Bear Hunt

If President Richard Whitney of the New York Stock Exchange was surprised at being suddenly ordered to Washington by the Senate last fortnight, he did not show it. The Exchange's president must be prepared for all sorts of wild stories and charges, especially when the market is in a bad way.

But Mr. Whitney may well have been surprised, upon reaching Washington last week, to learn the origin of his hurry call. Senator Walcott of Connecticut had, it seemed, received a telegram from no less a personage than Publicist George Barr Baker, faithful friend and volunteer adviser of President Hoover, disclosing the imminence of a "billion-dollar bear raid." The Senate Committee on Banking & Currency, on which Senator Walcott, once a Wall Streeter himself (Bonbright & Co.), is the Administration's spokesman, wanted Mr. Whitney to get up a complete list of persons on the short side of the market, wanted to quiz Mr. Wrhitney on bear practices and the Stock Exchange's rules.

President Whitney, precise in dress and address, confronted the Senators coolly. On his watchchain they could perceive a small gold animal charm which was neither a bull nor a bear, but a pig.* He could perceive that the committee's special attorney, aggressive Claude Raymond Branch of Providence, was irritating to the Senators; that Chairman Norbeck of South Dakota was impatient, Senator Glass of Virginia sarcastic, Iowa's Smith Wildman Brookhart belligerent.

Mr. Whitney flatly denied, as he had often denied before, that professional bears had had anything to do with the decline in market prices. He said that the short interest decreased by 230,000 shares during the previous week, while the market level fell to a new bottom. A similar condition existed last October, he said. As to bear raiding, he simply said: "Our investigations have disclosed no bear raids." He suggested that the Federal Government had put the general public into the market by educating the people to a knowledge of securities through Liberty Loan drives, agreed that public officials had helped to sustain the 1926-29 inflation through bullish statements.

Mr. Whitney explained that the sale of a long stock is far more depressing than a short sale, pointed out that the Administration's reconstruction measures have given investors an opportunity to get out of the market. Small investors have increased during Depression, he said. Asked to what cause he attributed the slump in prices, he replied:

"Liquidation by frightened investors who are giving these United States of ours away."

Senator Counzens of Michigan: It has come to my attention that a broker may use his customer's stock to depress the value of that stock.

Mr. Whitney: Senator Couzens, I deny that. No broker may do that.

Senator Couzens: Oh, don't be so innocent. How do you detect it?

Mr. Whitney: Our men check the brokerage offices.

Senator Brookhart: Do you think the rules you are constantly citing are enforced or evaded?

Senator Elaine: Maybe he thinks they are enforced better than the Prohibition law of the Federal Government.

Senator Brookhart: You brought this country to the greatest panic in history.

Mr. Whitney: We have brought this country, sir, to its standing in the world by speculation. You think you can affect the world by changing the rules of a stock exchange or board of trade?

Senator Brookhart: Yes, we can change them by abolishing the stock exchange and board of trade, so far as speculation is concerned.

Mr. Whitney: And then the people of the United States will go to Canada and Europe to do those very things and pay their taxes there.

The meeting adjourned with Senator Glass wondering why Mr. Whitney had been called at all. Three days later Mr. Whitney told the Senate Finance Committee that the proposed 1/4 of 1% tax on stock and 1/8 of 1% on bonds might force his Exchange to close.

Back before the Banking & Currency committee. Mr. Whitney presented a list of 24,000 traders on April 8 (day before the "billion-dollar bear raid" was to have been staged). The committee began sorting out the short-sellers. Many of them bore "nationally known names" but Senator Walcott demurred against their publication. Said he: "You wouldn't print them if they were made public." Washington, realizing how glad the Administration would have been to catch some big Democratic bears, wondered if some big Republicans had been found in bear's clothing.

*A fancier of fine hogs, Mr. Whitney may perhaps wear his pig charm because of the old Wall Street saw: "A bull can make money, a bear can make money, but a pig never can."

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