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INVESTIGATION OF CONCENTRATION
OF ECONOMIC POWER
HEARINGS
BEFORE THE
TEMPOKAPY MTIOML ECONOMIC COMMITTEE
CONGEESS OF THE UNITED STATES
SEVENTY-SIXTH CONGRESS
SECOND SESSION
PURSUANT TO
Public Resolution No. 113
(Seventy-fifth Congress)
AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO
MAKE A FULL AND COMPLETE STUDY AND INVESTIGA-
TION WITH RESPECT TO THE CON(JENTRATION OF
ECONOMIC POWER IN, AND FINANCIAL CONTROL
OVER, PRODUCTION AND DISTRIBUTION
OF GOODS AND SERVICES
PART 22-23
INVESTMENT BANKING
BROWN BROTHERS HARRIMAN & CO.
HARRIMAN RIPLEY & CO., INCORPORATED
FINANCING OF CHICAGO UNION STATION CO.
AND PACIFIC GAS AND ELECTRIC CO.
CHARLES E. MITCHELL— BLYTHE & CO., INC.
DECEMBER 12, 13, AND 14, 1939
Printed for tho nsp of (lip 'l>nipornr.v Nntionnl I';oononii<- ComniiMe©
UNITED STATES
GOVERNJtENT PRINTING OFFICff
124401 WASHINGTON : 1910
flORTHEASTERM UNIVFRSITY SCHOOlof lAWriRl??^
TEMPORARY NATIONAI. ECONOMIC COMMITTEE
(Created pursuant to Public Res. 113, 75th Cong.)
.lOSEPH C. O'MAHONEY, Senator from Wyoming, Chairman
HATTON W. SUMNERS, Representative from Texas, Vice Chairman
WILLIAM H. KING, Senator from Utah
WILLIAM E. BORAH, Senator from Idaho
CLYDE WILLIAMS, Representative from Missouri
B. CARROLL REECE, Representative from Tennessee
THDRMAN W. ARNOLD, Assistant Attorney General
» WENDELL BERGB, Special Assistant to the Attorney General
Representing the Department of Justice
JEROME N. FRANK, Chairman
♦LEON HENDERSON, Commissioner
Representing the Securities and Exchange Commission
GARLAND S. FERGUSON, Commissioner
*EWIN L. DAVIS, Comnyssioner
Representing the Federal Trade Commission ^ ' ^'
CD
ISADOR LUBIN, Commissioner of Labor Statistics
'A. FORD HINRICHS, Chief Economist, Bureau of Labor Statistics *i CaD
Representing the Dejiartment of Labor
JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel J T^,
Representing the Department of the Treasury jj cr>i
CLARENCE AVILDSEN, Special Adviser to the Secretary *' *^
Representing the Department of Commerce
JAMES R. BR^CKETT, Executive Secretary
«=>
•Alternates.
n
REPRINTED
BY
WILLIAM S HEIN & CO INC
BUFFALO. N. Y.
1968
CONTENTS
Testimony of: I'aw
Bovenizer, George W., Kuhn & Loeb Co., New York, N. Y 11427-11478
Evans, Lewis N., associate attorney, Securities and Exchange Com-
mission, Washington, D. C 11490
Glore, Charles F., Glore, Forgan & Co., Chicago, lU 11427-11478
Harriman, W. AvereU, Brown Brothers Harriman & Co., New York,
N. Y 11384-11391, 11393-11408, 11417-11425
Hiiflf, Charles H., associate utilities financial analyst. Investment
Banking Section, Securities and Exchange Commission, Washing-
ton, D. C 11391-11393, 11439, 11547-1^49
Jesup, Edward N., vice president, Lee Higginson Corporation, New
York, N. Y 11427-11478
Leib, George C, vice president and director, Blyth & Co., Inc., New
York, N. Y 11485-11510
Mathers, Lloyd, security analyst, Securities and Exchange Com-
mission, Washington, D. C 11521
Mitchell, Charles E., chairman, Blyth & Co., Inc. New York,
N. Y X 11549-11604
Ripley, Joseph P., president and director, Harriman Ripley & Co.
Incorporated, New York, N. Y 11408-11417, 11425-11426
Russell, Stanley A., Lazard Fr^res & Co., New York, N. Y 11479-
11485, 11511
Stewart, Percy M., Kuhn, Loeb & Co., New York, N. Y 11456-11478
Sturgis, Henry S., vice president. First National Bank of New York,
New York, N. Y 11427-11478
Whitehead, W. S., security analyst, Securities and Exchange Com-
mission, Washington, D. C 11439
Woods, George D., vice president and director, The First Boston Cor-
poration, New York, N. Y 11502-11505, 11512-11545
Statement of —
Henderson, Leon, commissioner, Securities and Exchange Commission,
Washington, D. C : 11383-11384
BROWN BROTHERS HARRIMAN & CO.— HARRIMAN
RIPLEY & CO. INCORPORATED
Purposes of Investment Banking hearing 1 1383
Organization of Brown Brothers Harriman & Co 11 385
Source of personnel of Brown Harriman & Co., Incorporated 11388
Stock ownership by Harriman family in Brown Harriman & Co.,
Incorporated 11 394
Powers under partnership agreement 1 1397
The Banking Act of 1933 _ 11401
Voting trust for stock of Harriman Ripley & Co., Incorporated- 11403, 11411
Interest of Harriman family in Brown Brothers Harriman & Co. and in
Harriman Ripley & Co., Incorporated 11404
Voting trust for stock of Harriman Ripley & Co., Incorporated — The
voting trustees 11406
Officers and directors of Harriman Ripley & Co., Incorporated, and
their prior affiliations.. 11408
Statement by W. Averell Harriman — Formation of Brown Harriman
& Co., Incorporated — Interests of Harriman family — Question of
control — Compliance with the Banking Act 11419
Efforts to procure capital in formation of Brown Harriman & Co., In-
corporated 1 1425
FINANCING OF CHICAGO STATION COMPANY
Chicago Union Station Co. financing, 1915-36 — ^Sources of documents. 11426
Identification of witnesses 1 1428
Ownership of Chicago Union Station Co • 11430
IV CONTENTS
Page
Agreements among investment banking houses on participations in
Chicago Union Station Co. financing 11431
First Chicago Union Station Issue — $30,000,000 First mortgage-4J^-
percent series A bonds, February 1916 1 1432
Subsequent issues— 1920 to 1924 11435
The 1935 refunding— Effects of the Banking Act of 1933 11440
The selection of underwriting associates 11442
Temporary placing of First National Bank's underwriting interest 11443
Efforts of Edward B. Smith & Co. to obtain a participation in the
1935 issue 11445
Transfer of Continental Illinois Bank & Trust Co.'s underwriting
interest to Field, Glore & Co 11447
First National Bank designates Edward B. Smith & Co., White,
Weld & Co., and Lazard Freres & Co. to receive its underwriting
interest - 1 1452
Question of applicability of interlocking directorate provisions of
Clayton Act and Transportation Act of 1920 11455
Summary of participations in the 1935 issues 11459
The 1936 refunding — Changes in participations necessitated by entry
of Morgan Stanley & Co. Incorporated 11462
Field, Glore & Co. requests assistance of Ralph Budd in obtaining a
position in syndicate 11467
Changes in participations necessitated by entry of Morgan Stanley &
Co., Inc. — Resumed 1 1468
Extent to which Chicago Union Station group had become crystal-
lized— Use of term "not a precedent" 11473
FINANCING OF PACIFIC GAS & ELECTRIC COMPANY
National City Co. accounts and their sub-sequent financing 11480
The Pacific Gas & Electric Co. account 1 1482
Future disposition of National City Company accounts 11484
C. E. Mitchell joins Blyth & Co. Inc 11486
The P. G. & E. financing 11488
Heirship of National City Co. business 11492
The first P. G. & E. financing— 1935 11496
The benefits of position in advertising 11499
Question of agreement between Ripley and Russell 11 500
Plan of fight on Rayburn Bill 11505
Question of permanence of the P. G. & E. underwriting group 11507
Denial by Mr. Russell of agreement between himself and Mr. Ripley. 11511
Organization and predecessors of the First Boston Corporation 11512
Offer of stock to employees and officers 11513
Acquisition by The First Boston Corporation of "preferential rights"
of the CJiase Harris Forbes Companies 11514
Executive personnel and stockholders of The First Boston Corpora-
tion . 11516
Investment banking by a public corporation 11519
Realignments in investment banking busines.s — 1933-1934 11521
The Harris Trust & Savings Bank and Harris, Forbes & Company
agreement 1 1525
Ownership of stock in Harris, Hall & Co. by officers of the First
Boston Corporation 11527
Mr. Addinsell's records of The First Bo.ston Corporation participations. 1 1529
Relation of Albert W. Harris to The First Boston Corporation and to
Southern California Edison Co 11535
Preparation of Southern California Edison Co. syndicate 1 1540
Relationship between Harris, Hall & Company and The First Boston
Corporation -- 11548
CONTENTS V
CHARLES E. MITCHELL— BLYTH & CO., INC.
Page
Return of "the Morgan people" to the investment banking business.. 11551
The IlUnois BeU Telephone financing, 1935 11554
Utility holding companies to which Morgan Stanley & Co., Incorpo-
rated, had succeeded J. P. Morgan & Co. as banker 11556
Position of Blyth & Co. in the Consolidated Edison Co. financing —
Percentage participation of Blyth & Co. to participation of Morgan
Stanley & Co., Incorporated 11560
Discussion with Floyd Carlisle relative to future Consolidated Edison
Co. business 11563
Competition in investment banking 11566
The Telephone account 11570
The Telephone group 1 1573
Value of opening deposit account with J. P. Morgan & Co. to an invest-
ment banking house 11577
Morgan Stanley & Co. "survey of street conditions" 1 1582
Performance records kept by Morgan Stanley & Co., Incorporated-". 11584
The October 1937 crisis — Possible readjustments among investment
banking firms 11587
Non-receptivity of Blyth & Co., Inc., to special capital 11589
Morgan Stanley & Co. questionnaire on underwriting activities of
Blyth & Co., Inc 11592
Mr. Leib's record of reciprocal obligations 1 1595
How reciprocity works in practice — Significance of reciprocity 11598
Reciprocal obligations as "combinations in restraint of trade" 11602
Schedule of exhibits vii
Tuesday, December 12, 1939 11383
Wednesday, December 13, 1939 11479
Thursday, December 14, 1939 11547
Appendix 11606
Supplemental data 1 1795
Index .. I
SCHEDULE OF EXHIBITS
Number and summary of exhibits
152ti. Letter from Willet C. Roper, secretary, Harriman
Ripley & Co. Incorporated, to Peter R. Nehemkis,
Jr. transmitting —
certificate of incorporation,
certificate of change of provifions of the certifi-
cate of incorporation,
certificate of classification of shares,
certificate of change of name to Harriman Ripley
& Co., Incorporated, and
certificate of reclassification of shares of Brown
Harriman & Co., Incorporated,
together with the certificates listed
1527. Table: Officers and directors of Brown Harriman &
Co., Incorporated, June 21, 1935
1528. Letter dated June 4, 1934 from James H. Perkins,
. chairman of the board of directors. The National
City Bank of New York, to the shareholders giving
notice that The City Company will discontinue the
securities business and wind up its affairs pursuant
to the Banking Act of 1933
1529. Table: Senior officers of The City Company of New
York, Incorporated (in dissolution, formerly The
National City Company) who were serving January
1 , 1933 but have left the service since that date
1530. Sections of the Banking Act of 1933 pertaining to the
divorcement of security affiliates and the segrega-
tion of commercial from investment banking (Sec.
20, 21 and 22) together with amendments thereto
in the Banking Act of 1935
1531. Table: Per cent of total voting stock, preferred and
common, including voting trust certificates of Har-
riman Ripley & Co., Incorporated, by holders,
December 12, 1939
1532. Table: Officers and directors of Harriman Ripley &
Co., Incorporated, November, 1939
1633. Voting trust agreement dated October 24, 1938, be-
tween Stockholders of Brown Harriman & Co.,
Incorporated and Frederick Baldwin Adams, George
Adams Ellis and Joseph Pierce Ripley, voting
trustees
1534. Table: Originations of bond issues by all houses
originating $20,000,000 or more per annum, 1927
1930
1535. Letter dated February 10, 1931 from C. E. Mitchell,
The National City Bank, to Mr. Julian W. Blount,
clerk. Senate Committee on Banking and Currency.
Table: Originations of bond issues by all houses
originating $20,000,000 or more per annum, and
volume of issues, in addition to their own origina-
tions, participated in by all houses originating
$20,000,000 or more per annum, 1927-1930
On file with the (.ommittee.
Intro-
duced
at page
\ ppears
11388
11389
11393
11393
11402
11404
11410
11412
11416
1 1 605
1160()
11607
11607
11609
11610
(')
11611
11416 11612
vni
SCHEDULK OF EXHIBITS
Number and summary of exhibits
1536. Letter dated December 6, 1939 from W. A. Harriman
to Peter R. Nehemkis, Jr. describing (a) Capital
interests in Brown Brothers Harriman & Co.,
(6) Right of capital partners with respect to firm
commitments, (c) Method of admission of new
partners, and (d) Method of determining distribu-
tion of profits ^
1537. Schedules showing the originations, participations and
profits of Harriman Ripley & Co., Incorporated
from June 30, 1934 to August 18, 1939
1538-1. Letter dated November 15, 1939 from H. A. Scandrett,
trustee of Chicago, Milwaukee, St, Paul and Pacific
Railroad Company to Peter R. Nehemkis, Jr. en-
closing copy of letter to Senate Committee on
Interstate Commerce.
Letter dated November 16, 1939 from H. A. Scandrett,
trustee of Chicago, Milwaukee, St. Paul and Pacific
Railroad Company to Senate Committee on Inter-
state Commerce consenting to the use by the Secu-
rities & Exchange Commission of documents relating
to Chicago Union Station Company financing
1538-2. Letter dated November 13, 1939 from Kuhn, Loeb &
Co. to Peter R. Nehemkis, Jr. enclosing copy of
letter to Senate Committee on Interstate Commerce.
Letter dated November 13, 1939 from Kuhn, Loeb &
Co. to Senate Committee on Interstate Commerce
consenting to the use by the Securities & Exchange
Commission of documents relating to Chicago
Union Station Company financing
1538 3. Letter dated November 24, 1939 from George H.
Pabst, Jr., asst. vice president, Pennsylvania Rail-
road Company, to Senate Committee on Interstate
Commerce (copy to Peter R. Nehemkis, Jr.) con-
senting to the use by the Securities & Exchange
Commission of documents relating to Chicago
Union Station Company finapcing
1539-1. Letter dated November 10, 1939 from Peter R.
Nehemkis, Jr. tp Kuhn, Loeb & Co. requesting con-
sent to use of documents on file with Senate Com-
mittee on Interstate Commerce relating to Chicago
Union Station Company financing
1539-2. Letter dated November 10, 1939 from Peter R.
Nehemkis, Jr. to The Cliicago, Milwaukee, St.
Paul and Pacific Railroad Co. requesting consent
to use of documents on file with Senate Committee
on Interstate Commerce relating to Chicago Union
Station Company financing -.
1539-3. Letter dated November 10, 1939 from Peter R.
Nehemkis, Jr. to The Pennsylvania Railroad Co.
requesting consent to use of documents on file with
the Senate Committee on Interstate Commerce re-
lating to Chicago Union Station Company financing.
1540. Letter dated January 18, .1915 fron\ F. L. iHigginson,
Jr., Lee Higginson & Co., to Mortimer L. Schiflf,
Kuhn, Loeb & Co. enclosing telegram from Mr.
Lane to Mr. Schweppe, Lee, Higginson & Co.
Copy of telegram dated May 17, 1912, unsigned (from
Mr. Lane of Lee. Higginson & Co.) to C. H.
Schweppe, Lee, Higginson & Co., concerning
tentative agreement between Kuhn, Loeb & Co.
and Lee, Higginson & Co. on Chicago Union
Station Company financing
Intro-
duced
at page
11419
11425
11428
11428
11428
11428
11428
11428
Appears
11613
(')
11G14
11614
11615
11615
11616
11617
I 1341 11617
Marked for identification only.
S<JHEDULE OF EXHIBITS
y
IX
Number and summary of exhibits
Intro-
duced
at page
1541. Letter dated January 19, 1915 from Lee, Higginson
& Co. to Kuhn, Loeb & Co. confirming conversa-
tion between Mortimer L. Schiff and F. L. Higgin-
son regarding equal share of two groups in Chicago
Union Station Company financing
1542. Letter dated January 20, 19J5, without signature
(from Kuhn, Loeb & Co.) to Lee, Higginson & Co.
confirming letter of January 19, 1915 and listing
members of Lee, Higginson & Co. and Kuhn, Loeb
& Co. groups
1543. Memorandum dated February 1, 1915 by Mortimer
L. SchifiF, Kuhn, Loeb & Co., regarding agreements
between Lee, Higginson & Co. and Kuhn, Loeb &
Co. and between National City Bank and Kuhn,
Loeb & Co. on Chicago Union Station Company
financing
1544. Memorandum dated July 28, 1911 by Mortimer L.
Schiff concerning request of White, Weld & Co. for
a position in Chicago Union Station Company
financing
1545. Memorandum dated June 16, 1915 by F. D. B.
(Francis D. Bartow), First National Bank, con-
cerning the price of a forthcoming issue of Chicago
Union Station Co. bonds and the participants
therein
1546. Letter dated February 8, 1916 from Donald G.
Geddes, Clark, Dodge & Co., to Jerome J. Hanauer,
Kuhn, Loeb & Co., requesting a $1,000,000 par-
ticipation in Chicago Union Station Company
financing
1547-1. Letter dated February 9, 1916, without signature
(from Kuhn, Loeb & Co.) to Clark, Dodge & Co.
confirming a $2,000,000 interest of Clark, Dodge
& Co
1547-2. Letter dated February 9, 1916 from Clark, Dodge &
to Kuhn, Loeb & Co. confirming their interest in
Chicago Union Station Company financing
1548. Table: Participants, amounts and percentages in
Chicago Union Station Company $30,000,000, First
Mortgage Bonds, 4}4%, Series A, dated January 1,
1916, due July 1, 1963, and offered February, 1916..
1549-1. Letter dated April 27, 1920 from J. J. Turner, presi-
dent, Chicago Union Station Company, to Kuhn,
Ijoeb & Co. and others describing the issue of
$10,000,000 First Mortgage Bonds, 6>^%, Series C_
1549-2. Letter dated April 27, 1920 from J. J. Turner to
Kuhn, Loeb & Co. and others confirming the sale
of Chicago Union Station Company $10,000,000
First Mortgage Bonds, 6]>i%, Series C
1550. Table: Participants, amounts and percentages in
Chicago Union Station Company $10,000,000
First Mortgage Bonds, 6}'2%, Series C, dated Jan-
uary 1, 1920, due July 1, 1963 and offered in April,
1920
1551-1. Letter dated May 26, 1921 from J. J. Turner to Kuhn,
Loeb & Co. and others confirming the sale of Chi-
cago Union Station Company $6,000,000 First
Mortgage Bonds, 6J>i%, Series C
1551-2. Letter dated May 26, 1921, without signature (from
Kuh,n, Loeb & Co.) to J. J. Turner, president, Chi-
cago Union Station Company, acknowledging letter
of Mav 26 ■_ .
11431
11431
11431
11432
11433
11434
11434
114.34
11434
11435
11435
11435
11436
11436
SCTHEDULE OF EXHIBITS
Number and summary of exhibits
1552. Table: Participants, amounts and percentages in
Chicago Union Station Company $6,000,000 First
Mortgage Bonds, 6>^%, Series C, dated January 1,
1920, due July 1, 1963 and ofifered in May, 1921--.
1553-1. Letter dated May 27, 1921, without signature (from
Kuhn, Loeb & Co.) to Lee, Higginson & Co. and
others confirming their one-half interest in Chicago
Union Station Company $6,000,000 First Mortgage
Bonds, 6^%, Series C
1553-2. Letter dated May 27, 1921, without signature (from
Kuhn, Loeb & Co.) to Pierpont'V. Davis, vice
president. The National City Company, confirm-
ing its interest in the Chicago Union Station Com-
pany $6,000,000 First Mortgage Bonds, 6}i%,
Series C
1553-3. Letter dated May 27, 1921 from Lee, Higginson &
Co. to Kuhn, Loeb & Co. confirming their one-half
interest in the Chicago Union Station Company
$6,000,000 First Mortgage Bonds, 6^.^%, Series C--
1553-4. Letter dated May 27, 1921 from Pierpont V. Davis,
vice president, The National City Company, to
Kuhn, Loeb & Co. confirming its interest in Chi-
cago Union Station Company $3,000,000 First
Mortgage Bonds, Q}i%, Series C
1554^1. Letter dated May 23, 1922 from J. J. Turner, presi-
dent, Chicago Union Station Company, to Kuhn,-
Loeb & Co. and others describing the issue of Chi-
cago Union Station Company $6,150,000 First
Mortgage Bonds, 5%, Series B
1554-2. Letter dated May 22, 1922 from Kuhn, Loeb & Co.
and others to J. J. Turner, president, Chicago Union
Station Company, confirming purchase of $6,150,000
First Mortgage Bonds, 5%, Series B
1555. Table: Participants, amounts and percentages in
Chicago Union Station Company $6,150,000 First
Mortgage Bonds, 5%, Series B, dated January 1,
1919, due July 1, 1963 and offered in May, 1922-.-
1556-1. Letter dated January 11, 1924 from Samuel Rea,
president, Chicago Union Station Company, to
Kuhn, Loeb & Co. and others confirming the sale
of $7,000,000 First Mortgage Bonds, 5%, Series B...
1566-2. Letter dated January 12, 1924, without signature
(from Kuhn, Loeb & Co.) to Samuel Rea, president,
Chicago Union Station Company, confirming the
purchase of $7,000,000 First Mortgage Bonds, 5%,
Series B
1557. Table: Participants, amounts and percentages in
Chicago Union Station Company $7,000,000 First
Mortgage Bonds, 5%, Series B, dated January 1,
1919, due July 1, 1963 and offered in January, 1924. .
1558-1. Letter dated November 12, 1924 from Samuel Rea to
Kuhn, Loeb & Co. and others confirming the sale
of Chicago Union Station Company $7,000,000
5% Guaranteed Bonds
1558-2. Letter dated November 14, 1924 from Kuhn, Loeb &
Co. to Samuel Rea confirming the purchase of
Chicago Union Station Company $7,000,000 5%
Guaranteed Bonds
1559. Table: Participants, amounts and percentages in
Chicago Union Station Company $7,000,000 5%
Guaranteed Bonds, dated December 1, 1924, due
December 1, 1944 and offered in November, 1924--
Intro-
duced
at page
Appears
page
11436
11436
11436
11436
11436
11436
11436
11437
11437
11437
11437
11437
11437
11438
11624
11625
11625
11625
11626
11626
11627
11627
11628
11628
11629
11629
1 1630
116.30
SCHEDULE OF EXHIBITS
KI
Number and summary of exhibits
Intro-
duced
at page
Appears
on
page
1560. Table: Percentage of interest of investment banking
houses in security issues of the Chicago Union Sta-
tion Company, 1916-1924
1561. File of documents from Lee Higginson Corporation
relating to Chicago Union Station Company financ-
cing. (Individual documents from this file were
subsequently introduced at the hearing and were
given separate exhibit numbers.)
1562. File of documents from Harriman Ripley & Co.,
Incorporated, relating to Chicago Union Station
Company financing. (Individual documents from
this file were subsequently introduced at the hear-
ing and were given separate exhibit numbers.)
1563. File of documents from Smith, Barney & Co. relating
to Chicago Union Station Company financing.
(Individual documents from this file were subse-
quently introduced at the hearing and were given
separate exhibit numbers
1564. File of documents from The First Boston Corporation
relating to Chicago Union Station Company
financing. (Individual docuiiients from this file
were subsequently introduced at the hearing and
were given separate exhibit numbers.)
1565. Letter dated July 12, 1934 from W. W. K. Sparrow,
vice president and comptroller, Chicago Union
Station Company, to W. W. Atterbury, president,
Chicago Union Station Company, concerning con-
versations with Pierpont V. Davis and George W.
Bovenizer on refunding the $16,000,000 6»^%,
Series C, issue
1566. Letter dated August 6, 1934 from A. J. County, vice
president. The Pennsylvania Railroad Company, to
W. W. K. Sparrow, vice president and comptroller,
Chicago Union Station Company, concerning re-
funding the $16,000,000, 61/2%, Series C Bonds
1567. Letter dated September 1, 1934 from W. W. K.
Sparrow to A. J. County, vice president. The
Pennsylvania Railroad, and Bruce Scott, vice
president and general counsel, Chicago, Burlington
& Quincy Railroad Co. stating terms of refinancing
of $16,000,000 Chicago Union Station Company,
6J4%, Series C Bonds
1568. Memorandum dated August 29, 1934 by H. S.
Sturgis, First National Bank, concerning designa-
tion by First National Bank of someone to take its
place temporarily in Chicago Union Station Com-
pany refunding
1569. Diary entries dated September 5, 1934 to March 16,
1935 by J. W. C. (J. W. Cutler) and K. W. (Karl
Weisheit), E. B. Smith & Co., concerning interest
in Chicago Union Station Company refunding
1570. Letter dated February 28, 1935, without signature
(from Charles F. Glore, Field, Glore & Co.) to
Ralph Budd, president, Chicago, Burlington &
Quincy Railroad Company, asking for assistance
in securing an interest for Field, Glore & Co. in
Chicago Union Station Company financing
1571. Telegram dated March 5, 1935 from C. F. G. (Charles
F. Glore) to J. R. F. (J. Russell Forgan) (both of
Field, Glore & Co.) concerning Budd's speaking to
Clement and Sparrow. .
11439
11439
11439
11440
11440
11441
11442
11443
11443
11446
11448
11448
11438
(')
(0
(•)
(')
11631
11632
11632
11443
11633
11634
11631
' On file with the committee.
XII
SCHEDULE OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
Appears
on
page
1572. Telegram, undated, from J. R. F. (J. Russell Forgan)
to C. F. G. (Charles F. Glore) concerning County's
support and possibility that the I. C. C. may insist
on public bidding
1573. Telegram dated March 5, 1935 from C. F. G. (Charles
F. Glore) to J. R. F. (J. Russel Forgan) stating
Kuhn, Loeb & Co. has been informed that Con-
tinental Illinois National Bank would like Field,
Glore & Co. to have its interest in Chicago Union
Station Company financing
1574. Letter dated March 11, 1935 from Charles F. Glore
to J. Russel Forgan describing the two groups
forming the Chicago Union Station account
1575. Letter dated March 23, 1935 from James J. Lee, as-
sistant secretary, Lee Higginson Corporation, to
Field, Glore & Co. granting Field, Glore & Co. a
10% interest in Chicago Union Station Company
$16,000,000 First Mortgage Bonds, 4% Series D.
1576. Memorandum dated March 7, 1935 by L. F. H. (Lev-
erett F. Hooper, vice president. First National Bank
of New York) describing the nomination of Edward
B. Smith & Co., Lazard Frere.s & Co., Inc. and
White, Weld & Co. to receive the former interest of
the First National Bank in Chicago Union Station
Company financing
1577. Memorandum dated March 13, 1935 by L. F. H.
(Leverett F. Hooper) describing the notification of
Edward B. Smith & Co., I^azard Freres & Co., Inc.
and White, Weld & Co. of their receipt of the former
interest of the First National Bank
1578. Memorandum dated May 6, 1935 from J. W. C. (John
W. Cutler) to Mr. (H. D.) Moore of Edward B.
Smith & Co., confirming the request of the First
National Bank to allocate 6^^% of its former 10%
interest to Edward B. Smith & Co
1579. Memorandum dated March 22, 1935 by H. D. Moore,
Edward B. Smith & Co., noting the percentages of
the members of the purchase group in the Chicago
Union Station Company $16,000,000 First Mort-
gage, 4%, Bonds, Series D and describing the
method by which Edward B. Smith & Co. obtained
an interest
1580. Memorandum dated March 18, 1935 by H. M. Addin-
sell, chairm^, executive committee, The First Bos-
ton Corporation, relating to the invitation by Lee
Higginson Corporation to The First Boston Corpo-
ration to participate in the Chicago Union Station
Companv issue ._
1581. Letter dated March 15, 1935 from Percy M. Stewart,
Kuhn, Loeb & Co., to W. W. K. Sparrow, vice pres-
ident, Chicago L^nion Station Company, suggesting
consideration of effect of Clayton Act on the .sale of
the bonds in view of participation of Field, Glore
&Co
1582-1. Extract from Section 20 of the Clayton Act
1582-2. Extract from Section 20a (12) of the Interstate Com-
merce Act
1583. Letter 4ated November 17, 1939 from Charles F.
Glore of Glore, Forgan & Co. to Peter R. Nehemkis,
Jr. stating that no opinion of counsel was obtained
on the legality of the participation of Field, Glore &
Co. in four Chicago Union Station Company issues.
11448
11449
11449
11450
11451
11453
11454
11 454
11455
11456
11456
11456
11448
11449
11635
11635
11636
11636
11637
11637
11638
11638
11639
11639
11457 i 11639
SCHEDULE OF EXHIBITS
xm
Number and summary of exhibits
Intro-
duced
at page
Appears
on
page
1584.
1585.
1586-1.
1586-2.
1587.
1588-1.
1588-2.
1589.
1590.
1591.
1592.
Telegram dated March 20, 1935 from W. W. K. Slpar-
row, Chicago Union Station Company, to Percy
M. Stewart, Kuhn, Loeb & Co., stating that par-
ticipation of Field, Glore & Co. will not affect
validity of bonds
Letter dated November 30, 1939 from Edith J. Alden,
secretary and asst. treasurer, Chicago, Burlington
& Quincy Railroad Company, to Peter R. Nehem-
kis, Jr. regarding participation of Field, Glore &
Co. in Chicago Union Station Company financing.
Opinion of Bruce Scott, vice president and general
counsel, Chicago, Burlington & Quincy Railroad
Company, regarding guaranty by the Burlington
of the Chicago Union Station Company $16,000,000,
4% First Mortgage Bonds, Series D. (Exhibit
No. 13 before the Interstate Commerce Commis-
sion.)
Letter dated March 22, 1935, without signature (from
Kuhn, Loeb & Co.) to Lee Higginson Corporation
confirming the one-half interest of Lee Higginson
Corporation in the $16,000,000 Chicago Union Sta-
tion Company 4% First Mortgage Bonds, Series
D, due July 1, 1963 and the $2,100,000 4% Guaran-
teed Bonds, due April 1, 1944
Letter dated March 23, 1935 from James J. Lee,
assistant secretary, Lee Higginson Corporation, to
Kuhn, Loeb & Co. acknowledging receipt of their
letter of March 22 and confirming it
Chart: Changes in 1935 from established interests in
Chicago Union Station Company financing and the
reductions necessitated by the entry of Morgan
Stanley & Co. Incorporated in 1936 financing
Table: Participants, amounts and percentages in
Chicago Union Station Company $16,000,000 First
Mortgage Bonds, 4%, Series D, dated January 1,
1935, due July 1, 1963 and offered in March, 1935_.
Table: Participants, amounts and percentages in
Chicago Union Station Company $2,100,000 Guar-
teed Bonds, 4%, dated April 1, 1935, due April 1,
1944, and offered in March, 1935
Memoranda dated February 27 and 28, 1935 from
H. S. S. (Henry S. Sturgis, vice president, First
National Bank) to Mr, (Leverett F.) Hooper (vice
president. First National Bank) regarding changes in
Percentage interests in forthcoming Chicago Union
tation Company issue caused by presence of
Morgan Stanley & Co
Letter dated January 25, 1936, without signature
(from C. F. Glore, Field, Glore & Co.) to Ralph
I3udd, president, Chicago, Burlington & Quincy
Railroad Company, requesting his help in Field,
Glore & Co.^s efforts to retain an interest in forth-
coming Chicago Union Station Company issue
Letter dated January 27, 1936 from Ralph Budd to
Charles F. Glore agreeing to write Mr. County on
behalf of Field, Glore & Co
Letter dated February 1, 1936 from Ralph Budd to
Charles F. Glore informing him of Mr. County's
wilhngness to have Field, Glore's participation in
the Chicago Union Station Company's refunding
receive full consideration
11457
11457
11459
11460
11460
11461
11462
11462
11463
11467
11467
11468
11640
11641
11641
Faces
11641
11642
11642
11643
11643
11468
11468
XIV
SCHEDULE OP EXHIBITS
Number and summary of exhibits
1593. Diary entries dated February 27, 1936 by J. W. C.
(John W. Cutler, Edward B. Smith & Co.) regard-
ing Chicago Union Station Company's $43,000,000
refunding issue
1594. Diary entry dated February 28, 1936 by K. W.
(Karl Weisheit, Edward B. Smith & Co.) giving
E. N. Jesup's explanation of the reduction in
Edward B. Smith & Co.'s interest in the Chicago
Union Station Company issue
1595. Memorandum dated March 3, 1936 by G. W. Speer,
Edward B. Smith & Co., accounting for the reduc-
tion in Edward B. Smith & Co.'s interest in the
$44,000,000 Chicago Union Station Company
issue in comparison with the interest in the
$16,000,000 issue in 1935
1596-1. Letter dated March 2, 1936 from Kuhn, Loeb & Co. to
Lee Higginson Corporation confirming the one-
half interest of Lee Higginson Corporation in the
Chicago Union Station Company $44,000,000
First Mortgage Bonds, 3%%, Series E, due July 1,
1963
1596-2. Letter dated March 2, 1936 from Lee Higginson
Corporation to Morgan Stanley & Co. Incorporated
confirming the interest of Morgan Stanley & Co.
in the Chicago Union Station Company $44,000,000
First Mortgage Bonds, 3%%, Series E, due July 1,
1963, together with percentages of other partici-
pants
1596-3. Letter dated March 2, 1936 from Kuhn, Loeb & Co. to
Pierpont V. Davis, vice president. Brown Harri-
man & Co., Incorporated confirming thp interest
of Brown Harriman & Co. in the Chicago Union
Station Company $44,000,000 First Mortgage
Bonds, 3%%, Series E, due July 1, 1963, together
with percentages of other participants
1597-1. Table: Participants, amounts and percentages in
Chicago Union Station Company $44,000,000
First Mortgage Bonds, S%%, Series E, dated
January 1, 1936, due July 1, 1963 and ofi'ered in
AprU, 1936
1597-2. Table: Participants, amounts and percentages in
Chicago Union Station Conapany $7,000,000
Guaranteed Bonds, 3>^%, dated September 1, 1936,
due September 1, 1951 and offered in April, 1936. .
1598. Memorandum dated September 22, 1934 by S. A.
Russell, Lazard Freres & Co., Inc., on conversation
with A. F. Hockenbeamer, Pacific Gas & Electric
Co., concerning possibUity of banking relationship-.
1599. Memorandum dated October 2, 1934 by S. A. Russell,
Lazard Freres & Co. Inc., on conversation with
George Leib of Blyth & Co. concerning P. G. & E.
financing
1600-1. Stipulation dated December 13, 1939 identifying docu-
ments from the files of Lazard Freres & Co
1600-2. Telegram dated February 16, 1935 from S. A. Russell
to John D. Harrison, Lazdrd Freres & Co., Inc.,
regarding Blyth & Co.'s position in Pacific Gas &
Electric financing.
1600-3. Letter dated April 15, 1935 from S. A. Russell, Lazard
Freres & Co., Inc., to A. F: Hockenbeamer, Pacific
Gas & Electric, referring to questions of law firms,
auditors, and liability under the Securities Act in
Southern California Edison financing, and discussing
significance of Pacific Gas & Electric financing
Intro-
duced
at page
11468
11469
11471
11472
11472
11472
11474
11474
11483
11484
11485
11485
11485
Appears
on
page
11644
11644
11644
11645
11640
11646
11647
11647
11648
il648
11649
11649
11650
SCHEDULE OF EXHIBITS
KV
Number and summary of exhibit,';
1600-4. Memorandum dated December, 1934 from George L.
Burr to S. A. Russell, Lazard Freres & Co., Inc.,
relating to Pacific Gas & Electric refunding oper-
ation
1600-5. Memorandum dated December 27, 1934 by S. A.
Russell relating to telephone conversation with
A. F. Hockenbeamer regarding private financing of
Pacific Gas & Electric
1600-e. Telegram dated February 18, 1935 from John D.
Harrison to S. A. Russell regarding second talk with
Davis and Sylvester on position of Brown Harriman
&Co
1600-7. Telegram dated February 20, 1935 from John D.
Harrison to S. A. Russell regarding Sylvester and
Davis' preferring to withdraw rather than to accept
third position
1600-8. Letter dated February 21, 1935, without signature
(from Lazard Freres & Co.) to James K. liOchead,
American Trust Company, regarding relative posi-
tions of BrowTi Harriman & Co. and Blyth & Co.. _
1600-9. Telegram dated February 28, 1935 from S. A. Russell
to John D. Harrison announcing formation of a
group for Pacific Gas & Electric Co. issue, and dis-
cussing position of Brown Harriman & Co. and
proposals as to coupon rate of bonds
1600-10. Letter dated April 6, 1935 from A. F. H. (A. F. Hock-
enbeamer, president, Pacific Gas & Electric Co.) to
S. A. Russell inquiring about counsel, auditors and
liability under the Securities Act in Southern Cali-
fornia Edison Company's refunding issue
1600-11. Letter dated September 6, 1935 from Roy L. Shurtleff,
Blyth & Co., Inc., to S. A. Russell, Lazard Freres &
Co., outlining a conversation between Russell, A. F.
Hockenbeamer and Shurtleff regarding bond syn-
dicate management in future Pacific Gas & Electric
Company issues
1600-12. Letter dated September 12, 1935 from S. A. RusseU,
Lazard Freres & Co., Inc., to Roy L, Shurtleff,
Blyth & Co., Inc., concerning Mr. Shurtleff's letter,
and assuring consideration of the question of bond
syndicate management before the next Pacific Gas
& Electric Co. issue
1600-13. Telegram dated February 8, 1936 from S. A. Russell
to (George) Ramsey and (J. D.) Harrison, Lazard
Freres & Co., Inc., concerning Lazard Freres & Co.'s
position in April, 1936 issue of Pacific Gas & Elec-
tric Co
1600-14. Memorandum dated February 27, 1936 by S. A.
RusseU giving participations arranged for $90,000,-
000, Pacific Gas & Electric Co. issue, and efforts to
obtain secor^d place for Lazard Freres & Co., Inc._.
1600-15. Letter dated April 1, 1936, without signature (from
S. A. RusseU, president, Lazard Freres & Co., Inc.)
to James B. Black, president. Pacific Gas & Elec-
tric Co., requesting reconsideration of position of
Lazard Freres & Co. in rumored forthcoming issue of
Pacific Gas & Electric Co
1600-16. Telegram dated April 3, 1936 from (J. D.) Harrison
to S. A. Russell, Lazard Freres & Co., Inc., sug-
gesting reasons for an improvement in the position
of Lazard Freres & Co. in future Pacific Gas & Elec-
tric Co. financing t
Intro-
duced
at page
11485
11485
11485
11485
11485
11485
11485
11485
11485
11485
11485
11485
11485
Appears
page
116.52
11653
11653
11654
11654
11654
11655
11655
11656
11656
11657
11658
11659
XVI
SCHEDULK OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
Appears
on
page
1601. Letter dated September 14, 1935 from Charles Blyth
to George Leib, Blyth & Co., Inc., regarding rela-
tionship with Morgan Stanley & Co. Incorporated
and other matters
1602. Table: $25,000,000 Pacific Gas & Electric Co. First
and Refunding Mortgage Gold Bonds, Series F,
due June 1, 1960 and offered in July, 1930, giving
the names, amounts, and percentages of the original
terms participants and the names of the members
of the distributing group
1603. Table: $25,000,000 Pacific Gas & Electric Co. First
and Refunding Mortgage Gold liimds, Series F,
4/^%, due June 1, 19G0 and offered in Januar.y, 1931,
giving the names, amounts and jiorccntages of the
original terms participants and the names of the
members of the distributing group
1604. Letter dated April 14, 1936 from Kugone M. Stevens,
Blyth & Co., Inc., to Harris Creech, president,
Cleveland Trust Company, denying that any New
York firm has a right to inherit National City Com-
pany business and stressing importance of Charles
E. Mitchell in National Citv Co. development
1605. Letter dated October 14, 1936, Irom Eugene M.
Stevens to Harris Creech denying claim of Brown
Harriman & Co. to inheritance of National ' City
Company business and requesting opportunity fxjr
Blyth & Co. to present financing proposals to Fire-
stone Tire & Rubber Co
1606. Letter dated February 21, 1935, without signature
(from George Leib, Blyth & Co., Inc.) to .lames
Black, North American Company, mentioning
desire of American Trust Co. to have Blyth & Co.
as heir to its interest in Pacific Gas & Electric Co.
business, referring to Blyth's historic connection
with Pacific Gas & Electric Co., and suggesting two
alternative percentage divisions among participants.
1607. Telegram dated February 15, 1935 from George Leib
to Charles R. Blyth suggesting possible assistance
in securing first place in forthcoming Pacific Gas &
Electric Co. issue for Blvth & Co
1608. Letter dated February 16, 1935 from Charles R. Blyth
to George Leib, regarding close connection between
A. F. Hockenbeamer of Pacific Gas & Electric Co.
and Stanley A. Ru.ssell of Lazard Freres & Co
1609. Telegram dated February 19, 1935 from George Leib
to Charles R. Blyth regarding Blyth & Co.'s
position in Pacific Gas & Electric Co. financing
1610. Telegram dated February 19, 1935 from George Leib
to Charles R. Blyth reciting S. A. Russell's telling
of agreement with Brown Harriman & Co. under
which he would handle his own accounts
1611-1. Telegram dated February 20, 1935 from George Leib
to Charles R. Blyth reciting S. A. Russell's agree-
ment to give Brown Harriman & Co. second place
if Lazard Freres & Co. headed Pacific Gas & Elec-
tric Co. financing
1611-2. Telegram dated February 21, 1935 from George Leib
to Charles R. Blyth suggesting attempt to take
leadershij) away from Lazard Freres & Co
1611-3. Telegram dated February 21, 1935 from George Leib
to Charles R. Blyth stressing importance of Blyth
& Co.'s position in present Pacific Gas & Electric
Company issue because of future duration of the
syndicate 1
11488
11490
11490
11492
11492
1 1660
11662
11663
11665
11666
11493
11496
11498
11498
11500
11500
11500
11500
11666
11667
11668
11669
11669
11669
11670
11670
SGHEDUIiE OF EXHIBITS
XVH
Number and summary of exhibits
Intro-
duced
at page
Appears
1611-4. Telegram dated February 21, 1934 from George Leib
to Charles R. Blyth summarizing letter sent to
James D. Black ("Exhibit No. 1606")
1611-5. Telegram dated February 22, 1935 from George Leib
to Roy L. Shurtleff, Blyth & Co. Inc., suggesting
persons influential in Pacific Gas & Electric Com-
pany affairs to break the impasse over leadership..
1611-6. Telegram dated February 22, 1935 from George Leib
to Bernard W. Ford, Blyth & Co., Inc., welcoming
Ford's entry into Blyth's fight for leadership.
1612. Telegram dated March 23, 1935 from George Ramsey
to George D. Woods, The First Boston Corporation,
referring to conflicting versions of S. A. Russell and
J. P. Ripley concerning understanding as to busi-
ness formerly participated in but not headed by
National City Company
1613. Telegram dated February 22, 1935 from George Leib
to Bernard W. Ford, Blyth & Co., Inc., regarding
telegram campaign against the Rayburn BUI
1614-1. Telegram dated February 25, 1935 from Bernard W.
Ford to George Leib describing developments in
Blyth & Co.'s efforts to obtain leadership of Pacific
Gas & Electric Company financing
1614-2. Telegram dated March 4, 1935 from Roy L. Shurtlefif
to George Leib, Blyth & Co., Inc., regarding forma-
tion of syndicate for Pacific Gas & Electric Com-
pany issue
1614-3. Telegram dated March 4, 1935 from Roy L. Shurtleff
to Eugene Bashore, Blyth & Co., Inc., suggesting
that further negotiations on Pacific Gas & Electric
syndicate be held in New York and suggesting con-
sideration qn effect of Blyth & Co.'s Public Utility
bill activities on their position in syndicate
1614-4. Telegram dated March 5, 1935 from Roy L. Shurtleff
to George Leib regarding final setting of Pacific Gas
& Electric syndicate
1614-5. Telegram dated March i4, 1935 from Roy L. Shurtleff
to George Leib regarding agreement with S. A.
