long as the exchanges are in session-and those wires are handled by our own individual operators.

We give the same service to the man in San Antonio who wants to buy a bond; the farmer in Spokane, Washington, who wants to sell 5,000 bushels of wheat against his growing crop, or against his grain in the warehouse; to the wholesale grocer down in Boston, who wants a carload of eggs, as we do to the man in our branch office in Fortysecond Street, New York.

The man in the small city expects the same service as the man in New York, and he gets it-the odd-lot trader expects the same service as the round-lot trader, and he gets it.

In order to build up an organization of such kind, which has required generations of experience and experimentation, a great deal of money, time, and thought has had to be expended, and if this bill, which is good in some particulars-I do not object to any regulatory bill that regulates merely a very great part of that organization will have to be scrapped and if it is scrapped you will have a bitter taste of bootlegging in the security market that will make the experience of the eighteenth amendment look like a pink tea.

The CHAIRMAN. Do you not think that $6 or $7 a quart whisky is going to make it look worse than it was during prohibition?

Mr. PIERCE. I think it will, and I do not know much about whisky. Mr. Untermyer, Samuel Untermyer, who has been one of the strongest critics of the stock exchange for the 33 years during which I have been in the Street and who certainly knows the business from one end to the other, has stated that this bill is unworkable. tainly is right, and he certainly knows what he is talking about.

According to press reports, Speaker Rainey has said on several occasions that during this session there would be no regulatory

measures.

The CHAIRMAN. The President of the United States has said differently.

Mr. PIERCE. I beg your pardon.

The CHAIRMAN. The President of the United States has a different idea.

Mr. PIERCE. Well, I do not share Speaker Rainey's opinion; but at any rate, if this bill is passed and no other stock-exchange legislation is passed, Speaker Rainey will still be right. It will not be regulation. It will be destruction. As a matter of fact, from my observation

Mr. KENNEY. Mr. Chairman

The CHAIRMAN. Mr. Kenney.

Mr. KENNEY. Are you opposed to any regulation?

Mr. PIERCE. No, sir; I believe in regulation. I am on record to that effect.

The CHAIRMAN. We would like for you to tell us what sort of regulation.

Mr. PIERCE. Well, that is rather a broad subject, Mr. Chairman. The CHAIRMAN. Yes; but it would get us somewhere, Mr. Pierce, if we could have your ideas.

You have made some rather interesting, dogmatic, statements, but what we really would like to have is, out of your experience as a business man, knowing so much more about these things than we possible could know, give us some information with reference to the workings

of this bill and the suggestions that you have to make as to regulation.

Now, that would be very helpful to us; but just statements that it will do this or it will not do that, without the reasons, is not giving us very much help.

Mr. PIERCE. Mr. Chairman, I will get to that, and God knows I want to be helpful.

The CHAIRMAN. We would like to have your help.

Mr. PIERCE. I think if you will ask Mr. Pecora he will tell you that for the last 2 months I have done everything I could to be helpful to him.

Let us take up section 6 of the bill. I think there can be no doubt in the world that from the standpoint of anybody, whether he be prejudiced against the New York Stock Exchange, stock exchanges in general, commodity exchanges in general, it would be extremely destructive.

I have had an analysis made of the accounts carried by our firm. Of those accounts in which there are unlisted securities, I find that the total value the total money value-of both listed and unlisted issues is $45,927,000.

The total value of the unlisted securities is $6,173,000, which means that the percentage of unlisted securities is 13.45. That is not exactly correct, but it is approximately correct. It is sufficiently correct to illustrate the point that I seek to illustrate. For instance, an insurance stock may be listed on the Hartford Stock Exchange. It is not good collateral in New York. We do not lend on it. It might just as well not be listed at any point. However, giving the other side the benefit of the doubt, we have broken down that unlisted lot, removing from it all those stocks listed on six of the more important exchanges except New York; namely, Boston, Philadelphia, Chicago, Detroit, San Francisco, and Los Angeles. Listed on those exchanges are shares in accounts of a value of $1,111,000. Deducting that lot from the total unlisted, we would still have a percentage of 11.03 of unlisted stocks in our accounts which under this bill would have to be liquidated.

