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niques and methods of disclosure has improved and I would hope that that improvement could be translated into a speedier access to the marketplaces for smaller businesses.

In addition to that, the Commission in its supervision of the stock regulatory role of the exchanges I would think would be in a position to engage in dialog which might develop newer techniques too, such, as Senator Sparkman indicated, the Industrial Development Corporation which might create new sources of financing for small business.

And then finally, the Commission, where it sits with all the new financing ideas that are developed having to be filed and passed through it's machinery, I would think that the Commission and its staff would be in a position to stimulate and pass on various types of thinking that may develop.

Senator GAMBRELL. I am concerned, and I don't know that there is anything directly that you can do, but in the business cycle, the first person who is cut off from access to both credit and to capital funds is the smaller businessman. We have seen a cycle here in the last couple of years where the smaller businessman needing capital or needing loan funds goes to the bank or he goes to an investment banker and he is told that money is tight and he can't get it. He reads in the paper every day where larger businesses get this on their own security.

I would like to see some program developed which would help a steady flow of capital made available to small as well as larger business in the country, and possibly in your position you can encourage some thinking to alleviate that situation.

I know you can't increase the supply of money and that type of thing, but it may be that industry itself can commit itself to keeping the channel open all up and down the line.

Mr. CASEY. I would like to say, Senators, the primary job of the SEC is to maintain investors' confidence. I think that if that is done effectively that in itself will make capital a little bit bolder and perhaps more readily available to small businesses. And on top of that, many segments of the securities business are really small businesses, small broker-dealer firms.

As we read quite regularly in the financial press, these firms, many of them do have their own capital problems. One of the areas of greatest concern for the Commission is the basis on which the capital deficiencies of the securities industry itself can be solved.

Senator GAMBRELL. Along the line that I am thinking. I think their level of consideration has to be given in keeping the flow of funds steady.

Mr. CASEY. Here is an industry right at the heart of the capitalist system which itself relies on temporary capital in large measure. We have got to actually take a hard look at that, I am sure.

Senator GAMBRELL. That's all I have, Mr. Chairman. Thank you. The CHAIRMAN. Senator Brock.

Senator BROCK. Thank you, Mr. Chairman. Mr. Casey, I would like to add my best wishes and gratitude for the sacrifice you are making to accept this responsibility, and I would also like to say that it is my own opinion I think your background will bring to the Commission a fresh perspective and a broader scope that might be bene

There was one particular colloquy where the Senator from Wisconsin, Mr. Proxmire, that I would like to pursue because it confused me a little bit, and I want to be absolutely sure that we are correct in our interpretation of what you are trying to say.

With regard to your own holdings, Senator Proxmire was inquiring as to the disposition of those holdings and the fact that you I think are going to, as he put it, put all of your assets into a blind trust, as broadly described, but effectively with a firm that would have total discretion in the purchase and sale of the securities. Mr. CASEY. That is correct.

Senator BROCK. But the question that bothered me followed that when the Senator asked you something along the line, if I can paraphrase it-you said these would be securities not under the jurisdiction of or affected by the Securities and Exchange Commission. And you said that is correct. Now I think perhaps either I misunderstood the question or you did.

The CHAIRMAN. May I break in there? I believe that the question may have been misunderstood. Actually, I was picking something out of his letter. Have you read the letter?

Senator BROCK. Yes, I have.

The CHAIRMAN. In which he said let me see if I can repeat it correctly-that during the time he served as Chairman of the Commission, that any investments he would make during that time other than U.S. bonds, he would clear with the proper authorities, General Counsel of the Exchange Commission, to make certain there was nothing that would constitute a conflict of interest. I imagine that would be controlled through what I described-Mr. Casey didn't call it a blind trust. I was the one that called it blind trust. I imagine it would be involved in that blind trust.

Mr. CASEY. Senator, I think perhaps I can answer what I think Senator Brock has in mind. Senator Proxmire did put his question rather broadly. And I responded in terms of the rules of the Securities and Exchange Commission which I had been informed prohibit any holding in a broker-dealer or an investment adviser.

These are businesses which are directly regulated by the Commission, and I would forswear any holdings in a company which is regulated in that sense. Now, there are other securities which have been registered with the Commission which are traded under the jurisdiction of the Commission, but it is never contemplated by the rules or anything else that anybody would not be able to invest in industrial companies and financial companies, banks and insurance companies which are broadly traded under the broad general supervision of the SEC.

