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Isn't there some fire?_


If people do get "fleeced," the fault lies mainly with outside
promoters or unscrupulous financiers, over whom the Stock Exchange has
no effective control. Some people imagine themselves "fleeced," when
the real trouble was their own get-rich-quick greed in buying highly
speculative or unsound securities, or having gone into the market
beyond their depth, or having exercised poor judgment as to the time of
buying and selling. Against these causes I know of no effective remedy,
just as there is no way to prevent a man from overeating or eating what
is bad for him.

In saying this, I do not mean to imply that stockbrokers have not a
duty in the premises.

[Sidenote: _Does the public get fleeced?_]

On the contrary, they have a very distinct and comprehensive duty
towards their clients, especially those less familiar with stock market
and financial affairs, and towards the public at large. And they have
furthermore the duty to abstain from tempting or unduly encouraging
people to speculate on margin, especially people of limited means, and
from accepting or continuing accounts which are not amply protected by
margin. In respect of the latter requirement, the Stock Exchange has
rightly increased the stringency of its rules some years ago, and it
cannot too sternly set its face against an infringement of those rules
or too vigilantly guard against their evasion.

Against unscrupulous promotion and financiering a remedy might be found
in a law which should forbid any public dealing in any industrial
security [for railroad and public service securities the existing
Commissions afford ample protection to the public] unless its
introduction is accompanied by a prospectus setting forth every
material detail about the company concerned and the security offered,
such prospectus to be signed by persons who are to be held responsible
at law for any wilful omission or misstatement therein.

[Sidenote: _Does the public get fleeced?_]

Such a law would be analogous in its purpose and function to the Pure
Food Law, Any, let us call it, "anti-fleecing" law which went beyond
that purpose and function would overshoot the mark. The Pure Food Law
does not pretend to prescribe how much a man should eat, when he should
eat or what is good or bad for him to eat, but it does prescribe that
the ingredients of what is sold to him as food must be honestly and
publicly stated. The same principle should prevail in respect of the
offering and sale of securities.

If a drug contains water, the quantity or proportion must be shown on
the label, so that a man cannot sell you a bottle filled with water
when you think you are buying a tonic. In the same way the proportion
of water in a stock issue should be plainly and publicly shown.

The purchaser should not be permitted to be under the impression that
he is buying a share in tangible assets when, as a matter of fact, he
is buying expectations, earning capacity or goodwill. These may be, and
often are, very valuable elements, but the purchaser ought to be
enabled to judge as to that with the facts plainly and clearly before

[Sidenote: _Does the public get fleeced?_]

The main evil of watered stock lies not in the presence of water, but
in the concealment or coloring of that liquid. Notwithstanding the
unenviable reputation which the popular view attaches to watered stock,
there are distinctly two sides to that question, always provided that
the strictest and fullest publicity is given to all pertinent facts
concerning the creation and nature of the stock.

Do "Big Men" Put the Market Up or Down?


_Is it not a fact that some of the "big men" get together from time
to time and determine to put the market up or down so as to catch
profits going and coming?_


As to "big men" meeting to determine the course of the stock market,
that is one of those legends and superstitions inherited from olden
days many years ago when conditions were totally different from what
they are now, and when the scale of things and morals, too, were
different, which it is hard to kill.

The fluctuations of the stock market represent the views, the judgment
and the conditions of thousands of people all over the country, and
indeed, in normal times, all over the world.

The current which sends market prices up or down is far stronger than
any man or combination of men. It would sweep any man or men aside like
driftwood if they stood in its way or attempted to deflect it.

[Sidenote: _Do "big men" put the market up or down?_]

True, men at times discern the approach of that current from afar off
and back their judgment singly, or sometimes even a few of them
together, as to its time and effect. They may hasten a little the
advent of that current, they may a little intensify its effect, but
they have not the power to either unloosen it or stop it.

If by the term "big men" you mean Bankers, let me add that a genuine
Banker has very little time and, generally speaking, equally little
inclination to speculate, and that his very training and occupation
unfit him to be a successful speculator.

The Banker's training is to judge intrinsic values, his outlook must be
broad and comprehensive, his plans must take account of the longer
future. The Speculator's business is to discern and take advantage of
immediate situations, his outlook is for tomorrow, or anyhow for the
early future; he must indeed be able at times to disregard intrinsic

[Sidenote: _Do "big men" put the market up or down?_]

The temperamental and mental qualifications of the Banker and
Speculator are fundamentally conflicting and it hardly ever happens
that these qualifications are successfully combined in one and the same
person. The Banker as a stock market factor is vastly and strangely
over-estimated, even by the Stock Exchange fraternity itself.