Mark you, $6,100,000 less $1,100,000, and we are only one house. The further away one gets from New York the greater the percentage of lending by brokers on unlisted stocks. The local house in Dubuque, Iowa, or Salt Lake City, Utah, is quite likely to lend on the stock of a good bank in such city, or of a local insurance company whose position is well known or even of some industrial which is not listed on any stock exchange.

Mr. PETTENGILL. Mr. Chairman

The CHAIRMAN. Mr. Pettengill.

Mr. PETTENGILL. How many dollars worth of unlisted securities did you say that you had?

Mr. PIERCE. $6,173,000, with a possible modification of some few thousand dollars, perhaps in securities that are listed on other stock exchanges.

In order to get a cross section in respect of this particular featureMr. LEA. Mr. Chairman

The CHAIRMAN. Mr. Lea.

Mr. LEA. Mr. Pierce, do you make that statement on the assumption that outstanding accounts would have to be liquidated, if this bill went into effect?

Mr. PIERCE. Yes; the bill precludes the possibility of carrying unlisted issues.

Mr. LEA. That is what I want to know, whether you are talking with reference to outstanding accounts, or future accounts after the bill might go into effect.

Mr. PIERCE. These are accounts, actually on our books.

Mr. MERRITT. Mr. Chairman

The CHAIRMAN. Mr. Merritt.

Mr. MERRITT. I suppose that these accounts that are in existence are not static. Do you average the same proportion of new accounts as you have of old?

Mr. PIERCE. It runs with great uniformity, and always has.

The effect, from the standpoint of these outstanding securitiesMr. PETTENGILL. May I ask one more question? Is it your view that if the bill is passed, many listed stocks will be withdrawn from listing and increase the total unlisted stocks?

Mr. PIERCE. I would think there can be no doubt about it.

Mr. LEA. Is it not a disadvantage to these unlisted stocks to have collateral privileges withdrawn?

Mr. PIERCE. In what sense, please, sir, to the public?

Mr. LEA. From a market sense.

Mr. PIERCE. You mean from the standpoint of the public?

Mr. LEA. Yes; from the standpoint of the buyer.

Mr. PIERCE. Oh, there can be no doubt about that.

Mr. LEA. Then, why would corporations with listed stock want it to become unlisted?

Mr. PIERCE. We may be talking at cross purposes. You are speaking from the standpoint of the public.

Mr. LEA. I am speaking from the standpoint of the man who wants to sell, or the man who wants to own it.

Mr. Marland's or Mr. Pettengill's question was to assume that there are a lot of little stocks going to become unlisted, and that will at the same time-

Mr. PETTINGILL. I was asking his opinion.

Mr. LEA. At the same time, I am speaking about a much more disturbing situation as to the unlisted stocks.

Mr. PIERCE. Yes, sir.

Mr. LEA. So what I want to know is why the listed stock is going to voluntarily become a nonlisted stock in view of the penalization that exists against the unlisted stock.

Mr. PIERCE. Well, from my study of this bill, if I had control of a corporation whose stock was listed, and if I had to live up to the regulations of this bill, my stocks certainly would become unlisted. Mr. LEA. Your stocks would become what?

Mr. PIERCE. Unlisted.

Mr. LEA. You want to escape regulation; is that what you want? Mr. PIERCE. No; I would escape a lot of trouble and expense. Mr. LEA. In what way? Would not the depreciation of the value of your stocks by becoming unlisted be greater than any possible losses you would suffer by complying with this bill?

Mr. PIERCE. I think there are many executives of corporations who are not in the least interested in the market value of their stocks. I do not say that that is a fact in the majority of cases, but it is in

some cases.

Mr. LEA. But, the public are very much interested in that question.

Mr. PIERCE. Well, on this mundane sphere of ours, the average stockholder does not have a great deal to say.

Mr. LEA. Mr. Pierce, so far as listing of these stocks is concerned, are there any particular difficulties about fixing the value of an unlisted stock for the purpose of sale?

Mr. PIERCE. There is great difficulty.

Mr. LEA. Well, are they, the unlisted stocks, commonly accepted for collateral purposes?

Mr. PIERCE. They are not.

Mr. LEA. Would there be any particular hardship then in denying that privilege by this bill?

Mr. PIERCE. There would.

Mr. LEA. In what respect?

Mr. PIERCE. In this respect: There are in the unlisted department of the New York Curb, for instance, a few stocks which are considered by all banks and brokers as excellent collateral. Such stocks as the stocks of some of the Standard Oil issues, for example. The banks, New York banks, take those issues quite readily, as readily as they will General Motors, or United States Steel.

