Senator COUZENS. Are you speaking of the modified resolution now?

Mr. EMERY. Do you mean the amendment offered by the Senator yesterday?

Senator COUZENS. Yes. Are you speaking of that modified resolution or the original resolution?

Mr. EMERY. Both; because the amendments offered by Senator Walsh do not remove in the slightest the objections to this resolution. The CHAIRMAN. Will you discuss that?

Mr. EMERY. Yes. The resolution proposed by Senator WalshSenator WALSH. Excuse me. The Senator did not propose any resolution yesterday.

Mr. EMERY. I should say offered an amendment.

Senator WALSH. No; the Senator said he was quite willing that the pending resolution should be amended by putting that proviso on it. Mr. EMERY. Well, adopting any description of the matter that is satisfactory to any one here, Mr. Chairman

Senator WALSH. I interrupted you because the press this morning, or at least some of them, made exactly the same statement; that I had offered another resolution.

Mr. EMERY. The Senator understands that I had no intention of offending him by my characterization.

Senator WALSH. I understand that perfectly well; but I do not see how you can have misunderstood me as offering any other resolution.

The CHAIRMAN. I understood that the Senator, by offering that paper, was willing to modify his original resolution to that extent. Senator WALSH. Exactly.

Mr. EMERY. Very well, then, Mr. Chairman, adopting that characterization, the amendment offered by the Senator, or which the Senator was willing to accept as a limitation, is to be attached immediately after line 4, on page 3, of the pending resolution, and reads as follows:

Resolved, That nothing herein contained shall be deemed to authorize the committee to inquire into

Senator WALSH. "Provided," not "resolved."

Mr. EMERY. Well, I just took this from the reporters.

Provided, That nothing herein contained shall be deemed to authorize the committee to investigate 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.

Then, Mr. Chairman, what the limitation proposes is that as to all the corporations elsewhere described in the resolution the committee will not inquire into the affairs of an operating corporation, as distinguished from a holding corporation, or other corporations named in the resolution, which is engaged exclusively in intrastate commerce, if such operating corporation is one the stock of which is not held by another corporation, or which is not subsidiary to another corporation, or which is not controlled, to some extent, by another corporation.

Then, Mr. Chairman, the limitation means this, that as to any corporation operating exclusively as an operating corporation with

respect to the utilities named in the resolution in any State in the Union, it will not be subjected to compulsory inquiry by this committee, unless a corporation in the same State, itself local in nature, holds stock in it or it is a subsidiary of it or it controls the publicutility corporation.

Senator WHEELER. And that holding company is engaged in interstate commerce.

Mr. EMERY. It does not say anything about holding companies, and there is no limitation upon the nature of the operation of the holding company or the corporation. The only limitation that is provided here is that the operating company will not be inquired into, if it is engaged exclusively in intrastate commerce, unless some other corporation owns stock in it or controls it or it is its subsidiary. That means, if it means anything, Mr. Chairman, that such companies as have been presented here in argument, where there is a holding in an operating company, or both, and where there are other utilities operating in the same State wholly local in nature, but the stock of which, or some stock in which, is held by another corporation within the same State, are still held to be within the power of this committee to enter into an inquiry of under the terms of the resolution.

That raises exactly the same question that was raised in the beginning, Mr. Chairman. There is no assertion that such a corporation which by definition is wholly engaged in intrastate commerce has any relation to interstate commerce or to a corporation engaged in interstate commerce.

Let me assume, Mr. Chairman, for purposes of argument, that it was related to a corporation engaged in interstate commerce. The fact that a corporation that holds stock in another corporation is engaged in interstate commerce does not justify an inquiry into the affairs of a local corporation which is not engaged in interstate commerce. It is the interstate-commerce part of its affairs which justifies congressional supervision or regulation.

Senator WHEELER. Assuming that the stock is being sold in interstate commerce, do you not think that Congress has the right to regulate that?

Mr. EMERY. If it has, sir, it is a very narrow right, and it is not comprehended within the inquiry here.

Senator WHEELER. I disagree with you entirely in your statement and with your views. I think that is an entirely erroneous idea that you have stated. I do not think it can be substantiated either by decisions or by the facts.

