes. Do you wish me to read the report?
Mr. UNTERMYEH. Eead any part of it that you care to read, or

that
has special reference to this subject, rather than to read it all.
Mr. FIELDA Yes. This is the report signed by Mr. Horace White,
a part of which reads as follows:
We have given the officers of the stock exchange an opportunity to reply to
this complaint. They say that on several former occasions they examined the
work of the New York Bank Note Co. and its predecessor, the Kendall Bank
Note Co., and found that it did not meet the requirements of the exchange as
to goodness of work, safeguards for plates, etc., and that the following named
corporations are now eligible for such work to be used in dealings on the stock
exchange:
American Bank Note Co.; International Bank Note Co.; Western Bank Note
& Engraving Co. of Chicago; British-American Bank Note Co., for Canadian securities ; Bradbury, Wilkinson & Co., London, England, for securities other than
American and Canadian.
It appears to have been the practice of the American Bank Note Co., or the
company which now owns it, the United Bank Note Co., to absorb any other
company that acquired the right to do work for the New York Stock Exchange.
In this way the Homer-Lea Note Co. and Franklin Bank Note Co. were absorbed in 1904, and the International Bank Note Co. and the Western Bank Note
& Engraving Co. in 1905. although the corporate existence of the two last
named companies is still preserved. The officers of the exchange admit that the
companies which issue securities are sufferers from this monopoly, both as to
promptness of delivery, and say that the exchange would be glad

Mr. UNTERMYER (interrupting). Both as to promptness of delivery and prices charged, is it not ?



890

MONEY TKUST.

Mr. FIELD. In the published report those words " prices charged "
were omitted.
Mr. UNTERMYER. Both as to prices charged and promptness of
delivery ?
Mr. FIELD. "Prices charged'' was omitted in all published reports.
Mr. UNTERMYER. N O ; you are mistaken.
Mr. FIELD. In the newspaper reports, I mean, and, in fact, all the
other reports I have seen. [Reading:]
The officers of the exchange admit that the companies which issue securities
are sufferers from this monopoly both as to promptness of delivery and say
that the exchange would be glad to be relieved of such monopoly.
From sources not connected with any of the parties to this controversy we
leam that, although the stock exchange will accept the work of certain foreign
engraving companes, they will accept it only for foreign securities and that
attempts by American corporations to avail themselves of competitive prices by
securing bids from foreign engravers have been thus defeated. From this it
would seem that other considerations than the goodness of the work and carefulness in guarding the plates are here operative and that the stock exchange
has not rid itself of the evils of monopoly.
Yours, very sincerely,
HOEACE WHITE, Chairman.

I want to call your attention to what we call the apparent bad faith
of the exchange
Mr. UNTERMYER (interrupting). Xo; I think we should strike
that out. If you have any facts, Mr. Field, I think it is all right to
state them.
Mr. FIELD. Let me state it this way, that there is in addition to
that—well, that point I will make a little later, if I may.
Mr. UNTERMYER. Very well. You understand I mean it does not
seem quite fair to characterize a thing without describing the facts.
Mr. FIELD. Immediately after that report, or two or three months
after that report, the stock exchange permitted the foreign companies named in the report to do work for domestic corporations,
but they are barred from doing work on anything like a competitive
basis by reason of the fact that there is 25 per cent ad Valorem duty
on all engraved matter imported into the United States; and in
addition to that, the time required in handling this work abroad
would make it almost prohibitory, because the average length of the
stock order or bond order is perhaps 60 days, and there are many
requirements to confer in connection with alterations and the submission of designs and proofs, etc.
Mr. UNTERMYER. Your point is, the admission of the English
companies or foreign companies to compete with the American Bank
Jvote Co. does not amount to competition at all?
Mr. FIELD. Exactly; that is correct.
In 1909 Mr. Kendall wrote a letter to the listing committee of the
stock exchange. May I read that letter ?
Mr. UNTERMYER. Yes. Is there a reply to it ?
Mr. FIELD. Yes. The letter reads as follows:
DECEMBER 21, 1909.