Mr. LEA. Just for the moment, without pledging myself, I do not see sufficient reason for denying the use of these unlisted stocks for collateral, but I would like to know the reasons for it, and what the effect would be if we come to adopt the provisions of this bill.

Mr. PIERCE. Well, the banks are our hosts, generally speaking, and we are quite willing to lend, freely, on the collateral on which the banks will lend freely to us.

Mr. LEA. But is not the situation of the broker somewhat different from the banks? He does not have the deliberate opportunity to investigate the collateral, does he, that the banks exercise?

Mr. PIERCE. Well, judging from the results, I would say that we have done about as well as the banks in the last 4 years.

Mr. LEA. I am not trying to express a viewpoint. I am trying to get yours.

Mr. PIERCE. That is mine, sir, and I do not mean to be facetious. Mr. MARLAND. Mr. Chairman

The CHAIRMAN. Mr. Marland.

Mr. MARLAND. Mr. Pierce, you said that a stockholder does not have much to say about the corporation.

Mr. PIERCE. Yes.

Mr. MARLAND. Why does he not?

Mr. PIERCE. Well, that is rather a broad statement, sir. I might state the incidental stockholder

Mr. MARLAND. Why does he not? What is there in the situation to prohibit the stockholders from having much to say about the corporation?

Mr. PIERCE. Inherently, I suppose, there is not; but as a practical matter I would say he is about in the position of the average voter. If New York City gets a bad form of government, or Philadelphia, or any other city, theoretically it is the fault of the voters.

Mr. MARLAND. In many of our large corporations, is it not a fact, quite a large percentage of the stock is in what you call "street names", broker's names?

45381-34--21

Mr. PIERCE. Yes, sir.

Mr. MARLAND. What percentage would you say of the Steel, for instance, or any other big corporation, is in brokers' names?

Mr. PIERCE. Oh, there is no way of guessing at that. One would have to look into the statistics. It might be I percent, or might be 5 percent, might be 15.

Mr. MARLAND. Sufficient to control the election of the corporate officers?

Mr. PIERCE. No, sir; save in few instances.

Mr. MARLAND. What is the practice of brokers in sending proxies at the request of officers of companies; sending proxies for the stock that is held in the street names?

Mr. PIERCE. Under the rules of the Stock Exchange, we may give proxies on the stock in your possession, registered in our name. I think that the practice of different brokers varies. It is our practice, if any contest is involved, to consult those customers of ours, even in respect of the stock standing in our name, carried for them, to ascertain to which side they would like us to give their proxy.

Mr. MARLAND. Have the stock-exchange officials ever given thought to any method of encouraging a greater interest among stockholders in the management of their corporations?

Mr. PIERCE. Not so far as I know, sir.

Mr. MARLAND. Another question I would like to ask, not in line with that: What percentage of the trading in stock during a month is for the account of customers and what percentage is for members' accounts?

Mr. PIERCE. I understand that has been given in the Pecora questionnaire. I have no information about it. So far as my particular house is concerned, 100 percent is for customers.

Mr. MARLAND. You mean your house never buys on its own account?

Mr. PIERCE. We do not.

Mr. MARLAND. Or the account of your members?

Mr. PIERCE. We have one or two members who at times buy on their own account, occasionally, very occasionally, and very moderately.

Mr. MARLAND. Probably you can tell us this: Has the stock exchange ever sought by questionnaire or otherwise to determine what proportion of the trading done during the day or month, or any period, is for customers' accounts and what percentage is for the account of the broker himself?

Mr. PIERCE. So far as I know, they have never attempted that until the Pecora questionnaire was prepared.

Mr. MARLAND. That would be establishable, would it not?

Mr. PIERCE. We ascertained it for Mr. Pecora.

Mr. MARLAND. You could do it any day, could you not?

Mr. PIERCE. If we set up the machinery, I should think we could without difficulty.

Mr. MARLAND. It never has been done, to your knowledge? Mr. PIERCE. So far as I know, not until the Pecora questionnaire was returned.

Mr. MARLAND. Mr. Chairman, I would like to add this: We have had a great deal of discussion by the opponents of the bill of various sections of the bill. I think we have covered them all pretty well.