Full text of 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 on Banking and Currency, House of Representatives, (1912-1913) : Part 5, Pages 343-411

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MONEY TRUST INVESTIGATION
INVESTIGATION
OP

FINANCIAL AND MONETARY CONDITIONS
IN THE UNITED STATES
UNDER

HOUSE RESOLUTIONS NOS. 429 AND 504
BEFORE A

SUBCOMMITTEE OF THE COMMITTEE ON
BANKING AND CURRENCY




PART 5

WASHINGTON
GOVERNMENT PRINTING OFFICE
1913

SUBCOMMITTEE OP THE COMMITTEE ON BANKING AND CURRENCY.
HOUSE O? REPBESENTATITES.
AR8ENE P. PUJO, Louisiana, Chairman.
WILLIAM O. BROWN, West Virginia.
GEORGE A. NEELEY, Kansas.
ROBERT L. DOUGHTON, North Carolina.
HENRY McMORRAN, 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. FONTENOT, Clerk.
A. M. MCDEKMOTT, Attbumt Clerk.
II




MONEY TRUST INVESTIGATION.
SUBCOMMITTEE OF THE
COMMITTEE ON BANKING AND CURRENCY,
HOUSE OF REPRESENTATIVES,

New York, N. Y., Wednesday, June 12,1912.
The subcommittee met at 11 o'clock a. m. in room 328, Customhouse Building.
Present: Messrs. Pujo (chairman), Brown, Stephens, Daugherty,
Byrnes, Neeley, Guernsey, and Heald.
Present also: Samuel Untermyer, Esq., of New York City, and
Edgar H. Farrar, Esq., of New Orleans, La., counsel for the subcommittee.
The CHAIRMAN. The committee will be in order.
TESTIMONY OF JAMES Q. CANNON—Eecalled.

Mr. UNTERMYER. Mr. Cannon, will you be good enough to resume
the stand ? As I have advised you, Mr. Cannon, we have asked you
to be good enough to return here to complete the record on the subject of these clearing-house Joan certificates.
Mr. CANNON. Yes.
Mr. UNTERMYEK. Which

were issued during the panic of 1907 by
the clearing houses throughout the country.
Mr. CANNON. Yes.
Mr. UNTERMYEK. YOU

delivered an address, which has not been
heretofore referred to, on that subject before the Finance Forum in
this city, did you not ?
Mr. CANNON. Yes.
Mr. UNTERMYER. On March 30, 1910 ?
Mr. CANNON. On March 30, 1910.
Mr. UNTERMYER. And that was published

and circulated ?

throughout the country

Mr. CANNON. Yes.
Mr. UNTERMYEK. AS

a part of that address you had photographic
facsimiles of various certificates that were issued by certain clearing
houses, which passed current in their respective localities as so much
money, did you not ?
Mr. CANNON. They passed current; not all of them as money.
Mr. UNTERMYER. In some districts they did pass current generally
in the community as money, did they not ?
Mr. CANNON. They are stated specifically, each one, and some of
them were checks and not clearing-house loan certificates.
Mr. UNTERMYER. Some of them were certificates made and engraved in imitation of money, were they not ? •
Mr. CANNON. I would not say in imitation of money.



343

844

MONEY TRUST INVESTIGATION.

Mr. UNTERMYEK. These are correct facsimiles, are they not [referring to pamphlet] %
Mr. CANNON. Yes. I have the originals, which I will be glad to
show to the committee ?
Mr. UNTERMYER. Have you them with you ?
Mr. CANNON. NO, sir; I nave not got them with me, but I will be
very glad to file them.
Mr. UNTERMYER. These reproductions in the address are facsimiles ?
Mr. CANNON. Yes.
Mr. UNTERMYER. And will answer the same purpose.
Mr. CANNON. All right, sir.
Mr. UNTERMYER. Except that the originals were engraved,

were
they not ?
Mr. CANNON. Some were engraved and some were printed. They
were all sorts of type.
Mr. UNTERMYER. SO far as you know, there was never any circulation tax paid on these certificates, was there ?
Mr. CANNON. Not according to my investigation; no, sir.
Mr. UNTERMYER. They were in denominations of one, two, and
five dollars, and in other denominations ?
Mr. CANNON. Yes.

Mr. UNTERMYER. The total amount issued was how much ?
Mr. CANNON. Approximately, I can give it. I was unable, in my
investigation of this questiofa, to find out exactly. I think I stated
here approximately how much was issued.
Mr. UNTERMYER. Upward of $250,000,000 was issued, was there
not?
Mr. CANNON. I think so; yes, sir. That is as near as I could find
in my investigation and in correspondence with the various clearing
houses.
Mr. UNTERMYER. And that was in addition to certificates that
were issued by some of the large corporations, such as railroads %
Mr. CANNON. They issued pay checks and not certificates.
Mr. UNTERMYER. Which circulated as money ?
Mr. CANNON. Yes; they passed from hand-to hand.
Mr. UNTERMYER. They were all payable through the respective
clearing houses, were they not ?
Mr. CANNON. YOU mean the pay checks ?
Mr. UNTERMYEK. Yes.
Mr. CANNON. NO, sir; the

pay checks were drawn upon individual
banks by the corporations.
Mr. UNTERMYER. But the certificates were all issued by and payable through the clearing houses ?
Mr. CANNON. Not all the certificates; no. They were different.
Mr. UNTERMYER. Were not these pay checks that were drawn by
the corporations on individual banks payable through the clearing
houses ?
Mr. CANNON. Yes.

Mr. UNTERMYEK. And the certificates that were issued in these
denominations were also payable through the clearing houses, were
they not ?
Mr. CANNON. Payable at the clearing houses.
Mr. UNTERMYER. Yes.
Mr. CANNON. Yea.



MONEY TBUSX INVESTIGATION.

345

Mr. UNTERMYER. Of this $250,000,000 and upward of certificates
that were issued during the panic of 1910, and which circulated as
you have explained, what amounts were issued in New York, Chicago,
and St. Louis ?
Mr. CANNON. I think I have it here. Have you there the page
that it is on ?
Mr. UNTERMYER. Yes; it is near the bottom of page 28.
Mr. CANNON. The three central reserve cities of the United States.
namely, New York, Chicago, and St. Louis, issued $250,000,000 of
various instruments designed to temporarily take the place of cash.
There were issued during the panic of 1907 in these cities $157,265,000,
or more than 60 per cent of the entire amount.
Mr. UNTERMYEE. In the city of New York there were upward
of one hundred millions ?
Mr. CANNON. $101,000,000, I think.
Mr. UNTEBMYEE. And in the nine subtreasury cities
Mr. CANNON. There were $206,254,000, or more than 80 per cent
of the total of these instruments put out.
Mr. UNTEEMYEE. YOU formulated and presented a plan of so-called
emergency currency, did you not ?
Mr. CANNON. I did in this address; yes, sir.
Mr. UNTEBMYEB. But has not that all been superseded by the
Aldrich-Vreeland bill ?
Mr. CANNON. Yes.
Mr. UNTEEMYER. SO

that that question of emergency currency has
now been legislated upon ?
Mr. CANNON. It has not been legislated on. It is a different proposition.
Mr. UNTEBMYEB. It is before Congress now ?
Mr. CANNON. It is before Congress now, in the Aldrich bill.
Mr. UNTERMYER. But that is a different plan from what you have
here?
Mr. CANNON. Yes.
Mr. UNTEBMYER. AS

I understand, your plan was intended only
to meet these exigencies ?
Mr. CANNON. TO meet emergencies that had arisen.
Mr. UNTERMYEE. In the particular localities ?
Mr. CANNON. In particular localities; so that in time of panic,
which is not a time to call loans, instead of being obliged to call loans
we could take our fixed assets and by arrangement with the clearing
house we could secure these clearing-house loan certificates and then
deposit them with the Subtreasurv and secure currency against them.
Mr. UNTEEMYER. Yours was a local plan, was it not ?
Mr. CANNON. Yes.
Mr. UNTEBMYEE. Intended

instead of the central reserve association?
Mr. CANNON. The central reserve association had not come upoa
the scene of action at that time?
Mr. UNTEEMYER. NO.
Mr. CANNON. It was simply

a temporary plan; an emergency plan,
as I call it.
Mr. UNTEEMYER. And your emergency plan involved the use of
commercial paper?
Mr. CANNON. Yes.




346

MONEY IKUST INVESTIGATION.

Mr. UNTERMYER. AS a basis for certificates ?
Mr. CANNON. Yes.

Mr. UNTERMYER. You are familiar, are you not, with the method
of loaning on stock-exchange collateral ?
Mr. CANNON. Yes.

Mr. UNTERMYER. YOU have been in touch with that system for
many years ?
Mr. CANNON. Yes.
Mr. UNTERMYER. In the course of the business of your bank ?
Mr. CANNON. Yes.
Mr. UNTERMYER. Will you be good enough to explain just what

the system is ?
Mr. CANNON. In the method of handling it?
Mr. UNTERMYER. Yes.
Mr. CANNON. I can not explain
Mr. UNTERMYER. Yes.
Mr. CANNON. Whenever we are

except from my own bank.

creditor at the clearing house for a
large sum of money which we desire to put out in the stock exchange
and find that we have so much that we desire to loan over and above
our reserve, we have a broker on the stock exchange who loans our
money on call, and we communicate with him with instructions to
make these loans on the stock exchange, and he loans the money to
various members of the stock exchange.
Mr. UNTERMYER. IS there a stand in the stock exchange devoted
to loans of money ?
Mr. CANNON. I can not tell you, Mr Untermyer.
Mr. UNTERMYER. Are there brokers who make this a special
business, or is it done through the regular stock exchange brokers?
Mr. CANNON. It is generally done through a regular stock exchange
broker, a customer of ours on the stock exchange.
Mr. UNTERMYER. HOW is the rate fixed?
Mr. CANNON. I do not know. We never know, except it comes
out on the ticker that the renewal rate is such a rate. I suppose it
is on account of the supply and demand of money on the board. If
there is a large amount of money to loan rates are low.
Mr. UNTERMYER. These are loans from day to day ?
Mr. CANNON. From day to day; yes.
Mr. UNTERMYER. They are demand loans on stock exchange
collateral ?
Mr. CANNON. Yes; demand loans on stock exchange collateral.
Mr. UNTERMYER. Who passes on those loans ?
Mr. CANNON. They are first presented to the loan clerk, and afterwards to one of the officers of the bank for initialing.
Mr. UNTERMYER. That is done each day with respect to each loan
with respect to which you are advancing money ?
Mr. CANNON. Yes.

Mr. UNTERMYER. And are these loans made strictly on what is
called stock exchange collateral ?
Mr. CANNON. They arc made strictly on what is called stock
exchange collateral; yes.
Mr. UNTERMYER. What is the customary margin?
Mr. CANNON. Twenty per cent; according to the salability of the
collateral.



MONEY TRUST INVESTIGATION.

347

Mr. UNTERMYER. That is, you require collateral, of the then
quoted market value on the exchange, of 20 per cent in excess of the
amount you are willing to loan ?
Mr. CANNON. Yes.

Mr. UNTEKMTER. And do you require that the collateral be mixed,
or do you take all one kind ?
Mr. CANNON. It is the salability of the collateral that we look to.
Mr. UNTERMTEK. But you do not go outside of the stock exchange
collateral ?
Mr. CANNON. XO, sir; not in making those loans.
Mr. UNTERMYEH. In making loans on collateral outside the stock
exchange, do you observe practically the same rule ?
Mr. CANNON. According to the value of the collateral and the
class of the collateral; it makes a difference, of course.
Mr. UNTERMYER. But do you take the quoted price of the collateral,
if it is an active stock, as the basis of your loan *
Mr. CANNON. Yes,

sir.

Mr. UNTERMYER. A security that is not listed on the stock exchange is not regarded, as a rule, as good collateral for this class of
loans?
Mr. CANNON. Not for this class of loans made on the stock exchange.
Mr. UNTERMYER. YOU make your loans generally to stock exchange
brokers ?
Mr. CANNON. TO stock exchange brokers; yes, sir.
Mr. UNTERMYER. In making your loans to stock exchange brokers
you sometimes take collateral that is not listed, do you not ?
Mr. CANNON. Very seldom.
Mr. UNTERMYER. AS a rule you require stock exchange collateral
from them, too, do you ?
Mr. CANNON. Yes,

sir.

Mr. UNTERMYER. DO you make any so-cal'ed financial loans, as
rule, on anythingexcept stock exchange collateral ?
Mr. CANNON. What do you mean by "financial loans"?
Mr. UNTERMYER. I mean loans to financial houses, to bankers, we
will say, as distinguished from loans to stock exchange brokers.
Mr. CANNON. DO you mean on unlisted collateral ?
Mr. UNTERMYER. Yes.
Mr. CANNON. Yes; you

make the loans on unlisted collateral outside of the stock exchange.
Mr. UNTERMYER. AS a rule ?
Mr. CANNON. Oh, yes. Some of the best loans that banks have
are that kind.
Mr. UNTERMYER. They are made to financial houses ?
Mr. CAXXOX. Made to individuals.
Mr. UNTERMYER. But you do make loans to financial houses on
what are called syndicate securities, do you not; that is, collateral
in the form of securities not yet listed, held by syndicates ?
Mr. CANNON. It has not been our custom to do it.
Mr. UNTERMYER. YOU are not in that line of business ?
Mr. CANNON. Not in that line of business; no sir.
Mr. UNTERMYER. YOU know that is a very large business ?
Mr. CANNOX. I know that has been done, but it is not in our line
of business.



348

MONEY TRUST INVESTIGATION.

Mr. UNTERMYEB. That is a very large business, done by the great
institutions here?
Mr. CANNON. I could not testify to that, because we do not do it.
Mr. UNTEBMYEB. DO you mean to say you do not know anything
about it ?
Mr. CANNON. I know something of it. but I am not familiar with it.
Mr. UNTEEMYEE. Have you not been a member of syndicates to
which these loans are made ?
Mr. CANNON. NO. sir.
Mr. UNTEEMYEE. YOU

are not connected with that branch of the
financial business ?
Mr. CANNON. We are entirely in a commercial business. I have
been all my life.
Mr. UNTEBMYEB. This is strictly outside the business of Wall Street
finance; it is commercial entirely, is it?
Mr. CANNON. I have always been in the commercial business,
buying and selling commercial paper and credits.
Mr. UNTERMYER. But, still, in your experience in Wall Street, do
you not know that is a very extensive business?
Mr. CANNON. That it has been done; yes, sir.
Mr. UNTEEMYEE. And not only that it has been done, but it forms
a very substantial part of the business of some of the great banks,
loaning on first-class collaterals that are held by syndicates ?
Mr. CANNON. I know it is done; yes, sir.
Mr. UNTERMYER. Have you any statistics as to the average daily
loans made in the stock exchange by the members through stock
exchange brokers on stock exchange collateral ?
Mr. CANNON. XO, sir; I do not know, to any extent at all.
Mr. UNTEEMYEB. Are there no such records or statistics ?
Mr. CANNON. I do not think there are; no, sir; not to my knowledge, at least.
Mr. UNTERMYEB. HOW is the business done on the stock exchange t
Does the broker give a receipt or a memorandum?
Mr. CANNON. That I couid not tell you. The loans come over
to us.
Mr. UNTERMYEB. The broker sends the loans to you ?
Mr. CANNON. The broker sends the loans in to us.
Mr. UNTERMYEB. What does he do, send an envelope containing
the securities ?
Mr. CANNON. Containing the securities; yes, sir.
Mr. UNTEBMYEB. And the collateral note ?
Mr. CANNON. The collateral note.
Mr. UNTEEMYEE. Then do you send a check?
Mr. CANNON. We give a check; yes, sir. We give a cashier's
check.
Mr. UNTERMYEB. IS that given against any account of the clearing
house, or just out of the general account?
Mr. CANNON. Oh, no; it is given out of the bank's own credit. It
has nothing to do with the clearing house, at all.
Mr. UNTERMYER. IS that the way you dispose of your credit balances
at the clearing house, as a rule, lending them out from day to day in
that way ?
Mr. CANNON. Yes, sir; except when we are purchasing paper in
the open market, or loaning to our own customers. Deposits decrease



MONEY TBTIST INVESTIGATION.

349

and you call in your money. It is the leeway, you might say, of the
banks.
Mr. UNTEBMYEB. On the other hand, when you have a surplus
outside your credit balance in the clearing house, you lend it in the
Street from day to day, do you not £
Mr. CANNON. We lend it in the Street from day to day; yes, sir.
Mr. UNTEEMYEE. In making those loans you make them through
these same brokers ?
Mr. CANNON. Yes,

sir.

Mr. UNTEEMYEE. On stock-exchange collateral i
Mr. CANNON. We do; yes, sir.
Mr. UNTEEMYER. When the market

values, as shown by the quotations of the stock exchange, change on securities that you have in
demand loans, what course does your business take ?
Mr. CANNON. If they go below 20 per cent we send them notice to
make good their margins.
Mr. UNTEEMYEE. As a rule, do these loans, with those fluctuations and the making good of margins, continue from day to day?
Mr. CANNON. They continue from day to day; yes, sir.
Mr. UNTERMYEB. Does the broker who places a loan get any
commission ?
Mr. CANNON. XO, sir.
Mr. UNTEEMYEE. What is his
Mr. CANNON. Simply because

advantage in doing business ?
he is a customer of the bank, and is

glad to do it for us.
Mr. UNTEEMYEE. At times a broker has a great many accounts,
has he not ?
Mr. CANNON. I suppose they are divided around amongst the
banks. Each bank does not employ the same broker.
Mr. UNTEBMYEE. But a number employ the same broker, do thev
not ?
Mr. CANNON. I do not think so.
Mr. UNTEEMYEE. DO you know as to that ?
Mr. CANNON. I do not know positively; I could not testify as to
that.
Mr. UNTEEMYEE. SO that vou have no guide to your operations
with respect to these demand loans, as to calling them, or requiring
additional margins, other than the quotations on the exchange ?
Mr. CANNON. Quotations on the exchange; yes, sir.
Mr. UNTERMYEE. It is important to you, and to all bankers, is it
not, that those quotations snould represent actual transactions ?
Mr. CANNON. Yes, sir.
Mr. UNTEEMYEE. And

that they should not represent manipulated
values; that is important to you, is it not?
Mr. CANNON. It is important that the values should be correct;
yes, sir.
Mr. UNTEEMYER. It is important that the quotations should represent genuine transactions, and not manipulation ?
Mr. CANNON. Yes, sir.
Mr. UNTEEMYEE. DO you

Stock Exchange ?

loan any money on the Consolidated

Mr. CANNON. NO, sir.

Mr. UNTERMYER. DO any of the banks that you know of ?
Mr. CANNON. Yes,




sir.

350

MONEY TBUST INVESTIGATION.

Mr. UNTERMYER. What bank ?
Mr. CANNON. I have heard of some banks loaning.
Mr. UNTEEMYEH. Just name any you have heard of.
Mr. CANNON. I have heard of some of the banks in that neighborhood, but I do not think I could testify as to which.
Mr. UNTEKMYEK. I do not think that you know of any, do you ?
Mr. CANNON. NO; I do not think I could testify as to them.*
Mr. UNTERMYER. I do not think you do. Do you know what
stocks are listed on the Consolidated Exchange ?
Mr. CANNON. NO, sir.

Mr. UNTERMYER. DO you know anything about its operations ?
Mr. CANNON. I do not; no, sir.
Mr. UNTERMYER. It is blacklisted

on the New York Stock Exchange, is it not?
Mr. CANNON. I do not know.
Mr. UNTERMYER. DO you not know that ?
Mr. CANNON. I do not know it is blacklisted; no, sir.
Mr. UNTERMYER. What would you call it, ignored ?
Mr. CANNON. They do not do business with each other.
Mr. UNTERMYER. Boycotted ?
Mr. CANNON. I would not want to use those words, because I do
not know; I am not familiar with the Consolidated Stock Exchange.
Mr. UNTERMYER. YOU know, do you not, Mr. Cannon, that only
a small proportion of the securities listed on the New York Stock
Exchange are listed on the Consolidated Exchange ?
Mr. CANNON. I have never looked into the matter, at all.
Mr. UNTERMYER. At any rate, your sole guide is the quotations
of the New York Stock Exchange f
Mr. CANNON. The New York Stock Exchange; yes.
Mr. UNTERMYER. And if a security is removed from the list of
securities on the New York Stock Exchange, how does that affect its
loanable value ?
Mr. CANNON. I should think it would affect it very seriously.
Mr. UNTERMYER. It would destroy it, would it not ?
Mr. CANNON. I would not say it would destroy it.
Mr. UNTERMYER. Ordinarily it would destroy it, would it not?
Mr. CANNON. I would not say it would destroy it, but I would say
it would affect it very seriously. It would depend on what the
security was.
Mr. UNTERMYER. The New York Stock Exchange you regard as
performing a very important function in the financial system of the
country, do you not?
Mr. CANNON. Yes, sir.
Mr. UNTERMYER. DO the

banks throughout the country lend their
surplus funds on the stock exchange ?
Mr. CANNON. Not throughout the entire country; no, sir.
Mr. UNTERMYER. Well, a large part of the country ?
Mr. CANNON. NO.
Mr. UNTERMYER. In

which localities do they not loan their surplus
funds in that wav, so that they come to New York ?
Mr. CANNON. The cities of Chicago, Boston, and Philadelphia, I
think, loan a large part of their surplus funds.
Mr. UNTERMYER. YOU mean in their own cities ?



MONEY TKUST INVESTIGATION.

351

Mr. CANNON. NO; on the stock exchange, through their correspondents.
Mr. UNTEEMYEB. Through their individual correspondents ?
Mr. CANNON. Yes.
Mr. UNTEEMYEB. And they direct the loans ?
Mr. CANNON. Yes.
Mr. UNTEEMEYEE. I mean the banks in Boston,

Chicago, and Philadelphia direct their correspondents
Mr. CANNON. They direct their correspondents to make these loans,
and rely upon them as to the value of the securities.
Mr. UNTEEMYEB. DO you know how many banks throughout the
country carry balances in New York City ?
Mr. CANNON. NO, sir.
Mr. UNTEBMYEB. Practically all of them, do they not ?
Mr. CANNON. NO, sir; a great many do not.
Mr. UNTEBMYEB. Where do they carry their balances ?
Mr. CANNON. In Chicago and St. Louis.
Mr. UNTEBMYEB. DO you not know that the Chicago banks

that
carry the balances of these country banks, themselves in turn carry
balances in New York City ?
Mr. CANNON. That may be true. The Chicago banks carry balances with us, but I could not testify that those balances are made up
of other balances deposited in Chicago.
Mr. UNTEEMYEB. Presumably that is so.
Mr. CANNON. I would not want to say that.
Mr. UNTEEMYEB. Take, for instance, the largest bank in Chicago,
the Continental & Commercial, Mr. Reynolds's Dank?
Mr. CANNON. Yes.
Mr. UNTEBMYEB. What is the capital of that bank ?
Mr. CANNON. I could not tell you.
Mr. UNTEHMYEB. Its deposits are said to be over $200,000,000.
Mr. CANNON. I do not know.
Mr. UNTEBMYEB. What is your information about what its depos-

its are?
Mr. CANNON. I have not seen the last statement. It is a large
bank, but I could not g^ve you those figures.
Mr. UNTEBMYEB. IS it not reputed to be the largest in the country;
the largest of all the banks ?
Mr. CANNON. I could not tell you without examining their figures.
I have not seen their figures lately.
Mr. UNTEBMYEB. When you last saw them, what were their reputed
deposits ?
Mr. CANNON. I am not certain whether they stood second or third,
or where.
Mr. UNTEBMYEB. YOU mean second or third in the country 1
Mr. CANNON.