Russell on three way heading of Pacific Gas &
Electric business ,
1614-6. Telegram dated March 14, 1935 from George Leib to
Roy L. Shurtleff inquiring whether management
fee to Lazard Freres & Co. was discussed
1614-7. Telegram dated March 14, 1935 from George Leib to
Roy L. Shurtleff regarding misunderstanding of
agreement as to three way management
1614-8. Telegram dated March 15, 1935 from Roy L. Shurtleff
to George Leib stating no management fee for
Lazard Freres & Co. was discussed and that he
can add nothing on the three way agreement
1614-9. Letter dated March 28, 1935 from Roy L. Shurtleff to
George Leib and Eugene Bashore, Blyth & Co., Inc.,
concerning selection and omission of San Francisco
dealers in Pacific Gas & Electric Company syndi-
cate . _
1614-10. Letter dated April 2, 1935 from E. B. (Eugene Ba-
shore) to Roy L. Shurtleff relating to method of
selectiori of dealers for Pacific Gas & Electric Com-
pany issue
1614-11. Letter dated April 3, 1935, without signature (from
George Leib) to Roy L. Shurtleff supplying details
of the efforts of Blythe & Co. to obtain leadership
in the Pacific Gas & Electric Company issue and
suggesting steps for future issues
124491— 10— pt. 22 2
11500
11500
11500
11503
11506
11^09
11509
11509
11509
11509
11509
11670
J 1671
1I,67J
11672
11672
11672
11673
11509
11673
11509
11673
11509
11673
11509
11674
11509
11674
11674
11675
1167:
11677
XVIII
SOHBDULB OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
1614-12. Telegram dated May 31, 1935 from George Leib to
Roy L. Shurtleff asking reason for jump in price of
security of Pacific Gas & Electric subsidiary
1614-13. Telegram dated May 31, 1935 from Roy L. Shurtleff to
George Leib informing of new Pacific Gas & Elec-
tric Co. issue
1614-14. Telegram dated June 4, 1935 from Roy L. Shurtleff to
George Leib describing objections to filing a regis-
tration statement for Pacific Gas & Electric Com-
pany issue with no underwriters listed
1614-15. Telegram dated June 4, 1935 from Roy L. Shurtleff to
George Leib giving final price and leading positions
in Pacific Gas & Electric Co. issue
1614-16. Letter dated June 7, 1935, without signature (from
George Leib) to Charles R. Blyth regarding position
of Blyth & Co. in Pacific Gas &-Electric Co. issue
1614-17. Letter dated August 20, 1935, without signature (from
George Leib) to Charles R. Blythe reviewing con-
versation with James Black, North American Com-
pany, discussing Blyth & Co.'s claims to leadership
or joint management of Pacific Gas & Electric Co.
business
1614-18. Letter dated September 5, 1935 from Roy L. Shurtleff
to George Leib regarding discussion with S. A.
Russell and A. F. Hockenbeamer on joint manage-
ment for Blyth & Co. in Pacific Gas & Electric Co.
b usiness
1614-19. Telegram dated September 30, 1935 from Roy L.
Shurtleff to George Leib regarding S. A. Russell's
promise to arrive at settlement of Blyth & Co.'s
management position before next Pacific Gas &
Electric Co. issue
1614-20. Letter dated September 6, 1935, without signature
(from George Leib) to Roy L. Shurtleff suggesting
letter to S. A. Russell reciting considerations in
support of Blyth & Co.'s efforts for joint manage-
ment
1614-21. Memorandum dated December 19, 1935 by Bernard
W. Ford for Charles R. Blyth giving attitude of
Allen Chickering toward Blyth & Co.'s position in
future financing of Pacific Gas & Electric Co
1614-22. Letter dated January 16, 1936, without signature
(from George Leib) to Charles R. Blyth discussing
possible criticism on the Street if Blyth & Co. re-
places Lazard Freres & Co. as leader of Pacific Gas
& Electric Co. business
1614-23. Letter dated January 16, 1936, without signature
(from Charles E. 5VIitchell) to Charles R. Blyth
summarizing discussion' with Harrison Williams
relating to Pacific Gas & Electric Co. and other
1614-24. Letter dated January 17, 1936 froiSf' Charles E.
Mitchell to Charles R. Blyth enclosing additional
letter summarizing discussion with Harrison
Williams :
1614-25. Letter dated Januarv 16, 1936, without signature
(from Charies E. Mitchell) to Charies R. Blyth
summarizing discussion with Harrison Williams
relating to Pacific Gas & Electric Co . .
Id 14 -26. Letter dated January 17, 1936, without signature
(from George Leib) to Charles R. Blyth regarding
steps to he taken in view of Lazard Freres & Co.'s
possible reaction to Blyth & Co.'s heading Pacific
Gas & Electric Co. business
11509
11509
11509
11509
11509
11509
11509
11509
11509
11509
11509
11509
11509
11509
11509
SCHEDULE OP EXHIBITS
XIX
Number and summary of exhibits
Intro-
duced
at page
Appears
1615. Letter dated August 23, 1939 from Nevil Ford, vice
president. The First Boston Corporation, to Peter
K. Nehemkis, Jr. regarding disposal of security
affiliate of the First National Bank of Boston in
compliance with the Banking Act of 1933
1616. Letter dated May 11, 1934 from Winthrop W. Aldrich,
chairman of the board, to the stockholders of The
Chase Corporation, regarding dissolution of the
Harris Forbes organization and termination of
joint transfer of stock in Chase Corporation and
Chase National Bank in compliance with the
Banking Act of 1933
1617. Letter from Daniel G. Wing, chairman of the board,
First National Bank of Boston, to the stockholders
of the bank and of The Chase Corporation regard-
ing the organization of The First Boston Corpora-
tion subsequent to its divorcement from the bank.
Accountants' report on The First Boston Corporation
dated May 10, 1934.
Balance sheet of The First Boston Corporation dated
April 21, 1934.
Statement of income and surplus of The First Boston
Corporation by periods, for the period from June
27, 1932 to April 21, 1934
1618. Letter from Allan M. Pope, president. The First
Boston Corporation, to George W. Bovenizer,
Kuhn, Loeb & Co., expressing hope for continuing
relationship
1619. Letter dated July 2, 1934 from H. M. Addinsell,
chairman of executive committee. The First Boston
Corporation, to Kuhn, Loeb & Co. requesting sub-
stitution of The First Boston Corporation for
Harris, Forbes & Co. and Chase Harris Forbes
Corporation in syndicate records of Kuhn, Loeb
&Co
1620. Statement dated December 12, 1939 prepared by
George D. Woods, The First Boston Corporation,
regarding organization of The First Boston Cor-
poration
1621. Letter dated April 13, 1939 from A. E. Burns, assist-
ant secretary, The First Boston Corporation, to
Peter R. Nehemkis, Jr. sending list of officers and
directors of The First Boston Corporation.
Table : Officers and directors of The First Boston Cor-
poration and their affiliations from January 1, 1929
1622. Table: The First Boston Corporation. List of holders
of 500 shares and over as of record at the close of
business, June 17, 1939
1623. Table: Participations of Stone & Webster and Blodget,
Inc. in issues managed by The First Boston Cor-
poration from June 14, 1934 to June 30, 1939
1 624. Memorandum dated April 4, 1934 by Dorsey Richard-
son, Lehman Brothers, regarding possibility of
closer relations with successor to First of Boston
Corporation _•
1625. Letter dated August 3, 1934, without signature (from
J. R. Macomber, chairman of the board. The First
Boston Corporation) to Albert W. Harris, Harris
Trust and Savings Bank of Chicago, regarding visit
of Burnett Walker of Edward B. Smith & Co. to
H. J. Bauer, chairman of Southern California Edi-
son Companj' .
11614
11514
11686
11687
11514
11514
11516
11516
11517
11518
11521
11522
1169C
11695
11695
11696
11699
11700
11704
11704
ilo23 11705
XX
SCHEDULE t»l'' EXHIBITS
Number and summary of exhibits
Appears
1626-1. Letter dated September 25, 1939 from Edward B.
Hall, Harris, Hall & Company, to W. S. White-
head, Securities & Exchange Commission, enclosing
copy of letter dated July 25, 1930 confirming the
reciprocal arrangement between Harris Trust and
Savings Bank, Chicago, Harris, Forbes & Com-
pany, New York, and Harris, Forbes & Company,
Inc., Boston, with a brief history of the Harris
organization
1626-2. Copy of letter dated July 25, 1930 from Harris,
Forbes & Company and Harris, Forbes & Com-
pany, Inc. to Harris Trust and Savings Bank con-
tinuing existing reciprocal arrangements with
respect to the purchase and marketing of securities.
1627. Letter dated September 18, 1939 from Norman W.
Harris, Harris, Hall & Company, to Peter R.
Nehemkis, Jr. regarding the capitalization of Harris,
Hal) & Company
1628-1. Stipulation dated December 13, 1939, signed by
George Leib, identifying documents from the files of
BIyth & Co., Inc
1628-2. Letter dated November 6, 1935 from H. M. Addinsell,
The First Boston Corporation, to Blyth & Co., Inc.
accepting a $3,000,000 interest in Los Angeles Gas
& Electric Corporation S40,000,000 issue
1628-3. Letter dated November 6, 1935. without signature
(from Blyth & Co., Inc.) to Harris, Hall & Com-
pany informing of i'he First Boston Corp.'s giving
up $500,000 of its participation in Los Angeles Gas
& Electric Corporation $40,000,000 issue enabling
Blyth & Co. to offer a $500,000 participation to
Harris, Hall & Co
1628-4. Letter dated November 6, 1935 (unsigned) from
Blyth & Co., Inc. to Harris, Hall & Company
requesting information to be supplied in connection
with the proposed issue of Los Angeles GiiS &
Electric Corporation bonds
1628-5. Letter dated November 6, 1935, without signature
(from Charles E. Mitchell, Blyth & Co., Inc.) to
H. M. Addinsell, The First Boston Corporation,
relating to the reduction of the participation of
The First Boston Corporation to $2,500,000 and the
offer of $500,000 to Harris, Hall & Co. in $40,000,000
Los Angeles Gas & Electric Corporation issue
1628-6. Letter dated November 7, 1935 from H. M. Addinsell,
The First Boston Corporation, to C. E. Mitchell,
Blyth & Co., Inc. acknowledging his letter of
November 6, 1935
1628-7. Letter dated November 8, 1935 from Norman W.
Harris, Harris, Hall & Company, to Blyth & Co.,
Inc. accepting a $500,000 participation in Los
Angeles Ga,s & Electric Corporation issue
1628-8. Letter dated November 9, 1935, without siptiature
(from C. E. Mitchell, Blyth & Co., Inc.) to Harris,
Hall & Company acknowledging Norman W.
Harris' letter of November 8, 1935
1629. Table: Underwriting participations bj' various firms
in business headed by The First Boston Corpora-
tion and The First Boston Corporation's participa-
tions in business headed by other underwriting
houses, as of February 28, 1939
11526
11526
11527
11528
11528
page
11707
11708
11709
11710
11710
11528 11710
11528
11528
1 1 528
11528
11528
11533
11711
11711
11712
11712
11712
11713
SCHEDULE OF EXHIBITS
XXI
Number and summary of exhibits
1630. Table: Participations of Harris, Hall & Company in
issues headed bv The First Boston Corporation
from November 11, 1935 to August 9, 1939
1631. Table: Participation of Morgan Stanley & Co.,
Incorporated in issues headed by The First Boston
Corporation, March 26, 1936 to August 9, 1939
Table: Participation of The First Boston Corporation
in issues headed by Morgan Stanley & Co. Incor-
porated, April 3, 1939
1632. Letter dated August 6, 1934 from Albert W. Harris,
Harris Trust & Savings Bank, to John R. Ma-
comber, The First Boston Corporation, giving
attitude of Harris Trust & Savings Bank toward
retention of the old business connections and will-
ingness to do business on a reciprocal basis
1633. Letter dated April 13, 1935 from Howard Fenton,
Harris Trust & Savings Bank, to II. M. Addinsell,
The First Boston Corporation, stating that H. M.
Byllesbj"^ & Company keep suVjstantial balances
with the Harris Trust & Savings Bank and re-
questing a participation for them in Southern Cali-
fornia Edison Co. financing
1634. Letter dated May 16, 1935, without signature (from
D. R. Linsley, The First Boston Corporation) to
J. R. Macomber, The First Boston Corporation,
regarding a talk with Mr. Fenton about making
Harris Trust & Savings Bank paying agent in
Chicago for several bond issues
1635. Letter dated April 15, 1935, without signature (from
B. W. Lynch, H. M. Byllesby & Company) to
D. R. Linsley, The First Boston Corporation,
regarding trusteeship and paying agency for San
Diego (Consolidated Gas & Electric Co.)
1636-1. Letter from E. J. F. (Edward J. Frost), Wm. Filene's
Sons Company, to Paul M. Mazur, Lehman Broth-
ers, regarding registrars and transfer agents for
preferred stock of Federated (Department Stores,
Inc.)
1636-2. Letter dated August 10, without^ signature (from
Paul M. Mazur) to E. J. F. referring to choice of
registrar and transfer agent as being usually left
to the banker and informing of the selection of
J. P. Morgan & Co. as transfer agent for preferred
stock of Federated (Department Stores, Inc.)
1636-3. Letter dated June 26, 1937 from James S. Rogan,
president, American National Bank, to Joseph A.
Thomas, Lehman Brothers, relating to deposit
accounts of Schenley Distillers Corporation and its
method of paying for revenue stamps
1636-4. Letter dated March 3, 1938 from Lehman Brothers to
Elmer W. Stout, chairman of the board, American
National Bank, mentioning suggestion of American
National Bank as Indianapolis depositary of Schen-
ley Distillers Corporation
1636-5. Letter dated February 28, 1938 from Elmer W. Stout,
American National Bank, to Joseph A. Thomas,
Lehman Brothers, requesting that he suggest
American National Bank as Indianapolis depositary
of Schenley Distillers Corporation
1636-6. Letter dated June 20, 1938 from F. K. Houston, presi-
dent. Chemical Bank & Trust Company, to J. A.
Thomas, Lehman Brothers, requesting trusteeship
or New York paying agency in proposed Indian-
apolis Power & Light Co. issue
Intro- Appears
duced on
at page page
11533
11533
11535
11538
11538
11538
11538
11538
11538
11538
11538
11176
11717
11721
11722
11722
11723
11723
11724
11724
11725
11725
11538 I 11726
XXTI
SKUHKDULE OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
1636-7. Letter from J. A. Thomas, Lehman Brothers, to Frank
K. Houston, Chemical Bank & Trust Company,
stating belief that commitments have been made
by others than Lehman Brothers regarding trustee- I
ship and paying agencies in Indianapolis Power &
Light Co. issue 11538
1637. Memorandum dated August 17, 1938 from L. B. to j
F. K. Shrader, Halsey, Stuart & Co., Inc., regard- i
ing call from Samuel Armstrong, Chase National
Bank, relating to efforts to obtain New York pay-
ing agency in PubUc Service Company of Northern
Illinois issue 1 1539
1638-1. Telegram dated March 11, 1935 from John R. Macom-
ber to Pope and Addinsell, The First Boston Cor-
poration, regarding forthcoming issue of Southern
California Edison Company and question of leader-
ship 11540
1638-2, Memorandum initialed by W. C. M. and J. R. M. re-
garding meeting of representatives of Southern Cali-
fornia Edison Company and of The First Boston
Corporation, March 14, 1935 11540
1638-3. Telegram dated March 18, 1935 from G. D. Woods to
Macomber, The First Boston Corporation concern-
ing Blyth & Co.'s position and other developments
in Southern California Edison Co. issue and histori-
cal position of The First Boston Corporation's pre-
decessor firms in financing of Pacific Lighting Co.
, and subsidiaries 11540
1638-4. Letter dated March 21, 1935 from G. D. Woods to
George Ramsey, The First Boston Corporation, re-
garding Field, Glore & Co.'s approaching Southern
California Edison Company 1 1540
1638-5. Memorandum dated March 22, 1935 by H. M. Addin-
sell, The First Boston Corporation, noting develop-
ments on $68,000,000 Southern California Edison
Co. Refunding Mortgage 25- Year, 3%% Bonds 11540
1639-1. Tentative Ust of participants, with percentages and
amounts on basis of a $68,000,000 issue of Southern
California Edison Co I 11545
1639-2. Table: Participants, percentages and amounts in $30,- I
000,000 Southern California Edison Company Re-
funding 5s, due September 1, 1952 and offered Sep-
tember 15, 1927 11545
1639-3. Telegram dated March 21, 1935 from G. D. Woods to i
George Ramsey, The First Boston Corporation, re-
garding inclusion of Pacific Company in Southern
California Edison group 11545
163&-4. Letter dated March 23, 1935 from G. D. Woods to
George Ramsey, The First Boston Corporation, re-
garding positions of various houses in Southern
California Edison Co. syndicate 11545
1639-5. Letter dated April 8, 1935 from J. B- Lovelace, Amer-
ican Capital Corporation, to Sidney A. Mitchell,
Bonbright & Company, Inc., expressing belief that
Bonbright & Company's close connection with hold-
ing company financing was a factor in their omission
from the Southern California Edison Co. issue 11545
1639-6. Telegram dated March 23, 1935 from G. D. Woods to
George Ramsey, The First Boston Corporation,
suggesting that if Field, Glore & Co. is included in
Southern California Edison Co. financing. The First
Boston Corp. should have o'pportunity of cfriginal
terms participation in National Distillers Products
Corp. issue headed by Field, Glore & Co 11545
Appears
on
page
11726
11727
11727
11728
11728
11729
11730
11730
11731
11731
11731
11732
11733
SCHEDULE OP EXHIBITS
XXIII
Noinber and sanunary of exhibits
Intro-
duced
at page
Appears
on
page
1639-7. Telegram dat3d Mkrch 25, 1935 from G. D. Woods to
George Ramsey, The First Boston Corporation, in-
forming of inclusion of Field, Glore & Co. in South-
em CaJjif ornia Edison Co. underwriting^^.
1^39-8. Telegram dated March 25, 1935 from G. D. Woods to
George Ramsey, The First Boston Corporation, giv-
ing list of participants and percentages in Southern
California Edison Co. underwriting
1639-9. Telegram dated March 26, 1935 from John Macomber,
The First Boston Corporation, to Harry J. Bauer,
Southern California Edison Co., urging a 3% inter-
est for White, Weld & Co. in Southern California
Edison Co. underwriting
1639-10. Telegram dated March 26, 1935 from H. M. AddinseU
to G. D. Woods, The Firet Boston Corporation, giv-
ing list of participants and percentages in Southern
Calif omia Edison Co. underwriting and inqturing
as to possible revisions
1639-11. Letter dated March 27, 1935 initialled "J. it. M. (?)"
(John R. Macomber?), to WilMam Edmunds, The
First Boston Corporation, regarding position of
Aldred & Company atad other houses in Southern
CaUfornia Edison Co. issue
1639-12. Telegram dated April 12, 1935 from Wilham Edmunds
to J. R. Macomber regarding question &f Lacreasmg
participation of Bodell & Co. in Southern California
Edison Co. issue ..
1639-13. Telegram dated April 17, 1935 from Harry J. Bauer,
Southern California Edison Co., to Albert W. Har-
ris announcing signing of underwriting agreement -
1639-14. Table: $75,000,000 Southern CaUfornia Edison Com-
pany Ltd. Refunding Mortgage Gold Bonds, Series
of 3^ %, giving prices, spread, underwriters partici-
pations, sales to insurance companies, territorial
distribution of dealers and bonds, etc
1639-15. Letter dated April 1, 1935 from G. P. Muhlfeld, Stone
& Webster, Incorporated, to J. R. Macomber, The
First Boston Corporation, expressing appreication
at inclusion in Southern California Edison Co.
syndicate and hoping for inclusion in proposed Du-.
quesne Light Co. issue .
1639-16. Table: Acceptances and dechnations of group offering
to insurance companies of Southern California Edi-
son Company S%% bonds, due May 1, 1960
1639-17. Letter dated October 4, 1939 from J. B. Dobbins, as-
sistant comptroller, to G. D. Woods, vice president.
The First Boston Corporation, showing profit dis-
tributed to various underwriters in connection with
Southern California Edison Co. d%% bond issue.
1639-18. Memorandum dated April 6, 1935 initialed F. M. S.
(Frank M. Stanton) to J. R, Macomber, The First
Boston Corporation, regarding distribution of
bonds of Southern California Edison Co. to the
selling group _^
1639-19. Table: Boston, New York and San Francisco housesj
in Southern Cahf ornia Edison issue
1639-20. Telegram dated April 22, 1935 from Stanton Griffis,
Hemphill Noyes & Co. to H. M, AddinseU request-
ing larger aUotment in Southern California Edison
Company deal
11545
11545
11545
11545
11545
11545
11545
11545
11545
11545
11.545
11545
11545
11545.
11733
11734
11734
11735
11735
11736
11736
11737
11738
11739
11739
11740
11741
11741
XXIV
SCHEDULE OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
Appears
on
page
1639-21. Letter dated April 22, 1935 from H. M. Addinsell,
First Boston Corporation, to Stanton Griffis, Hemp-
hill Noyes & Co., expressing regret at inability to
provide larger allotment of Southern California
Edispn Co. bonds for Hemphill Noyes & Co
1639-22. Letter 'dated April 25, 1935 from Shields & Co. to The
First Boston Corporation giving reason for declin-
ing ofiFer of Southern California Edison bonds
1639-23. Specimen of dealer performance record card used by
The First Boston Corporation
1640-1. Telegram dated November 4, 1935 from G. B. Hey-
wood, Harris, Hall & Company, to Norman Harris,
Harris, Trust & Savings Bank, regarding Los Ange-
les Gas & Electric Corporation deal
1640-2. Telegram dated November 5, 1935 from G. B. Hey-
wood, Harris, Hall & Company, to L. V. Bower,
Harris, Hall & Company, regarding closed situa-
tion of Los Angeles Gas & Electric Corporation
financing and stating difficulty of obtaining par-
ticipation
1640-3. Telegram from Norman Harris, Harris Trust & Savings
Bank, to G. B. Heywood announcing that half million
interest has been obtained in Los Angeles Gas &
Electric Corporation financing
1640-4. Letter dated November 6, 1935 from C. E. Mitchell,
Blyth & Co., Inc., to Harris, Hall & Co. offering
half million interest ceded by The First Boston
Corporation in Los Angeles Gas & Electric Corp.
financing
1640-5. Letter dated February 15, 1936 from L. V. Bower,
Harris, Hall & Co., to G. D. Woods, The First
Boston Corporation, inquiring whether possible
Central Illinois Electric & Gas Co. business would
be available
1640-6. Letter dated February 18, 1936 from G. D. Woods to
L. v. Bower regarding possible offering to Harris,
Hall & Co. of some position in future Central
Illinois Electric & Gas Co. financing
1640-7. Letter dated February 21, 1936 from L. V. Bower,
Harris, Hall & Co., to G. D. Woods acknowledging
above
1640-8. Letter dated August 30, 1938 from E. B. Hall, Harris,
Hall & Company, to G. D. Woods regarding late
data in connection with Central Illinois Electric
& Gas Co. financing
1640-9. Letter dated September 2, 1938 from G. D. Woods to
E. B. Hall regarding prospect of talking over
Central Illinois Electric & Gas Co. issue
1640-10. Letter dated September 2, 1938 from L. V. Bower,
Harris, Hall & Company, to G. D. Woods, The
First Boston Corporation, in appreciation for Cen-
tral Illinois Electric & Gas Co. participation...
1640-11. Letter dated June 10, 1939 from E. B. Hall, Harris,
Hall & Company, to G. D. Woods regarding in-
clusion of various firms in the advertising of Central
Illinois Electric & Gas Co. issue
1640-12. Table: Rough draft of announcement of Central
Illinois Electric & Gas Co. issue
1640-13. Letter dated October 20, 1938 from E. O. Boshell,
Harris, Hall & Company, to D. C. McClure, presi-
dent. Central Illinois Electric & Gas Co., regarding
possible private placement of Central Illinois Light
& Gas bonds with Equitable and Northwestern
Mutual Life insurance companies
11545
11545
11545
11548
11548
11548
11548
11548
11548
11548
11548
1 1 .=^48
11548
11548
11548
11742
11742
11744
11746
11746
11746
11746
11747
11747
11748
11749
11749
11749
11750
11750
11548 117.M
SCHEDULE OF EXHIBITS
XXV
Number and summary of exhibits
1640-14. Letter dated December 6, 1938 from L. V. Bower,
Harris, HaU & Co., to D. C. McClure, Central
Illinois Electric & Gas Co., regarding success in
privately placing Central Illinois Electric & Gas
bonds with insurance companies ._
1640- If). Letter dated April 26, 1939 from L. V. Bower, Harris,
Hall & Company, to D. C. McClure regarding
Chase National Bank's new interest in Central
Illinois Electric & Gas Co
1640 16. Memorandum dated February 3, 1937 by E. B. Hall,
Harris, Hall & Company, regarding talk with
George Murnane of Monet, Murnane & Company,
relative to possible refunding operations for Amer-
ican Steel Foundries
1640-17. Telegram from Harris, Hall & Company, to E. B.
Hall, Harris, Hall & Company, relative to repaying
obligation to other underwriters in American Steel
Foundries financing
1640 18. Trlegram dated November 8, 1935 from L. V. Bower,
Harris, Hall & Company, to J. H. Collins, Harris,
Hall & Company, regarding silent underwriting
position in Continental Steel Corporation deal
1640-19. Letter, informal, dated November 18, 1935 from L. V.
Bower, Harris, Hall & Company, to Niles Chapman,
Continental Steel Corporation, suggesting a
$2,000,000 Continental Steel Corporation issue
1640-20. Letter dated November 20, 1935 from L. V. Bower,
Harris, Hall & Company, to Nile? Chapman, Con-
tinental Steel Corporation, formally outlining a pro-
posed $2,000,000 Continental Steel issue
1640-21. Letter dated January 7. 1936 from E. B. Hall, Harns,
Hall & Company, to H. E. Wood, Harold E. Wood
& Company, regarding the sharing of Continental
Steel Corporation issue with F. S. Moseley & Com-
pany and impossibility of including other under-
writers
1640-22. Table: Central Illinois Electric & Gas Co. $14,750,000
First Mortgage Bonds, 3^%, Series of 1964. Under-
writers, principal amount and total purchase price. .
1640-23. Table: $3,000,000 Central Illinois Electric & Gas Co.
3%-3H%-4% Serial Debentures. Underwriters,
principal amount underwritten and total purchase
price
1640-24. Memorandum dated May 23, 1936 by E. B. Hall,
Harris, Hall & Company, listing tentative under-
writing syndicate for proposed $32,000,000 financ-
ing of Wisconsin Power & Light Company
1640-25. Letter dated January 18, 1936 from L. V. B.^w.-r,
Harris, Hall & Company, to I. B. Smith, preside -t,
Iowa Electric Light & Power Company, discussing
proposed refunding of Iowa Electric Light & Power
Company's outstanding 5s of 1946
1640-26. Letter dated February 4, 1936 from L. V. Bower,
Harris, Hall & Company, to I. B. Smith, Iowa
Electric Light & Power Co., amending agreement
between Iowa Electric Light & Power Co. and Harris
Trust & Savings Bank
1640-27. Letter dated February 22, 1936 from L. V. Bower to
I. B. Smith, Iowa Electric Light & Power Co., re
above
Intro- Appears
duced on
at page page
11548
11548
11548
11548
11548
11548
11548
11548
11548
11548
11548
11548
11751
11752
11752
11753
11548 11753
11753
11754
11755
11756
11756
11548 11757
11757
11758
11759
XXVI
SCHEDULE OF EXHIBITS
Number and summary ot exhibits
1640-28.
1640-29.
1640-30.
1640-31.
1640-32.
1640-33.
1640-34.
1640-35.
1640-36.
1640-37.
1640-38.
1640-39.
1640-40.
1640^41.
Letter dated March 4, 1936 from George B. Heywood,
Harris, Hall & Company, to D. R. Linsley, The
First Boston Corporation, offering the latter equal
participation in Iowa Electric Co. and on Iowa
Electric Light & Power Co. financing _
Letter dated March 8, 1936 to H. M. Addinsell (in-
complete) regarding interests in underwriting group
for $3,600,000 Iowa Electric Light & Power Co.
First Mortgage 4s
Letter dated September 30, 1936 from L. V. Bower,
Harris, Hall & Company, to Fred Poor, Poor &
Company, regarding discussion with Mr. Boatner
with reference to railway business
Memorandum dated October 21, 1936 by E. B. HaU,
JIarris, Hall & Company, to L. V. Bower, relative
to signing of stand-by agreement with Poor &
Company
Letter dated January 20, 1936 from L. V. Bower,
Harris, HaU & Company, to Frank Fratcher, Iowa
Electric Company, regarding need for haste in pre-
paring papers for March 15, 1936 issue for Iowa
Electric Company
Letter dated February 4, 1936 from L. V. Bower to
Frank Fratcher, Iowa Electric Company, discussing
an arrangement to purchase Iowa Electric Company
Convertible 6s
Letter dated February 24, 1936 from L. V. Bower to
Scott Mclntyre, Scott, Mclntyre & Company, re-
garding difficulties in Iowa Electric Company re-
funding >-
Letter dated February 24, 1936 from L. V. Bower to
Frank Fratcher, Iowa Electric Company, request-
ing company's authority to buy in Iowa Electric
Company's bonds proposed to be refunded
Letter dated February 25, 1936 from L. V. Bower to
Frank Fratcher, Iowa Electric Company, regarding
how to keep small firms out of the account and the
advisability of the running of Iowa Electric Com-
pany financing over the names of large houses
Letter dated February 29, 1936 from F. A. Fratcher,
Iowa Electric Company, to L. V. Bower, Harris,
Hall & Company, extending authority requested in
"Exhibit No. 1640-35"
Letter dated March 5, 1936 from H. M. Addinsell, The
First Boston Corporation, to E. B. Hall, Harris,
HaU & Company, declining to participate in Iowa
Electric Company business
Letter dated December 4, 1935 from E. B. HaU,
Harris, Hall & Company, to John E. Barber, The
Middle West Corporation, regarding hopes of
Harris, HaU & Company doing business in Public
Service Company of Oklahoma refunding^
Letter dated December 5, 1935 from John E. Barber,
The Middle West Corporation, to E. B. HaU, Harris,
Hall & Company stating impracticability of dis-
cussing financing of Public Service Company of
Oklahoma
Letter dated December 27, 1935 from L. V. Bower,
Harris, Hall & Company, to Walter J. Cummings,
Continental Illinois National Bank & Trust Co.
requesting the bank to aid Harris, Hall & Co. obtain
a position in the forthcoming Public Service Com-
pany of Oklahoma financing
Intro-
duced
at page
Appears
page
11548
11548
11548
11548
11548
11548
11548
11548
11548
11548
11548
11548
11648
11548
11759
11760
11761
11761
11761
11762
11762
11763
11763
11764
11764
11765
11765
11766
SCHEDULE OF EXHIBITS
XXVII
Number and summary of exhibits
Appears
on
page
1640-42. Letter dated January 22, 1936 from E. B. Hall, Harris,
HaU & Company, to Charles F. Glore, Field, Glore
& Co., regarding opposition to )i% management
fee for Field, Glore & Co. in Public Seivice Com-
pany of Oklahoma financing 11548 11766
1640-43. Letter dated January 23, 1936 from C. F. Glore, Field,
Glore & Co., to E. B. Hall, Harris, Hall & Company,
relative to agreeing that management fee should be
dropped in Public Service Company of Oklahoma
financing 11548 11767
1640-44. Memorandum dated February 6, 1936 by E. B. Hall
to Mr. G. B. Heywood, Harris, Hall" & Com-
pany, listing the underwriting syndicate for the
$16,000,000 Public Service Company of Oklahoma
financing 11548 11767
1640-45. Letter dated June 23, 1939 from Harris, HaU & Com-
pany to Central Illinois Electric & Gas Co. announc-
ing the public offering of First Mortgage 3%%
Bonds of 1964 and the 3%-3K%-4% Serial Deben-
tures of Central Illinois Electric & Gas Co 11548 11768
1641. Schedule: Originations, participations and profits of
Blyth & Co., Inc., dated October 20, 1939 11550 0)
1642. Letter dated July 31, 1935 from Charles E. Mitchell
Inc., to Charles Blyth, Blyth & Co., Inc., relative to
possible return of J. P. Morgan & Co. to investment
banking business . 11551 11768
1643. Letter dated August 2, 1935 from Charles Blyth to
Charles E. Mitchell, Blyth & Co. Inc., further rela-
tive to the return of J. P. Morgan & Co. to the in-
vestment banking business and the need for getting
"close to them" 11559 11769
1644. Letter dated September 26, 1935 from Charles E.
Mitchell to Charles Blyth, Blyth & Co., Inc., rela-
tive to the conference with Harold Stanley regarding
exclusion of Blyth & Co. Inc. from Bell Telephone
of Illinois financing . 11559 11770
1645. Letter dated September 30, 1935 from Charles Blyth
to Charles E. Mitchell, Blyth & Co., Inc., regarding
C. E. Mitchell's talk with Harold Stanley and other
underwriting problems of Blyth & Co., Inc 11559 11771
1646. Table: Blyth & Co., Inc. participations in issues of
Consolidated Edison Co. of New York, Inc. and its
subsidiaries, June 14,1 934- June 30, 1 939 11 562 11773
1647. Letter from Charles E. Mitchell to Charles Blyth,
Blyth & Co., Inc., regarding Harold Stanley's,
Morgan Stanley & Co. Incorporated, request for
figures showing financial situation of Blyth & Co.,
Inc 11563 11773
1648. Memorandum dated March 29, 1936 by Charles E.
Mitchell to C. R. Blyth, Bernard Ford, Roy L.
Shurtleff and George Leib, Blyth & Co., Inc., listing
underwriting syndicate for $60,000,000 debenture
issue of Consolidated Edison Company of New York _ 11568 11774
1649. Letter dated August 2, 1935 from Charles Blyth to
to George Leib, Blyth & Co. Inc., regarding advis-
ability of opening an account with J. P. Morgan &
Co 11579 11775
1650. Letter dated January 4, 1936 from Charles Blyth to
Charles E. Mitchell, Blyth & Co., Inc. approving
opening an account with J. P. Morgan & Co 11579 11776
' Marked for identification only.
XXVIII
SCHEDULE OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
Appears
on
page
1651-1. Letter dated September 22, 1939 from Henry C.
Alexander, J. P. Morgan & Co., to Peter R. Nehem-
kis, Jr. enclosing table of deposit accounts main-
tained with J. P. Morgan & Co. and Drexel & Co.
by members of the Investment Bankers Association
of America
1651-2. Table: Deposit accounts of members of Investment
Bankers Association of America with J. P. Morgan
& Co.-Drexel & Co. as of 7/1/39
1651-3. Table: Loans by J. P. Morgan & Co.-Drexel & Co.
to those members of the Investment Bankers Asso-
ciation of America having deposit account with
them as of July 1, 1939
1652-1. Letter dated April 11, 1936 from Eugene M. Stevens
to C. E. Mitchell, BIyth & Co., Inc. regarding
position of J. P. Morgan & Co. in proposed Crane
Company financing.
1652-2. Letter from C. E. Mitchell, Blyth & Co., Inc. to
Harold Stanley, Morgan Stanley & Co. Incorporated
requested special consideration for Blyth & Co.
Inc. in Crane Company financing
1652-3. Letter dated April 17, 1936 from Harold Stanley,
Morgan Stanley & Co. Incorporated to C. E.
Mitchell, Blyth & Co., Inc., declining to make
any commitment in Crane Companv financing
1652-4. Letter dated May 26, 1936 from C. E. Mitchell, to
Charles R. Blyth, Blyth & Co., Inc., regarding
Blyth & Co., Inc. being excluded by Morgan
Stanley & Co. Incorporated from Crane Company
business and Niagara Falls Power issue
1652-5. Letter dated May 27, 1936 from Eugene M. Stevens,
to C. E. Mitchell, Blyth & Co. Inc., relative to
disappointment |at being excluded from Crane
Company business
1652-6. Letter dated May 29, 1936 from C. E. Mitchell to
to E. M. Stevens regarding Harold Stanley's com-
ments on Blyth & Co., Inc. not getting Crane
Company's business
1653-1. Table: Profits of Blyth & Co., Inc. from Morgan
Stanley & Co. Incorporated underwritings since
1935
1653-2. Letter dated October 7, 1937 from C. R. Blyth, to
Charles E. Mitchell, Blyth & Co. Inc., concerning
general operating conditions of Blyth & Co. Inc..
1654. Letter dated October 21, 1937 from Charles Mitchell,
Inc., to Charles R. Blyth, Blyth & Co. Inc., re-
garding suggestion from Harold Stanley, Morgan
Stanley & Co. Inc. and Elisha Walker, Kuhn, Loeb
& Co., concerning possible changes in investment
houses, consolidations, buy-out^", etc. and possi-
bility of Blyth's acting in these situations
1655. Letter from Charles E. Mitchell to Charles R. Blyth
regarding Morgan Stanley & Co.'s request for a
statement of amount of underwTiting done in the
past three years by Blvth & Co. Inc
1656-1. Letter dated August 16, 1939 from C. E. MitcheU
to P. R. Nehemkis, Jr. enclosing as requested a
copy of underwriting figures furnished by Blyth
& Co. Inc. to Morgan Stanley & Co. Incorporated
in response to Exhibit 1665
11582
11582
11582
11582
11582
11582
11582
11582
11586
11586
11587
11592
11692
11777
11777
11778
11778
11779
11779
11582 i 11780
11780
11781
11781
11781
11782
11783
11783
SCHJADULE OF EXHIBITS
XXIX
Number and summary of exhibits
Intro-
duced
at page
Appears
1656-2. Letter dated August 8, 1938 from Roy L. Shurtlefif,
Blyth & Co., Inc., to Morgan Stanley & Co., In-
corporated giving record of Blyth & Co., Inc.
underwritings from September 1, 1935 to August
15, 1938
h 57. Letter dated August 10, 1938 from C. E. Mitchell to
Charles R. Blyth giving reason for Harold Stanley's
questionnaire. (Possible charge of monopoly)
1658-1. Table: Reciprocal business of Blyth & Co. Inc. with
Morgan Stanley & Co. Incorporated from Novem-
ber, 1935 to November, 1938 '-
1658-2. Table: Reciprocal business of Blvth & Co. Inc. with
Kuhn, Loeb & Co. from April, 1935 to June, 1939..
1658-3. Table: Reciprocal business of Blyth & Co. Inc. with
The First Boston Corporation from May, 1935 to
July, 1939
1658-4. Table: Reciprocal business of Blvth & Co. Inc. with
DiUon, Read & Co. from May, 1935 to July, 1939..
SITPPLEMENTAL DATA
Exliibiis relating to the financing of Chicago Union Station
Company
1670. Letter dated December 13, 1939 from E. N. Jesup,
Lee Higginson Corporation, to Peter R. Nehemkis,
Jr. naming Harold Stanley of Morgan Stanley &
Co. and A. M. Anderson of J. P. Morgan & Co. as
the individuals with whom N. P. Hallowell dis-
cussed Chicago Union Station Co. undervn-iting
1756. Memorandum dated March 28, 1935 by W. W. K.
Sparrow, vice president, Chicago Union Station
Company, describing discussions with members of
Interstate Commerce Commission on competitive
bidding for $16,000,000 First Mortgage Bonds,
47o, Series D
1759 -f. Letter dated December 14, 1939 from Peter R. Nehem-
kis, Jr. to George W. Bovenizer, Kuhn, Loeb & Co.,
regarding correct figures on participations in Chi-
cago Union Station Company $6,150,000 First
Mortgage Bonds, 5%, Series B
1759-2. Letter dated December 18, 1939. from George W.
Bovenizer, Kuhn, Loeb & Co. to Peter R. Nehem-
kis, Jr. confirming figures presented at the hearing
on participations in Chicago Union Station Com-
panv $6,150,000 First Mortgage Bonds, 5%, Series
B.;
Unnumbered. Letter dated March 15, 1940 from Peter R.
Nehemkis, Jr. to Chicago Union Station Com-
pany requesting list of firms to whom invit.a-
tions to bid were extended on $16,000,000
First Mortgage Bonds, 3>^%, Series F and
replies received in response to invitation
11592
11594
11595
1 1 595
11595
11595
11784
11594
11784
H7S7
11790
11792
11795
11795
11797
11798
11798
XXX
SCHEDULE OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
SUPPLEMENTAL DATA — Continued
^hibits relating to the financing of Chicago Union Station
Company — Continued
UiiiniiiLhered. Letter dated April 8, 1940 from M. W. Clement,
president, Chicago Union Station Company,
to Peter R. Nehemkis, Jr. giving details on
rejection of bid of Halsey, Stuart & Co. for
$16,000,000, 3/8% bonds and acceptance of
otfer of Kuhn, Loeb & Co., and enclosing
copies of letters received in reply to invitation
for bids
Enclosed with the above:
List of bankers, banks, and insurance companies
invited to bid on Chicago Union Station Com-
pany $16,000,000 First Mortgage Bonds,
3/8%, Series F
Letter dated March 5, 1940 from M. W. Clement,
president, Chicago Union Jtation Company,
to Halsey, Stuart & Co., Inc. inviting bid on
$16,000,000 First Mortgage Bonds, 3/8%,
Series F
Chicago Union Station Company, General
balance sheet as of December 31, 1939
Chicago Union Station Com.pany, Income
account for the years ended December 31,
1937, 1938 and 1939
Copy of letter dated March 8, 1940 from Alfred
Shriver, vice president, Morgan Stanley & Co.
Incorporated, to M. W. Clement, president,
Chicago Union Station Company, acknowl-
edging receipt of letter of March 5, 1940
relating to $16,000,000 First Mortgage Bonds,
3^8%, Series F
Copy of letter dated March 9, 1940 from E. C.
Wampler, president. Stern, Wampler & Co.,
Inc., to M. W. Clement acknowledging invita-
tion to bid on Chicago Union Station Company
$16,000,000 First Mortgage Bonds, 3/8%,
Series F
Copy of letter dated March 6, 1940 from Philip
H. Ackert, Freeman & Company, to M. W.
Clement acknowledging invitation to bid on
Chicago Union Station Company $16,000,000
First Mortgage Bonds, 3/8%, Series F
Copy of letter dated March 7, 1940 from Gold-
man, Sachs & Co. to M. W. Clement declining
to bid and stating policy of not engaging in
competitive bidding except on state and
municipal obligations
Copy of letter dated March 6, 1940 from Evans,
Stillman <fe Co. to M. W. Clement declining to
bid and stating policy of not engaging in com-
petitive bidding except on state and municipal
obligation.';
Letter dated March 12, 1940 from Halsey, Stuart
& Co., Inc. to Cliirago Union Station Companv
bidding on $16,000,()()0 First Mortgage Bonds",
3 '.»%, Series F .
S^THBDULE OF EXHIBITS
XXXI
Number and summary of exhibits
Intro-
duced
at page
Appears
on
page
SUPPLEMENTAL DATA — Continued
Exhibits relating to the financing of Chicago Union Station
Company — Continued
Unnumbered. Letter dated March 15, 1940 from Peter R.
Nehemkis, Jr. to Harry L. Stuart, Halsey,
Stuart & Co., Inc., requesting memorandum
regarding Chicago Union Station Company
$16,000,000 First Mortgage Bond^, S%7o,
Series F
Unnumbered. Letter dated March 21, 1940 from Harry L.
Stuart to Peter R. Nehemkis, Jr. giving his-
tory of Chicago Union Station Company trans-
action from his point of view .^
Enclosed with the above:
Memorandum dated February 15, 1940 by Harry
L. Stuart regarding discussions with Henry
Scandrett and J. W. Severs, Chicago, Mil-
waukee, St. Paul & Pacific Railroad, on pro-
posed financing of Chicago Union Station
Company
Copy of letter dated March 14, 1940 from H. W.
Johnson, vice president, Chicago Union Sta-
tion Company, to Halsey, Stuart & Co., Inc.,
rejecting bid on Chicago Union Station Com-
pany $16,000,000 First Mortgage Bonds, 3%%,
Series F_
Letter dated March 21, 1940 from Harry L.
Stuart to J. W» Severs, Chicago, Milwaukee,
St. Paul & Pacific Railroad, relating to rejec-
tion of bid of Halsey Stuart & Co. on Chicago
Union Station Company $16,000,000 First.
Mortgage Bonds, 3}$%, Series F
Umiumbered. Transcript of hearing before the Interstate Com-
merce Commission, March 23, 1940, regarding
Chicago Union SUtion Company $16,000,000
First Mortgage Bonds, 3)^%, Series F
Unnumbered. Report and order of the Interstate Commerce
Commission relative to Chicago Union Station
Company $16,000,000 First Mortgage Bonds,
3%%, Series F
Unnumbered. Letter dated May 10, 1940 from George W.
Bovenizer, Kuhn, Loeb & Co., to Peter R.
