The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-02-07
Big Losses to Investors Pos
sible IL Institution Did
Not Fix Prices.
SHORT SELLING DEFENDED
Measure Said to Make Post
master-General a Dictator
With Too Much Power.

ton OF summing up OF the objections
to the owen bill. framed to regulate
stock exchange transactions through the
medium Of Post ONCE Department sur
VIGILANCE. the case OF the New York Stock
Exchange before the Senate Committee on
Banking and Currency was concluded to-
day. Next Wednesday John O. Milburn.
counsel for the exchange. will summarize
objections and present an argument
against the bill.
The principal witnesses at to- days hear
ings were Charles A. Conant. the financial
expert, and Henry X. Pomroy. ex-prcsl-
dent OF the exchange. Mr.. Conant's
presentation was a statement Of the value
OF the exchange as price fixing and
market providing medium. which he char
acterized as indispensable to the preser-
walton Of the democracy Of investing
opportunities
The elimination of the stock exchange
as the central market for speculative and
investing securities OF all sorts for the
United states would, Mr.. Conant feared.
result In the creation Of a situation similar
to that which exists In the market to-day
for unlisted bonds Of all classes.
Mr.. Conant explained that without the
continuous ebb and flow OF securities prices
presented by the stock exchange as a
going concern purchasers and sellers Of
all forms Of securities would be COM
houses for the purchase or disposition Of
their stocks and active bonds.
Market Would He Restricted.
The result would be n divergence OF the
bid from the offered price which would
tend slowly to restrict the market. In
times Of stress IL would be not infre-
quent thing for holders Of securities to
be compelled to sell out at distressing
losses.
The inhibitions of the pending bill
upon publicity for exchange quotations
would slowly but surely remove the
market for such securities and tend To
depreciate II not destroy values MI.
Conant asserted.
The owen bill was characterized by
Mr. Conant as "A roundabout and clumsy
way Of getting AZ the problem of honest
stock and bond valuations
According to his view, proper corrective
legislation should be applied TO the
corporations themselves ana not TO the
brokers struggling in an active market to
maintain properly adjusted price quota
tions aimed to meet the actual value OF
securities He said:
The New York Stock Exchange, In
other words, should not be made the whip
with which to drive the corporations to
an honest expression OF the value of their
tangible and intangible assets and OF
their current or contingent liabilities"
Mr.. Conant believed the owen bill WAS
a long way from being the sort OF measure
needed. Indeed. II was his opinion that
the pending trade commission bill, framed
20 regulate the character OF securities
issued by industrial corporations and to
control their conduct. coupled with the
projected bill empowering the Interstate
Commerce Commission 10 regulate the
issue of securities OF all classes by the
railways and other common carriers,
furnished I'll that IL needed.
The necessity for the preservation OF
the privilege OF short selling" Mr., Conant
insisted, was important and imperative.
short selling Ia Defended.
short selling" said the expert is
a vital function Of financial economies
Senator Shafroth interrogates MI CO.
nant as 10 the danger of short selling
creating corners" in the market at which
Mr.. Conant volunteered the belief that
since the Northern Pacific panic OF May 3.
1901 there had not been an actual corner
in the New York security market. He
said, however. that perhaps within the
two years Immediately preceding this
terrific explosion there had been attempted
corners which were partly successful.
He did not believe the developed con-
dition OF trade and security during the
last ten years had left open opportunity
for further performance along this line
Investment securities" said Mr., Co
nant. ARE not always OF necessity divi-
dend payers
He cited instances and gave the conf
mittee an analysis OF the difference be-
tween speculation and investment. Spec
ulation. according to Mr.. Conant. is a
preceding circumstance TO the develop
ment of securities AS an investment prop
ositon, and it IL only after such securitie,
have passed through the various f!uctuat
ing stages OF speculation that sufficient,
accurate market values are established
upon which to create genuine investments
stocks or bonds.
at is entirely wrong" said Mr.. COnant
ITO try to draw line between speculation
and investment with morality or immoral
ity for the characterizing adjective Of
either 1t Is not proper 10 say tina
either investment or speculation is RICH
or wrong.
Speculation il undoubtedly right and
necessary II IL only erratic, baseles:
and insuiliciently considered speculation
that Is evil, and the success or failure vi