Yes.

Mr. UNTEBMYEB. They were about $200,000,000 in deposits, were
they not ?
Mr. CANNON. I do not remember the last figures, because I have
not looked at them lately.
Mr. UNTEBMYEE. Would not that be an interesting subject to you ?
Mr. CANNON. It would be interesting; yes.
Mr. UNTEBMYEB. And you can not give us any idea as to which is
the largest bank in this country in the amount of deposits they carry ?



352

MONEY TBUST INVESTIGATION.

Mr. CANNON. Not on the last figures.
Mr. UNTEBMYER. I do not mean yesterday's figures, but, say, a
month ago. It is about $200,000,000, is it not ?
Mr. CANNON. I could not testify unless I saw the figures.
Mr. UNTEKMTEE. DO you not know that that bank keeps balances
in New York ?
Mr. CANNON. Yes.
Mr. UNTEKMYEB. With the City Bank and
Mr. CANNON. A great many banks; yes.
Mr. UNTEKMYEB. And those balances are,

other institutions ?

in turn, loaned out by
the New York banks on the stock exchange ?
Mr. CANNON. Not entirely on the stock exchange.
Mr. UNTEBMYER. I mean partially. When there is a surplus of
funds in the hands of a New York bank the New York bank does not
discriminate as to where it comes from *
Mr. CANNON. NO ; it puts it in the pot.
Mr. UNTERMYER. It puts it in the pot and lends it out; yes. So
that in that way the surpluses or balances, or part of them, of all the
banks in the country that are here in New York, either directly from
the country banks or through the intermediary banks, are loaned out
on the stock exchange or otherwise on collateral or on loans generally ?
Mr. CANNON. The surplus funds are loaned out here; yes.
Mr. UNTEBMYEB. These funds that go into the pot are loaned out
of the pot ?
Mr. CANNON. Yes; if they are to be used on the stock exchange.
Some of them, of course, do not go on the stock exchange.
Mr. UNTEBMYEB. Such as are usable on the stock exchange are
loaned in that way ?
Mr. CANNON. Yes; as I understand it.
Mr. UNTEBMYER. And in that way the whole country contributes
its part to the operations on the stock exchange ?
Mr. CANNON. I would not want to say the whole country.
Mr. UNTEBMYEB. Which part of the country does not ?
Mr. CANNON. I will not say the whole country, because all the
banks' money is not loaned out on the stock exchange.
Mr. UNTEBMYEB. I said they contribute to it; I did not say that
all the money of the country went onto the stock exchange. But the
question is whether or not through the system you have explained
the entire country does not, directly or indirectly, contribute to the
operations on the' stock exchange.
Mr. CANNON. I should say that a very large portion of it does, in
their surplus funds coming here in that way.
Mr. UNTEBMYEB. That is what makes possible these vast speculative operations, is it not ?
Mr. CANNON. Some people think that is true; yes.
Mr. UNTEBMYEE. DO you not think so ?
Mr. CANNON. I should think it helps it; yes.
Mr. UNTEBMYEB. DO VOU remember the occasion of the 24th of
October, 1907, when call money reached its highest point on the
stock exchange 1
Mr. CANNON. I do not remember the exact date; no.
Mr. UNTEBMYEB. YOU remember that there was an occasion during
that time when call money was quoted at 125 per cent, do you not?



MONEY TBUST INVESTIGATION.

353

Mr. CANNON. I can not remember the exact date. It was along
in October of that year. I think there was a very tight money market
in October of that year.
Mr. UNTERMYEK. DO you remember that money went to 125 per
cent ?
Mr. CANNON. I do not remember the highest point.
Mr. UNTERMYER. HOW high do you recall its going ?
Mr. CANNON. I do not recall the date.
Mr. UNTERMYER. Not the date, but do you not remember the per
cent to which money went ?
Mr. CANNON. I do not, no.
Mr. UNTERMYER. Can you give it approximately ?
Mr. CANNON. I can not. I can look it up and give it to you.
Mr. UNTERMYER. But you must have some recollection about it ?
Mr. CANNON. I have no recollection of the highest rate for money.
Mr. UNTERMYER. NO; but how high do you recall its going during

that time ?
Mr. CANNON. That would be difficult for me to answer. It was a
very high rate.
Mr. UNTERMYER. But that does not mean anything.
Mr. CANNON. I could not give it without looking it up.
Mr. UNTERMYER. Some people might think 10 per cent is a high
rate; but you know money has gone up to over 100 per cent on the
stock exchange, do you not ?
Mr. CANNON. It lias at times, yes.
Mr. UNTERMYER. And it did during the 1907 panic, did it not?
Mr. CANNON. I think it did, but I could not testify positively.
Mr. UNTERMYER. DO you remember that on the afternoon of
that same day it suddenly went back to 6 per cent ?
Mr. CANNON. NO, sir; I do not.
Mr. UNTERMYER. And down to 3 per cent?
Mr. CANNON. NO, sir; I do not.
Mr. UNTERMYER. DO you remember whether

money at that time on the stock exchange ?

you were loaning any

Mr. CANNON. NO, sir.

Mr. UNTERMYER. YOU do not remember whether you were?
Mr. CANNON. NO, sir.
Mr. UNTERMYER. DO you

remember whether the banks all stopped
lending money on the stock exchange on a given date ?
Mr. CANNON. NO, sir; I do not remember.
Mr. UNTERMYER. Or did they resume that day ?
Mr. CANNON. I do not remember, no, sir.
Mr. UNTERMYER. I thank you, Mr. Cannon. I understand you
want to get awav.
Mr. CANNON. Yes.

Witness excused.
TESTIMONY OF RANSOM H. THOMAS.

The witness was sworn by the chairman.
Mr. UNTERMYER. YOU live in the city of New York ?
Mr. THOMAS. Morristown, N. J.
Mr. UNTERMYER. Are you now engaged in business ?
Mr. THOMAS. Yes,




sir.

354

MONEY TBUST INVESTIGATION.

Mr. UNTEEMYEE. In what business ?
Mr. THOMAS. In the stock business.
Mr. UNTEBMYEE. YOU are a member of a stock-brokerage firm ?
Mr. THOMAS. Yes; R. H. Thomas & Co.
Mr. UNTEBMYEB. YOU were the president of the New York Stock
Exchange in 1907, were you not ?
Mr. THOMAS. Yes,

sir.

Mr. UNTEBMYEE. YOU were the president during the 1907 panic?
Mr. THOMAS. The year from 1907 to 1908; yes, sir.
Mr. UNTEBMYEE. The president is elected for one year, is he not?
Mr. THOMAS. For one year.
Mr. UNTEEMYEB. When does the term of office begin?
Mr. THOMAS. I think it is the second Monday in May that the election is held, and the president takes his office the next day.
Mr. UNTEBMYEE. YOU recall very distinctly, do you not, the stirring
events of that panic in October, 1907 ?
Mr. THOMAS. Yes,

sir.

Mr. UNTEBMYEB. It was a time of great distress on the stock
exchange and great excitement ?
Mr. THOMAS. Great excitement; yes.
Mr. UNTEEMYEE. DO you recall a day when call money was very
high?
Mr. THOMAS. Yes.
Mr. UNTEEMYEB. It

it not ?

was very high for a number of days, was

Mr. THOMAS. Yes.

Mr. UNTEEMYEB. It ranged between what figures during those
days?
Mr. THOMAS. It would be difficult for me to state exactly the rate—
for instance, on this day in October that you refer to—because I
was not on the floor when it was lending at the highest point. I
could only say that I was told that it loaned at 100 per cent during
that day.
Mr. UNTEBMYEB. That was the 24th of October, 1907, was it not ?
Mr. THOMAS. That was the 24th of October.
Mr. UNTEBMYEE. Was that the culmination of the panic ?
Mr. THOMAS. NO, sir.
Mr. UNTEEMYEE. It continued for some time after that, did it?
Mr. THOMAS. Yes, sir.
Mr. UNTEBMYEB. While you were on the floor in the early part of the

day, how high had money gone?
Mr. THOMAS The only rate that I recall for money made on the
morning of O x>ber 24 was 6 per cent on loans made by the broker
representing the City Bank, and that was recorded on the board where
the loans are made.
Mr. UNTEBMYEE. And money went during that forenoon to 60 per
cent, did it not ?
Mr. THOMAS. NO. Shall I answer it in a little different way?
Mr. UNTEBMYEE. Certainly.
Mr. THOMAS. My attention was called to the scarcity of money
Mr. UNTEEMYEE. Your attention was called to the scarcity of money
that morning, was it ?
Mr. THOMAS. Yes.

Mr. UNTEEMYEB. Was not money 60 per cent then ?



MONEY TBUST INVESTIGATION.

355

Mr. THOMAS. Can I explain that as it developed ?
The CHAIRMAN. YOU should answer yes or no, and then make any
explanation you desire.
Mr. THOMAS. It is a little story. Mr. Turner, a member of the
exchange, came to me. Shall I proceed ?
The CHAIRMAN. I will give you the view of the committee. It is
this: A witness when asked a question calling for a yes or no answer
may answer in one of three ways—yes, or no, or that he does not
remember. Then he has a right, after having answered yes, or no,
to make an explanation of his answer so far as it is germane to the
question, but not to digress into irrelevant matters.
Mr. UNTERMYER. "We might be kept years at this investigation if
we did not pursue a definite line.
Mr. THOMAS. I stated it to you the other day. Shall I proceed on
that line, or would that be irregular ?
Mr. UNTERMYER. Let me ask you the questions, if you please.
Mr. THOMAS. Certainly.
Mr. UNTERMYER. On the 24th of October, 1907, you went to the
city, did you not, to get relief from the money stringency ?
Mr. THOMAS. Yes.

Mr. UNTERMYER. At that time what was the price of call money ?
Mr. THOMAS. The registered rate on the post was 6 per cent, and
60 per cent was bid.
Mr. UNTERMYER. And no money was forthcoming at that ?
Mr. THOMAS. Sixty was bid, and the last recorded loan on the
board was 6 per cent.
Mr. UNTERMYER. That was *at the opening of the exchange ?
Mr. THOMAS. NO; that was in the forenoon.
Mr. UNTERMYER. Sixty per cent was bid for money, and how
much was asked for it in response to that bid ?
Mr. THOMAS. There was no money there, so far as I saw.
Mr. UNTERMYER. That was what created this consternation among
the members of the exchange, was it ?
Mr. THOMAS. Sixty per cent was bid for money, and so far as one
could judge—I spent but a moment there—there was no money
forthcoming.
Mr. UNTERMYER. And that being so, were you appealed to to see
what could be done to relieve the stringency ?
Mr. THOMAS. A suggestion was made to me by Mr. Turner.
Mr. UNTERMYER. Pursuant to that suggestion, did you go to see
Mr. James Stillman, of the City Bank ?
Mr. THOMAS. Yes, sir.
Mr. UNTERMYER. And he referred you to whom ?
Mr. THOMAS. I think I will have to adopt the chairman's

suggestion and waive answering it.
Mr. UNTERMYER. YOU spoke to Mr. Stillman about the money
stringency ?
Mr. THOMAS. Yes.

Mr. UNTERMYER. And what did he say to you ?
Mr. THOMAS. He recommended to me to go to Mr. Morgan and tell
him the exact story that I had told him, Mr. Stillman.
Mr. UNTERMYER. Did Mr. Stillman ask you how much money
would be required to relieve the stringency ?
Mr. THOMAS. He. did.



856

MONEY TBUST INVESTIGATION.

Mr. UNTEBMYEB. What did you tell him i
Mr. THOMAS. I answered him that that was a difficult question to
answer, and I told him—shall I state what I told him ?
Mr. UNTEBMYEB. If you will, just state how much you told him
you thought was needed.
Mr. THOMAS. $25,000,000.
Mr. UNTEEMYEB. And when he told you to go to Mr. Morgan, did
he tell you that he would telephone Mr. Morgan ?
Mr. THOMAS. He said that he would advise Mr. Morgan that I
was coining. Yes; I think that is right.
Mr. UNTEEMYEB. Pursuant to that conversation did you go over
to Mr. Morgan's office ?
Mr. THOMAS. I went from the City Bank to Mr. Morgan's office,
yes, sir.
Mr. UNTERMYEE. Did you see Mr. Morgan ?
Mr. THOMAS. NO, sir.
Mr. UNTEBMYEB. YOU did not see him at all ?
Mr. THOMAS. I saw Mr. Morgan later, but not at that
Mr. UNTEBMYEB. I mean you saw him on that visit ?

time.
You waited

for him. did you not ?
Mr. THOMAS. Before I left the office I saw him.
Mr. UNTEEMYEE. In the meantime he was in a conference, was he ?
Mr. THOMAS. Yes; that is to say, he was in his private office and
I could not see him. That is my answer.
Mr. UNTEBMYEB. HOW long did you wait before you saw him ?
Mr. THOMAS. Well, 20 minutes.
Mr. UNTEEMYEE. AS he came out of* his private office did a number
of other gentlemen also come out ?
Mr. THOMAS. There was great excitement, and the office was filled
with people.
Mr. UNTEBMYEB. But there were a number of gentlemen with him
in conference, were there not ?
Mr. THOMAS. I was not in the office.
Mr. UNTEEMYEB. But I understood from you that there were six
or eight gentlemen with him in this conference ?
Mr. THOMAS. I stated that I was not in the conference—was not in
the room—and so I could not tell who were present.
Mr. UNTEEMYEB. When they came out, did you see who had been
in there?
Mr. THOMAS. NO ; I could not answer that question, as I explained
to you the other night. I could not tell you who were there.
Mr. UNTEBMYEB. YOU mean you do not remember, or that you did
not see them ?
Mr. THOMAS. The office, as I have answered, wasfilledwith people,
and the excitement was intense, and I could not tell you the names
of the gentlemen who were there.
Mr. UNTEBMYER. IS it that you do not recall now, or that you did
not see who were in the conference ?
Mr. THOMAS. I did not see who were in the conference.
Mr. UNTEBMYEB. YOU do not know whether they were bank
presidents ?
Mr. THOMAS. I could not definitely swear as to a man who was
there, Mr. Untermyer.



MONEY TRUST INVESTIGATION.

357

Mr. UNTEKMYER. NOW, will you be good enough to tell us what
you told Mr. Moigan when you saw him ?
Mr. THOMAS. Mr. Morgan apparently came out of his private office
and came to where I was standing in the lobby and said "We are
going to let you have"—I think these are his words—"'$25,000,000.
Go ovei to the exchange and announce it," or, "Will you go over to
the exchange and announce it?"
Mr. UNTEKMYER. IS that all ?
Mr. THOMAS. NO, sir.
Mr. UNTERMYER. Proposed, then.
Mr. THOMAS. I said, One suggestion,

Mr. Morgan, I would like to
make." He said, " What is it ?" I said, " I t is this: That you divide
this up among several people, as I think it would have a better effect
in bringing in money and meeting the emergency." He said, "That
is a good suggestion. Perkins, divide that up in lots among several
people." And I proceeded to the stock exchange. Is that an answer ?
Mr. UNTEKMYER. Yes. Is that all ?
Mr. THOMAS. That is all the conversation I had with Mr. Morgan.
Mr. UNTERMYER. Was Mr. Perkins there ?
Mr. THOMAS. Mr. Perkins was there. I advised you in my conversation with you night before last that Mr. Perkins was there.
Mr. UNTERMYER. I did not remember.
Mr. THOMAS. Yes.
Mr. UNTERMYER. Was there anybody else there ?
Mr. THOMAS. The office as filled with people.
Mr. UNTERMYEE. Was anybody else a party to this

conversation
between you and Mr. Morgan in which Mr. Perkins was a participant?
Mr. THOMAS. I think Mr. Turner, a member of the board, was outside when Mr. Morgan made that statement to me.
Mr. UNTERMYER. Have you now stated to me in substance what
took place at that time ?
Mr. THOMAS. Yes,

sir.

Mr. UNTERMYER. Did you ask Mr. Morgan, or did you learn,
whether any of the gentlemen who were then in conference with him
were lending this money under his direction ?
Mr. THOMAS. Mr. Untermyer, not at all.
Mr. UNTERMYER. YOU did not? Well, I just asked you.
Mr. THOMAS. Certainly.
Mr. UNTERMYER. YOU did not know from what source the money
was coming, did you ?
Mr. THOMAS. NO, sir.
Mr. UNTERMYER. When

vou went over to the exchange, what announcement did you make ?
Mr. THOMAS. Mr. Turner, as I understand it, said, "'Wait a moment and Mr. Thomas will make a statement."
Mr. UNTERMYER. Mr. Turner said that to whom I
Mr. THOMAS. TO those who were at the loan crowd, gathered at the
loan crowd, waiting for developments to be made.
Mr. UXTERMYER. Waiting for this fiat or determination ?
Mr. THOMAS. Not at all: and they did not know anything about it.
Mr. UNTERMYER. Oh.
Mr. THOMAS. Not that
60241—PT 5—12
2




I know of.

358

MONEY TRUST INVESTIGATION.

Mr. UNTEBMTER. They did not know it was coming ?
Mr. THOMAS. XO, sir.
Mr. UNTEBMTEB. IS there

a stand in the stock exchange that is
devoted to the lending and borrowing of money ?
Mr. THOMAS. Yes.

Mr. UNTEBMTEB. And you made a statement, did you ?
Mr. THOMAS. I made a statement.
Mr. UNTEBMTEB. Will you be good enough to tell us what you
said to them ?
Mr. THOMAS. I said to them, "Be perfectly calm. I have not any
money, but relief is coming, you can depend upon it."
Mr. UNTEBMTEB. YOU did not say how much relief ?
Mr. THOMAS. I did not, sir.
Mr. UNTEBMTEB. And how soon after that did relief come ?
Mr. THOMAS. Very promptly.
Mr. UNTEBMTEB. About liow long was it?
Mr. THOMAS. About a minute and a half or two minutes.
Mr. UNTEBMTEB. TWO minutes ?
Mr. THOMAS. Perhaps five minutes.
Mr. UNTEBMTEB. Then the banks began lending money through

their brokers, did they ?

Mr. THOMAS. NO, sir.
Mr. UNTEBMTEB. DO you
Mr. THOMAS. I do not.
Mr. UNTEBMTEB. But the

know who loaned that money?

loan brokers who were ordinarily lending
money for the banks began lending money, did they not ?
Mr. THOMAS. Money appeared in different parts of the crowd.
As I was not a borrower or a lender I left there immediately, and I
could not tell you who loaned this money.
Mr. UNTEBMTEB. Then the rate dropped from about 100 per cent
to about 6 per cent, immediately ?
Mr. THOMAS. The rate dropped immediately.
Mr. UNTEBMTEB. TO 6 per cent ?
Mr. THOMAS. I could not tell you. I did not borrow any that night.
Mr. UNTEBMTEB. DO you not remember what the rate was ?
Mr. THOMAS. I have not a doubt but what it dropped to 6 per cent.
Mr. UNTEBMTEB. It dropped to 3 per cent after the day was over ?
Mr. THOMAS. After all the balances were made.
Mr. UNTEBMTEB. I mean after everybody's wants were satisfied
the rate dropped to 3 per cent ?
Mr. THOMAS. I did not see it at 3 per cent. I could not answer
that. Very likely it did.
Mr. UNTERMTEB. YOU went to Mr. Stillman, did you not. because
he was the head of the largest bank in Xew York ?
Mr. THOMAS. XO, sir.

Mr. UNTEEMTEB. YOU knew he was the head of the largest bank
in New York, did you not ?
Mr. THOMAS. I knew he was president of the Gty Bank.
Mr. UNTEBMTEB. YOU knew that that was the largest bank in
New York ?
Mr. THOMAS. In general, yes; substantially. To answer you, yes.
Mr. UNTEBMTEB. YOU knew that he was the head of that bank ?
Mr. THOMAS. I assumed that he was the president; yes, sir.



MONET TBUST INVESTIGATION.

359

Mr. UNTERMYER. YOU knew that besides being the president of the
bank he was. the directing head of it and controlled the bank, did you
not*
Mr. THOMAS. NO. sir: I do not know whether he controlled it.
Mr. UNTERMYER. YOU knew that he controlled its managers
absolutely ?
Mr. THOMAS. I knew that he was the president.
Mr. UNTERMYER. YOU knew that he was the president and controlled it absolutely ?
Mr. THOMAS. Absolutely no more than any other man in this room.
Mr. UNTERMYER. HOW many years have you been on the stock
exchange ?
Mr. THOMAS. I have been for thirty-odd years.
Mr. UNTERMYER. And you did not know that James Stillman
during his incumbency of the presidency of the City Bank was in
absolute control of its policy and management ?
Mr. THOMAS. Mr. Untermyer, I can only say about that that I have
never known any more than that Mr. Stillman was president of that
bank.
Mr. UNTERMYER. Did you ask Mr. Stillman why it was that, being
president of this bank, the largest bank in New York, instead of
responding to your request for relief he sent you to Mr. Morgan ?
Sir. THOMAS. NO, sir.
Mr. UNTERMYER. Did you ask him ?
Mr. THOMAS. I did not ask him.
Mr. UNTERMYER. Did you understand

dent of any bank ?

that Mr. Morgan was presi-

Mr. THOMAS. NO, sir.

Mr. UNTERMYER. Or director of any bank?
Mr. THOMAS. I did not think of those things at that time.
Mr. UNTERMYER. NO; I understand you to say that you have no
idea as to what bank, if any, commenced lending this money after
this interview with Mr. Morgan, on the stock exchange ?
Mr. THOMAS. That is right, sir. I so stated here. That is absolutely the correct answer.
Mr. UNTERMYER. When a loan is made on the stock exchange, is
there any slip or memorandum that passes, to designate the name of
the lender ?
Mr. THOMAS. NO. If I was to borrow $100,000 of the Fourth
National Bank, I would make a memorandum, "Borrowed $100,000
of the Fourth National Bank," and send it to my office.
Mr. UNTERMYER. SO that when you borrow at the loan stand you
know from whom you are borrowing, do you not ?
Mr. THOMAS. Yes: from an individual or a bank or a trust company
I so report.
Mr. UNTERMYER. I say a borrower knows from whom he borrows ?
Mr. THOMAS. Yes; he would have to know in order to send his loan.
Mr. UNTERMYER. IS there any record kept by the exchange of these
matters ?
Mr. THOMAS. None whatever.
Mr. UNTERMYER. IS there any available means that you can suggest
to us by which we can ascertain who suddenly came into the loan
crowd, through their brokers and loaned this monev after this talk
of yours with Mr. Morgan ?