So what I am saying is, I will instruct my investment adviser in the purchase of investments for my account not to purchase anything which is prohibited by the Commission rules or any industry which operates directly under the supervision of the Commission.

Senator BROCK. That is what I wanted to clarify because I think there could have been some confusion there.

Mr. CASEY. I appreciate that.

Senator BROCK. I wanted it explicitly in terms as of now and in the future you will have no securities prohibited by the act.

Mr. CASEY. Yes, sir.

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Senator BROCK. And that such securities as are bought and sold and they have been under the broad regulatory jurisdiction of the SEC

Mr. CASEY. Would not be prohibited by the rules.

Senator BROCK. Right. They too will be out of your control while you are in that capacity?

Mr. CASEY. Right.

Senator BROCK. So there can be no conflict of interest in that sense. Mr. CASEY. That is correct.

Senator BROCK. Thank you very much, Mr. Chairman.

The CHAIRMAN. Senator Taft.

Senator TAFT. Thank you, Mr. Chairman.

The CHAIRMAN. May I say this is the first opportunity we have had to welcome Senator Taft to the committee. The other new members were here yesterday. We are sorry you couldn't be here, we missed you, but we do welcome you to the committee.

If I am not mistaken, your father served on this committee and left it right at the time that I came to the committee or shortly thereafter. Anyhow, it was during that period that he became so intensely interested in housing, and particularly in public housing. We had the Taft-Ellender-Wagner bill at times when the Republicans were in power, and the Wagner-Ellender-Taft bill when the Democrats were in power. But I can recall so well it took about 3 years to pass that bill that we originated. And I can remember so well his very powerful testimony before our committee in 1947, and I believe in 1948 and again in 1949.

I have often credited him--certainly the three of them-with writing something that I think has been most influential and important; that is, the housing policy that is incorporated in the 1949 act where it says that every American family-I am paraphrasing had the right to look to the opportunity to own a decent, safe, and sanitary home, or at least to have one, whether it was owned or rented, in decent surroundings. There is a great deal more to it, but it is a very fine policy and stands as the basic policy of our housing programs today, for many of which your father was responsible.

It is good to welcome you to this committee.

Senator TAFT. Thank you very much, Mr. Chairman. I am honored to be a member of this committee, and appreciate deeply the very kind remarks that you have made. It has been an inspiration to watch the work you have done in the field of housing. I look forward to working with this committee on its many important assignments.

The CHAIRMAN. May I say we have a very fine committee, hardworking committee, and lots of work before the committee.

Senator TAFT. I am quite aware of that. I apologize for not having been here yesterday, but the weather in Cleveland, Ohio, did not permit a rapid return to Washington.

Mr. Casey, may I join the other members of the committee in welcoming you here, and commending you for undertaking what I think is one of the most difficult jobs in the Government.

I have practiced law a great deal, some in the field of securities. You certainly are taking on extremely profound responsibilities.

I have no questions about your basic background. I have studied it and certainly think you are well qualified in every way to undertake

these responsibilities. I look forward to helping you carry them out in any way I can.

I think that there is a real challenge in this area to try to reduce the redtape with which we lawyers must often contend when dealing with the Securities and Exchange Commission, and the entire field of securities regulation. There are a number of areas that seem to me to be closely related to the basic regulation of securities. I am going to inquire about your attitude and background with regard to one or two of these.

One concerns the function of the Securities and Exchange Commission and antitrust aspects of our business corporations such as mergers and consolidations.

Do you have any views, any philosophies, with regard to antitrust that you would be willing to offer to the committee this morning?

Mr. CASEY. Well, I am a strong believer in the philosophy and purposes of antitrust. I don't see where the Securities and Exchange Commission has a great deal to do with antitrust except insofar as the issue of fixed rates is concerned, fixed commission rates. I think this is a question into which the commission has to be looking very deeply, and resolve any conflict between maintaining the strength and viability of the mechanism of the securities market, and the antitrust philosophy which would urge a competitive rate structure.

And I approach that question without any preconception at all. It is a subject in which I have to inquire very deeply and discuss with other members of the commission and staff, read the record and staff studies before I really have any points of view on it.

