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production. Drastic readjustments will be inevitable and large sums will be needed to pay the costs of this readjustment.

The only hope that this readjustment can be made quickly so that the millions who will be out of work during the period of readjustment may be speedily reemployed is the hope that industry will be able to raise the necessary funds through the sale of securities to the public. Unless private capital can be enlisted by private enterprise in this way, the Government will be faced with the necessity of providing for the millions who will be seeking jobs and unable to find them.

Our experience has shown that these laws have almost closed the doors to the capital markets. During the past 7 or 8 years we have seen how these laws have blocked industrial expansion and thus helped to perpetuate the unemployment created by the depression. I would particularly like to emphasize the extent to which these laws have hampered, if not prevented, the raising of venture capital for new and untried enterprise. The progress of this country has been built upon venture capital and out of the risks that venture capital takes.

Labor and taxpayers alike have paid a heavy price for the unfortunate mistakes in these laws. We can only hope that Congress will remedy the defects in these laws so that they will not have to pay a heavier price at a more critical time when the war is won and peace

returns.

Two factors have tended to prevent the financing of industrial expansion and of new ventures. One factor is the present registration process. There can be no doubt that the excessive costs, the prolonged delays, and the baffling complexities of this process have greatly discouraged financing. The remedy for this situation lies in the simplifi-. cation of the process and of the present awkward forms, the elimination of the vast amount of unnecessary duplication, the reduction of the heavy costs, and the shortening of the so-called paralysis or waiting period. All these things the Wadsworth bill would do, and it is vital that they be done.

The other factor which has tended to prevent the financing of industry and industrial expansion is the impairment of our securities markets by excessive and unwise regulation. This has not only hampered the sale of new issues of securities but has jeopardized the interests of investors who must rely upon our securities markets for the safe purchase and sale of securities.

Thus by law and as a result of the great uncertainty as to the meaning of certain parts of the law, and particularly that part dealing with manipulation, the normal forces of supply and demand have been greatly restricted. Any such interference with supply and demand is bound to weaken a market and is wholly inconsistent with the sound principle of a free and open market. A manipulator exerts artificial pressure upon the supply and demand in a single security. These provisions of the law interfere with the supply and demand for all securities. A manipulator hurts a few investors, while these provisions are injurious to the interests of all investors. Moreover, these provisions have tended to destroy the capacity of our markets to absorb any substantial quantity of new issues of securities and have thus retarded financing which would have created innumerable jobs to absorb the unemployed.

Mr. Wadsworth's bill proposes a sound remedy. It would repeal certain irrational provisions of the law, and it would clarify other

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provisions of the law so that honest men may buy and sell securities with some degree of assurance that the S. E. C. will not later charge them with violating the law. And above all, it would impose upon the S. E. C. the affirmative duty "to encourage and foster orderly, active, stable, and liquid markets for securities upon securities exchanges and in the over-the-counter markets."

It is our duty, I submit, to accept these sound amendments proposed in Mr. Wadsworth's bill now, so that when victory and peace come, industry will be able to finance its change-over to peacetime production and thus speedily provide new jobs for those who are so loyally serving at the front and in the war-production factories at home.

Now, with your permission, Mr. Chairman, I would like to read a telegram the association received from Jeremiah D. Maguire, president, Federation Bank & Trust Co.

The CHAIRMAN. You may do so.
Mr. COMSTOCK [reading]:

[Telegram]

WADSWORTH W. MOUNT,

PALM BEACH, FLA., January 25, 1942.

Commerce and Industry Association of New York,

New York, N. Y.:

Necessity for adoption Wadsworth amendment to Securities Act is greatly augmented since date of its original presentation. It has my unqualified endorsement. Labor in America will give it full support. William Green in public expression has advocated such a program. You are free to use this message at your discretion.

JEREMIAH D. MAGUIRE, President, Federation Bank & Trust Co.

Now, Mr. Chairman, may I read a short excerpt from Mr. Green's address covering that point?

The CHAIRMAN. You may.

Mr. COMSTOCK. The address is entitled "We Are Americans First and Members of Our Union Second."

The interest of labor extends in a very definite and active way into the field of investment. This is reflected in the investment which labor makes in social security, retirement benefits, health, accident, and life insurance. All of this represents an investment of a total amount which, if fully known, would be surprising indeed. Then there is the investment of labor in home building, securities and savings, and Government bonds. Labor also exercises a most lively interest in taxation because it knows and understands quite well that a large part of the tax burden of the Nation is borne by labor and that a large amount of the taxes collected is drawn from the productive power, skill, and genius of labor. All of these are financial, economic, and social problems which affect the common interests of employers and employees, investors, and all classes of people.

Labor is tremendously interested in the enactment of sound and constructive legislation regulating stock-market enterprises, the sale of securities, and the bases of investment. Labor is conscious of the fact that the Nation must guard against excesses in the field of investment such as occurred in 1929. On the other hand it is strongly opposed to the enactment of oppressive legislation. It maintains that legislation regulating the sale and marketing of securities should serve to protect investors, that its objective should be to preserve security markets, functioning so well, under reasonable and wise regulations, as to attract such additional capital as business may require in order to maintain and expand opportunities for work and, at the same time, preserve the fruits of labor for economic security.