Stock List Committee of New York Stock 'Exchange.
GENTLEMEN : We are about to give great publicity to the inclosed letter in
the New York newspapers. If you will point to us where it is unfair, incorrect,
untruthful, or misleading, we will revise it in the light of the facts you adduce.
Kindly return the manuscript.
Yours, very truly,
GEOBGE H. KENDALL, President.



MONEY TEUST.

891

This is the letter which Mr. Kendall sent with that:
How long will the members of fair and unbiased mind allow the
committee on stock list to discriminate against all competitors of the
American Bank Note Co.? Will they not at some time, in simple
justice and for a love of fair play demand of their representatives
that the undersigned company no longer be excluded from doing
business?
For more than 35 years the New York Bank Note Co. has been a postulant
for a genuine admission of its engraving and printing to dealings on the board
and at all times has been worthy of it. We are unofficially told that control of
our institution must be divided among several stockholders. We reply, " That
is pointing us direct to control by the American Bank Note Co. through the
same means by which it acquired control of the Lee, Franklin, and International of New York, the Western of Chicago, and some 24 other concerns, several of which are collusively operated as ostensible competitors." Stating it another way, the present control Is the only way to maintain an actual competition in the trade. It may be harsh for us to speak of the committee on stock
list as having robbed us of our prosperity, robbed the public of our competition, and by this means enriched the stockholders of the American Bank Note
Co. In an aggregate of tens of millions. But how would you say It if you were
In our place?
As an Illustration of the situation, if the Pennsylvania Railroad, or any other
corporation, should give us an order to make some bonds for it and offer the
issue for listing, the committee would say, " You must throw them away and get
them engraved by the American or one of its subcompanies before we will consider your application." If you do not believe this, ask the committee on stock
list to deny it.
As another Illustration, and to give some idea of what this monopoly may
amount to, the average dealings in stock are many hundred thousand shares
daily, and the rules of the exchange preclude more than 100 shares being
written upon any one certificate. The American's price is not less than 10
cents each. Our price does not exceed 6 cents each. We estimate the total
output of the American and its subcompanies to the country as being in the
vicinity of 50.000 certificates per day, by no means all of which are used on the
New York Stock Exchange, but which, by reason of the mononoly and the
ensuing prestige, the customer is practically forced to pay this difference in
price, which, if these figures are substantially correct, shows $2,000 per day
excess cost to the public. Bonds, though not rendered useless by transfer, are
much more expensive still, and our prices are in the vicinity of one-half of
theirs.
From 1SS0 to 1887, during which time we spent a fortune to comply with the
stock list committee's recommendations, on which they never made us any
report, they said we did not do work good enough to meet their requirements.
Mr. Jay Gould privately gave us the Western Union stock certificate to do, which
we duplicated exactly, except that we placed our name as the maker instead of
the American Bank Note Co., and during the ensuing year he took up all the
floating stock in the Street engraved by the American, issuing ours in its place.
No one in the exchange ever discovered the substitution of our certificate. In
fact, they were so exact that no one ever discovered that there had been any
change in the engraving or engraver or printing. When we called the attention
of the stock list committee to this'test of the quality of our work, which they
had been handling for a year, they promptly sent word to the transfer agent,
the Mercantile Trust Co., not to transfer any more of the certificates of the
Western Union Co. on to those engraved by us, as they would not be received
as a good delivery after 12 the next day. Mr. Gould replied that if this ruling
were adhered to he would take Western Union and all of the corporations that
he controlled to the Consolidated Exchange, where he could get fair consideration
for the engraving of his securities. Then the committee yielded, and for the next
five years we were admitted, and the stock list committee accepted as listable
more than 100 issues aggregating in the vicinity of one billion of dollars of capitalization made by us. But how? For the most frivolous excuses, such as that
the committee preferred to have Lehigh Valley and all other large issues of
bonds printed in brown after we had delivered them in green, or vice versa, and
by similar exactions we were put to continuous aud untold losses. Nevertheless,
we prospered at prices 40 per cent less than the American's, because thPir prices



