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Senator PROXMIRE. That is not what the ad said. The ad said "virtually intact." That is not what the result would be. You asserted that the Russians already had deployed their own ABM giving protection to their striking force. Now this is just not the fact. The Russian system is not designed to protect the striking force; it is designed to protect the population of Moscow. So again, there was a misstatement; isn't that correct? Did the Russians deploy an ABM system to protect their striking force?

Mr. CASEY. The point is and the thrust of the statement is the Russians had deployed an ABM system and we did not have any experience with one and the committee thought we should not be under such a handicap.

Senator PROXMIRE. I think that's fine you can say that

Mr. CASEY. Now just a minute. The ABM system around Moscow happens to have a range which covers a good part of western Russia, the heavy industrialized areas of Russia, and I think it would have the capacity of protecting any portion of the Soviet striking force in that area from incoming missiles. So this is a semantic argument.

If you want to redraft the ad, republish it, I would perhaps change it somewhat at that point.

Senator TOWER. Would the Senator vield?

If this is going to be made an issue here, I would suggest the committee go into executive session so we could examine the intelligence data, for I think you are raising the whole question about whether the Russians do or do not have a first strike configuration.

Senator PROXMIRE. No, no; I am not raising that.

Senator TowER. I think we are getting into a classified area.

Senator PROXMIRE. No, no; I don't want to raise the ABM issue. I know that comes in indirectly. All I want to do is to determine the extent to which Mr. Casey, as the man responsibile for this ad, did place an ad which was accurate or inaccurate, and it seems to me it

is not

Mr. CASEY. Senator

Senator PROXMIRE. One more point

Mr. CASEY. Would you let me comment on that?

Senator PROXMIRE. Yes, sir.

Mr. CASEY. Our committee placed an ad which we believed to be accurate. Now it may be if I was at the SEC and that ad would go through the machinery of disclosure of the SEC, if we got a dead bug letter that said this word should be changed to reflect the facts more accurately, if I had the benefit of that help, I may have edited the ad. I think that is true of any actual speech I make, you make, any statement anybody makes.

Anybody can come back and suggest refinements and corrections. I think that is what we have here. The thing I want to say is that ad was placed by our committee with the conviction and belief that it was accurate and accurately expressed our point of view on the issue ! with which it dealt.

Senator PROXMIRE. Now this response, Mr. Casey, is the best response you have given me.

Mr. CASEY. Thank you.

Senator PROXMIRE. I think it is a very good response. I don't say 1 I buy it completely, but I think it is a good response because I think

it shows a sensitivity to the fact that the SEC must be meticulous in requiring an exact statement of the fact, that they must be accurate. Nevertheless, I do think that this does indicate that in your role. here that you were less than completely concerned with accuracy.

Just one more point. You say this is sponsored by the Citizens Committee for Peace with Security, the implication being that the signers are disinterested public-spirited citizens, and the fact is that 64 of the signers of the ad were officers or directors of companies which would benefit financially from the installation of the ABM and that many others may or may not have stock in these that would benefit.

Mr. CASEY. Do you know that to be a fact, Senator?

Senator PROXMIRE. Sixty-four

Mr. CASEY. Do you know that to be a fact?

Senator PROXMIRE. Well, I know this to be-may I say that this is from a press report in the Washington Post in which I have complete faith. [Laughter.]

Mr. CASEY. Would you mind telling us the authors of that?

Senator PROXMIRE. Mankewicz and Braden, men for whom I have respect. I am raising this, not to say that I have capacity to determine whether expressions are true or untrue; I would simply point out that this ad which you placed in papers around the country does raise some serious question as to your standard of accuracy and truthfulness. Senator BENNETT. Will the Senator yield?

Senator PROXMIRE. Yes.

Senator BENNETT. If the Senator's point of view were followed to the ultimate, no man who ever made a political speech or signed a political ad could ever qualify for Federal office because I am sure this Senator, and I am reasonably sure the Senator from Wisconsin, has indulged in political poppery.

Senator PROXMIRE. I hope the Senator from Utah will speak for himself. The Senator from Wisconsin never indulges in political poppery.

Senator TowER. Well, perhaps not willingly.

