The Washington times., 1934-07-16
REPORT BLASTS
STOCK MARKET
PRACTICES

Inc most sweeping S1pOSuIc VI
the "sins Of Wan Street" in his
tory was before the public today.
The Senate Banking Committee
published q partial report Of its
investigation which started In
March, 1882.
MANAGEMENT Of stock deals and
floating Of securities now Is en-
trusted to, the refrigerated Fed
eral Securities and Exchange
Commission, established as the
result Of the committees disclo-
Sures.
Act Strikes Deeply
According to the committee
report:
"The (cOmmissiOn) act strikes
deeply not only at defects In
the machinery Of the exchanges
but at all the causes Of disaS-
trOus speculation in the past.
Il Is the most important defense
yet erected against the forces
Of prOstratiOn and despair
which sprang full-armed from
the debacIe Of October, 1929"
The inquiry cost $25O,OOO but it
was worth it, according to the
committee report.
Needs For Control Cited
Citing the necessity for govern
mental action to control the stock
market, the report said:
'In retrospect, the fact
efnerSes with increasing clarity
that the excessive and un-
restrained speculation which
dominated the securities market
In recent years, has impeded
the flow Of interstate com
( merce, disrupted the national
credit, dislocated industry and
trade, and dragged In its trail
millions Of persons to ruin and
despair"
The committee declared that
the value Of stocks listed on the
New York Stock Exchange drop
ped from $89, 668, 276, 1854 Septem-
Der /, 1929, to $15,633, 479. SIT
July l, 1882.
Huge Profits to Brokers
Meanwhile, according to the
committees computations. the
brokers were accommodating profits
Of nearly 1000 million dollars,
as represented by commissions
Of $1,649, 668,691 and interest Of
1926, 49, 72.
The brokers enticed the public
to buy stocks through manipula-
tive devices like pools, which
made a fictitious activity in q
stock, by substituting some fin
ancial writers, sending forth
glowing dope" on the future Of
a. security through market letters
and other means and by encourag-
ing margin trading, according to
the report.
Its report related how the
Standard Oil Company, Inc, of
New Jersey, Electric Bond and
Share Company. Henry L. Do
herty and Company, the Sinclair
Consolidated Oil Corporation and
other large corporations invested
their SURPRISES in brokers' loans
which in October, 1929, rose to a
peak of more than $500 million
dollars.
Almost Wiped Out
This huge total declined to
$241,599,943 on August /, 1882.
Concurrently the average price
Of stock sank from $212 to $35.
The report also denounced
trading brokers in their own &C
counts during the fictitious stocks
rally Of July, 1888, when specula-
ton in alcohol company securi-
ties in advance of repeal, was rife.
Brokers during that month did
more than q per cent of the
entire trading on their own, the
report said, and it noted that this
might have been construed as
"a widespread public participation
In the market"
Specialists trading on their own
accounts are motivated less by an
altruiStic desire to supply markets
for their customers than by the
prospect of making profits on
their trades, the report continued
Kennedy Pool Raped
One Of the pools, mentioned
derogatorily in the report, concen-
trated on Libby wnes-F Ford glass
company stock. Curiously, Joseph
p. Kennedy, chairman of the new
securities and exchange commits.
sion, was a participant in this
pool, along with Walter F. Chry-
Sler, Kuhn Loeb and Company
and other Wall Street powers.
A theory advanced by stock ex-
change members that short selling
cushions" the market was dis
puted by the report which said
that the runaway market Of 1928
1929 was in no way curbed by &C.
tivitieS on the part of short sellers.