Evening star., 1933-10-10
WALL STREET QUIZ
RAPIDLY ADVANCES
Rail Stock Worth $4,000, 900
Went to Trusts at Time
of Crash.
Continued From First Page.)

transaction occurred during - period
Of rapidly declining prices"
Pecora said the minutes of the trusts
board meeting November 13. 1929. two
days after the purchase, showed no
record Of the transaction or its approval.
Senator Couzens, looking over the
cords. said they showed much Of the
stock had been pure lased before the
report on 1t by Cove:dale and Colpitts
Tracy previously had testified the
stock was bought on the basis Of IA
vorable report from this flrm.
Questioned by Pecora, Tracy said the
books did not show any record Of ap-
proval Of the transaction, but I'VE had
all agreed we wanted to buy railroad
stocks"
Dillon, Read & Co. also believed IN
railroad stocks at the time he asserted,
only to be asked:
Then why did Dillon. Read q Co.
part with their railroad shares?"
Trust Wanted Two Issues.
II don't know about Dillon, Read &
Co., but we wanted railroad securities, I"
the witness answered.
He said the trust had only bought
from Dillon, Read & Co., stocks In the
Rock Island and Frisco lines, but not
securities in the other roads which the
bankers had obtained through the pool
I'VE only wanted the Rock Island and
Frisco stock" he said.
Both Of these lines are now In re-
ceivership and the stock values have de-
preciated to q fraction Of their former
value.
Pointing out the lines were In re-
ceivership, Pecora said:
"And thoSo tWn etnrke vuovn kA ~.
you picked out for purchaser"
Correct" Tracy agreed, saying the
trust previously had no stock in either
company and wanted some.
Defending the purchase, Tracy said
during the six-month period after the
transaction, Rock Island stock ranged
In price form 101 to l25.
Tracy testified there was panic"
on the market the week the trust
bought the shares of Rock Island stock
from Dillon. Read & Co.
Proper During Panic.
And you thought it proper for an
investment trust to purchase this large
block Of stock while there was q panic
on the market" Pecora remarked.
Yes" the witness said.
Pecora became more aggressive in
his questioning, while Tracy replied in
low. even voice
Turning to the Frisco stock, Tracy
said Dillon. Read g. Co. acquired 16, ,060
shares from the pool operations and
sold them to the trust for $l793.OOO.
Pecora's records showed the circum-
stances Of this transaction we're the
same as in the Rock Island stock, with
Dillon, Read & Co. apparently taking q
loss OF nearly 100000 on the purchase
price Of 81 092 900.
Again Pecora showed there was no
record Of approval by the directors.
Pecora asked il the stock purchased
by the Foreign" trust eventually found
its way into the international" trust
Tracy said 1t was sold to the latter in
December at the market price.
The Rock Island stock bought by
Foreign for ia was sold to Interna-
tional December 81 at 11184
The Frisco stock. which was bought
fer 111a. was sold to the other trust
for los.
Was that sale on December 81 to cut
your income tax?" Couzens asked.
1T wAs for offsetting our profit"
Tracy replied. agreeing with Couzens.
We are allowed to do that under the
internal revenue act"
Pecora asked if the sole purpose of
transferring the stock was to Offset
profit for tax purposes, why it wasn't
bought back again after the new year
There is no reason" he was told.
The International still owns the stock
The evidence developed by Pecora
showed Dillon. Read g. Co., owning
stock in both trusts, shifted the securi-
ties from one to the other for tax pur-
poses.
The examination turned to acquisi-
tion OF large block Of Seaboard Air
line bonds by the pool between the
International Trust and Dillon, Read
&, Co.
Tracy said he did not remember who
recommended the purchase. but that
Dillon, Read g. Co. were bankers for
the line, which also is now In receiver
ship.
Early End Foreseeu.
As hearings were resumed today,
Chairman Fletcher expressed conf
dence they could be completed next
month In time to prepare report
with legislative recommendations for
the opening Of Congress in January.
Fletcher disclosed that Federal reg
ulation Of the stock exchanges would
be one of his Recommendations, though
he said he had not worked out the
details.
I'VE have got to provide for regula-
tion Of the exchanges" Fletcher said,
adding that he was considering pro-
pCsals for a Federal commissioner or
board to preserve them as marke.
places for securities but to eliminate
abuses
Asserting that through brokers loans
eight and half billion dollars had
IL
the country to finance Wall Street
speculation in 1929. Fletcher said:
I'VE can't have that happen again
We are going to try to prevent it,
Senator Costigan of Colorado, an
other Democratic member Of the H.
vestigating group, had suggested Sat-
urday that the hearings might need
to be extended into the new year. but
Fletcher said he did not believe 1t