Nehemkis, Jr. giving participants and per-
centages in Chicago Union Station Company
$16,000,000 First Mortgage Bonds, Sys7o,
Series F
Enclosed with the above:
'J able: List of subunderwriters in Chicago Union
Station Company issue
Memorandum dated March 15, 1940 by George
W. Bovenizer giving history of Chicago Union
Station Company issue
Memorandum dated January, 1940 calculating'
savings possible tliruugli calling Chicago Union
^Station $16,000,000 First Mortgage Bonds,
ii4%, Series D
11808
11809
11810
11811
11811
11812
11818
11822
1 1 822
11824
1182;-)
XXXII
SCHEDULE OF EXHIBITS
Number and summary of exhibits
Intro-
duced
at page
Appears
on
page
SUPPLEMENTAL DATA — Continued
Exhibits relating to the financing of Chicago Union Station
Company — Continued
Unnumbered.
Letter dated May 14, 1940 from E. N. Jesup,
vice president, Lee Higginson Corporation, to
Peter R. Nehemkis, Jr. giving participants,
percentages and amounts in Chicago Union
Station Company §16,000,000 First Mort-
gage Bonds, 3}^%, Series F
Exhibit relating to the testimony of George Leib
1757. Telegram dated December 19, 1939 from George Leib,
Blyth & Co., Inc., to Peter R. Nehemkis, Jr. relating
to indirect stock interest of Harrison Williams in Blyth
& Co. and its subsequent acquisition by Blyth & Co_..
Exhibits relating to the testimony of George D. Woods
1696. Letter dated December 16, 1939 from Arthur H. Dean,
Sullivan & Cromwell, counsel to The First Boston Cor-
poration, to Peter R. Nehemkis, Jr. regarding the
holdings of stock of Messrs. Macomber, Addinsell and
and Linsley in Harris, Hall & Company, Incorporated.
Unnumbered. Letter dated February 24, 1940 from George D.
Woods, The First Boston Corporation, to Peter
R. Nehemkis, Jr. indicating whether holdings
of investment banking firms in stock of The
First Boston Corporation were for their own
or customers' accounts
Exhibit relating to the testimony of Charles E. Mitchell
1068. Memorandum supplementing table on deposit accounts of
investment banking firms with J. P. Morgan & Co. —
Drexel & Co
11825
11826
11826
11827
11827
INVESTIGATION OF CONCENTEATION OF ECONOMIC POWEK
TUESDAY, DECEMBER 12, 1939
United States Senate,
Temporary National Economic Committee,
Washington^ D. G.
The committee met at 10:50 a. m., pursuant to adjournment on
Friday, December 8, 1939, in the Caucus "Room, Senate Office Build-
ing, Senator Joseph C. O'Mahoney presiding,
Present: Senator O'Mahoney, chairman; Representative Reece;
Messrs. Henderson, Ferguson, Davis, O'Connell, Avildsen, Hinrichs,
and Brackett.
Present also : Undersecretary Edward J. Noble, Clifton M. Miller,
and Robert McConnell, Department of Commerce ; Theodore J. Kreps,
economic adviser to the committee; Peter R. Nehemkis, Jr., special
counsel ; Samuel M. Koenigsberg, associate attorney ; and David Rysh-
pan, financial analyst, Securities and Exchange Commission.
The Chairman. The committee will please come to order. This
hearing on investment banking is under the direction of the Securi-
ties and Exchange Commission.
The Commission was designated by the full committee to make the
presentation m accordance with the terms of the act under which
this committee operates. Mr. Henderson, of the Securities and Ex-
change Commission, will open the hearing with the statement of
its purposes.
STATEMENT OF LEON HENDERSON, COMMISSIONER, SECURITIES
AND EXCHANGE COMMISSION, WASHINGTON, D. C.
PURPOSES OF INVESTMENT BANKING HEARING
Mr. Henderson. The hearings on investment banking which we
are to begin this morning and continue through the follo%v4ng week
are being conducted by the S. E. C. at the direction of this committee,
the Temporary National Economic Committee.
The data and testimony to be offered will cover three major lines
of inquiry: (1) The manner in which the investment banking proc-
esses have been adjusted to conform with the provisions of the Bank-
ing Act of 1933; (2) the extent to which concentration exists in the
industry; and (3) the manner in which business is negotiated between
underwriters and issuers and among underwriters.
The S. E. C. wishes it distinctly understood that the scope of these
hearings is limited to three questions. It is impossible to cover every
phase of the investment-banking business in the time which has been
allotted to us by the committee.
11. S8.^
1 24491 -40 — pt. 22 ^
11384 CONCENTRATION OF ECONOMIC POWER
Technical problems arising from the administration of the several
acts which the Securities and Exchange Commission administers will
not be covered in the present hearings. Such technical matters receive
the daily attention of the Commission and its staff, and are now in the
process of study and analysis by various departments of the
Commission.
Likewise, the special problems affecting dealers in securities through-
out the Nation will not be discussed at these hearings. We recognize
fully the importance of the small dealer in the investment-banking
process. To treat adequately all the special problems affecting the
distribution of securities would require time and study far beyond
that which has been available to us.
May I emphasize that the presentation of the material, the subject
matter of which I have previously outlined, has as its purpose a dis-
cussion of the industry rather than the individuals or firms through
whom the study is to be presented.
Peter R. Nehemkis, Jr., special counsel of the Conmiission's Invest-
ment Banking Section, will serve as counsel to the committee during
these hearings and will conduct the examination of the witnesses.
June 16, 1934, is a date to which frequent reference will be made
throughout these hearings. For on that date the Banking Act, which
had been enacted by Congress during the previous year, became effec-
tive. In accordance with its terms, many of our great commercial
and private banks were confronted with the necessity of making read-
justments in their business activity. Therefore, such great commer-
cial banks as the National City Bank of New York and the Guaranty
Trust Co. divorced themselves from their security affiliates. In the
course of these hearings we shall have occasion to inquire into the
manner and results of this divorce.
Private banks were likewise confronted with the necessity of read-
justing their businesses in accordance with the provisions of the Bank-
ing Act. Thus, for example, J. P. Morgan & Co. elected to abandon
its securities business and remain a bank of deposit. Kuhn, Loeb &
Co., on the other hand, elected to discontinue its commercial banking
activities and remain in the underwriting business. Here, too, we
shall have occasion during the course of these hearings to examine into
the methods by which these private banks, among others, segregated
their activities.
This morning Mr. Nehemkis will present testimony dealing with
the impact of the Banking Act of 1933 upon the private banking firm
of Brown Brothers Harriman & Co.
The Chairman. Mr. Nehemkis.
Mr. Nehemkis. Mr. W. Averell Harriman, please.
The Chairman. Do you solemnly swear tliat the testimony you
are about to give in this proceeding shall be the truth, the whole truth,
and nothing but the truth, so help you God?
Mr. Harriman. I do.
TESTIMONY OF W. AVEEELL HARRIMAN, BROWN BROTHERS
HARRIMAN & CO., NEW YORK, N. Y.
Mr. Nehemkis. Mr. Harriman, will you state your full namo and
address for the record?
Mr. HARRTTVTA-Nr. William AverelJ Harriman.
CONCENTRATION OF ECONOMIC POWER 11385
Mr. Nehemkjs. Wliat is your business or profession, Mr. Harri-
man ?
Mr. Haeriman. I am a private banker; also an active railroad
director.
Mr. Nehemkis. You are a director, are you not, of the American
Ship & Commerce Corporation?
Mr. Haeriman. Yes.
Mr. Nehemkjs. And of the Guaranty Trust Co. of New York ?
Mr. Harriman. Yes.
Mr. Nehemkis. And of W. A. Harriman Securities Corporation ?
Mr. Harriman. Yes.
Mr. Neiiemkis. And of the Illinois Central Railroad?
Mr. Harriman. Yes.
Mr. Nehemkis. You are the chairman of the executive committee
of that railroad, are you not?
Mr. Harriman. That is correct.
Mr. Nehemkis. And of the Los Angeles & Salt Lake Railroad?
Mr. Harriman. That is correct.
Mr. Nehemkis. And of the Mississippi Valley Corporation ?
Mr. Harriman. Yes.
Mr. Nehemkis. And of the Oregon Short Line Railroad?
Mr. Harriman. Yes.
Mr. Nehemkis. And the Oregon-Washington Railroad & Navi-
gation Co. ?
Mr. Harriman. Yes.
Mr. Nehemkis. And the Yazoo & Mississippi Valley Railroad?
Mr. Harriman. Yes.
Mr. Nehemkis. And the Union Pacific Railroad ?
Mr. Harriman. Yes.
Mr. Nehemkis. And you are the chairman of the board of the Union
Pacific?
Mr. Harriman. That is correct.
Mr. Nehemkis. And you are also a director of the Western Union
Telegraph Co. ?
Mr. Harriman. Yes.
Mr. Nehemkis. Do you hold any directorates other tlian those that
I have mentioned?
Mr. Harriman. Offlaand I don't recall.
Mr. Nehemkis. Mr. Chairman, I offer in evidence a table indicating
the directorships which have just been mentioned by the witness.
The Chairman. Do you want this included in the record? You
have already cited each of them.
Mr. Nehemkis. Not necessarily, Mr. Chairman.
organization of brown brothers harriman & CO.
Mr. Harriman, as I understand it the private banking firm of Brown
Brothers Harriman & Co. is a partnership ?
Mr. Harriman. That is correct.
Mr. Nehemkis. And all of the partners are general partners?
Mr. Harriman. That is correct.
Mr. Nehemkis. Will you indicate the names of your partners ?
it know that I have the list.
11386 CONCBNTKATION OF ECONOMIC POWER
Mr. Nehemkis. Suppose in the interest of time I give you the
names and you tell me if I am correct ?
Mr. Harriman. All right, sir.
Mr. Nehemkis. Thatcher M. Brown.
Mr. Harriman. Yes.
Mr. Nehemkis. Moreau D. Brown.
Mr. Harriman. Yes.
Mr. Nehemkis. E. Roland Harriman.
Mr. Harriman. Yes.
Mr. Nehemkis. W. Averell Harriman.
Mr. Harriman. Yes.
Mr. Nehemkis. Prescott T. Busch.
Mr. Harriman. Yes.
Mr. Nehemkis. Lewis Curtis.
Mr. Harriman. Yes.
Mr. Nehemkis. Robert A. Lovett.
Mr. Harriman. Yes.
Mr. Nehemkis. Ray Morris.
Mr. Harriman. Yes.
Mr. Nehemkis. Knight Woolley.
Mr. Harriman. Yes.
Mr. Nehemkis. Are there any other partners ?
Mr. Harriman. No.
Mr. Nehemkis. Will you tell us, Mr. Harriman, what the partner-
ship Brown Brothers Harriman & Co. was?
Mr. Harriman. Brown Brothers Harriman & Co. was a successor
firm of Brown Brothers who started in business some hundred years
ago, I have forgotten the exact date. That firm through many years
did what was known in the old days as merchant banking business,
starting in as merchants and subsequently as financing transactions
of the character of trade, and they got into exchange businesses, and
through the years have developed a business which they are now
conducting, except for the investment banking business which they
were prevented from doing since the Banking Act of 1933.
Mr. Nehemkis. In short, Brown Brothers, one of the predecessor
firms, was engaged in the business of private banking as well as the
underwriting of securities?
Mr. Harriman. That is correct.
Mr. Nehemkis. And W. A. Harriman Co., Inc., was engaged in
the securities business as well as that of private banking?
Mr. Harriman. Some of the present partners of Brown Brothers
Harriman & Co. were engaged in the activities of a company known
as the W. A. Harriman Co., Inc., and Harriman Brothers & Co., a
private banking firm or partnership. These two Harriman firms did
substantially parallel business to what Brown Brothers Harriman
was doing under one firm. In 1931 those three firms were merged,
or those three activities were merged into one firm, then known as
Brown Brothers Harriman & Co., and since tliat time have continued
in business.
Mr. Nehemkis. So for our present purposes we need but consider
three predecessor organizations. Brown Brothers, W. A. Harriman &
Co., Inc., and Harriman Brothers & Co.
Will you tell me, Mr. Harriman, where the firm of Brown Brothers
Harriman & Co. is located?
CONCENTRATION OF ECONOMIC POWER 11387
Mr. Hakrimak. 59 Wall Street, New York City, with banking
activities in Boston, Philadelphia, and with an office in Chicago.
Mr. Nehemkis. Do you have any European affiliations?
Mr. Harriman, Not directly at the present time.
Mr. Nehemkis. Have you had any recently?
Mr. Harriman. Historically, the firm of Brown Brothers & Co. had
relationship with Alexander Brown & Co. in Baltimore. In the Civil
War those activities were separated as the result of the war. In 1914,
up to 1914, there was a relationship between Brown Brothers & Co.
and Brown Shipley & Co. in London, and as the result of the inter-
national situation at that time, the interests of the two .firms were
entirely segregated.
Mr. Nehemkis. Will you describe rather briefly, if you will, Mr.
Harriman, the nature of the business which was transacted by the
firm. Brown Brothers Harriman & Co., prior to the Banking Act
of 1933?
Mr. Harriman. They accepted deposits, lent money, did an accept-
ance business — I don't know how many details you want, or how
understandable these terms will be.
They conducted a foreign-exchange business, were members of the
New York Stock Exchange, and executed orders for customers on
commission basis. They were also engaged in the underwriting and
distribution, retail selling, of securities.
Mr. Nehemkis. Now, the Banldng Act of 1933 required that the
firm of Brown Brotliers Harriman & Co. give up either its com-
mercial banking business or its underwriting business?
Mr. Harriman. That is correct.
Mr. Nehemkis. And the firm of Brown Brothers Harriman & Co.
reached a decision. Which business did your firm elect to abandon?
Mr. Harriman. The underwriting business.
Mr. Nehemkis. Now, the object of the Banking Act was to effect
the divorce of underwriting firms from commercial banking, was it
not?
Mr. Harriman. There were certain objectives that Congress had
at that time, the effect of which was to cause us to give up our under-
writing business. I am not willing to answer yes to that question
in the way you put it, because I don't know what you have in mind
in the subsequent questions. I will be glad to develop any aspect
of the situation that you want me to.
Mr. Nehemkis. You will have a full opportunity, Mr. Harriman,
to develop that as we go along.
The firm Brown Brothers Harriman & Co, presently conducts a
general commercial banking business under the supervision of the
banking law of the State of New York, is that correct?
Mr. Harriman. That is correct.
Mr. Nehemkis. At the time of the enactment of the Banking Act,
you were seriously concerned, were you not, about the fate of those
employees and partners of your firm who were engaged in the securi-
ties branch of your firm's business, and which it was compelled to
abandon ?
Mr. Harriman. That is correct.
Mr. Nehemkis. So for personal reasons, if for no other, jou were
anxious to see these individuals placed in rcme new organization?
Mr. Harbiman. That is correct.
11388 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. On May 29, 1934, there was caused to be organized
under the laws of New York an underwriting firm under the name
of Brown Harriraan & Co., is that correct?
Mr. Harrimz\n. That is correct.
Mr. Nehemkis. Mr. Chairman, I offer in evidence the certificate
of incorporation and the amendments thereto, together with the letter
of transmittal, from Harriman Ripley & Co., Incorporated, by Willet
C. Roper, secretary, to myself.
The Chairman. Do you want to identify this through the person
who sent the letter, or through Mr. Harriman ?
Mr. Nehemkis. The letter of transmittal I would say was suffi-
cient identification.
The Chairman. This is the company of which you were just asking
Mr. Harriman?
Mr, Nehemkis. Yes.
The Chairman. Suppose we ask JNlr. Harriman if this is the cer-
( ificate.
Mr. Nehemkis. Mr. Harriman, I show you the certificate of incor-
poration and the several amendments thereto. Can you tell me
whether you recognize these documents ?
Mr. Harriman. I have no doubt that they are correct.
The Chairman. Do you want these incorporated in the record or
filed?
Mr. Nehemkis. Filed, if you will.
The Chairman. They may be accepted for filing.
(The documents referred to were marked "Exhibit No. 1526" and
are on file with the committee.)
Mr. Nehemkis. Mr. Harriman, where is the firm of Brown Harri-
man & Co., Incorporated?
Mr. Harriman. 63 Wall Street.
Mr. Nehemkis. And the firm of Brown Brothers you said was
located at 59 Wall Street?
Mr. Hareiman. 59.
Mr. Nehemkis. That is the same building, is it not?
Mr. Harriman. The same building, except separate entrances.
Mr. Nehemkis. The same building, separate entrances. Do you
happen to know who formerly occupied the space now occupied by
Harriman Ripley & Co.?
Mr. Harriman. Part of the space they occupy was occupied, 1
believe, by Brown Brothers Harriman & Co. I think they took
ndditional space in the building. I am not clear on that, but I think
they did.
Mr. Nehemkis. The underwriting firm by chance does not occupy
space formerly occupied by the National City Co., does it?
Mr. Harriman. I don't know. That is a question that you had
better ask Mr. Ripley, whom I understand you are going to call.
Mr. Nehemkis. I am asking it of you. You do not know?
Mr. Harriman. No.
SOURCE OF personnel OF BROWN HARRIMAN * CO., INC.
Mr. Nehemkis. I notice that the original incorporators of the
underwriting firm of Harriman Ripley & Co. were Charles N. Cald-
CONCENTRATION OF ECONOMIC POWER 11389
well, Jr., David H, Jackman, and Samuel C. Wood. Can you tell
me who these individuals are?
Mr. Harriman. No.
Mr. Nehemkis. Who would know?
Mr. Harriman. I think Mr. Ripley would know. I don't know
whether you want any assumptions, but I assume they were clerks
in the lawyers' office that incorporated the company. I don't know
whether you want assumptions. You can ask Mr. Ripley.
Mr. Nehemkis. Mr. Harriman, how did it happen that the name
Brown Harriman & Co. was selected as the name for the new invest-
ment banking firm?
Mr. Harriman. Certain partners that had been engaged in the
securities business of Brown Brothers Harriman & Co. became officert^
and directors of the new business, joining with certain men who had
been associated with the City Company — National City Co. There
were considerable discussions, as I recall, of what name could be
selected. They were embarking on a new enterprise. Our partners
that went to this new organization were anxious to indicate a con-
tinuity to retain as much as was possible of the goodwill that they
had enjoyed as being partners of the firm, and that name was selected
after a good deal of thought and consideration and it was a difficult
decision to make, and I think that is about as mucli as I can say
about it.
Mr. Nehemkis. Would you tell me, Mr. Harriman, from what
principal sources the personnel of Brown Harriman came?
Mr. Harriman. I think I have got that information you had asked
me to bring down. There were a total of four hundred and thirty-and-
odd officers and employees of this new company when it started busi-
ness; 5 of the officers came from Brown Brothers Harriman & Co., 7
of the officers had been previously associated with the National City
Co. In addition to those 12, there were 223 employees and staff of
Brown Brothers Harriman & Co. that went to this organization and
203 that had been previously employed by the City Company.
Mr. Nehemkis. Mr. Chairman
Mr. Harriman. As I recall it, those -were substantially all of the
employees that were engaged in that part of the activities of the firm.
There were perhaps about half of the employees that were working
for the City Co.
Mr. Nehemkis. Mr. Chairman, may I offer in evidence a table
entitled "Officers and directors of Brown Harriman & Co., Inc., June
21,1935"?
The Chairman. From what source was it compiled ?
Mr. Nehemkis. The source of this information is predicated upon
a registration statement for brokers or dealers transacting business
on over-the-counter markets on file with the Securities and Exchange
Cormnission.
The Chairman. This statement, therefore, is taken from the records
of the Securities and Exchange Commission ?
Mr. Nehemkis. The official record; correct.
The Chairman. Do you desire to have this printed in the record?
Mr. Nehemkis. If you will order it so.
The Chairman. Without objection, it is so ordered.
(The table referred to was marked "Exhibit No. 1527" and is in-
cluded in the appendix on p. 11605. )
11390 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. I should like to point out, if I may, Mr. Chairman,
the names of some of the principal officers that came from these
various organizations to form the officers of the new underwriting
house of Brown Harriman. Joseph Pierce Ripley, who was the
president and director, who is still president and director, came from
the National City Co., and Mr. Ripley was formerly a vice president
of the National City Co.
Ralph Thompson Crane came from Brown Brothers & Co.
Mr. Harriman. May I correct that, Mr. Nehemkis ?
Mr. Nehemkis. Yes.
Mr. Harriman. Mr. Ripley was the executive vice president of the
National City Co.
Mr. Nehemkis. I accept that correction, Mr. Harriman. Mr. Pier-
pont van Derveer Davis, a vice president and director of Brown
Harriman & Co., likewise came from the National City Co., where he
was a vice president and director. Mr. Hendrik Jolles, a vice presi-
dent and director of Brown Harriman & Co., likewise came from the
City Company.
Horace Sj^lvester, Jr., a vice president and director of Brown Hi»r-
riman, also came from the City Co. of New York. Lawrence Tighe,
a vice president and director of Brown Harriman, was formerly asso-
ciated with Brown Brothers & Co. ; and Charles Stedman Garland, a
vice president and director of Brown Harriman & Co., also came from
Brown Brothers & Co., where he had been a partner. Sidney Lester
Castle was formerly with the National City Co. Henry Mann was
formerly with the National City Co. Harry Frederick Mayer like-
wise was associated with the National City Co.. Willet Roper came
from Brown Brothers. Reginald Martine came from Brown Brothers,
and William Eppel came from the National City Co.
The Chairman. This list is also derived from the records of the
Securities and Exchange Commission ?
Mr. Nehemkis. I am reading from the exhibit previously offered.*
The Chairman. I see.
Mr. Nehemkis. I should like to offer in evidence a document ob-
tained from the files of the City Company of New York, now in dis-
solution. Those names are somewhat confusing. The City Company
of New York was the name which subsequently appeared, but for our
purposes it is the same as the National City Co.
The Chairman. Let me suggest, Mr. Nehemkis, that in correct or-
der, those documents ought to be identified before they are presented.
Now, if Mr. Harriman, who is under oath, is not identifying this
document, it ought to be presented by some person who is under oath
and who can identify it.
Mr. Nehemkis. This document, if you please, Mr. Chairman, is
taken from the files of the -City Company. It is an exhibit of this
committee ; it is vouched for by this committee's counsel.
The Chairman. Let the comittee's counsel be sworn and offer it in
the regular way, then. We want to do this in regular order.
Mr. Nehemkis. I quite agree, sir, that you are suggesting an or-
derly procedure, but if I were to follow your suggestion we would
have half the investment banking population of New York City in
this room today to identify their files.
*"S3xbibit No. 1527," appendix, p. 11606.
CONCENTRATION OF ECONOMIC POWER 11391
The Chairman. Somebody ought to identify these files before they
are received.
Mr. Nehemkis. I will be very happy to subpena any individual
from the City Company you wish to identify this document, but I
venture to say
The Chairman (interposing). Mr. Harriman is on the stand. If
Mr. Harriman can identify this
Mr. Nehemkis. He can't.
The Chairman. For what purpose are you admittmg it?
Mr. Nehemkis. I wish to indicate from the files of the National
City Co. certain information concerning the personnel whose names
have previously been given as to their former function with that
company.
The Chairman. Perhaps Mr. Harriman can testify with respect to
that, if it is material evidence.
Mr. Nehemkis. In all probability it would be better, if you wish to
follow the procedure you are suggesting, to defer this discussion until
another witness comes who I think can do it.
The Chairman. Very well.
JNIr. Nehemkis. Mr. Harriman, at the time of the organization of
Brown Harriman & Co., the principal officers were the former officers
of the City Company, the security affiliate of the National City Bank
of New York, is that correct?
Mr. Harriman. Will you state the question again ?
Mr. Nehemkis. Will you read the question ?
(The I'eporter read Mr. Nehemkis' last question.)
Mr. Harriman. The principal officers of what ?
Mr. Nehemkis. Of Brown Harriman & Co.
Mr. Harriman. The main officers of Brown Harriman & Co. were
drawn partly from the partners of Brown Brothers Harriman & Co.
and partly from the City Company organization.
Mr. Nehemkis. How did it happen that so large a number of the
senior personnel came from the security affiliate of the National Citv
Bank of New York?
Mr. Harriman. As I recall it, they were pretty nearly balanced,
50-50 on important positions.
It is true that we selected at the time the discussion of the organiza-
tion took place, in which I participated, Mr. Eipley as president of the
company. Mr. Ripley had been associated with us when we were at
39 Broadway, operating under the name of W. A. Harriman & Co.
He had an important position with us for several years. I had got to
know him intimately, had great respect for him, and it was as the
result of that relationship that he was selected — the intimate contact
that we had with him at that time — that he was selected as the president
from the group of active men who came from both of these two sides.
Mr. Nehemkis. Had you any discussion at that time with Mr.
Perkins, the president of the National City Bank ?
Mr. Harriman. I don't recall any discussions with Mr. Perkins.
There may well have been some discussions with Mr. Perkins, but they
don't register in my recollection.
Mr. Nehemkis. Mr. Chairman, I should like to offer a letter to the
shareholders of the National City Bank of New York by James H.
Perkins, chairman of the board of directors. This is a public document
11392 CONCENTRATION OF ECONOMIC POWER
which was widely distributed to all stockholders at the time. Do you
feel that Mr, Perkins should identify it?
The Chairman. The same comment I made on the previous exhibit
can be made on this. I don't wish to impede your examination, but it
seems to me if Mr. Harrinian is on the stand you ought to question him
with respect to whatever testimony you wish to elicit from him.
iMr. Nehemkis. I have no propriety in asking Mr. Harrimun to
ideritify a document written by Mr. Perkins which is a matter of public
information. I want this on the record, because upon this letter from
which I propose to read, certain further facts are to be elicited from
the witness.
The CHAffiaiAN. The letter isn't identified by you ; it is presented by
you. It is true you are the counsel here and you are presenting this
testimony, but counsel are not witnesses.
Mr. Nehemkis. I know, but these
The Chairman (interposing). If you wish to become a witness, I
will swear you and you can identify it, and then the responsibility will
be yours.
Mr. Nehemkis. But you are placing me in the position of repudiat-
ing your own exhibits.
Tlie Chairman. Not at all. These are not our exhibits. These are
exhibits you are bringing up. Please don't argue with me.
Mr. Nehejikis. I am not, sir. You feel this document should be
identified?
The Chairman. I certainly do. I don't want any question raised
about anything that is presented.
Mr. Nehemkis. I shall have to ask Mr. Perkins to come down to
identify this dociunent, then.
Mr. Harriman, in acquiring
Mr. Henderson (interposing). Just a moment.
Mr. NilJ^iemkis. May I request this witness be dismissed for a mo-
ment so I mav ';all another ?
Mr. Charles Huff, please.
The Chairman. Do you solemnly swear that the testimony you are
about to give in this proceeding will be the truth, the whole truth, and
nothing but the truth, so help you God?
Mr. Huff. I do.
Tlie Chairman. You may be seated.
TESTIMONY OF CHARLES H. HUFF, ASSOCIATE UTILITIES FINAN-
CIAL ANALYST, INVESTMENT BANKING SECTION, SECURITIES
AND EXCHANGE COMMISSION, WASHINGTON, D. C.
Mr. Nehemkis. What is your full name ?
Mr. Hurr. Charles H. Huff.
Mr. Nehemkis. Are you a member of the staff of the Investment
Banking Section in the S. E. C, ?
Mr. HuTF. I am.
Mr. Nehemkis. For how long have you been a member of that staff?
Mr. Huff. Since last March.
Mr. Nehemkis. In connection with your various field investigations,
havp ymi had oppfminn to examine thf» files of thp City Company of
CONCENTRATION OP ECONOMIC POWER 11393
New York, Incorporated, in dissolution, formerly the National City
Co.?
Mr Huff. I have.
Mr. Nehemkis. And, in that connection,- have you had occasion to
discuss documents obtained from those files with the liquidating
officers ?
Mr. Huff. I didn't^ — I had some work on that. I don't recall ex-
actly the extent of it.
Mr. Nehemkis. I show you a document which is a copy of a letter
from James H. Perkins, to the shareholders of the National City
Bank of New York and ask you whether this is a copy of the letter
you obtained from the files of that company ?
Mr. Huff. Yes; this letter was given to me in response to my re-
quest for the letter that had been sent out.
The Chaikman. Given to you by whom ?
Mr, Huff. I have seen a great many people. I would have to refer
to my notes to know exactly. It was an official.
Mr. Nehemkis. Was it Mr. Law ?
Mr. Huff. Mr. Law.
Mr. Nehemkis. And Mr. Law is one of the liquidating officers of
the National City Co. ?
Mr. Huff. Yes, he is. He is the most active officer, as he explained
to me. He has all of the records.
Mr. Nehemkis. I show you a document obtained from the files of
the City Co. of New York, Incorporated, in dissolution, formerly the
National City Co., entitled "Senior Officers of the City Company of
New York, Incorporated (in dissolution)." I ask you whether this
document was obtained from the files of the City Co. ?
Mr. Huff. Yes; this was given to me in the same way, by Mr. Law.
Mr. Nehemkis. That is all, Mr. Huff.
(The witness, Mr. Huff, was excused.)
Mr. Nehemkis. Mr. Chairman, if you please, may 1 offer these two
documents, identified by the previous witness as having been obtained
from the files of the City Co., in evidence?
The Chairman. Without objection, the documents may be admitted.
(The documents referred to were marked "Exhibits Nos. 1528 and
1529" and are included in the appendix on p. 11606 and 11607.)
TESTIMONY OF W. AVERELI HARRIMAN, BROWN BROTHERS
HARRIMAN & CO., NEW YORK, N. Y.— Resumed
Mr. Nehemkis. Mr. Harriman, may I read to you two paragraphs
from Mr. Perkins' letter [reading from "Exhibit No. 1528"] :
The Banking Act of 1933 passed last June required divorcement of commercial
banking from investment banking within the period of a year. I have felt that
The National City Bank of New York should support the policy of Congress in
both letter and spirit. In the year past we have been endeavoring to find a way
fully to meet this policy and at the same time to preserve any good-will value
there might be in the business of The City Company of New York, Inc., formerly
The National City Company.
Good-will is a nebulous thing. In so far as it is attached to the name of the
City Company it cannot be realized on, because the continued use of the name
would identify the user with the Bank and that cannot be permitted without
control by the Bank, which is forbidden by law. In so far as it may be repre-
11394 CO]NfCENTRATION OF BCONOMrC POWER
sented by personnel trained in the investment banking business, such personnel
consists of free individuals whom the City Company is not in a position to deliver
to a prospective purchaser.
So that, in taking- over the principal former executives of the City
Companj', Brown Harriman & Co. acquired in effect whatever good-
will was transferable?
Mr. Harriman. I think that is too broad a statement.
Mr. Nehemkis. How would you like to refine it?
Mr. Harriman. Well, the investment banking business is a very
personal business. Individuals have clients just as a law firm would
in conducting their business. Certain individual partners have their
contacts. Goodwill and continuity, as far as the relationships with
the issues of securities, comes largely through those personal contacts,
and if they have been developed over many years they are very apt,
as in the legal profession, to stay with the individuals.
The Chairman. Were there a large number of the employees of the
previous institution who did not come over?
Mr, Harriman. Yes. In this case, as I have explained in what I
have said before, the Brown Harriman Co. started with about half of
the staff of the men that were on the City Company. Now, when you
go broader, away from the persons dealing with the issues of securi-
ties, you get into the question of the general public and the investing
public, and there to carry on the goodwill, I think you need the
name, the continuity of the name.
Mr. Nehemkis. And that, I suppose, would be true of whatever
goodwill was acquired from Brown Brothers Harriman & Co., via
any personnel that came to the new banking fii-m ?
Mr. Harriman. Yes.
STOCK ownership BY HARRIMAN FAMILY IN BROWN HARRIMAN & (X)., INC.
Mr. Nehemkis. At the time of the organization of Brown Harri-
man & Co., Mr. Harriman, there .was issued, was there not, 200,000
shares of $20 par value common stock ?
Mr. Harriman. That is correct.
Mr. Nehemkis. The initial capital of the firm was, therefore,
$4,000,000?
Mr. Harriman. Plus $1,000,000 of paid-in surplus; a total of
$5,000,000.
Mr. Nehemkis. Of these 200,000 shares, 196,000 shares were taken
by the members of the Harriman family and their personal holding
companies ?
Mr. Harriman. That is correct.
Mr. Nehemkis. The remaining 4,000 shares were taken by three
officers of Brown Harriman & Co., Incorporated, and the wife of the
fourth?
Mr. Harriman. As I recall it; yes.
Mr. Nehemkis. Do you say that is a correct statement, or not ?
Mr. Harriman. Yes; it is,
Mr. Nehemkis. Over 4,000 shares taken in the manner I described ?
Mr, Harriman, Yes,
Mr. Nehemkis. In other words, the oflScers of Brown, Harriman &
Co. contributed but $80,000 toward the initial $5,000,000 capital of
the new firm?
CONCENTRATION OF ECONOMIC POWER 11395
Mr. Harriman. Twenty-five times four. It is $100,000.^
Mr. Nehemkis. Correct. My associate corrects me. So that the
officers of Brown Harriman & Co. were obviously not contributing
capital, but were contributing their technical skill and business con-
nections with the accounts of the City Company or Brown Brothers
Harriman & Co.?
Mr. Harriman. They were contributing technical skill and reputa-
tion—the value of goodwill was what was going to be transferred—
what was going to come with the individuals was a matter the future
would determine.
Mr. Nehemkis. But some element of the ability of the personnel to
continue with their relationships with corporations was of signifi-
cance, was it not?
Mr. Haeriman. The previous contacts that these individuals had
had, and the business they had done, and the reputation that they
had for competence and integrity was an important aspect. This
type of business requires, as does the private-banking business, two
thnigs. It requires ample capital and requires men to manage the
concern, and the conduct of this business is not possible without both
these elements.
Mr. Nehemkis. I see. On April 1, 1935, did not Brown -Harriman
& Co. increase its capitalization through the issuance of 50,00Q shares
of $20 par value preferred stock ?
Mr. Harriman. That is correct.
Mr. Nehemkis. In other words, an additional $1,000,000 of capital
was provided ?
Mr. Harriman. That is correct.
Mr. Nehemkis. Ail of this preferred stock was taken, was it not,
by members of the Harriman family and their personal holding com-
panies?
Mr. Harriman. That is correct.
Mr. Nehemkis. Since June 15, 1934, the stock holdings of the offi-
cers of Brown Harriman & Co. has increased by 8,200 shares, is that
correct, sir?
Mr. Harriman. 8,200 shares, yes. That is correct.
Mr. Nehemkis. In other words, they held as of June 30, 1939,
12,200 of the 208,200 shares outstanding on that date?
Mr. Harriman. 208 out of the
Mr. Nehemkis. Yes.
Mr. Harriman. 208.
Mr. Nehemkis. 208
Mr. Harriman. 200 shares, and they held how many?
Mr. Nehemkis. They held 12,200 shares?
Mr. Harriman, That is correct.
Mr. Nehemkis. At no time during this period did the Harriman
family and its personal holding companies directly or indirectly hold
less than 95 percent of the common stock, and 100 percent of tlie pre-
ferred stock of Brown Harriman & Co., Incorporated, is that correct,
Mr. Harriman?
Mr. Harriman. I think your mathematics is a little bit off, but it
is substantially correct.
1 Includes $5 per share of paid-in surplus.
11396 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. Do you accept my statement as being substantially
correct ?
Mr. Harriman. I would say that we held all of it.
Mr. Nehemkis. All of the preferred stock ?
Mr. Harriman. All of the preferred stock, and in excess of 90 per-
cent of the common stock.
Mr. Nehemkis. In excess of 90 percent. Therefore the members of
the Harriman family, until October 24, 1938, had absolute control over
the underwriting house of Brown Harriman & Co.; is that correct?
Mr. Harriman. No.
Mr. Nehemkis. You have just testified, have you not, Mr. Harriman,
that the Harriman family and its personal holding companies held all
of tlie preferred stock of Brown Harriman & Co.?
Mr. Harriman. Preferred stock votes, too, as well as the
Mr. Nehemkis. And you have also testified that the Harriman fam-
ily and its personal holding companies hold substantially 90 percent of
the common stock of Brown Harriman & Co. I am going to ask the
reporter to repeat the question which I asked j'ou, when you said "No."
Mr. Harriman. Well, now, I will go on.
Mr. Nehemkis. Do you understand my question?
Mr. Harriman. Yes. It comes down to a question of what "control"
means, and if I understand the dictionary, "control" means the exercise
of control. We did not exercise any control as stockliolders — the ma-
jority of the stockholders. We had the rights of all stockliolders to
vote at the annual meetings or to call special meetings of stockholders,
and the majority of the stockholders, which were my brother and I,
certainly had the right up to '38 to vote stock, and we could have
elected a new boai-d of directors or could have done any of the things
that stockholders can do. As a practical matter we had nothing to
do with the operations of the business, and we, as I recall it, sent in
our proxies in the way stockholders usually do, and the directors were
reelected from year to year.
The Chairman. In other words, this was an illustration of the di-
vorcement of ownership and control, so commonly to be noted in
corporate structures today ?
Mr. Harriman. Well, I will be glad to answer that "Yes," sir.
The Chairman. And when the stockholders, which in this case were
the members of the Harriman family, elected a board of directors, that
board of directors under the bylaAvs had full discretion in the manage-
ment of the affairs of the company ?
Mr. Harriman. That is correct, sir.
The Chairman. That is the way you wish the matter to be under-
stood?
Mr. Harriman. Yes, sir. I would also like to point out that my
brother and I are two individuals of definite characters, and althougn
lor your purposes I have answered the question for my brother and
myself and the Harriman family, there are individuals involved in
that, and I don't think it is accurate to leave the impression that this
was one dominating personality.
Mr. Nehemkis. May I put this question to you: As I understand
your explanation of the problem of control, what you are saying, in
effect, if I understand you correctly, is that while you had the power
all during this time to exercise control, nevertheless, you and your
CONCENTRATION OP ECONOMIC POWEK 11397
brother did not see fit to exercise the power which you had. Isn't that
what you are saying?
Mr. Harrima'n, Mr. Nehemkis, there are certain windows there
[pointing], and I have the power, I believe, to force my way through
those windows and jump out onto the stro-^-t. If we had attempted to
do what you indicate it would have been financial suicide for the
company that was doing business. It would have been impossible to
have active men in a business that requires personal and intimate rela-
tionships to function with any group of stockholders who would be
as arbitrary as you have indicated, so from my standpoint I don't
think as a practical matter we could have done the things that you
have indicated except in an emergency. I would go to that window
and try to jump out of it if the house were on fire, but I wouldn't do
it otherwise.
Mr. O'CosfNEix. Going back to your previous answer a little way
back, you referred to the fact that ordinarily, while you and your
family owned th^ voting control that you had not exercised, which
you refer to as control, you would ordinarily send in proxies and that
sort of tiling. How ws^s tlie first lioard of directors of Brown Harri-
man & Co. elccte--^?
Mr. Harkiman. j'Vi«\".- v^':is full discussion before the incorporation
between my brother and myself and the partners of Brown Brothers
Harriman & Co. that went into th'-s business, and Mr. Ripley and
some of his associates who were going to become associated with this
business.
Mr. O'CoNNELL. But, technically, I take it that the first board of
directors, the first slate of officers of the Brown Harriman & Co.,
were elected pursuant to a vote of the stockholders ?
Mr. Hareiman. That is correct, and they resulted from a general
discussion of all of the men involved in the management, as well as
my brother, Roland, and myself as stockliolders.
Mr. O'CoNNELL. But the stockholders who were entitled to vote
elected, the slate?
Mr. Harriman. That is correct.
Mr. Nehemkis. Mr. Harriman, at the time of incorporation of
Brown Harriman & Co., E. Roland Harriman and yourself owned
substantially all of the paid-in capital of the firm of Brown Brothers
Harriman & Co. Is that correct?
Mr. Harriman. That is correct.
Mr. Nehemkis. And this situation, I take it, has not changed ma-
terially since 1934?
Mr. Harriman. It has not.
POWERS UNDER PARTNERSHIP AGREEMENT'
Mr. Nehemkis. Under the articles of partnership as they existed
m 1934 at the time of the incorporation of Brown Harriman & Co.,
E. Roland Harriman and yourself could by acting^ together determine
the distribution of profits among the partners. Is that correct, sir?
Mr. Harriman. Let me get my memorandum out, may I ?
Mr. Nehemkis. Surely.
Mr. Harriman. You are quoting from a letter that I wrote you ?
11398 CONCENTRATION OP ECONOMIC POWER
Mr. Nehemkis. I am paraphrasing from a letter which you wrote
to me on December 6, 1939.'
Mr. Harriman. Would you mind letting me follow that again?
Mr. Nehemkis. I will repeat the question for you. I think I said
that, under the articles of partnership as they existed in 193-i at the
lime of the incorporation of Brown Harriman & Co., E. Roland
Harriman and W. Averell Harriman could, by acting together, deter-
mine the distribution of profits among the partners of the private
banking firm of Brown Brothers Harriman & Co. ?
Mr, Harriman. I believe that is correct; yes, sir.
Mr. Nehemkis. Under the articles of partnership now in effect and
operative since 1936, the distribution of profits is determined by the
vote of two-thirds of the partners, each partner being entitled to
one vote?
Mr. Harriman. That is the way the partnership articles read.
Mr. Nehemkis. At the time of the incorporation of Brown
Mr. Harriman (interposing). I would like to, if I may, say that
as a matter of fact those matters resulted from a discussion of all
of the partners and no case do I recall in which they weren't settled as
a practical fact by agreement of all concerned.
Mr. Nehemkis. At the time of the incorporation of Brown Harri-
man & Co., E. Roland Harriman and yourself, I understand, had a
veto power over Brown Brothers Harriman & Co.'s. financial com-
mitments. That is to say, to give a simple illustration, if, one of
the partners should desire to make a loan of $30,000,000, let us say,
to Germany, E. Roland Harriman and W. A. Harriman could veto
that exercise of financial commitment?
Mr. Harrijman. Either one of us could.
Mr. Nehemkis. Under the articles of partnership in effect dating
from January 1, 1936, Ho financial commitment can be taken over the
objection of any partner having any of the ordinary capital of the
firm. Is that correct?
Mr. Harriman. That is correct.
Mr. Nehemkis. So that E. Roland Harriman or yourself, by your
individual objection, can veto any financial commitment proposed
by the other partners?
Mr. Harriman. That is correct.
Mr. Nehemkis. Now under the articles of partnership in effect
in 19
Mr. Harriman (interposing). Frankly, I don't like the word
"veto." "Veto" gives a significance which I think is beyond the fact.
It is perfectly natural in this type of business that the cap'ital part-
ners should have the right to be consulted before any commitments are
made. Their capital is at risk, and if they object to a commitment
being taken any one of them could object; it would be unfair for the
firm to take the commitment without their approval.
The Chairman. In other words, you operate more or less by unani-
mous consent? , .
Mr. Harriman. As far as these matters that he has been discussing
with me are concerned.
The Chairman. That is what I mean.
iSee "Exhibit No. 1530," appendix, p. U613.
CONCENTRATION OP ECONOMIC POWER 11399
Mr. Harriman. We do. As a matter of practical fact we wouldn't
take any commitment against the objection of any one of the partners.
Mr, Nehemkis. Now under the articles of partnership which were
in effect in 1934 at the time of the incorporation of Brown Harriman
& Co., is it not correct that E. Roland Harriman and yourself had
the power to block the entry of any new partners into the firm?
Mr, Harriman, That is 1934? Let me check this. In 1934 my
brother and I, if we acted together, but neither of us acting alone,
could amend or modify all of the articles, and the introduction of a
new partner was deemed to be an amendment of the articles,
Mr. Nehemkis, You accept my question and may I now accept
your answer as being correct?
Mr, Harriman. Yes,
Mr. Nehemkis. Is it correct tl\at E. Roland Harriman and your-
self still have this power under the present articles of incorporation ?
Mr. Harriman. I don't believe so. As I understand it, the articles
can be amended now by two-thirds vote, can't they ?
Mr. Nehemkis. According to the provision, which I do not want
to read
Mr. Harriman [reading from "Exhibit No. 1536"] :
Two thirds of the partners of the firm may amend, * * *
At the present time — you have read the number of partners — my
brother and I are two out of a total of nine, is it ?
Mr. Nehemkis. Yes. Since you have started, will you read the
next paragraph of that page 2 ?
Mr. Harriman. "Two-thirds of the partners "
Mr. Nehemkis (interposing). No; the effect of the corresponding
provision on page 2.
Mr, Harriman. You have already said that in 1934 my brother
and I, acting together but neither of us alone, had the right to intro-
duce new partners and amend the articles, but I am going back. You
asked me about the present situation. In the present situation an
introduction of a new partner can only, according to the articles, be
accomplished by the action of two-thirds of the partners.
Mr. Nehemkis, That is what I understand.
Mr, Harriman, So that at the present time technically a partner
could in theory be introduced without my brother's and my approval.