May I add, in parenthesis, that a sharp line of demarcation exists
between the speculator and the gambler? The former has a useful and
probably a necessary function, the latter is a parasite and a nuisance.
He is only tolerated because it seems impossible to abolish him without
at the same time doing damage to elements the preservation of which is
of greater importance than the obliteration of the gambler.

To the Members of the Exchange

Now by this time the Committee would surely feel that it has had a
surfeit of my wisdom, as I am sure you must feel, but if you will be
indulgent a very little while longer, I should like to say a few words
more to you whose guest I have the honor to be this evening.

My recent observation of and contact with Congressmen and others in
Washington have once more fortified my belief that the men by and large
whom the country sends to Washington to represent it, desire and are
endeavoring, honestly and painstakingly, to do their duty according to
their light and conscience, and that, making reasonable allowance for
the element of party considerations, they represent very fairly the
views and sentiments of the average American.

[Sidenote: _The pioneer period of economic development is ended_]

Most of them are men of moderate circumstances. Very few of them have
had occasion to familiarize themselves with the laws, the history and
the functionings of finance and trade; to come into relation to the big
business affairs of the country, or to compare views with its active
business men.

It may be assumed that, very naturally, not a few of them have failed
to come to a full recognition of the facts that the mighty pioneer
period of America's economic development came definitely to an end a
dozen years ago, that with it came to an end practices and methods and
ethical conceptions, which in the midst of the magnificent achievements
of that turbulent period were, if not permitted, yet to an extent
silently tolerated, and that business has willingly fallen into line
and kept in line with the reforms which were called for in business as
in other walks of our national life.

The opinions of the world, and particularly of the political world,
travel along well worn roads. Men are reluctant to go to the effort of
reconsidering opinions once definitely formed and fixed.

[Sidenote: _The vacuum cleaner of reform and regulation_]

Many in and out of Congress are still under the controlling impress of
the stormy years when certain deplorable occurrences affecting
corporations and business men were brought to light, when it was
demonstrated that certain abuses which had accumulated during well nigh
two generations needed to be done away with for good and all, and when
the people went through the ancient edifice of business with the vacuum
cleaner of reform and regulation, using it very thoroughly, perhaps, in
spots, a little too thoroughly.

Not a few politicians are still sounding the old battle cry, although
the battle of the people for the regulation and supervision of
corporations was fought to a finish years ago _and won by the people_,
and although the people themselves of late, on the few occasions when
a direct proposition has been put up to them, such as recently in
Missouri, have indicated that they consider the punitive and
probationary period at an end and want business to be given a fair
chance and a square deal.

When the right of suffrage was thrown open to the masses of the people
in England, a great Englishman said, "Now we must educate our masters."

In this country it is not so much a question of educating our masters,
the people and the people's representatives [who, moreover, would
resent and refuse to tolerate for a moment any such patronizing
assumption], as of getting them to know us and getting ourselves to
know them.

[Sidenote: _The need for closer contact and better understanding_]

All parties concerned will benefit from coming into closer contact with
each other and becoming acquainted with each other's viewpoints.

Can we honestly say that we are doing our full share to bring about
such contact and to get ourselves and what we believe in properly
understood, believe in not only because it happens to be our job in
life and our self-interest, but because in the general scheme of things
it serves a legitimate and useful and necessary function for our

How many of us have taken the trouble to seek the personal acquaintance
of the Congressmen or Assemblymen or State Senators representing our
respective districts?

How many of us make an effort to come into personal relationship with
people, both here and in the West, outside of our accustomed circles?
Yet an ounce of personal relationship and personal talk is worth many
pounds of speech making and publicity propaganda.

[Sidenote: _"To be one of fifteen men around a table"_]

When you look a man in the face and talk to him and question him and
realize in the end that he is sincere in his viewpoint, whether you
share it or not, and that he is made of the same human stuff as you,
and has neither horns nor claws nor hoofs, much animosity, many
preconceived notions are apt to vanish and you are not so cocksure any
longer that the other fellow is a destructive devil of radicalism or a
bloated devil of capitalism, as the case may be.

I recall in this connection an incident which concerns my great friend,
the late E.

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