Senator TAFT. You do also have responsibility under the Holding Company Act.

Mr. CASEY. The Holding Company Act, yes.

Senator TAFT. That really is what I was referring to.

Do you have any feeling about size of corporations as being something with which you are concerned, or are not concerned? I am sorry to have missed Mr. Kleppe yesterday, but on preceding days we were talking about this matter of small business and large business.

Mr. CASEY. I am concerned with the size of the corporations when the size is so great that they can dominate a market and snuff out competition, and impair the ability of small businesses to survive. Senator TAFT. Of course, under the Holding Company Act you are sometimes concerned with companies which are dealing entirely in a monopolous situation.

Mr. CASEY. Monopoly. It is a regulated situation anyway.

Then you get into the question of a rapidly developing technique; sometimes technological requirements require larger regional scope and larger capital base, and in those cases where the operations are monopolistic and recognized as such, and subject to regulation anyway, I think there may be a different public policy. Each case has to be measured on its own circumstances.

Senator TAFT. Have you, in your practice, been involved in public utility law and antitrust law?

Mr. CASEY. I have been involved in antitrust cases, handled a lot of private antitrust cases. Haven't been involved in public utilities at all. I've been involved in antitrust cases of a private character.

Senator TAFT. That's the only area I wanted to explore this morning. Thank you very much.

Mr. CASEY. Thank you very much, Senator.

Senator TAFT. I wish you well.

Mr. CASEY. I look forward to working with you.

Senator TAFT. I know it is going to be a very challenging assignment. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

Senator Tower.

Senator TOWER. Mr. Chairman, before Senator Proxmire proceeds, may I, on behalf of Senator Brooke, who very much regrets he could not be here today, ask instead that he be allowed to submit questions in writing to Mr. Casey to be answered in writing for the record? The CHAIRMAN. Will that be satisfactory, Mr. Casey?

Mr. CASEY. Yes, sir.

The CHAIRMAN. Thank you very much.

(The questions and answers follow:)

SENATOR BROOKE'S QUESTIONS FOR MR. CASEY

1. In light of the problems which investors encountered in recent months regarding their inability to obtain both cash and securities belonging to them, would you favor regulations requiring the strict segregation of cash and securities from those owned by brokerage firms as an ultimate goal? If not, why not?

2. Please provide this Committee with your assessment based on SEC staff analysis of the current condition of brokerage houses following passage of the Securities Investor Protection Act. In this regard, I would appreciate your informing the Committee of what steps have been taken by the SEC to remedy those problems which gave rise to the recent crisis and what further measures are contemplated.

3. It has been suggested by a number of industry spokesmen that we must begin moving toward negotiated commission rates. I would appreciate your opinions regarding the advisability of instituting such a system and the benefits and detriments to be derived therefrom.

4. During the recent crisis, it became evident to many legislators that the SEC was not performing its regulatory functions adequately. Specifically, customers' fully paid for securities were being hypothecated despite SEC regulations to the contrary. This breakdown in regulatory practices has led many to the conclusion that industry self-regulation is an anachronism which no longer serves any useful purpose. I would appreciate your commenting on whether the SEC would have been in a better position to prevent abusive conduct if industry selfregulation were eliminated and whether industry self-regulation serves any useful purpose today.

5. Is there any reason why financial institutions other than brokerage houses (e.g. banks, insurance companies) could not engage in the functions of a brokerdealer? In responding to this question, I would appreciate your drawing a distinction between investment banking functions and strictly trading fuictions, recognizing the fact that the former functions may create problems which are not encountered with the latter.

6. We have been encountering extremely high volumes of trading in recent days which leads many persons to fear that the back office problems of last year may again reappear. Mr. Donald Regan of Merrill Lynch, Pierce, Fenner & Smith, Inc. recently suggested that the SEC might promulgate rules which would limit the trading activities of those firms encountering back office problems. Do you believe that similar rules should be instituted in periods of high volume? Do you believe that we should begin moving toward a "certificateless society" and, if so, what role do you believe the SEC should play in this process?

7. I would appreciate your comments regarding what steps might be taken to improve the capital structure of broker-dealers. In this regard, I hope you will discuss the interplay between steps which might be taken to phase out the use of customers' free credit balances and securities and the infusion of alternate means of capital.

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