Senator BENNETT. Well, the Senator from Utah has sat on the floor of the Senate now for many years and heard the Senator from Wisconsin deliver many speeches which were beautifully put together to create political impressions, and I am sure he did not go to every possible source to make sure that every statement he made was accurate under the rules of the Securities and Exchange Commission. Senator PROXMIRE. Of course. My point here is there are several statements that are clearly inaccurate that were published, not in a speech that was made offhand, off-the-cuff, impromptu, or even with the great care we take for Senate speeches.

But this was a statement prepared, I presume, at considerable expense and published in papers throughout the country as a responsible expression of a position taken by many Americans of great stature. Under the circumstances it seems to me that it should be a statement that would be truthful and accurate, and I think on the basis of the facts this is not either truthful or accurate.

Senator TowER. Would the Senator yield?

May I say in Mr. Casey's statement sent to the chairman of the Foreign Relations Committee, I note that one of the members of

that committee was Vince Lombardi, who was coach of the Green Bay Packers.

Senator PROXMIRE. I am sure if Vince Lombardi were here today he wouldn't like that either. Let me go ahead.

Mr. CASEY. Well, you know, Vince did like it because he took part in it.

Senator PROXMIRE. He didn't know how accurate this was.

Well, let me just proceed with one point, Mr. Chairman, if that is permissible.

In July of 1969 this committee questioned your predecessor on whether or not he was negotiating with IDS for a position as head of IDF, and at that time we were assured that he was not. Mr. Budge later, as you know, left the SEC to become the chairman of IDS. There was only one other instance before Mr. Budge left in which a commissioner had joined the securities industry, and I regret that very much, and resent it very much because I was under the impression that Mr. Budge had given us, if not assurance, a clear understanding that he would not do that.

I am delighted this morning that you have given us assurance that you will not take such a course yourself, and I would hope that as chairman you would do your best to enforce this kind of standard and this kind of view among other members of the Commission. I don't say that you should be expected to do anything more than set a good example and indicate the strength of your conviction that this is

wrong.

I have heard a number of very responsible people express concern of the breakdown of the SEC because there might be a tendency for people to come from the securities industry into it and then go back to the securities industry, because they would be doing this kind of thing the confidence in the SEC might break down.

So I think it is most useful and certainly a strong point in your favor that you have indicated you will not do that.

Now I did have one other point.

Mr. Casey, there have been reports that the President is planning a thorough reorganization of the independent regulatory Commissions, one feature of which would be to have a single Commissioner instead of a Commission, and that the judicial functions of the Commission would be given to a group; that much of the authority and power would reside in a single person.

In view of the fact that you might very well be the chairman of the Commission when the President should come forth with that kind of a proposal, it would be very interesting to me to have your views on whether or not you feel that this would be a sound approach or whether there are dangers involved in it, and what counsel you can give this committee in this respect.

Mr. CASEY. Well, Senator, I haven't seen that proposal or seen any of the studies on which it was based. Before anything happens it will go to the appropriate committees of Congress, I assume, and by that time I think I will be prepared, will have studied the issue and the operations of the Commission as I learn them, and at that time I think I would be in a much better position to give a definitive statement of my views. I don't think my views at this point would mean very much

Senator PROXMIRE. Well, have you had a chance to read the statement on the regulatory agencies by Dean Landis in 1960?

Mr. CASEY. I intend to do that.

Senator PROXMIRE. The reason I raise that point is Dean Landis, as you know, was very critical of the breakdown of regulation. He had been the Chairman of the SEC and very critical of regulatory agencies, pointing out they start out with zeal and gradually become owned by the group they are regulating. And any kind of ideas or suggestions you have as to what Congress can do to make modifications or changes or engage in whatever shakeups we can to prevent that would be very welcome

Mr. CASEY. I do know that the Chairman of the SEC has under the present arrangements a great many responsibilities, executive and policymaking, quasi-judicial character, and I am wondering how one man can discharge them all.

Senator PROXMIRE. I would like to ask if, Mr. Casey, you say you interpose no objection to having the trial transcript submitted to the committee. Would you take the initiative to have that done? Mr. CASEY. If the committee would like me to.

Senator PROXMIRE. All right, sir. Thank you.

The CHAIRMAN. Senator McIntyre.

