Second Draft

For nearly a month brokers and businessmen have been parading their objections to the Stock Exchange control bill before House and Senate Committees. By last week they had a warm feeling that they had made good headway toward modification when Ferdinand Pecora retired with his squad of bright young legalites to round off the measure's harshest features. A new draft will be submitted this week. Probable revisions include:

1) Establishment of a separate division of the Federal Trade Commission to administer the Securities Act and the Exchange Bill, with enlargement of the Commission to include perhaps two experienced securities men.

2) Reduction of margin requirements from 60% to around 40% of market price. Power to raise margins will be given to the Federal Reserve Board instead of the Commission.

3) Easing of the clause requiring segregation of brokerage and dealer business to permit the existence of odd-lot brokers and small dual-purpose firms.

4) Easing of the clauses on specialists, independent audits and proxies.

5) Delimitation of the Commission's powers instead of the blanket power now provided. But its authority to regulate over-the-counter markets will be widened.

Just before Ferdinand Pecora & friends retired for redrafting last week, the bill received its first major attack from within the Administration. Before the House Interstate Commerce Committee, Assistant Secretary of Commerce John Dickinson, no Wall Streeter, denounced it as entirely too drastic, predicted "disastrous" results if passed in its present form. Particularly he lashed the margin requirements, esti mating that $380,000,000 of unlisted securities would be dumped from brokerage accounts, and another $350,000,000 of listed stock would have to be liquidated to satisfy the 60% margin. Such wholesale liquidation, he warned, might reverse the upward curve of business. Like Ferdinand Pecora, Mr. Dickinson knows his subject. Last autumn President Roosevelt put him in charge of a committee to study possible Exchange regulations. The committee's report, turned in last January, recommended regulation of a moderate character through a special Federal body. Sagely Mr. Dickinson's committee said: "It must always be recognized that the average man has an inherent instinct for gambling. ... If abolished in one form, it seems always to crop out in another." Like Adolf Augustus Berle Jr.. John Dickinson was a child prodigy. Graduated from Johns Hopkins at 19, he has been associated with Princeton, where he got his doctorate and later taught, and Harvard, where he got his law degree and taught at Radcliffe. He left a law chair at Pennsylvania to go to Washington. Now 40 and an intellectual in a government of intellectuals, he has proved one of the most moderate of the Washington professors. In conference he lectures in his best pontifical manner, but in his office he puffs a corncob pipe, swings his feet to the desk top.

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