The Government's Week

Last week the U. S. Government did the following for and to U. S. Business:

P: Effected regulation of over-the-counter security trading after three years' study by SEC. Passed by Congress just before adjournment was the Maloney bill granting SEC indirect control over 0-T-C trading through dealers' associations. The 9,000-odd active 0-T-C dealers are supposed to band together in geographical groups, draw up rules, elect officers and police themselves (all subject to SEC approval). If SEC decides that this has failed to prevent manipulation, excessive commissions, other unfair practices, it may step in. Though last week's act exempted dealers in Government, State and municipal securities, Washington insiders predicted that the next Congress will tackle legislation to regulate municipals.

P: Refused, then offered new hope of, aid to the stricken railroads. Congress adjourned without passing any railroad emergency legislation, but the Interstate Commerce Commission agreed to reconsider its recent 6-to-5 decision against allowing a basic coach-passenger fare-increase from 2-c- to 2 1/2-c- a mile. ICC also approved a reorganization plan of Spokane International Railway and Coeur d'Alene & Pend d'Oreille Railway calling for the merger of the two. Total trackage of these two roads is 161 miles, but the event was a milestone: the first ICC approval of a Class I reorganization since Section 77 of the Bankruptcy Law was extended to railroads in 1933.

-c- Launched what may become the biggest trust-busting expedition in U.S. history as President Roosevelt signed a resolution for a $500,000 monopoly study by a committee of six Congressmen, six members of Government executive agencies. Named chairman of the committee was Wyoming's trust-busting Senator Joseph C. O'Mahoney, named a member was Idaho's trust-busting Senator William Edgar Borah, who declared: "I venture the belief that the committee is not proposing any witch-hunting program. . . ."

-c- Proposed further limitations of speculative trading in grain futures. Under the Commodity Exchange Act this right is given to a Commodity Exchange Commission consisting of the Secretaries of Agriculture and Commerce and the Attorney General. The Secretary of Agriculture is chief and has under his direction the Commodity Exchange Administration, now headed by a heavy-set crop technologist of Swiss descent, Dr. Joseph William Tell Duvel, who has been with the Department of Agriculture off and on since 1902. Last week Dr. Duvel submitted the CEA's proposals for speculative limits. Thereupon, Secretary of Agriculture Henry Wallace announced that to prevent undue price fluctuation from speculation, the Commission proposed: 1) a 2,000,000 bu. limit on net long or short positions in all futures combined or any one contract market (3,000,000 in "spread positions") except during the delivery month when the limit would be cut to 1,000,000; 2) a daily trading limit per person of 2,000,000 bu. in all futures combined, also cut to 1,000,000 in the delivery month, These limitations, which will not apply to bona fide hedging operations, will go into effect shortly after July 10 unless there are convincing objections.

P: Reshaped the bankruptcy laws to give SEC more authority (see p. 10).

P: Began moving in on the investment trust business. With the security exchange and the utility industry both come to heel, SEC's next major move is the long-awaited regulation of investment trusts. After three years' study, SEC last week sent Part I of its report to Congress, will send other installments this summer, later recommend legislation. Largely a survey of the field, Part I produced the following gloomy statistics: 1) since 1929 assets of investment trusts have shriveled from $7,000,000,000 to $3,700,000,000; 2) of 1,272 investment companies existing at one time or another between 1927 and 1936, only 961 were still active at the end of 1936; 3) between 1927 and 1935, 400 investment trusts expired and 22 of these showed losses to security holders of $510,000,000 (90% of their stake).

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