Above and beyond all is the preservation of freedom, liberty, and democracy. That is of transcendent importance. Our free institutions, our form of government, our way of life must be preserved at any cost. As I have frequently

stated to the membership of the great organization which I have the honor to represent, we are Americans first, and members of our union second. That sentiment can be repeated here.

I would like, Mr. Chairman, if I may, to put this whole speech into the record.

The CHAIRMAN. You may do so.

(The speech above referred to is as follows:)

From the American Federation of Labor Information and Publicity Service.

[For release in Monday a. m. papers, December 1, 1941]

HOLLYWOOD, FLA., November 30.-"We are Americans first and members of our union second."

That is the spirit in which the 5,000,000 members of the American Federation of Labor have pledged themselves to aid the Government in the successful completion of the national defense program, President William Green told the convention of the Investment Bankers Association of America, meeting here. In an address, broadcast from 10 to 10:30 o'clock tonight over a Nation-wide network of the Mutual Broadcasting System, Mr. Green called for a united stand of capital, labor management, and labor in support of the defense program.

The text of his address, entitled "The Preservation of Free Enterprisethe Common Objective of Capital and Labor," follows:

THE PRESERVATION OF FREE ENTERPRISE THE COMMON OBJECTIVE OF CAPITAL AND LABOR

The political and economic philosophy espoused by the founders of our Republic has been tried and tested in the crucible of human experience. During all the years which have intervened since the Bill of Rights was drafted and the Declaration of Independence was proclaimed the basic principles of our free Government have met the stern requirements of all economic and social changes which have taken place. That, in itself, is remarkable. It stands as a tribute to the political sagacity and economic wisdom displayed by our forefathers.

The principle of free enterprise is embodied within the foundation upon which our Nation's political structure has been builded. There is nothing strange about this formula. It is easily understood. It obligates the Government to guarantee, protect, and preserve the exercise of the right of private ownership of property, to prevent the illegal seizure of privately owned property, to establish security of title to property legally acquired, and to protect the individual in the exercise of the right to own and manage property for either public or private use.

Individual liberty and security are inseparably associated with the vital principle of free enterprise and the private ownership of property. These priceless blessings will remain with us only so long as we maintain the source from which they flow. They will go with the wind, pass beyond our reach and it will be difficult, if not impossible, to regain them if ever there is substituted for them any form of communism or governmental regimentation. Because labor understands fully that it will suffer most if ever the foundation and superstructure of free government is destroyed or impaired it stands firm in its determination to protect and preserve free enterprise and the private ownership of property at any cost.

Regardless of how capital and labor, employer and employee, management and workers, may disagree upon other economic, social and political questions they stand united in defense of the maintenance of free enterprise and the preservation of the joint benefits which flow therefrom.

This attitude of Labor has become definitely established because it has been privileged to study and evaluate the operation and application of communism in Russia, fascism in Italy, and nazi-ism in Germany. In Russia free enterprise has been completely destroyed while in the totalitarian nations national socialism has been substituted therefor. In all of them the right of working men and women to organize into free, democratic unions, as they exist in our own country, has been destroyed. The same blow which destroyed free enterprise also destroyed free, democratically controlled unions in the countries named. Today

labor is regimented, subjected to compulsory service and governmental control in Russia, Germany, and Italy. Thus we see that when free enterprise passes out governmental control of both capital and labor moves in.

The chief menace to the preservation of free enterprise within a democracy is met when destructive economic changes take place. Long distressing periods of unemployment which cause widespread hunger and human distress, heavy losses in investments, deflation and forced liquidation of valuable assets tend to destroy public confidence in our so-called capitalistic system.

Those who advocate government ownership of all the means of production and distribution charge that all our woes are directly traceable to the faults of private ownership. This, of course, is not true. But, even so, distressed minds do not function normally nor do the victims of violent economic changes think clearly when they become panic stricken. Instead, they become receptive to any plausible plan which allegedly supplies a remedy for existing economic ills. These experiences which we have all too frequently met make clear the necessity for the establishment of a sound system of economics which will guard against recurring periods of widespread unemployment and industrial chaos. This requires sound thinking and constructive planning. The shifts which take place in our changing economies should be anticipated and preparations should be made to meet them.

This

Confusion follows changes from a peacetime to a wartime economy. cannot very well be avoided because no opportunity is presented for planning or preparation. Our national thinking changes. People become impatient, act hastily, make serious mistakes and pay the penalties therefor. There is no time nor opportunity for constructive planning. We now behold the development of a most contradictory situation. The demand, at the moment, is for service of the highest order but even so many well-equipped factories are being closed down and thousands of workers are being thrown out of employment daily because of priority orders which prevent factories affected from securing basic material necessary to their operation. Labor has insisted that before a priority order is issued affecting employment and industrial production a survey should be made in order to determine the plant facilities, labor supply, civic and community needs and after said survey is completed efforts should be made to convert the plant into a defense production plant so that national defense can be further promoted and the industrial and civic needs of all affected can be protected and preserved.