360

MONEY TEUST INVESTIGATION.

Mr. THOMAS. I could not answer, as I stated to you the other night,
Mr. Untermyer, who loaned that money.
Mr. UNTEBMYEE. NO; but I say is there any available means you
can suggest for our ascertaining who made these loans? I ask you
because you know the machinery of the exchange and you know the
custom in making these loans.
Mr. THOMAS. The exchange would have nothing to do with it and
would know nothing about it. It is all individual, entirely.
Mr. UNTEBMYEB. DO you know why, up to that time, there was no
lending of money around ?
Mr. THOMAS. We were in the midst of a panic, and any man's
answer is as good as another's.
Mr. UNTEBMYEB. YOU do not know and you do not think anybody
would know?
Mr. THOMAS. I do not know.
Mr. UNTEEMYEE. When Mr. Morgan gave the word, did that change
the panic conditions ?
Mr. THOMAS. DO I understand the question ? How am I to understand the question ? Have it read.
The question was read by the stenographer, as follows:
Mr. UNTBRMYEK. When Mr Morgan gave the word, did that change the panic
c onditiona?
Mr. THOMAS. It certainly had a very decided effect upon relieving

the situation, which, as I said before, was panicky.
Mr. UNTEEMYEE. Then, it rested with one man to say whether the
panic should go on or should end, did it ?
Mr. THOMAS. I could not answer that question. I could not assent
to that, that it rested with one man.
Mr. UNTEEMYEE. YOU do not dissent from it. do you ?
Mr. THOMAS. I had had no conversation before and was not present at the conference, and consequently I am unable to answer that
question.
Mr. UNTEEMYEE. Had the banks been lending money on the preceding day?
Mr. THOMAS. I could not answer that question. It is presumed
that banks loan their money; but as to whether they did or not, I
could not answer it.
Mr. UNTEBMYEB. Your house was in the brokerage business at that
time, was it not ?
Mr. THOMAS. Yes,

sir.

Mr. UNTEEMYEE. And all brokers have to borrow money to carry
their customers, do they not ?
Mr. THOMAS. More or less.
Mr. UNTEEMYEE. DO you remember whether your house was in the
market at that time, the day preceding the 24th of October? I
merely ask it for the purpose of possibly refreshing vour memory as
to whether money was being loaned the day before the 24th.
Mr. THOMAS. X would have to answer that question by telling you
I was on a very conservative basis, and as president of the stock exchange I was giving my entire time to the affairs of the exchange.
Mr. UXTEEMYEK. So that you have no means of telling us now,
TO m your present recollection, whether money was being loaned on
he -23d of October, and on what terms ?



MONEY TBXJST INVESTIGATION.

362

Mr. THOMAS. That I could not answer.
Mr. UNTERMYER. Is there nv re. OT>\ in the exchange of the money
rate from day to day ?
Mr. THOMAS. XO.
Mr. UNTERMYER. What do you say ?
Mr. THOMAS. AS a matter of record from

mean?

month o month, do you

Mr. UNTERMYER. Yes.
Mr. THOMAS. NO. sir.
Mr. UNTERMYER. That is. as a matter of record?
Mr. THOMAS. XO, sir.
Mr. UNTERMYER'. There are daily quotations for

are not preserved, are they ?

money, but they

Mr. THOMAS. XO, sir.
Mr. UNTERMYEE. The

quotations for money are written on the
blackboard every day and are quoted in the newspapers, are they not ?
Mr. THOMAS. In a general way, they are.
Mr. UNTERMYER. The accounts of brokers that are thus carried
from day to day on collateral demand loans are generally carried
upon what margin ?
Mr. THOMAS. Twenty per cent is the general understood rule.
Mr. UNTERMYER. Twenty per cent margin over and above the
quoted price of the securities upon the exehange ?
Mr. THOMAS. XO; that is not it.
Mr. UNTERMYER. That is not correct ?
Mr. THOMAS. That is not correct.
Mr. UNTERMYER. Will you not state it in your own words ?
Mr. THOMAS. When a loan is made the understanding is that you
put in a margin of 20 per cent over and above the face of the loan.
Mr. UNTERMYER. HOW is the margin fixed; upon the quoted price
of the securities ?
Mr. THOMAS. Yes.
Mr. UNTERMYER. Of the day ?
Mr. THOMAS. Yes, sir.

Witness excused.
TESTIM01TY OF MB. JAMES B. MABOH.

The witness was sworn by the chairman.
Mr. UNTERMYER. Are you the president of the New York Stock
Exchange ?
Mr. MABON. I am.
Mr. UNTERMYER. Just recently elected?
Mr. MABON. Yes.
Mr. UNTEHMYER. What is yourfirm?
Mr. MABON. Mabon & Co.
Mr. UNTERMYER. HOW long have you been

a member of the stock
exchange ?
Mr. MABON. Twenty-one years.
Mr. UNTERMYER. During "that time nave you been a member of the
governing committee ?
Mr. MABON. I have been a member of the governing committee
from 1900.
Mr. UNTERMYER. For the lus-t 12 years?




362

MONEY TSUST INVESTIGATION.

Mr. MABON. For the last 12 years, yes.,
Mr. UNTERMYER. Have you also been a member of the various
other committees of the exchange ?
Mr. MABON. I have been a member of the stock-listing committee
and also of the committee on unlisted securities white it was in
existence.
Mr. UNTEEIIYER. For how many years were you a member of the
committee on stock list ?
Mr. MABON. About eight years.
Mr. UNTERMYER. IS the president of the exchange ex officio a
member of the various committees ?
Mr. MABON. NO; he is of the finance committee.
Mr. UNTERMYER. He is the chairman of the governing committee,
is he not ?
Mr. MABON. He is the president of the stock exchange and presides at governing committee meetings.
Mr. UNTERMYER. What was this unlisted department to which
you refer ?
Mr. MABON. The unlisted department was a committee appointed
under the constitution to give quotations to certain securities which
did not comply with the requirements of the stock-listing committee.
Mr. UNTERMYER. Were those securities of companies that would
not, or did not, make an exposure of their affairs ?
Mr. MABON. In some cases.
Mr. UNTERMYER. YOU had upon that unlisted department, had
you not, stocks such as those of the Amalgamated Copper Co. and of
the American Sugar Refining Co. that would not make any sort of
a statement ?
Mr. MABON. I found them there when I became a member of the
unlisted committee.
Mr. UNTERMYER. They had been there for many years ?
Mr. MABON. For some years; yes.
Mr. UNTERMYER. Did they appear in the regular list with simply
a star in front of them to designate that they were unlisted securities on the list ?
Mr. MABON. I believe so.
Mr. UNTERMYEE. Dealings in them were permitted ?
Mr. MABON. Yes.
Mr. UNTERMYER. Until what year ?
Mr. MABON. I think, 1910.
Mr. UNTERMYER. That was after the

mittee, so called ?

Mr. MABON. Yes.
Mr. UNTERMYER.

report of the Hughes com-

And then pursuant to the recommendations of
that report that department was abolished 1
Mr. MABON. That was pursuant to a resolution of the governing
committee of the stock exchange.
Mr. UNTERMYER. Acting upon the recommendations of that
report ?
Mr. MABON. I can not answer that question in that way, Mr.
Untermyer, because during the five years when I was chairman of
that committee the committee on unlisted securities did not list
any securities that did not furnish as complete a report of its affairs
as to the stock list committee.



MONEY TBUST INVESTIGATION.

363

Mr. UNTERMYEE. Then, during your incumbency the unlisted department did not list any securities in the unlisted department?
Mr. MABON. They did list.
Mr. UNTERMYEE. But you required the same return during that
time as was required in the listed department 1
Mr. MABON. Yes.
Mr. UNTEEMYEE.

What was the advantage of their going upon the
unlisted department ?
Mr. MABON. I do not know what the advantage was; but I wish
to correct that, to say that there were probably one or two exceptions to that rule. I could go into those exceptions if you wanted
me to.
Mr. UNTERMYEE. What do you mean by exceptions to the rule;
companies that did not make any report?
Mr. MABON. Yes; did not make a complete report.
Mr. UNTERMYER. Whose securities were still listed? I am not
interested in this subject to any extent, except to find out if you
know whether or not it was really upon the recommendations contained in the report of the so-called Hughes committee that this unlisted department, which allowed to remain upon the list with a star
before them stocks of companies that made no report, and no disclosure of their condition, was abolished.
Mr. MABON. I can not say it was only because of the Hughes committee, because the members of the governing committee might have
had it in mind to do it of their own volition.
Mr. UNTERMYEE. DO you not remember that the Hughes committee
reported that unless the stock exchange would make certain reforms
they would recommend requiring that it be incorporated ?
Mr. MABON. I do not remember that recommendation in the
Hughes committee's report; no, sir.
Mr. UNTERMYEE. DO you not remember there was some question
about its being incorporated or not incorporated, and that certain
reforms were suggested?
Mr. MABON. I know the Hughes committee report dealt with certain reforms that were suggested, but whether this reform was as you
state it, I do not know.
Mr. UNTEEMYEE. IS this a print of the so-called Hughes report;
that is, the report of the investigating committee appointed by Gov.
Hughes [handing witness pamphlet]?
Mr. MABOX. Of course, I have not read it, but I will assume it is.
Mr. UNTEEMYER. Subject to correction if the printed copy is not
correct, we would like to have it marked in evidence.
The pamphlet referred to was marked "Exhibit No. 27, June 12,
1912."
Mr. UNTERMYEE. That investigation was not held pursuant to any
legislative authority, was it ? It was a mere voluntary committee,
appointed by Gov. Hughes, without the consent of either house of
the legislature, was it not ?
Mr. MABON. I do not know of my own knowledge. I know what
the general impression was, but I do not know of my own knowledge.
Mr. UNTERMYER. DO you not recall the circumstances of the appointment of that committee ?
Mr. MABON. I do recall that there was a committee appointed by
the governor.



364

MONEY TBUST INVESTIGATION.

Mr. UNTERMYER. And that there was no legislative action upon it ?
Mr. MABON. That I do not remember.
Mr. UNTERMYER. YOU recall also that there was no appropriation
for the committee, and that the facts it gathered were voluntarily
given ?
Mr. MABON. I can not answer that question. I assume it is true,
but I do not know of my own knowledge.
Mr. UNTERMYER. DO you know whether there was any evidence
taken ?
Mr. MABON. I do not.
Mr. UNTERMYER. DO

sworn ?

you know whether any witnesses were

Mr. MABON. NO.
Mr. UNTERMYER.

Or whether the committee had power to call
anybody who did not care to volunteer information ?
Mr. MABON. I do not know.
Mr. UNTERMYER. DO you know whether the sessions of this committee were secret or open?
Mr. MABON. TO my knowledge I do not know.
Mr. UNTERMYER. DO you know anything about it?
Mr. MABON. I remember conversations only.
Mr. UNTERMYER. Did you meet the committee ?
Mr. MABON. I did
Mr. UNTERMYEK.

not.

We are anxious, Mr. Mabon, not to go over any
matters that have been discussed in this report, so far as we find they
are based on any investigation or evidence, and to that end I would
like to inquire from you whether you were a member of the committee
in this unlisted department of the stock exchange when this report
was made ?
Mr. MABON. I am sure I was.
Mr. UNTERMYER. DO you recall any evidence being asked or any
facts being requested to be produced before that committee concerning that department ?
Mr. MABON. Yes. As chairman of the unlisted committee I made
a report to the governing committee with reference to the unlisted
committee and what its functions were.
Mr. UNTERMYER. YOU made a report to that governing committee ?
Mr. MABON. TO the governing committee, before there was any
thought of any investigating committee, because I wanted to define
what I assumed to be the functions of the unlisted committee; and
that report was incorporated in the minutes, and was a part of the
evidence that was produced before the Hughes committee.
Mr. UNTERMYER. That you know, do you ?
Mr. MABON. I know it from the report that was made.
Mr. UNTERMYER. From what report ?
Mr. MABON. From the answers that were made to the Hughes
committee.
Mr. UNTERMYER. Who made any answers to the Hughes committee ?
Mr. MABON. I do not know who made any answers to the Hughes
committee.
Mr. UXTERMYER. Were questions put by the Hughes committee in
writing to the exchange ?
Mr. MABON. There were some; yes.




MONEY TBTJST INVESTIGATION,

365

Mr. UNTERMYER. That is the way the investigation was conducted,
was it ? A form of questions was sent to the exchange, which were
answered in writing, not under oath ?
Mr. MABON. I could not say, Mr. Untermyer, of my own knowledge,
what method was adopted. I do know what I am telling you. I can
only testify to what I know of the facts of the case.
Mr. UNTERMYER. All you know then is that certain questions in
writing were put ?
Mr. MABON. I know that questions in writing were put, pertaining
to the unlisted department.
Mr. UNTERMYER. TO whom were they put ?
Mr. MABON. I do not remember how the questions came to me or
who gave me the questions.
Mr. UNTERMYER. They came to you, did they ?
Mr. MABON. They came to me.
Mr. UNTERMYER. And you made written answers ?
Mr. MABON. I think not.
Mr. UNTERMYER. Did anybody make answer ?
Mr. MABON. That I do not know; but I presume so; yes.
Mr. UNTERMYER. YOU do not know as to that?
Mr. MABON. I do not know personally; I am quite sure that
they did.
Mr. UNTERMYER. Who ?
Mr. MABON. I do not know.
Mr. UNTERMYER. YOU do not know who made
Mr. MABON. I know that certain men made

the answers ?
the answers. I do
not know who the men were who made the answers.
Mr. UNTERMYER. AS chairman of the committee you did not make
them, did you ?
Mr. MABON. NO.

Mr. UNTERMYER. YOU do not know whether these answers that
were made were made under oath or not ?
Mr. MABON. I do not know.
Mr. UNTERMYER. SO far as you know, this committee never swore
any witnesses, did it?
Mr. MABON. I do not know, one way or the other.
Mr. UNTERMYEE. Then you have not any idea on what they predicated their report or conclusion, have vou ?
Mr. MABON. I do not understand the question. Who predicated
it; the Hughes committee?
Mr. UNTERMYER. The Hughes committee; yes. You do not know
what they had before them—what material and how gathered?
Mr. MABON. I do not know.
Mr. UNTERMYER. At any rate, this unlisted department was abolished in 1910?
Mr. MABON. I think that was the date.
Mr. UNTERMYER. Thereupon did these great corporations, like the
Amalgamated Copper Co. and the American Sugar Refining Co.,
whose stocks had been dealt in on the exchange, file applications
and make disclosures so as to procure admission to the regular list ?
Mr. MABON. I think that a great many of the corporations made
these applications before the date of the termination of the unlisted
committee.



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MONEY TBUST INVESTIGATION.

Mr. UNTEBMYEB. Why; since they had been allowed all those years
to deal freely in the securities on the exchange, although they made
no disclosures?
Mr. MABON. I can not answer what actuated them.
Mr. UNTEBMYEB. Why did you permit during all these years active
dealing in securities of that kind by companies that made no report
of their condition and gave no information to the public as to what
their assets or their liabilities were ?
Mr. MABON. For the time that I was chairman of that committee
we made a great many efforts, and succeeded in a great many cases,
in having them transferred from the unlisted to the regular list.
Mr. UNTEBMYEB. During those years when the Amalgamated Copper stocks were upon this unlisted list dealt in on the stock exchange
they were very active, were they not?
Mr. MABON. Yes.
Mr. UNTEBMYEB.

They were the most active of all the stocks on
the list, were they not ?
Mr. MABON. I would not say that.
Mr. UNTEKMYEB. Were there not times when the Amalgamated
stock was the most active of the list ?
Sir. MABON. I could not answer that question. I know it was very
active. I will assume it was, but I can not say it was the most
active.
Mr. UNTEBMYEB. And the sugar stock was also very active ?
Mr. MABON. Also very active; yes.
*Mr. UNTEBMYEB. For how many years did the stock exchange allow
those securities to be thus dealt in without any disclosure of the assets
or liabilities or anything concerning these corporations ?
Mr. MABON. It must nave been a varying time, but I do not know.
Mr. UNTEBMYEB. The Amalgamated stock was on the list from the
time of its organization in 1898 was it not ?
Mr. MABON. I assume so.
Mr. UNTEBMYEB. The sugar stock was on the list many years more ?
Mr. MABON. Prior to that; yes.
Mr. UNTEBMYEB. Would you say that one had been on that unlisted
list for 20 years and the other for about 10 or 12 years?
Mr. MABON. I should assume so.
Mr. UNTEBMYEB. During that time, Mr. Mabon, was there any way
by which any intending buyer could ascertain what these companies
owned what their properties were or what their assets were or what
their earnings were, or what their obligations were, or what their
business was ?
Mr. MABON. Certainly some of the information could be obtained.
Mr. UNTEBMYEB. Where ?
Mr. MABON. The unlisted department—this is my understanding;
I am quite sure I am right—did require certain information from these
people but whether they could give the detailed information that the
stock list required or not was another question.
Mr. UNTEBMYEB. Let us take the Amalgamated, for instance. Do
you not know that there was not a bit of information on the files of
the exchange ?
Mr. MABON. I do not know that.
Mr. UNTEBMYEB. DO VOU know whether there was any?
Mr. MABON. I think there was; yes.




MONEY XBUST IJtfVESTIGATION.

367

Mr. UNTEEMYEE. What information was there there up to the
time when the stock was required to be listed?
Mr. MABON. Certainly information as to the amount of the capital
stock.
Mr. UNTEKMYEE. AS to the amount of stock outstanding?
Mr. MABON. Yes.

Mr. UNTEEMYEE. Anybody could get that from the files of the
Secretary of State, could he not ?
Mr. MABON. I presume so. You asked me the question whether
we had any information.
Mr. UNTERMYER. Of course you had to know the amount of stock
outstanding, on account of the isuse of certificates, did you not?
Mr. MABON. Yes.
Mr. UNTEEMYEK. SO as to list a
Mr. MABON. Yes.
Mr. UNTERMYEE. That you had

was dealt in?

given amount of certificates?
to know as to every security that

Mr. MABON. Yes.

Mr. UNTEEMYEE. But apart from that, was there any information
on file?
Mr. MABON. I could not answer. I presume there was.
Mr. UNTERMYEE. DO you not know that the Amalgamated was
operated all these years as a blind pool ?
Mr. MAHON. I do not know it; no.
Mr. UNTEEMYEB. YOU dealt in it, did you not? Your firm dealt
in the stock?
Mr. MABON. I presume it did.
Mr. UNTERMYEE. For customers ?
Mr. MABON. I presume we did, although we do very little stock
business.
Mr. UNTEBMYEB. And you knew, did you not, that during all
those years you could not find out what they had been earning ?
Mr. MABON. I do not know that.
Mr. UNTEKMYER. DO you know whether you could or not ?
Mr. MABON. I do not know. I am stating personally that of my
own knowledge I do not know.
Mr. UNTERMYER. AS a broker, and this being an active stock, is it
possible you did not know the general conditions surrounding that
unlisted stock that was being dealt in on the exchange ?
Mr. MABON. Yes; I did know the conditions.
Mr. UNTERMYER. YOU knew the conditions surrounding it for years,
did you not?
Mr. MABON. Yes.
Mr. UNTEBMYEB.

And you knew, did you not, that for years you
could not find out what its assets or its obligations or its earnings
were?
Mr. MABON. NO; I do not know that you could not find out.
Mr. UNTEBMYEB. Did you ever find out ?
Mr. MABON. I do not remember whether I ever found out or not.
Mr. UNTERMYER. DO you know of anybody who did ?
Mr. MABON. I do not.

Mr. UNTERMYER. DO you know whether you could find out ?
Mr. MABON. I presume the unlisted committee did have certain
information.



368

MONEY TBUST INVESTIGATION.

Mr. UNTERMYEB. Will you not look and see what information they
had and let us have it I
Mr. MABON. I will, yes; with great pleasure.
Mr. UNTEEMYEK. And as to the sugar company also ?
Mr. MABON. Yes.
Mr. UNTEEMYER. YOU

know, do you not, it was a matter of public
knowledge that these companies made no disclosure of their affairs,
as to earnings, assets, or anything else for years while they were
being dealt in on the exchange ?
Mr. MABON. Mr. Untermyer, the question as to whether they made
no report or whether they made a meager report presents two questions. I do not know whether they made a meager report. I have
never been interested in Amalgamated Copper and can not answer
the question.
Mr. UNTERMYER. HOW about the sugar company?
Mr. MABON. I think the sugar company made reports.
Mr. UNTERMYER. Of what?
Mr. MABON. Of their affairs.
Mr. UNTERMYER. DO you mean to say that down to 1908 the
American Sugar Refining Co. made any reports of its assets or earnings or property ?
Mr. MABON. I have seen reports made to the State of Massachusetts by the sugar company.
Mr. UNTERMYEE. YOU have seen the report made to the State of
Massachusetts ?
Mr. MABON. I have seen it in the paper.
Mr. UNTERMYER. When was that»
Mr. MABON. Some years ago.
Mr. UNTERMYER. Was that during the Havemeyer regime ?
Mr. MABON. I do not remember.
Mr. UNTERMYER. But you have seen no reports to anyone except
the State of Massachusetts?
Mr. MABON. I do not remember having seen others.
Mr. UNTERMYER. At any rate, in 1910 the committee came to the
conclusion, did it not, that this was an improper and a dangerous
situation for such securities to be dealt in on the exchange ?
Mr. MABON. I could not express it that way, Mr. Untermyer.
Mr. UNTEEMYER. Express it your own way then.
Mr. MABON. They concluded it was a wiser thing to have all the
securities on the exchange under one stock-list committee.
Mr. UNTERMYER. They concluded, did they not, that it was wiser
to require companies that wanted their securities listed on the exchange
to make full disclosure ?
Mr. MABON. Yes.

Mr. UNTEEMYER. What were the evils that had arisen out of the
dealing on the exchange in stocks that did not make these disclosures ?
They were subject to manipulation, were they not?
Mr. MABON. I do not think so; no.
Mr. UNTERMYER. And false rumors ?
Mr. MABON. I do not know about it.
Mr. UNTERMYER. If a company made no statement of its earnings,
were not its securities more liable to be affected by rumors and false
information as to what these earnings were than if it made a statement
of them?



MONEY TBUST INVESTIGATION.