Mr. EMERY. Well, the statement here is perfectly plain, Mr. Chairman, that it is proposed to inquire into the affairs of every utility corporation, the stock of which is held by another corporation, whether that corporation which holds the stock is as local as the one in which the stock is held or not, and by the definition itself the question is not left open to differences of opinion with respect to the character of the corporation.

Senator HOWELL. If the stocks of various electrical corporations are being sold, and it is notorious that they are being sold throughout the country, together with the securities; therefore, the stock and securities enter into interstate commerce. Would not Congress have

the right to investigate these various corporations to determine as to the value of these securities and whether or not citizens would be justified in buying them or might be wronged in buying them?

Mr. EMERY. Does the Senator mean that because the stock is transported in interstate commerce that an inquiry is justified into the affairs of the corporation which transports the stock from one State to another?

Senator HOWELL. No; I mean that these stocks are sold throughout the country, and you might say, in interstate commerce. They are offered for sale in different States. These various companies that deal in these securities are buying up and underwriting these stocks. A company in Boston may underwrite the stocks of a corporation in Missouri and then offer them for sale throughout the country. Now, under those circumstances would not congress have authority to inquire into the character of this business, the security of these stocks and bonds, and the circumstances of management? Mr. EMERY. What the Senator means, then, is if the securities of a company, any company, not merely public-utility companies, but any company

Senator HOWELL. I am speaking particularly of public-utility companies. It has become a notorious fact that this is being done throughout the country, and the volume of these stocks and bonds has become very large, and if they are not properly based the public might be injured through their purchase. I think we have a right to assume a condition of this character in a particular industry.

Mr. EMERY. But the Senator, of course, means that it is true of any corporation whose stocks are offered for sale and not peculiarly to a public-utility corporation?

Senator HOWELL. No; I say we are dealing with a condition that exists throughout the country now, a peculiarly notorious condition that exists; and therefore, under such circumstances, would not Congress have authority, and especially so because of the fact of this very general practice in connection with this particular character of stocks and bonds?

Mr. EMERY. Senator, the Supreme Court of the United States has declined so far to hold that the sale and transportation of the stock of a corporation in interstate commerce is interstate commerce. Senator WALSH. In what cases?

Mr. EMERY. In the blue-sky cases to which you referred the other day.

Senator WALSH. Oh, well.

The CHAIRMAN. I wanted to ask you that flat question, Mr. Emery, as to whether or not the electric-light company at Rushville, Ind., which we have used before as an illustration and which we will use again

Senator WHEELER. Where is Rushville?

The CHAIRMAN. Well, it is a little obscure town out in Indiana with a little electric-light plant. It is municipally owned, and, as far as the facts are concerned, I am not warranted in using it, but as an illustration it operates in Rushville. Suppose that all the stock is owned in Rushville. It operates exclusively there. As I understand, there is no stock sold anywhere outside the town. As I understand it, by the modification of the resolution now the Senator does not propose to inquire into the operation or the management of that

electric-light company. But suppose that the citizens, or half of them, should conclude to sell their stock over in Ohio and did find purchasers over in Ohio. Does that make it interstate to such an extent that it would come within the purview of the resolution and it could be investigated because of that sale of the stock?

Mr. EMERY. I can not conceive that it can.

The CHAIRMAN. That is where you and Senator Walsh disagree sharply, and I would like to have your argument on that.

Mr. EMERY. Perhaps the disagreement is not as great as it seems. Your inquiry is whether or not the fact that citizens of another State hold stock in a domestic corporation causes that corporation to be engaged in interstate commerce. Is that your inquiry?

The CHAIRMAN. Yes; that is to say, whether or not the sale of stock can be inquired into as an interstate commerce proposition, regardless of where the institution upon which the stock is based is operated or the limit of its operations is confined.

Mr. EMERY. It being a purely local institution?

The CHAIRMAN. Yes.

Mr. EMERY. No, sir.

Senator MAYFIELD. Will you kindly answer this question in connection with it: Could the Congress investigate a road-bond issuebonds issued on purely county roads? Those bonds are sold all over the country.