892

MONEY TBUST.

were more than half profit. For instance, as the stock exchange records will
show, we were ordered not to deliver any of our work to our customers until
the stock-listing committee passed on the proofs, which they sometimes delayed.
Meanwhile our customers were naturally greatly embarrassed by this holdup.
Mr. Sage was our president for seven years, and in 1892 he tried, through an
infamous process, to enforce a demand that I join his 10 per cent of stock and
sell my controlling interest to the American. I refused, and the stock exchange
immediately stopped listing anything engraved by us, and have so continued
until to-day.
We have been assured by the most eminent lawyers that we have no redress;
that the stock exchange is not a corporation; and that the American Bank
Note Co. can avail itself of any favoritism the exchange may show it. We
are also advised that for the same reason the public has no means of escaping
the extortionate prices of a monoply which wje have persistently fought for
30 years. It is well that the public should know, even as the security customers
now know, the meanness, the restraint of trade, the throttling of competition,
the forcing of consumers of printing to pay two prices, the successful evasion
of legal responsibility, and the crushing of a competing bank-note company
by not allowing the public to do business with it, or requiring it to put itself
in a position where the American can get it, and by putting such frivolous
conditions upon it when they accepted its work that it could not do business.
It is certain that a large proportion of the corporations of the country would
gladly give us their orders at a great saving to themselves if the exchange
would let them.
On the date of November 4 the New York papers published the news that
Waterloo & Sons, of London, had been granted the right to engrave securities
for listing on the New York Stock Exchange. This was generally commented
upon by the papers as " breaking the engraving monopoly." Is this the case?
The exchange has passed over a local company, known to be a genuine competitor, and has admitted a foreign corporation which may be as closely connected with the American Bank Note Co. as Bradbury, Wilkinson & Co., also
of London, which the American controls. In any case a London company can
not seriously compete for American contracts in security engraving, work in
which time is the essence, and less than 60 days the average life of an order
from start to finish, and where frequent conferences as to details, approval of
designs and proofs, the making of alterations, etc., are essential. Altogether,
does it not appear that " to break the monopoly " a competitor has been selected
who can do the least possible damage to the Bank Note Trust?
The Hughes commission, in response to our request that it investigate the
bank-note phase of the exchange, in their report touched upon this subject.
I will quote from the last sentence:
"From this it would seem that other considerations than the goodness of
the work and carefulness in guarding the plates are here operative, and the
stock exchange has not rid itself of the evils of monopoly."
GEOBGE H. KENDALL,

President of the New York Bank Note Co.

Mr. UNTEKMYER. Did you get a reply to that?
Mr. FIELD. We did. This is the reply.
Mr. TJNTERMYEK. Read it.
Mr. FIELD (reading):
NEW YOBK STOCK EXCHANGE, SECBETABY'S OFFICE,
COMMITTEE ON STOCK LIST,

New York, December 29, 1909.
GEOBGE H. KENDALL, Esq.,

President New York Bank Note Co.
SIB: I have received your communication of December 21, in which you
state that you " are about to give great publicity to the inclosed in the New
York newspapers."
The inclosure referred to is an article purporting to be signed by you, making a violent attack upon the New York Stock Exchange because, as stated by
you, the engraving work of your company has not been passed upon by it as
satisfactory.
I have submitted this extraordinary communication to the committee on
stock list, to which you addressed it.




MONEY TRUST.

