The Washington herald., 1912-12-14
They Are Thrown Out During Hear.
ings Before the Puio
Committee.
VETERANS ON STAND
MOST OF THE DAY
Ethics of Shirt Sale Are Discussed
by F. K. Sturgis and .
s Rudolph Kepler.

tons of reform Of the New York Stock
Exchange:
That members of the big board be pro-
hibited from executing orders for impor-
tant operators like James Keene who are
known to have manipulated the market
That the New York Stock Exchange
prohibit short sales Of stock.
That the exchange compel the actual
delivery Of stock at he New York Ex-
change Clearing House.
Members of the committee seemed to be
under the impression that it would be as
feasible for the Stock Exchange to pre-
vent its members from doing business for
manipulators like Keene as ii is TO apply
the regulation against any member exc
cutting orders for a member of the Con-
solidated Exchange. Also. the commit
tees counsel seemed to believe that the
enforced presentation of stock certificates
at the clearing house would materially
reduce speculation. All Of these sugges-
tons were met by officers of the ex-
change with the argument that they
would be impracticable.
Considering Ethics.
\ large part of the days proceedings
were taken up with the consideration of
tho ethics OF the short sale. Frank K.
Sturgis and Randolph Kepler, both for
Ier presidents OF the exchange ana now
members of the board OF governors, gave
their views on so-caIled manipulation in
the stock market and defended the meth
COS and practices of the big board.
Mr.. Sturgis could imagine circum-
stances under which it was perfectly
sustifiable to go short of the market, but
he had never in his life sold a share in
this way for himself, and he did not APP
prove OF the practice when the market
was in normal condition.
He acknowledged that it was largely a
gamble, but admitted that the New York
Stock Exchange had never seriously con-
sdered the proposition of forbidding it.
Mr. Kepler thought that manipulation
was legitimate when the rules OF the eX-
change were observed. and when it did
not pass the bounds of reasonablenss.
The test of reason that he would apply
seemed to depend upon the wealth of
the manipulation and the length OF his
pocketbook.
The committee in the course of the day
tried to obtain from Harry Content. who
has the reputation of executing the big
gest orders on the street, and of repre-
senting some Of the most important trad
ers, how the feat of artifcially raising
and depressing price levels was accomp-
lished. Mr.. Content smiled and shook his
head. He knew very little about such
things, and that little chiefly from here
cate or pool in such transaction, although
he may have bought and sold stocks for
house that was managing the pool. But
anyway, a pool is an old-fashioned idea
now, according to Harry Content
Now said he, each man is a pool
for himself
In other words, as Mr.. Content views
the situation, big operators have learned
from bitter experience that it is safer TO
do their own manipulating than to go
into partnership with others. Human ma
tuTe IS weak, and the partners seemed
frequently TO yield to temptation.
In Mr.. Contents opinion, also, the pub
lie is benefited by speculation in stocks.
He is in favor of marginal transactions.
4 like it myself was his comment on
this class OF transactions.
Suggests Delivering Stock.
Samuel F. STREET. who is chairman of
the Clearing House Committee, and a
member of the board OF governors OF the
New York Stock Exchange, also was
examined in the course of the days pro-
ceedings. It was while he was on the
stand that Mr.. Untermyer suggested that
speculation might be reduced materially
IL every broker who sold stock was
obliged TO deliver the stock at the clear
ing house. Counsel for the committee
asked Mr.. Streit's opinion in regard to
that.
I have none said the witness.
SturEis on stand.
Mr. Sturgis was asked by Samuel I'm
termyer why the punishment melted out
to the board members of the firm of S.
3. Chaplin & co. for their participation
in the Rock Island skyrocketing of De-
cember q. 1893, had been so COMPARE
lively light when the splitting of COM
missions by board members with out
siders was punished by expulsion, or at
least lengthy terms of Punishment from
the, floor. Mr.. Sturgis grew emphatic in
his denunciation Of the crime" of COM
mission splitting. It was the unpardOn-
able Sin Of the stock exchange.
At the conclusion of his testimony
Mr. Sturgis sought and obtained from
the committee, with the assistance of
John G. MiIburn. counsel for the stock
exchange permission to read into the
record his address in tribute to the
stock exchange delivered a year or so
ago. The abstract from the speech,
which Mr.. Sturgis read. was a para
graph Of great praise for the honesty,
probity, and responsibility of the stock
exchange.
Mr.. Sturgis told the committee that
he did not think It was his duty to give
a moral lesson to the stock exchange
or to the public. He deprecated the con-
diuons that from time to time present
ed opportunity to bring on excessive
manipulative transactions, but he could
not discern at this time the probability
Of remedial or corrective regulations on
the part of the stock exchange itself
that would altogether obviate the evil.
In defense OF the short selling Of the
rnarlRD in times Of panic or impending
panic Mr.. Sturgis took definitive issue
with the examiner. Mr.. Untermyer. The
effort on the part of Mr.. Untermyer to
force Mr.. Sturgis to a confession that
short sales in times of stress served only
further to depress the market and upset
confidence was unavailing.
Mr.. Sturgis explained that the man
holding inactive stocks upon which he
could not realize cash or its equivalent
IN haste was, for the purpose Of self
protection, forced to take the short side
Of the market in order that the profits
from his short side commitments might
furnish the sinews OF protection for his
long-inactiye stocks. 1t was for this rea-
son that the holder of valuable but in
active stocks and other securities against
which he had money owing was forced
into the active issues for quick short
side returns.
Rudolph Heppler, also a stock exchange
governor and a former president, fol-
lowed Mr.. Sturgis on the stand. Mr.
Keppler said that short sales OF stock
were justihable when they were reason
able. When asked by Mr. UntermyerI
If he. agreed with the statement en-
bodied in the Hughes report on stock
exchange conditions to the effect that