369

Mr. MABON. I can not answer that question; that is a question of
opinion.
Mr. UNTERMYER. If the company made no disclosure of its assets
or obligations, were the securities of the company more liable to fluctuation based on rumor ?
Mr. MABON. I could not say.
Mr. UNTERMYER. YOU do not think so ?
Mr. MABON. I could not say.
Mr. UNTERMYER. But what is your opinion about it ?
Mr. MABON. Will you ask the question again ?
Mr. UNTEEMYEK. What is your own opinion about it, frankly, Mr.
Mabon ?
Mr. MABON. My only effort is to be as frank as possible with you
and the committee.
Mr. UNTERMYEK. I am sure it is.
Mr. MABON. I received my subpcena notice a very little while ago
and I have not formed an opinion. The matter has not come to my
attention.
Mr. UNTERMYER. But can you not form an instant opinion on that
proposition ?
Mr. MABON. NO. I will say it did not necessarily mean that there
could be greater fluctuations in a stock that furnisned meager information than in a stock about which full information was furnished.
Mr. UNTERMYER. YOU do not think a stock that furnished no information would be more liable to manipulation than a stock with respect
to the merits of which everybody had full access and knowledge ?
Mr. MABON. We did have some information. You spoke of it as
furnishing no information. I am inferring that we had certain
information.
Mr. UNTERMYER. YOU mean you knew how much stock was out ?
Mr. MABON. And probably we had other information.
Mr. UNTERMYER. But you do not know that you had any, do you ?
Mr. MABON. I think so. We can have the information for you this
afternoon.
Mr. UNTERMYER. YOU were a member of the stock exchange at the
time the listed stocks were removed from the list ?
Mr. MABON. Yes.
Mr. UNTERMYER. I am referring to the listed securities.
Mr. MABON. Yes. I understood the question.
Mr. UNTERMYER. AS a broker and a man familiar with Wall

Street
methods, you understand thoroughly, do you not, the advantages of
securing a listing of a stock on the New York Stock Exchange ?
Mr. MABON. There are advantages, undoubtedly.
Mr. UNTERMYER. Among them are what ?
Mr. MABON. A ready market.
Mr. UNTERMYER. IS that all you care to say ?
Mr. MABON. That is all I care to say.
Mr. UNTERMYER. What about the availability of stocks that are
listed as collateral for loans ?
Mr. MABON. In loans we make we have both listed and unlisted
securities as collateral, and it makes no difference.
Mr. UNTERMYER. I will repeat the question. What about the
availability of stocks that are listed as collateral for loans; does it
make them more available ?



370

MONEY TBUST INVESTIGATION.

Mr. MABOX. Yes; in a broad way, it does.
Mr. UNTEBMYER. DO you not kiiow in a broad way or a narrow
way, or any other way, that the listing of a stock makes it more available as collateral for a loan all over this country ?
Mr. MABON. There are stocks that are quite as available as stacks
that are listed.
Mr. UNTERMYEE. IS there any stock that you know of, except
Standard Oil stock, that is as available ?
Mr. MABON. I should say that of the Singer Manufacturing Co.,
and there are others.
Mr. UNTERMYER. What others %
Mr. MABON. I have no others in mind, but I am sure there are
others.
Mr. UNTERMYEB. I wish you would name some.
Mr. MABON. I can not recall any at the moment.
Mr. UNTERMYER. DO you not know that the banks do not lend,
as a rule, on collateral of stocks that are not listed ?
Mr. MABON. I do not know what the rules of the banks are.
Mr. UNTERMYER. DO 30U not borrow from banks?
Mr. MABON. Yes.
Mr. UNTERMYEK.

And do you not know that stock-exchange loans
are not made by the banks except on stock-exchange listed collateral?
Mr. MABON. I do not know that, because I have borrowed money
on stocks that were not listed.
Mr. UNTEBMYER. YOU might have put in a few that were not
listed, but mainly you have made loans on stocks that were listed?
Mr. MABON. Xot necessarily.
Mr. UNTERMYER. We are talking about loans made on the stock
exchange, through stock-exchange brokers.
Mr. MABON. Y"es.
Mr. UNTERMYER.

Where you loan primarily on stock-exchange
collateral, do you not ?
Mr. MABON. Primarily, yes.
Mr. UNTERMYEB. On stocks that are listed on the regular list ?
Mr. MABON. Certainly.
Mr. UNTERMYER. DO you not know that in reckoning the margin
for a loan the quotation on the list of the stock exchange as to the
large sales is taken as a basis 1
Mr. MABON. I assume so, yes.
Mr. UNTERMYER. What is the customary margin required on demand loans from day to day on stock-exchange security ?
Mr. MABON. The customary margin required is 20 per cent on the
face value of the loan.
Mr. UNTERMYER. That is to say, the stock-exchange value or
quotation of the security at the time of the loan should be 20 per cent
in excess of the amount loaned ?
Mr. MABON. Yes, sir.
Mr. UNTERMYEB. If there

is no market for the security, no stockexchange quotation, how is the margin fixed ?
Mr. MABON. I do not know.
Mr. UNTERMYER. YOU do not know ?
Mr. MABON. XO.



MONEY TBUST INVESTIGATION.

371

Mr. UNTEBMYEB. There is no way of fixing it. ^o far as you do
know?
Mr. MABON. I do not know. That is a matter for the banks.
Mr. UNTEBMYEE. SO that you realize, do you not, the importance
to the security of a company and to its value of having its stock
listed on the regular list of the stock exchange ?
Mr. MABON. In the main, I do; yes.
Mr. UNTEBMYEB. Is there any "place in which a stock can be
listed in New York, other than the New York Stock Exchange, to
give it that current value for lending purposes ?
Mr. MABON. I do not know.
Mr. UNTEEMYEB. DO you know of any ?
Mr. MABON. I do not know of any.
Mr. UNTEBMYEE. DO you know of any other place in the country
where a stock can be listed so as to give it that current value for
loaning purposes ?
Mr. MABON. I am not qualified to answer, because I do not know.
Mr. UNTEBMYEE. If you are not qualified after 23 years of experience as a broker, willVou tell me anybody who is qualified?
Mr. MABON. YOU asked about the country. I do not know what
the rules of the Philadelphia, Chicago, Baltimore, and other exchanges
are. Perhaps I have misinterpreted your question.
Mr. UNTEBMYER. I am not speaking about the rules of those
exchanges. I am speaking about the listing on the New York Stock
Exchange, making a security available for borrowing purposes on
call loans all over the country.
Mr. MABON. What is your question (
Mr. UNTEBMYEE. Does it not make it available all over the country ?
Mr. MABON. I do not know of my personal knowledge whether
it makes it available all over the country. I know loans are made
in New York City. I do not know about the whole country. I
presume it does, but I do not know.
Mr. UXTEEMYEB. YOU know that there are included in your regular list corporations that operate all over the country, and do not
operate in New York City ?
Mr. MABON. Yes.
Mr. UNTEBMYEE.

is it not %

Mr. MABON. Yes.
Mr. UNTEEMYEK.

And that is so as to a vast number of industries,

Can you conceive of any reason why they should
conform to the regulations of your exchange and have their stocks
listed here, except to give their stock a world's market and make them
available for loans, and give them a value in that way ?
Mr. MABON. I can not answer that question, as to what animates
corporations in trying to list their securities on the New York exchange.
Mr. UNTEEMYEE. DO you not think you know why they list them ?
Mr. MABON. I know some of the advantages.
Mr. UNTEBMYEB. What are the advantages %
Mr. MABON. I know some of the advantages, but not all the things
that come into their minds. I can not tell what animates them to try
to have their securities listed.
Mr. UNTEEMYER. YOU know one of the things that animates them
is to give them a market ?




372

MONEY TBUST INVESTIGATION.

Mr. MABON. Yet..

Mr. UNTEKMYER. And that is the way they get their market <
'
Mr. MABON. Yes.

Mr. UNTERMYEE. And you know another thing that animates them
is that they get a loanable value as collateral ?
Mr. MABON. I do not know about that. I do not think that is—
for instance, the Pennsylvania Railroad in listing its securities I do
not think is desirous of getting a loanable value.
Mr. UNTERHYER. DO you not think that the railroad in listing its
securities does so partly in order that its stocks may get a value and
be available in the hands of their stockholders for loans 1
Mr. MABON. I can not answer what the railroads have in their
minds, Mr. Untermyer.
Mr. UNTERMYER. YOU know certain things that are matters of
general knowledge, do you not ?
Mr. MABON. I have my opinion about it; yes.
Mr. UNTERMYER. Suppose the Pennsylvania Railroad Co. should
remove its stock from the list, or have it removed, to-morrow; what
effect do you suppose that would have upon the market value of that
stock?
Mr. MABON. It depends upon the cause for its removal. If they
should voluntarily ask to have it removed, you mean ?
Mr. UNTERMYER. Yes.
Mr. MABON. I should say it would not have very much
Mr. UNTERMYER. SO you do not think your exchange is

ful adjunct to the financial system, after all!
Mr. MABON. I do.
Mr. UNTERMYER.

effect.
a very use-

" *

If the removal of a stock from the list, a stock
such as the Pennsylvania Railroad Co.'s stock, would not make much
difference in the value, what is the use of the exchange 1
Mr. MABON. I decline to answer that question. I do not know.
Mr. UNTERMYER. Why should you decline to answer it ?
Mr. MABON. Because the Pennsylvania Railroad is a railroad that
is very well known
Mr. UNTERMYER. We are talking about anv railroad or any stock.
Mr. MABON. But you asked me about the TPennsylvania Railroad.
If you ask about any stock, I will say it might make a difference, and
it might not. That is a hypothetical question.
Mr. UNTERMYER. Well, let us stick to the Pennsylvania Railroad,
then. Y^ou say it would not make much difference.
Mr. MABON. I say it would not make a great deal of difference.
Mr. UNTERMYER. Then banks that loan only on collateral of stocks
that are listed on the stock exchange would not loan on that stock?
Mr. MABON. I can not answer that.
Mr. UNTERMYER. Y'OU know there are certain banks that make
these loans only on stock which is listed on the stock exchange ?
Mr. MABON. 1 do not know.
Mr. UNTERMYER. DO you know anything about it ?
Mr. MABON. I do not'know about that particular thing, whether
there are banks that only do that—that only loan on that kind of
collateral.
Mr. LNTERMVEK. And you have been a member of the governing
committee for how many years ?
Mr. MABON. Twelve vears.



MONEY TRUST INVESTIGATION.

373

Mr. UNTEKMYER. And a broker for how many years?
Mr. MABON. For 25 years.
Mr. UNTERMYEE. What useful purpose, then, does the stock exchange serve to the financial system of the country ?
Mr. MABON. It furnishes a place where transactions in securities,
between its members, can be made.
Mr. UNTEEMYEE. It furnishes a market, you mean?
Mr. MABON.

Yes.

Mr. UNTEKMYEK. It furnishes the only market, does it not?
Mr. MABON. I should say not.
Mr. UNTERMYEE. Where are there any other markets for securities ?
Mr. MABON. In the United States
Mr. UNTERMYER. In New York, we will say ?
Mr. MABON. There are markets on the curb.
Mr. UNTEEMYER. YOU mean outside, in the open ?
Mr. MABON. Yes.
Mr. UNTERMYER. YOU

mean on the street corners ? You mean you
can sell stock on the street corners to anybody who would buy ?
Mr. MABON. There is also a market in the offices.
Mr. UNTERMYER. Would anybody go to buy securities out on the
curb or in a broker's office, a stock that is listed on the exchange ?
Mr. MABON. I should say, yes.
Mr. UNTERMYER. YOU think so ?
Mr. MABON. Yes.
Mr. UNTEBMYER. SO

your idea is that the business is just as well
done in brokers' offices as on the exchange ?
Mr. MABON. I did not answer it that way; no.
Mr. UNTEBMYER. I asked you what other places furnished a market. Do you not know that those places you have named do not
furnish a market for a stock-exchange security ?
Mr. MABON. I did not understand you question to refer only to
stock-exchange securities.
Mr. UNTERMYER. I am speaking of stock-exchange securities.
Mr. MABON. May I have the original question repeated ?
Mr. UNTERMYER. I asked you what other market there is for those
securities than the market afforded by the New York Stock Exchange.
Mr. MABON. That is the primary market.
Mr. UNTERMYER. IS there any other?
Mr. MABON. Certain banking houses, I understand, do trade over
the counter, in bonds.
Mr. UNTEBMYER. IS there any other market for stocks ?
Mr. MABON. I do not know.
Mr. UXTERMYER. Do you know of any ?
Mr. MABON. I do

not.

Whereupon, at 1 o'clock p. m., the committee took a recess until
2 o'clock p. m.
60241—PT 5—12




3

374

MONEY TBUST INVESTIGATION.
AFTEB BECKSS.

The subcommittee reconvened, pursuant to the taking of recess, at
2 o'clock p. m., Hon. A. P. Pujo (chairman) presiding.
TESTIMONY OF JAMES G. CANNON—Recalled.

Mr. UNTEBMYEK. Mr. Cannon, I find that there is a feature of this
out-of-town check business in which we are interested that has not
been discussed. I did ask you and Mr. Hepburn concerning the
question of out-of-town checks, but I did not ask you whether there
had not been some official action of the clearing-house committee on
the subject during the present year.
Mr. CANNON. There was a special committee appointed to make an
investigation.
Mr. UNTEBMYEE. Did you forget to tell us about that?
Mr. CANNON. Yes; I did not think it was necessary.
Mr. UNTEBMYEB. YOU did not ? You were the chairman of that
committee ?
Mr. CANNON. Yes.
Mr. UNTEBMYEB. IS

this the resolution that was passed in April of
the present year on motion of A. Barton Hepburn [exhibiting newspaper clipping] ?
Mr. CANNON. Read it, and I can tell you better.
Mr. UNTEEMYEB. I am going to read it. It is as follows:
Whereas there were adopted on April 3, 1899, rules and regulations of this association
regarding collections outside the city of New York which, with the exception of
special interpretations put upon certain clauses of the same by the clearing-house
committee, have never been altered or amended. In view of the fact that the
volume of collections during the last 13 years has increased very largely and also
the fact that since these rules and regulations were established there have been
various methods pursued in the handling of collections by the various clearinghouse associations throughout the country, it would seem as if the time has arrived
when a careful investigation should again be made of this matter: Therefore be it
Resolved, That a special committee of five be appointed by Frank A. Vanderlip,
chairman of this committee, for the purpose of making a thorough investigation of the
subject of inland exchange and collections and the methods pursued by other clearinghouse associations and to report to this committee such changes in the rules or regulations of the New York Clearing House Association as in their judgment may be
deemed best; and be it further
Resolved, That this committee be authorized to invite to appear before them managers of other associations and members of this association for the purpose of procuring
any necessary information.

That is the resolution, is it not 1
Mr. CANNON. Yes.
Mr. UNTEBMYEB. Why

is it that neither Mr. Vanderlip nor Mr.
Hepburn nor yourself gave the committee any information on the
subject when you have been upon the stand?
Mr. CANNON. I can only speak for myself. I tried to confine
myself particularly to the questions which you asked me.
Mr. UNTEBMYEB. That committee is still in existence ?
Mr. CANNON. Yes.
Mr. UNTEBMTEB. YOU are the chairman of it, are you ?
Mr. CANNON. Yes.
Mr. UNTEBMYEB. The other members are Walter E. Frew, president

of the Corn Exchange Bank; Joseph T. Talbert, vice president of the
National City Bank; Edward Townsend, president or the Importers




MONEY TRUST INVESTIGATION.

375

& Traders National Bank: and J. W. Platten, president of the United
States Mortgage & Trust Co. ?
Mr. CANNON. Yes, sir.
Mr. UNTERMYER. Has that committee had a number of sessions ?
Mr. CANNON. Yes; it has.
Mr. UNTERMYEB. When was the last session of that committee ?
Mr. CANNON. I think it was on Friday or Saturday.
Mr. UNTEEMYEE. Of last week ?
Mr. CANNON. Last week; yes.
Mr. UNTEEMYEE. That was before this subject was presented to the

committee ?
Mr. CANNON. Before this subject was presented to this committee ?
Mr. UNTEEMYER. Yes: to this committee here.
Mr. CANNON. Entirely so.
Mr. UNTEEMYEE. Friday or Saturday of last week?
Mr. CANNON. But they had had nothing to do with this subject
before this committee.
Mr. UNTEEMYEE. This particular question of out-of-town checks
had been discussed before Saturday of last week, had it not, in this
hearing ?
Mr. CANNON. In this hearing; yes, sir. But the meeting of the
committee had nothing to do with that, sir.
Mr. UNTEEMYEE. At these different meetings that have been held
of that committee has the subject been discussed of doing away with
the discretionary points ?
Mr. CANNON. That subject has been discussed as to the general
rules and regulations of clearing houses all the way through.
Mr. UNTEBMYEB. Has the subject been mooted of doing away with
discretionary points ?
Mr. CANNON. We have been asked various questions with reference
to those things ?
Mr. UNTERMYER. Has the committee discussed among itself the
question of abrogating the discretionary points at which there are no
charges made for collection ?
Mr. CANNON. We discussed doing away with them—and doing away
with them hi various ways. The committee have no plan whatever of
their own. The committee has taken up a general discussion of the
whole subject.
Mr. UNTERMYER. I see that among the few discretionary points is
Bayonne, X. J. Do you notice that ?
Mr. CANNON. Ye3;"the old discretionary points.
Mr. UNTERMYER. The present discretionary points ?
Mr. CANNON. Yes; the present discretionary points.
Mr. UNTERMYER. They nave not been changed, have they?
Mr. CANNON. NO.

Mr. UNTERMYER. Why is a little place like Bayonne, N. J., put into
these discretionary points ?
Mr. CANNON. The discretionary points which were put in 13 years
ago Were put in on all those points which always remitted at par to
New York. Here it is, on pages 20 and 21, I think, discretionary
points. It is in section 2, on page 20, "Boston, Providence"
Mr. UNTERMYER. The discretionary points are
Mr. CANNON. Boston, Providence, Albany, Troy, Jersey City,
Bayonne, Hoboken, Newark. Philadelphia, and Baltimore.



376

MONEY TBUST INVESTIGATION.

Mr. UNTERMYER. Bayonne was the home of the Standard Oil Co.,
was it not ?
Mr. CANNON. That has nothing to do with the discretionary points.
Mr. UNTERMYEK. Oh, answer my question ?
Mr. CANNON. Not that I am aware of.
Mr. UNTERMTER. Did you not know that the Standard Oil Co. had
its home office at Bavonne, N. J. 1
Mr. CANNON. I did not know that it was their home.
Mr. UNTERMYER. YOU knew that they had a business there ?
Mr. CANNON. Yes.
Mr. UNTERMYER. YOU knew

that they had their great refining plant
there ?
Mr. CANNON. Yes; I knew that.
Mr. UNTERMYER. YOU knew that ?
Mr. CANNON. But I was not aware of it 13 years ago.
Mr. UNTERMYER. DO you not know that that was so 13 years ago ?
Mr. CANNON. I do not know.
Mr. UNTERMYER. YOU do not know ?
Mr. CANNON. NO, sir.

Mr. UNTERMYER. Then you do not know the reason why Bayonne
was put in among the discretionary points ?
Mr. CANNON. The reason was
Mr. UNTERMYER. DO you know ?
Mr. CANNON. NO, sir; I do not know; except that they remitted
at par.
Mr. UNTERMYER. It has been found, has it not, by your committee
that bankers in Newark, for instance, and banks in Newark, solicit
business from New York merchants who have out of town checks to
pass through the New York banks, because it is a discretionary point,
and they in turn can have those checks collected through the New
York banks without charge ?
Mr. CANNON. Yes, sir. It is so with all discretionary points.
Mr. UNTERMYER. And you will find that they are using the discretionary points to have the checks collected without charge ?
Mr. CANNON. A large number are used that way. We use them
ourselves to collect our checks without charge.
Mr. UNTERMYER. YOU use those points for that purpose ?
Mr. CANNON. Yes.
Mr. UNTEBMYER. IS

that one of the reasons why it is proposed to
do away with those discretionary points ?
Mr. CANNON. It is not proposed to do away with them at all.
Mr. UNTERMYER. It is not proposed to ?
Mr. CANNON. Oh, no, sir.
Mr. UNTERMYER. It is proposed

to remit the checks on the other
points that are not discretionary ?
Mr. CANNON. NO, sir; there is no plan whatever before us.
Mr. UNTERMYER. What is the purpose of your special committee ?
Mr. CANNON. May I say a word ?
Mr. UNTERMYEK. Yes.

Mr. CANNON. This whole question of inland exchange and countrychecks is one of the most difficult problems that the bankers of this
country have to meet, as is evidenced by the fact that 91 clearing
houses have established those rules and regulations concerning them.
Mr. UNTERMYER. Out of how manv ?



MONEY TEUSX INVESTIGATION.

377

Mr. CANNON. Out of 242.
Mr. UNTERMYER. And the others do not make any charge, do they ?
Mr. CANNON. The others do not make any charge. There are two

things involved in the collection of a country check. First, is the
cost of collection to us, and, second, is the amount of time consumed
in making that collection. Those are two very important things in
connection with handling this whole matter. Thirteen years ago—
may I make this statement, Mr. Untermyer ?
Mr. UNTERMYER. Yes.
Mr. CANNON. Thirteen

years ago, when this question came up,
investigation was made throughout the banks as to the cost of collecting at that time these country checks.
Mr. UNTEHMYER. DO you not think that is entirely too much
hearsay ?
Mr. CANNON. NO, sir; I have it here before me.
Mr. UNTERMYER. Were you a party to any investigation of this
subject at that time ?
Mr. CANNON. I was, at the time.
Mr. UNTERMYER. Was there a committee appointed ?
Mr. CANNON. NO; there was a conference 01 the clearing house, by
the clearing house committee.
Mr. UNTERMYER. But there was no special committee appointed ?
Mr. CANNON. NO special committee appointed, except the clearing
house committee. At that time they called in some of the junior
officers of the banks in reference to this matter.
Mr. UNTERMYEH. There has been no change in the regulations for
13 years ?
Mr. CANNON. NO, sir; there has not.
Mr. UNTERMYEE. Have you any data other than what you produced yesterday as to the total amount of this business that passes
through all the banks ?
Mr. CANNON. I have not; no, sir.
Mr. UNTEBMYER. Did you look to see whether you could get the
rest of the data ? You produced some data here relating to 35 or 40
national banks.
Mr. CANNON. NO; Mr. Hepburn did that. I did not say it.
Mr. UNTEBMYER. YOU found no additional data ?
Mr. CANNON. NO; no additional data. When this committee is
through, we shall be very glad to produce any data on behalf of our
committee.
Mr. UNTERMYER. We would like, Mr. Cannon, any reliable data that
can be gathered on the subject, for the guidance of this committee.
Mr. CANNON. Can I give you these data that were gathered 13 years
ago?
Mr. UNTERMYER. Not unless you personally know something about
them. Have you them here in any form ?
Mr. CANNON. I have them here in this form [exhibiting book].
Mr. UNTERMYER. Let me see what that is. We do not care to
encumber the record with hearsay.
Mr. CANNON. I think that is a "fair statement of the case.
Mr. UNTERMYER. NO; I do not think so. I think it is rather the
contrary, if I may say so.
Mr. CANNON. Would you like to have me explain that to you ?
I will do so.




378

MONEY TBUST INVESTIGATION.