In fact, we would not introduce into the finn a partner who is not
acceptable to each partner.
The Chairman, The firm is now a corporation?
Mr, Harriman, No ; the firm is still a partnership. We are talking
now about the firm.
The Chairman, It possesses all the inherent qualities of a part-
nership,
Mr. Harriman. Yes, sir; all the partners are personally liable for
all of the obligations of the firm and when you talk about paid-in
capital it is true that my brother and I have substantially all of the
paid-in capital, but each and every member of the firm is financially
obligated after the capital is used up.
The Chairman, And since it is a partnership it is quite natural
that nobody who is not acceptable to the existmg partners would be
permitted to enter?
Mr. Harriman, That is correct.
124491— 40— pt. 22 i
11400 CONCENTRATION OB^ ECONOMIC POWER
Representative Reece. May I ask why you operate as a partner-
ship ? If it is not pertinent, I will withdraw the question.
Mr. Harriman. I will be glad to try to answer that question. I
am not sure that I can. There are certain definite advantages of
incorporation and there are certain advantages of a partnership,
with disadvantages in both cases. This firm has historically oper-
ated for the 100-year period as a partnership. There is a certain
personal touch about a partnership. You come into an office, the
partners are sitting around, there isn^t the authority designated of a
president and certain vice presidents. The people who do business
with us like to talk to a partner; they feel they are talking to a
principal and not a salaried employee. It makes it possible to discuss
things perhaps a little bit more personally with our customers. In
addition to which we are members of the New York Stock Exchange
and that is only possible if you have a partnership.
The disadvantages are that all of us are personally liable for the
commitments and there are certain restrictions of activity. We
haven't got some privileges of incorporated banks. So I don't know
whether I could fully answer your question.
Mr. Nehemkis. Mr. Harriman, let me endeavor to sum up what I
understand to be the facts that we have been developing up to this
point.
At the time of the organization of Brown Harriman & Co., virtually
the total capital interest in Brown Brothers Harriman^& Co. was held
by yourself and your brother, E. Roland Harriman ?
Mr. Harriman. That is correct.
Mr. Nehemkis. That is still true?
Mr. Harriman. Yes, sir.
Mr. Nehemkis. The two brothers, E. Roland and W. Averell, could
by acting together determine the distribution of profits, and that is
still true?
Mr. Harriman. They could at that time, but it is no longer true
technically according to the articles. In reality we couldn't in either
case. In '34 we could technically, and at the present time the articles
are so drawn that we can't in fact. On your own questions you brought
that out.
Mr. Nehemkis. No firm commitments of a financial nature could be
made over the objections of yourself and your brother, E. Roland?
Mr. Harriman. Yes; and as a practical matter of any partner of
the firm.
Mr. Nehemkis. And no new partners could be brought into the
firm over the objections of yourself or of your brother, E. Roland
Harriman ?
Mr. Harriman. That is true, or, as a practical matter, of the other
partners of the firm.
Mr. Nehemkis. But in particular, in both of those last questions,
over your objection or that of your brother?
Mr. Harriman. In the year 1934.
Mr. Nehemkis. I am addressing myself to the year 1934, the time of
the organization of Brown Harriman & Co.
(Affirmative nod by the witness.)
Mr. Nehemkis. The two Harrimans, E. Roland and W. Averell,
acting together could force the retirement of any partner; they had
that power?
CONCENTRATION OF ECONOMIC POWER 11401
Mr. Harriman. They had that power, but again I say we could not
have exercised that power,
Mr. Nehemkis. That was not my question.
Mr. Harriman. Well, that is all right, Mr. Nehemkis, but I think
1 am entitled to answer a question in such a way that it conveys the
correct impression of the state of affairs.
Mr. Nehemkis. I want you to.
Mr. Harriman. I am sure that the committee will want me to have
that privilege.
Mr. Nehemkis. I desire that myself, but I want to get an answer
to a question and then if you wish to expand that I want you to
feel free, of course, to do that. Let me repeat the question : The two
Harrimans acting together could at the time we are discussing the
matter, 1934, force the retirement of any partner. Is that correct?
You had the power to do so?
Mr. Harriman. Under the articles as they were then drawn we
had that technical power. We could not, in matter of fact, have
exercised that power without the approval of all of the other part-
ners.
The Chairman. Of course, that is true of any partnership.
Mr. Harriman. That is true of any partnership.
Mr. Nehemkis. So during this whole period the controlling own-
ership of the private banking firm of Brown Brothers Harriman &
Co. and the investment banking firm of Brown Harriman & Co. were
in the same hands?
Mr. Harriman. Will you ask that question again?
(The reporter read the question.)
Mr. Harriman. I would like the privilege of not answering that
question yes or no. Technically it is a fact that my brother and I,
two individuals, and certain members of our family have substan-
tially all the capital of Brown Brothers Harriman & Co., and have
over 90 percent of ^Ihe financial interest in this firm, this corporation
that is now known as Harriman Ripley & Co. I can't help but
reiterate the fact that these two businesses are businesses that require
capital and management and that neither of these two activities
can be a success without a combination of those, two things. They
are equally important. You can't say which is more important than
the other because they are both of the essence, and therefore in
connection with Brown Brothers Harriman & Co., which is a part-
nership, there are partners who contribute capital, there are other
partners who contribute capital and contribute to management, there
are other partners who contribute to majiagement. It is a combi-
nation of those things that makes for the activities and success of a
firm, and to recite our capital interest in the firm with a categorical
answer of "Yes," I don't want to leave in the minds of any member
of the committee that I consider that that indicates, as it might in a
shoe business or some other business of an impersonal character, a
dominating control, because it just does not jibe.
THE banking AOT OF 19 33
Mr. Nehemkis. Mr. Chairman, I should like to offer in evidence at
this time certain relevant sections of the Banking Act of 1933 which
bear upon the testimony.
11402 CONCENTRATION OF ECONOMIC POWER
The Chairman. Do you vv-ant these printed in the record?
Mr. Nehemkis. If you will, sir.
The Chairman. Without objection it is so ordered.
(The sections of the Bunking Act of 1933 referred to were marked
"Exhibit No. 1530" and are included in the appendix on p. 11607.)
Mr. Nehemkis. May I read you a provision from section 21 of the
Banking Act. Will you give Mr. Harriman a copy ? [Reading from
"Exhibit No. 1530"] :
It shall be unlawful for any person, firm, corporation, association, business
trust, or other similar organization, engaged in the business of issuing, under-
writing, selling, or distributing, at wholesale or retail, or through syndicate
participation, stocks, bonds, debentures, notes, or other securities, to engage at the
same time —
The Chairman. Wliere are you reading, Mr. Nehemkis?
Mr. Nehemkis. I am reading from section 21 (a) —
to engage at the same time to any extent whatever in the business of receiving
deposits * * ♦."
Now do you consider that the purpose of the law, Mr. Harriman,
was merely to effect technical changes in the investment banking busi-
ness, or was the purpose and intent to completely segregate these two
branches of banking?
Mr. Harriman. It is difficult for me to tell you gentlemen what the
intent of Congress was at the time the Banking Act of 1933 was passed.
It is my recollection that there was one fundamental reason for it, and
that was to protect the deposits and the capital of banking institutions
from being invested in and engaging in the underwriting business,
which we all know is a highly hazardous business, and whatever rela-
tionships there may have been which Congress in their wisdom thought
were abuses between the banks and their affiliates. When you are
through I would like to read something from the debate.
Mr. Nehemkis. If E. Roland Harriman or yourself personally
engaged in the underwriting business, that I take it would be a viola-
tion of the law so long as you were the controlling partners in Brown
Brothers, Harriman?
Mr. Harriman. I am not going to answer that question without
advice of a lawyer and a study of it. I can say. Senator, that what
we have done we naturally scrutinized with the best legal advice that
we could have, and I don't believe that there is any question as to the
lawfulness of the activities of my brother and myself and of the two
firms, the firm and the corporation. There have been hundreds of
examinations a!nd I am not competent, Senator, to discuss the technical
legal aspects ot the situation.
The Chairman. I was about to suggest to counsel that probably it
would be helpful if in addressing questions to the witnesses you would
endeavor to elicit the facts and then let the committee draw any con-
clusions that it may wish. To propound a question of this character to
the witness I think is obviously a little bit premature, to say the least.
Let's develop the facts. There is no objection, I think, on the part of
anybody to stating exactly what the facts may be, but obviously if
counsel or if the chairman would argue with the witness, the witness
would be entitled to argue back about the inferences to be drawn.
The Chairman with pleasure takes note of the fact that Under
Secretary Edward J. Noble, of the Department of Commerce, is pres-
CONCENTRATION OB' ECONOMIC POWER 11403
ent this morning. We will be glad to have him participate in the
hearing at his pleasure.
Mr. Nehemkis. Mr. Harriman, on October 24, 1938, was there not
created a voting trust?
Mr. Hari?iman. Senator, may I read — there was an implication in
what Mr. Nehemkis asked me, and may I read very briefly from the
debate in Congress on this question of the Banking Act ?
The Chairman. You may proceed.
Mr. Harriman. This is Mr, Glass. Senator Robinson interrupted
Senator Glass when he was expounding the purposes of the bill, and
he is talking about private bankers so that "they" refers to private
bankers. This is Senator Robinson, of Arkansas, speaking. He in-
quired from the floor : "That means that if they" — which I understand
is private bankers — "wish to receive deposits they must have separate
institutions for that purpose?"
Senator Glass' answer is "Yes."
That is the only part of the debate that I know that had any refer-
ence to private bankers.^
VOTING TRUST FOR STOCK OF HARRIMAN RIPLET & CO., INCORPORATED
Mr. Nehemkis. Mr. Harriman, on October 24, 1938, was not a voting
trust set up under which there was deposited the common and pre-
ferred stock of Brown Harriman & Co. held by members of the Harri-
man family and their personal holding companies?
Mr. Harriman. That is correct.
Mr. Nehemkis. Was not the duration of this voting trust to be
10 years ?
Mr. Harriman. That is correct.
Mr. Nehemkis. And under the voting trust agreement were there
not three voting trustees?
Mr. Harriman. There were.
Mr. Nehemkis. Will you state the names of the three trustees and
tell us briefly something about the background of each ?
Mr. Harriman. The first one is Joseph P. Ripley, who, as you
brought out, is president of Harriman Ripley & Co., which I don't
think it has been brought out is the present style under which Brown
Harriman & Co. now does business.
The Chairman, In other words, Brown Harriman & Co. is the
identical institution now known as Harriman Ripley.
Mr, Harriman. Harriman Ripley, yes. Very frankly, Senator, the
names were so close that it created confusion and we realizad a very
few months after they started with that name that it hadn't worked
out as we had expected.
We thought the banking firm would be known as it always had
been as Brown Brothers and this institution known in the Street as
Brown Harriman, but it didn't work out that way.
The Chairman. Brown Brothers was the other institution?
Mr. Harriman. That is the other firm, and nobody was able to
keep it straight, and after a lot of discussion and trying to find an
opportune time, on January 1, a year ago, 1939, the name was changed
£0 Harriman Ripley & Co.
The Chairman. Brown Brothers Harriman is what sort of firm?
* For complete text of the dUcaflfilon on this point, ae« appendix, p. Ji8i!8.
11404 CONCENTRATION OF ECONOMIC POWER
Mr. Harkiman. Brown Brothers Harriman is a banking company
doing all the functions of a banking institution.
The Chairman. That is an ordinary bank except that it is a
private bank ? It accepts deposits ?
Mr. Harriman. It accepts money and does forei^ exchange.
The Chairman. And the other is an underwriting company?
Mr. Harriman. Harriman Ripley & Co. is an underwriting
company.
INTEREST OF HARRIMAN FAMELT IN BROWN BROTHERS HARRIMAN & CO.
AND IN HARRIMAN RIPLEY & CO., INCORPORATED
The Chairman. And both institutions are owned substantially by
the same persons?
Mr. Harriman. I will have to say that that is not the case at the
present time. It was largely the case — as far as paid-in capital was
concerned — it was largely the case in 1934. At the present time my
brother and my children have very substantial interests in the firm
under irrevocable trusts that we have set up.
The Chairman. What is the distinction in ownership now between
the two?
Mr. Harriman. That is in the banking business?
The Chairman. That is Brown Brothers Harriman.
Mr. Harriman. Brown Brothers Harriman & Co., my brother and
I have substantially all, not the last penny but substantially all the
paid-in capital; that is the working capital of the firm. We have
nine partners. All of us are responsible for the obligations of that
firm, so that all the personal assets of every one of my partners, as
well as my brother and myself, are back of the firm, but actually, of
the paid-in capital that the firm is working on, my brother and I
have contributed substantially all of it.
The Chairman. That is a partnership set-up?
Mr. Harriman. That is a partnership.
The Chairman. Now the other?
Mr. Harriman. In the corporation, cutting through certain hold-
ing companies, Senator, this is the distribution. I will give Mr.
Nehemkis a copy of this, if I may.
The Chairman. You have just handed the chairman a typewritten
sheet entitled "Percent of Total Voting Stock, Preferred and Common,
Including Voting Trust Certificates."
Mr. Harriman, Tliis should be Harriman Ripley & Co. That re-
lates to that company.
The Chairman. This shows the stock ownership of Harriman Rip-
ley & Co., a corporation?
Mr. Harriman' Yes, sir.
The Chairman (reading) :
Percent
W. A. Harriman ,. 30. 59
E. R. Harriman ^ 30.59
4 children 34. 08
Ripley & stafiO 4. 74
Total 100.00
(The list referred to was marked "Exhibit No. 1531" and is in-
cluded in the appendix on p. 11404.)
CONCENTRATION OF ECONOMIC POWER 11405
Mr. Hareiman. I would like to state that it is true that my brother
and I are trustees for the trusts that we have set up, irrevocable trusts
for our four children.
The Chairman. Now, then, this is distribution of the stockholder
ownership of the corporation ?
Mr. Harbiman. Cutting through certain details. I will be glad
to give you the exact ownership.
The Chairman. How about the management of the two companies ?
Mr. Harriman. My brother and I are active partners in the part-
nership.
The Chairman. The banking partnership?
Mr. Harriman. The banking firm. We were stockholder and now
are voting trust certificate holders of Harriman Ripley. We have
functioned in no greater extent than any stockholder, of any com-
pany, where a man would have a substantial investment. I think in
actual fact we have done probably less. We haven't had anything to
do with the management or its affairs or its commitments or anything
other than reports that would logically be made by corporations to
their stockholders.
The Chairman. You are not officei-s of the company?
Mr. Harriman. We are not officers nor directors.
The Chairman. That partnership is managed
Mr. Harriman (interposing). That firm; it is a corporation.
The Chairman. I was referring now to Brown Brothers Harriman,
the banking institution.
Mr. Harriman. That firm is managed by nine partners, of which
my brother and I are two.
The Chairman. So that of the bank, you do exercise a managerial
power ?
Mr. Harriman. I do. I think you are familiar with some of my
other activities.
I would like to state at some stage — ^I don't know whether this is
the opportune moment or wait until Mr. Nehemkis is finished in
trying to make me a dominating factor in something I am not — ^but
I would like to explain one of the reasons — may I do it now ?
The Chairman. May I ask the companion question? In answer
to the question I have already propounded, you have said that you
and your brother are active partners in the banking partnership and
that you exercise a certain managerial power there ?
Mr. Harriman. That is correct.
The Chairman. Now, with respect to the corporation, are you or
either of you officers of the corporation?
Mr. Harriman. No, sir.
The Chairman. Would the corporation be the institution which
handles securities and investments?
Mr. Harriman. That is right.
The Chairman. Do you exercise any managerial power over that
portion ?
Mr. Harriman. None whatsoever.
The Chairman. Who are the managers of that corporation ?
Mr. Harrision. Mr. Ripley is the president and there is a board of
directors of five individuals who are officers of that firm.
The Chairman. And they operate in accordance with the bylaws
imder the charter issued by the State of New York ?
11406 CONCENTRATION OF ECONOMIC POWER
Mr. Harriman. Yes, and none of the partners, my brother nor I
nor any of the partners of the firm doing the banking business have
anything to do with the management of this corporation doing the
underwriting.
• The Chairman. And your interest in this company is that of a
stockholder deriving profits, if possible, from the operation of the
company ?
Mr. Harriman. That is correct. We were motivated to organize
that company — if I get a chance to do so I would like to tell you
why we organized this company, but perhaps this isn't the opportune
time to.
The Chairman. You were about to make a statement when I inter-
rupted you and unless Mr. Nehemkis objects I thmk you might
make the statement now.
Mr. Nehemkis. I think it might be more helpful to the committee
if we proceed and develop the facts.
Mr. Harriman. I will be very glad to wait until I hear all of what
Mr. Nehemkis has in his mind.
Mr. O'CoNNELL, May I ask a question?
Mr. Harriman, I understood you to say a little earlier that j'our
interest in the Harriman Ripley Co. was the same sort of interest
that any other stockholder would have. I understand you and your
brother either own or control a majority of the stock interest in that
company. That is correct, is it not?
Mr. Harriman. Mr. Nehemkis is going to explain about a voting
trust, and I will be glad to wait until he explains it.
When this company was started, my brother and I and certain
holding companies were owners of over 90 percent.
Mr. O'CoNNELL. To the extent that you are owners of the stock in
this company, I take it your position is that you are interested in
the affairs of the company to the same extent that any stockholder
would be interested in the affairs of the company ?
]\Ir. Harriman. As a stockholder.
Mr. O'CoNNELL. You have no reason for feeling that your interest
in this company is any different from your interest in any other type
of company in which you might have a stock interest?
Mr. Harriman. I wouldn't think so, no.
voting trust for stock or harriman riplet & CO., incorporated —
THE VOTING TRUSTEES
Mr. Nehemkis. You were about to describe the background of the
three voting trustees. You had mentioned the name of Joseph Pierce
Ripley and you had indicated that Mr. Ripley was the president of
Brown Harriman & Co., and is now the president of Harriman Ripley
& Co. You were going to tell us something about the prior affilia-
tions of the three trustees. "What was Mr. Ripley's prior background,
just very briefly?
Mr. Harriman. Mr. Riploy wont to work I tliink as mechanic's
helper somewhere out West and drifted to New York, and got into
the enijineering firm of J. 0. Wliite & Co., engineers. He came from
that firm to W. A. Harriman & Co. and was with us for several
years — ^I have forgotten the length of time — worked with us and had
an important msition with us. He had an opportunity to go with
CONCENTRATION OF ECONOMIC FOWEK 11407
the National City Co., which had broader opportunities than the one
he had with us at that moment, and he was interested in tlie experience
that would give him and he went to them, and he worked up in that
organization until in 1934 he was the executive vice president at the
time when there was no president. Then he joined the group that
organized Harriman Kipley & Co. and is now the president of that
company. He is a man of great personal integrity and ideals ; he is
most careful; he is an unusual combination of a very careful and
thorough man with rather broad vision and understanding as to the
fundamentals of business of this character and I don't know anyone
in this profession whom I have greater confidence in than I have in
Mr. Ripley, and my brother shares that view.
Mr. Nehemkis. Another one of the voting trustees is Mr. George
Adams Ellis?
Mr. HAnRiMAN. That is correct.
Mr. Nehemkis. Will you tell us briefly about Mr. Ellis?
Mr. Harriman. Mr. Ellis is a lawyer of the firm of Clark, Carr
& Ellis. He happens to be a personal counsel of my brother and
myself and of my mother's estate. He is a man that I have had a
great deal of confidence in, not only as a lawyer but as a common-
sense lawyer as well.
Mr. Nehemkis. And the third voting individual is Mr. Fred Bald-
win Adams.
Mr. Harriman. That is correct.
Mr. Nehemkis. And Mr. Adams is the president of the West Indies
• Sugar Co., is he not ?
Mr. Harriman. That is correct,
Mr. Nehemkis. And director and chairman of the Air Reduction
Co.?
Mr. Harriman. That is correct.
Mr. Nehemkis. And director of the Atlantic Coast Line Railway?
Mr. Harriman. That is right.
Mr. Nehemkis. How did it happen that Mr. Frederick Baldwin
Adams was selected ?
Mr. Harriman. Mr. Adams is an old personal friend of my brother
and myself. He had a small interest in the corporation, W. A. Har-
riman & Co., and was one of its directors. In selecting men for this
voting trust, we selected him among our intimate friends that we
thought not only understood in a general way tho character of the
business that was being conducted but he was a man that had real
common sense and judgment, and we had a great deal of regard for
his opinion.
Mr. Nehemkis. At the time this voting trust was set up, Mr. Har-
riman, what purpose did you have in mind, what did you seek to
accomplish ?
Mr. Harriman. This voting trust, I will state it negatively first,
was not set up to further insulate my brother or myself from this
business. We didn't consider that we needed any such insulation,
for either legal reasons or for practical i-easons. The voting trust
was set up because Mr. Ripley asked us to set the voting trust up.
Mr. Nehemkis. May I interrupt? Do I understand you correctly
that the underlying purpose of the voting trust was suggested by Mr.
Joseph P. Ripley ?
11408 CONCE^fTRATION OF ECONOMIC POWER
Mr. Harriman. That is correct, and we were glad and willing to
accede to it for reasons that he had in mind. As I have explained
to you, and as the Senator has seen, there is a number of individuals
on whose lives depend certain continuity of voting rights of this
stock. There was question in the mind of Mr. Ripley and some of his
associates as to what might happen if some of us died, and in this type
of business it isn't desirable to have outsiders as stockholders who
might have different motives than the strict conduct of the business,
and it was for that reason that he asked us to set the voting trust up.
It was entirely at his suggestion, and I understand you are going to
call him. You can ask him any further details you want.
Mr. Nehemkis. I would like to call at this time Mr. Joseph P.
Ripley.
The Chairman. It is now a quarter past. Have you finished with
Mr. Harriman?
Mr. Nehemkis. No. I expect to recall Mr. Harriman.
The Chairman. Would this be a suitable point to recess ? We will
recess until 2 o'clock, if that be agreeable.
Mr. Harriman. Senator, may I ask that at some time I be asked
to make a statement about the fundamental reasons that my brother
and I put the money that we did into this enterprise?
The Chairman. I will be very glad to put the question to you.
Mr. Henderson. I will make an effort to see that it is done.
Mr. Harriman. In case I am not called, I would like the opportunity
to record that I want that opportunity.
The Chairman. The committee will stand in recess until 2 o'clock
this afternoon.
(Wliereupon, at 12: 15 o'clock, the meeting recessed until 2 o'clock
the same day.)
AFTERNOON SESSION
The committee resumed at 2 : 10 p. m., on the expiration of the
i-ecess.
The Chairman. The committee will please come to order.
Mr. Nehemkis. Mr. Ripley, please.
The Chairman. Do you solemnly swear that the testimony you are
about to give in this proceeding shall be the truth, the whole truth,
and nothing but the truth, so help you God?
Mr. Ripley. I do,
TESTIMONY OF JOSEPH EIPLEY, PRESIDENT AND DIRECTOR,
HARRIMAN RIPLEY & CO., INCORPORATED, NEW YORK, N. Y.
officers and directors of harriman riplet & CO., incorporated, and
their prior affiliations
Mr. Nehemkis. Mr. Ripley, will you state your full name and ad-
dress, please ?
Mr. Ripley. Joseph Pierce Ripley, Smithtown, Long Island, N. Y.
Ml'. Nehemkis. What is your present business connection?
Mr. Ripley. Harriman Ripley & Co.
Mr. Nehemkis. Are you an officer of tliat company?
Mr. Ripley. Yes.
Mr. Nehemkis. What position do you occupy?
CONCENTRATION OF ECONOMIC POWER 11409
Mr. RiPLET. President and director.
Mr. Nehemkis. How long have you held. that position?
Mr. Ripley. About 5^/^ years.
Mr. Nehemkis. Were you president and director of Brown Harri-
man & Co. ?
Mr. Ripley. Yes; but I must make clear that that is the same cor-
porate entity as Harriman Ripley & Co.
Mr. Nehemkis. Are you now president and a director of the firm
of Harriman Ripley & Co., Incorporated ?
Mr. Rlpley. I am president and director of the corporation known
as Harriman Ripley & Co., but I cannot refer to it as a firm.
Mr. Nehemkis. Will you give me the names of the other officers and
directors of Harriman Ripley & Co/, Incorporated, and also state their
prior affiliations?
Mr. Ripley. The names of the other directors are Pierpont V. Davis,
who is vice president and director; Hendrik R. JoUes, who is vice
president and director; Horace C. Sylvester, Jr., who is vice president
and director; Willet Crosby Roper, who is treasurer and a director.
Do you want the assistants ?
Mr. Nehemkis. I want you to give me a statement
Mr. Ripley (interposing). Reginald Martine is comptroller. Wil-
liam R. Eppel is assistant treasurer and assistant secretary.
Mr. Nehemkis. Does that complete all of the senior and junior
officers of Harriman Ripley & Co., Incorporated ?
Mr. Ripley. Yes ; to the best of my recollection.
Mr. Nehemkis. Now will you state, Mr. Ripley, the prior affilia-
tions of each of the officers and directors whom you have just given?
Mr. Ripley. Pierpont V. Davis was previously a vice president of
the National City Co.
Mr. Nehemkis. May I interrupt for a moment, Mr. Ripley ? Were
you likewise a vice president of the National City Co. ?
Mr. Ripley. I was at one time an assistant vice president of the
National City Co. Then I was a vice president of the same company,
and during the last year, approximately, ending the latter part of
May 1934, 1 was executive vice president of the same company.
Mr. Nehemkis. Will you proceed, Mr. Ripley?
Mr. Ripley. Mr. Hendrik Jolles was a vice president of the National
City Co. Mr. Horace Sylvester, Jr., was a vice president of the Na-
tional City Co. Mr. Willet C. Roper was an office manager, I believe,
of the firm of Brown Brothers Harriman & Co. ; Mr. William R. Eppel
was in the employ of the National City Co., and I have forgotten his
title at the time he left the National City Co. Mr. Reginald Martine
was in the employ of Brown Brothers Harriman & Co., but I cannot
remember his exact position there.
Mr. Nehemkis. Now, how about some of the others that you men-
tioned, some of the junior vice presidents? Wliat about^ — did you
mention Elwood D. Smith's prior affiliation ?
Mr. Ripley. I thought you wanted to know the directors. Elwood
D. Smith is a vice president of Harriman Ripley & Co., and was em-
ployed by the National City Co. until the latter part of May, 1934.
Mr. Nehemkis. And Mr. Robert McLean Stewart ?
Mr. Ripley. Mr. Robert McLean Stewart is now a vice president
and was previously employed by the National City Co. until the latter
part of May 1934. Mr. Milton C. Cross, who is a vice president of
11410 CONCENTRATION OF ECONOMIC POWER
Harriman Ripley & Co., was employed by the National City Co. until
the latter part of May, 1934. Mr. Harry W. Beebe is a vice presi-
dent of Harrimon Ripley & Co. and was employed by the National
City Co. until the latter part of May, 1934.
Mr. Nehemkis. So that at the present time, 10 out of the 12 oflBcers
and directors of Harriman Ripley & Co., Incorporated, were formerly
associated with the National City Co., the security affiliate of the
National City Bank of New York; is that correct, Mr. Ripley?
Mr. Ripley. You will have to give me a minute to add it up and
check the 10. I think it is correct.
Mr, Nehemkis. Take all the time you wish, Mr, Ripley.
Mr. RiPLET. It is 10, but there is a name which I omitted, that be-
ing the name of James G. Scarff, who is a vice president of Harriman
Ripley & Co. and was with the National City Co, until the latter part
of May 1934,
Mr, Nehemkis. AVliat is your complete answer ? How many of the
present officers and directors of Harriman Ripley & Co., Incorporated,
were formerly associated with the National City Co. ?
Mr. Ripley, I would say that there are 10 officere of Harriman
Ripley & Co. who were associated with the National City Co., and
that there are 4 directors of Harriman -Ripley & Co., who were with
the National City Co. Your question was officers and directors.
Mr. Nehemkis. You have answered my question, Mr. Ripley.
Mr. Chairman, may I offer in evidence a table showing the officers
and directors of Harriman Ripley & Co., Incorporated, as of No-
vember 1939? This table indicates the names of the officers or direc-
tors, their present position with the firm of Harriman Ripley & Co.,
Incorporated, their previous connection, and the position held in
that firm.
This table was prepared by the Investment Banking Section and
is predicated on the registration statement for brokers or dealers
transacting business on the over-the-counter markets on file with the
Securities and Exchange Commission.
The Chairman. Without objection it may be received.
(The table referred to was marked "Exhibit No. 1532" and is
included in the appendix on p. 11610.)
Mr. Nehemkis, Mr, Ripley, of the previous personnel of the
National City Co. that are now associated with Harrimaii Ripley &
Co., Incorporated, will you tell mo the duties of Mr. Sylvester at
the time he was a vice president of the National City Co, ? Do you
by chance recall that?
Mr, Ripley. Mr. Sylvester was with the National City Co, for
an extended period of time, but the answer to your question depends
upon the time you are talking about. If you mean
Mr. Nehemkis (interposing). Immediately prior to dissolution and
resignation of Mr. Sylvester,
Mr. Ripley, Mr. Sylvester had charge of the purchase and sale of
municipal bonds and had charge of what we call the "sales and
trading department," to the best of my recollection.
Mr. Nehemkis. And what are Mr. Sylvester's functions with Har-
riman Ripley & Co., Incorporated?
Mr, Ripley, He is a vice president in charge of the sales depart-
ment, and a director of the company.
CONCENTRATION OF ECONOMIC POWER 11411
Mr. Nehemkis. Now, what were the duties, as of the same tune
and period as stated in my preceding question, of Mr. P. V. Davis
at the time he was a vice president of the National City Co.?
Mr. KiPLET. P. V. Davis as a vice president of the National City
Co. in the latter part of May 1934, was a vice president in the buying
department, as we call it.
Mr. Nehemkis. Did he not have any more specific functions than
that? Did he not concern himself with particular types of securities?
Mr. Ripley. Davis bought various varieties of corporate securities,
but he is generally looked upon as somewhat of a specialist in railroad
bonds.
Mr. Nehemkis. And, Mr. Ripley, at the time that you were a vice
president of the National City Co., what were your duties?
Mr. Ripley. At the same time, sir?
Mr. Nehemkis. At the same time, and let me state that all the
questions I will ask you hereafter until I so indicate have the same
time sequence. If there is any question in your mind, ask me.
Mr. Ripley. I was executive vice president of the company, in
charge of operations.
• Mr. Nehemkis. Did you not have any specialized type of security
buying as your particular jurisdiction?
Mr. Ripley. Not at that time, but my background was rather more
the purchase of industrial securities.
Mr. Nehemkis. Did you by chance concern yourself with the pur-
chase of public utility securities?
Mr. Ripley. Very seldom, sir.
Mr. Nehemkis. IS'ow what about the duties of Mr. Jolles? Do
I pronounce his name correctly?
Mr. Ripley. No; his name is pronounced Jol'les — J-o-l-l-e-s.
Mr. Nehemkis. Wliat were his duties?
Mr. Ripley. Mr. Jolles' duties with the National City Co, were
in what essentially we call the foreign field.
Mr. ^ehemkis. And Mr. Beebe who was at the time the junior
officer, what were his duties and functions ?
Mr. Ripley. Mr. Beebe in the National City Co. was in the sales
department and took some part in syndicating.
Mr. Nehemkis. And what are his duties with Harriman Ripley
& Co., Incorporated?
Mr. Ripley. He handles our syndicating of issues.
Mr. Nehemkis. And Mr. Scarff?
Mr. Ripley. Mr. Scarff is a vice president in the buying depart-
ment of Harriman Ripley.
Mr. Nehemkis. And Mr. Milton Cross?
Mr. Ripley. The same.
VOTING TRUST FOR STOCK OF HARRIMAN RIPLEY & CO., INCORPORATED
Mr. Nehemkis. Mr. Ripley, I show you a copy of a voting trust
agreement dated October 24, 1938. I ask you to tell me whether
you recognize that document as the voting trust agreement undei
which you operate.
11412 CONCENTRATION OF ECONOMIC POWER
Mr. Ripley. I recognize it as the voting trust agreement of certain
shares of Harriman Ripley & Co. I am puzzled to know how to
say that I operate under it.
Mr. Nehemkis. You do identify this as the voting trust agree-
ment?
Mr. Ripley. I identify that as a voting trust agreement under
which various shares of Harriman Ripley are deposited.
Mr. Nehemkis. Mr. Chairman, I should like to have this docu-
ment, just identified, filed with the committee.
The Chairman. Without objection, it may be filed.
(The agreement referred to was marked "Exhibit No. 1533" and
is on file with the committee.)
The Chairman. How many shares are the subject of this agree-
ment ?
Mr. Ripley. One hundred and ninety-six thousand shares of com-
mon stock and 50,000 shares of preferred stock.
The Chairman. What proportion of the total stock of the com-
pany does that represent?
Mr. Ripley. Something over 90 percent, Mr. Chairman. I don't
know the exact percentage.
Mr. Nehemkis. And can you tell me the prior holders of the pre-
ferred stock before it was deposited under the agreement?
Mr. Ripley. Five thousand shares, prior to this agreement, held
by W. Averell Harriman; 5,000 preferred stock held by E. Roland
Harriman; 15,000 shares of preferred stock were held by the Mer-
chant Sterling Corporation.
Mr. Nehemkis. And what is the Merchant Sterling Corporation?
Mr. Ripley. May I complete? I am not through yet.
Twenty thousand shares of preferred stock were held by Orama
Securities Corporation, and 5,000 held by the Sterling Iron & Rail
way Co.
Mr. Nehemkis. You had occasion to mention certain companies
there. Will you tell me what those companies are?
Mr. Ripley. I don't know.
Mr. Nehemkis. You have no knowledge of what they are?
Mr. Ripley. I am satisfied as to who they are, but I don't have
categorical knowledge.
Mr. Nehemkis. Who would know?
Mr. Ripley. Mr. Harriman would know.
Mr. Nehemkis. Now, of the common stock prigr to its deposit
under the agreement, can you tell me who the holders were and the
amounts held, if you will, please ?
Mr. Ripley. Twenty-two thousand shares of common stock were
held under a trust for the benefit of Mary Averell Harriman ; another
22,000 shares of common stock were held in a trust for the benefit
of Kathleen L. Harriman ; another 22,000 shares were held in a trust
for the benefit of Elizabeth Harriman; another 22,000 shares were
held in a trust for the benefit of Phyllis Harriman; 54,000 shares
were held by Merchant Sterling Corporation; 54,000 shares were
held by Orama Securities Corporation.
Mr. Nehemkis. Are you a voting trustee under the voting-trust
agreement ?
CX>NCENTRATION OF ECONOMIC POWER 11413
Mr. Ripley. I am, under the voting-trust agreement which you
just turned in.
Mr. Nehemkis. Are there any other voting-trust agreements?
Mr. Ripley. No ; but I thought possibly you referred to these trusts
I mentioned here.
Mr. Nehemkis. Do you know, Mr. Ripley, can you tell me whether
you and your two associates as voting trustees have ever held any
meetings ?
Mr. Ripley. Yes.
Mr. Nehemkis. And when did you hold such meetings?
Mr. Ripley. We met in October 1938, when the trust was estab-
lished and closed.
Mr. Nehemkis. Have you ever held any other meetings?
Mr. Ripley. Two of the trustees were present at the stockholders'
meeting held in the early part of 1939.
Mr. Nehemkis. And will you give me the names of those two
trustees who were present at the meeting you referred to?
Mr. Ripley. Frederick B. Adams and myself.
Mr. Nehemkis. Now, at the first meeting that you referred to,
October 25, 1938^ I believe you said
Mr. Ripley (interposing). I didn't say the day, but that sounds
correct.
Mr. Nehemkis. You accept that date as being the date of the
meeting ?
Mr. Ripley. Yes.
Mr. Nehemkis. Will you tell me briefly what the nature of the
business was which was transacted?
Mr. Ripley. We closed the voting trust. By that I mean that the
stock was delivered to the voting trustees, the voting trust agreement
was executed, the voting trust certificates were issued and delivered,
the stock was taken to the vault of a bank, and the other regular
procedure of closing such a voting trust was gone through.
Mr. .Nehemkis. Other than the meeting of October 25, 1938, at
which were present all three voting trustees, has there been any other
meeting at which all three voting trustees were present for the pur-
pose of transacting business?
Mr. Ripley. There has been no formal meeting, but the voting
trustees see each other from time to time, informally.
Mr. Nehemkis. But that was the only formal meeting?
Mr. Ripley. I would say so, except the shareholders' meeting in
the early part of 1939.
Mr. Nehemkis. I beg your pardon, you were not finished.
Mr. Ripley. 1939. I just didn't get a chance to give the last word.
Mr. Nehemkis. Are there any records kept of the meeting of the
voting trustees, any formal minutes or records?
Mr. Ripley- There is no record other than the closing papers of
the first meeting in 1938, which is about 1 year ago, plus the record of
the stockholders' meeting held in March 1939.
^ Mr. Nehemkis. Now, at the time that you became a voting trustee,
did you receive any instructions as to what your duties were to be?
Mr. Ripley. Yes.
Mr. Nehemkis. From whom did yon receive such instructions?
Mr. RiPLET. Counsel.
11414 concentrXtion of economic power
Mr. Nehemkis. And will you indicate counsel's name?
Mr. Ripley. Davis, Polk, Wardwell, Gardiner, and Reed.
Mr- Nehemkis. Did you receive instructions from any other per-
son or persons?
Mr. Ripley. No.
Mr. Nehemkis. Did you have any discussions with Mr. W. Averell
Harriman or with E. Roland Harriman concerning your duties and
functions as a voting trustee?
Mr. Ripley. No.
Mr. Nehemkis. jMr. Ripley, what do you conceive the purpose of
the voting trust agreement to be?
Mr. Ripley. I conceive the purpose to be precisely what is written
on the first paragraph in the first page which reads [reading from
"Exhibit No. 1533"] :
WHEREAS the Stockholders deem it for the best interests of themselves and
of the Corporation to act together concerning the management of the Corpora-
tion and to that end to unite for a definite period of time certain voting and
other powers and rights held by them as stockholders of the Corporation, and
to place such rights and powers in the hands of the Trustees as hereinafter
provided.
Mr. Nehemkis. I believe that Mr. Harriman testified this morning
that the suggestion for the creation of the voting trust agreement was
yours. Is that correct?
Mr. Ripley. I couldn't hear just what he testified, but I will testify
that the suggestion was mine ; yes.
Mr. Nehemkis. Now, would you describe for the coimiiittee, if you
will, Mr. Ripley, the manner by which the National City Co. was
associated with the National City Bank of New York?
Mr. RiPiJET. Yes. I will do so to the best of my ability from recol-
lection. All of the stock of the National City Co. was held under a
trust agreement by three trustees for the benefit of the stockholders
of the National City Bank, and the stock certificate pertaining to the
National City Co. was printed or engraved on the reverse side of the
shares of the National City Bank. That is my recollection.
Now, do you want me to describe the trust agreement?
Mr. Nehemkis. No ; that is all I have asked for and I think you have
done that very well.
Mr. Ripley. I want to add that the appointment of the trustees under
the National City plan was in the hands of those persons who were
directors in the National City Bank. The power to remove a trustee
rested in the hands of those who were directors of the National City
Bank. The trust agreement recites that the trustees of the National
City Co. might consult the directors of the National City Bank for
advice, and that they would be protected if they acted on such advice;
if one of those three trustees should die or resign, the appointment of a
successor was in the hands of those wiio were the directors of the
National City Bank.
Mr. Nehemkis. Would it be an accurate statement, Mr. Ripley, to
say that your familiarity with the voting-trust machinery of the
National City Bank of New York and National City Co. prompted
your suggestion for the creation of a similar instrument for Brown
Brothers Harriman & Co., Harriman Ripley & Co., Incorporated?
Mr. RiPLET. No; that would be an inaccurate statement.
CONCENTRATION OF ECONOMIC POWER 11415
Mr, Nehemkis. How did it happen that you suggested the voting-
trust arrangement? You must recall, if perhaps you can, what the
discussions were at the time. What prompted you to suggest that
special type of instrument?
Mr. Ripley. For 9 years, sir, I worked for the National City Co.,
whose stock was traded on the public markets. It went up one day and
it went down another day. I observed the effect of that situation on
an investment-banking organization. I observed that some members
of the staff were watching the market for the stock of the company
rather than tending to their business. I vowed that, if I could help it,
I would never wish to work for an investment-banking organization
whose stock was spread all around and for which there were public
markets.
Now, in 1934 I went through some difficulties in organizing a new
investment banking organizatioin. I had several hundred employees
to whom I thought I owed a great obligation for the continuance of
their employment. Why? Because literally hundreds of them came
to me from time to time asking me what the future held out, whether
there was going to be any job for them.
Now, in 1934, June, we succeeded in organizing Brown Harriman
& Co., which has since become Harriman Ripley & Co. After organ-
izing it, there was a great amount of confusion that took place at that
time. It began to dawn on my mind that something might happen
if either or both of the Harrimans should die; something might hap-
pen if one of these girls for whose benefit certain shares are held
should marry and then die; and it became clear to me that I might
end up right back where I started. Now, feeling as I did that I had
this obligation to my staff and to myself, I made up my mind that
I was goin^ to try to do something to prevent getting myself back
into the position where the stock of this company was spread around
in various hands and the future was distinctly uncertain.
Mr. Nehemkis. It couldn't possibly be true, could it, Mr. Ripley,
that the purpose of the voting-trust agreement was to immunize the
banking firm of Brown Brothers Harriman & Co. from the underwrit-
ing firm of Brown Harriman & Co., now Harriman Ripley & Co. ?
Mr. Ripley. That was not the purpose.
Mr. Nehemkis. And it couldn't possibly be true, could it, Mr. Rip-
ley, that the purpose of the vpting-trust agreement was to create a
legal fiction that would prevent the banking firm from having any
direct physical contact with the underwriting firm ?
Mr. Ripley. That was not the purpose.
Mr. Nehemkis. Now, the National City Co. was one of the largest
originators and distributors of securities in the United States prior to
the time of its dissolution. Is that correct, Mr. Ripley ?
Mr. Ripley. Yes.
Mr. Nehemkis. I have before me a table entitled, "Origination of
bond issues by all houses originating $20,000,000 or more per annum,
1927-30." The source of the data underlying this table is predicated
upon hearings held before a committee of Congress pursuant to Senate
Resolution 71, Seventy-first Congress, third session, 1931. The data
appears on page 299. Some of the data which went into the prepara-
tion of this table is also predicated upon information appearing in
124491 — 40 — pt. 22 6
11416 CONCENTRATION OF ECONOMIC POWER
the Wall Street Journal during the years 1927-30. May it please the
committee, I offer this table in evidence.
The Chairman. This, you say, is taken from the Senate hearings?
Mr. Nehemkis. That is correct.
The Chairman. Without objection, it may be admitted.
(The document referred to was marked "Exhibit No. 1534" and is
included in the appendix on p. 11611.)
Mr. Nehemkis. I notice in this exhibit, Mr. Ripley, that for the year
1927 the National City Co. originated over $408,000,000 of securities
which were 54 percent of all originations by bank affiliates, and for
the year 1929, over $465,000,000 of securities, which were 48 percent
of the total bank-affiliate originations.
Mr. Ripley. Let me interrupt. You have misread your own
statement.
Mr Nehemkis. Have I?
Mr. RiPLET. Ye3. You said 1929 ; you mean 1928.
Mr. Nehemkis. I thought I said 1927, but I accept your correction.
For the year 1929 the National City Co. appears to have originated
over $360,000,000 of securities which represent 30 percent of the total
bank affiliate originations, and for the year 1930 I observe from this
table that the National City Co. originated over $227,000,000 of securi-
ties, which i-epresents 12 percent of the total bank-affiliate originations.
Mr. Chairman, may it please the committee, I should like to offer in
evidence a table likewise taken from the hearings pursuant to Senate
Resolution 71 which I mentioned a moment ago, and a letter offered in
connection with those hearings to Mr. Julian W. Blount, then clerk
of the United States Senate Committee on Banking and Currency.
The letter was written by Mr. C. E. Mitchell, who at that time, I be-
lieve, was president of the National City Bank. The letter is dated
New York, February 10, 1931.
Deae Mb. Blotjwt : In the course of my hearing before the Senate Committee on
Banking and Currency on February 2, Senator Walcott requested me to gather
some data regarding the increasing importance in recent years of banking af-
filiates in the investment banking business, and I agreed to do so. As a result
of a study made by our people, I am now able to send for your records the
attached sheets.
The first is a record of the past four years of the origination of bond issues by
all houses who originated $20,000,000 or more per annum. From this table it will
be noted that banking affliate organizations daring this period increased from
12.8 per cent of the total in 1927 to 23.3 per cent in 1928, 41.5 per cent in 1929, and
39.2 per cent in 1930.
