can safely trust to the good sense and the good judgment of the committee with respect to these matters. I feel the same way with respect to the thing that was focused in the mind of Senator Hawes; but in deference to his attitude in respect to the matter and I respect him, and his attitude is perhaps sound-he was thinking of more or less insignificant local corporations. They have no national aspect at all in their operations. I would assume that the committee would not go into that, but I am perfectly willing to make it plain that they should not.

Senator HAWES. I think you are advocating the old theory of the king; give him all the power and he will do no wrong. I have a different theory than that. We have gotten away from the theory that we give the committee power and then trust to their discretion to keep within constitutional limitations.

Senator WALSH of Montana. We are always obliged when we give power anywhere to recognize that it may be abused. That subject has been frequently discussed.

Senator HAWES. When I vote on this matter my responsibility extends to the question of power that I give to a committee. Whether you abuse that power or you do not abuse it is another subject. It is the old theory that the king can do no wrong.

The CHAIRMAN. Will you kindly read that suggested amendment again, Senator Walsh?

Senator WALSH of Montana (reading):

Provided, That nothing herein contained shall be deemed to authorize the committee to inquire into the affairs of any corporation engaged purely in intrastate business not being a subsidiary of or whose stock is not held or operations are not controlled to some extent by another corporation.

Mr. EMERY. At what point, Senator, would that go into the resolution?

Senator WALSH of Montana. I would put it in just before the general provisions, after line 8 on page 3.

Mr. Chairman, I have corrected the language so it will read this way:

Provided, That nothing herein contained shall be deemed to authorize the committee to inquire into the affairs of any operating corporation engaged exclusively in intrastate business not being a subsidiary of or whose stock is not held or whose operations are not to some extent controlled by another corporation.

Senator SACKETT. Suppose it is controlled by operations of a corporation in the same State, Senator. Would that make any

difference?

Senator WALSH of Montana. Yes; if there is a holding company that has gathered up all of the operating companies in the State I would like to go into the operations of that company.

Senator SACKETT. You think we would have the right to do that, even if it were all intrastate?

Mr. WALSH of Montana. Yes; because in all probability that holding company would sell its securities in the market. Take the State of Kentucky, for example. If there is a holding company that has gathered up all the operating companies in the State and in order to get capital to buy them it sells its stocks and bonds indiscriminately in the general market or in the New York curb market.

Senator SACKETT. But it is all subject to the State jurisdiction, both as to its rates, as to its contributions, as to the value of its securities, and the price paid under the blue-sky law.

Senator WALSH of Montana. I want to submit something on the blue-sky law. And that reminds me, Mr. Chairman, the Federal Trade Commission the other day, you will recall, sent a further report upon this general subject to the Senate. I have before me here proof sheets of the report, and as soon as the gentlemen get through I want to have permission to call your attention to salient features of that report, which refers to the subject that Senator Sackett now speaks of.

Senator SACKETT. I was asking that question really with reference to the statement made regarding the Consolidated Gas Co. in which they said they had no interest outside of the State, although they were a holding company.

Senator WALSH of Montana. But I think their stock is quoted on the New York market.

Senator SACKETT. I think it is, but every part of the holding company and the organization, as I understand it, is subservient to the State law. Now, whether the Federal authority ought to intervene in that case was the question I was trying to put to you. You think they should?

Senator WALSH of Montana. That is a very important question, as to whether they should or should not, in view of the fact that they sell their stocks on the New York market.

Senator SACKETT. It seems to me, in view of this argument made here as to the rights under the fourth amendment against unreasonable search and seizure, it might require that company to come into court to maintain their rights under the fourth amendment, without any reason or power apparently in the Federal Government to force them to do it It seems to me it should be limited somewhat in that line.

Senator WALSH of Montana. It seems to me, Senator, that that is not the case. If their stocks were not sold in the market that might be the case, but even so, if in order to legislate with relation to the general subject of those that are engaged in interstate commerce, should we not have an opportunity to inquire about how they do their business? Maybe it would serve as a good guide for any legis lation. They may operate their business so well and so efficiently and so securely that we ought to enforce a similar system upon other companies.

Senator SACKETT. I grant you that. And I think the point is well taken, but if there is no inherent power in the Congress to go into a particular phase such as that in order to get at a knowledge, it seems to me it ought to be limited to the actual power which Congress possesses; and if we go into a variety of these things and overstep the bounds of congressional authority, I think we are probably going a little too far. I offer that as a suggestion to be thought A citizen is, to a certain extent at least, protected by the amendment to the Constitution, and if we overstep that he is forced to protect himself through the employment of counsel, through the attendance upon committee hearings, about a matter in which the Congress of the United States apparently has not got the power to inquire into.

over.

Senator WALSH of Montana. I discussed the matter of power in opening the matter.

Senator SACKETT. I thought that was where there was a ground of difference of opinion, and I wanted to bring it out.

Senator WALSH of Montana. It seems to me that the specific case would have to be determined when the witnesses with reference to the matter are called before the committee.

Senator HAWES. Mr. Chairman, the hour of 12 is approaching. Will we be able to hold a session this afternoon?

Senator WALSH of Montana. Mr. Chairman, I am obliged to attend a session of the Committee on Public Lands this afternoon. We were to meet this morning. I supposed that we would get through with this last week.

The CHAIRMAN. I do not think we should meet this afternoon. I would like to have all of the witnesses present who desire to be heard stand up.

Mr. SwOPE. Mr. Chairman, the representative of the Pennsylvania Public Service Committee wishes to be heard. He can be here

to-morrow.