Mr. UNTERMTEB. I understand it perfectly. Where did you get
this paper ?
Mr. CANNON. From the Fourth National Bank.
Mr. UNTEBMTEB. From yourfiles?
Mr. CANNON. I had that on my own files; yes, sir. I might also
state that it is from an address I delivered on the subject some
twelve years ago; a public address.
Mr. UNTEBMTEB. Have you the address here ?
Mr. CANNON. I have not got it here; no, sir.
Mr. UNTEBMTEB. Those are data you prepared the other day for
us, are they not ?
Mr. CANNON. NO, sir.
Mr. UNTEBMTEB. Of

the number of clearing houses in the
country ?
Mr. CANNON. The number of clearing houses; yes. I got that.
Mr. UNTEBMTEK. TWO hundred and forty-two ?
Mr. CANNON. That is a separate memorandum; that has nothing
to do with the data at all.
Mr. UNTEBMTEB. They were all typewritten at the same time,
were they not ?
Mr. CANNON. Yes; I had them put on there.
Mr. UNTEBMTEB. That was done a few days ago ?
Mr. CANNON. It was done when I was down here before.
Mr. UNTEBMTEB. I do not see how that is going to aid us, Mr.
Cannon; something you did a few days ago
Mr. CANNON. Making a copy from an address I delivered some 12
years ago.
Mr. UNTEBMTEB. I do not see how that is going to help us. We
want any compilation of the figures showing the cost of this business;
but we want the figures, we do not want deductions or conclusions
or results. We want the figures as to each bank in the clearing
house, and the items of cost,, if you can get them for us, so that the
committee will have the data on which to form its own conclusions.
Can you get us those data 3
Mr. CANNON. I will get them later on. I will be very glad to furnish the committee with those data. These data are old data.
Mr. UNTERMTEB. These are not data; these are conclusions.
What we want are the figures on which this is based.
Mr. CANNON. That is 13 years ago.
Mr. UNTEBMTER. Then it is not very useful to us. We want figures as of to-day.
Mr. CANNON. I will get you the figures from our committee.
That is what we based it on 13 years ago. The figures were gotten
together on that basis 13 years ago.
Mr. UNTEBMTEB. Where are the figures from which these conclusions were drawn? For instance, you have here the average cash
cost.
Mr. CANNON. They were made from a large mass of figures. I do
not know what has become of them.
Mr. UNTEBMTEB. YOU see, the committee wants figures; it can
not take conclusions. I think that is all.
Witness excused.



MONEY TRUST INVESTIGATION.

379

TESTIMONY OF MB. JAMES B. MABON—Besumed.

Mr. UNTEBMYEB. Have you, during the recess, gathered information on any of the points concerning which I asked you, and as to
which you had not the data ?
Mr. MABON. The only thing I remember is that you were asking
about the unlisted statements, and that is all I had time to gather.
Mr. UNTEBMYEB. Did you get them for us ?
Mr. MABON. Yes, samples; the rest of them are in evidence here.
Mr. UNTEEMYEE. Take, for instance, the statement of the Amalgamated Copper Co.
Mr. MABON. I have that here.
Mr. UNTEEMYEE. When was itfiled?
Mr. MABON. That was filed June 22, 1901.
The papers produced by Mr. Mabon were handed to Mr. Untermyer.
Mr. UNTERMYEE. Are these copies of the same thing?
Mr. MABON. NO, they are all different. I simply got them as
samples.
Mr. UNTEEMYEE. Did you find any application for the listing of the
stock of the American Sugar Refining Co. ?
Mr. MABON. I found that there had been no application.
Mr. UNTEEMYEB. YOU mean it was listed in the unlisted department without any application whatever ?
Mr. MABON. Yes, sir. I found that information.
Mr. UNTEEMYEE. And it remained on the list all those years without any application or any data whatever ?
Mr. MABON. That is the information; yes, sir.
Mr. UNTEEMYEB. Did you find when it was put in the unlisted
department ?
Mr. MABON. I think the record is here. I can give it to you in a
minute.
Mr. UNTEEMYEE. If you will.
Mr. MABON. Mr. Martin, will you find it ?
Mr. MAETIN. We have sent for the original box.
Mr. UNTEEMYEE. DO you remember the date ?
Mr. MABON. The box is here.
Mr. UNTEEMYEB. HOW do you account for the fact that the stock
was put upon the list of the unlisted department, and dealt in down
to 1910, without any application, without any data as to its debts,
or its assets, or its earnings, or anything concerning it ?
Mr. MABON. I could not tell you.
Mr. UNTEEMYEB. YOU produce here these two statements or
applications with respect to the Amalgamated Copper Co. ?
Mr. MABON. Yes, sir.
Mr. UNTEBMYEB. Are

those the applications on which those securities were listed in the unlisted department 3
Mr. MABON (examining papers). Yes, those are the data on which
they were admitted to quotation.
Mr. UNTEEMYEB. I ask that they be marked.




380

MONEY TBUST INVESTIGATION.

The papers referred to were marked respectively "Exhibit No. 28,
June 12, 1912;" and "Exhibit No. 29, June 12, 1912," and are hero
printed in the record as follows:
EXHIBIT NO. 28, JUNE 12,1912.
DEPARTMENT OF UNLISTED SECURITIES.
COMMITTEE ON UNLISTED SECURITIES, AMALGAMATED COPPER CO.

Incorporated April 27, 1899, under the lawB of the State of New Jersey.
Authorized capital stock, all outstanding, $75,000,000.
No personal liability. Par value of shares, $100 each.
Kegjstrar, Central Trust Co., New York. T]
Transfer agent, National City Bank, New
York7and company's office, Jersey City.
The company has no bonded debt. Five consecutive quarterly dividends of 2 per
cent, each beginning in October, 1899, have been paid.
The stocks of the following companies are owned wholly (excepting organizers'
shares) by this company:
Capital stock.

Washoe Copper Co., Butte, Mont
$5, 000,000
Colorado Smelting & Mining Co., Butte, Mont
2,500,000
Diamond Coal & Coke Co., Diamondville, Wyo
],500,000
Big Black Foot Milling Co., Bonner, Mont
700,000
A majority of the stock of the following companies is owned by this company:
Capital stock.

Anaconda Copper Mining Co., Butte, Mont
$30,000,000
Parrot Silver & Copper Co., Butte, Mont
2,298,500
Hennesey Mercantile Co., Butte and Anaconda, Mont
1,500,000
This company is a large owner of the stock of the Boston & Montana Consolidated
Copper & Silver Mining Co., located at Butte, Mont.
There is no bonded debt on any of the above-named companies.
EXTRACTS FROM CERTIFICATE OF INCORPORATION.

Third. The objects for which and for any of which the corporation is formed are
to do any or all of the things herein set forth, to the same extent as natural persons
might or could do, and in any part of the world, viz:
(1) To carry on the business of mining, milling, concentrating, converting, smelting,
treating, preparing for market, manufacturing, buying, selling, exchanging, and
otherwise producing and dealing in gold, silver, copper, lead, zinc, brass, iron, steel,
and in all kinds of ores, metals, and minerals, and in the products and by-products
thereof of every kind and description, and by whatsoever process the same can be
or may hereafter be produced; and generally and without limit as to amount to buy,
sell, exchange, lease, acquire, and deal in lands, mines, and minerals, rights and
claims, and in the above-specified products, and to conduct all business appurtenant
thereto.
(2) To carry on as principals, agents, commission merchants, or consignees the
business of mining, milling, concentrating, converting, smelting, treating, buying,
selling, exchanging, manufacturing, and dealing in the above-specified lands, properties, rights, products, and all materials used in the manufacture of each, any, and
all of such articles, and to carry on as such principals, agents, commission merchants,
or consignees any other business which in the judgment of the company may be conveniently conducted in conjunction with any of the matters aforesaid. * * *
(6) To cause or allow the legal title, estate, and interest in any property acquired,
established, or carried on by the company to remain or be vested or reigstered in the
name of or carried on by any other company or companies, foreign or domestic, formed
or to be formed, and either upon trust for or as agents or nominees of this company, or
upon any other terms or conditions which the board of directors may consider for the
benefit of this company, and to manage the affairs or take over and carry on the
business of such company or companies so formed or to be formed. * * *
(7) To acquire and carry on all or any part of the business or property of any company engaged in a business similar to that authorized to be conducted by the company, and to undertake in conjunction therewith any liabilities of any persons, firms,



MONEY TBUST INVESTIGATION.

381

association, or company possessed of property suitable for any of the purposes of this
company. * * *
(8; To purchase, subscribe for, or otherwise acquire and to hold the shares, stocks,
or obligations of any company organized under the laws of this State, or of any
other State, or of any Territory or colony of the United States, or of any foreign
country. * * *
(12) To carry out all or any part of the foregoing objects as principals or agents or
in conjunction with any other person, firm, association, or company, and in any part
of the world.
EXTRACTS FHOM THE BY-LAWS.

Directors.

3. The property and business of the corporation shall be managed by a board of
directors, eight in number; they shall be chosen from the stockholders and shall hold
office for one year, and until others are elected and qualified in their stead. * * *
8. The annual meeting of the stockholders, after the year 1899, shall be held on
the first Monday of June m each year, at Jersey City, N. J., at 10 o'clock a. m., when
they shall elect, by a plurality vote, the aforesaid directors to serve for one year and
until their successors are elected or chosen and qualified, each stockholder being
entitled to one vote, in person or by proxy, for each share of stock standing registered
in his oi her name on the twentieth day preceding the election, exclusive of the day
of such election. * * *
Officers.

10. At the first meeting after the election of directors, when there shall be a quorum,
the board of directors shall elect, by ballot, a president and vice president from their
own number who shall hold office for one year and until their successors are elected
and qualify. * * *
Standing committee.

16. There may be an executive committee of three directors appointed by the board,
who shall meet when they see.fit. They shall have authority to exercise all the powers
of the board at any time when the board is not in session." The president shall also
ex officio be a member of the executive committee. * * *
Dividends.

23. Before payment of any dividends or making of distribution of profits there shall
be set aside out of the net profits of the company such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any property
of the company, or for any such other purpose as the directors shall think conducive
to the interests of the company.
Dividends shall be declared on the third Thursday, or the next business day thereafter, of September, December, March, and June, and paid on the last Monday, or the
;icxt business day thereafter, of October, January, April, and July.
Alterations of by-laws.

2G. The directors may at any regular or at any special meeting alter or amend these
b\ -laws.
Officers.—Henry H. Rogers, vice president; William G. Rockefeller, secretary aud
treasurer; Percival J. Mclntosh, assistant treasurer.
Directors.—Henry H. Rogers. William G. Rockefeller, James Stillman, Albert C.
3urrage, F. P. Olcott. Robert Bacon, A. R. Flower.
Seventy-five million dollars capital stock admitted to quotation in the unlisted
department this day. November 23. 1900.




H. K. POMROY, Chairman.
WM. MCCLURE, Secretary.

382

MONEY TBUST INVESTIGATION.
EXHIBIT NO. 29, JUNE 12,

1912.

DEPARTMENT OP UNLISTED SECURITIES.
COMMITTEE ON UNLISTED SECURITIES, AMALGAMATED COPPER CO.

Incorporated April 27,1899, under the laws of the State of New Jersey.
Authorized capital stock, increased June 6, 1901, to
$155,000,000
Outstanding capital stock
Temporary certificates for capital stock outstanding
Temporary certificates unissued

$73,540,200
6,459,800

75,000,000
80,000,000
155,000,000

No personal liability. Par value of shares, $100 each.
Registrar in New York, Central Trust Co. Kegistrar in Boston, National Shawmut
Bank.
Transfer agent in New York, National City Bank. Transfer agent in Boston, Kidder, Peabody & Co.
The company has no bonded debt.
The stocks ot the following companies are owned wholly (excepting organizers'
shares) by this company:
Capital stock.

Washoe Copper Co., Butte, Mont
$5,000,000
Colorado Smelting* Mining Co., Butte, Mont
2,500,000
Diamond Coal & Coke Co., Diamondville, Wyo
1,500,000
Big Black Foot Milling Co., Bonner, Mont
700,000
A majority of the stocks of the following companies are owned by this company:
Capital stock.

Anaconda Copper Mining Co., Butte, Mont
$30,00Q, 000
Parrot Silver & Copper Co., Butte, Mont
2,298,500
Hennessy Mercantile Co., Butte and Anaconda, Mont
1,500,000
There is no bonded debt on any of the above-named companies.
Boston & Montana Consolidated Copper & Silver Mining Co., Butte, Mont.
(total authorized capital, $3,750,000; par value, $25)
$3,447,200
Butte & Boston Consolidated Mining Co., Butte, Mont, (total authorized
capital, $2,000,000; par value, $10)
1,838,500
BONDED DEBT, CONSTITUENT COMPANIES.

Boston & Montana Consolidated Copper & Silver Mining Co. 7 per cent,
bonds, $100,000 due each year from 1902 to 1907; can not be redeemed
until due
"
$600,000
Butte & Boston Consolidated Mining Co. 6 per cent bonds, due Apr. 1,1917. 1,500,000
The Amalgamated Copper Co. hereby makes application to your committee for
admission to quotation in the unlisted department of additional shares of its capital
stock to the amount of 800,000 shares ($80,000,000). There have heretofore been
admitted to quotation 750,000 shares ($75,000,000). The additional amount for the
quotation of which application is now made will bring the total up to 1,550,000 shares
($155,000,000).
The increase of the capital stock of this company to 1,550,000 shares was duly authorized by the stockholders at a special meeting, duly called for the purpose, held at the
company's office in the city of Jersey City, N. J., on June 6, 1901.
On June 19, 1901, the board of directors, pursuant to the authority conferred by the
stockholders, filed in the office of the secretary of state of New Jersey a certificate of
the increase of the capital stock of this company from 750,000 shares ($75,000,000) to
1.550,000 shares ($155,000,000), and paid the organization tax thereon. They also
on the same date, in pursuance of the same authority, acquired 137,888 shares of the
capital stock of the Boston & Montana Consolidated Copper & Silver Mining Co., out
of a total issue of 150,000 shares, and 183,850 shares of the capital stock of the Butte
& Boston Consolidated Mining Co., out of a total issue of 200,000 shares, issuing therefor 735,402 shares of the authorized increased capital stock of this company, being at
the rate of five and one-third shares of its stock for one share of the stock of the Boston
& Montana Co., and one and one-third shares of the stock of the Butte & Boston Co.,




MONEY TRUST INVESTIGATION.

383

taken together. The remaining 64,598 shares of the authorized increased stock of this
company will be issued in the same proportion for the balance of the shares oi stock
of those* companies outstanding, provided they shall be presented for sale or exchange within the period prescribed in the offer made to the stockholders of the
respective companies.
It appeared by the report of the special committee appointed by the board of directors of this company (which was submitted to the stockholders) that the market value
of the properties of the Boston & Montana and Butte & Boston companies, taken
together, was estimated by experts at $85,000,000, and that at the market price at
which the shares of the two companies were selling the entire stock of both companies,
for which it was proposed to issue the $80,000,000 increased stock of this company,
was in excess of $90,000,000.
The officers and directors of the company are as follows:
Officers.—Anson R. Flower, president; H. H. Rogers, first vice president: A. H.
Melm, second vice president; William G. Rockefeller, secretary and treasurer; P. J.
Mclntosh, assistant treasurer.
Directors.—Robert Bacon, George F. Baker, Frederic Cromwell, Anson R. Flower,
Frederic P. Olcott, Walter G. Oakman, William G. Rockefeller, James Stillman.
WILLIAM G. ROCKEFELLER, Secretary.
JUNE 22, 1901.

The committee on unlisted securities directs that additional amounts of Amalgamated Copper Co.'s capital stock, aggregating $80,000,000, be admitted to quotation
in the unlisted department from time to time, upon the receipt of notice from said
company of the issuance of its capital stock in exchange for "temporary certificates."
H. K. POMHOY, Chairman.
WM. MCCLTJKE, Secretary.

Mr. UXTERMYER. Do you find in Exhibits 28 and 29, or anywhere
on the files of the stock exchange, any statement of the assets, or
liabilities, or earnings of the Amalgamated Copper Co., or anything
other than its capital stock and the amount outstanding, and the
fact that there are no bonds on the property ?
Mr. MAHON. That seems to be all the information here. There is
some additional information, I see, below.
Mr. UNTERMYER. What ?
Mr. MAHON (reading):
The stocks of the following companies are owned wholly by this company.
And then follows the list. The information is very meager.
Mr. UNTERMYER. There is not anything like the information that is
required as to a stock that you list, is there ?
Mr. MAHON. NO. We have the application of the Amalgamated
Copper Co. when coming on the regular list, and it would be interesting to follow the differences in the two applications.
Mr. UNTERMYER. The difference is, is it not, that one tells you
something about the company and the other tells you nothing ?
Mr. MABON. That is right; little or nothing.
Mr. UNTERMYER. The other tells you nothing you can not get by
looking at the public records ?
Mr. MABON. Very true.
Mr. UNTERMYER. It is a fact, then, is it not, that down to 1910
the stock exchange was haying large dealings in securities of the
Amalgamated Copper Co. without any information to the public or
the stockholders or anybody else as to its assets or its liabilities or
its earnings ?
Mr. MABON. It is a fact; yes.
Mr. UNTERMYER. That led to abuses in dealings in the securities,
did it not ?
Mr. MABON. I do not know of any.



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MONEY TBXJST INVESTIGATION.

Mr. UNTERMYER. DO you not know that the stock was rigged up
and down the market ?
Mr. MABON. I do not know it.
Mr. UNTEBMYER. And manipulated notoriously; do you not know
that?
Mr. MABON. NO, sir.
Mr. UNTEBMYER. SO

far as any information could be obtained by
any stockholder or by any intending purchaser of the stock as to the
merits of the security it was in effect a blind pool, was it not ?
Mr. MABON. I do not quite understand what you mean by a "blind
pool."
Mr. UNTEBMYER. YOU never heard the phrase before, did you ?
Mr. MABON. Yes; I have heard the phrase before.
Mr. UNTEBMYEB. YOU never understood what it meant ?
Mr. MABON. I have not
Mr. UNTEBMYER. Of course you understand it. Was it not so
operated ?
Mr. MABON. I do not know. I can not answer that it was.
Mr. UNTEKMYER. If you, for instance, were contemplating buying
Amalgamated Copper stock, you knew that you would have to take
it on credit, did you not; that you could not find out anything
about it ?
Mr. MABON. Very true.
Mr. UNTEKMYER. That made it a ball for speculative play, did
it not ?
Mr. MABON. I do not see necessarily that it made it a ball for
speculative play.
Mr. UNTEKMYEB. YOU thought that made it an investment stock,
when you could not find out anything about it ?
Mr. MABON. The stock was paying dividends, and I might have
bought it on the fact that it was paying dividends.
Mr. UNTEKMYER. But there was not anything to show that it was
earning them, -was there ?
Mr. MABON. AS far as I know, there was not.
Mr. UNTERMYER. Or how much more it was earning ?
Mr. MABON. I do not know what information was given subsequent
to this.
Mr. UNTERMYER. Have you not, produced here the only information
that was given until 1910, when it was put upon the regular list ?
Mr. MABON. The only information that was given to the stock
exchange; yes.
Mr. UNTERMYER. That is ?
Mr. MABON. Yes.
Mr. UNTERMYER. IS

it not a fact, now, Mr. Mabon, that it was
because of the abuses that arose from that method of doing business
on the exchange that the unlisted department was abolished ?
Mr. MABON. It is a fact that the information was so meager that it
was very desirable that all of the securities should come in the regular
list. I "disapproved of placing any securities on the unlisted department that did not give full information.
Mr. UXTERMYER. Mr. Taylor reminds me, and I would like to put
upon the record the fact, that the American Sugar Refining Co.'s
stock was transferred to the regular list January 28, 1909.
Mr. MABON. Yes.



MONEY TRUST INVESTIGATION.

385

Mr. UNTERMYER. Not in 1910.
Mr. MABON. I said about 1910.
Mr. UNTEEMYEK. Amalgamated

was transferred, was it not, March
10, 1910?
Mr. MABON. I believe so. It was 1910. to the best of my knowledge.
Mr. UNTEEMYEE. Were there any other stocks largely dealt in that
had been allowed to be dealt in and quoted on this unlisted list up to
the time you abolished it in 1910—any prominent stocks?
Mr. MABON. I think there were quite a number. I do not know
how prominent. Great Northern Ore was one.
Mr. UXTEEMYEE. The Great Northern Ore Co. ?
Mr. MABON. Yes, sir.
Mr. UNTEEMYEE. Those were participation receipts, were they not ?
Mr. MABON. Yes, sir.
Mr. UNTERMYEE. And there was no statement?
Mr. MABON. There was no statement. The Federal Sugar Refining

Co. was another. That was a partial statement, not a complete
statement.
Mr. UNTEEMYEE. Can you give us any information as to what was
the purpose of these companies in seeking to have their stock dealt
in on the exchange and withholding information from their stockholders and the public as to the evidence concerning their properties ?
Mr. MABON. NO, sir; I can not.
Mr. UNTEEMYEE. It is a fact, is

it not, that the United States
Steel Co. was really the leader in the industrial world in making full
and complete statements of its affairs to its stockholders and the
public ? It blazed the way for a reform in financial matters in that
respect, did it not ?
Mr. MABON. I do not know that other companies did not make the
same full statement that the United States Steel Co. did, but I do
know that the United States Steel Co. does make full reports.
Mr. UNTEKMYEE. DO you not remember that it was the first company that adopted that policy and departed from the policy existing
theretofore of secrecy and refusal to give information of its affairs ?
Mr. MABON. I know it was very prominent—•—•
Mr. UNTERMYER. It is entitled to the credit of having taken the
lead in that reform, is it not ?
Mr. MABON. I think SO; yes.
Mr. UNTEEMYEE. Were you here yesterday when there was read to
Mr. Ely and put into the record the regulation of the New York Stock
Exchange prohibiting it or any of its members from dealing with any
member of the Consolidated Exchange, or telephoning to any member
of the Consolidated Exchange, or sending a messenger or a clerk to
his office, or having any sort of communication between officers or
members of the stock exchange and the Consolidated Exchange ?
Mr. MABON. I was not.
Mr. UNTERMYER. YOU are familiar with the rules, are you not ?
Mr. MABON. Yes.
Mr. UNTEEMYER. YOU have been a member of the governing com-

mittee that has tried members of the New York Stock Exchange for
infraction of that rule, have you not?
Mr. MABON. I am not sure.
Mr. UNTERMYER. You know thev have been tried ?



386

MONEY TETJST INVESTIGATION.

Mr. MABOX. I know there have been such cases.
Mr. UNTERMYER. And they have been suspended for doing that ?
Mr. MABOX. Yes. Whether they have been tried during my
incumbency I am not sure. The records will show. I can tell you in
a few moments.
Mr. UXTEBMYEK. What is the reason for the rule ?
Mr. MABOX. The reason for the rule is so that the stock exchange
shall have control of its own business.
Mr. UXTEBMYEK. IS that the only explanation you care to make ?
Mr. MABOX. Yes; I think so.
Mr. UXTERMYER. In wha way is the control by the stock exchange
of its own business interfered with if a man who is a member of the
Consolidated Exchange wants to sell stock that is not listed on the
Consolidated Exchange through a member of the New York Stock
Exchange, if that security is listed on the New York Stock Exchange '.
Mr. MABOX. They have their own exchange wherein to sell their
stock.
Mr. UXTERMYEK. Suppose it is not listed on that exchange ?
Mr. MABON. They can sell it at auction.
Mr. UNTEBMEYEK. Where can they sell it at auction ?
Mr. MABON. At public auction.
Mr. UNTERMYER. YOU mean they can go to an auctioneer; that
they can sell it at public auction ?
Mr. MABOX. Yes.
Mr. UNTEKMYER. At what public auction ?
Mr. MABOX. Wellers.
Mr. UNTERMYER. They can gp to him and ask

him to put it up on
the auction block in his auction room; is that it ?
Mr. MABON. Yes.