Senator MCINTYRE. I just want to say, Mr. Casey, I am sorry I couldn't have been here for all of the questioning by my distinguished colleague from Wisconsin. This is a tough job. I notice that Mr. Budge has been sitting in the room here smiling with relief, I think, perhaps that he no longer holds this difficult job.

We had a conversation yesterday, and I feel that you are competent, ready to go ahead, you have a lot to learn like most of us up here. Thank you, Mr. Chairman.

The CHAIRMAN. Senator Bennett.

Senator BENNETT. Mr. Chairman, I can't let the inference of the Senator from Wisconsin's last statement go unchallenged. Judge Budge is a friend of mine. I defended him against the Senator from Wisconsin in his initial attack which I thought was completely unjustified. No man in public office can so shut himself away from the world that potential employers recognizing his value cannot and should not be allowed to talk to him. Judge Budge declined the offer while he was still Chairman of the SEC. After he decided to leave SEC, the offer was renewed and he accepted it after his resignation had been accepted by the President.

Now it is my understanding that the position he holds as head of the Fund is not under the jurisdiction of SEC. So I personally feel that the judge's honor and integrity is challenged again, and I feel that I should make this statement in defense of a man that really can defend himself but under the present circumstances has no forum. Senator PROXMIRE. Well, may I say to the Senator from Utah I am not challenging Judge Budge's integrity and honor. I think he is an honorable man and a man of high integrity. I am challenging his judgment, though. I think it was very bad judgment to go to the IDS, from chairmanship of the SEC.

The CHAIRMAN. Mr. Casey, I have a few questions to submit to you from Senator Williams, who is chairman of our Subcommittee on Securities. Unfortunately, Senator Williams is sick in New Jersey at the present time and cannot be here.

Before I do that, however, I want to say that this really is not relevant to this hearing, but I think Judge Budge, Chairman Budge, did a very fine job as Chairman of the Securities and Exchange Commission, one of the best, I think. I know he was conscientious, hard working, and he cooperated always with us in trying to work out our difficult problems. And I hope nothing will be understood from these hearings as reflecting upon Judge Budge.

But let me submit these questions for Senator Williams:

Last year during hearings held by this committee on the Federal Broker-Dealer Insurance Corporation, Chairman Budge expressed some displeasure over the New York Stock Exchange's net capital inspections of its member firms. I think it would also be fair to say Chairman Budge felt that if the Exchange had been more diligent in its inspections that conceivably some of the financial crises which beset various brokerage firms would not have occurred.

During this colloquy, Senator Muskie cited to Chairman Budge rule 15c3-1(b) (3) promulgated under the Securities Exchange Act of 1934 which allows the Commission to revoke the exemption from the Commission's net capital rule for any exchange on 10 days written notice when it appears to the Commission to be necessary or appropriate in the public interest or for the protection of investors to do so. By revoking this rule the SEC would have assumed primary responsibility for inspecting New York Stock Exchange member firms for net capital violations. Chairman Budge's reply, and I wish to quote it to you, was:

I think the New York Stock Exchange alone has twice as many employees as the SEC. We are not staffed to go into the brokerage houses all over the country to perform this function.

My question to you is: In the event that the debacle of 1969 and 1970 was repeated would your attitude on the SEC assuming primary responsibility for brokerage firm capital inspections be the same as that of Chairman Budge?

Mr. CASEY. I really can't answer that question definitively. I would say, however, that I think it important that the Commission as vigorously as possible oversee and supervise the self-regulatory operation of all the exchanges, including the New York Stock Exchange. I would hope that with vigorous oversight and supervision that the self-regulatory process would work. If it became clear that the self-regulatory process will not work and that the Commission would have to directly enforce the net capital rule, I think it is something we would have to consider very carefully, consider very seriously, and that it would imply with it a budgetary consequence and considerable expansion of the SEC staff, as Judge Budge indicated, and I would be prepared to look at that if the circumstances and experience indicated that was necessary to maintain public confidence in the capital markets.

The CHAIRMAN. Very good. You, of course-this is not Senator Williams', it is mine-you know, of course, that the stock exchange and many broker-dealer firms went through very hard times over the last 2 years, and you are familiar with the legislation which we passed near the end of the last session setting up an insurance arrangement for broker-dealer firms. You will, of course, be giving consideration

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