893

I need hardly state to you that this article which you inclose is filled with
statements which are both misleading and untrue, for you must know of your
personal knowledge that such is its character. I have no intention of entering
upon a controversy with you in the public press. Such methods may commend
themselves to your judgment; they certainly do not to mine. You are quite at
liberty to publish whatever you choose to take the responsibility of publishing,
but you must be well aware that repeated opportunities extended to you only
demonstrated that the work and methods of the various successive companies
under your management or control were so inferior to those of their competitors
that the exchange, in the interest of investors in securities, found itself unable
to pass upon them as satisfactory.
As requested by you, I herewith return the paper inclosed in your communication.
Yours, truly,
WILLIAM W. HEATON, Chairman.

Mr. Kendall wrote them, in reply to that, this letter which I have
here.
Mr. UNTEBMYEB. Just state the substance of what it says.
Mr. FIELD. He simply called attention to the fact that if they
would point out any inaccuracies or misstatements in the statement
he would correct them; and also would keep such matters confidential, so that anything they said would not necessarily be published.
They replied to it by returning the manuscript with a little letter
raying they were returning it.
Mr. UNTEHMYEE. What else have you to offer ?
Mr. FIELD. In 1910 Mr. Kendall appeared before the Ways and
Means Committee of the New York Legislature and stated the facts
fully to them.
Mr. UNTERMYER. Have vou not stated the controversy now, Mr.
Field?
Mr. FIELD. Up to June, 1910. There have been developments since
ihen.
Mr. UNTERMYEE. YOU brought a lawsuit, did you not?
Mr. FIELD. Yes.
Mr. UNTEEMYER. We
Mr. FIELD. All right.

do not want to go into that.
In June, 1911, there was a considerable controversy arose over the city of New York bonds.
Mr. UNTEEMYEE. That we want to know something about.
Mr. FIELD. The supervisor of city records, who has the detail of
the matter of placing the engraving for New York City, requested us
to bid on an issue of $60,000,000 of bonds of the city of New York.
We replied that it would be no use to bid, because our work would
not be accepted on the New York Stock Exchange, and that we had
made repeated efforts to get such work for many years, always with
the same result, that they would not let us bid; or if they did they
would not consider the bid. He requested us in this case to put in
another bid, which we did. Our bid was $44,500. The American's
bid was $62,000. They afterward reduced their bid 10 per cent, making it $55,800, which was still $11,000 over our bid. On account of
this difference in price the comptroller wished to place the order with
as. Before doing so he sent Mr. Ferguson, supervisor of city records and deputy comptroller, to see Mr. Ely, secretary of the New
York Stock Exchange, to find out whether, if 'he bonds were engraved by the New York Bank Note Co., they would or would not be
listed. Mr. Ely did not give them any satisfaction. He would not
answer yes or no. Then the comptroller wrote a letter to the New
York Stock Exchange asking that question.



894

MONEY TRUST.

Mr. UNTEBMYEB. The fact is you got the order ?
Mr. FIELD. Yes.
Mr. UNTEBMYEB.

New York?

And you did engrave the bonds of the city of

Mr. FIELD. We did.
Mr. UNTEBMYEB. Were they listed or were they refused ?
Mr. FIELD. They were refused listing.
Mr. UNTEBMYEB. Are they still refused listing?
Mr. FIELD. Yes.
Mr. UNTEBMYEB. With respect to the bonds of the State

Island, did you engrave those?

of Rhode

Mr. FIELD. We did.
Mr. UNTEBMYEB. And

have you engraved bonds for various cities
and public authorities ?
Mr. FIELD. Many of them.
Mr. UNTEBMYEB. DO you do that work all over the country?
Mr. FIELD. Yes, sir.
Mr. UNTEBMYEB. Have

you met with any difficulties elewhere such
as you have met with here?
Mr. FIELD. Practically not.
Mr. UNTEBMYEB. That is about all there is to it, is it not ?
Mr. FIELD. I think so.
Witness excused.
The CHAIBMAN. Gentlemen, the committee will adjourn at this
time until next Monday at 2 o clock p. m.
Whereupon, at 3.30 o'clock p. m., the committee adjourned until
Monday. December 16.1912, at 2 o'clock p. m.

x