no advice. There the question of speed is always a troublesome one. We recognize that in a chapter X case, as much as in any judicial determination of rights, delayed justice may be no justice at all.

But I do not know that I can put my finger on any case where anybody suffered because of the passage of time. Now, there may be such, but I just do not recall them.

Mr. GREENE. I can say this, in accordance with that statement, that we have frequently declined to submit an advisory report to the court for that very reason, that it would delay a proceeding and might affect a commitment which was based upon a certain period of time, a commitment by an underwriter perhaps, or some other time commitment. We, of course, have been alert to the question of delay, and we ourselves have frequently gone into courts and have made various motions in order to have the proceedings expedited because it sometimes happens that trustees are inclined to drag the proceedings along a bit for personal or other reasons.

Mr. MCGUIRE. At some place in your answer, Mr. Greene, I gathered that you feel that your organization is understaffed. Is that true?

Mr. YOHALEM. I would like to address myself to that. I testified earlier in relation to the Holding Company Act and endeavored to point out that we have had our staff very sharply contracted in recent years. I should point out that when the chapter, X functions of the Commission were shifted from the Division of Corporation Finance to the Utilities Division, the only professional person that came to the added function was Mr. Greene, and whatever other professional work is required in the Washington office has just been absorbed by the people who are engaged in Holding Company Act work. Therefore, when I talk of lack of staff in the Washington office, I think there is a shortage of staff, it is a composite problem of Holding Company Act plus chapter X.

Mr. MCGUIRE. After reading the newspapers, you would think everybody is falling over each other on the Government payroll and doing nothing at all. One of the first things nearly every commission we have appearing before us brings up is that there is a delay in getting out the information because they are understaffed. As a matter of fact, the Civil Aeronautics Board appeared and said they had 650 fewer people working there now than in 1939.

Mr. GREENE. Not a week has gone by that I have not put in at least two or three evenings of overtime work and week ends.

Mr. YOHALEM. You talk to me at a very sensitive moment because I was downtown each of the last two nights and will have to be downtown tomorrow.

Mr. MCGUIRE. I think that is prevalent in the Government service. A manufacturer from my home State came down here to advise the Government on some business he is well informed on. He said he always used to meet Government officials, and he thought it was one sinecure after another. He has been down here 6 months and never worked harder in his life. He has been putting in 16 or 18 hours a day, and he says that any big operator that criticizes Government officials should be subpenaed to come to Washington and spend some time finding out how hard they work here.

Would you say the Commission has had too big a role in the actual drafting of the plans of the reorganization?

Mr. YOHALEM. No; I would not say so, at all. I would say that we have had a very fruitful role in the drafting plans of reorganization. You recognize that the drafting of the plan does not lie with us under the statute. It lies in the first instance with the trustee and, after he has submitted his notions of the plan, then with creditors or perhaps the debtor. The role we played has depended mostly on the extent to which the trustee or other parties have sought our assistance. We are in no position to stop, and never have stopped, anybody from filing a plan or stopped anybody from filing a plan about which they have not consulted us.

I think it has been the experience of the reorganization that it speeds the proceedings considerably if prior to their filing the plan they do talk it out with us, because I do not hesitate to say that we have had more experience in this field than anybody else.

Mr. MCGUIRE. Would it be desirable to leave drafting of reorganization as much as possible to the security holders themselves, subject to the review by the court without SEC participation?

Mr. YOHALEM. I do not think so. I think that would be going back to the good old days; and, so far as I have been able to judge, there was more old than good.

Mr. MCGUIRE. Do you think the powers of the Commission in reorganization proceedings can be narrowed or eliminated without jeopardizing public safety?

Mr. YOHALEM. By "public safety," I take it you mean public safety in this restricted area?

Mr. MCGUIRE. That is right.

Mr. YOHALEM. And in this restricted area I personally do not feel there should be any limitation. I would not know at what point in the reorganization process any limitations on our activities would either be helpful or desirable.

Mr. MCGUIRE. Based on your experience in chapter X proceedings, can you make any recommendations for changes in this chapter of the Bankruptcy Act?

Mr. YOHALEM. At this point I take it you are requesting the Commission's view. I think in any event, and insofar as I know, the Commission has not felt that any amendments were necessary or desirable. except one or two minor ones that have been made with our participation and concurrence. So far as I am concerned personally, my own experience with the chapter-and it has been considerable-leads me to believe that it is a very good working law as it now stands. I suppose there is no law that cannot be improved upon if one sets himself to that task. But I do not know of any particular area in the statute where here is sufficient difficulty of operation or inadequacy to lead me as a personal matter to feel that amendment was necessary.

Mr. MCGUIRE. How many employees are assigned to chapter X proceedings?

Mr. YOHALEM. In the Washington office there are only Mr. Greene and I guess one full-time clerical employee. In the field it is different. The New York office, which has by far the bulk of the case load, has 15 professional employees, consisting of 9 lawyers and 6 financial analysts and accountants.

