The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-11-13
Exchange Lau Authority
Calls Cotton Pool Illegal
'on H. Dos Passos Says S135OOOOOO Plan Is Contrary to
sherman Law-Thnks President and Attorney
General Erred in Approving It,
BANKERS HERE SEE FAILURE FOR McADOO IDEA

John r. Dos Passos who IL an au-
thority OH Stock Exchange law and pro-
cedure. in an opinion regarding the
proposed sl35. 000,0 900 cotton pool says
that tho plan is contrary to the anti
trust laws and that the members of the
Federal Reserve Board cannot lawfully
enter into any arrangement whereby they
shall administer the cotton pool, az their
duties are explicitly outlined and limited
under the Federal reserve act. lie adds
that II Is Unprecedented for the President
and the Attorney-G General OF the United
states to give their views in advance OF
any actual litigation
Mr. Dos Passos's opinion against the
legality OF the pool may be summarized
as follows:
First. he asserts that the Government
OF the United States can have no direct
interest in this subject under its Con-
stitution and laws until a question arises
as to whether the plan il valid under the
antitrust laws. and that IL IL premature
and unprecedented for the Executive and
Attorney-General to give their views in
advance of any actual litigation.
Second, he says that the plan for a
fund to be administered under the direc-
ton OF a central committee 20 be com
posed OF the individual members Of tine
Federal Reserve Board cannot be carried
out; that the members of the Reserve
Board have no right to enter into this
business. being confined to their duties
specially defined by the act creating the
board II having been explicitly provided
that the five members (outside OF the
Secretary OF the Treasury and tho Comp
troller) shall devote their entire time
to the business of the Federal Reserve
Board" and that an attempt TO admin
lister the affairs of a financial private
copartnershp IN which the Government
Is not and cannot he Interested would
constitute an Abandonment Of their legtl-
mate functions. SO. FAR. therefore. as they
are concerned the plan must he aban-
doned.
Third. he states that the purpose OF the
cotton loan fund l. TO sustain the price OF
cotton and to keep 1t from the public.
which Is interested in buying cotton az
Cheaply as possible; that 1t wthdraws
much cotton from the market and fixes
the minimum price at cents per pound
and, therefore, Is contrary TO the anti
trust laws lie cites the case OF the Joint
Traffic Association. where the subject In
volved was an agreement between thirty
one railroads. which formed an associa-
ton among themselves, the paper estab-
fishing IL being designated as a gentle
mems agreement, wherein IL was specih-
cally provided that the agreement should
OF the interstate commerce law, and IL
was further provided that the managers
should cooperate with the Interstate Conn
merce Commission 10 secure stability and
uniformity In fates. II was sought by
Introducing the Government officials In
the plan, to overcome all objectons-just
as II Is here attempted TO use the MEM
bers of the Federal Reserve Board. The
clothes OF responsibility cannot conceal
fundamental legal defects and the SUI
preine Court OF the United States held the
plan Illegal lie further asserts that this
cotton fund" scheme would probably be
Illegal at common law as constituting the
engrossng of necessaries.
Fourth. he Is OF the opinion that no
national bank can subscribe to this fund
that Il is financial copartnership with
all the features arising from such an
association. and that IL is no different
in effect from an attempt on the part
Of the national banks to subscribe for
stock in corporation. the class A
subscribers receiving on payment OF a
subscription participation certificate,
which is transferable ON the books Of the
committee specifying the terms under
which the own will be entitled to share
In the distribution OF the moneys realized
from the loans made from the fund Gre
ated." The Supreme Court of the United
states has frequently held that national
banks have no powers except those OK
pressly conferred upon them, and that