I offer, Mr. Chairman, the letter from which I have just read, and
the table which I have previously identified.
The Chairman. Without objection, it may be admitted.
(The documents referred to were marked "Exhibit No. 1535" and
are included in the appendix on p. 11612.)
Mr. Nehemkis. Mr. Ripley, at the time that the City Company was
confronted with the necessity of dissolution, what discussions took
place, if any, among the officers with respect to their future relation-
ship with the investment banking business?
Mr. Ripley. We discussed the problem of what we would do with
the organization, the staff, and ourselves.
Mr. NEEffiMKis. And you were seriously concerned about finding a
place for many of the personnel with whom you no doubt had been
associated during the years?
CONCENTRATION OF ECONOMIC POWER 11417
Mr. Ripley. Particularly so, because I thought that it constituted
the finest investment banking organization that existed at that time.
Mr. Nmeiemkis. You are refernng to the National City Co.
Mr, Ripley. Yes.
Mr. Nehemkis. And I assume that the officers discussed amongst
themselves their own future?
Mr. Ripley. Yes.
Mr. Nehemkis. Now, were there any discussions among the officers
concerning the business of the City Company?
Mr. RipLey. I don't know how to interpret your question.
Mr. Nehemkis. Well, I will give you another question and see if I
can make it clearer to you. Did any discussions take place among the
officers as to what disposition was to be made of the business formerly
handled by the City Company?
Mr. Ripley. Do you mean what disposition by the bank which
controlled the situation?
Mr. Nehemkis. That is implied in the question I asked; yes.
Mr. Ripley. Yes; there was doubtless discussed the question as to
what the bank would do about it.
Mr. Nehemkis. What wasi the nature of those discussions?
Mr. Ripley. We were wondering whether the bank was going to
completely give up the situation or find some way to carry on. We
didn't know what they were going to do.
Mr. Nehemkis. And were there any discu^ons among the officers
as to whether certain accounts of the! National City Co. would fol-
low certain officers in their new coimections ?
Mr. Ripley. I have expressed the opinion from time to time to
my associates that as time went on the natural outcome and evolution
would be that issuing corporations would probably see fit to do busi-
ness with those people with whom they had successfully and satis-
factorily done business in the past, but that was only an opinion.
Mr. Nehemkis. Mr. Ripley, was one of your fellow officers in the
National City Co. Mr. Stanley Russell?
Mr. Ripley. Yes.
Mr. Nehemkis. Did you have an understanding with Mr. Stanley
Russell concerning the participations that the National City Co. for-
merly had and as to what their future disposition might lie ?
Mr. RiPiiEY. No.
Mr. Nehemkis. You had no understanding with Mr. Stanley Rus-
sell concerning the originations of the National City Co. and what
their future disposition might be?
Mr. Ripley. No.
Mr. Nehemkis. So that you had, if I understand you correctly, no
understanding concerning either National City Co. originations or
participations ?
Mr. Ripley. No understanding.
Mr. Nehemkis. I would like to recall Mr. Hanriman.
TESTIMONY OF W. AVERELL HAERIMAN, BROWN BROTHERS
fiARRIMAN & CO., NEW YORK, N. Y.— Resumed
Mr. Nehemkis. Mr. Harriman, this morning you were about to
tell us what you conceived the function of the voting-trust agree-
11418 CONCENTRATION OF ECONOMIC POWER
ment to be. Will you give me your opinion of what you conceived
that instrument to be and what its purpose is in your judgment?
Mr. Harriman. Mr. Ripley has read, from the voting-trust agree-
ment its purposes^ and I don't know that I can amplify that to anv
extent. Mr. Ripley has told you his concern because of the individ-
ual stockholders and what might happen in the event of their death.
I don't believe I can add anything to what he said.
Mr. Nehemkis. In other words, you accept the observations of Mr.
Ripley as your own?
(Mr. Harriman nodded his head.)
Mr. Henderson. Mr. Nehemkis, I think that you asked two very
specific questions of Mr. Ripley, and Mr. Harriman may want to
speak directly on both of those. It is correct that he shoul'd have
that opportunity.
Mr. Nejiemkis. Yes. In your opinion, Mr. Harriman, one of the
purposes of setting up the voting trust agreement could not possibly
have been an effort to immunize the banking firm of Brown Brothers
Harriman & Co. from the underwriting firm of Brown Harriman &
Co. or Harriman Ripley & Co., Incorporated?
Mr. Harriman. When you say "could not possibly" — I think in
the letter that I wrote to Mr. Henderson — I will try to get that letter
if I can, I don't recall the language of it — this letter was a letter
written to Mr. Henderson in reply to certain questions that he asked
me. In the preamble of the letter I gave a rather brief history of
the relationship of my brother and myself to Harriman Ripley &
Co. as stockholders, indicating that the partnership of Brown
Brothers Harriman & Co, had no interest in Harriman Ripley, and I
indicated that the conduct of the two businesses were entirely sepa-
rate; there was no interlocking relationships of any kind. I think
that is a fair summary of the first part of it. I can read it if you
wish.
Mr. Nehemkis. I think that is a fair statement.
Mr. Harriman. I speak of the fact that we have been stock-
holders, and I make this statement:
We are not, however, and never have been directors or officers of the new
corporation and we have not directly or indirectly in any way engaged in or
carried on business for the new corporation. While we have naturally as
stockholders been familiar with the results of its operations, we have been
scrupulous in leaving the management and operation of the corporation entirely
to its own board of directors and officers. The formation in 1938 of the voting
trust for stock of the new corporation merely confirmed the position that we
have taken Irom the beginning, that we would not interfere or participate In
Its business.
Although I stated this morning that it was not the piirpose in con-
sidering the fundamental purposes of setting up this voting trust to
immunize ourselves or the firm from the business, it is a fact, I be-
lieve, that it does further remove us from the corporation because
we have given to these voting trustees our voting rights as stock-
holders.
Mr. Nehemkis. If that is the result achieved, is it not possible
that you had that end result in mind at the time that you were
considering how to effect this physical immunization that we have
been speakmg of ?
Mr. Harriman. Well, I think a tair answer to that statement is
that we, my brother and I, gave consideration and consulted counsel
CONCENTRATION OF ECONOMIC POWER 11419
on the legal aspects of being stockholders of this new situation, and
as far as I am concerned I believe I dismissed it from my mind and
went about my business.
Mr. Nehemkis. Mr. Harriman, I show you a letter dated Wash-
ington, D. C, December 6, 1939, addressed to me. I ask you to tell
me whether you wrote that letter, whether this is your signature.
Mr. Harriman. That is correct.
Mr. Nehemkis. Mr. Chairman, if it please the committee, I offer
the letter just identified by the witness in evidence.
The Chairman. Do you want this letter to be printed in the record ?
Mr. Nehemkis. I do, sir.
The Chairman. Do you care to have it read ?
Mr. Nehemkis. We have covered the data.
The Chairman. Without objection, it may be printed in the record.
(The letter referred to was marked "Exhibit No. 1536" and is in-
cluded in the appendix on p. 11613.)
Mr. Nehemkis. Mr. Chairman, I believe that Mr. Harriman indi-
cated this morning that he wished to make some statement. I have no
further questions to put to him, and I wish to turn later again to
Mr. Ripley.
The Chairman. Are you ready now, Mr. Harriman, to make the
statement to which you referred this morning ?
statement by w. averell harriman — formation of brown harriman
& CO., incorporated — interests of harriman family — QUESTION or
CONTROL — COMPLIANCE WITH THE BANKING ACT
Mr. Harriman. Yes, sir. With your permission and the permission
of the committee, I will make this very brief, but as some of these
questions have perhaps had some implications in them which I haven't
been fully able to follow, I would like just in a simple ^v^ay to indicate
my attitude and my brother's attitude toward this whole affair that
is under your scrutiny.
I have to go back a little bit to the situation that led up to the
Harriman firm company merging with Brown Brothers in the crea-
tion of the firm Brown Brothers Harriman & Co. One of the moti-
vating reasons on my part for being glad of the association was that it
brought me in contact with a group of partners who had long training
and skill in this business. I had had to give a great deal of my per-
sonal time and attention in our smaller organization to its affairs, and
I looked forward to an opportunity to do certain other things which I
was very much interested in.
This merger was brought about January 1, 1931, and I would indi-
cate not only that that was one of the purposes I had in mind in
connection with it, but, if I may, just briefly high-spot some of the
things outside of the banking business that I have engaged in.
In June of 1931 I became chairman of the executive committee of
the Illinois Central, in July of 1932 as a result of Judge Lovett's death
I became chairman of the board of the Union Pacific Railroad Co.
For certain months in '33 and '34 and '35 I devoted myself to activities
with the N. R. A. here in Washington. I think I was down here for
two periods combined, totaling something like 12 or 13 months.
During the last 3 years I nave been chairman of the business ad-
visory council of the Department of Commerce. That may seem to
11420 CONCENTRATION OF ECONOMIC POWER
you to have nothing to do with the particular investigation, but I
want to make it quite plain that there is no motive in this situation
other than those that I describe or have described, of any controlling
desire in my part in the activities in the banking field. I was in a
mood to withdraw myself from the immediate activities, although I
have continued to take very keen interest in the business of Brown
Brothers Harriman & Co. and keep my oflSce there.
Mr. AvLLDSEN. What was your position in the N. R. A. organization?
Mr. Habriman. I was, the last winter, the winter of '34 and '35,
administrative officer serving under the N. R. A. Board. That was a
full-time job.
Mr. Henderson. I think I can bear testimony that that was a full-
time job.
The Chairman. I take it you were at that time Mr. Henderson's
boss.
Mr. Harriman. He resents that question.
Mr. Henderson. Mr. Harriman was an employee of the Board of
which I was a member.
Mr. Harriman. I think I will argue the point, though, at some
time as to whether he was my boss or I was his. At all events, we
worked together.
Mr. Henderson. We got a lot of work from Mr. Harriman, I can say
that.
Mr. Harriman. In 1933, Congress passed the Banking Act. Under
the provisions, the firm had to go out of the underwriting business.
It was brought out through testimony this morning that I was
concerned and my brother was concerned over the future of our
partners and the employees. We had given a good deal of thought
during that year and considered various proposals that would be
helpful to these men. It wasn't until Mr. Ripley came to us in
May that we developed a program that was most to our liking.
I want to make it clear, gentlemen, that we had three motivating
purposes, and I say this without any qualification. The first was our
concern over our partners and our' employees. The second was — if
we can bring ourselves back to the mental state of business people
in the country at that time — there was a great deal of concern over
what was going to happen to the investment banking machinery.
There was so much of it had been done by the bank affiliates. The
fact that I was working in Washington was a clear indication
that questions of employment and general economic good were much
in my mind at that time.
I felt that it was an important public service to assist in the
starting of an enterprise that would carry on the important function
of assisting in the flow of private capital into industry. That is to
my mind one of the greatest sources of employment and stability
of our economy, and I thought we were doing that. I don't mean
to say we could have afforded to make improvident investments, but
I can assure you gentlemen that was very much in the minds of
my brother and myself in connection with tnis question. We thought
we were doing a useful job as citizens of the country in making tnis
thing possible.
In our early discussions, Mr. Ripley thought that he might be able
to get some capital from people he knew, or some of the other men
that were coming into this new situation, and there were discussions
CONCENTRATION OF ECONOMIC POWER 11421
with certain people; and when we first considered it, we had in
mind the possibility that we might undertake only a relatively, con-
siderably less share of the capital. When it came to the final closing
of the situation, it had been impossible to obtain money from sources
that Mr, Ripley was ready to receive it from; he has explained to
you why he did not want to go to the general public; he did not
think this is the character of business we should go to the general
public with and I agree with that. So it was a question finally
put up to us as to whether we would put all this money into it or see
the whole thing given up, and we decided to do it.
It is an unusual situation for a couple of men to put in as large a
sum of money and not be more active than we have in the business,
but I can assure you that the two reasons that we have given are
the only two motivating reasons that I can think of. As it appeared
to us at that time, and as it appears to us at the present time, there is
no advantage to Brown Brothers Harriman Co. because we as a com-
pany have no stock interest in Harriman Ripley & Co.j and as far
as I know, I don't see any advantage to Harriman Ripley in the
fact that two partners of Brown Brothers Harriman & Co. had a
substantial stock interest and are now holders of the voting-trust
certificates.
Those, briefly, are our motivating reasons. I am frank to say
that I am proud of our association with this situation. The com-
pany has given employment, has done a job that is creditable to
the community and to the name they bear, and they have made a
reasonable profit, nothing brilliant, but they have made a reasonable
profit.
The Chaieman. Now, as I understand the situation, Mr. Harri-
man
Mr. Hareiman (interposing). May I say also we wouldn't have
made this investment unless we felt it was a sound investment. That
was the third reason.
The Chairman. As I understand the testimony which has been
given here by yourself and Mr. Ripley, prior to the passage of the
banking act of 1933 Brown Brothers Harriman, a partnership, was
engaged in the business of banking in all its phases, and in the busi-
ness of underwriting securities,
Mr. Harriman, Yes, sir.
The Chairman. After the passage of the act of 1933, which pro-
vided for the divorcement of the underwriting business from the
business of banking, the firm which is now known as Harriman Rip-
ley & Co, was organized ?
Mr, Harriman. Yes, sir.
The Chairman. You and your brother became the pricipal stock-
holders of the new company?
Mr. Harriman. Yes, sir.
The Chairman, Which was to engage solely in the business of
underwriting investment securities?
Mr, Harriman, That is correct.
The Chairman. Then, for the purpose of managing that company
you secured the services of investment experts, some of whom, as
many as 11, apparently were former officials or employees of the
National City Co,
Mr. Harriman, I think there were about 210 in all.
11422 CONCENTRATION OF KCONOMIC POWER
The Chairman. I meant the officers. I did use the word employees.
Those persons had by their experience especial training in the busi-
ness in which this new company was to engage; that is correct?
Mr. Harriman. That is correct.
The Chairman. Then the ownership of stock in this new com-
pany
Mr. Harriman (interposing). Just a minute. In addition to the
group that came over from the City Co. were some 230 partners and
employees of Brown Brothers, Harriman & Co.
The Chairman. Yes. So that your personnel, both official and
employees, was drawn from Brown Brothers and from National City,
and all had been trained.
Mr. Harriman. And it is rather an accident of human frailty or
various reasons as to why they started off more or less balanced and
now it was brought out in the testimony as I listened to it, in which
I learned something about the company, there were 11 out of the 13
principal officers that were from the City Co. That is due to deaths,
and retirements for one reason or another, all explainable if you
were interested in it.
The Chairman. Then as I recollect
Mr. Harriman (interposing). But it started off about a 50-50
relationship.
The Chairman. As you recall the table which you presented this
morning, the family stock interest was divided into three groups of
approximately 30 percent each, and Mr. Ripley and his associates are
the owners of less than 5 percent of the stock of this company.
Mr. Harriman. At present associated with Harriman Ripley.
The Chairman. Mr. Ripley and his associates are the managers of
this company?
Mr. Harriman. That is correct.
The Chairman. And you and your brother and family as stock-
holders do not attempt to exercise any control over their discretion
in the management of the company?
Mr. Harriman. That is correct.
The Chairman. And in addition to the fact that they operate under
by-laws, adopted by the directors, and as I understood your testi-
mony are free within those by-laws to act, you and your associates of
the Harriman family have signed the voting-trust agreement which
was brought in here, by which all of the voting powers of this 00-
percent-plus stock ownership is vested in Mr. Ripley, who is the
president of the company, and in his associates?
Mr. Harriman. Not in his associates; two outside individuals.
The Chairman. I meant in the trustee associates.
Mr. Harriman. Yes; two outside individuals.
The Chairman. And those two trustees are not themselves officers
or directors of the company?
Mr. Harriman. No.
The Chairman. Mr. Ripley is the only one of the trustees who is
an officer of the company?
Mr. Harriman. That is correct.
The Chairman. And at the time that this company was organ-
ized, and at the time that the voting trust agreement was drawn, did
you consult counsel?
Mr. Harriman. Yes, sir.
CONCENTRATION OF ECONOMIC POWER 11423
The Chairman. As to whether or not this transaction complied
with the provisions of the Banking Act of 1933 with respect to
divorcement ?
Mr. Harriman. Every aspect of it ; yes, sir.
The Chairman. And what advice were you given by counsel ?
Mr, Harriman. Of course, that was 5i/^ years ago and I am not
sure I can give it, but counsel advised that every aspect of the
transaction entered into in 1934 was entirely within the law, unquali-
fiedly.
Mr. O'CoNNEix. Did you say in 1934? That wasn't the year the
voting-trust agreement was entered into, was it?
Mr. Harriman. No. I thought the Senator asked me about the
transaction in 1934.
The Chairman. Well, both.
Mr. Harriman. Of course, again in 1938 when the voting trust was
set up, that was done, of course, with the advice of counsel.
Mr. O'Connell. Your answer is, as to the original divorcement
in 1934, that you consulted counsel later when the stock held by you
and your brother, or the beneficial ownership, vvas put in the hands
of voting trustees; you also consulted counsel as to whether or not
the transaction was proper under the banking law ?
Mr, Harriman. That is correct.
Mr. O'Connell. This morning, and throughout your testimony,
you have been very careful and very explicit on the point that al-
though you had the ownership of the stock you exercised no control
over the management of the company?
Mr. Harriman. That is correct.
Mr. O'Connell. You also indicated this morning in answer to a
question from me that you felt that your position as regards this
corporation was the same as regards your position with regard to
any other corporation in which you might hold stock. Is that
correct ?
Mr. Harriman. That — I think you will recall I hesitated in the
answer. I said it was substantially correct. There are two some-
what quite different aspects, if you might own a few hundred shares
of a company that you could buy and sell ; this was a frozen invest-
ment. We couldn't get in and out, naturally, and we gave it a great
deal more thought than we would, perhaps^ the purchase of a small
investment in a big corporation. In addition to that, this corpora-
tion bears my brother's and my name, and we naturally gave it a
great deal of thought because of that.
Mr. O'Connell. I also understood you to say you exercised prac-
tically no control, in spite of those facts?
Mr. Harriman. That is correct.
Mr. O'Connell. Would you say that you would feel under all the
facts a duty to exercise less or more control as regards a securities
company in which you hold a majority of the stock than you would
an industrial company, say?
Mr. Harriman. Well, the Senator asked me a question as to what
was the advice of counsel. I remember one thing counsel told us;
that was, if we had wanted to be directors of Harriman Ripley, it
was his legal opinion that it would have been entirely legal for us
to have done so. We had plenty to do, and we didn't want to take
on that responsibility, and in a small situation of that kind it is
11424 CONCENTRATION OF ECONOMIC POWER
rather difficult for directors to be at arms' length from management
as they are in a railroad or other corporation of that kind. The
borderline between directors and management is so slight that I
preferred not to become involved to that extent.
Mr. O'CoNNELL. Well, frankly, what I was interested in and was
attempting to find out — it is rather difficult, I'm afraid — was as to
how much of your attitude as regards control of the investment
company was predicated upon the legislation evidenced by the Bank-
ing Act of 1933, the purpose of which, as I understand it, was to
divorce the banks from their investment affiliates.
Mr. Harriman. Well, I think that if it hadn't been for the Bank-
ing Act — I am trying to be perfectly frank about it — if it had not
been for the Banking Act, with a company that my brother and I
had as large an interest in as we had in this — I don't know of any
other exact situation — it might well have been that we would have
taken a larger part in the affairs of the company. But we wanted to
not only live up to the letter of the law but to be quite sure that we
were abiding by the spirit of the law. I have always thought this
in connection with it. You are pressing me for details, and I had
not wanted to take too much of the committee's time. The private
banking business had suffered very materially during the depression
because of its connection with the underwriting business, and the
deposits of the firm had shrunk very materially. We had an uphill
battle to rebuild the individuality and personality of the private
banking business, and that had a bearing in addition to our con-
nection with the underwriting house, and was one of the reasons
why some of niy partners were pressing at all times for a change
of the name of Brown Harriman, which seems obvious to you gentle-
men now that it was a mistake, but at the time, as I explained this
morning, we did not appreciate that it would be. There was a
reluctance on the part
The Chairman. Do you make that conclusion as of 3'ourself or
for the conunittee, that that was a mistake ?
Mr. Harriman. Well, for myself. You are able, I am sure, to
make your own deductions from it. But I want to make it plain
that tne private banking business had suffered from certain or the
difficulties involved, and we had this uphill battle to do, and my
partners and those that were with me during the day-to-day busi-
ness were very anxious to keep themselves as far dissociated as was
possible.
The Chairman. Now^ does the banking company — the banking
partnership — now exercise any control over the underwriting busi-
ness of the corporation?
Mr. Harriman. In no shape, manner, or description, sir.
The Chairman. Does the underwriting company exercise any con-
.rol over the banking business ?
Mr. Harriman. In no shape, manner, or description, sir.
The Chairman. Do you, as a stock owner, exercise any control, any
iirectional control, with respect to the business of the underwriting
company ?
Mr. Harriman. Not with respect to the business at all.
The Chairman. But with respect to the election of directors and
he selection of officers?
Mr. Harriman. Well, we did that up to 1938. Since that time
OONCBNTRATION OF ECONOMIC POWER 11425
The Chairman. Until the voting trust agreement?
Mr. Harriman. That is correct.
The Chairman. Until that voting agreement was entered into?
Mr. Harriman. That is correct.
The Chairman. Now, the termination of that voting trust agree-
ment is in 1948?
Mr. Harriman. 1938— oh, yes; 1948.
The CHAmMAN. But it is terminable prior to that time?
Mr. Harriman. I don't think it is.
Mr. RrpLET. By the trustees.
Mr. Harriman. By the trustees; yes.
The Chairman. But not by the stockholders?
Mr. Harriman. No.
The Chairman. So that when you signed this voting trust agree-
ment, so far as you were concerned, you delivered into the hands of
Mr. Ripley and the other two trustees the complete power to vote
that stock until 1948?
Mr. Harriman. That is correct.
Mr. NEHinviKis. I have no further questions of Mr. Harriman. I
wish to ask Mr. Ripley one matter, if you please.
The Chairman. Mr. Harriman is now being dismissed. Thank
you, Mr. Harriman.
Mr. Harriman. Thank you.
Mr. Nehemkis. Thank you, Mr. Harriman.
(The witness was excused.)
TESTIMONY OF JOSEPH P. RIPLEY, PRESIDENT AND DIRECTOR,
HARRIMAN RIPLEY & CO., INCORPORATED, NEW YORK, N. Y.—
Resumed
Mr. Nehemkis. Mr. Ripley, in response to a communication which
I sent to you on August 18, 1939, in behalf of this committee, had
you caused to be prepared certain schedules showing the originations,
participations, and profits of Harriman Ripley & Co., Incorporated?
Mr. Ripley. Yes; using the term profits in the sense of gross
profits.
Mr. Nehemkis. I show you these schedules and ask if they are the
schedules which were prepared or caused to be prepared by. you ?
Mr. Ripley. Yes.
Mr. Nehemkis. Are they the schedules which you submitted to
me?
Mr. Ripley. They are the schedules which Mr. W. C. Roper sent
to you.
Mr. Nehemkis. Mr. Chairman, I ask that the schedules, just iden-
tified by the witness, be marked for identification.
The Chairman. They may be received.
(The schedules referred to were marked "Exhibit No. 1537" for
identification.)
efforts to procure capital in formation of brown harriman a
cx)., incorporated
Mr. Miller. May I ask a question of Mr. Ripley? In 1934, when
this firm, the underwriting distributing business, was organized, and
11426 CONCENTRATION OF ECONOMIC POWER
Mr. Harriman and his brother put up substantially all of the $5,000,000
required to conduct the business, if Mr. Harriman and his brother
had been unwilling or unable to put up that money, would it have
been difficult to obtain it from other sources?
Mr. Ripley. My answer is that there is no doubt whatever that it
would have been difficult, because I tried. When I first approached
the two Harrimans to get capital to organize and launch a new invest-
ment banking organization, they asked me if I could get anybody else
to chip in, so to speak, and help ; I said yes, that I thought I could.
Bear in mind that this was about the middle or latter part of May
1934; it was not until almost the last minute that we men learned that
w^e would be let out of the National City Bank & Co., a total of 400
of us. The time became very short. I approached several other men
who I knew had capital. I have their names here. I hope the com-
mittee will not ask me to give the names, but I shall give them if I am
required to do so. Every one of them were men of prominence in
American business and they had capital.
I approached them to try and get them to join this party, so to
speak, with the Harrimans and the rest of us, to launch this venture,
and I was unsuccessful in every case.
Now, as time went on and the deadline came nearer I urged the
Harrimans to go ahead, anyway, with the assurance that my associates
and I would put up what we could, and so we did.
So my answer to your question is decidedly yes, because I tried it.
Mr. Miller. Why was it that capital was so unwilling or disinter-
ested in going into the investment banking business at this period?
Mr. Ripley. I can only answer you as to the reasons th'at were given
me by these men whom I approached. Generally speaking, they said
that they felt there was great uncertainty as to the future of the
business. They did not know what might be the effect of the Securi-
ties Act of 1933, particularly the liabilities involved in that act. And
even today we don't know when we look at an income account of our
company whether it is right, in view of those liabilities.
Mr. Miller. That is all.
The Chairman. Are there any other questions?
Mr. Secretary Noble, do you care to ask any questions?
Mr. Noble. No; thank you.
The Chairman. Thank you very much, Mr. Ripley.
(Witness excused.)
The Chairman. You may call the witnesses if you wish.
Mr. Nehemkis. George Bovenizer, Henry S. Sturgis, Edward N.
Jesup, and Charles Glore.
CHICAGO UNION STATION CO. FINANCING, 1 !tl5-:!<! — SOTTKCES OF DOCUMENTS
The Chairman. Mr. Nehemkis, are you ready?
Mr. Nehkmkis. May it please the committee, the testimony which
you are to hear this aiFternoon on the financing of the Chicago Union
Station Co. begins with the year 1915, and concludes with the last
financing for the Station Co. "in 1930.
This study is being presented to you as an illustration of the part
played in underwriting groups by what has come to be known in the
banking buskiess as the historical relation of a banking house to a
CONCENTRATION OF ECONOMIC POWER 11427
particular piece of financing and the proprietary rights which result
therefrom. Now these proprietary rights, to which I have just re-
ferred, were affected in the case of certam of the participants by the
passage of the Banking Act of 1933. In the course of the hearings
we shall have an opportunity to see what happened to these pro-
prietary rights.
Before we proceed with the facts of the case and the swearing in of
the witnesses, I believe that a brief statement is in order concerning
the documentary evidence to be presented.
The staff of the Investment Banking Study requested the permis-
sion of a number of investment banlving houses to examine their
files on the financing of the Chicago Union Station Co. In all cases
this was freely granted, without the service of a subpena. The
majority of the documents which are to be offered in evidence were
obtained in this mapner.
We had, however, learned that the files of several companies had
already been examined and copies of material obtained by the Rail-
road Finance Investigation conducted by a subcommittee of the Sen-
ate Conunittee on Interstate Commerce. For the record I might add
th'at that investigation, to which I have just referred, was authorized
by Senate Resolution No. 71, Seventy-fourth Congress, and that
Senator Burton K. Wheeler was the chairman of the subcommittee.
The companies whose files the Railroad Finance Investigation had
studied were: Kuhn, Loeb & Co., the Chicago, Milwaukee, St. Paul
& Pacific Railroad Co., and the Pennsylvania Railroad Co.
We felt that it would save time and relieve these companies from
a duplication of work if instead of asking them for leave to make
transcripts from their files we first studied the material obtained
by the Railroad Finance Investigation. Accordingly, we asked these
companies to consent to our use of this material, and they have all
complied with our request.
At an appropriate time I will offer in evidence, Mr. Chairman, the
letters from these companies authorizing us to use the material pre-
viously made available to the Railroad Finance Committee, but I
think you will want first to swear in the witnesses.
The Chairman. Do you and each of you solemnly swear that the
testimony you are about to give in this proceeding shall be the truth,
the whole truth, and nothing but the truth, so help you God ?
Mr. BovENizER. I do.
Mr. Sturgis. I do.
Mr. Je»up. I do.
Mr. Glore. I do.
TESTIMONY OF GEORGE W. BOVENIZER, KUHN, lOEB & CO., NEW
YORK, N. Y.; HENRY S. STURGIS, VICE PRESIDENT, FIRST NA-
TIONAL BANK OF NEW YORK, NEW YORK, N. Y. ; EDWARD N.
JESUP, VICE PRESIDENT, LEE HIGGINSON CORPORATION, NEW
YORK, N. Y. ; CHARLES F. GLORE, GLORE, FORGAN & CO., CHICAGO,
ILL.
The Chairman, Please be seated, gentlemen.
Mr. Nf.hf.mki8. I might add, Mr. Chairman, and gentlemen of the
committee, that no other examination was made of the files of these
11428 CONCENTRATION OF ECONOMIC POWER
companies on the financing of the Station Co. other than an examina-
tion of the files of the Milwaukee Railroad. It will therefore be
understood that when copies of material from the files of these thi-ee
companies are offered for the record they were obtained in the manner
I have just described.
I offer in evidence, if you please, the letters from the companies
authorizing us to make use of the data in the files of the Railroad
Finance Investigation Committee.
Ml-. AviLDSEN. Which are these tliree companies?
Mr. Nehemkis. Kuhn, Loeb & Co.; the Chicago, Milwaukee, St,
Paul & Pacific Railroad Co.; and the Pennsylvania Railroad Co.
The Chairman. There has been presented to the chairman for
admission to the record the following letters : One from the Chicago,
Milwaukee, St. Paul & Pacific Railroad Co., dated November 15, 1939,
and signed by H. A. Scandrett. Without objection, it may be ad-
mitted to the record. Attached to this is a carbon copy of what pur-
ports to be a letter from Mr. H. A. Scandrett, to the Senate Com-
mittee on Interstate Commerce, dated November 16, 1939. Do you
desire that to be printed in the record ?
Mr. Nehemkis. I do, sir.
The Chairman, Both of these letters may be admitted to the record.
There is then what purports to be a copy of a letter from Kulin,
Loeb & Co., addressed to the United States Senate Committee on
Interstate Commerce, dated November 13, 1939. Mr. Nehemkis says
that the original of this will be offered to the committee at the earliest
opportunity.^ With that understanding it may be admitted to the
record.
The next is a purported copy of a letter of November 24, 1939, of
the Pennsylvania Railroad Co,, signed by George H. Pabst, Jr., assist-
ant vice president. And this is certified as having been received by the
S. E. C. Without objection, it may also be printed in the record.
(The letters referred to were marked "Exhibits Nos. 1538-1 to
1538-3" and are included in the appendix on pp. 11614 and 11615.)
The Chairman, Now, there are three other copies of letters. One
is a copy of a letter dated November 10, 1939, addressed to Kuhn,
Loeb & Co., by Peter R. Nehemkis, Jr., special counsel for the invest-
ment section of this monopoly study. A letter of Mr. Nehemkis, dated
November 10, 1939, to the Chicago, Milwaukee, St. Paul & Pacific
Railroad Co., and one below them, dated November 10, to the Penn-
sylvania Railroad Co, All of these may be printed in the record,
(The letters referred to were marked "Exhibits Nos, 1539-1 to
1539-3" and are included in the appendix on pp. 11615-11617,)
identification of witnesses
Mr. Nehemkis, Mr. Bovenizer, will you state your full name and
address ?
Mr, Bovenizer, George Wallace Bovenizer, Irving-on-the-Hudson,
N, Y.
Mr, Nehemkis, Are you a partner of the firm of Kuhn, Loeb?
Mr, Bovenizer. I am.
1 See, infra, p. 11479.
CONCENTRATION OF ECONOMIC POWER 11429
Mr. Nehemkis. And for how many years have you been a partner?
Mr. BovENizER. Since January 1, 1929.
Mr. Nehemkis. Mr. Glore, will you state your full name?
Mr. Glore. Charles F. Glore, Lake Forest, 111.
Mr. Nehemkis. And are you a partner of the investment banking
house of Glor^ Forgan & Co.?
Mr. Glore. Yes.
Mr. Nehemkis. And where is Glore, Forgan & Co. located ?
Mr. Glore. In New York and Chicago.
Mr. Nehemkis. Mr. Bovenizer, are you not a director of the Penn-
road Corporation?
Mr. Bovenizer. I am.
Mr. Nehemkis. And Mr. Glore, are you a director of Adams Oil
& Gas Co.?
Mr. Glore. I am.
Mr. Nehemkis. Of American Brake Shoe & Foundry Co. ?
Mr. Glore. I am not.
Mr. Nehemkis. Are you a director of the Chicago, Burlington &
Quincy Railroad?
Mr. Glore. I am not.
Mr. Nehemkis. Are you a director of the Chicago Corporation?
Mr. Glore. I am.
Mr. Nehemkis. Are you a director of the Continental Casualty Co. ?
Mr. Glore. I am.
Mr. Nehemkis. Are you a director of Montgomery Ward & Co. ?
Mr. Glore. I am.
Mr. Nehemkis. And the Studebaker Corporation?
Mr. Glore. I am.
Mr. Nehemkis. You just indicated you were not a director of the
American Brake Shoe & Foundry Co. and Chicago, Burlington &
Quincy. When did you cease being a director of those two companies ?
Mr. Glore. I am not sure, but probably 2 or 3 years ago — 2 years
ago. ,
Mr. Nehemkis. I think you had better advise Poor's Register of
Directors and Executives that they have got you down as a director in
those two companies.
Mr. Jesup, will you state your full name?
Mr. Jesup. Edwawi Nelson Jesup, Greenwich, Conn.
Mr. Nehemkis. j0id are you a partner of the investment banking
house of Lee, K[iggiiison & Co. ?
Mr. Jesup. I am a vice president.
Mr. Nehemkis. How long have you held that office ?
Mr. Jesup. Sinde June 1932.
Mr. Nehemkis. Mr. Sturgis, willyou state your full name?
Mr. Sturgis. Heni^y S. Sturgis, Oedarhurst, Long Island.
Mr. Nehemkis. And what is your business ?
Mr. Sturgis. I am vice president of the First National Bank of the
City of New York.
Mr. Nehemkis. How long have you been an officer of that bank?
Mr. Sturgis. Since 1925.
Mr. Nehemkis. Are you a director, Mr. Sturgis, of J. I. Case Co.?
Mr. Sturgis. I am.
11430 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. And the Delaware, Lackawanna & Western Rail-
road Co.?
Mr. Sturgis. I am.
Mr. Nehemkis. Of General Mills, Inc. ?
Mr. Sturgis. Yes.
Mr. Nehemkis. Hecker Products Corporation?
Mr. Sturgis. Yes.
Mr. Nehemkis. International Agricultural Corporation?
Mr. Sturgis. Yes.
Mr. Nehemkis. Junior Mercantile Co. ?
Mr. Sturgis. That is a subsidiary of another ; I am.
Mr. Nehemkis. New Jersey General Security Co. ?
Mr. Sturgis. Yes.
Mr. Nehemkis. Of the Ohio River Co. ?
Mr. Sturgis. That is another subsidiary company.
Mr. Nehemkis. Pullman Co.?
Mr. Sturgis. Yes.
Mr. Nehemkis. Pullman, Inc. ?
Mr. Sturgis. Yes.
Mr, Nehemkis. And West Virginia Coal & Coke Corporation ?
Mr. Sturgis. That is right.
Mr. Nehemkis. I shall endeavor to keep your faces before me. I
am not familiar with you, so if I look at the wrong individual at
the moment, you will forgive me. I will get to know you in a few
minutes.
Mr. Bovenizer, when was the Chicago Union Station Co. organized ?
ownership of CHICAGO UNION STATION CO.
Mr. Bovenizer. I think it was in 1915. I am not sure of the date.
Mr. Nehemkis. And what is the purpose of the Chicago Union
Station Co. ; what does it operate ?
Mr. BovEUizER. Provides a terminal for certain railroads.
Mr. Nehemkis. Is it correct, Mr. Bovenizer, that the outstanding
capital stock of the station is owned in equal shares by four rail-
roads ?
Mr. Bo\^NiZER. That is my understanding,
Mr. Nehemkis. And can you tell me the names ?
Mr. Bovenizer. Originally the Pennsylvania Co., the Panhandle,
that is Pittsburgh, Cincinnati, Chicago & St. Louis; Chicago, Mil-
waukee & St. Paul; I think Chicago, Burlington & Quincy.
Mr. Nehemkis. Now, the Pittsburgh, Cincinnati, Chicago & St.
Louis is over 99 percent owned by the Pennsylvania system, is it
not?
Mr. Bovenizer. I believe so.
Mr. Nehemkis. In other words, the Pennsylvania is half owner
of the station?
Mr. Bovenizer. Yes.
Mr. Nehemkis. And the St. Paul and Burlington are each owner
of one-fourth?
Mr. Bovenizer. That is right.
Mr. Nehemkis. The directors and princi])al officers of the Station
Co. are directors and officers of these proprietary roads, are they not?
Mr. Bovenizer. Usually ; yes.
CONCENTRATION OF ECONOMIC POWER 11431
Mr. Nehemkis. Kuhn, Ijoeb & Co., I believe, have been bankers
for the Pennsylvania and St. Paul for many years, have they not?
Mr. Bo^'ENIZER. Over 50 years.
AGREEMENTS AMONG INVESTMENT BANKING HOUSES ON PARTICIPATIONS
IN CHICAGO UNION STATION CO. FINANCING
Mr. Nehemkis. Now, in May of 1912, did not Kuhn, Loeb & Co
come to a tentative agreement with Lee, Higginson & Co. with respect
to the financing of the Chicago Union Terminal Co., whereby Kuhn
Loeb & Co. and Lee, Higginson & Co. were each to have a one~hali
interest in the business?
Mr. Bovenizer. That is the groups.
Mr. Nehemkis. The groups tespectively which bought those?
Mr. Bovenizer. Yes.
Mr. Nehemkis. Mr. Chairman, I introduce a letter of F. L. Hig-
ginson, Jr., to Mortimer L. Schiff, dated January 18, 1915, enclosing
an unsigned copy of a telegram to Mr. C. H. Schweppe, dated May 17,
1912. Both of these documents were obtained in the manner which
I described at the outset of these hearings.
Acting Chairman Reece. The document referred to may be ad-
mitted,
(The documents referred to were marked "Exhibit No. 1540" and
are included in the appendix on p. 11617.)
Mr. Nehemkis. Mr. Chairman, may it please the committee, I offer
in evidence a letter dated January 19, 1915, to Messrs. Kuhn, Loeb &
Co., from LeCj Higginson & Co.
Acting Chairman Reece. It may be received.
(The letter referred to was marked "Exhibit No. 1541" and is in-
cluded in the appendix on p. 11618.)
Mr. Nehemkis. I offer in evidence a letter from Kuhn, Loeb & Co.
to Lee, Higginson & Co., dated January 20, 1915.
I likewise offer a memorandum by Mortimer L. Schiff, dated Febru-
ary 1, 1915, from which memorandum I should like to read.
Acting Chairman Reece. It may be admitted.
(The documents referred to* were marked "Exhibits Nos. 1542 and
1543" and are included in the appendix on pp. 11618 and 11619.)
Mr. Nehemkis. The memorandum bears the heading [reading from
"Exhibit No. 1543"] :
Memorandum in Reoakd to Chicago Union Station Financing. B^. 1, 1915
I have agreed that this business, if it develops, is to be done joint Account
between Lee, Higginson & Co. and ourselves, each having one-half. Lee, Higgin-
son's group includes Morgans, the First National Bank of New York and the
Illinois Trust and Savings Bank of Chicago.
In our group are included the National City Bank and Messrs. Clark, Dodge
& Co. I have today agreed with McRoberts —
Do you by the way recall-
Mr. Bovenizer (interposing). Samuel McRoberts, vice president of
the National City Bank at that time.
Mr. Nehemkis (reading further) :
I have today agreed with McRoberts that they are to have one-third interest
and we two-thirds interest in our share, subject to such allotment on original
terms as we may determine to make to Messrs. Clark, Dodge & Company,
(signed) Mortimer L. Schiff.
124491 — 40 — pt. 22 6
11432 CONCENTRATION OF ECONOMIC POWER
So prior to the actual financing of the Station Co., there had been
previous discussion of how the Station Co. business was to be dis-
tributed?
Mr. BovENizER. Yes.
Mr. Nehemkis. I offer a memorandum by Mortimer L. Schiff, dated
July 28, 1911. This is entitled "Chicago Terminal Bonds." I read
from this memorandum [readmg "Exhibit No. 1544"] :
Weld, of White Weld & Co., called on. me to-day and stated that they were
aware that a larger issue of bonds in the above connection would come sooner
or later, and that they would like to have a position in such transaction when it
came, as they believed they could be of material assistance in placing the bonds.
I said to him that we had certain commitments in this business which would
necessitate our consulting our associates in any further commitments we might
make ; that I thought it would be some time until this business would come to a
head, and therefore it would be better not to take this up now, but that, as far
as we were concerned, while we could not commit ourselves in any way, we
would be pleased if it were found possible to take care of them in some way
and avail of their selling organization. He said that it was perfectly satisfac-
tory to them to leave it in this way, and that he would see us again when he
returned, in five or six weeks, from his vacation, for which he leaves this
evening.
Initialed M. L. S.
And those initials are of Mortimer L. Schiff, late partner of
Kuhn, Loeb& Co.?
Mr. BovENizER. Yes.
Acting Chairman Reege. It may be admitted.
(The memorandum referred to was marked "Exhibit No. 154i"
and appears in full on this page.)
Mr. Nehemkis. So 2 years before the Station Co. was organized,
it would appear that Kuhn, Loeb & Co. had certain commitments in
this business and had certain associates with whom it was necessary
to consult with reference to any further commitments?
Mr. BovENizER. If the business materialized.
Mr. Nehemkis. Mr. Jesup, just as Kuhn, Loeb divided up its 50
percent interest among its friends, so, too, Lee, Higginson divided its
50 percent interest iriS the business among four housfes ; do you recall
that?
Mr. Jesup. Tha,t is right, including Lee, Higginson.
Mr. Nehemkis. Now, including Lee, Higginson, what were the
four houses?
Mr. Jesup. J. P. Morgan & Co., Continental, at that time the
Illinois Merchants Trust, and the First National Bank of New
York.
riRST CHICAGO UNION STATION ISSUE — $30,000,000 FIRST MORTGAGE 4%
PERCENT SERIES A BONDS, FEBRUARY 1916
Mr. Nehemkis. Now, the first piece of Chicago Union Station
business, Mr. Bovenizer, was a $30,000,000 first-mortgage, 414-percent
series A issue, which was offered on February 9, 1916; is that correct?
Mr. Bovenizer. Yes ; I have it February 8, but that is near enough.
Mr. Nehemkis. I am sorry, I didn't hear your answer.
Mr, Bovenizer. That is correct.
Mr. Nehemkis. This issue was planned, I believe, in the middle of
1915, and the actual participants in the financing were agreed upon
at a meeting held in June 1915, at the office of your firm?
CONCENTRATION OF ECONOMIC POWER 11433
Mr. BovENizER. I can't confirm those details. I have no doubt
it is correct.
Mr. Nehemkis. But to the best of your recollection ?
Mr. Bov'ENizER. To the best of my recollection, yes.
Mr. Nehemkis. Mr. Chairman, I should like to offer in evidence
a memorandmn by Francis D. Bartow, dated June 16, 1915, from
which I should like to read three paragraphs.
Before I proceed with the reading, I am going to ask you, Mr.
Sturgis, to look at this memorandum and tell me whether you recog-
nize this to be a copy which was prepared from an original in your
files?
Mr. Stdegis. That is right.
Mr. Nehemkis. I offer the memorandum identified by Mr. Sturgis
in evidence, and may I ask, am I correct that the initials "F. D. B."
are Francis D. Bartow ?
Mr. Sthrgis. That is correct.
Mr. Nehemkis. Who was at that time associated with the bank ?
Mr. Sturgis. He was at that time an officer of the bank.
Mr. Nehemkis. And what is Mr. Bartow's present business connec-
tion?
Mr. Sturgis. He is one of the partners of J. P. Morgan.
Acting Chairman Reece. It may be admitted.
(The memorandum referred to was marked "Exhibit No. 1545" and
is included in the appendix on p. 11619.)
Mr. Nehemkis. I read from the memorandum identified by Mr.
Sturgis [reading from "Exhibit No. 1545"] :
At 2 o'clock Mr. Hine attended a meeting at K L's and upon his return told me
they had agreed to pay 93%, and offer the bonds for re-sale at 96%, which is
about a 4.65% basis. However, Mr. Holden and his associates decided that they
would prefer to get the consent of the Illinois Public Service Commission to a
minimum price of 91, and then come back and deal firm with the Group. There
was also a question of clearing up some small mortgages which are now a lien
upon the property. This will be done before the present bonds can be sold.
In their negotiations the Group did not come to the question of discussing prices
with Mr. Holden and his associates. They, therefore, do not know of the determi-
nation reached to pay as high as 93%.