In Chicago there are five. In Cleveland, the regional administrator, who is an alumnus of the Reorganization Division, and one of his as

sistants devote part of their time to chapter X work, and I suppose from time to time they may call on the services of others in the office, but that would be occasional. There is nobody in that office specifically assigned to chapter X work exclusively.

Then on the west coast we have a lawyer who covers the enormous area I was going to say west of the Rockies-but, in fact, he also goes to Utah and Montana and Nevada. He goes east of the Rockies, too. Of course, the case load is much lighter.

Mr. MCGUIRE. He lives the life of the recluse?

Mr. YOHALEM. Yes; he spends a good deal of his time in a Pullman berth, and I suppose that is being a recluse, too. That is the whole story on staff except that division staff members will from time to time get into a chapter X proceeding to assist Mr. Greene for a minimal amount of time.

Mr. MCGUIRE. What percentage does this constitute of the employees in the Public Utilities Division?

Mr. YOHALEM. The Public Utilities Division now as of this moment has a roll of 84, I think, with 4 people on reimbursable loan to other agencies or other divisions of the Commission, so that we have a net working force of 80. Of that 80, Mr. Greene is the only professional employee in chapter X work, and he has one filing clerk.

I might say that the regional offices, even those people in the regional offices working on chapter X work, are not in the Public Utilities Division.

Mr. MCGUIRE. You mentioned before that chapter X matters were transferred from the Division of Corporation Finance to the Division of Public Utilities on January 1, 1950. Why was this done?

Mr. YOHALEM. I think it was done by the Commission in order to make the most effective use of manpower. The large part of the work of the Public Utilities Division is in the reorganization field; and therefore, our professional employees are at that work all the time. The Corporation Finance Division's functions are diverse and not primarily reorganization work. I think the Commission felt that it was a more logical segregation of activity to put all the reorganization in one place.

The other reason, I think, was that the Holding Company Act work was not a static load because, as holding-company reorganizations are concluded, that work is out, gone, and I think it was, therefore, the Commission's judgment that the process of sloughing off Holding Company Act work could be merged with the absorption of chapter X work with much better utilization of man-hours. I think it has turned out that way.

Mr. MCGUIRE. You feel the results are satisfactory?

Mr. YOHALEM. Yes. Whether one of the reasons was or was not the fact that I personally have been active in chapter X work—that is, intimately active in it-I just do not know.

Mr. MCGUIRE. Would you care to elaborate any further as to why the Commission did not participate in the reorganization of the Tucker Corp.?

Mr. YOHALEM. That has seemed to be a question of some interest. I don't know that I will add anything by elaborating, but perhaps I ought to say this: As I stated this morning, in the first place it did not appear to us that the assets available were sufficient to afford any

participation to security holders. That by itself and by normal criteria would have dictated that we not participate in the case.

Then I think of less compelling force but certainly a factor that had to be given consideration was the circumstance that there was pending in Chicago the criminal prosecution of Mr. Tucker and his associates. I think that in that circumstance, where on the one hand the Commission was not satisfied that they could do anything for public security holders, it felt that as a consequence it would be best not to participate in the chapter X proceeding and subject itself to possible criticism in the sense that it might be unjustly accused of using the chapter X court as a forum, if you will, for pursuing matters which were germane to the prosecution.

Now, as the case progressed, from time to time we ad occasion to reconsider whether the failure to participate was proper, and each time we continued of the view that there was nothing to be achieved by our becoming a party to the case.

I might say that, as the case proceeded, from time to time we have been in formal consultation with the trustee and have seen as helpful as we could on those problems about which he has chosen to consult us; for example, the civil litigation that he has had under consideration in the case and the business problems that were attendant on salvaging whatever could be salvaged out of the assets. Now, so far as I know, that is the whole story.

Mr. MCGUIRE. Has the court invited such participation?

Mr. YOHALEM. In the Tucker case?

Mr. MCGUIRE. Yes.

Mr. YOHALEM. Not that I know of.

Mr. MCGUIRE. Did the staff recommendation call for participation in this proceeding?

Mr. YOHALEM. No. Well, I should say this: that there was one occasion when the Chicago office suggested that participation was desirable, and I overruled that suggestion and then took the matter to the Commission, with both views expressed. The Commission concurred in my judgment that there was no advantage in getting into it. Mr. MCGUIRE. I want to thank you, Mr. Yohalem, and Mr. Greene, for coming here this afternoon. It has been very enjoyable and very enlightening.

Mr. YOHALEM. Thank you.

(Whereupon, at 1:30 p. m., the committee adjourned subject to

SUBCOMMITTEE OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE HOUSE OF REPRESENTATIVES

EIGHTY-SECOND CONGRESS

SECOND SESSION

ON

POWERS, DUTIES, AND FUNCTIONS OF SECURITIES
AND EXCHANGE COMMISSION

PART 2

(DIRECT PLACEMENTS OF CORPORATE SECURITIES)

MAY 20 AND 21, 1952

Printed for the use of the Committee on Interstate and Foreign Commerce,