The Waterbury Democrat., 1934-10-27

thews of Wisconsin, an experi- enced practical economist, we'll versed in blue sky security opera tions; James Landis, an able law yer who has made a study of cor porate finance; Ferdinand Pecora, whose brilliant castigation of Wall street speaks for itself, Joseph P. Kennedy, chairman of the commission, was a Wall street man and I opposed his nomina- tion. But he knows Wall street, is aware of it's sins and has shown himself to be at least as vigorous as his colleagues in tanning the exchange. He is particularly in- terested in forcing corporations to mend their ways. If this commis- sion is let alone I believe it will ultimately force a comprehensive progra: of reform in the stock markets. say if it is let alone. At pres ent immense pressure is being ap- piled by the exchange, by business and by politicians to frighten it.
 The commission is being warned
 that drastic regulation will re- suit in crippling the issuance of
 new securities and blocking the revival of the capital goods indus tries. In my book on speculation have tried to show through elab- crate studies. that the stock ex- change really does not perform any function whatever in produc- ing any new capital funds for in dustry. That is an old fiction which has been sold to legislators for years. It is pure bunk. But it is being trotted out again to scare the commission. There is some ground for believing that it has already scared some of the ex- alted politicians who rule our des- tinies.
 The chief peril to adequate reg ulation of the exchange now is the possibility that nod from the White House may cause the com mission to slow up for political reasons. a BUT THIS must be remembered. Whether Wall street is governed in the interest of the people or the interest of Wall street will de- original act contained provisions which would make it impossible for the commission to be pro- Wall street one. Rules controlling margins, regulations prohibiting brokers from gambling for their own account. drastic provisions affecting pools were in the bill. The Wall street lobby with the aid of the United States treasury department took all these teeth out of the act. They left the whole subject up to a commission.
 As for margins, this was left to the federal reserve board. A good commission can be trusted to penetrate the pretensions and fakes of Wall street and enforce sound transactions. But the fu- ture will depend on what kind of men make up these commissions. There is no guarantee that they will not. in the end. fall under the dominion of the powerful inter- ests they are set up to control, as has happened to our utility com missions. our railroad and bank ing and Insurance commissions. Let us not be too sure, therefore, that Wall street will not come back. - TO AFFORD us some insurance against this. however. I urge that the following measures should be
 I. First Of. all. the trouble does not lie. just in the stock ex- changes. It lies in our whole financial system, which is ram shackIe, unscientific - indeed the craziest thing in our civilization. It was not created by experts to meet the needs of a highly com plex,. society. It just grew. with out order or sdesign-a collection of improvisations without any logical relation to the functions which a financial system ought to make a. study. of the whole thing and effect a thoroughgoing refor- nation of 1t sall--which means our banks. our savings mechanisms, our. insurance organization. our investment devices, our corpora tion laws and our trading mar, kets.
 2. We have made beginning on our trading markets. This should be strengthened by (a) prohibiting security brokers from speculating for, their own account; (b) prohibiting them from acting as bankers and making loans on securities: Co prohibiting banks from making loans on securities or any other form of collateral (d) taking away from the feder- al reserve board all control over margins; (e) taking the autono- nous direction of exchanges out of the hands of brokers and giving representation to all interests con- cerned in trading; and (fy finally putting all these things into laws