Evening star., 1932-02-24
WHITNEY DEFENDS
SHORT INTERESTS
Market Would Have Closed
Without Bear Selling, He
Tells Subcommittee.
BY the Associated Press.

BY the Associated Press.
Richard Whitney, president of the
New York stock Exchange, told House
judiciary subcommittee today that IF
there was no short selling I am con-
fident our market would have closed
months ago"
He said short selling is necessary
and useful practice"
Whitney opened his testimony with a
general discussion of the mechanics of
Stock Exchange transactions. The ju-
dietary group is considering bills both to
regulate ana prohibit short selling.
Borrowing of Stock.
Whitney said he could mot see why
it is wrong" Tor a short seller to bor-
row stock "if the borrowing of money
is permitted"
Short sales are executed in the same
manner as other Sales," he said. THE
compensation short sellers pay for loans
is sufficient to secure lenders.
1T is an outstanding achievement
that our market has stayed open,"
Whitney continued. IF there was no
short selling I am confident our market
would have closed months ago. The
securities market would have followed
the same course the real estate market
did after the break, and the conse-
quences would have been disastrous.
Loans Remain Liquid.
Because the exchange h.as stayed
open, the huge total of loans based on
securities in this country has remained
liquid. Had they become illiquid our
entire banking system would have been
deVastatinqly affected +"
Whitney said short selling was banned
for two days when England went off
the gold standard.
I'VE felt the only alternative was
closing the exchange" he said
I'VE stopped short selling because we
were aware of the existence of short
interest Of 4 100000 shares.
There was no doubt that a tempo
rary ban on short selling would bring
buying power into the market The sub
sequent events proved the governing
board was right"
Whitney said announcement Of the
Reconstruction Finance Corporation
plans was well received" but brought
no permanent effect on stock price
trend because Its effect on business
was problematical."
mot Dominant Factor"
"Short selling is not a dominant
factor on security prices" he said.
Though the Exchange has been under
closer supervision for the last year than
ever before, we have failed to discover
any evidence of organized short selling
or bear raids. There is no evidence to
support the theory that small group
of SPECTATORS have conspired to drive
prices downward.
I'VE have investigated every sus-
picious case; in recent months bear
raiding has not existed on the New
York Stock Exchange.
THE greatest short interests have
been in the active issues; otherwise,
there Is nothing surprising or i'm
portant about it."
When Whitney concluded his pre-
pared statement, Representative La
Guardia, Republican, New York, asked
whether the Exchanges most recently
applied restriction TO short selling was
taken at the request OF President
Hoover.
Il do not feel that can say anything
about a conversation with the Presi-
dent without his permission" Whitney
replied.
existing evils?"
1T was not taken in any way to cor
recJ chlStLl6 cNAsI WAIAley ASPIANN'
1--WE did 1t because last week the Gov
erning Committee of the Exchange,
realizing that the popular misconception
had grown so great as to disturb even
many intelligent persons, decided to
make its position in regard to the lend
| ing of stocks absolutely clear.
1T. therefore, ruled that the consent
of customers to the lending Of stocks
could not be incorporated in the usual
| form of agreement which customers sign
when they open brokerage accounts. 1t
REQUIRED that these consents be incor-
norated In separate documents so that
customers would clearly understand the
| nature of the power they were vesting
| in their brokers.
"Our most recent action Is only an
other method Of preventing any possible
abuse of short selling.