Mr. UNTERMYER. That is the alternative, is it, of a man who happens to be a member of the Consolidated Exchange who owns securities that are listed on the New York Stock Exchange and wants to
sell them through a member of the New York Stock Exchange ?
Mr. MABON. He could sell them through his bank.
Mr. UNTERMYER. HOW through Irs bank ? Do you mean his bank
can sell them to the New York Stock Exchange ?
Mr. MABON. Yes.
Mr. UNTERMYER.

His bank can not do it if it is known it is selling
them for a Consolidated Exchange member?
Mr. MABON. NO. The bank could do it; ves.
Mr. UNTERMYER. YOU mean he can sell them surreptitiously
through his bank ?
Mr. MABON. I do not like the word surreptitiously.
Mr. UNTERMYES. He can not sell them openly, can he ?
Mr. MABON. The bank can give an order to a broker.
Mr. UNTERMYER. If the bank which gives the order to the broker
tells him that they are for a Consolidated Exchange member the
broker can not sell them, can he ?
Mr. MABON. NO. That rule does prohibit it.
Mr.UNTERMYER. Then, do you not think that that is a fair question,
that he can onlv sell them surreptitiously through a bank ?
Mr. MABON. Yes.



MONEY TKUST INVESTIGATION.

387

Mr. UNTERMYER. DO you not regard that as a most oppressive
and unjust rule ?
Mr. MABON. I do not.

Mr. UNTERMYER. HOW do you justify it ? You are the president
of the stock exchange. We would like to know how you justify it.
Mr. MABON. I justify it by the fact that the Consolidated Exchange
is an organization that is a rival organization of our own, and this is
a business that we have and is a business that we should be able to
keep. I do not see any reason why we should not strengthen our
institution as much as we can.
Mr. UNTERMYER. But do you not keep all that business when your
own listed stocks are sold on your own exchange through your own
brokers ?
Mr. MABON. What business ?
Mr. UNTERMYER. The business to which you refer. It does not
take any business away from you, does it, for a member of the Consolidated Exchange to sell through your exchange stocks that are not
listed on his exchange, but it gives you business, does it not ?
Mr. MABON. Yes.
Mr. UNTERMYER.

ness, does it not ?

And your refusal to take it really takes away busi-

Mr. MABON. Yes.
Mr. UNTERMYER.

But you are willing to take away business, you
are willing to drive away business, are you not, in order to prevent a
man who is a member of another exchange from doing any business at
all, and to drive him out of business ?
Mr. MABON. Yes.

Mr. UNTERMYER. Then your purpose with this rule is to drive
every man out of the business of dealing in stocks who can not be a
member of the New York Stock Exchange ?
Mr. MABON. NO ; I should think not
Mr. UNTERMYER. If a member of the Consolidated Exchange wants
to become a member of your exchange he can not do so unless you
have a vacancy, can he ?
Mr. MABON. And he must buy a seat.
Mr. UNTERMYER. That is, he must buy one of the existing seats
if he can get it ?
Mr. MABON. Yes.

Mr. UNTERMYER. And if there is no one to buy out then he can
not get one ?
Mr. MABON. He could buy one. He could purchase from any
member of the stock exchange who is willing to sell.
Mr. UNTERMYER. But if there is nobody willing to sell a seat,
then he can not get into the business, can he ?
Mr. MABON. He can not get on the stock exchange.
Mr. UNTERMYER. Your rules forbid any man who is a member of
the Consolidated Exchange buying a seat on the New York Stock
Exchange, do they not ?
Mr. MABON. While a man is a member of the Consolidated
Exchange, yes.
Mr. UNTERMYER. AS long as a man is a member of the Consolidated Exchange you will not have anything to do with him, will you ?
Mr. MABON. NO.



388

MONEY TRUST INVESTIGATION.

Mr. UNTEBMYEB. YOU will not even let one of your members send
him a telephone message, will you ?
Mr. MABON. I would not say that that is a fact.
Mr. UNTEBMYEB. DO you not know that the rule forbids it ?
Mr. MABON. That is applicable to transactions in securities.
Mr. UNTEBMYEB. DO you not know that the rule forbids it, without reference to what it "is about ?
Mr. MABON. I have not read the rule for some time.
Mr. UNTEEMYEB. Suppose you read it again now, and see whether
the rule does not absolutely forbid any kind of communication on am'
subject, by messenger, clerk, telephone, or otherwise, with any man
who happens to be a member of the Consolidated Exchange.
Mr. MABON (after examination of the rules). That is the phraseology; yes.
Mr. UNTERMYER. And that is the construction that is put upon it 1
Mr. MABON. Yes.
Mr. UNTEBMYEB.

What is the purpose of preventing a stock exchange member from writing a letter or sending a telephone message
from his office to the office of a Consolidated Exchange member, under
penalty of suspension ?
Mr. MABON. I should say that there would be no penalty if it was
an ordinary message.
Mr. UNTEBMYEB. That is not the construction you put upon it ?
Mr. MABON. The language is as you have stated it, but I do not
think it would be so construed.
Mr. UNTEBMYEB. Have you ever had a case in which you have
found a member not guilty who had written or telephoned to a
member of the Consolidated Exchange ?
Mr. MABON. I do not remember any case against a Consolidated
Exchange member.
Mr. UNTEKMYER. DO you not know that there have been cases
where you have suspended members who communicated with members of the Consolidated Exchange?
Mr. MABON. There have been such cases, but I do not remember
the cases.
Mr. UNTERMYER. Perhaps I can refresh your memory. Do you
remember the Blood case ?
Mr. MABON. Yes; I do remember it.
Mr. UNTERMYER. DO you remember the Alley case ?
Mr. MABON. Yes.
Mr. UNTERMYEB.
Mr. MABON. Yes,
Mr. UNTERMYER.

Were those cases of infraction of this rule ?
I think so.
They were each suspended for one year, were

they not ?
Mr. MABON. I believe so; yes, sir.
Mr. UNTEEMYER. What is the effect of suspending a member from
the exchange; what is the effect on his business 1
Mr. MABON. I should say very detrimental.
Mr. UNTERMYER. It puts an end to it, does it not 1
Mr. MABON. I should say not.
Mr. UNTERMYER. It does not put an end to it ?
Mr. MABON. I should not think so.
Mr. UNTERMYER. Can he or his firm do any business on the
exchange during the term of his suspension ?



MONEY TEUST INVESTIGATION.

389

Mr. MABON. He can through other members; yes. He can give
his orders to other members of the exchange.
Mr. UNTERMYER. Yes, but he can not get any commissions, can he ?
Mr. MABON. During that interval, no.
Mr. UNTERMYER. The other member is not allowed to divide with
him, is he ?
Mr. MABON. MO.
Mr. UNTERMYER.
Mr. MABON. NO.
Mr. UNTERMYER.

Or give him any part of the commissions ?

He has no way of recouping his expenses or
maintaining his office on those orders, has he ?
Mr. MABON. On those particular orders, I should say not.
Mr. UNTERMYER. SO that really puts him out of business unless
he wants to do business for nothing and pay his expenses besides ?
Mr. MABON. It does what I said. He can do business, but hecan not get any profit on it.
Mr. UNTERMYER. He can do business and not get any compensation ?
Mr. MABON. Yes.
Mr. UNTERMYER.

business, is it ?

That is not a very effective way of conducting

Mr. MABON. NO, sir.
Mr. UNTERMYER. SO that virtually puts
Mr. MABON. For the time, yes.
Mr. UNTERMYER. What happens to a

him out of business ?

member who charges a
custonier less than one-eighth of 1 per cent for buying or selling a
security i
Mr. MABON. He is punished under a certain act which forbids it.
Mr. UNTERMYER. He is punished by expulsion ?
Mr. MABON. Suspension, I think it is.
Mr. UNTERMYER. IS he not punished by expulsion?
Mr. MABOX. I think the penalty is suspension for one year.
Mr. UNTERMYER. One to five years for the first offense, is it not ?
Mr. MABON. Yes.
Mr. UNTERMYER.

And for the second crime of charging less than
the others he is expelled, is he not ?
Mr. MABON. Yes.

Mr. UNTERMYER. That rule is very rigidly enforced, is it not ?
Mr. MABOX. Yes.
Mr. UXTERMYER.

And does it make any difference as to the rate
that he must charge, whether the stock is selling at $5 or $200 a
share ?
Mr. MABON. NO; it makes no difference.
Mr. UNTERMYER. He has got to charge the same rate of commission
on a $5 share that be would on a $200 share, has he not?
Mr. MABON. Yes.
Mr. UNTERMYER.

I want to call attention to the rules bearing on
that subject and read them into the record. That one-eighth of
1 per cent is collected both by the broker who sells and by the broker
who buys, is it not ?
Mr. MABON. It is, on each transaction.
Mr. UXTERMYER. It is twice on one transaction ?
60241—FT 5—12




4

390

MONEY TRUST INVESTIGATION.

Mr. MABOX. It is only once on one transaction. The buyer pays
the one-eighth and the seller pays the one-eighth, if that is what you
mean.
Mr. UNTERMYER. That is two commissions on one transaction, is
it not?
Mr. MABOX. The transactions are made by two people.
Mr. UNTERMYER. And each gets one-eighth ?
Mr. MAHON. Yes.
Mr. UNTERMYER. SO

that the price on each share of stock is
one-quarter of lper cent of the transaction, to both parties ?
Mr. MABON. The commission is that.
Mr. UNTERMYER. And if a $100 share, par value, we will say, is
selling for $5, then the tax or commission of both parties on that
transaction is how much in money ?
Mr. MABON. The man that buys pays $12.50 and the man that
sells pays $12.50 on 100 shares.
Mr. UNTERMYEE. Each pays 12J cents on a share ?
Mr. MABON. Yes.
Mr. UNTERMYER.

That is 25 cents tax on that share, which may
be selling for $5 or less ?
Mr. MABON. Yes, and there are also stocks that are selling- for
$250. That is the off-setting average.
Mr. UNTERMYEK. DO you not know that other exchanges in other
countries have a graded charge based upon the selling price?
Mr. MABON. I am aware
Mr. UNTERMYER. In London, for instance.
Mr. MABON. London has just changed its ruling on the matter of
commissions. I am not aware of what the present system is.
Mr. UNTERMYER. But the other system is one based on the selling
price, is it not ?
Mr. MABON. I am not sure.
Mr. UNTERMYER. That seems a better method, does it not ?
Mr. MABON. It averages up pretty well, I think.
Mr. UNTERMYER. But it seems fairer, does it not? Where it
averages up, it places the burden of the transaction where it belongs,
does it not ?
Mr. MABON. Yes, it does.
Mr. UNTERMYEB. Can you turn to the rule that we want to read
into the record on the subject of commissions ?
Mr. MABON. These are $100 shares.
Mr. UNTEBMYER. I understand; shares of a par value of $100.
Mr. MABON. Yes; not $5 shares or $10 shares.
Mr. UNTERMYER. Well, it is on every share, no matter what its par
value may be, unless it is a mining share ?
Mr. MABON. Yes. On the par value. That is, one share of $5
would not be the same.
Mr. UNTERMYER. I am talking about a share that is selling for $5.
Mr. MABON. But the par value must be a $100.
Mr. UNTEBMYER. NOW I will read this into the record, from article
34 of the constitution:
ARTICLE XXXIV.—Commission*.
SECTION 1. Commissions shall be charged and paid, under all circumstances, upon
all purchases or sales of securities dealt in upon the exchange, and shall be absolutely
net and free from all or any rebatement, return, discount, or allowance in any shape



MONEY TBUST INVESTIGATION.

391

or manner whatsoever or by any method or arrangement, direct or indirect; and no
bonus, nor any percentage or portion of the commission, shall be given, paid, or allowed,
directly or indirectly, or as a salary or portion of a salary, to any clerk or person for
business sought or procured for any member of the exchange.
SEC. 2. All commissions shall be calculated upon the par value of securities, and
the rates shall be as follows.

Then follows the rate as between nonmembers—one-eighth of 1 per
cent—and as between members there is a different rate, is there not ?
Mr. MABON. Yes.
Mr. UNTEKMYEE.

That is called what ?

Mr. MABON. Clearance business.

Mr. UNTERMYEB. That is $2 ?
Mr. MABON. The clearance business is where a member buys and
pays for the stock and turns it over to his principal. The $2 business
is where a member buys and names his principal.
Mr. UNTEEMYEE. Under subdivision (c) I find the following:
On mining shares, subscription rights, and notes of corporations, such ratestomembers and nonmembers as may be determined, from time to time, by the committee on
commissions, with the approval of the governing committee.
Under that subdivision there is a relaxation of the rule with respect
to mining shares, is there not ?
Mr. MABON. There has been a specific ruling.
Mr. UNTERMYEB. And where the selling price of the mining shares
is under $10, then the commission is one-sixteenth?
Mr. MABON. Yes.
Mr, UNTEBMYEB.

And where it is over $10, then it comes under the

general rule ?
Mr. MABON. Yes.

Breads:

(d) Government and municipal securities are exempted from the provisions of this
article.
Mr. UNTEKMTEB. But Government and municipal securities can
not be dealt in on the exchange unless they are engraved by a company
that is approved by the exchange?
Mr. MABON. That is true.
Mr. UNTEEMYEE. We will come to that later. That is the reason
New York City can not get its bonds listed on the New York Stock
Exchange, is it not ?
Mr. MABON. Yes.
Mr. UNTERMYEB.

Because the engraving company has not been
approved by the exchange?
Mr. MABON. Because we are involved in a $5,000,000 suit.
Mr. UNTERMYEB. Because somebody has sued you, that is the reason the bonds of the city of New York, engraved by that company
that has sued you, can not get entrance to the listed securities on the
New York Stock Exchange ?
Mr. MABON. Yes.
Mr. UNTEBMYEB.

Why should you visit upon the city of New York
the fact that the company that engraved the bonds has sued you ?
Mr. MABON. We have not visited anything upon the city of New
York. The market for the bonds is practically the same as the market for other securities
Mr. UNTEEMYEE. But you will not let them be listed on the
exchange in view of the fact that this company that engraved the
bonds has sued you ?



392

MONEY TRUST INVESTIGATION.

Mr, MABON. The suit is pending.
Mr. UNTERMYEB. Because the suit is pending ? What has the city
of New York got to do with that 1
Mr. MABON. I do not know.
Mr. UNTERMTER. Can you give us anv reason why you should
visit the penalty upon the city of nonadmission of these bonds to
the stock exchange ?
Mr. MABON. I can give no reason.
Mr. UNTERMYER. Have you ever heard anybody give any reason
for that action ?
Mr. MABON. That it might have a bearing on the suit that is
pending.
Mr. UNTERMYER. You mean that it might hurt you in that suit ?
Mr. MABON. It might have a bearing on it.
Mr. UNTERMYER. DO you think your members have the right to
protect themselves against the consequences of their act, when they
are sued for it, by refusing to the city of New York admission of its
securities on your list ?
Mr. MABON. I do not see that any damage has been done to the
city of New York.
Mr. UNTERMYER. YOU do not think, then, that the listing of
securities on the stock exchange"is any benefit, do you?
Mr. MABON. I do, yes; in many cases.
Mr. UNTERMYER. The companies pay prettv well for it, do they
not?
Mr. MABON. New York Gty does not pay for it.
Mr. UNTERMYER. I mean other companies that have their securities listed. They pay how much ?
Mr. MABON. Fifty dollars a million dollars.
Mr. UNTERMYER." Fifty dollars on every million dollars of par value ?
Mr. MABON. Yes.
Mr. UNTERMYER.

I will proceed to read further on this subject of
commissions from the regulations of the exchange, at page 85:
COMMISSIONS—RECIPROCAL BUSINESS.
APKIL 14,

1897.

That transacting or offering to transact business in grain, produce, cotton or other
commodities, without commission, or for a nominal commission, by any member of
this exchange or firm represented therein, for a customer dealing in securities dealt
in at the exchange, is a method or arrangement for rebatement of commissions, and
is a violation of the commission law.
That giving or offering to give reciprocal business in grain, produce, cotton, or
other commodities dependent upon the amount of stock-exchange business received
is a method or arrangement for rebatement of commissions and is a violation of the
commission law.

The commission law means the law of the exchange, does it not ?
Mr. MABON. Yes.
Mr. UNTERMYER.

It does not mean any law of the State of New
York?
Mr. MABON. Cretainly not.
Mr. UNTERMYER. Here is the "law" in reference to mining shares.
But we have already referred to that.
From page 86, under the heading ' 'Taking over or accepting transactions," I read as follows:



MONEY TBUST INVESTIGATION.

398

TAKING OVER OR ACCEPTING TRANSACTIONS.

APRIL 12,1911.

Whenever a nonmember oi this exchange shall cause to be executed in any market
outside of the United States any order or orders for the purchase or sale of securities
listed on this exchange, other than Government, State, or municipal securities, and
said purchase or sale shall be accepted by a member or a firm who are members of this
exchange for the account of said nonmember, one-eighth of 1 per cent commission
shall be charged said nonmember in addition to any commission charged by the
party or parties making the transaction.

From page 89 I read as follows:
INTEREST.

MARCH 26,1902.

That any agreement or arrangement entered into between a member or his firm,
and his or their customer, whereby special and unusual rates of interest are stipulated
for, or money advances upon unusual terms are made a condition, in connection with
the conducting of an account, with intent thereby to give special or unusual advantages to such customer for the purpose of securing his business, shall be deemed to be
a violation of Article XXXIV of the constitution, commonly known as the commission law.

On page 90 I find the following:
STAMP TAX.

MAT 24,1905.
That in the judgment of the governing committee any member of the exchange
who, by agreement or otherwise, directly or indirectly, assumes or bears for his own
account, or relieves his principal from any part of the stamp tax imposed by the act
of the Legislature of the State of New York, approved April 19, 1905, is guilty of a
violation of Article XXXIV of the constitution relating to commissions.

All these regulations were passed, were they not, for the express
purpose of preventing any member from getting around the collection of one-eighth of 1 per cent on the sale and one-eighth of 1 per
cent on "the purchase of any of the stock exchange securities by
any device or pretext ?
Mr. MABON. Yes.

Mr. UNTEKMYEE. And the exchange has been very rigid in the
enforcement of that rule, has it not ?
Mr. MABON. Yes.

Mr. UNTEEMTEE. And, as I think you said, has suspended and
expelled members for noncompliance ?
Mr. MABON. Yes.
Mr. UNTEEMYEE.

Why does not the exchange permit its members
to compete for business by allowing the giving of such terms on sales
and purchases as the members seefit?
Mr. MABON. Because it is a competition of service instead of a competition for the other business. The members who give the best
service are competing that way for businss at one-eighth of 1 per cent.
We find that one-eighth of 1 per cent is a fair charge, and it is uniform
and has worked well.
Mr. UNTEKMYEK. On an average day of a million shares it would
amount to $250,000 cash in a day on the sale of securities, would it
not?
Mr. MABON. All transactions are not made on behalf of people who
are not members of the exchange.
Mr. UNTEEMYEE. Yes; but somebody pays for it. You mean that
that includes transactions of exchange members dealing for themselves ? Is that what vou mean ?




394

MONET TBUST INVESTIGATION.

Mr. MABON. Yes.

Mr. UNTEBMYEB. But a market of 1,000,000 shares is not unusual,
sit»
Mr. MABON. It has been, lately.
Mr. UNTEBMYEB. DO you not think that if you reform your ways
ef business the business will increase again if you regain the confidence
of the public?
Mr. MABON. We are trying to, Mr. Untermyer.
Mr. UNTEBMYEB. DO you not think that if manipulation of the
exchange could be stopped, it would make the stock exchange a more
desirable place for people who want to invest their money to go and
buy securities ?
Mr. MABON. One of the greatest efforts of the governors of the
exchange is to stop manipulation.
Mr. UNTEBMYEB. And you know it is going on ?
Mr. MABON. I do not think so.
Mr. UNTEBMYEB. YOU do not think there is any manipulation ?
Mr. MABON. I doubt it, very much.
Mr. UNTEBMYEB. Have you ever in the last five years, punished
anybody for manipulation of the stock exchange—any of your
members ?
Mr. MABON. I do not remember of it.
Mr. UNTEBMYEB. YOU know, do you not, that there have been
many instances in which the whole capital stock of a company
Mr. MABON. Mr. Untermyer, we have punished members. I do
remember a case.
Mr. UNTEBMYEB. Within five years ?
Mr. MABON. Within five years, yes, sir; S. B. Chapin & Co.
Mr. UNTEBMYEB. Let us see about that. I have not that on my
list. Was that a case of creating a fictitious market in Rock Island
by giving orders to 20 brokers to each buy 2,000 shares at the
opening of the market ?
Mr. MABON. Yes.
Mr. UNTEBMYEB.

In other words, the broker gave out orders to 20
members of the stock exchange each to buy 2,000 shares, and to
another set of brokers he gave orders to each sell 2,000 shares ?
Mr. MABON. I think not. The evidence does not show that; I
think not. There were no sell orders given.
Mr. UNTEBMYEB. Then he gave orders to 20 brokers each to buy
2,000 shares 1
Mr. MABON. Yes.
Mr. UNTEBMYEB. And in that way drove up the price of the stock ?
Mr. MABON. Yes.
Mr. UNTEBMYEB. That was a pretty glaring case, was it not ?
Mr. MABON. We punished it.
Mr. UNTEBMYEB. YOU punished it very severely, did you not ?
Mr. MABON. I do not just remember what the punishment was.
Mr. UNTEBMYEB. Your punishment was 30 days' suspension ?
Mr. MABON. I do not remember.
Mr. UNTEBMYEB. I say you punished it with 30 days' suspension ?
Mr. MABON. I do not remember.
Mr. UNTEBMYEB. And the man who charges his customer less than

one-eighth of 1 per cent is punished by from one to five years' suspension for the first offense and is expelled the second time, is he not ?



MONEY TRUST INVESTIGATION.

395

Mr. MABON. Yes.
Mr. UNTERMTER.

And the man who sends a message to a consolidated exchange broker is punished by suspension or expulsion, is he
not?
Mr. MABON. Yes.
Mr. UNTEBMTEB.

Was that the time the Rock Island pool was
operating?
Mr. MABON. I do not know anything about a Rock Island pool.
Mr. UNTEBMTEB. YOU never heard of the Rock Island pool?
Mr. MABON. NO.
Mr. UNTEBMTEB. YOU never heard of the Reading pool ?
Mr. MABON. I have heard the name of the Reading pool.
Mr. UNTEBMTEB. YOU never heard of the Reading pool ?
Mr. MABON. I have heard the name of the Reading pool.
Mr. UNTEBMTEB. Have you heard of them selling the whole

capital
stock of the company in a week on the exchange ?
Mr. MABON. I do not know about that.
Mr. UNTEBMTEB. DO you not know that is about what happened ?
Mr. MABON. I do not know.
Mr. UNTEBMTEE. DO you know whether it happened ?
Mr. MABON. I do

not.