Mr. EMERY. When you say road bonds, I assume that it is a bond issued by a municipality or a State?

Senator MAYFIELD. A county or a subdivision of a county or municipal bonds. They are sold indiscriminately all over the country; at New York, Chicago, St. Louis, and all leading money centers of the country.

Mr. EMERY. Well, those are bonds issued by a municipality or a subdivision of the State. Of course, they are not subject to inquiry by another sovereignty for a different reason. But I gather, Mr. Chairman, from your inquiry that there is in the minds of the committee an idea that because a man holds stock or because a corporation holds stock in one State of a corporation existing in another State that that stockholding is interstate commerce.

The CHAIRMAN. That is the contention of Senator Walsh, and I wanted to get your view on that subject.

Mr. EMERY. I can not conceive that that can be the thing. The Senator himself has said in his own argument that a holding company is not engaged in interstate commerce, and I say that the determination of whether or not any particular kind of business is to be subjected to the control of Congress is to be determined by the character of the business which it conducts; and that, so far as that business is interstate in its nature, to that extent, and to that extent only, that business is subject to the control of Congress.

The CHAIRMAN. Regardless of the stock or where it is sold. Mr. EMERY. Mr. Chairman, the Congress of the United States passed two acts for the purpose of undertaking to determine the conditions under which children should be employed in production. Those two exercises of power came before the Supreme Court of the United States, and it decided that this was an attempt upon the part of Congress to regulate production and not commerce.

Senator WHEELER. That was an entirely different thing.

Mr. EMERY. I am answering the Senator's question now as to whether or not the Rushville Electric Light Co., which illuminates the illustrious town to which the Senator adds additional color and light, is capable

Senator WHEELER. Mostly color.

Mr. EMERY. The Senator asked whether the stock of that company, if held by the citizens of another State, causes that company to be engaged in interstate commerce and subject to the control of commerce by virtue of the sale of such stock. I say it does not. I say there is no opinion in any court to sustain the contention that it is.

What I want to point out to the Senator is this further fact in respect to Senator Walsh's suggested modification of the pending resolution; that I assume that the Rushville Electric Light Co., being engaged in service to the community, is not subject to inquiry by Congress with respect to the conduct of its business, because it is a purely local utility.

Now, under this modification, if a bank in Indiana owned any stock in the Rushville Electric Light Co., and, therefore, exerted to the extent of the ownership of that stock any control over the affairs of the Rushville Electric Light Co., the Rushville Electric Light Co. would be subjected to the inquiry of the Senate committee. I do not think that is subject to difference of opinion among us. That is precisely what this modification suggests; that is, although it is a local public utility corporation, the fact that its stock is held by another corporation, in whole or in part, would subject it to inquiry. I suggest to the members of this committee that there can be found nowhere any decision of any court that by the slightest color can indicate that the fact that that bank in Indiana, a wholly local institution, owns stock of the Rushville Electric Light Co., subjects that company to the visitorial powers of the Senate of the United States or either House of Congress, or of both.

Senator COUZENS. Supposing the Rushville Electric Light Co. issued bonds and preferred stocks and they advertised and sold them in interstate business. Would Congress have any right to investigate?

Mr. EMERY. The Rushville Electric Light Co.?

Senator COUZENS. That is what I am talking about.

Mr. EMERY. For the purpose of determining whether or not they shall pass any

Senator COUZENS. Blue-sky legislation.

Mr. EMERY. Control of the mails or otherwise?

Senator COUZENS. Yes; to that extent we could investigate the Rushville Electric Light Co., if they were selling bonds and stock in interstate business, and in order to devise legislation for blue-sky purposes we could investigate the adequacy, if you please, of the security of the property back of the securities being offered.

Mr. EMERY. I say with respect to that, Senator, that the Supreme Court of the United States has refused to pass on that subject so far. Senator CouZENS. That does not settle it.

Mr. EMERY. It settles it to this extent, that when the blue sky law cases before the Supreme Court of the United States the chief contention upon which the cases in two hundred and sixteenth United States was decided when an injunction was issued was be