At the meeting in the morning the question was brought up of participants in
the business and it was understood that there will be five Signatories, made up as
follows :
Kuhn, Loeb & Co.
Lee, Higginson & Co.
Illinois Trust & Savings Bank, Chicago
First National Bank, New York
Natiohal City Bank, New York
The issue to be approximately $25,0<X),0OO, to be divided equallv between
K L & Co.
Lee, H. & Co.
K L & Co. will take care of the National City Bank, L. H. & Co. will divide
$12,500,000 equally into four parts.
% 111. Trust & Sav. Bk,
Vi J. P. M. & Co.
% First of New York
% Lee, H & Co.
I should like to offer in evidence a letter of Donald G. Geddes to
Jerome J. Hanauer, dated February 8, 1916.
Mr. Bovenizer, wasn't Mr. Hanauer a former partner of the Houst
of Kuhn, Loeb?
Mr. BovENizEB. Yes.
11434 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. And he is now deceased ?
Mr. BovENizER. That is correct.
Acting Chairman Keece. It may be admitted.
( The letter referred to was marked "Exhibit No. 1546" and appears
in full on this page.)
Mr. Nehemkis. The letter is written on the stationery of Clark,
Dod^e & Co., 51 Wall Street, New York City [reading "Exhibit No.
1546 f] :
PERSONAL,
February 8, 1916,
CHICAGO TERMINAL 41/2% BOND SYNDICATE,
Jerome J. Hanauer, Esq.,
Messrs. Kuhn, Loeb & Co.,
New York. N. Y.
My dear Mr. H. :
Referring to our couversation in regard to Chicago Terminal 4'/^% bonds, I
shall be very much disappointed if Clark, Dodge & Co., do not receive as a
minimum in the above Syndicate, a participation of $1,000,000 of bonds. As
you know, this matter has dragged on for about three and a half years, and
we have had a great deal of trouble in keeping ourselvo« informed fully as
to what was going on. Considering these circumstances, I do not feel that
we should be called upon to give up more than 50 percent of our participation
in this business.
Very truly yours,
(Signed) Donald G. Geddes.
Do you recall the surrounding circumstances at that time, Mr.
Bovenizer, in order to explain whether or not your firm had been
having discussions with Clark, Dodge & Co. with regard to a give-up
on the basis of their participation?
Mr. Bovenizer. He is talking about a participation in the selling
syndicate.
Mr. Nehemkis. So this letter refers to a selling group ?
Mr. Bovenizer. He wanted to be sure to get at least one million
bonds for sale.
Mr. Nehemkis. I offer in evidence a letter of Kuhn, Loeb & Co. to
Clark, Dodge & Co. and of Clark, Dodge & Co. to Kuhn, Loeb, dated
February 9, 1916.
Acting Chairman Reece. It may be admitted.
(The letters referred to were marked "Exhibits Nos. 1547-1 and
1547-2" and are included in the appendix on p. 11620.)
Mr. Nehemkis. I should like to offer in evidence at this time a table
prepared by the staff of the Investment Banking Section which shows
the amounts in dollars and percentage participations of the $30,000,-
000 First Mortgage Bonds, 4I/2 percent. Series A, to Avhich reference
has been made and which were offered in February 1916.
(The table referred to was marked "Exhibit No. 1548" and is
included in the appendix on p. 11621.)
Mr. Nehemkis. I might add that the data on the table was taken
from ledger transcripts, memoranda, and correspondence of' the sev-
eral houses who are represented by the witnesses here.
Mr. Bovenizer. I know that the first part is all right. I don't
know about the rest.
Mr. Nehemkis. Have you any corrections on the second part?
Mr. Jesup. No.
CONCENTRATION OF ECONOMIC POWER 11435
SUBSEQUENT ISSUES 1920 TO 19 24
Mr. Nehemkis. Mr. Bovenizer, subsequent to February 1916, the
company sold five bond issues up to and including November 1924;
is that correct?
Mr. Bovenizer. That is right.
Mr. Nehemkis. I would like to offer in evidence, Mr. Chairman,
two letters by J. J. Turner, president of the Chicago Union Station
Co., to the syndicate, dated April 27, 1920.
Acting Chairman Reece. They may be admitted.
(The letters referred to were marked "Exhibits Nos. 1549-1 and
1549-2" and are included in the appendix on pp. 11621 and 11622.)
Mr. Nehemkis The first offering was $10,000,000 of first-mortgage
bonds, 61^ percent, series C, in April 1920; is that correct, Mr.
Bovenizer ?
Mr. Bovenizer. I think so.
Mr. Nehemkis. AVoukl you examine that table and tell me if it is
your knowledge and belief tliat the dollar amounts and percentage
participations were allocated in accordance with the figures there set
forth?
(The table referred to was marked "Exhibit No. 1550" and is in-
cluded in the appendix on p. 11623.)
Mr. Bovenizer. The first part is right. Mr. Jesup will check the
second.
Mr. Jesup. That is right.
Mr. Nehemkis (referring to "Exhibit No. 1550"). Now, on this
offering, Kuhn, Loeb & Co., which, together with Lee, Higginson &
Co., had a joint interest, divided up their interests as follows: Kuhn,
Loeb took $3,000,000 or 30 percent : the National City Co. took $1,500,-
000, or 15 percent ; Clark-, Dodge & Co. took $500,000, or 5 percent. I
note, Mr. Bovenizer, that at this time the interest of the old National
City Bank was now taken by the National City Co. ?
Mr. Bovenizer. Yes.
Mr. Henderson. Mr. Nehemkis, as an expert on witness's memories,
it is very refreshing to have Mr. Bovenizer answer as he does, since
we have had some witnesses who couldn't seem to remember. I would
like to take the time to make the observation.
Mr. Nehemkis. Mr. Jesup, if I understand correctly, the Lee, Hig-
ginson 50-percent participation of $5,000,000 was allocated as follows :
Lee, Higginson took $1,333,333, 13 percent of the issue ; First National
Bank took the same amount ; J. P. Morgan & Co. took Ihe same
amount; and Illinois Trust & Savings Bank took $1,000,000, or 10
percent.
Mr. Jesup. That is right.
Mr. Nehemkis. Now those percentage participations were identical
with those received by these four houses in the previous issue.
Mr. Jesup. That is right.
Mr. Nehemkis. Mr. Bovenizer, in the issue that we are now dis-
cussing there were some variations as between the 1920 offering and
the previous offering [referring to "Exhibits Nos. 1548 and 1550"].
In the previous offering KL received 28-percent participation, Na-
tional City Co., 14-percent participation, and Clark, Dodge 6 percent.
The 1920 offering had some slight variations, KL 30 percent, National
11436 CONCENTRATION OF ECONOMIC POWER
City 15, Clark, Dodge 5, Do you recall that to be substantially
correct ?
Mr. BovENizEK. Yes ; I think it is.
Mr. Nehemkis. I should like to offer in evidence a letter by J. J.
Turner, president of the Chicago Union Station Co. to the syndicate,
and the reply of Messrs. Kuhn, Loeb & Co., dated May 2G, 1921.
(The letters referred to were marked "Exhibits Nos. 1551-1 and
1551-2" and are included in the appendix on pp. 11623 and 11624.)
Mr. Nehemkis. The next offering, I take it, Mr. Bovenizer, was
$6,000,000 first mortgage bonds 6i/^, series C, which were offered in
May of 1921, and the syndicate there consisted of Kuhn, Loeb, Na-
tional City taking part of the Kuhn, Loeb interest, and the percentage
participations were respectively 33 and 16 [referring to "Exhibit
No. 1552"] . Clark, Dodge had at this time dropped out, as I under-
stand it, and the interest was divided up between KL and National
City?
Mr. Bovenizer. That is correct.
Mr. Nehemkis. Mr. Jesup, will you glance at the table Mr. Boven-
izer is about to pass to you? I understand that Lee, Higginson's
$3,000,000 interest was divided up between the same groups as in the
preceding issues : First National Bank, J. P. Morgan & Co., Illinois
Trust & Savings Bank, and that the percentage participations of
these houses, including your own, were the same as in the two pre-
ceding issues. Is that correct?
Mr. Jestjp. That is correct.
(The table referred to was marked "Exhibit No. 1552" and is in-
cluded in the appendix on p. 11624.)
Mr. Nehemkis. I offer in evidence the following letters, if the com-
mittee please : letters of Kuhn, Loeb & Co. to Lee, Higginson & Co.
and P. V. Davis, vice president of the National City Co., and the
replies to those letters dated May 27 and 31, during the year 1921.
(The letters referred to were marked "Exhibits Nos. 1553-1 to
1553-4" and are included in the appendix on pp. 11625 and 11626.)
Mr. Nehemkis. I believe the next offering, the next piece of financ-
ing, Mr. Bovenizer, was the $6,150,000 first-mortgage bonds, and this
was a private offering in May of 1922. Is that correct?
Mr. Bovenizer. Yes.
Mr. Nehemkis. I offer in evidence a letter of J. J. Turner, president
of the Chicago Union Station Co. to the syndicate and the reply
dated May 23, 1922, Mr. Chairman.
(The letters referred to were marked "Exhibits Nos. 1554^1 and
1554-2" and are included in the appendix on pp. 11626 and 11627.)
Mr. Nehemkis. The percentage participations, Mr. Bovenizer, on
the interest divided up by Kuhn, Loeb were exactly the same as in
the preceding issue; in other words, KL took 33 percent, and Na-
tional City took 16?
Mr. Bovenizer. The percentage figures are right but the dollars are
wrong.
Mr. Nehemkis. Would you be good enough to let me have the cor-
rect information?
Mr. Bovenizer. Yes.^
^ Mr. Bovenizer subsequently agreed that the figures in "Exhibit No. 1555" were correct.
See "Exhibit No. 1759-2," introduced on December 20, 1939, and appearing in appendix,
p. 11798.
CONCENTRATION OF ECONOMIC POWER 11437
Mr. Jesup. This checks with the information I have.
Mr. Nehemkis. We can correct that at a little later time.
Acting Chairman Reece. The table may be admitted subject to
correction of the figures.-
(The table referred to was marked "Exhibit No. 1555" and is in-
cluded in the appendix on p. 11627.)
Mr. Nehemkis. I offer in evidence a letter of Samuel Rea, president,
Chicago Union Station Co., to the syndicate, and reply dated January
12, 1924.
Acting Chairman Reece. It may be admitted.
(The letters referred to were marked "Exhibit 1556-1 and 1556-2"
and are included in the appendix on p. 11628.)
Mr. Nehemkis. In this syndicate, Mr. Bovenizer, the percentage
participations of Kulin, Loeb and National City continue to remain
the same?
Mr. Bovenizer. Right.
Mr. Nehemkis. If you will glance at that table, Mr. Jesup, and
tell me whether to your knowledge and belief the percentage partici-
pations of the four houses therein listed were likewise the same?
Mr. Jesup. That is right.
Mr. Nehemkis. Wasn't there a new participant? Illinois Mer-
chants Trust Co.? That is to say, the Illinois Merchants Trust Co.
took over the share of the Illinois Trust & Savings Bank, as a result
of a consolidation that tooK place at that time?
Mr. Jesup. That is right.
Mr. Nehemkis. Otherwise, the percentage participations are the
same?
Mr. Jesup. Yes.
Acting Chairman Reece. It may be admitted.
(The table referred to was marked "Exhibit No. 1557" and is in-
cluded in the appendix on p. 11629.)
Mr. Nehemkis. I think the next piece of financing, and the last of
the five that I have mentioned at the outset, was a $7,000,000 offering
of 5 percent guaranteed gold bonds. These bonds were offered in
November of 1921. Is that correct, sir ?
Mr. Bovenizer. Yes; there is also $850,000 first mortgage bonds.
Mr. Nehemkis. I am going to refer to that in just a moment. I
should like to offer, in this connection, a letter of Samuel Rea, presi-
dent of the Chicago Union Station Co., to the sjnndicate, and reply,
dated November 12 and 14, 1924.
Acting Chairman Reece. They may be admitted.
(The letters referred to were marked "Exhibits Nos. 1558-1 and
1558-2" and are included in the appendix on pp. 11629 and 11630.)
Mr. Nehemkis. In this issue I take it that the respective participa-
tions of Kuhn, Loeb & Co. and National City were still the same?
Mr. Bovenizer. Yes.
Mr. Nehemkis. Mr. Jesup, would you tell me whether the per-
centage participations on the table which you have in your hand show
any variation over those of the preceding four issues that we have
discussed ?
Mr. Jesup. They are the same.
^ See footnote 1, opposite page.
11438
CONCENTRATION OF ECONOMIC POWER
Mr. Nbhemkis. And the participants are the tiamei;
Mr. Jesup. That is right.
Mr. Nehemkis. I offer this table in evidence, with one qualifying
statement, that together with this issue that we have discussed, Mr.
Chairman, there was also purchased and sold $850,000 first mortgage
4I/2 percent bonds, series A^ dated January 1, 1916, and due Julv 1.
1963.
Correct, Mr. Bovenizer?
Mr. Bovenizer. Yes.
(The table referred to was marked "Exhibit No. 1559" and is in-
cluded in the appendix on p. 11630.)
Mr. Nehemkis. Mr. Chairman, I should like to offer in evidence
a table showing the percentage of interests of the investment banking
houses in the security issues of the Chicago Union Station Co., 1916-
24. The committee is alread}^ familiar with the names of these par-
ticipants. May I draw your attention to certain essential facts about
those percentage participations? During this entire period of time
there appears to be no variation in the percentage participation of
Lea Higginson & Co., First National Bank of New York, J. P. Morgan
& Co., Illinois Trust & Savings Bank. Mr. Jesup, do you accept my
statement as being correct and accurate ?
Exhibit No. 1560
[Prepared by the staff of the Investment Banking Section, Monopoly Study, Securities and Exchange
Commission]
Chicago Union Station Co. — Percentage of interest.'^ of investment bankiri;/
houses in security issues of the Chicago Union Station Co., 1916-1924
[Summary of "Exhibits Nos. 1548, 1550, 1552, 1555, 1557 and 1559'
1
Kuhn,
Loeb &
Co.
National
City
Bank
Clark,
Dodge &
Co.
Lee Hig-
ginson
& Co.
First
National
Bank of
New-
York
J. P. Mor-
gan*
Co.
Illinois
Trust &
Savings
Bank
(1)
(2)
(3)
(4)
(5)
(6)
(7)
$30,000,000 04% "A" Due 1963,
Offered Feb., 1916
Percent
28.88
30.00
33.33
33.33
33.33
33. 33
Percent
14.44
115.00
1 16. 67
' 15. 67
< 16. 67
1 16. 67
Percent
6.67
5.00
Percent
13.33
13.33
13.33
13.33
13.33
13.33
Percent Percent
13. 33 13. 33
13. 33 13. 33
13.33 13.33
Percent
10.00
$10,000,000 6H% "C" Due 1963
Offered April, 1920..
10.00
$6,000,000 614% "C" Due 1963,
Offered May, 1921 .
10.00
$6,160,000 5% "B" Due 1963,
Offered May, 1922
13.33
13.33
13.33
13.33
13.33
13.33
10.00
$7,000,000 5% "B" Due 1963,
Offered Jan., 1924 ..
•10.00
$7,000,000 5% Guaranteed Due
1944, Offered Nov., 1924
•10.00
1 National City Company.
• Illinois Merchants Trust Company.
Note.— Kuhn. Loeb & Co. and Lee Higginson & Co. each had an interest of 50% in the security issues of
the company, which they distributed to themselves and their associates in the proportions iniiicated here.
The associates of Kuhn, Loeb <fe Co. were The National City Bank and later the National City Company,
and Clark, Dodge & Co. The associates of Lee Higginson & Co. were the First National Bank of New
York, J. P. Morgan & Co., with a non-aypearing interest, and the Illinois Trust* Savings Bank, later
Illinois Merchants Trust Co.
Mr. Jesup. That is correct.
Mr. Nehemkis. And I note, Mr. Bovenizer, that with the exception
of the first two offerings there are no poreeiitage variations of Kuhn,
Loeb and National City for the third, fourth, fifth, and sixth offerings;
CONCENTRATION OF lOCONOMIC POWER 11439
they remain the same. Do you accept my statement as being correct
and accurate?
Mr. BovENizER. Yes.
Acting Chairman Reece. It may be admitted.
(The table referred to was marked "Exhibit No. 1560" and appears
in full on the opposite page.)
Mr. Nehemkis. At this point may I call two members of my staff,
Mr. Whitehead and Mr. Huff. Will you both step forward and allow
the chairman to give you the oath ?
Acting Chairman Reece. Mr. Huff was sv.orn.
Mr. Whiteliead, do you solemnly swear that the testimony you are
about to give in this procedure shall be the truth, the whole truth, and
nothing but the truth, so help you God ?
Mr. Whitehead. Yes.
TESTIMONY OF W. S. WHITEHEAD, SECURITY ANALYST, AND
CHARLES H. HUFF, ASSOCIATE UTILITIES FINANCIAL ANALYST,
SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D. C.
Mr. Nehemkis. Mr. Whitehead, as a member of the staff of the
Securities and Exchange Commission, have you had occasion to ex-
amine the files of Lee Higginson Corporation?
Mr. Whitehead. I have.
Mr. Nehemkis. I show you a file of documents which purport to
have been obtained from that company, and I ask you to identify
them and tell me whether you obtained them from the files of that
company.
Mr. Whitehead. These were obtained from the files of Lee Higgin-
son Corporation of New York City.
Mr. Nehemkis. I ask that the documents just identified be received
in evidence.
(The documents referred to were marked "Exhibit No. 1561." The
documents were subsequently offered individually, each one receiving a
new exhibit number.)
INIr. Nehemkis. Mr. Hiiff, I show you a file of documents coming from
the firm of Harriman Ripley & Co., Incorporated, with reference to
Chicago Union Station Co. I ask you to examine this file and tell me
whether you obtained these documents from the files of Harriman
Ripley & Co.
Mr. HufT. These are documents that I obtained from the files of
Harriman Ripley & Co., Incorporated.
Mr. Nehemkis. I ask th.at the file identified be received in evidence.
(The file of documents referred to was marked "Exhibit No. 1562."
The documents were subsequently offered individually^, each one re-
ceiving a new exhibit number.)
(Mr. Avildsen assumed the Chair.)
Mr, Nehemkis. I show you a file of documents purporting to come
from the firm of Smith, Barney & Co. with reference to the Chicago
Union Station Co. 1 ask you to examine this file and tell me
whether or not you obtained these documents from the files of that
company.
Mr. HuTF. Yes; I obtained these from the files of Smith, Barney
& Co.
11440 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. If it please the committee, I ask that these docu-
ments just identified be received in evidence.
Acting Chairman Avildsen. They may be received.
(The file of documents refered to was marked "Exhibit No. 1563."
The documents were subsequently offered individually, each one re-
ceiving a new exhibit number.)
Mr. Nehemkis. I show you a file purporting to come from The
First Boston Corporation containing documents with reference to the
Chicago Union Station Co. I ask you to examine this file and tell
me whether you obtained these documents from The First Boston
Corporation.
Mr. Huff. I obtained these from the files of The First Boston
Corporation.
Mr. Nehemkis. May it please the committee, these documents are
submitted to the record.
Acting Chairman Avildsen. They may be received.
(The file of documents referred to was marked "Exhibit No. 1564."
The documents were subsequently offered individually, each one re-
ceiving a new exhibit number.)
THE 1935 REFUNDING ^EFFECTS OF THE BANKING ACT OF 1933
Mr. Nehemkis. Mr. Bovenizer, during the summer of 1934, was
there not presented the question of a refunding issue for Station
bonds?
Mr. Bovenizer. Yes.
Mr. Nehemkis. Your firm presented it?
Mr. Bovenizer. With Lee Higginson.
Mr. Nehemkis. Besides the guaranteed bonds I understand there
were also outstanding about the middle of 1934 the following first
mortgage issues of the Station Co. : $30,850,000 series A 4i/> percent ;
$13,150,000 series B 5 percent; $16,000,000 series C 61/2 percent. Is
that correct ?
Mr. Bovenizer. I have no figures here, but I am quite sure that is
right.
Mr. Nehemkis. The former group of underwriters, however, at this
time was no longer intact?
Mr. Bovenizer. Yes; so far as we were concerned the National
City Co. had gone out of business.
Mr. Nehemkis. What had happened to break up the old group?
Mr. Bovenizer. The National City Co. had gone out of business
because of the act which had passed. We had taken Brown Harri-
man in in their place.
Mr. Nehemkis. Weren't there also some other changes? AVhat had
happened, Mr. Jesup, to the Chicago banlt ? They were likewise out
of the group ?
Mr. Jesup. That is right.
Mr. Nehemkis. And that was due to the enactment of the Bank-
ing Act?
Mr. Jesup. That is correct.
Mr. Nehemkis. Mr. Jesup, J. P. Morgan & (!!o. likewise was affected
by the passage of the Banking Act ?
Mr. Jesup. That is right.
CONCENTRATION OF ECONOMIC POWER 11441
Mr. Nehemkis. At this time, Mr. Bovenizer, did not Mr. Sparrow,
vice president of the Station Co., discuss the refunding with Mr.
Davis, formerly of the National City Co., and now with Brown Har-
riman, as well as with yourself ?
Mr. Bovenizer. Yes; he did.
Mr. Nehemkis. I offer in evidence, Mr. Chairman, a copy of a letter
from the files of Kuhn, Loeb & Co. with reference to the subject mat-
ter. That is a letter obtained in the manner which I described at
the outset of these hearings, so it requires no identification, but I
would like Mr. Bovenizer to be familiar with it before I discuss it.
Mr. Bovenizer. All right, Mr. Nehemkis.
Mr. Nehemkis. You have examined it ?
Mr. Bovenizer. Yes.
Mr. Nehemkis. I offer it in evidence.
(The letter referred to was marked "Exhibit No. 1565" and is in
eluded in the appendix on p. 11631.)
Mr. Nehemkis. I should like to read from that letter, Mr. Chair-
man. This is a letter from W. W. K. Sparrow, vice president and
comptroller of the Station Co., to W. W. Atterbury, president of the
Station Co. [reading from "Exhibit No. 1565"] :
I have had some discussion with Mr. Newcomet of your company and have
also had some correspondence with Mr. Pierpont V. Davis, vice president, Brown
Harriman & Co. Incorporated, (formerly National City Company), and Mr. Geo.
W. Bovenizer, of Kuhn, Loeb & Co., New York, concerning the possibility oi
refinancing series "C" 6V2 percent issue on a better basis.
Mr. Henderson. Was there a mistake there? That says Brown
Harriman Co., formerly National City Co. ?
Mr. Nehemkis. That is right.
Mr. Henderson, Was that in the letter ?
Mr. Nehemkis. I am reading exactly from the letter. I am afraid
I don't understand your question, Mr. Commissioner. "V^'ill you re-
peat it?
Mr. Henderson. I wanted to make sure. I didn't understand that
Brown Harriman was a
Mr. Nehemkis (interposing). I will read it again, sir. It says here
[reading from "Exhibit No. 1565"] :
I have had some discussion with Mr. Newcomet of your company and have
also had some correspondence with Mr. Pierpont V. Davis, vice president. Brown
Harriman cS: Co. Incorporated, (formerly National City Company), and Mr. Geo.
W. Bovenizer, of Kuhn, Loeb & Co., New York, concerning the possibility oi
refinancing series "C" QV2 percent issue on a better basis.
When in New York yesterday I discussed this quite fully with Mr. Bovenizer
and Mr. Davis.
Do you recall, Mr. Bovenizer, whether Mr. County had any objec-
tion to bringing in the firm of Brown Harriman & Co. through con-
sultation with Pierpont Davis ?
Mr. Bovenizer. Not that I know of.
Mr. Nehemkis. I offer in evidence, Mr. Chairman, a letter dated
August 6, 1934, from A. J. County to W. W. K. Sparrow, vice presi-
dent and comptroller of the Chicago Union Station Co. This letter
has been obtained in the fashion which I described at the outset of
the hearings.
Acting Chairman Avildsen. To be printed?
11442 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. Printed, if you please, sir.
(The letter referred to was marked "Exhibit No. 1566" and is in-
cluded in the appendix on p. 11632.)
THE SELECTION OF UNDERWRITING ASSOCIATES
Mr. Nehemkis. I would like to read one paragraph from that
letter [reading from "Exhibit No. 1566"] :
I note that you are interviewing Mr. Davis, of Brown Harrimau & Co.—
Ml". County writes to Mr. Sparrow —
as well as Mr. Bovenizer. I am not sure that Brown Harriman & Co. partici-
pated in the previous bond issue. If not, I assume that it would not be neces-
sary to bring them in now, although they are a very high class tirm and Mr.
Pierpont V. Davis is a good adviser.
I take it, Mr. Bovenizer, that Mr. County meant that the Pemisyl-
vania was not under any moral obligation or commitment to include
Brown Harriman in the underwriting group since Brown Harriman
had not been a member of tlie previous group. Is that correct?
Mr. Bovenizer. That is his interpretation, but it was up to us to
include them or not.
Mr. Nehemkis. And did you include tliem ?
Mr. Bovenizi:;r. Yes.
Mr. Nehemkis. And you recognized them as the successor to the
National City Co.'s interest?
Mr. Bovenizer. Yes, that they were the only successor at that time.
Mr. Henderson. ]May I ask a question, please?
Mr. Nehemkis. If you please, sir.
Mr. Henderson. Do I understand that it wasn't up to the Pennsyl-
vania Railroad as to whether or not Brown Harriman was included?
Mr, Bovenizer. It was up to us entirely.
Mr. Henderson. You already had the business.
Mr. Bovenizer. No, but it was up to us to include Brown Harri-
man in it, as the successors of the National City Co., because all
the j)rincipal officers at that time of the former National City Co.
and a large part, I shotdd say the better part, of the distributing
organization had gone into this firm of Brown Harriman & Co.,
Incorporated.
Mr. Henderson. Suppose the Pennsylvania Railroad, wliich I un-
derstand has about 50 percent ownership of the terminal, had wanted
some other firm instead of Brown Harriman?
Mr. Bovenizer. Wc would have been delighted to consider that and
probably would have followed their wishes.
Mr. O'CoNNELL. I luiderstood you to say it wasn't up to them?
Mr. Bovenizer. No, it was up to us to use the successor of the
National City Co. That is what I meant by that statement, because
they had been our associates, you understand, heretofore, the National
City Co. had been chosen by us, one of our original group in this
business, in 1912 or 1911, as the memorandum states.
Mr. O'CoNNELL. By virtue of this long established custom, do
I understand that your firm and Lee Higginson were entitled to the
business and you also were entitled to decide who would participate?
Mr. Bovenizer. That was based entirely upon the service rendered;
so long as they wished to keep u}) the contact we were entitled to it
and hoj^ed to keep it up.
CONCENTRATION OF ECONOMIC POWER 11443
Mr. O'CoNNELL. But you also indicate that the Pennsylvania Rail-
road or the Terminal Co. would not be in position to tell you who
would participate.
Mr. BovENiZER. Oh, yes. I think probably they would tell us, but
the Pennsylvania Railroad Co., as I understand it, was perfectly will-
ing to deal with us alone ; it was up to us to choose our own associates,
which we did.
Mr. O'CoNNELL. But one statement that puzzled me was that you
indicated it was entirely up to you.
Mr. BovENizER. I meant by that statement to choose the successor
of the National City Co. for this particular group.
Mr. O'CoNNEix. That is exactly it.
Acting Chairman Avildsen. It was not up io you to choose the suc-
cessor of the Illinois Merchants Co. ?
Mr. BovENizER. No ; that was up to Lee Higginson. We were doing
this business on a joint group basis. Our original partner in the
business was the National City Bank which became the National City
Co., and later on in our eye? became Brown Harriman & Co.
Mr. Nehemkis. May I offer in evidence, Mr. Chairman, a letter from
W. W. K. Sparrow to Mr, A. J. County and Mr. Bruce Scott, dated
September 1, 1934. This letter was obtained in the fashion described
at the outset of these hearings.
Acting Chairman Avildsen. Without objection, it will be ad-
mitted.
(The letter referred to was marked "Exhibit No. 1567" and is in-
c hided in the appendix on p. 11632.)
Mr. Nehemkis. At this time, Mr. Bovenizer, did you not discuss the
possible refunding with Mr. Jesup?
Mr. Bo%'enizer. Yes.
Mr. Nehemkis. And, Mr. Jesup, did you have occasion to discuss
the possible refunding with Mr. Sturgis?
Mr. Jesup. Yes.
Mr., Nehemkis. Mr. Sturgis, I show you a memorandum dated Au-
gust 29, 1934. and ask you to tell me whether that memorandum was
not dictated by you.
Mr. Sturgis. That is part of a series of memoranda. That is one;
yes.
Mr. Nehemkis. Is the memorandum which you have in yr)ur hand
one which was dictated by j^ou on the date there designated ?
Mr. Sturgis. That is correct.
Mr. Nehemkis. Mr. Chairman, may it please the committee, I offer
in evidence the memorandum identified by the witness.
Acting Chairman Avildsen. It may be received.
(The memorandum referred to was marked "Exhibit No. 1568" and
appears in full in the text.)
TEMPORARY PLACING OF FIRST NATIONAL BANk's UNDERWRITING INTEREST
Mr. Nehemkis. I should like, if I may, to read to you from that
memorandum prepared by Mr. H. S. Sturgis, dated August 29, 1934
[reading "Exhibit No. 1668"] :
Mr. Jessup of Lee, Higginson & Co. called with reference to the possibility
of a refunding issue by the Chicago Union Station Company. He stated that
he had discussed the matter with Mr. Bovenizer of Kuhn, Loeb & Co. and that
11444 CONCENTRATION OF ECONOMIC POWER
while tliere were a number of "ifs" in regard to the business there was a
possibility that an issue would come along perhaps in October. The purpose of
his call was to tell us that when the business materialized he would inform
us and would then ask us to designate some one to take our place in the business
with the idea that we were not permanently out of the uuderwritiug business
and would probably wish to have Lee, Higginson place our share on a purely
temporary basis where we would be 3ure to have it back when, as and if
the Banking Act is changed so as to permit us to underwrite.
I thanked him very much for his information and told him that I was
sure that everyone had expected that Lee, Higginson would take this attitude,
and that in spite of expecting it all of us would be most pleased to know that
that is their attitude.
Now, Mr. Jesup, upon what did you predicate your opinion that
the First National Bank was not permanently out of the underwrit-
ing business? I might just say that the memorandum reporting your
conversation is dated August 29, 1934.
Mr. Jesup, I had been led to believe that Mr. Sturgis and some of
his associates had been working on tlie theory that there might pos-
sibly be a change in the act and they could build up some optimism
in regard to that, and I think that is the reason for that statement.
Mr. Nehemkis. In anticipation of the possible revision of the Bank-
ing Act of 1933, you called upon Mi\ Sturgis, who was then repre-
senting the First National Bank, to request him to designate someone
who might serve, shall I say, as a temporary custodian of the interest
in this financing of the First National Bank of New York. Is that
correct, sir?
Mr. Jesup. Well, I don't believe that that was the phraseology I
used. I told him that we had two or three ideas ourselves, but if
he had any suggestions, we would be very glad to give them considera-
tion. I think that is the phraseology I used.
Mr. Nehemkis. Is that your recollection of the conversation, Mr.
Sturgis ?
Mr, Sturgis. That is approximately my recollection, that we were
no longer in the business, that there was still some hope, let us say,
that that was not a permanent situation. We had served this com-
pany for many years, and if the banks were again permitted to under-
write, that we would have an opportunity to get back. On the other
hand, the people designated were far from just custodians. They
were good, sound houses who properly could be included in that
business.
Mr. Nehemkis. But you indicated in connection with the visit of
Mr. Jesup that you were not relinquishing your rights to this financ-
ing, you were merely designating other houses or you would designate
other houses who would have perhaps the opportunity of occupying
your own position in the group. Is that correct?
Mr. Sturgis. Well, I would phrase it somewhat differently.
Mr. Nehemkis. You phrase it to me and let me have your version.
Mr.- Sturgis. In the first place, the people who designate who shall
have the business are obviously the corporation putting out the issue,
and it can designate Kuhn, Loeb & Co. with all of it, or rather
Kuhn, Loeb with half of it, or Lee Higginson with half of it — that
is their business. These are big issues and Lee Higginson, I gather,
wanted to diversify their risk or reduce the amount of the risk and
they asked partners into that business. We apparently were good
(CONCENTRATION OB^ ECONOMIC POWER 11445
partners for Lee Higginson for many years, and they kept us on as
such in their business.
Mr. Nehemkis. Since 1911.
Mr. Sturgis. They could put us out at any time they wanted to.
But when he was kind enough — and let me make this plain, that we
were in many pieces of business, and this is the only one where we
have ever been asked to designate a successor. So if you are trying
to prove a proprietary interest, you are taking the one instance, as
far as we are concerned, that is in the records. There is no other.
Mr. Nehemkis. The subject matter of discussion before this com-
mittee this afternoon, Mr. Sturgis, is the financing of the Chicago
Union Station Co.
Mr. Sturgis. Yes, but you introduced this with the statement you
were going to show a proprietary interest of the people in this,
Mr. Nehemkis. These hearings will continue at the pleasure of
the committee for 2 more weeks. We shall have occasion to discuss
this problem in much more detail.
Mr. Sturgis. I am trying to answer your question but I am trying
to put my point clearly. Lee Higginson invited us to be partners.
They did in 1934 invite us to say who might take our places. It was
a very nice thing for them to do, we appreciate it and we took
advantage of it.
Mr. Nehemkis. At this time, Mr. jesup, did you have occasion, in
view of this realignment that was taking place as the result of the
impact of the Banking Act, to discuss the problem of the new
members of the group with the Station Co. ?
Mr. Jesup. No ; not as far as I know.
Mr. Nehemkis. Mr. Bovenizer, what is your recollection as to
whether you or or other members of your partners discussed bringing
in new members of the group with the company?
Mr. Bovenizer. My recollection is it was not discussed with the
company.
Mr., Nehemkis. In other words, you felt this was a matter for the
syndicate, your people could handle it ?
Mr. Bovenizer. So far as the company was concerned, Kuhn, Loeb
and Lee Higginson were doing the business.
Mr. Nehemkis. And they would have implicit confidence in any
selections you would make.
Mr. Bovenizer. Yes.
efforts or EDWARD B. SMITH & CO. TO OBTAIN A PARTICIPATION IN THE
19 35 ISSUE
Mr. Nehemkis. As the result of this realignment that was taking
place as the result of the Banking Act, Mr. Bovenizer, certain banking
houses were attempting to obtain a place in the business, notably
E. B. Smith & Co., (Smith, Barney & Co.) ; is that correct?
Mr. Bovenizer. I don't remember them coming to me. The only
ones that came to me were Mr. Glore here who thought he ought
to get the place of one of the Chicago participants and I referred
him to Mr. Jesup.
Mr. Nehemkis. We will come to that in a moment.
1144(5 CONCENTRATION OF ECONOMIC POWER
Mr. Chairman, may I offer in evidence a document identified pre-
viously as coming from the files of Smith, Barney & Co.
Acting Chairman A\tldsen. Without objection, it may be admitted,
(The document referred to was marked "Exhibit No. 1569" and is
included in the appendix on p. 11633.)
Mr. Nehemkis. And may I read to you certain diary entries in
the document which has just been admitted. The first diaiy entry is
by JWC, John W. Cutler, partner of the firm of Smith, Barney &
Co., and it is dated September 5, 1934, and reads as follows [reading
from "Exhibit No. 1569"] :
JRS—
the initials are Joseph R. Swan —
or JWC to speak to Bovenizer regarding possibility of refunding the 5s and
0%s, as per KW's memo.
KW is Karl Weisheit.
As per KW's memo of August 10th.
I want to read you another diary entry dated December 7, 1934
[reading further] :
RC Jr.—
that is R. Cheston —
and I —
John W. Cutler-
spoke to George Bovenizer today when he was in the office for Chesapeake
syndicate meeting. He said they had had the thing set up for several months
and had hoped to do it in October but did not go ahead then on account of St.
Paul situation. They are considering refunding only the 6%s ($18,000,000, I
think). Will probably take it up again in February. Might be well to say
something to County of P. R. R. —
Pennsylvania Railroad —
If opportunity presents. JPM&Co —
I think that represents J. P. Morgan & Co. —
Had interest in old accovmt thru their connection with Burlington. Question
whether or not we might see George Whitney about this.
May I read you another diary entry by Mr. Cutler bearing the date
December 11, 1934 [reading further] :
Spoke to Mr. Whitney reference Morgan's former interest in busness and he
said that their position in the various accounts came from LH&Co —
Lee Higginson & Co. —
(Schweppe of that firm had been very active in the earlier negotiations).
Therefore, anything he might do would have to be after talking with LH&Co.
Question: Should we say anything to them directly?
May I read you another diary entry by John W. Cutler, dated De-
cember 14, 1934 [reading further] :
Talked with Bovenizer reference my conversation with Whitney. He said he
might be able to say something to Higginson in our behalf.
CONCENTRATION OF ECONOMIC POWER 11447
TRANSFER OF CONTINENTAl. ILLINOIS BANK & TRUST CO.'s UNDERWRITING
INTEREST TO FIELD, GLOBE & CO.
Mr. Bovenizer, do you recall whether the Continental Illinois Bank
& Trust Co. asked your firm to transfer their interest in the Station
Co. business to Field, Glore & Co. ?
Mr. Bovenizer. I don't recall that.
Mr. Nehemkis. Mr. Glore, at long last I come to you. Do you
have any recollections on the subject?
Mr. Glore. In connection with the Continental?
Mr. Nehemkis. Yes, do you recall any occasion wherein Continental
requested Kuhn, Loeb to transfer their old interest in the Chicago
group to your firm ?
Mr. Glore. Our files show that I wired our New York office, that
one of their vice presidents had phoned Kuhn, Loeb & Co. saying that
the}^ had no objection to their interest being transferred to us.
Mr. Nehemkis. You have in your "hands a letter, a photostatic copy
of a letter, dat6d February 28, 1935, addressed to Mr. Ralph Budd, pres-
ident, Chicago, Burlington & Quincy Railroad Co., 547 West Jack-
son Boulevard, Chicago, 111. Do you recognize that photostatic copy
as being a true and correct copy of an original letter in your files ?
Mr. Glore. I do.
Mr. Nehemkis. I would like, Mr. Chairman, to oflfer this letter just
identified into evidence. And may I read from this. You will recall
this is a letter from Mr. Glore to Mr. Budd [reading from "Exhibit
No. 1570"] :
Dear Me. Budd: Sometime ago I discussed with you briefly the possibility of
calling the outstanding Chicago Union Station 6%'s, at that time asking if I
could count on the Burlington's help to be included In this business if it were
done. Your answer was that I could. ■
I later found that Mr. Sparrow was handling the matter and that it was being
negotiated largely by the Pennsylvania with Kuhn Loeb. The old Union Station
group was composed of Kuhn Loeb, Lee Iligginson, National City Company,
First National of New York, and the Continental Illinois Company. The latter
three are now out of business, but Kuhn Loeb are recognizing Brown Harri-
man in the National City Company's place, inasmuch as practically the entire
personnel of the National City Company are now associated with Brown
Harriman.
I note, Mr. Bovenizer, that Mr. Glore says Kuhn, Loeb are recogniz-
ing Brown Harriman in the National City Co.'s place, inasmuch as
practically the entire personnel of the National City Co. are now as-
sociated with Brown Harriman. You have already testified that that
was the case ?
Mr. Bovenizer. Yes, sir.
Mr. Nehemkis. Continuing with the letter, Mr. Chairman [reading
further from "Exhibit No. 1570"] :
The Continental Illinois have advised Kuhn, Loeb that they would like to see
their former interest in our hands and from conversations I have had with Kuhn,
Loeb, there is no objection to our being included.
So that it would appear, Mr. Bovenizer, that Mr. Glore did have
conversations with you.
Mr. Bovenizer. I said Mr. Glore had conversations with me, and
I referred him to Lee Higginson because it was out of their share this
participation was to come,
Mr. Nehemkis. So that your memory is quite correct?
124491 — 40— pt. 22 7
11448 CONCENTRATION OF ECONOMIC POWER
Mr. BovENizER. Yes ; I had conversations with Mr. Glore.
Mr. Henderson. You couldn't remember the conversations?
Mr. Glore. I probably did have them, though, I don't know.
Mr. Nehemkis. The Commissioner said he still thinks it is a good
record, Mr. Bovenizer.
I take it as a fact, Mr. Glore, that you requested Mr. Budd to ask
Mr. Sparrow to assist your firm in obtaining the participation of the
business, and Mr. Budd carried out your request.
Mr. Glore. Yes.
(The letter referred to was marked "Exhibit No. 1570" and is in-
cluded in the appendix on p. 11634.)
Mr. Nehemkis. I show you a telegram, a photostatic copy of which
you now have in your possession, with the initials, "C. F. G." to
"J. R. F." dated March 5, 1935. C. F. G. are your own initials, and
J. R. F. I take to be the initials of Mr. Forgan ?
Mr. Glore. That is right.
Mr. Nehemkis. Is that a true and correct copy of the original in
your possession?
Mr. Glore. Yes.
Mr. Nehemkis. Mr. Chairman, I offer in evidence the telegram just
identified.
Acting Chairman Avildsen. Without objection it may be admitted.
(The telegram referred to was marked "Exhibit No. 1571" and is
included in the appendix on p. 11634.)
Mr. Nehemkis. Apparently, Mr. Glore, Mr. County was willing to
support the Burlington's request. Is that correct as you recall the
situation ?
Mr. Glore. That is right.
Mr. Nehemkis. Now I show you a telegram, of which you now have
a photostatic copy, dated March 5, 1935, to C. F. G. from J. R. F.,
C. F. G. being yourself?
Mr. Glore. Yes.
Mr. Nehemkis. And J. R. F. being your partner, J. Russel Forgan ?
Mr. Glore. That is correct,
Mr. Nehemkis. This telegram reads as follows :
Sargent reports —
Is that Fred W. Sargent, president of the Chicago & Northwestern ?
Mr. Glore. Fred
Mr. Nehemkis. This is Fred Sargent?
Mr. Glore, No.
Mr. Nehemkis, What Sargent is this?
Mr. Glore, It is an employee of ours,
Mr, Nehemkis [reading "Exhibit No, 1572"]—
Sargent reports that County has told him he will put in ;i word with K. L. in
support of Burlingtons position in Union Station financing. Sargent thinks
County has hoard from Burlington. He states further that it is possible that the
ICC will insist on public bidding for the bonds, although this is by no means
assured.
Initialed J. R. F, to C, F, G.
(The telegram referred to was marked "Exhibit No. 1572" and
appears in full above.)
Mr, Glore, do you recall whether Mr, Bryce, a vice president of the
Continental Illinois Bank, also interceded m your behalf by advising
CONCENTRATION OF ECONOMIC POWER 11449
K. L. that the bank would like to have its interest taken up by your
firm?
Mr. GiiORE. He did.
Mr. Nehemkis. I show you a photostatic copy of a telegram, pre-
sumably sent by you to your partner, J. Russel Forgan, and ask you
to tell me whether this is a true and correct copy oi an original from
your files.
Mr. Glore. It is.
Mr. Nehemkis. I offer the telegram, dated March 5, 1935, from
Charles F. Glore to J. Russel Forgan, just identified by the witness,
and I should like to read the contents of that telegram [reading "Ex-
hibit No.. 1573"] :
"Bryce phoned Stuart" — That was Bryce of the Continental —
•'phoned Stuart" — that, presumably, is Percy Stewart, your syndicate
manager.
Mr. BovENizER. Yes ; but his name is spelled wrong.
Mr. Nehemkis. But it is Percy Stewart that is referred to [reading
further] :
Bryce phoned Stuart in Bovenizer's office that Coatinental would like to have
us have their interest in Union Station.
Initialed C. F. G., to J. R. F. I offer this in evidence.
(The telegram referred to was marked "Exhibit No. 1573" and
appears in full above.)
Mr. Nehemkis. Mr. Glore, I take it that your firm was finally in-
cluded in the underwriting group, its participation being generally
considered as coming from the old interest of the Continental Illinois?
Mr. Glore. That I don't know. It came from Lee Higginson.
Mr. Nehemkis. Mr. Glore, I show you a letter presumably written
by yourself to your partner, J. Russel Forgan, dated March 11, 1935,
and I ask you to tell me whether that photostat which you have in
your hands is a true and correct copy of the original in your files in
Chicago.
Mr. Glore. It is.
Mr. Nehemkis. Is it a correct copy ?
Mr. Glore^ It is ; yes.
Mr. Nehemkis. Mr. Chairman, may I offer in evidence a letter dated
March 11, 1935, from Mr. Glore to Mr. Forgan, which has just been
identified ?
Acting Chairman Avnj)SEN. Without objection, it may be admitted.