Mr. UNTEBMTEB. HOW long ago were these tremendous dealings in
Reading ?
Mr. MABON. I do not know which
Mr. UNTEBMTEB. The last big operation in Reading ?
Mr. MABON. I do not know, Mr. Untermyer.
Mr. UNTEBMTEB. YOU are around every day, are you not 1
Mr. MABON. I am around every day; yes, sir.
Mr. UNTEBMTEB. YOU know, generally, what is going on down here ?
Mr. MABON. I do not follow the stock market at all.
Mr. UNTEBMTEB. Being a member of the exchange, you do not follow the market ?
Mr. MABON. I am interested in the bonds.
Mr. UNTEBMTEB. But you know that from time to time there are
these enormous dealings ?
Mr. MABON. Yes.
Mr. UNTEBMYEB.

That are not efforts of investors, all of a sudden,
to buy two or three hundred thousand shares of stock or securities on
one day ?
Mr. MABON. I do not know about that.
Mr. UNTEBMTEE. YOU have no idea ?
Mr. MABON. NO ; I say I have no knowledge of the matter.
Mr. UNTEBMTEB. But you have your opinion about it, have you
not?
Mr. MABON. I have not thought very much about it; no.
Mr. UNTEBMTER. NO; you have not. Well, that is the only case of
so-called punishment that you know of in all the manipulations that
have taken place on the exchange, is it not?
Mr. MABON. The only case that I recollect, Mr. Untermyer; and I
had even forgotten that until you recalled it.




396

MONEY TEUST INVESTIGATION.

Mr. UNTEEMYEE. I read from page 91 of the constitution and resolutions of the stock exchange, under the head of-"Telephones":
TELEPHONES.
NOVEMBER 8, 1911.

That the resolution adopted by the governing committee on March 28, 1900, be
amended by striking out the words "Sec. 8" and inserting in lieu thereof the words
"Sec. 10," so that said resolution as amended shall read as follows, viz:
"Resolved, That the privilege of telephonic communication between the offices of
members and the building of the New York Stock Exchange shall not be enjoyed
as of right, but shall rest in the discretion of the committee of arrangements or the
governing committee, and that the committee of arrangements shall have power, in
their discretion, at any time and from time to time to withhold such privilege from
any member and to disconnect or cause to be disconnected any private telephone
in the stock exchange building. Said committee shall also have power, in their
discretion, at any time and from time to time to deprive any member of the privilege
of using any public telephone in the stock exchange building. Said committee
shall not be obliged to assign any reason or cause for any action taken by them under
this resolution."
*
*
*
*
*
Every decision of the committee of arrangements by which the privilege of telephonic communication with the stock exchange building shall be withheld from
any member, pursuant to this resolution, shall be immediately posted upon the
bulletin board m the exchange and every member of the exchange shall be deemed
to have notice thereof. If after any such notice shall have been posted any member
of the stock exchange shall furnish to the member named therein or to his partner
•r firm or office any facilities for communication between the office of such member
and the stock exchange building or between the office of the member named in such
notice and the office of any other member of the exchange by means of private wire,
telephone, or any electric or other device, contrivance, or apparatus, he may be
suspended by the governing committee for a period not exceeding two months,
pursuant to the provisions of section 10, Article XVII, of the constitution of the
exchange.
TELEPHONE OB TELEGRAPH CONNECTIONS
MAY

9, 1900

[To take effect an June l iono.1

First. That hereafter no member of the stock exchange and no firm of which such
member is a partner, shall establish telephonic or telegraphic wire connection between
the office of such member or firm and the office of any firm or individual not a member of the stock exchange transacting a banking or brokerage business, unless application therefor shall first be made to the committee of arrangements and shall have
been approved by them.
Second. Everv such telephonic or telegraphic wire connection which shall be so
authorized by the committee of arrangements, as well as all existing telephonic or
telegraphic wire connections of the same character, shall be registered with the committee of arrangements, who shall make such regulations governing the matter as
they shall deem necessary.
Third. That the committee of arrangements shall have power at any time in their
discretion to order any connection of the character described in these resolutions to
be discontinued.
Fourth. While members of the stock exchange may connect their offices by wire
with the offices of nonmembers, in accordance with the provisions of these resolutions,
and pay for such wire connection, nevertheless no such member shall directly or
indirectly, by himself or through his firm, pay the cost of telegraph operators or anv
other expense pertaining to nonmembers' offices.

Do you know the reason for that rule, or for that set of rules, limiting the use of telephone communication between the members of the
exchange and the stock exchange building and between members and
banking houses and others that are nonmembers, other than the
Consolidated Exchange members ?
Mr. MABOX. It is to have a record of what connections there are
between the stock houses, their offices, and the men whom they have
telephone communications with.



MONEY TRUST INVESTIGATION.

397

Mr. UXTERMYER. What is the purpose of it ?
Mr. MABON. SO far as I know, it is simply to order the discontinuance of any telephones which are not to telephone to proper people.
Mr. L'NTERMYER. What do you mean by "'proper people"? This
does not refer to the Consolidated Exchange, now; it refers to anybody else, does it not ?
Mr. MABON. Yes.
Mr. UNTERMYER.
Mr. MABON. Yes.
Mr. UNTEEMYER.

For instance, a banking house ?

Why should not a stock exchange member have
a telephone connection with a banking house without the permission
of the stock exchange ?
Mr. MABON. We want to know
Mr. UNTERMYER. What ?
Mr. MABON. We want a record of whom the telephones are with.
Mr. UNTERMYER. And if you do not approve of them, then they
can not have a connection, can they ?
Mr. MABON. AS I understand it. I do not know very much about
this rule myself.
Mr. UNTERMYER. Have you any other explanation to make of that
series of rules ?
Mr. MABON. I have not.
Mr. UNTERMYER. YOU understand that is independently of your
relations with the Consolidated Exchange, now, is it not ?
Mr. MABON. Yes.
Mr. UNTERMYER.

I do not understand why the liberty of members
t.o use telephones between their own offices and anybody they please
is to be infringed in this way.
Mr. MABON. I do not think there has ever been a case, to my
knowledge, where there has ever been any objection.
Mr. UNTERMYER. But you have got the rule, have you not ?
Mr. MABON. Yes.
Mr. UNTERMYER. DO you not know that there has been such a case ?
Mr. MABON. NO; I know of no such case, Mr. Untermyer.
Mr. UNTERMYER. Have you that record here in the Chapin case ?

We would like to put that Chapin case in this record, if it is here, if
we may be furnished with a copy of it. We will ask that the record
of the proceedings of the trial or Chapin beput in evidence, and a copy
will be furnished, and will be marked "Exhibit 30, June 12, 1912. '
That record is on pages 502, 503, and 504 of book No. 6 of the minutes
of the governing committee of the New York Stock Exchange.
The extract referred to was marked "Exhibit No.30, June 12,1912,"
and is here printed in full, as follows:
[Extract of minutes, governing committee, Bee 30,1908.]
The secretary presented the following charge and specifications against Simeon B.
(Tiapin and Frederick D. Countiss:
N E W YORK, December SO, 1909.

To the governing committee of the New York Stock Exchange.
GENTLEMEN: In accordance with instructions from the special committee of three
appointed to investigate and report on the transactions in the Rock Island Co. common
stock made upon the exchange December 27,1909, I respectfully present the following
charge and specification against the members of the firm of S. B. Chapin & Co., under
section 8, Article X y i l , of the constitution of the exchange:
"Charge.—That Simeon B. Chapin and Frederick D. Countiss, members of the
exchanse and members of the firm of S. B. Chapin & Co., have been guilty of an act
or
acts detrimental to the interest or welfare of the exchange.



398

MONEY TBUST INVESTIGATION.

"Specification.—In this, that on December 27, 1909, taid firm of S. B. Chapin &
Co., by direction of a customer of said firm, gave orders prior to the opening of the
exchange at 10 o'clock of the morning of said day to 20 brokers or firms, members
of the exchange, as follows: Dudley Bros., Foster & Adams, R. H. Fiero & Co., J. M.
Fiske & Co., C. I. Hudson & Co., Foster & Lounsbery, Van Schaick & Co., H. L.
Horton & Co., H. K. Burras & Co., W. B. Franklin & Co., Harris & Fuller, Jewell,
Stringer & Co., Fairchild & Co., Herrick, Berg & Co., J. J. Manning, S. H. P. Pell
& Co., Simmons & Slade, Malcom & Coombe, Shoemaker, Bates & Co., Dick Bros.
& Co., each to buy 2,000 shares of the common stock of the Bock Island Co. at the
opening of the exchange at the market, which orders were accordingly executed
by the persons to whom the same were given. The competitive buying by so many
brokers at the same time caused an advance in the price of said stock of about 30
points, and the said stock receded the same number of points after said buying by
said members had ceased.
"That said firm, and the members thereof, should have known, and must have
known, that the execution of such an order in such a manner could serve no proper
or legitimate purpose, but that the same would result in confusion, panic, and loss,
and would create a fictitious condition of the market in the same stock, thus depriving the quotations of transactions upon the exchange of their value as standards of
the real market value of securities.
"That such execution of said order by said firm constituted a misuse by them of
the facilities of the exchange, and was likely to cause, and did cause, the exchange
and its methods to be unjustly and adversely criticized in the public press and otherwise, and was an act detrimental to the interest or welfare of the exchange.
"Respectfully,
"GEOBGE W. ELY, Secretary."

In that case of Chapin the transaction of giving these orders to
20 brokers each to buy 2,000 shares of stock at the opening, no one
broker knowing that the other brokers had orders, resulted m lifting
the stock 30 points on the opening, did it not ?
Mr. MABON. The record is there.
Mr. UNTEBMTEB. It says 30 points.
Mr. MABON. If so, that is true.
Mr. UNTEBMYEB. And as soon as the buying had taken place the
stock went down 30 points ?
Mr. MABON. If the record shows it. I do not know.
Mr. UNTEBMYEE. That was an excessive case of manipulation, was
it not?
Mr. MABON. The only case I have in mind.
Mr. UNTEBMYEB. I say it was an excessive one, was it not ?
Mr. MABON. I say it is the only one that I know of.
Mr. UNTEBMYEB. SO that you want the committee to understand
that in your experience as a "broker on the stock exchange you have
never heard of the manipulation of securities on the stock exchange
except in this one instance; is that right ?
Mr. MABON. I have heard in a general way, but I have not
Mr. UNTEBMYEB. DO you not know that it is a matter of daily
occurrence 1
Mr. MABON. I know that it is a matter of daily report. I do not
think it is a matter of daily occurrence.
Mr. UNTEBMYEB. But you know from the way the stocks "act,"
as the phrase goes, the way they jump, the way they act, and the
amount of the dealings, that they are manipulated dealings ?
Mr. MABON. I do
Mr. UNTEBMYEB.
Mr. MABOX. NO.
Mr. UNTEBMYEB.
Mr. MABOX. NO,



not.
YOU
sir.

do not know anything about it ?

That is no indication to you t
sir.

MONEY TEUST INVESTIGATION.

399

Mr. UNTEEMYEK. The stock-exchange broker can not take the list
on certain days, can he, and by looking at it and seeing the magnitude
of the transactions determine that they are the result of a manipulation ?
Mr. MABON. I most decidedly think not.
Mr. UNTERMTEE. YOU most decidedly think not ? Now, you
remember the dealings in Reading a few months ago ?
Mr. MABON. Not particularly.
Mr. UNTEBMYER. DO you mean to say you do not remember when
they dealt in 200,000 shares and over in a day ?
Mr. MABON. I do not remember.
Mr. UNTEEMYEB. YOU do not remember anything about it, or
Union Pacific ?
Mr. MABON. I have no doubt there were large transactions in both
stocks.
Mr. UNTERMYEB. All of a sudden, for a week or two, and then the
transactions dropped down to a small amount, did they not ?
Mr. MABON. That is very often the case. It does not necessarily
involve manipulation.
Mr. UNTEEMYEB. That does not indicate, to your mind, as a man
experienced in the methods of the stock exchange, that there has
been a manipulation in the stock ?
Mr. MABON. Decidedly not.
Mr. UNTEEMYEE. DO you know what they call a "movement" in
stock ?
Mr. MABON. Yes.
Mr. UNTEEMYEE. Did you ever hear the phrase ?
Mr. MABON. Yes.
Mr. UNTERMYEB. What does that mean ?
Mr. MABON. It means great activity.
Mr. UNTEBMYEE. Great activity, caused in what way ?
Mr. MABON. It may be caused in many ways. I have

never
figured any particular way of a movement in stock.
Mr. UNTEBMYEB. Mr. Chairman. I have a letter from Mr. Hepburn, in which he states as follows:
In reading over my testimony, I find on page 545, in answer to your question:
Mr. UNTERMYER. It was a very ill advised blunder to let this thing go the way it
did, to say the least?
Mr. HEPBUHN. Yes.

My answer there, I am very sure, was the same I had repeated a dozen times, at
least, before: " I t was a mistake." I would like to have the word "Yes" corrected
and changed to " It was a mistake."
If there is no objection may that change be made?
The CHAIRMAN. I order that the change be made in the minutes.
Mr. UNTERMYEB. DO you remember the trial of one of your co-

members, S. L. Blood ?
Mr. MABON. Very indistinctly; I remember it.
Mr. UNTEBMYEE. December 28, 1904. I would like a record of
that. [Referring to book.] I offer in evidence the proceedings of
the governing committee of the exchange, Mr. Pomroy in the chair,
33 members present, September 4, 1904, in the case of Sylvester L.
Blood, a member of the exchange. The specification of the charge
is as follows:

During the period mentioned (that is June, 1904), said Blood was a member of the
firm of S. L. Blood & Co.; that said firm did establish telephonic wire communication
between the office of said Blood and of said firm, and the office of W. B. Smith & Co.



400

MONEY TRUST INVESTIGATION.

at 71 Broadway, in the city of New York; that the firm of Smith & Co. transacted a
banking or brokerage business, and no one of the partners constituting same was a
member of the New York Stock Exchange; that said telephonic wire communication
was maintained regularly during all or the greater part of the period mentioned in
said charge (that is between Mar., 1904, and June, 1904) during that portion of each
business day when business was transacted on the exchange, and that no application
for such telephonic wire communication was made to the committee of arrangements
by said Blood or by his firm of S. L. Blood & Co., or by any member or representative
thereof, nor was the same ever approved by or registered with the committee or arrangements, all of which was in violation of the resolution of the governing committee.

On page 97 of the same record, it being book 3 of the minutes of the
governing committee of the exchange, I offer the following:
On motion, the committee proceeded with the hearing of the charge against S. L.
Blood. Mr. Blood was called and appeared, and in his presence were read the charge
and specification. The governing committee determines that S. L. Blood is guilty
of the specification and guilty of the charge.
Resolved, That S. L. Blood be suspended from the exchange for a period of one year.

Would you like to revise your statement, in view of that, as to
whether or not this regulation for the use of telephones in the exchange
has been enforced ?
Mr. MABON. Yes. I was not aware of that case.
Mr. UNTERMYER. What particular moral wrong had S. L. Blood
done in maintaining telephonic communication with a banking house ?
Mr. MABON. I do not know, Mr. Untermyer.
Mr. UNTEKMTEE. There does not appear to have been any charge
of wrongdoing.
Mr. MABON. I do not remember the case, at all.
Mr. UNTESMTEB. YOU remember the case of Alley ?
Mr. MABON. Very distinctly.
Mr. UNTERMYER!^ That was the same case as Blood's, was it not ?
Mr. MABON. I am not sure.
Mr. UNTEKMTER. On the same day ?
Mr. MABON. Was it on the same day ? The record will show.
Mr. UNTERMYER. Alley was charged with the same offense, of
having telephonic communication with the firm of M. M. Looram &
Co., transacting a banking and brokerage business. Do you remember that ?
Mr. MABON. I do not remember it, and I do not know whether these
men were members of the Consolidated Exchange or not.
Mr. UNTERMYER. They were not charged under any such resolution.
Mr. MABON. What date was that ?
Mr. UNTEKMYER. That is September 28. 1904. I offer in evidence
the proceedings resulting in the suspension of W. S. Alley for one
year on a charge similar to that preferred against Blood, on pages
84 and 96 of book 6 of the minutes of the governing committee of
the stock exchange.
The matter referred to is here printed in the record as follows:
[September 14, 1904.—Governing Committee Minute Book 6, p. 84.]

To the Governing Committee of the yew York Stock Exchange.
GENTLEMEN: I hereby present the following charge and specification against
William S. Alley, a member of the exchange.
CHABGE.—That at various times between the 1st day of December. 1903, and
the 1st day of May, 1904. William S. Alley, a member of the New York Stock
Exchange, was guilty of acts detrimental to the interest and welfare of said
exchange.




MONEY TKUST INVESTIGATION.

401

Specification: That during the period mentioned in the charge, said Alley wafr
a member of the firm of Alley, Conger & Co.; that said firm did establish telephonic wire connection between the office of said Alley and of said firm and thtofOce of M. M. Looranj & Co., at 25 Broad Street, in the city of New York; that
said firm of M. M. Loorani & Co. transacted a banking or brokerage business,
and no one of the partners constituting the same was a member of the New
York Stock Exchange; that such telephonic wire connection was maintained
regularly during all or a great part of the period mentioned in the charge,
during that portion of each business day when business was transacted on the
exchange; and that no application for such telephonic wire connection was ever
made to the committee of arrangements by said Alley, or by Ms firm of Alley,
Conger & Co., or by aDy member or representative thereof, nor was the same
ever approved by, or registered with, said committee of arrangements; all of
which was in violation of the resolution of the governing committee of the
New York Stock Exchange, relating to wire connections, passed May 9, 1900, to
take effect June 1, 1900.
Respectfully submitted.
CHARLES L. BUBNHAM,

Assistant Secretary.
SEPTEMBER 13,

1904.

[September 28, 1904.—Governing Committee Minute Book 6, p. 96.]
Moved that the governing committee determines that W. S. Alley is guilty of
the specification and the charge.
Seconded and unanimously carried.
Moved that W. S. Alley be suspended from the exchange for a period of one
year from to-day.
Seconded and carried by a rising vote (23 ayes, 11 nays).

Mr. UNTEBMTEE. NOW, I would like the Raymond case, of February
11,1912. I want to put in the records in all these cases. [Afterreceiving minute book.] I offer in evidence, in book 5 of the minutes of the
governing committee of the stock exchange, the minutes of the proceedings in the case of H. Raymond, of the firm of Raymond, Pynchon &
Co., February 11, 1902, the charge being that he paid to Gaylord,
Blessing & Co., who were nonmembers, of St. Louis, $314, which was in
payment of the cost of Gaylord, Blessing & Co.'s telegraph operator,
and he thereby violated the resolution of the governing committee of
May 9, 1900, known as the wire resolution. What is the wire
resolution? That is a resolution to the effect that they shall not
make any payment of commission or rebate any commission under
cover of paying for anybody else's telegraphic service, is it not ?
Mr. MABON. Yes.
Mr. UNTEEMYEK. AS

this member of the exchange was located in
New York and the customer was located in St. Louis, the charge was
that he had paid for the use of a telegraph operator in the St. Louis
office. Is that it ?
Mr. MABON. It is very likely.
Mr. UNTEKMYEE. And he was adjudged guilty and suspended for
60 days. Is not that right ?
Mr. MABON. TO the best of my knowledge.
The matter referred to is here printed in the record as follows:
[February 11, 1902.—Governing Committee Minute Book 5, pp. 546, 547.]

The committee of arrangements complains to the governing committee, under
section 8, article 17, of the constitution, that on or about March, 1901, Harry
Raymond, of the firm of Raymond, Pynchon & Co.. did pay to Gaylord. Blessing
& Co. (nonmembers), of St. Louis, the sum of $314. which was in payment of
the cost of said Gaylord, Blessing & Co."s telegraph operator, and did thereby
violate the resolutions of the governing committee of May 9. 1900, known as
the " wire resolutions."



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MONEY TBUST INVESTIGATION.

Moved that the governing committee finds that Harry Raymond is guilty of
having violated the resolutions of May 9, 1900 (known as the wire resolutions),
as set forth in the complaint of the committee of arrangements.
Seconded and carried—33 ayes, 2 nays, and one member not voting.
Moved that Harry Raymond be, and he Is hereby, suspended for a period of
60 days commencing from to-day.
Seconded and carried (unanimously).
Mr. UNTEBMYEB. I offer pages 546 and 547 of the record. The

next case is W. F. Raynor, November 4, 1906. You remember the
Kaynor case, do you not ?
Mr. MABON. 1 just remember it; yes, sir.
Mr. UNTEBMYEB. He was suspended for four years for dividing his
commissions with his customers.
Mr. MABON. The record will show that; I do not keep it in my mind.
Mr. UNTEBMYEB. While we are looking for that, you said something
a little while ago, in answer to my question as to why the members
were not allowed to compete for business in the way of regulating
their commissions with their customers, that what the stock exchange
aimed at was competition in service and not competition in commissions.
Mr. MABON. Yes; in rate.
Mr. UNTEBMYEB. Why should you not have competition in both ?
Mr. MABON. The only reason I can give you, Mr. Untermyer, is that
one-eighth is, we think, very moderate, and we have never heard any
complaints from anybody about the rate, and that it has worked well
in the past years.
Mr. UNTEBMYEB. Suppose you should choose to-morrow to make it
one-half of 1 per cent, would not that simply amount to an additional
tax upon the whole country in the purchase and sale of securities ?
Mr. MABON. If we should do that, yes.
Mr. UNTEBMYEB. DO you not understand that this commission rate
is, in effect, a tax upon all investors throughout the United States ?
Mr. MABON. Yes.
Mr. UNTEBMYEB. DO

you conceive that you gentlemen performing
that public function have a right to do a thing like that ?
Mr. MABON. We feel that one-eighth is a proper charge for the
service that is rendered.
Mr. UNTEBMYEB. What, in your opinion, would be the result of
abrogating the rule and letting every member of the exchange fix his
own Tbargain with his customers ?
Mr. MABON. I think it would be bad for the public and for the
exchange as well.
Mr. UNTEKMYEB. HOW would it be bad for the public, if they could
get their service cheaper ?
Mr. MABON. Because in competition for business if the competition
should get so low the service would be inferior and the man would
lose in service what he would make up in the commission.
Mr. UNTEBMYEB. That would be applicable to every business,
would it not ?
Mr. MABON. Yes.

Mr. UNTEBMYEB. YOU know that other businesses are not permitted to combine in that way ?
Mr. MABOX. There is no combination.



MONEY TBUST INVESTIGATION.

