THE GOVERNMENT: Tips on Tipsters

An oft-repeated expression of naïve Secretary of Agriculture Henry A. Wallace is “I was astonished.” Last week, Secretary Wallace “was astonished at the number of speculative accounts controlled by so-called commodity counselors or ‘tipsters.’ ” His astonishment was conveyed in a letter to a unique Washington meeting that marked the opening of a campaign to squelch such tipsters. Present were officers from most of the important U. S.

commodity exchanges.* In Secretary Wallace’s absence, leathery-faced Assistant Secretary Harry Lowrance Brown presided. On the driver’s seat with him sat such Government officials as Chief J. W.

T. Duvel and Assistant Chief J. M. Mehl of the Commodity Exchange Administration.

A heavy-footed Baptist farmer from Georgia who has never seen Tobacco Road, Acting Secretary Brown read Henry Wallace’s note, then called on Mr. Mehl to report on a CEA survey of the first eight months of 1937. CEA had learned that 4,488, or 15%, of all commodity trading accounts were subject to powers of attorney; 70% of commodity trading houses had no such controlled accounts on their books and most holders of such controlled accounts had only one apiece; 23 persons controlled ten or more accounts apiece (a total of 9% of all controlled accounts), six of these being partners in commission houses, one a relative of his clients, the remaining 16 professional tipsters (usually taking a cut of all profits, but not sharing losses); together the 16 controlled 300 accounts, and one of them had transactions in the first six months of 1937 totaling 39,000,000 bu. of wheat, 11,000,000 bu. of corn and 39,000 bales of cotton; 15 lost money for a majority of their clients, one was on relief, another had a string of gambling houses.

To Secretary Wallace this looked bad.

Acting Secretary Brown was pleased to find that it also looked bad to the exchange representatives, who last week went home pledged to think up methods of tipping tipsters out of the commodity markets.

Last week the U. S. Government also did the following for and to U. S. Business:

¶ Delayed imposing limits on speculative trading in grain. Commodity Exchange Commission let slip the news that the effective date for these rules (TIME, June 27) had been postponed indefinitely since both the Chicago Board of Trade and Cargill Inc. had protested that the rules exceeded CEC’s constitutional prerogative.

¶ Warned the utility industry of impending application of the “death sentence” (geographic integration). SEC Chairman Douglas sent letters to the 66 principal utility holding companies, telling them he expected them to file plans, however tentative, for compliance with the “death sentence” before December 1.

¶ Began an investigation of monopolistic practices in the automobile industry. Though Congress failed to appropriate the $50,000 this will cost (TIME, May 9), FTC sent its snoopers into the field last week to ruffle the ledgers of Chrysler, Ford and General Motors.

¶ Jumped once more on the oft-investigated Van Sweringen railroad empire. This time, SEC decided to investigate Alleghany Corp. for making “false and misleading statements” in its financial reports. Gist of SEC’s suspicions are that between 1931 and 1937 losses of $23,000,000 on sale of investments were listed under capital surplus rather than profit & loss and that between 1932 and 1937 Alleghany did not count a $29,612,125 loss from selling securities to its rich affiliate, Chesapeake & Ohio R. R. In the offing, Washington insiders suspected, was a Monopoly Investigating Committee look into the present battle between Financier Robert Young and Guaranty Trust Co. for control of Alleghany.

¶ Urged U. S. banks not to take excessive risks on loans. This conservative plea by Chairman Leo Crowley of Federal Deposit Insurance Corp. was in direct opposition to advice from other New Deal financiers.

Month ago, bank examinations were unified and liberalized in an effort to spur bank lending. Fortnight ago, RFC Chairman Jesse Jones resumed his familiar demand that banks be as liberal as RFC in their loans. To Leo Crowley, whose FDIC may have to pay for any errors bankers make, this is cockeyed finance. Last week, in his semiannual statement, he wrote that so far as FDIC is concerned bank examinations will be as strict as ever, will be based upon a principle fit to make RFC shudder—”ability of the obligor or debtor to repay the obligation.”

*Those represented in Washington: Chicago Board of Trade, New York Cotton Exchange, New Orleans Cotton Exchange, New York Mercantile Exchange, Chicago Mercantile Exchange, New York Wool Top Exchange, Minneapolis Chamber of Commerce, Kansas City Board of Trade, Duluth Board of Trade, Milwaukee Grain & Stock Exchange, St. Louis Merchants’ Exchange, National Grain Trade Council.