(The letter referred to was marked "Exhibit No. 1574" and is in-
cluded in the appendix on p. 11449.)
Mr. Nehemkis. May I read from the letter ? [Reading from "Ex-
hibit No. 1574:"]
Refunding of Chicago Union Station 6%'s seems all set and new bonds will be
offered very shortly.
Kuhn-Loeb and Lee-Higginson will head the business as in the past— Brown
Harriman and ourselves will follow, and probably Smith and the First of Boston
follow us. I don't know yet what our interest will be, nor do I particularly care.
I am much more interested in the position.
By that you meant, did you not, your place in the advertising
position ?
Mr. Glore. I meant it was a Chicago piece of business, and we were
very glad to be included in it.
11450 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis (reading further) :
What I had not understood until recently is that the Chicago Union Station
account is a consolidation of two groups that were working on the issue, Kuhn-
Loeb and the National City being one, Lee Higginson being the other. Asso-
ciated with Lee Higginson were the First National, Morgan —
I take it that reference to Morgan, Mr. Glore, is J. P. Morgan & Co. ?
Mr. Globe. Right.
Mr. Nehemkis (reading further) :
Morgan with a silent interest, and the old Illinois Merchants Bank. Our
interest wiU have to come out of the Lee Higginson participation, and we prob-
ably will be considered as taking the Old Continental interest.
That was your impression at the time ?
Mr. Gloee. It must have been.
Mr. Nehemkis (reading further) :
Apparently the First National and Morgan are the ones suggesting Smith
and the First of Boston.
On what did you base that statement, Mr. Glore — "Apparently the
First National and Morgan are the ones suggesting Smith and the
First of Boston"?
Mr. Glore. It may have been a guess, or it may have been some-
thing that somebody told me at that time.
Mr. Nehemkis. I offer in evidence Mr. Chairman, a letter of James
Lee, assistant secretary, Lee Higginson Corporation, to Messrs. Field,
Glore & Co., March 23, 1935. This I take it is the official letter, Mr.
Jesup, which notified Field, Glore of its 10 percent share. Will you
examine that document and tell me whether that is a true and cor-
rect copy of the original in the files of your firm ?
Mr. Jesup. That is correct.
Mr. Nehemkis. Mr. Chairman, I offer the document ii> evidence.
Acting Chairman Avildsen. Without objection, it may be ad-
mitted.
(The letter referred to was marked "Exhibit No. 1575" and is
included in the appendix on p. 11635.)
Mr. Nehemkis. Now, Mr. Jesup, I believe at this time you again
had occasion to talk with the people at the First National Bank to
ask whether or not they would designate a sucessor for their under-
writing interest. Do you recall that?
Mr. Jesup. That is in connection with the first issue?
Mr. Nehemkis. That is in connection with the first issue coming
out.
Mr. Jesup. Well, I thought I answered that before.
Mr. Nehemkis. Perhaps Mr. Sturgis had better tell us.
Mr. Sturgis. Well, March 7, 1935', that has to do with the re-
funding.
Mr. Jesup. It is the conversation in regard to the same issue.
Mr. Nehemkis. I show you a copy, bearing the initials L. F. H..
of a memorandum dated March 7, 1935, obtained from the files of
the First National Bank of New York, and ask you to examine this
memorandum, Mr. Sturgis, and tell me whether or not you are familiar
with the contents thereof.
Mr. Sturgis. That is right.
Mr. Nehemkis. Will you tell me Avhose initials are represented bv
L. F.H.? c
CONCENTRATION OF ECONOMIC POWER 11451
Mr. Sturgis. Leverett F. Hooper, vice president of the bank.
Mr. Nehemkis. Vice president of the bank at the time of the writ-
ing of the memorandum?
Mr. Sturois. That is right — no; I don't remember. He was made
a vice president. He was either manager of the bond department or
vice president ; I don't remember on that date.
Mr. Nehemkis. Mr. Chairman, I offer in evidence the memoran-
dum identified by Mr. Sturgis.
(The memorandum referred to was marked "Exhibit No. 1576"
and is included in the appendix on p. 11636.)
]\Ir. Nehemkis. I should like to read from this memorandum, if
you please [reading from "Exhibit No. 1576"] :
Mr. Jesup called today, saying that the Chicago Union Station Company
was considering redeeming its $16,000,000 First Mortgage 6%% bonds. Series
"C" on July 1 by the issuanpe of a like amoimt of 3%% or more probably 4%
bonds. If this is done, the company expects to sell at the same time an issue
of .$2,100,000 debentures. Mr. Jessup said that Field, Glore & Company had
inherited the underwriting interest of the Illinois Merchants Trust Company.
Did you, Mr. Glore, correctly understand that to be the situation
at the time?
Mr. Glore. I beg your pardon?
Mr. Nehemkis. I was reading from a statement in Mr. Hooper's
memorandum in which he says, "Mr. Jesup said that Field, Glore
& Co. had inherited the underwriting interest of the Illinois Mer-
chants Trust Co." I asked if that was your general recollection?
Mr. Glore. At that time I didn't know where the interest came
from.
Mr. Nehemkis. On what was your impression based, Mr. Jesup?
,Mr. Jesup. I am not sure that I used that phraseology. We had
had no conversation, as far as my partners in Chicago can recall,
with the Continental Illinois Bank. I think, if my recollection is
correct — and I get this recollection from one of my Chicago asso-
ciates— it included Glore, Forgan very largely because of the fact
that the request had been made by Mr. Budd, of the Burlington, to
include it. I don't think that I carried any impression in the back
of my mind that we had "inherited," if that is the phraseology used,
the position of the Continental Illinois Bank.
(Discussion off the record.)
Mr. Jesup. Mr. Nehemkis, may I add to my statement? I don't
believe that I carried any impression in the back of my mind that
Field, Glore had inherited the position from the bank. There is
nothing in our records which would indicate that. I considered that
they were a member having the same interest that had formerly gone
with the Continental Illinois Bank, and the main reason that exists
in my mind for including Glore, Forgan is because of a request made
upon us by Mr. Budd.
Mr. Nehemkis. And apparently, Mr. Leverett Hooper, a vice presi-
dent in charge of the investment department of the First National
Bank, must have misunderstood you, because he says very distinctly,
"Mr. J^sup said that Field, Gore & Co. had inherited the underwriting
interest of the Illinois Merchants Trust Co."
But to continue the reading of the letter, Mr. Hooper goes on to
say [reading further from "Exhibit No. 1576"] :
J. P. Morgan had been asked if they cared to name an underwriting bouse to
have their share, and decided ncft to do so.
11452 CONCENTRATION OF ECONOMIC POWER
Now, Mr. Jesup, with which partners of the firm of J. P. Morgan
& Co. did you discuss this matter?
Mr, Jesup. I did not discuss it with any partner of J. P. Morgan
& Co. One of my associates, I believe, took the matter up with J. P.
Morgan & Co., and I don't know who the partner was that he did
discuss it with.
Mr. Nehemkis. Can you tell me the name of your associate that
had these discussions ?
Mr. Jesup. I believe it was N. P. Hallowell.
Mr. Nehemkis. Would you be good enough, Mr. Jesup, to send me
a letter which I may present to the committee from either you or
Mr. Hallowell, telling me the name of the partner or partners of
J. P. Morgan & Co. with whom Mr. Hallowell discussed this matter 1
Mr, Jesup. Yes.
Mr. Nehemkis. You will do that?
Mr. Jesup. Yes.
Mr. Nehemkis. Thank you, sir.*
As I understand the memorandum from which I am reading, J. P.
Morgan & Co. authorized Lee Higginson to distribute its share as
Lee Higginson saw fit.
Mr. Jesup. As I understand it, the conversations that took place —
I get this from my associate. He asked the firm, or one of the part-
ners of J. P. Morgan & Co., if they cared to suggest any underwriter
or underwriters to take the place they had formerly had. They said
no, they had no suggestions to make. We were entirely free to do
whatever we wanted to.
Mr. Nehemkis. Are you familiar as a result of your discussions
with Mr. Hallowell at the time, as to what reason J. P. Morgan &
Co. advanced for not being willing to designate a successor to their
proprietary interest in the business?
Mr. Jesup. I don't believe they gave any reasons at all. They just
made a simple statement that they had no further interest in it.
FIRST national BANK DESIGNATES EDWARD B. SMITH & CO., WHITE, WELD &
CO., AND LAZARD FRERES & CO. TO RECEIVE ITS UNDERWRITING INTEREST
Mr. Nehemkis. Mr. Sturgis, in distributing the business to White,
Weld, E. B. Smith, and Lazard Freres, the First National Bank did
not relinquish its proprietary interest in the account. Is that correct?
Mr. Sturgis. I said before, we don't claim any proprietary interest.
We designated and suggested these three names to Mr. Jesup. He
was quite free to say "No" to any of the suggestions we made, and
the people whom we had designated were quite free to take it, or
say "Yes; we will take it, but we are going to hold on as long as
we want."
Mr. Nehemkis. I want you to look at a memorandum obtained
from the files of your bank, bearing date of March 13, 1935, with the
initials L. F. H. You have the original. Is that a true and correct
copy ?
Mr. Sturgis. Well, I would like to look at it. Yes ; that is correct.
Mr. Nehemkis. Mr. Chairman, I oflfer in evidence the memoran-
dum just identified.
1 Mr. Jesup subsequently submitted the iDformation requested. See "Exhibit No. 1670."
appendix, p. 1179B.
CONCENTRATION OF ECONOMIC POWER 11453
Acting Chairman Avildsen. Without objection, that may be ad-
mitted.
(The memorandum referred to was marked "Exhibit No. 1577"
and is included in the appendix on p. 11636.)
Mr. Nehemkis. L. F. H., I take it, is Leverett F. Hooper, the
writer of the previous memorandum?
Mr. Sturgis. That is correct.
Mr. Nehemkis (reading from "Exhibit No. 1577") :
Mr. Jesup telephoned me that while consummation of this business was at
least ten days away and the price of the new bonds was as yet undetermined,
they were now forming their group. Of our interest amounting 13%%, one-half
or 6%% of the business would be offered to E. B. Smith & Company, one-quarter
of our interest or 3%% of the business would be offered to White Weld, and
one-quarter of our interest or 3%% of the business would be offered to Lazard
Freres. Accordingly, S. A. W.
Who is S. A. W.?
Mr. Sturgis. Samuel A. Welldon.
Mr. Nehemkis. What is his position at the bank?
Mr. Sturgis. Vice president.
Mr. Nehemkis (reading further) :
Accordingly, S. A. W. telephoned John Cutler of E. B. Smith and I telephoned
Alec White of Wliite Weld and Jack Harrison (Stanley Russell away) of
Lazard Freres that at our request the account would offer them the above
interests in the business on original terms.
The account which is mentioned was on original terms ?
Mr. Sturgis. That was meant.
Mr. Nehemkis. Is that the meaning of the term "account"? The
original terms?
Mr. Sturgis. I don't know, I presume so.
Mr. Nehemkis (reading further) :
— that at our request the account would offer them the above interests in the
business on original terms.
The account consisting of Kuhn, Loeb and Lee Higginson ? I pre-
sume that is what you meant?
Mr. Jesup. Yes.
Mr. Nehemkis (reading further) :
E. B. Smith & Company will appear, White Weld and Lazard Freres will not.
We added that we hoped that banks were not permanently out of the underwriting
business and if and when we could legally do so, we would expect to recapture this
business from them.
Now, you seem to be rather allergic, Mr. Sturgis, to the use of the
words "proprietary interest." Would you mind explaining to me
the distinction between recapture and any other thing that doesn't
represent proprietary interest in your mind?
Mr. Sturgis. If you have a piece of business that you have had
for many years, you certainly are going to do everything you can to
retain it. Subject to the prior offering of these bonds by the Chicago
Union Statioi) to friends of ours, and subject to their still wanting
us in the business, we hoped that we would again be back in it when
we legally could be.
Mr. Nehemkis. Now, I may be mistaken about this and I am sure
you will correct me, but this memorandum is written March 13, 1935,
and as I recall from the testimony this morning, the Banking Act of
1933 became effective on June 16, 1934. Would you enlighten me,
11454 CONCENTRATION OF ECONOMIC POWER
Mr. Sturgis, as to what the First National Bank of New York was
doing in the underwriting business, anyway?
Mr. Sturgis. We weren t in the underwriting business.
Mr, Nehemkis. You were, according to two memoranda introduced
in evidence, parceling out underwriting participation in the Chicago
Union Station Co. and designating the successors of your proprietary
interest.
Mr. Sturgis. Do you call that being in the underwriting business?
Mr. Nehemkis. You explain it. I put the question to you.
Mr. Sturgis. I can assure you we got no fee for it, and I claim that
if you are in the business you are going to be paid for it.
Mr. Nehemkis. I should like to offer in evidence, Mr. Chairman, a
memorandum obtained from the files of Smith, Barney & Co, which has
been previously identified by a member of my staff.
Acting Chairman Aatldsen. Is it dated?
Mr. Nehemkis. It is dated May 6, 1935, and signed "JWC" and I ask
leave to read fi*om this memorandum.
Acting Chairman Avtldsen, Without objection, it may be admitted.
(The memorandum referred to was marked "Exhibit No, 1578" and
is included in the appendix on p, 11637.)
Mr, Nehemkis. There is a memorandum from J. W. Cutler, May 6,
1935 [reading from "Exhibit No. 1578"] :
CHICAGO UNION BTATION
I confirmed with Mr. Welldon and Mr. Hooper of the First National Bank that
thfey requested 6%% of their former interest in the business be allocated to us.
I would like to make this a matter of record. I think you should add that they
asked that they be allowed to consider taking this interest back should banks some
time in the future be permitted to underwrite,
I ask leave to offer in evidence, Mr, Chairman, a memorandum ob-
tained from the files of Smith, Barney & Co., ard previously identified.
This memorandum is dated March 22, 1935, and is signed by H. D.
Moore.
Acting Chairman Avildsen. Without objection, it may be admitted.
(The memorandum referred to was marked "Exhibit No. 1579" and
is included in the appendix on p. 11637,)
Mr, Nehemkis. I should like, if I may, to read one paragraph of
this memorandum, which is headed,' "Purchase Group — For Record
Only" [reading from "Exhibit No, 1579"] :
It was stated in the purchase group letter to us from Lee Higginson Corporation,
dated March 23, 1935, that our interest in this business was not to constitute a
precedent for future financing of this company. Also, it was Mr. Cutler's under-
standing with the First National Bank that the Bank should be allowed to con-
sider taking this interest back some time in the future if banks were permitted
to underwrite the issuance of securities again.
Now, Mr. Jesup, in the realignment of banking houses which was
taking place at this time, The First Boston Corporation was also
offered a participation by Lee Higginson, is that correct?
Mr. Jesup. That is correct.
Mr. Nehemkis. There has been, Mr. Chairman, previously identified
a memorandum as coming from the files of The First Boston Corpora-
tion. I now offer in evidence the memorandum previously identified,
dated March 18, 1935, and written by H, M, Addinsell.
CONCENTRATION OF ECONOMIC POWER 11455
Acting Chairman Avildsen. Without objection, it will be admitted.
(The memorandum referred to was marked "Exliibit No. 1580" and
is included in the appendix on p. 11638.)
Mr. Nehemkis. I should like, if I may, Mr. Chairman, to read the
last paragraph of Mr. Addinsell's memorandum [reading from "Ex-
hibit No. 1580"] :
While some of the old members of the syndicate have gone out of business and
this is a realignment, this is an invitation to appear as a principal in a new piece
of business that neither Harris Forbes nor First Boston appeared in in the past.
Field Glore is injected on account of Mr. Charles Glore's being a director of the
C. B. & Q.
Did Mr. Addinsell correctly understand the situation, Mr. Glore ?
Mr. Glore. I don't know.
Mr. Nehemkis. You don't care to comment, do you ?
Mr. Glore. I don't see how I could.
Mr. Nehemkis. Mr. Jesup, if I understand the situation correctly,
First Boston obtained its 5 percent interest out of the old interest
of J. P. Morgan & Co. which Lee, Higginson was authorized to dis-
tribute by J. P. Morgan & Co., is that correct?
Mr. Jesup. I would consider it came out of the general pot which
we had to reallot, and whether it was to be considered coming out
of J. P. Morgan's interest and Continental's or someone else's, I don't
know. I don't carry any recollection about that at all. It came out
of the general pot which we had to reallot.
QUESTION OF APPLICABILITT OF INTERLOCKING DIRECTORATE PROVISIONS
OF CLAYTON ACT AND TRANSPORTATION ACT OF 19 2 0
Mr. Nehemkis. Mr. Glore, may I direct a question to you. If I
recall correctly, I think the previous testimony shows that you had
asked Mr. Budd; the president of the Burlington, to use his influence
in obtaining a position in the underwriting group for Field, Glore
& Co. I think that is correct, isn't it?
Mr. Glore. That is right.
Mr. Nehemkis. At this time you were director, were you not, of
the Chicago, Burlington & Quincy Railroad Co. ?
Mr. Glore. I was.
Mr. Nehemkis. And you were also a partner of the investment
banking firm of Glore, Forgan & Co., then known as Field, Glore
&Co.?
Mr. Glore. That is right.
Mr. Nehemkis. Now, Mr. Bovenizer, Mr. Stewart of your firm was
somewhat concerned at that time about Mr. Glore's dual position
and drew Mr. Sparrow's attention to the matter. Do you recall that ?
Mr. Bovenizer. No : that I don't recall.
Mr. Nehemkis. Let me see if this refreshes your recollection.
Mr. Bovenizer. Mr. Stewart is here if you would like to ask him.
Mr. Nehemkis. Let me put the question and see if you recall it.
I show you a letter from Percy M. Stewart, to W. W. K, Sparrow,
dated March 15, 1935. I ask you to read that letter. Glance quickly
to the last paragraph. That contains the point I want your clari-
fication on.
Mr. Bovenizer. I think I was away at this time, Mr. Nehemkis.
That is why he wrote the letter.
11456 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. You say Mr. Stewart is here. I call Mr. Stewart,
Mr. Chairman.
Are you Mr, Percy Stewart ? May the witness be sworn ?
Acting Chairman Avildsen. Do you solemnly swear the testimony
you shall give in this proceeding shall be the truth, the whole truth,
and nothing but the truth, so help you God ?
Mr. Stewart. I do.
TESTIMONY OF PERCY M. STEWART, KUHN, LOEB & CO., NEW
YORK, N. Y.
Mr. Nehemkis. Since you will be but a moment, do you mind
standing?
I ask you to look at that letter which purports to bear your signa-
ture, and tell me whether or not that is a correct copy of an original
letter which you wrote on March 15, 1935, to Mr. W. W. K. Sparrow,
vice president of the Chicago Union Station Co.
Mr. Stewart. Yes ; it is correct.
Mr. Nehemkis. It is correct ?
Mr. Stewart. Yes.
Mr. Nehemkis. That is all, Mr. Stewart, thank you very much.
Mr. Bovenizer, are you familiar with the subject matter of the last
paragraph of the letter which you examined ?
Mr. Bovenizer. I am afraid I am not. I wasn't in the discussion
at that time. I am quite sure I was away, otherwise Mr. Stewart
wouldn't have written this letter to Mr. Sparrow. I would have.
Mr. Nehemkis. Mr. Chairman, I offer in evidence the letter just
identified by Mr. Percy M. Stewart, Kuhn, Loeb & Co. This letter
is dated March 15, 1935, and I have had it identified for the record
by the person who sent it.
Acting Chairman Avildsen. Without objection, it may be received.
(The letter referred to was marked "Exhibit No. 1581" and is
included in the appendix on p. 11638.)
Mr. Nehemkis. May I read the last paragraph of Mr. Percy
Stewart's letter [reading from "Exhibit No. 1581"] :
I want at this time to tell you that Messrs. Field, Glore & Co. will be asso-
ciated with ourselves and the Lee Higginson Corporation on original terms in
this financing. As you probably know, Mr. Glore is a director of the C. B. & Q.
I suggest therefore that it might be well if you called that Railroad's attention to
this so that they may determine for themselves whether, in view of this direc-
torship, there is any danger that the sale of these bonds, guaranteed by the
Burlington, will be in violation of the Clayton Act.
I should like at this time, Mr. Chairman, to introduce an extract
of Section 20 of the Clayton Act and Section 20a of paragraph 12 of
the Interstate Commerce Act of 1920.
Acting Chairman Avildsen. Without objection, they may be
admitted.
(The extracts referred to were marked "Exhibits Nos. 1582-1 and
1582-2" and are included in the appendix on p. 11639.)
Mr. Nehemkis. May I read to the committee the pertinent language
of those two provisions. Section 20 of the Clayton Act provides
that [reading from "Exhibit No. 1582-1"] :
No common carrier engaged in commerce shall have any dealings in securi-
ties • • * to the amount of more than $50,000, in the aggregate, in any one
year, with another corporation, firm, partnership, or association when the said
CONCENTRATION OF ECONOMIC POWER 11457
common carrier shall have upon its board of directors * * * any person
* * * who has any substantial interest in such other corporation, firm, part-
nership, or association, unless and except such purchases shall be made from, or
such dealings shall be with, the bidder whose bid is the most favorable to such
common carrier, to be ascertained by competitive bidding under regulations to
be prescribed by rule or otherwise by the Interstate Commerce Commission.
Section 20a (12) of the Interstate Commerce Act of 1920 makes it
[reading from "Exhibit No. 1682-2"] :
unlawful for any officer or director of any carrier to receive for his own benefit,
directly or indirectly, any money or thing of value in respect of the negotiation,
hypothecation or sale of any securities issued or to be issued by such carrier.
Now Mr. Glore, may I direct a question to you, please? Did you
have occasion to obtain an opinion of counsel whether or not your
dual position as director of the Burlington and partner in the in-
vestment banking house of Field, Glore & Co. ran afoul of the Clay-
ton Act?
Mr. Glore. I did not. I remember the matter being up with the
Burlington at the time this financing was done.
Mr. Nehemkis. Mr. Glore, I show you a letter addressed to me
from you, dated November 17, 1939. I ask you if that is your sig-
nature and if that is a copy of a letter which you sent to me?
Mr. Glore. It is.
Mr. Nehemkis. I offer this letter in evidence.
Acting Chairman Avildsen. Without objection, it may be ad-
mitted.
(The letter referred to was marked "Exhibit No. 1583" and is
included in the appendix on p. 11639.)
Mr. Nehemkis. Mr. Bovenizer, in response to Mr. Stewart's letter,
Mr. Sparrow advised Kuhn, Loeb & Co. that Mr. Glore's dual posi-
tion would not constitute a violation of the Clayton Act. Do you
not recall that situation or those circumstances?
Mr. Bovenizer. I do not.
Mr. Nehemkis. Mr. Stewart, I will have to call you back.
TESTIMONY OF PERCY M. STEWART, KUHN, LOEB & CO., NEW
YORK CITY— Resumed
Mr. Nehemkis. Will you tell me if you recognize that wire from
Sparrow to you dated March 20, 1935 ?
Mr. Stewart. Yes.
Mr. Nehemkis. That is a, true and correct copy of an original in
your possession ?
Mr. Stewart. Yes.
Mr. Nehemkis. Mr. Chairman, I offer a telegram to Mr. Percy
M. Stewart, Kuhn, Loeb & Co., from W. W. K. Sparrow, dated
Chicago, March 20, 1935.
Acting Chairman Avildsen. Without objection, it may be admitted.
(The telegram referred to was marked "Exhibit No. 1584" and
appears in full in the text.)
Mr. Nehemkis. I should like, Mr. Chairman, if I may to read
one sentence from that telegram. Perhaps I had better read the
whole telegram [reading "Exhibit No. 1584"] :
Referring last paragraph your letter fifteenth (stop) General Counsel of
Burlington advises in respect to that question it involves personal liability of
(Jlore alone and could not in any way affect validity of bonds (stop) Under-
11458 CONCENTRATION OF ECONOMIC POWER
stand Mr. Glore's counsel satisfied he is not violating Clayton Act and h»
expects to particijmtc.
Did Mr. Sparrow correctly understand you, Mr. Glore, and if he
did, which version of that matter is correct, the one you previously
said to be the case or the circumstances now set forth in Mr. Spar-
row's wire?
Mr. Glore. What did I previously say?
Mr. Nehemkis. I asked whether 3'ou had occasion to obtain an
opinion of counsel about your dual position.
Mr. Glore. In answer to your lettter on that point, I consulted our
files. I have nothing in our files on this subject. I remember the
consideration so far as the Burlington was concerned and I have no
recollection of ever having written to our attorney about the matter.
Apparently from Mr. Sparrow's telegram c^r letter, I did at that time.
Mr. Nehemkis. Can you advise us as to which version is correct?
Was Mr. Sparrow correct in his understanding, or was your previous
statement correct ? Which do you stand on ?
Mr. Glore. I have no recollection of having consulted our attorney
about this matter.
Mr. Nehemkis. Were you in communication at that time, do you
recall, Mr. Glore, with Mr. Sparrow?
Mr, Glore. Yes.
Mr. Nehemkis. Now this telegram 'of Mr. Sparrow's was dated
March 20, 1935, and I think it would be a correct inference that it
must have been sent closely following his discussions, if any, with
you .
Mr, Glore. I am sure it was.
Mr. Nehemkis. Would you hazard the guess that your memory
may have failed you on the circumstances at that time?
Mr. Glore. I have no recollection of having discussed the matter
with our attorney.
Mr. Nehemkis. Very well, sir.
Mr. Chairman, I should like leave of the committee to offer a
letter from Edith J. Alden, secretary of the Chicago, Burlington &
Quincy Railroad Co., addressed to Peter R. Nehemkis, Jr., special
counsel, Investment Banking Section, Securities and Exchange Com-
mission, Washington, D. C, November 30, 1939. Before permitting
it to leave my hands, may I just read two paragraphs from this
letter [reading from "Exhibit No. 1585"] :
Replying to your letter of November 21st having: relation to the issue by
Chicago Union Station Company of $16,000,000 4% First Mortgage, Series D, and
$2,100,000 4% Guaranteed bonds in the year 1935 :
Our records do not show that any question vras raised as to the participation
of Field, Glore & Co. In these bond issues by reason of the fact that Mr. Charles
F. Glore. a partner in Field, Glore & Co., was at that time a director of
Chicago, Burlington & Quincy Railroad Company. The only opinion of which
we have record is the opinion of our Vice President and General Counsel made
a part of the application filed with the Interstate Commerce Commission, a
copy of which is hereto attached. I am advised that it is not likely that any
sucii question was raised or considered so far as this company was concerned
in view of the fact tliat the bonds in question were issued and sold by the
Chicago Uidon Station Company. The Chicago, Burlington, c& Quincy Railroad
Company's connection with the transaction was as guarantor of the bonds and,
of course, in order to make such guarantee it was required to secure the author-
ity of the Interstate Commerce Commission.
CONCENTRATION OF ECONOMIC POWER 11459
Acting Chairman Avtldsen. Without objection, the letter ma}- be
admitted.
(The docmnents referred to were marked "Exhibit No. 1585 and are
included in the appendix on p. 11640.)
Mr. Nehemkis. Mr. Glore, what is your understanding of the pur-
pose of section 20 of the Clayton Act and 20a (12) of the Transporta-
tion Act? What do you think was intended by those two provisions?
Have you any impressions on that?
Mr. Glore. My only feeling about it is that had we been dealing
directly with either the Burlington or Chicago Union Station Co. we
would have fallen under that act. We had no direct dealing with the
Chicago Union Station Co. and we tried to secure, and did secure, a
participation in a piece of business that had been negotiated by others.
Mr. Nehemkis. If I understand you correctly, you take the position
that since this was Station company business, guaranteed by Burling-
ton, that situation took it outside the confines of the Clayton Act?
Mr. Glore. No ; I think it took us outside to some extent. I think,
furthermore, it was a piece of business that we had a very minor
interest in that had been negotiated by other bankers.
Mr. Nehemkis. Did not these two provisions from the Clayton Act
and Transportation Act which I have read have as their underlying
purpose to prevent railroad directors from using their position as
directors to further any interest which they might have in a railroad's
financing ?
Mr. Gix)re. I don't think the fact that I was a director of the Bur-
lington had anything to do with it. I have known Mr. Budd for a
great many years.
Mr. Nehemkis. I think you have misunderstood my question. I am
going to ask the reporter to read it,
(The reporter read the previous question.)
Mr. Glore. I imagine so.
Mr. Nehemkis. Does not the rationale of this legislation apply
equally to railroads' guaranteeing the issues of their partly owned
subsidiaries ?
Mr. Glore. I wouldn't want to pass on that.
Mr. Nehemkis. You have no comment on that?
Mr. Glore. No.
Mr. Nehemkis. Did you not seriously concern yourself about the
problem at the time?
Mr. Glore. No.
Mr. Nehemkis. You felt, as far as your firm and your position,
there was nothing to worry about?
Mr. Glore. I think I shared the opinion of the Burlington when
tliis question was first raised.
SUMMARY OF PARTICIPATION IN THE 1935 ISSUES^
Mr. Nehemkis. Mr. Bovenizer, if we may now sum up the allotment
in the two 1935 issues, as I understand it, the 50-50 division between
the two principal underwriters, Kuhn, Loeb and Lee Higginson,
\^S!^y'** ^°- l'^56," introduced on December 19, 1939, and appearing in the appendix,
?• }J,2^' 'elates to the question of competitive bidding on the $16,000,000 Issue floated
in 1936.
11460 CONCENTRATION OF ECONOMIC POWER
remained in effect with the modification that 21/2 percent of Lee
Higginson's division was ceded to K. L. ?
Mr. BovENizER. That is right.
Mr. Nehemkis. I should like to offer a letter from Kuhn, Loeb to
Lee Higginson Corporation, dated March 22, 1935, and the reply
thereto.
Acting Chairman Avildsen. Without objection, it may be admitted.
(The letters referred to were marked "Exhibits Nos. 158^1 and
1586-2" and are included in the appendix on p. 11641.)
Mr. Nehemkis. Mr. Jesup, this 214 percent was a portion of J. P.
Morgan & Co.'s share that had not been distributed to the other firm,
was it not ?
Mr. Jesup. It was 5 percent out of the total 50 percent which had
not been distributed, and in discussing the distribution of that 5
percent with Kuhn, Loeb, we came to the conclusion that we would
not distribute it, and following out the 50-50 arrangement, Kuhn,
Loeb took 50 percent of the 5 percent, and we took 50 percent.
Mr. Nehemkis. But the 2^/^ percent was the old J. P. Morgan por-
tion ?
Mr. Jesup. Well, no; it came out of the total 50 percent that was
to be distributed. Whether it came from J. P. Morgan or th-^ Con-
tinental Illinois, I don't know.
Mr. Nehemkis. It was all in the fire?
Mr. Jesup. We considered it was in the pot to distribute. As a
matter of fact, as I recall the memorandum ^ read by you that was in
Mr. Sturgis' file he suggested that half of the 131/^ percent be given
to E. B. Smith and 25 percent each to White, Weld and Lazard
Freres & Co. We increased the participation by E. B. Smith to 10
percent over the 6% he had suggested. I considered that likewise
came out of the pot. That was 50 percent to distribute.
Mr. Nehemkis. May I refer to my previous question, Mr. Jesup?
Kuhn, Loeb obtained 35 percent, did it not, in 1935? Do you recall
that?
Mr. Jesup. I think that is correct. We haven't an official record
of that, but that is my understanding.
Mr. Nehemkis. And Brown Harriman got 171/2 percent?
Mr. BovENizER. I believe that is correct.
Mr. Nehemkis. Now, Lee Higginson got 15% percent.
Mr. Jesup. That is right.
Mr. Bo\t:nizer. That is right,
Mr. Jesup. That was 13 V^, which we elected to take, plus the 2i/^.
Mr. Nehemkis. Now, Field, Glore & Co. got a 10-percent interest;
is that correct; and that 10 percent was the same 10-percent inter-
est which the Continental Illinois Bank & Trust Co. used to have;
do you recall that, Mr. Jesup ?
Mr. Jesup. Well, the amount was the same, yes; the amount was
the same.
Mr. Nehemkis. And, of course, as you all wili recall, there has
been evidence introduced which seems to indicate that at least in the
investment banking community, it was regarded that Field, Glore had
inherited the old 10-percent interest. Now, the First National Bank
» "Exhibit No. 1577," appendix, p. 11636.
CONCENTRATION OF ECONOMIC POWER 11461
of New York had a 13V^-percent interest; that is correct, isn't it,
Mr. Sturgis?
Mr. Sturgis. That is right.
Mr. Nehemkis. And that 131^-percent interest was split three ways :
6% percent was divided — was given to E. B. Smith & Co.; White,
Weld & Co. obtained 3i/^ percent ; Lazard Freres & Co. obtained 31/3
percent.
Mr. Sturgis. That is right. Well, I think they got them; that is
what we asked them to give.
Mr. Nehemkis. I think it is safe to assume that the evidence here-
tofore introduced from the files of E. B. Smith shows that? We may
assume that ?
Mr. Sturgis. Well, they got 10, don't forget. They got something
besides.
Mr. Nehemkis. That's right. Now, we have accounted for all the
old interests in the group except the 13l^-percent interest of J. P.
Morgan & Co. Now, if I am correct, Mr. Jesup — and you will please
correct me if I have fallen into error — that 131^ percent went to the
First Boston, which obtained 5 percent; 3I/3 percent to Edward B.
Smith & Co., and 2i/^ percent to your own firm, and an additional 2i/^
percent out of the old Morgan interest went to K. L., plus Brown
Harriman^
Mr. Jesup (interposing). That is the way we divided the 13^3
percent.
Mr. Nehemkis. You now recognize that those figures I have given
you are correct, and that those figures represent the distribution of
the J. P. Morgan & Co. 13i/^-percent interest?
Mr. Jesup. Well, it accounts for 13^3 percent, but I think — and I
have said this before — that I carry back in my mind that we were
allotting 50 percent.
Mr. Nehemkis. Yes.
Mr. Jesup. Now, Mr. Sturgis has testified that he has made sugges-
tions Begarding 13% percent, and to the suggestion we made we added
31/3.
Mr. Nehemkis. Yes. Now, does it not follow, Mr. Jesup, that since
we have accounted for all the redistribution of the percentage allot-
ments of this group except the 131/^ percent, which I just traced for
you, that that redistribution obviously is the 13l^ -percent interest
formerly held by J. P. Morgan ?
Mr. Jesup. Yes ; that can be considered so.
Mr. Nehemkis. Fine.
Mr. Chairman, I should like to offer in evidence a table prepared
by members of the staff, which substantially carries out the kind of
distribution I have been going through with the witnesses.
Acting Chairman AviLDSEN. If there is no objection, it may be
admitted.
(The table referred to was marked "Exhibit No. 1587" and is in-
cluded in the appendix facing p. 11641.)
Mr. Nehemkis. I should like at this time to introduce two tables,
showing the amounts and the percentages of the participation in the
$16,000,000 first-mortgage issue, and the $2,100,000 guaranteed-bond
issue.
11462 CONCENTRATION OF ECONOMIC POWER
Acting Chairman Avildsen. If there is no objection, they may
be admitted.
(The tables referred to were marked "Exhibits Nos. 1588-1 and
1588-2" and are included in the appendix on p. 11642.)
THE 1936 REFUNDING CHANGES IN PARTICIPATIONS NECESSITATED BY
ENTRY OF MORGAN STANLEY & CO. INCORPORATED
Mr. Nehemkis. Now, Mr. Bovenizer, in the fall of 1935, was not
consideration again given to the possible refunding of the $13,150,000
5 percent series B bonds ?
Mr. Bovenizer. Thirteen million? Probably it was.
Mr. Nehemkis. This proposal was amplified in the succeeding
months, as I recall, and finally included in addition to the $13,150,000
of series B bonds, $30,850,000 4i/o percent series A bonds; is that
right?
Mr. Bovenizer. That is right. The balance outstanding — that is
right.
Mr. Nehemkis. Now, the final plan, as I recall it, was to refund
those two issues with the 44 million first mortgage issue?
Mr. Bovenizer. That is right.
Mr. Nehemkis. Is that correct?
Mr. Bovenizer. Yes; the first mortgage 334's.
Mr. Nehemkis. I don't hear your answer.
Mr. Bovenizer. The first mortgage 3%'s.
Mr. Nehemkis. Now, about this time, Mr. Jesup, in September
1935, do you recall whether or not the underwriting firm of Morgan
Stanley & Co. was organized?
Mr. Jesup. I believe they were.
Mr. Nehemkis. Now, the entry of Morgan Stanley & Co. into this
picture that we have been looking at necessitated making certain
changes in the percentage interests which the various members of the
group would have in the coming issue, as against the previous issue.
Correct ?
Mr. Jesup. I wouldn't say it necessitated them ; no.
Mr. Nehemkis. Now, at this time, did you have occasion to call on
Mr. Sturgis and explain this new development to him? Do you
remember that?
Mr. Jesup. I think that is correct. Is this [indicating paper] for
Mr. Sturgis to identify ?
Mr. Nehemkis. For Mr. Sturgis; yes. Mr. Sturgis, you have in
your possession now a carbon copy of a memorandulii dated February
27, 1936, bearing what purport to be your initials. I ask you to state
whether or not that copy is a true and correct copy of an original in
your possession ?
Mr. Sturgis. Correct.
Mr. Nehemkis. I didn't hear your answer.
Mr. Sturgis. That is correct.
Mr. Nehemkis. I oft'er the memorandum dated February 27, 1936,
bearing the initials, "H. S. S.," entitled "Memorandum for Mr.
Hooper."
Acting Chairman Avildsen. Without objection, it may be ad-
mitted.
CONCENTRATION OF ECONOMIC POWER 11463
(The memorandum referred to was marked '^Exhibit No. 1589"
and is included in the appendix on p. 11043.)
Mr. Nehemkis. I should like to read from this memo, if I may
[reading from "Exhibit No. 1589"] :
Mr. Jesup, of Lee Higginson & Co., came to see me today to report that
Chicago Union Station will issue about $43,000,000 bonds for the purpose of
calling the 4%'s and 5's. They will probably be 3%'s at a premium. He came
in the second instanct to explain that they were making some changes in the
percentage interest which various members of the group would have in this
issue as against the former one, all caused by the presence now of Morgan
Stanley & Company in the business.
Mr. Jesup, did Mr. Sturgis correctly understand you?
Mr. Jesup. I think that is right.
Mr. Nehemkis [reading further] :
It appears that in the former issue J. P. Morgan & Co. advised Lee Higginson
to allocate that interest wherever they wished. .They gave 5 per cent to the
First Boston and divided the remainder between themselves and Kuhn, Loeb and
Company. Field. Glore and Company got the 10 per cent interest of the Con-
tinental Bank. Mr. Jesup reported that Mr. Stanley —
Mr. Sturgis, Mr. Stanley is what individual ?
Mr. Sturgis. Well, I assume — I don't know. Mr. Stanley, I assume,
is of Morgan Stanley.
Mr. Nehemkis. Could it possibly be Mr. Harold Stanley?
Mr. Sturgis. I assume it was.
Mr. Nehemkis. You think so [reading further] :
Mr. Jesup reported that Mr. Stanley felt that this interest was too large; it
has, therefore, been cut to 7% per cent. ^
Now, Mr. Jesup, as I understand the memorandum that I have
Lcen reading from, the share of Field, Glore was cut down because
Mr. Stanley felt it was too large. When did you have occasion to
discuss this matter with Mr. Stanley?
Mr, Jesup. I don't believe that I discussed it with Mr. Stanley.
Mr. Nehemkis. Then what was the basis of your statement that
Mr. Stanley felt that this interest was too large and it has therefore
been cut to 71/2 percent?
Mr. Jesup. Well, I think I must have gotten that understanding
from one of my associates, perhaps, who did discuss the business with
Morgan Stanley & Co.
Mr. Nehemkis. Do you have any further recollections as to which
of your associates may have discussed it with Mr. Stanley ?
Mr. Jesup. I think it was Mr. Hallowell.
Mr. Nehemkis. Well, just as you were good enough to indicate
earlier that you would furnish the committee with a statement about
which of your partners — I think Mr. Hallowell — talked with — which
partner of J. P. Morgan, will you do likewise for this situation?
Send me a note telling me who— —
Mr. Jesup (interposing). Whom he talked to in the firm of Mor-
gan Stanley & Co. ?
Mr. Nehemkis. That is correct, and about when.^
Now, do you recall discussing that situation with whichever of
your associates was involved? You must have, I presume, because
you had this information.
Mr. Jesup. Yes.
1 See "Exhibit No. 1670," introduced on December 15. 1939, and included in the
appendix, p. H795.
124491 — 40 — pt. 22 8
11464 CONCENTRATION OP ECONOMIC POWER
Mr. Nehemkis. Do you recall from your conversation with your
associate whether he saw Mr. Stanley on his own volition or whether
he was requested to see Mr. Stanley?
Mr. Jesup. I am sure that he saw Mr. Stanley on his own volition.
Mr. Nehemkis. Well, now, how did it happen, Mr. Jesup, that one
of your associates should be discussing this matter at ail with Morgan,
Stanley & Co.? They had never before been in the group, having,
as you testified a few moments ago, just been organized at this time.
Mr. Jesup. Well, I think the thing that motivated us was the fact
that during the interim between this issue and the last issue, the firm
of Morgan, Stanley & Co. had been formed, and that firm had been
formed, as I remember it, largely from the personnel of J. P. Morgan
& Co. Three of the partners of J. P. Morgan had gone with the firm
of Morgan, Stanley & Co., and it was perfectly natural under the
circumstances to discuss it with Morgan, Stanley & Co. I think that
was part of the reason. Other reasons — we considered them a desir-
able underwriter to have associated in the business in a substantial
way, and we valued their opinion and advice' in regard to price,
terms, and so forth. I think those were the reasons.
Mr. Nehemkis. Would it be — I beg your pardon.
Mr. Jesup. Those were the reasons that motivated it.
Mr. Nehemkis. Would it be a correct statement, from what you
have just said, that you regarded Morgan, Stanley & Co. as the heir
to the interest, the 13 percent interest, formerly had by J. P. Morgan
& Co. ?
Mr. Jesup. Certainly not a legal heir.
Mr. Nehemkis. But in a loose usage, the usage that you and your
associates make of the term on the Street ?
Mr. Jesup. Well, I don't think I would, no; I don't think I would
necessarily consider them an heir.
Mr. Nehemkis. But your associate (name to be supplied by you
at some future date) did feel constrained to discuss this question —
not only discuss it, but to accept Mr. Stanley's recommendation that
the firm of Field, Glore be cut down because he, Mr. Stanley, felt
the percentage interest was too large?
Mr. Jesup. I don't think that was done on Morgan Stanley & Co.'s
recommendation. We had to cut various other participants in order to
inject them into the situation. There were other people out besides
Glore.
Mr. Nehemkis. That is correct, but Mr. Sturgis, writing, I presume,
shortly after his conversation with you, says [reading from "Exhibit
No. 1589"] :
Mr. Jesup reported that Mr. Stanley felt that this interest was too large. It
has, therefore, been cut to 7% percent,
Now, Mr. Jesup, what was the interest which was ultimately given
to Morgan Stanley & Co. ?
Mr. Jesup. 15 percent.
Mr. Nehemkis. In other words, they got even a larger interest than
the old J. P. Morgan & Co. ?
Mr. Jesup. That is correct.
Mr. Nehemkis. Now, to continue with th 3 reading of the memoran-
dum [reading further from "Exhibit No. 1589"! :
and Morgatt Stanley & Co. will have 15 per cent gvith IjCg Higgiuson a like
amount. The First of Boston will have the same 5 por tent allocated half from
CONCENTRATION OF ECONOMIC POWER 11465
Kuhn, Loeb & Co. and half from the Lee Higginson & Co. group. This cuts to 10
per cent the interest which we would ordinarily have to allocate to our friends
and they propose to allocate it in the same manner as last time.
Mr, Sturgis, which friends were you referring to ?
Mr, Sturgis. As it states there in the memo, one-half to E. B. Smith
& Co. and a quarter each to Lazard Freres and White, Weld.
Mr. Nehemkis. As I understand, Field, Glore's interest was reduced
from 10 percent to 7i/2 percent?
Mr. Stuegis. That is correct.
Mr. Nehemkis. The interest which Lee Higginson had previously
divided with Kuhn, Loeb & Co, was taken over by Morgan Stanley ?
Mr. Jesup. Will you repeat that, please ?
(The question was read.)
Mr. Jesup. That is right.
Mr. Nehemkis. And the share which the First National Bank would
have for allocation was also under the necessity of being cut?
Mr, Jesup, That is right.
Mr. Nehemkis. This meant reducing the shares of the houses which
had been first designated, with your leave, Mr. Sturgis, as temporary
custodians of the business; in other words, those three houses hud to
be cut?
Mr. Stukgis. That is right.