403

Mr. UNTERMYER. DO you not think this is a combination, when
your membership is limited to 1,100 and nobody else can go into the
business ?
Mr. MABON. Thay can go into the business. Anybody can form a
stock exchange—any group of men.
Mr. UNTERMYER. YOU mean they could start another stock
exchange ?
Mr. MABON. Certainly.
Mr. UNTERMYER. HOW about getting corporations to list their
securities on another stock exchange ?
Mr. MABON. I do not know.
Mr. UNTERMYER. YOU would not allow it, would you ?
Mr. MABON. We would not allow what ?
Mr. UNTERMYER. YOU would take them off vour list, would vou
not?
Mr. MABON. I do not know what we would do.
Mr. UNTERMYER. DO you not know that if another stock exchange
were formed you would do just what you are trying to do to the
Consolidated Exchange ?
Mr. MABON. I do not know it; no.
Mr. UNTERMYER. What would be your reason
Mr. MABON. I do not know what the exchange would do.
Mr. UNTERMYER. YOU know what the exchange is doing to kill off
another exchange, do you not ?
Mr. MABON. Yes.

Mr. UNTERMYER. IS not that a pretty good criterion of what it
would do to kill off another one ?
Mr. MABON. Not necessarily.
Mr. UNTERMYER. The stock exchange forbids a member of the
Consolidated Exchange to sell any securities on the stock exchange,
does it not ?
Mr. MABON. Yes.
Mr. UNTERMYER. YOU

say that there is nothing to prevent other
men from getting together and forming another exchange; is that
your idea ?
Mr. MABON. Yes.
Mr. UNTERMYER. YOU know that is impossible, do you not ?
Mr. MABON. I do not know it; no.
Mr. UNTERMYER. YOU know what the experience of the Consol-

idated has been, after 20 years of trouble, do you not ?
Mr. MABON. I do know what the experience of the Consolidated has
been; yes.
Mr. UNTERMYER. DO you know the experience of the New York
Produce Exchange, when they attempted to start dealing in stocks ?
Mr. MABON. In a slight way; yes.
Mr. UNTERMYER. YOU remember that, do you not ?
Mr. MABON. Yes.

Mr. UNTERMYER. YOU killed that, did you not ?
Mr. MABON. I think not.
Mr. UNTERMYER. Does the produce exchange now deal in securities
that are dealt in on your exchange ?
Mr. MABON. I think not.
Mr. UNTERMYER. It started and tried to do it, did it not 1
Mr. MABON. I do not think so; no, sir.



404

MONEY TBUST INVESTIGATION.

Mr. UNTEKMYEB. Let us see.
Mr. MABON. They dealt in securities

which were not listed on our
exchange.
Mr. UNTERMYEE. DO you know that the New York Produce
Exchange is an incorporated organization ?
Mr. MABON. I understand so; yes.
Mr. UNTEKMYEB. And that under its charter it has the power to
deal in stocks and other securities ?
Mr. MABON. I do not know it; no. I assume it; I do not know it.
Mr. UNTEKMYEE. When was it that the produce exchange made an
attempt to deal in securities ?
Mr. MABON. Several years ago.
Mr. UNTEKMYER. Can you tell us about when ?
Mr. MABON. I can not tell you about when, Mr. Untermyer; probably in the last six or seven years, I think.
Mr. UNTEKMYEB. It was while you were a member of the governing
committee ?
Mr. MABON. Yes; I think so.
Mr. UNTEKMYEK. What was the outcome of it ?
Mr. MABON. I do not know. They did not trade in securities that
were listed on the exchange.
Mr. UNTEBMYEB. What was the outcome of their attempt to deal
in any securities ?
Mr. MABON. I never knew that they dealt to any extent in securities; they made an effort to do it.
Mr. UNTERMYER. What sort of regulations did you impose ?
Mr. MABON. I do not remember it.
Mr. UNTEBMYEE. DO you not remember that you imposed a regulation that would make it impossible for any member of the stock
exchange to be a member of the produce exchange ?
Mr. MABON. I do not.
Mr. UNTEEMYEB. DO you

not .know you have a regulation now
which would make it impossible for a member of the produce exchange
to be a member of your exchange, if the produce exchange were to
deal in securities'.
Mr. MABON. Absolutely not. That is not a fact.
Mr. UNTEBMYEB. Oh, yes, it is. Do you not know that no member
of your exchange can be a member of any other exchange that deals
in securities that are listed on your exchange ?
Mr. MABON. Listed on our exchange, yes. The produce exchange
were not dealing in securities listed on our exchange.
Mr. UNTEEMYEE. Your rules forbade any member of your exchange
to remain a member of the produce exchange if the produce exchange
started to deal in securities listed on your exchange 1
Mr. MABON. Very true; but that is not what you said.
Mr. UNTEBMYEB. A number of the members of your exchange artnow members of the produce exchange, are they not ?
Mr. MABON. I think so; yes, sir.
Mr. UNTEKMYEE. A great many of them ?
Mr. MABON. Yes, sir.
Mr. UNTERMYEB. If the

produce exchange had gone on with its
endeavor to deal in scurities that were listed on your exchange, the
members would either have had to get out of that exchange or get
out of vours. would thev not?



MONEY TRUST INVESTIGATION.

405

Mr. MABON. Presumably.
Mr. UNTERMYEB. And yet you say there is nothing to prevent gentlemen from getting together and forming another exchange ?
Mr. MABON. Not at

all.

Mr. UNTEBMYER. YOU do not think that rule of your
Mr. MABON. There is a great deal of business done outside of the
stock exchange.
Mr. UNTEBMYER. IS there; in the securities listed on your exchange ?
Mr. MABON. Oh, yes.
Mr. UNTEBMYER. Where is the business done ?
Mr. MABON. Principally over counters.
Mr. UNTEBMYER. I do not understand you. Over whose counters ?
Mr. MABON. The brokers go from office to office and transact busi-

ness in the offices.
Mr. UNTEBMYER. HOW is one broker to know that another broker
has a particular stock to sell?
Mr. MABON. They gu on the street from office to office and find [out
what is for sale.
Mr. UNTEEMYEB. They do that as to stocks that are listed on the
exchange, do they?
Mr. MABON. Securities, yes; and certain stocks.
Mr. UNTERMYEB. They do that as to stocks that are listed on the
exchange ?
Mr. MABON. Yes, sir.
Mr. UNTERMYER. They

go from office to office to find out who has
these stocks to sell, instead of going to the exchange, where they are
sold?
Mr. MABON. Yes, sir.
Mr. UNTERMYER. They do ?
Mr. MABON. Yes, sir.
Mr. UNTERMYER. Then, finally,

if they find anybody who has any
to sell, how is the price fixed ?
Mr. MABON. It is fixed by mutual agreement.
Mr. UNTERMYER. IS it not fixed by reference to the quotations on
the exchange ?
Mr. MABON. Not at all.
Mr. UNTERMYEB. Why

should they buy at one price over the
counter, when there is another price prevailing in the exchange ?
Mr. MABON. Because there are a great many securities that are
listed on the stock exchange which are very inactive there, and which
are traded in, as I say, in the offices. Certain houses are known to
be dealers in certain types of securities. Transactions are made
with them in their offices.
Mr. UNTERMYEB. YOU refer to inactive stocks, do you?
Mr. MABON. Inactive stocks; yes.
Mr. UNTERMYER. Has not every stock got a place of sale on the
exchange; a so-called stand, where it is dealt in?
Mr. MABON. Every stock that is listed has a location.
Mr. UNTERMYEB. Every stock that is listed has a stand or place
alloted to it in the exchange ?
Mr. MABON. Yes, sir.
Mr. UNTERMYER. SO that

the broker who wants to buy or sell that
particular stock, whether it is active or inactive, knows just where to
go to offer it, does he not?
00241—PT 5

406

MONEY TBTJST INVESTIGATION.

Mr. MABON. Yes.

Mr. UNTERMYER. And the people who want to buy know where to
go to buy that stock ?
Mr. MABON. Yes.

Mr. UNTERMYER. The members ?
Mr. MABON. Yes, sir.
Mr. UNTERMYER. With

that arrangement in vogue in the exchange,
you say that members go around from office to office to find where
they can locate a holder of that stock so as to buy it, when they can
go to the stand that is allotted to it ?
Mr. MABON. I did not say so. Mr. Untermyer. I said there were
brokers outside of the stock exchange who did business in these
securities.
Mr. UNTEKMYER. YOU mean that there are men that are not in
the exchange ?
Mr. MABON. Not members of the exchange.
Mr. UNTERMYER. Who buys privately 3
Mr. MABON. Yes; and who do a very large business.
Mr. UNTERMYER. Buy privately ?
Mr. MABON. Yes.

Mr. UNTERMYER. And sell privately ?
Mr. MABON. Yes.
Mr. UNTERMYER. They are not members of the exchange ?
Mr. MABON. Not members of the exchange.
Mr. UNTERMYER. Can you name any of those men who

make a
living at that ?
Mr. MABON. I know that there are such men.
Mr. UNTERMYER. Can you name anyone who can make anything
like a living out of it, or even office rent, at that sort of business ?
Mr. MABON. I think there are a great many, but I can not name
them. I see their advertisements in the papers, and I know they do
the business, but I can not name them. There are quite a number of
such men outside the regular brokers.
Mr. UNTERMYER. Why should a stock exchange broker sell his
securities over a counter instead of at the exchange ?
Mr. MABON. I did not say a stock exchange broker; I said an
outside broker.
Mr. UNTERMYEB. An outside buyer and an outside seller, you
mean?
Mr. MABON. Yes.
Mr. UNTERMYER.

A man might have to ransack the whole town to
find a buyer under such circumstances, might he not ?
Mr. MABON. I think not; not from my information.
Mr. UNTEBMYER. IS that your idea of the way a business should
be conducted by a broker, without being a member of the exchange ?
Mr. MABON. That is one of the ways. They do a thriving business.
Mr. UNTERMYER. But you can not name any of them ?
Mr. MABON. I have not them in mind, no; but I can get their
names.
Mr. UNTERMYER. If there are men of that kind who do a thriving
business you must have some of them in mind.
Mr. MABON. I can get you the names of outside brokers who do a
good business.



MONEY TBUST INVESTIGATION.

407

Mr. UNTERMYER. I offer in evidence an extract from book No. 6 of
the minutes of the meeting of the governing committee of the stock
exchange, page 276, concerning the charge against- B. F. Raynor,
October 24, 1906, and from page 280, also the result of the hearing,
which was "'suspension for four years."
The extract referred to is here printed in the record, as follows:
[October 24, 1906.—Governing Committee Minute Book 6, p. 276.]

To the Governing Committee of the New York Stock Exchange.
GENTLEMEN : I respectfully present the following charge and specifications
against Edwin F. Baynor, a member of the New York Stock Exchange:
CHARGE.—That said Edwin F. Raynor on various occasions and more particularly on or about the dates mentioned herein has violated the provisions of
Article XXXIV of the constitution of the exchange, commonly known as the
commission law.
Specification, 1: In this, that the stud Edwin F. Raynor did, during the time
from September 8, 1896, to September 14. 1896, both inclusive, purchase and sell
stocks in this exchange for the account of E. F. Schroeder, of this city, charging
therefor the regular rate of commission, viz, one-eighth of 1 per cent; that
thereafter, on or about September 15, 1896, the said E. F. Schroeder received a
rebatement, return, discount, or allowance paid, or caused to be paid, to him,
by or through the instrumentality of said Edwin F. Raynor, by a credit to the
account of said E. F. Schroeder upon the books of said Edwin F. Raynor, of the
sum of $125. and a corresponding debit on or about September 16, 1896, to the
individual account of said Edwin F. Raynor upon said books, the same being
a rebatement, return, discount, or allowance upon 1,000 shares of stock purchased and sold for the account of said E. F. Schroeder, and that the said
Edwin F. Raynor did thereby violate the provisions of Article XXXIV of the
exchange.
Specification 2: In this, that the said Edwin F. Raynor did, during the time
from November 7. 1898, to January 3, 1899, both inclusive, purchase and sell
stocks in this exchange for the account of E. F. Schroeder, of this city, charging
therefor the regular rate of commission, viz, one-eighth of 1 per cent; that
thereafter, on or about January 4, 1899, the said E. F. Schroeder received a
rebatement, return, discount, or allowance, paid or caused to be paid to him
by or through the instrumentality of said Edwin F. Raynor, by check of Pearl &
Co., upon the Bank of the State of New York, dated January 4, 1899, to the
order of E. F. Raynor, and by him indorsed to the order of E. F. Schroeder, for
the sum of $1,362.50, the same being a rebatement, return, discount, or allowance upon 10,900 shares of stock purchased and sold for the account of said
E. F. Schroeder. and that the said Edwin F. Raynor did thereby violate the
provisions of Article XXXIV of the constitution of the exchange.
Respectfully,
GEOBGE W. ELY, Secretary.

[November 14, 1906. Minute Book, Governing Committee, 6, p. 283.]
Moved that the governing committee determines that Edwin F. Raynor is
guilty of the charge and first and second specifications thereto.
Seconded and unanimously carried.
Moved that Edwin F. Raynor be, and he hereby is, suspended from the exchange for the period of four years, commencing from this day.
Seconded and unanimously carried.
Mr. UNTERMYER. Will you tell me why this man was tried and

suspended for four years on that charge of giving a rebate, two years
after the alleged offense ?
Mr. MABOX. I can not; no, sir.

Mr. UNTERMYER. That was for four years. Can you give any
explanation of that transaction?
Mr. MABOX. I can

not.

Mr. UXTERMYER. There is no such limitation in the stcok exchange,
is there ?




408

MONEY TBUST INVESTIGATION.

Mr. MABON. Not that I know of.
Mr. UNTEBMYEE. I offer in evidence an extract from book 6 of the
proceedings of the governing committee of the New York Stock Exchange, pages 551 and 557, the minutes of the proceedings of the
charge against Mr. F. L. Hutton, of the firm of E. H. Hutton & Co.
The extract referred to is here printed in the record as follows:
[May 11, 1910.—Governing committee minute book 6, p. 551.]
NEW XOBK, May 2,

1910.

To the Governing Committee of the New York Stock Exchange.
GENTLEMEN : In accordance with Instructions from the committee on commissions, I herewith make the following charge and specification against Franklyn
L. Hutton, a member of the exchange and a general partner in the firm of
E. F. Hutton & Co.:
CHABGE.—That the said Franklyn L. Hutton, a general partner in the firm of
B. F. Hutton & Co.. represented upon the exchange, has been, through the said
firm of E. F. Hutton & Co., guilty of violating section 1, Article XXXIV, of the
constitution, relating to commissions.
Specification: In this, that the said firm of E. F. Hutton & Co. did enter
into an agreement or arrangement, during the early part of the year 1909, with
one Hosmer J. Barrett, who was in the employ of said firm, to pay said Hosmer
J. Barrett a salary of $1,500 per month because of the fact that said firm had
profited by the business sought or procured for it by said Hosmer J. Barrett
during the preceding three years in a sum amounting to about $30,000 a year,
and said firm paid said Barrett said salary, in accordance with said agreement
or arrangement, from May 1. 1909, to April 26, 1910; and said Franklyn li.
Hutton, through the said firm of E. F. Hutton & Co., thereby violated the provisions of section 1, Article XXXIV, of the constitution of the exchange.
GEORGE W. ELY, Secretary.

[May 25, 1910.—Governing committee minute book 6, p. 558.]
Moved that the governing committee determines that Franklyn L. Hutton is
guilty of the charge and specification.
Seconded and carried—29 ayes, 8 nays.
Moved that Franklyn L. Hutton be, and he hereby is, suspended for a period
of one year, commencing from this day.
Seconded and carried—28 ayes, 8 nays.
Mr. UKTEBMETEB. Were you a member of the committee that

passed on this Hutton case ?
Mr. MABON. Yes; I was a member of the governing committee.
Mr. UNTEKMYEK. In effect, the charge against Mr. Hutton was that
they had hired a man at a salary, and that his salary was to some
extent dependent upon the amount of business he could influence,
was it not ?
Mr. MABON. That is my recollection; yes.
Mr. UNTEBMYER. All the members of the stock exchange have
clerks, have they not ?
Mr. MABON. Yes.
Mr. UNTEKMYEE. They all get salaries, I suppose,
Mr. MABON. I presume so.
Mr. UNTEEMYEE. Many of them are supposed to

except partners?

be able to influence some business for the firm, are they not ?
Mr. MABON. I presume so.
Mr. UNTERMYEE. I do not quite understand what offense this firm
of Button & Co. committed in the employing of a man at a salary.
I wish you would explain a little more fully. Was it the size of the
salarv f



MONEY TKUST INVESTIGATION.

409

Mr. MABON. It was the salary dependent on the business which he
brought to the firm.
Mr. UNTEEMYEE. It does not say so.
Mr. MABON. That is my understanding.
Mr. UNTERMYER. Well, every man's salary is conditioned upon his
usefulness, is it not?
Mr. MABON. I am not qualified to answer that.
Mr. UNTERMYEB. Well, it is supposed to be, is it not ?
Mr. MABON. Yes.

Mr. UNTEBMYER. According to that rule, does the stock exchange
have to pass upon what each member shall pay by way of salary to
his clerks ?
Mr. MABON. NO.
Mr. UNTEBMYER.

The thing that attracted attention there was the
size of the salary, was it not ?
Mr. MABON. I presume so; yes.
Mr. UNTEBMYER. Mr. Barrett's salary was how much a year ?
Mr. MABON. If you will refresh my memory I may be able to
answer. I do not remember exactly.
Mr. UNTERMYER. $1,500 a month?
Mr. MABON. $18,000 a year; yes.
Mr. UNTEBMYER. And the gentlemen who suspended Mr. Hutton
for a year thought that was entirely too big a salary; did you?
Mr. MABON. Yes.

Mr. UNTERMYER. YOU did not have to pay it, did you ?
Mr. MABON. NO.
Mr. UNTERMYER. IS that all you had
Mr. MABON. That is all I remember.
Mr. UNTEBMYER. It is contrary to the

against Mr. Hutton ?

regulations of the exchange,
is it not, for any membsr to employ a clerk at a salary conditioned on
his bringing in a given amount of business ?
Mr. MABON. Yes; that is my understanding—a fluctuating salary.
Mr. UNTERMYER. Or to give him a gratuity if he attracts business
to you ?
Mr. MABON. I do not know about that.
Mr. UNTERMYER. Are you allowed to give gratuities to clerks or
anybody else for bringing business ?
Mr. MABON. Not for bringing business; no, sir.
Mr. UNTERMYER. But suppose they bring business; are yo<i allowed
to make them presents ?
Mr. MABON. Not for the purpose of bringing business; no, sir.
Mr. UNTERMYER. I offer in evidence the proceedings in reference
to the charge against I. B. Newcombe, May 23, 1904, from book 6 of
the minutes of the governing committee of the New York Stock Exchange, pages 52 and 67.
The extract from minute book 6 referred to is here printed in the
record, as follows:
[May 4, 1904.—Governing Committee Minute Book 6, p. 52.]

To the Governing Committee of the New York Stock Exchange.
GENTLEMEN : I hereby make the following charges against Isaac B. Xewcombe, a member of the exchange:
FIBST CHARGE.—That at various times between the month of May, 1903, and
the month of March. 1904. the said Isaac B. Newcombe. a member of the firm



410

MONEY TBUST INVESTIGATION.

of Stewart Browne & Co., represented upon said exchange, was guilty of violatting section 1 of Article XXXIV of the constitution of the exchange.
Specification 1. That by himself and through the said firm of Stewart Browne
& Co., the said Isaac B. Newcombe did agree with, one Claude M. Harburger,
a clerk of said firm employed in its office, to give, pay, or allow unto said clerk
a bonus, or percentage, or portion of the commission for business sought or
procured for said Isaac B. Newcombe and said firm.
Specification 2. That at various times between the Month of May, 1903, and
the month of March, 1904, in pursuance of such arrangement, the said Isaac B.
Xewcombe himself, or through the said firm, did pay to said Harburger, a clerk
in the employment of said firm, a bonus, or percentage, or portion of the commission for business sought or procured for said firm, which bonus or commission was at the rate of $2 for each hundred shares of stock transacted by or
through the procurement of said Harburger as said clerk.
SECOND CHARGE.—That at various times between the month of May, 1903, and
the month of March, 1904, the said Isaac B. Xewcombe, a member of the firm
of Stewart Browne & Co., represented upon said exchange, was guilty of violating section 6 of Article XXXV of the constitution of said exchange.
Specification. That during a portion of the time in the charge mentioned the
said Harburger was employed by said firm as a clerk in their principal office,
and during another and later portion of said time was employed as managing
clerk of a branch of said firm in the Hotel Savoy, in the city of New York; that
as such clerk and managing clerk the said Harburger was not paid by said
firm only a fixed salary not varying with the business, but was paid a certain
amount as salary, together with other amounts which varied directly in proportion to the business contributed or procured by him for said firm.
Respectfully submitted.
WM. MCCLUBE, Secretary.
N E W YORK, May 4, 1904.

[May 25, 1904.—Governing Committee Minute Book 6, p. 68.]
Moved that I. B. Newcombe is guilty of the first charge and specifications
1 and 2 thereof.
Seconded and unanimously carried (by a rising vote).
Moved that I. B. Newcombe is guilty of the second charge and specification.
Seconded and unanimously carried (by a rising vote).
Moved that I. B. Newcombe be and hereby is suspended from the exchange
for the period of five years commencing from to-day.
Seconded and unanimously carried (by a rising vote).

Mr. UNTERMEYER. YOU have pretty effectually done away with any
competition on the question of commission in tne exchange, have y ou
not, by these convictions and punishments of from one to four ana
five years' suspension for the offenses ?
Mr. MABON. I hope so.
Mr. UNTERMYER. What do you mean by competition in service ?
Will you tell me what is the difference between the service of one
broker who gets an order to buy a hundred shares on the exchange and
goes to the place where it is sold and buys it and the service of
another broker where he is given the price at which he shall buy ?
Mr. MABON. It is only one phase of the relations between a client
and broker. The broker might give his client information about a
security, might advise him not to buy at the present price, but to
wait. It is very often a question of whether it is wise to buv at the
market price or buy at a limit. In all those ways I think the judgment of the broker "is valuable.
Mr. UNTERMYER. In advising his clients ?
Mr. MABON. Yes.
Mr. UNTERMYER.

Then, why should not one broker be permitted
to get more for his services than another1? Why do you put them
all on a labor-union basis ?



MONEY TBUST INVESTIGATION.

411

Mr. MABON. We do it for the sake of uniformity, because we think
the service is a proper one.
Mr. UNTERMYER. What is that ?
Mr. MABOX. The same answer that I made before; that we do it
for the sake of uniformity and because we think the service is worth
what we charge.
Mr. UNTEBMYER. YOU do it for the sake of preventing competition
in rates do you not ?
Mr. MABON. Yes; for the sake of preventing competition in the
rate.
Mr. UNTEBMYER. That is the same purpose you have in mind in
limiting the membership—to prevent competition ?
Mr. MABON. I do not think so.
Mr. UNTERMYER. What is your purpose in limiting the membership, other than to limit competition and add to the value of a seat
on the stock exchange ?
Mr. MABON. I am not competent to answer. I never reflected on
the matter at all.
Mr. UNTERMYER. I think we ought to stop here for the evening.
Thereupon, at 4.15 o'clock p. m., the subcommittee adjourned
until to-morrow, Thursday, June 13, 1912, at 11 o'clock a. m.