This confusion seriously affects investors' banks and business interests. The owners of small industries affected by priority orders are in some instances faced with serious financial losses, if not financial ruin. The effect of priority orders has reached a serious stage. Because I foresaw these difficulties I appointed a defense committee several months ago for the specific purpose of dealing with this phase of the defense program. While recognizing the dire necessity of priority orders yet I was of the opinion that much distress and suffering could be avoided through the development of a constructive plan which would provide for the conversion of consumers goods industries affected by priority orders into defense production industries. I express the hope that this convention will give this serious economic problem careful thought and consideration. Perhaps by so doing you may find a way by which you can render great public service to investors, industrial ownership, labor and the public, as well. The serious problem of priorities is but one of many problems which suddenly arose out of our shifting and expanding production program for defense. The problem of labor migration confronted us with the necessity for speedy transportation, housing facilities, and the transplanting of workers from one community to another. Today thousands and thousands of workers and their families are living in trailers, tents, and hastily constructed houses in sections where housing needs could not be met. This will affect the schooling of the children, the adjustment of living conditions, and the care of the health of large numbers of people.

In many instances the call for skilled workers was far in excess of the number available in the localities where increased activity, due to the construction of cantonments, shipbuilding, industrial defense plants, and other defense 'activities, was taking place. Thus, it became necessary to move large numbers of workers into those areas. All of this will be followed by demobilization.

The enactment of the Selective Service Act, which provided for the admission of millions of young men into the training service of our Government, presented other problems for settlement. Many of these young men were drawn from the ranks of labor and were called upon to engage in technical training. They will

return to their homes and to their respective communities when their term of military service has expired.

We know that a decided change is inevitable when the post-war period is reached. No doubt, the principle of free enterprise and private ownership in all free, democratic countries throughout the world will be called upon to meet a most severe test. Undoubtedly, its virtues and its value in meeting the economic needs of an impoverished and debt-ridden world will be definitely challenged. There is grave danger that the pendulum of political expediency may swing far to the left, just as it did in some countries following the close of the World War. The call of the moment is for preparation now, and if we are successful in planning we may cushion the economic shock which will occur at the close of the prevailing international conflict.

The distressing situation which existed between 1929 and 1933 taught the Nation many valuable lessons. The number of unemployed fluctuated between 1,804,000 in 1929 to 13,270,000 in 1933.

Can our Nation afford to face a comparable situation when the post-war period arrives? Common sense and good judgment call for the exercise of all efforts possible to avoid it. Some economists doubt the ability of our social order to withstand a strain similar to the one our Nation was forced to meet during the distressing period of unemployment which existed between 1929 and 1933. No one can tell, at the moment, when the tragedy in Europe will end or when the defense program of our own country will be completed. Furthermore, we cannot tell where fate may lead us or what part our Nation will play in the great war drama which is being enacted at the present time. But, we can originate and develop a constructive plan which will provide for the absorption of workers then thrown idle, into new channels and newly developed industries, when the coming change from a wartime to a peacetime economic system takes place. We can prepare and launch a huge homebuilding program which will cover the Nation. A survey can be made and plans prepared for the immediate launching of a huge public works program. All of this will call for the expenditure of large sums of money. All of this character of planning should be formulated and made ready so that the economic needs of the Nation could be met in as large a way as possible. It will be far better for the Nation to provide employment for the millions who will be forced out of defense production industries rather than to supply relief to unemployed and those dependent upon them as we were forced to do during the previous periods of economic distress.

No doubt, new and difficult problems affecting the investment banking interests represented in this convention have arisen out of the rapidly changing events which have taken place during the past year. You who are in attendance at this convention understand these problems because you have lived very closely with them. It would be presumptuous for me to attempt to deal with them either in an analytical or advisory way.

I can, however, with perfect propriety emphasize the interdependence of all groups connected with the diversified activities of our national life. The old conception that labor is not interested in preserving business enterprise never rested upon a sound basis and should be discarded. Labor is deeply interested in the preservation of business. It has ever maintained that the owners and management of property are entitled to a fair, just, and equitable return upon investments. It has insisted that decent wages shall constitute a prior lien upon the earnings of industry. This represents sound economic thinking because the success of business depends very largely upon the establishment and exercise of a character of buying power among the masses of the people which would square with the productive capacity of industry. Long years of study and experience have taught us the lesson that in order to avoid overproduction we must balance the buying and consuming power of all classes of people with our facilities of production.

The interest of labor extends in a very definite and active way into the field of investment. This is reflected in the investment which labor makes in social security, retirement benefits, health, accident, and life insurance. All of this represents an investment of a total amount which. if fully known, would be surprising indeed. Then there is the investment of labor in homebuilding, securities and savings, and Government bonds. Labor also exercises a most lively interest in taxation because it knows and understands quite well that a large part of the tax burden of the Nation is borne by labor and that a large amount of the taxes collected is drawn from the productive power, 74947-42-pt. 5——10

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