The CHAIRMAN. Do you know of any others, Senator Lenroot? Mr. LENROOT. I do not at this time, Mr. Chairman.

The CHAIRMAN. Very well. Then I imagine we can conclude this side of the controversy to-morrow. Then, Senator Walsh, you want some time?

Senator WALSH of Montana. I think that I shall content myself with submitting these documents. At the present time I do not think I shall present any witnesses.

Senator HAWES. Senator Walsh, during the interim will you give consideration to the language at the bottom of page 2 and the top of page 3 relating to expenditures or public ownership or municipal ownership, either for or against it? It seems to me that that section will divert the attention of your committee in any limited investigation that you might make to another subject. Will you consider whether or not that can be eliminated without affecting the broader aspects of the resolution?

Senator WALSH of Montana. Senator, you will observe that the amendment which I have suggested would likewise limit that. Senator HAWES. Well, I will look that over.

The CHAIRMAN. The committee will rise until 10 o'clock to-morrow morning.

(Thereupon, at 11.50 o'clock a. m., the committee adjourned to meet at 10 o'clock a. m., Wednesday, January 25, 1928.)

INVESTIGATION OF PUBLIC UTILITY CORPORATIONS

WEDNESDAY, JANUARY 25, 1928

UNITED STATES SENATE,

COMMITTEE ON INTERSTATE COMMERCE,

Washington, D. C.

The committee met, pursuant to adjournment on yesterday, at 10 o'clock a. m., in room 212, Senate Office Building, Senator James E. Watson presiding.

Present: Senators Watson (chairman), Couzens, Sackett, Pine, Metcalf, Howell, Wheeler, Fess, Smith, Mayfield, Black.

Present also: Senator Walsh of Montana.

The CHAIRMAN. The committee will come to order. Mr. Emery are you ready to resume your statement? Mr. EMERY. Yes, Mr. Chairman. The CHAIRMAN. You may go ahead.

STATEMENT OF JAMES A. EMERY, ESQ., GENERAL COUNSEL, NATIONAL ASSOCIATION OF MANUFACTURERS-Resumed

Mr. EMERY. May I ask, Mr. Chairman, in view of the very considerable space that intervenes between the conclusion of my remarks on yesterday and the various proceedings of the committee, if what I now say can be related to what I then said, in conclusion, so that I may be able to present a consecutive statement?

The CHAIRMAN. Certainly. And I understand that you want to proceed now without interruption?

Mr. EMERY. I am at the service of your committee, but I think I can serve the committee's convenience better perhaps if I may be permitted to conclude my main statement.

The CHAIRMAN. Very well.

Mr. EMERY. At the session on yesterday, Mr. Chairman, I had endeavored to point out that the resolution pending before your committee directed a general inquiry into the affairs of a great number of corporations whose operations were plainly intrastate in character; that it carried with it an inquiry not only into the affairs of intrastate public utility corporations, but into all engineering, construction, contracting, and management corporations which were related to them either by holding their stock or being affiliated with them, or of which they were joint stockholders.

I asserted that the intrastate features of the operations of such utility companies, and of such nonutility companies or private_corporations, an inquiry into whose private affairs was proposed by

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the terms of the resolution, were easily separable in their operations from any form of interstate commerce in which the public utility corporations named in the resolution were engaged, or in which the corporations included in the inquiry were engaged; and that the resolution therefore involved a general inquiry into the purely local operations and structure of thousands of corporations which were not subject to control by Congress and upon the subject matter of whose operations within the terms of the resolution itself Congresswas not competent to legislate; that such general inquiry into their affairs under compulsion was forbidden by the terms of the fourth amendment, and that in many decisions of the Supreme Court of the United States involving either direct inquiries by either branch of Congress or by the instrumentalities of Congress, namely, the Federal Trade Commission or the Interstate Commerce Commission, that power had been denied. And I have not referred to numberless opinions by inferior courts of the United States tending to the same result, but I shall be glad to incorporate those in my argument, if I may.

The CHAIRMAN. Very well.

Mr. EMERY. I undertook to point out that the nature of the Congressional power of inquiry when exercised by either House for the purpose of obtaining adequate information upon which to legislate, was limited by the competency of either House to deal with the subject matter of the inquiry, and that the sole right of inquiry into the otherwise protected privacy of individuals was predicated upon that authority to legislate on the subject; and of course, as I have pointed out, to require books, records, documents, and testimony necessary to inquire into the conduct of members to protect the integrity of its proceedings in the exercise of its legislative deliberations.

I pointed out that this power was not a direct grant through constitutional channels but a power implied from the power to legislate upon the various subjects committed to the authority of Congress by the express provisions of the Constitution, and subject to the limitations otherwise therein stated. And that being an implied power, it must be shown to be indispensable to the exercise of an express power in order to vindicate its exercise.

The fourth amendment I have referred to, and I undertook to briefly call the committee's attention to its history, to the importance it had at all times had attached to it in the course of this Government of ours, and to the fact that the Supreme Court had stated frequently that its terms were to be liberally construed in protecting the rights of the citizen, while the right of the exercise of the expressed powers of Congress was to be strictly construed when exercised by either body.

I was undertaking to point out to the committee, when other matters interrupted, the various limitations that have been set upon the exercise of this power by instrumentalities of Congress, and I pointed out to the committee the limitations placed on inquiries by the Interstate Commerce Commission, beginning with the case of Interstate Commerce Commission v. Brimson, where the power of the Interstate Commerce Commission to make inquiry and to require production of testimony and witnesses was sustained, but where the limitations were expressly stated by the court, and it was declared