Mr. Nehemkis. Now, I take it, Mr. Sturgis, that your principal
interest at this time, in 1936, as on the earlier occasions, was to retain
your former interest in this piece of financing so that if banks were ever
again permitted to underwrite, you would still be in a position to take
your old position. Is that a correct statement?
Mr, Sturgis. Our interest was to try to do so ; yes.
Mr. Nehemkis, Well, you certainly succeeded.
Mr, Sturgis, Well, we don't know yet.
Mr, Nehemkis. Well, you succeeded up to 1936; you were doing
pretty well, Mr. Sturgis.
Now, in other words^ if I understand this situation correctly, and
you, of course, will point out my error, 3 years after the enactment
of the Banking Act, the financial community still recognized that
the First National Bank of New York had a proprietary interest in
the financing of the Chicago Union Station Co. ?
Mr, Sturgis, I think you have got to let me answer that question a
little more broadly than it is worded.
Mr. Nehemkis, Please do.
Mr, Sturgis, There has been a good deal read in this memo about
the possibility of banks gettmg back in the underwriting business,
I think you have got to recall that in 1935, the proposed amendments
to the Banking Act, which went as far as the conference between
the Senate and the House, which included in it a provision which
under certain restrictions would permit the banks again to under-
write
Mr, Nehemkis (interposing). That was never enacted in the law,
however,
Mr. Sturgis. It was not, but it was definitely in the air. It might
have been a vague hope, but I think it was much more so than that,
because a great many people felt it was a proper thing, I still do,
Mr. Nehemkis. Was your bank, by the way, one of the banks that
advocated an amendment to the Banking Act so as
11466 CONCENTRATION OP ECONOMIC POWER
Mr. Stuegis (interposing). I personally worked very hard for it.
I believe in it, and I think you will have it yet, because you are going
to need it.
Mr. Nehemkis. Well, that is another subject. So if I understand
this matter correctly, if the Chicago Union Station Co., let us say,
should, 3 years from now, decide to do a piece of refunding, there
would still be a question" as to whether some of the present members
of the group could have their percentage interest, and they would
have to obtain some information from you or there would have to be
some conversation with you as to whether or not they could have
Mr. Sturgis (interposing). That is not a correct statement, sir. In
the first instance, the Chicago Union Station has got to decide whom
they want to underwrite. If they decide they want Kulin, Loeb and
Lee Higginson, then Lee Higginson still has the option as to whether
they offer us any of that business. The only thing we have tried to
do is to say to E. B. Smith and our other friends, "Don't resent it if
we try to get it back."
Mr. Nehemkis. Now, Mr. Jesup, you have been a messenger of
good tidings on numerous occasions; let's take tHe same hypothetical
situation I put to Mr. Sturgis. Let's say 3 years from now, the Sta-
tion Co. proposes to do a piece of underwriting — I mean refunding —
and your firm and Mr. Bovenizer's firm still have a joint account.
Would you feel constrained to still visit, as you have done in the
past, Mr. Sturgis and ask him to what particular underwriting houses
he wished to designate the First National's interest in the business?
Mr. Jesup. Well, I find that a very difficult question to answer. I
don't see very well how I can speculate on what I might do several
years from now, and I don't see how I can cross that bridge until we
come to it.
Mr. Nehemkis. Let me ask another question. Perhaps you can
help me with this. Suppose tomorrow word reaches you from Mr.
Bovenizer that the Station Co. is about to have discussions on refund-
ing. You have had several meetings, you talked over the deal with-
Mr. Bovenizer, you are ready to set it up. Would you, on that basis,
feel constrained to again visit Mr. Sturgis and get from him authoriza-
tion to designate other houses, or to get his views on who the new
members of the group might be?
Mr. Sturgis. I would like to answer that question.
Mr. Nehemkis. Please, Mr. Sturgis.
Mr. Henderson. Counsel, Mr. Sturgis
Mr. Sturgis (interposing). If he has made all his allocations, he
has no obligation to come to us any more at all. I will help him out.
Don't put him in a place where he has got to make a commitment
with me.
Mr. Henderson. I think Mr. Sturgis has a point there.
Mr. Nehemkis. Mr. Glore, I think you had anticipated
Mr. Henderson (interposing) . I think that is what you lawyers call
a reversionary interest in the thing, but speaking for the committee —
I don't want to assume that it has any legal status, since I am not a
lawyer — I can say that I think we have finished with that point and
we can go forward from here.
CONCENTRATION OF ECONOMIC POWER 11467
FIELD, GLORE & CO. REQUESTS ASSISTANCE OF RALPH BUDD IN OBTAINING A
POSITION IN SYNDICATE
Mr. Nehemkis. Thank you, Mr. Commissioner. May I direct a
question to you, Mr. Glore? You rather anticipated it, hadn't you,
tnat the entry of Morgan Stanley might affect the position of your
own firm ? I believe in January, a month before the redistribution of
the shares was made, you had occasion to write to Mr. Budd about
the future position of Field, Glore. Do you recall that situation?
Mr. Glore. I do.
Mr. Nehemkis. Well, I show you a letter from you to Ralph Budd,
dated January 25, 1936, and I ask you to tell me whether that i^ a true
and correct copy of an original^which is in your possession ?
Mr. Glore. Yes.
Mr. Nehemkis. Mr. Chairman, I offer this letter in evidence.
Acting Chairman Aviidsen. Without objection, it may be received
in evidence.
(The letter referred to was marked "Exhibit No. 1590" and is in-
cluded in the appendix on p. 11643.)
Mr. Nehemkis. May I read to the committee from this letter?
This is a letter by Charles F. Glore to Ralph Budd. Esq., Chicago,
Burlington & Quincy R. R. Co., 547 West Jackson Blvd., Chicago, 111.,
and it says [reading from "Exhibit No. 1590"] :
I have just learned this morning that the Chicago Union Station plan to do
some additional refinancing.
If you will remember, in the recent issue of $16,000,000 4's Field, Glore & Co.
secured a position very largely, if not entirely, through your help. Normally, I
v?ould not bother you again on this subject, but with the return through Morgan
Stanley & Co. of J. P. Morgan & Company to the bond business, there may be
some discussion of interests in the proposed business that might or might not
affect the position that we secured in the last financing.
I take it, then, Mr. Glore, that you recognized that the return of
J. P. Morgan & Co. to business was being done through Morgan
Stanley ; is that what you meant ?
I don't want to misunderstand you. If you meant something — I
mean, after all, you people in the banking community, you know
the "deer runs" and the "salt licks." I am just trying to understand
these problems. If I misunderstood you, I want you to tell me I have.
Well, perhaps I might continue with the letter while you contem-
plate that [reading further] :
With this thought in mind, I am wondering if you would be willing to drop
Mr. County of the Pennsylvania Railroad a note to the effect that you would
like to have us continued in Union Station business. I suggest Mr. County for
the reason that I understand Mr. Clement is away from his office.
If entirely consistent and you can write such a letter, it will be very much
appreciated. Very truly yours, Charles F. Glore.
And now I show you, Mr. Glore, a photostat copy of a letter from
Ralph Budd, addressed to you, and dated January 27, 1936. I ask if
you recognize that letter?
Mr. Gloke. I do.
Mr. Nehemkis. You do recognize it?
I offer in evidence a letter from Ralph Budd to Mr. Glore, dated
January 27, 1936.
(The letter referred to was marked "Exhibit No. 1591" and appears
in full on the following page.)
11468 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. May I read this letter, Mr. Chairman? [Reading
"Exhibit No. 1591" :]
Dear Me. Globe: This will acknowledge your letter of January 25 about the
proposed refunding of Chicago Union Station issues. I shall be glad to write Mr.
County as suggested and hope that your Company will be included in the syndi-
cate if the proposed refinancing is undertaken.
Yours very truly,
(Signed) Ralph Budd.
I now show you, Mr. Glore, a letter addressed to you from Ralph
Budd, dated February 1, 1936, and ask you if you recognize that letter
as being an original in the files of your company ?
Mr. Glore. Yes.
Mr. Nehemkis. I offer this letter in evidence, Mr. Chairman.
Acting Chairman A\^LDSEN. Without objection, it may be admitted.
(The letter referred to was marked "Exhibit No. 1592" and appears
in full in the text.)
Mr. Nehemkis. May I read this letter by Mr, Budd to Mr. Glore ?
[Reading "Exhibit No. 1592":]
Deab Mb. Globe : I advised you on January 27 that I would write Mr, County
about including your Company in the syndicate if the proposed refunding of
the Chicago Union Station is undertaken. Mr. County has answered my letter
as follows :
"Will be glad to see that the matter receives full consideration in connection
with the refunding of the Chicago Union Station Company issues, for which we
will desire the widest possible market."
Yours very truly,
Ralph Buan.
I should like at this time to offer in evidence, Mr. Chairman, a
memorandum pertaining to the Chicago Union Station Co., from the
files of Smith, Barney & Co., which has been previously identified.
Acting Chairman Avildsen". Is there any date on it?
Mr. Nehemkis. There are a series of diary entries, which I will
designate as I read to you, with your leave, the memorandum in
question.
Acting Chairman Avildsen. Without objection, it may be admitted.
(The memorandum referred to was marked "Exhibit No. 1593"
and is included in the appendix on p. 11644.)
CHANGES IN" PARTICIPATIONS NECESSITATED BY ENTRY OF MORGAN STANI4EY
& CO., INC. — RESUMED
Mr. Nehemkis. This is a diary entry, under date of February 27,
1936, entered by J. W. C, who is John W. Cutler, a partner in the
firm of Smith, Barney & Co. Mr. Sturgis, would you listen atten-
tively to this diary entry? i[Reading from "Exhibit No. 1593":]
H. sturgis of First National Bank called today and said business would
probably come next week. $43,000,000 3%s. Same group, with addition of
Morgan Stanley, on account of their being back in business.
Mr. Chairman, I take it this is what the literature of psychology
refers to as a psychological slip, undoubtedly the writer of the diary
entry must have meant J. P. Morgan & Co. [reading further] :
Therefore, participations will be reduced and ours will be 5% instead of 6%%,
as it was in the old issue.
And a question mark there.
We may expect to bear officially from Mr. Jesup of Lee Higglnson.
CONCENTRATION OF ECONOMIC POWER 11469
I want to emphasize that last sentence, in view of the previous
testimony of some of the witnesses.
We may expect to hear officially from Mr. Jesup of Lee Higgluson.
I continue with the diary entry, by John W. Cutler, dated February
27, 1936.
Mr. Jesup of Lee Hig telephoned later. His conversation was as follows:
"We are planning to call the 41/28 and 5 percent bonds of Chicago Union Station,
which will involve an issue of about $43,000,000 of new bonds. The group will
be the same, ourselves, Kuhn, Loeb, etc. — Kuhn Loeb heading. The bonds will
probably be S%s, to be sold at a premium. Price not definitely fixed — some-
where around 3.50 to 3.55 basis. The Road wants the premium in order to avoid
putting up new money."
I call your attention to the next paragraph, Mr. Chairman.
[Reading further from "Exhibit No. 1593" :]
"The account becomes more complicated this time, as Henry Sturgis probably
explained to you, as Morgan Stanley is back in business, and that slices every-
body. Out of the 10% interest that the First Natl, had left out of their ISVs,
Henry — "
I presume he refers to you, Mr. Sturgis —
"said he wanted to divide 50% to EBS&Co.— "
meaning E. B. Smith & Co. —
"and 25% each to Lazard and White Weld, giving EBS&CO. an interest of 5%
and Lazard and White Weld each 21/2%."
I should like to offer in evidence at this time, Mr. Chairman, a diary
entry by Karl Weisheit of the firm of Smith, Barney & Co., the memo-
randum having been previously identified.
Acting Chairman Avildsen. If there is no objection, it may be
admitted.
(The memorandum referred to was marked "Exliibit No. 1594"
and is included in the appendix on p. 11644.)
Mr. Nehemkis. May I read from this memo :
JWC—
That is John W. Cutler —
asked Ed Jesup if they were expecting to give us a participation out of their
interest as in the last deal where we got 3%% from them. Jesup explained
that the 3%% had come out of J. P. Morgan & Co.'s interest which they could
not at that time take themselves and that since Morgan Stanley were now in
business they would take the interest which J. P. Morgan & Co. formerly had
so that there was nothing to give us in addition to the 5% out of the First
National Bank's interest.
Mr. Jesup, did Mr. Karl Weisheit, partner of the firm of Smith,
Barney & Co., correctly understand you?
Mr. Jesup. Mr. Nehemkis, I have no recollection of talking to Mr.
Karl Weisheit. I presume that he did, and I presume that is correct.
But I have no recollection of that.
Mr. Nehemkis. I am sorry. My associate points out to me that
any conversation you may have had was not with K^rl Weisheit, the
writer of the diary entry, but with John W. Cutler.
Mr. Jesup. Oh, I think that is right ; I think that is right.
Mr. Nehemkis. Do you recall having such a conversation?
Mr. Jesup. liather vaguely.
Mr. Henderson. Mr. Nehemkis, these fractional participations are
getting confusing. Would you ask the witness whether any of those
11470 CONCENTRATION OF ECONOMIC POWER
participations were ever sold — ^I mean, whether a company interest
was ever sold?
Mr. Nehemkis. I think you put the question so well, Mr. Hender-
son, I can't improve upon it.
Mr. Henderson. Mr. Jesup, were any of those participations taken
off of one and given to another, ever sold or traded for a considera-
tion ?
Mr. Jesup. Not that I know ; no.
Mr. Sturgis. Never heard of it. .
Mr. Henderson. I mean, is there any reciprocal treatment given in
any case with any of these ?
Mr. Jesup. No.
Mr. Sturgis. Not that I know of.
Mr. Henderson. Let me ask, Mr. Sturgis, do you recall getting any
consideration for this business that you threw to these people ?
Mr. Sturgis. Why, in what form? Certainly not in money.
Mr. Henderson. No; any specific business that you got as a direct
result
Mr. Sturgis (interposing). Certainly not; never anytliing asked
for.
Mr. Nehemkis. May I just suggest a possible question that I am
sure you were about to ask, Mr. Henderson? Would such consid-
eration possibly have been in the way of trusteeship, registrarship ?
Mr. Sturgis. Never got it.
Mr. Nehemkis. Sinking fund?
Mr. Sturgis. Never got it, never asked for it, nor was it offered
to us.
Mr. Nehemkis. How about deposit accounts?
Mr. Sturgis. Well, these people have had deposits with us for
years.
Mr. Henderson. That is all.
Mr. Nehemkis. I take it then, Mr. Jesup, from the diary entry
which I read a moment ago, that you recognize that Morgan Stanley
was taking over the old J. P. Morgan & Co. interest.
Mr. Jesup. Well they got a larger interest than J, P. Morgan.
Mr. Nehemkis. Correct, they got a 15 percent interest whereas J. P.
Morgan had formerly had only a 131/^ percent.
Mr. Jesup. That is right.
Mr. Nehemkis. So in addition to taking over the old interest and
as a result of cutting down Field, Glore and other reallocations, they
came out with a larger interest than J. P. Morgan & Co. formerly
had?
Mr. Jesup. The reason for that was, we wanted to keep 15 percent
for ourselves and wanted to put Morgan Stanley on the same basis.
Mr. Nehemkis. So that you recognize, Mr, Jestip, that even with
the passage of the Banking Act of 1933, the proprietary interest of
this business on the part of J. P. Morgan & Co. did not lapse. Do you
want that question repeated?
Mr. Jesup. No. Well, I — we didn't feel that we had any legal obli-
gation or moral obligation to offer this participation to Morgan
Stanley. It was something that we wanted to do because of the history
of the account.
CONCENTRATION OF ECONOMIC POWER 11471
Mr. Nehemkis. But you felt that with the entry of Morgan Stanley
into business you wanted them to have the old participation in addition
to a slightly larger amount ?
Mr. Jesup. We wanted them to have exactly the same participation
that we were taking.
Mr. Nehemkis. Now, ha,ve any of the other banking firms in the
financial community recognized this proprietary right of J. P. Morgan
& Co. to its business ? Do you recall ?
Mr. Jesup. I don't know.
Mr. Nehemkis. Perhaps this will refresh your recollection. I
should like at this time, Mr. Chairman, to offer in evidence a memoran-
dum obtained from the files of Smith, Barney & Co. and previously
identified. This memorandum is by G. W. Speer and is dated March
3,1936.
Acting Chairman Avildsen. If there is no objection it will be
received.
(The memorandum referred to was marked "Exhibit 1595" and is
included in the appendix on p. 11644.)
Mr. Nehemkis. May I read to you, Mr. Jesup, from a statement by
a member of the banking community? [Reading from "Exhibit No.
1595"] :
The First National Bank of New York had an interest of 10% in Chicago Union
Station financing in the past. When the First 4s, Series "D", were sold in
March, 1935, their interest was increased to 13%% because of the fact that
J. P. Morgan & Co. was not in the business. The First National Bank directed
that 50% of their interest (or 6%% of the total busine.ss) be allocated to us
and we received an additional 3%% interest through Lee Higginson Corporation
out of their proportion of J. P. Morgan & Co.'s interest.
In the case of the present financing the interest of the First National Bank was
reduced to their former 10% because of the fact that Morgan Stanley & Company
took over the old J. P. Morgan & Co. interest.
So that we have another banking house in the community recogniz-
ing that Morgan Stanley took over the old J. P. Morgan & Co. interest.
Mr. Jesup. Who wrote that memorandum 1
Mr. Nehemkis. This is a memorandum written by G. W. Speer, a
memorandum obtained from the files of Smith, Barney & Co., dated
March 3, 1936, and identified by a member of my staff as having been
furnished to him by a responsible partner of the firm of Smith, Barney
& Co. May I continue with the reading? [Reading further from
"Exhibit No. 1595"] :
In the case of the present financing the interest of the First National Bank was
reduced to their former 10% because of the fact that Morgan Stanley & Company
took over the old J. P. Morgan & Co. interest. Half of this 10%, or 5% of the
total business, was allocated to us, 25% each (or 2^/^% of the total business)
being given to White, Weld & Company and Lazard Freres & Company, Inc. We
received no interest in the present purchase group through Lee Higginson Cor-
poration because the 3^^% which we had thus received when the First 4s, Series
"D," were offered was taken by Morgan, Stanley & Company. Consequently our
final interest in this financing was limited to the 5% allocated to us by the First
National Bank.
In other words, as I understand what this individual is saying, Mr.
Jesup, Morgan Stanley had a right to the proprietary share of J. P.
Morgan & Co.'s interest even if it necessitated cutting the shares of the
other houses that had previously obtained positions in the earlier
financing.
11472 CONCENTRATION OF ECONOMIC POWER
Mr. Jesdp. Well, I don't know Mr. G. W. Speer. To the best of my
belief and knowledge, I never had any conversation with him. I can't
place him at all. I think in this memorandum he is using entirely his
own phraseology, and in some respects it is inaccurate. The interest
of the First National Bank was never 10 percent. It was always
131/^ percent.
Mr. Nehemkis. Before we get into a discussion of this, the record
is correct on the basis of your own preceding testimony as to what the
accurate percentages were. This was a reading from a diary entry.
Mr. Stdrgis. What I want to raise is
Mr. Nehemkis (interposing). You don't deny that?
Mr. Sturgis. I want to raise this question — that he is so inaccurate
in regard to our participations that I want to raise a question as to the
accuracy of the rest of the memorandum.
Mr. Nehemkis. That is a very legitimate comment.
Mr. Bovenizer, to come back to you for a moment, I haven't for-
gotten about you. The participation as thus rearranged as a result of
the organization of Morgan Stanley & Co. w^ere carried out when the
issue was floated. Is that correct ? Do you recall that?
Mr. BovENizEE. Yes; surely.
Mr. Nehemkis. I should like to offer, Mr. Chairman, a letter from
Kuhn, Loeb & Co. to Lee Higginson, dated March 2, 1936 ; a letter from
the assistant secretary of Lee Higginson Corporation to Morgan Stan-
ley & Co., Inc., dated March 2, 1936, bearing on the lower left-hand
corner the following statement [reading from "Exhibit No. 1596-2"]
Conflrmed : March 2, 1936. Morgan Stanley & Co. Incorporated (Signed) Harold
Stanley, President.
and a letter from Kuhn, Loeb & Co. to Pierpont V. Davis, Esq., vice
president, Brown Harriman & Co., Incorporated, under date of March
2, 1936, All of these letters have been previously identified.
Acting Chairman Avildsen, Without objection, they will be re-
ceived.
(The letters referred to were marked "Exhibits Nos. 1596-1 to
1596-3" and are included in the appendix on pp. 11645-11646.)
Mr. Nehemkis. May I offer at this time, Mr. Chairman, two tables
prepared by the staff of the Investment Banking Section from ledger
transcripts, memoranda, and correspondence furnished us and obtained
from the various houses here concerned, showing the percentage dis-
tribution of the $44,000,000 first-mortgage issue offered in April 1936,
and the $7,000,000 guaranteed bond issue offered in August 1936, con-
cerning which our testimony has dealt,
Ma;7 I point out, before relinquishing these documents to you, the
participation interests of the various firms.^
In the April 1936 issue we find that Kuhn, Loeb & Co., which had a
i'oint interest, 50-50 with Lee Higginson, ceded 21^ percent to the
i'irst Boston Corporation and divided the remainder of its interest as
follows: 31.67 percent retained by Kuhn, Loeb; Brown Harriman &
Co. Incorporated, 15,83 percent; the First Boston Corporation, 5 per-
cent. Is that correct ?
Mr. Bovenizer. We gave 2i^ percent to the First Boston.
' Referring to "Exhibit No. 1597-1." See appendix, p. 11647.
CONCENTRATION OF ECONOMIC POWER 11473
Mr. Nehemkis (interposing) . And also your firm, Mr. Jesup, gave
214 percent to the First Boston ?
Mr. Jesup (interposing). That is right.
Mr. Nehemkis. So in the Lee Higginson group, we have Lee Hig-
ginson, 15 percent ; Field, Glore & Co., 7i/^ percent ; Edward B. Smith
& Co., 5 percent ; White, Weld & Co., 2^^ percent ; Lazard Freres, 2^
percent ; and the First Boston, having received 2^ percent from each
of the two houses, obtained an aggregate of 5 percent.'
Now, in the August 1936 offering of guaranteed bonds, Mr. Bove-
nizer, were there any changes in the percentage allotments ?
Mr. BovENizEB. No; the same arrangement as in the March trans-
action.
Mr. Nehemkis. And, Mr. Jesup, in the August offering were there
any percentage changes in the members of your group «
Mr. Jesup. I think they were just the same. They were the same;
yes.
EXTENT TO WHICH CHICAGO UNION STATION GROUP HAD BECOME
CRYSTALLIZED — ^USE OF TERM "nOT A PRECEDENT"
Mr. Nehemkis. So by this time the participations of these various
houses whose names I have read off had become crystallized, and
would this be a fair statement: That in all probability, unless the
Station Co. itself requested, you will regard this group as being the
group for the next offering on Station Co. bonds ?
Mr. Jesup. No.
Mr. Nehemkis. You think
Mr. Jesup (interposing). Not necessarily; there might be a lot of
conditions that might alter all those participations.
Mr. Nehemkis. As far as you know, Mr. Bovenizer, is this the group
that can be considered the group for Station Co. financing?
Mr. Bo^^ENIZER. I would say that of any group that has carried
through for a long time now.
Mr. Nehemkis. These percentages have gone through, as we saw
earlier, since 1915?
Mr. Bovenizer. Yes.
Mr. Nehemkis. And you do not feel, however, that there is any
precedent about this financing ?
Mr. Bo^'ENizER. No.
Mr. Nehemkis. In other words, if there should come out a refund-
ing issue in the next month, you would reshuffle this whole group ?
Mr. Bovenizer. I wouldn't say we would ; we would consider what
we might do. We might take it just as it is, we might not. I don't
know at this moment what we might do.
Mr. Nehemkis. Is it probable, however, that you would include
the same houses ?
Mr. Bovenizer. As far as we are concerned, I should say yes.
Mr. Nehemkis. What would your answer to the same question be,
Mr. Jesup.
Mr. Jesup. I would think so, unless something happened in some
of these houses which might possibly alter the facts.
1 "Exhibit No. 1597-1."
11474 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. May I offer in evidence the two tables which have
been identiJBed ?
Acting Chairman Avtldsen. Without objection, they will be
received.
(The tables referred to were marked "Exhibits Nos. 1597-1 and
1597-2" and are included in the appendix on p. 11617.)
Mr. O'CoNNFXL. I noticej Mr. Jesup, one of these memoranda of
diary entries of Mr. Speer, in the last paragraph he states this [read-
ing from "Exhibit No. 1595"] :
As in the case of the previous financing it was stated in the purchase group letter
to us from Lee Higginson Corporation that our interest in the business was
not to constitute a precedent ia connection with any future financing for
Chicago Union Station Company.
Do you recall if that general statement was contained in that group
letter?
Mr. Jesup. That is right.
Mr. O'CoNNELL. Is that contained in the letter to each of the par-
ticipants, or was it contained in the letter to Smith, Barney & Co.?
Mr. Jesup. I assume that it was in each of the letters.
Mr. O'CoNNELL. Would you know specifically whether in the group
letter to Morgan Stanley & Co. you advised them that the 15 percent
participation was not to be considered a precedent in connection with
future financing?
Mr. Jesup. I wouldn't remember unless I saw the letter.
Mr. O'CoNNELL. But you are familiar with the fact that in some
cases that statement is made in the group letter?
Mr. Jesup. That is right.
Mr. O'CoNNELL. What is the theory behind that, to protect you
from what ?
Mr. Jesup. Just the thought in back of our minds and the hope
that there might be possibly a change in the act.
Mr. O'CoNNELL. What do you understand that this particular
provision does? Does it protect you from a legal obligation to con-
tinue to allot business to particular
Mr. Jesup (interposing). No; no particular obligation, it just puts
us on record that we might possibly change the group.
Mr. Nehemkis. Mr. O'Connell, I think I have here in front of
me the letter which was sent by Lee Higginson to Morgan Stanley,
which I offered a moment ago without reading. I think this con-
tained the information you want.
Mr. O'CoNNELL. Would you read that portion of it?
Mr. Nehemkis. I will give you the result of it. There is no state-
ment in this letter that this allocation was not to be considered a
precedent. The percentage participations are set out in the letter.
It states as follows [reading from "Exhibit No. 1596-2"] :
Your participation in this purchase will be subject to a management fee of
%% and your pro-rata share of all exi)enses (inclnding any losses which may
result from purchases and sales dealing in these bonds) .
In addition to yourselves, the following have also been Included in this pur-
chase, with interest as Indicated.
Then appears the rest of the gi'oup, and their interest and their
dollar amounts [reading further] :
CONCENTRATION OF ECONOMIC POWER 11475
Of the interest of the $2,200,000, principal amount to The First Boston Corpo-
ration, $1,100,000 (1. e. 2%%) has been offered to them by Messrs. Kuhn, Loeb
& Co., and $1,100,000 (i. e. 21/2%) by Lee Higginson Corporation.
Those are the percentages that Mr. Jesup and Mr. Bovenizer testi-
fied to.
I find nothing in here that says that this business was not to be
regarded as a precedent, and I assume that it is always very important
ii), the banking community to indicate whether these matters are a
precedent.
This letter was pretty much in the nature of a binding obligation,
because, as you recall at the time I offered this letter, I indicated that
at the bottom of this letter there appeared the following [reading
further from "Exhibit No. 159e-2"] :
Confirmed March 2, 1936. Morgan Stanley & Co. Incorporated, (Signed)
Harold Stanley, President.
So that Mr. Stanley, unless there was some oral conversation, cer-
tainly was never informed formally that he could understand that
this was not a precedent for future business.
Mr. O'CoNNELL. Of course, Mr. Jesup, my interest arises because of
your statement made several times that there was no legal or moral
obligation on your part or on the part of the other syndicate manager
to allocate a share of this business to any particular company ; and if,
as appears to be the fact, in writing to Smith, Barney, who was
apparently the successor to one of the original participants, you found
it necessary to use rather formal legal language to the effect that it
was not to constitute a precedent for future business, and, on the other
hand, did not find it necessary to make such a formal statement to
other participants, it would seem to me to require a little more elabora-
tion as to just what in terms of the trade the situation really was. It
isn't a legal question, as I underscand it.
Mr. Jesup. In the first place, I might say that possibly that phrase
should have been included. Possibly the reason that it was not in-
cluded— I am speculating on this now — I think it was because Mor-
gan Stanley had exactly the same participation that we had, and we
regarded them as a main, chief partner in the business, possibly on a
little different basis than some of the others having a smaller interest.
Mr. O'CoNNELL. Do you think by any stretch of the imagination
that Smith, Barney might have been considered as having obtained a
legal right to future participation had you not put this provision in
your letter?
Mr. Jesup. No; I don't think so. Very frequently those letters
are written without any qualifjdng phrase at all, such as that. We
frequently get that kind of a letter without any qualifying phrase.
I don't necessarily consider that that is any binding obligation un-
less the phrase is used. I can remember innumerable cases where we
have had a piece of business and the letter of corifirmation hasn't
contained that phrase.
Mr. O'CoNNELL. I am quite sure it would ha ve no legal effect. I
am rather interested in the usage in the business which seems to
have grown up of accepting what has been referred to as a proprie-
tary interest on the part or the original participants, let me say, in
1147() CONCENTRATION OF ECONOMIC POWER
a group, and that you continue on in such a way as to protect that
proprietary interest even after the Banking Act of 1933 when the
original participant is no longer in existence. That is a usage which
has apparently developed as far as this evidence is concerned,' is it
not?
Mr. Jesup. That is right.
Mr. Nehemkis. Would you indicate under what circumstances you
would feel constrained, or your syndicate manager would feel con-
strained to write in a letter something to this effect: "This group
shall not constitute ^ precedent for future business"? Do I make
myself clear?
Mr. Jesup. It might possibly be some such thing as we have been
talking about, Mr. Sturgis' optimism, possibly the banks coming in,
or some other siti^tion which might arise which might possibly
change the make-up of the account.
Mr. Nehemkis. Is it not a fact, Mr. Jesup, that the manager of an
account is usually very careful to indicate at the time of offering his
participations to other members of the group whether or not that
particular offering does tronstitute a precedent ?
Mr. Jesup. I don't think so, Mr. Nehemkis.
Mr. Nehemkis. Mr. Bovenizer, you have been in this business for
many, many years. What is your judgment?
Mr. Bovenizer. I don't think it is ever done, except in a very ex-
traordinary case.
Mr. Nehemkis. In other words, if the manager of the account is
quite clear in his mind that he is going to reshuffle the group on the
next issue, or for one reason or another doesn't want the group to
become crystallized, he will indicate to the participants that this
does not constitute a precedent?
Mr. Bovenizer. I should say, Mr. Nehemkis, that no group is
crystallized. It may chaiige at any time.
Mr. Nehemkis. Except the Chicago Union Station Co. group,
v.'hich remained crystallized from the year 1915 u.ntil the last piece
of financing, 1936. What is your version, Mr. Glore? What do you
think? What is your own practice in your firm?
Mr. Glore. I don't know.
Mr. Nehemkis. Do you originate business?
Mr. GiiORE. Yes.
Mr. Nehemkis. What do you do?
Mr. Glore. I don't know.
Mr. Nehemkis. Mr. Fennelly isn't here?
Mr. Glore. No.
Mr. Nehemkis. I haven't any further direct questions, but as you
recall, Mr. Chairman, we offered a chart earlier to which I should like
to refer. This chart, when the committee has leisure to examine it,
Tvill show the history of these various participations through the pieces
of ti lancing that we have been discussing and as we have traced in the
previous testimony how these minute little percentages were alio-
CONCENTRATION OF ECONOMIC POWER 11477
cated and redistributed. I now offer this copy in lieu of the one pre-
viously offered.^
Acting Chairman Avildsen. It may be admitted. Is it a different
chart ?
Mr. Nehemkis. It is the same one, but a caption has been put on.
Just substitute the charts.^
Mr. Miller. I would like to ask a question, Mr. Chairman. I would
like to have Mr. Bovenizer, if he would-, explain to the committee in a
very general way, what the practice is of an underwriting house in get-
ting up a group +o purchase a new issue, No. 1, and No. 2, a continu-
ing piece of business, a new piece of financing for an old account.
Will you just tell us in a general way what the general* customs of the
business have been ?
Mr. Nehemkis. Mr, Miller, may I interrupt a moment? It is ter-
ribly late, and I perhaps might tell you tiiat in the course of these
hearings I think the committee is going tc be deluged with descrip-
tions of just the- point that you are raic^mg. You maj' want to get
Mr. Bovenizer's reaction, but I thought in view of the fact that it is
after 6, if Unformed you of this point you might waiit ' c defer your
question.
Mr. Miller. I don't want to keep the members of the. committee,
but I think there has been a lot of confusion here about the custom
of these syndicates. I would like Mr. Bovenizer's view.
Acting Chairman A\tldsen. Is Mr. Bovenizer going to be a witness
at subsequent hearings ?
Mr. Nehemkis. I don't think so.
Mr. Bovenizer. There will be others here who can answer the
question.
Acting Chairman Avildsen. How long would it take you?
Mr. Bovenizer. I don't know. There is no general custom. Every
group stands on its own feet. If you had a group that has gone on
for a number of years and you are satisfied with the members of it,
you don't usually change them unless you feel you ought to include
somebody else because of their placing ability, or something along that
line. If some organization has been coming along and growing, you
tell the rest of your group. That is why I say these groups are no
precedent, because somebody may come along tomorrow and turn out
to be what we think is just as good as somebody we have got in here.
We make up our minds that we ought to give them 5 or 7i/^ percent
and tell the rest of the boys in the group, "We've got to cut you down
to let them in." I mean, every account in my mmd stands on its own
two feet. And then you wouldn't want, perhaps, the same people to
offer the same security all the time. The geographical considerations
have to be taken into consideration. One thing will sell better -m
Chicago than it will jn New York or in San Francisco better than
either place. You include more people out there or you seek people
1 Previously entered as "EzhiWt No. 1587," appendix, facing p. 11641.
11478
CONCENTRATION OF ECONOMIC POWER
out there to be in your account. There are an awful lot of considera-
tions. I don't think you could make any hard and fast rule.^
Acting Chairman Avildsen. Does that answer your question, Mr.
Miller?
Mr. Miller. Yes.
Mr. Nehemkis. Mr. Chairman, do you desire to hear at this time
the witnesses to be called tomorrow ?
Acting Chairman Avildsen. If you please.
Mr, Nehemkis. At the morning session we will discuss, if it is your
pleasure, the financing of the Pacific Gas & Electric Co. The two wit-
nesses will be Mr. Stanley Russell, of Lazard Freres & Co., and Mr.
George Leib, of Blyth & Co. At the afternoon session we will discuss
the financing of the Southern California Edison Co., and the witness
will be Mr. George D. Woods, of The First Bostor. Corporation.
Acting Chairman Avildsen. Are there any other questions of the
present witnesses? If not, they will be excused.
(The witnesses, Bovenizer, Glore, Jesup, and Sturgis were excused. )
Acting Chairman Avildsen. The committee will stand adjourned
until 10 : 30 tomorrow morning.
(Whereupon, at 6:15 p. m., the committee recessed until 10:30
a. m. Wednesday, December 13, 1939.)
1 By a circular letter dated March 5, 1940, the Chicago Union Station Company invited
bids for the sale of $16,000,000 principal amount first Mortgage 3%% Bonds, Series F,
due July 1, 1963. 107 invltatlona were extended. The Statiwu Company received 5 ac-
linowledgments and 1 bid, the latter from the investment banking firm of Halsey, Stuart
& Co., Inc., which submitted a bid of 98.05% of the principal amount of said bonds, plus
accrued interest at the coupon rate to the data of payment therefor. On March 14, 1940,
the Company rejected the said bid, and awarded the issue to a syndicate headed by Kuhn
Loeb & Co.
A comparison of the syndicate members and their percentage participations for this
financing with that of the last previous underwritings of the Chicago Union Station Co.
follows :
Underwriter
$44,000,000 1st. mtge.
'iH7o Series E of '63
(Ex. #1597-1a $7,-
000,000 Guaranteed
3M% Bonds of '51
(Ex. #1697-2)
$16,000,000 1st. mtge.
'iM% Bonds Series
Fof'63, (See supple-
mental data, p. — )
Zuhn, Loeb & Co..
Lee, Higginson Corporation . .
Harriman, Ripley & Co., Inc
Morgan Stanley & Co., Inc..
Qlore, Forgan & Co
Smith, Barney & Co...
The First Boston Corp
White, Weld & Co.
Lacard Freres & Co
31.67
15.00
15.83
15.00
7.60
5.00
6.00
2.60
2.60
31.67
15.00
16.83
15.00
7.60
6.00
5.00
2.50
2.60
The details of the $16,000,000 Series F financing are included In the appendix, p. 11822.
INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER
WEDNESDAY, DECEMBER 13, 1939
United States Senate,
Temporaky National Economic Committee.
Wdshington, D. C.
The committee met at 10:35 a. m., pureuant to adjournment on
Tuesday, December 12, 1939, in the Caucus Room, Senate Office Build-
ing, Representative B. Carroll Reece presiding.
Present: Representative Reece, acting chairman; Messrs. Hender-
son, O'Connell, Avildsen, and Brackett.
Present also : Senator Joseph Guffey, of Pennsjdvania ; Baldwin B.
Bane, Securities and Exchange Commission; Clifton M. Miller,
Department of Commerce; Hugh B. Cox, Department of Justice;
Peter R. Nehemlds, Jr., special counsel, and Samuel M. Koenigsberg,
associate attorney, Securities and Exchange Commission.
Acting Chairman Reece. The committee will come to order, please.
Before you call the next witness, Mr. Nehemkis, Commissioner Hen-
derson would like to make a statement. We would be glad to have
you do so now, Commissioner.
Mr. Henderson. For the jDurppse of complete understanding, I
would like to say that the S. E. C. is not recommending and is not
studying recommendations relating to specific changes in the Banking
Act of 1933. The endeavor of this presentation is to bring out the
facts, and anything relating to recommendations concerning legisla-
tion must necessarily come, if at all, from this committee.
Acting Chairman Reece. Mr. Nehemkis, are you ready to proceed %
Mr. Nehemkis. Mr. Chairman, you may recall that yesterday
afternoon ' I told Senator O'Mahoney that inadvertently the original
copy of a letter from Kuhn, Loeb & Co. was not placed in the record,
and I would have it here this morning. I should now like to offer
a letter from Kuhn, Loeb & Co., addressed to the committee's counsel,
and a copy of a letter by Kulm, Loeb to the Senate Committee on
Interstate Commerce.^
Mr. Nehemkis. Mr. Stanley Russell.
Acting Chairman Reece. Do you solemnly swear that the testi-
mony you are about to give in this proceeding shall be the truth, the
whole truth, and nothing but the truth, so help you God ?
Mr. Russell. I do.
1 See Bupra, p. 11428.
*Prevloufaly entered as "Exhibits Nos. 1538-3 and 1539-1." See supra, p. 11428.
11479
124491— 40— pt. 22-
11480 CONCENTRATION OF ECONOMIC POWER
TESTIMONY OF STANLEY A. RUSSELL, LAZARD FRERES & CO.,
NEW YORK, N. Y.
Mr. Nehemkis. Mr. Russell, will you state your full name and
address, please?
Mr. Russell. Stanley A. Russellj Cresmont Road, Montclair, N. J.
Mr. Nehemkis. With what banking house are you now associated ?
Mr. Russell. Lazard Freres & Co.
Mr. Nehemkis. What is your position with that house?
Mr. Russell. Partner.
Mr. Nehemkis. You became associated with Lazard Freres at
w hat time, Mr. Russell ?
Mr. Russell. August, in 1934.
Mr. Nehemkis. And prior to your association with Lazard Freres,
what was your previous business connection?
Mr. Russell. The National City Co.
Mr. Nehemkis. And at the National City Co., what position did
you occupy?
Mr. Russell. Vice president.
Mr. Nehemkis. And as vice president of the National City Co.,
did you have any particular or special duties?
Mr. Russell. I handled the purchase of industrial and public
utility securities,
Mr. Nehemkis. Mr. Russell, are you a director of the General
American Investors' Corporation?
Mr. Russell. Yes, sir.
Mr. Nehemkis. And of the Pennsylvania Dixie Cement Corpo-
ration ?
Mr. Russell. Yes, sir.
Mr. Nehemkis. Do you hold any other directorships?
Mr. Russell. I don't think so.
NATIONAL CITY CO. ACCOUNTS AND THEIR SUBSEQUENT FINANCING
Mr. Nehemkis. Mr. Russell, am I correct in believing that the
Pacific Gas & Electric Co. was formerly an account of the National
City Co.?
Mr. Russell. Yes, sir.
Mr. Nehemkis. And do you recall whether the Anaconda Copper
Co. account was also once associated with the National City Co.?
Mr. Russell. Yes, sir.
Mr. Nehemkis. Could you tell me some of the other important
accounts that had been handled by the City Co. prior to its disso-
lution ?
Mr. Russell. Consolidated Edison Co.
Mr. Nehemkis. That was formerly known as Consolidated Gas
Co.?
Mr. Russell. Yes, sir.
Hershey Chocolate Corporation, National Steel Co., Container
Corporation, United Aircraft, and others. I don't remember.
Mr. Nehemkis. Do you recall whethei the Firestone Tire & Rub-
ber Co. was?
Mr. Russell. Yes, sir.
Mr. Nehemkis. That was a National City account?
Mr. Russell. Yes, sir.
CONCENTRATION OF ECONOMIC POWER 11481
Mr. Nehemkis. How about the Boeing Airplane Co.?
Mr. Russell. Well, I included that in the United.
Mr. Nehemkis. I see. But the financing had been really separate,
hadn't it, for both the companies?
Mr. Russell. Well, I think originally it was combined, and then
it was separated.
Mr. Nehemkis. And United Air Lines Transport Corporation?
Mr. Russell. Well, that was separated.
Mr. Nehemkis. And the Virginian Railway Co. ?
Mr. Russell. Yes.
Mr. Nehemkis. Wasn't that an account?
Mr. Russell. Yes, sir.
Mr. Nehemkis. Now, can you tell me who in the banking field has
financed recently some of these old National City accounts? Let
me start with the first one we talked about, Pacific Gas & Electric.
The first financing after the passage of the Banking Act was under
the leadership of what banking firm ?
Mr. Russell. Lazard Freres & Co.
Mr. Nehemkis. And Anaconda Copper?
Mr. Russell. Blyth & Co.
Mr. Nehemkis. And National Steel?
Mr. Russell. Kuhn Loeb & Co.
Mr. Nehemkis. Ana Hershey?
Mr. Russell. They have had none.
Mr. Nehemkis. And what about Container Corporation?
Mr. Russell. They have had none.
Mr. Nehemkis. And how about the United Aircraft Corporation?
Mr. Russell. I think Brown Harriman and G. M.-P. Murphy took
that business.
Mr. Nehemkis. And do you recall who has done any financing for
Firestone Tire & Rubber Co. ?
Mr. Russell. Brown Harriman and I think Otis & Co.
Mr. Nehemkis. And the Virginian Railway Co. ?
Mr. Russell. Brown Harriman.
Mr. Nehemkis. I think you mentioned that Consolidated Gas had
been a National City account. Who has handled that financing?
Who has been the leader?
Mr. Russell. Morgan Stanley & Co.
Mr. Nehemkis. Let me ask you which accounts of those that we
have been speaking of have been underwritten by your firm, Lazard
Freres. Pacific Gas & Electric?
Mr. Russell. That is one.
Mr. Nehemkis. Just that one?
Mr. Russell. That is correct.
Mr. Nehemkis. How did it happen that the Pacific Gas & Electric
account went to Lazard? Who was responsible for bringing that
account to your firm ?
Mr. Russell. I presume I was.
Mr. Nehemkis. And would you hazard a guess as to how it hap-
pened that Firestone and Boeing Airplane and United Aircraft and
Transport Co., and I believe you also said the Virginian Railway Co.,
found themselves with the firm of Brown Harriman & Co. ?
AVho was responsible, would you say, for bringing those accounts
to that firm ?
11482 CONCENTRATION OF ECONOMIC POWER
Mr. Russell. Mr. Ripley had the contact with all of those accounts,
except the Virginian Railway, which was a contact of Mr. Davis.
Mr. Nehemkis. Mr. Davis being a vice president of Brown Har-
riman, now Harriman Ripley & Co. ?
Mr. Russell. Correct.
Mr. Nehemkis. So that all of those accounts that we referred to
that went to Harriman Rii)ley were brought there by Mr. Joseph
Ripley, who had the contacts with his accounts, or Mr. Davis, who
had the contact with the Virginian Railway, if I understand that
correctly ?
Mr. Russell. That is my opinion.
Mr. Nehemkis. And how did it happen that Anaconda Copper
Mining Co. went to Blyth & Co. ?
Mr. Russell. Because Mr. Mitchell had the contact, primarily.
Mr. Nehemkis. Mr. Mitchell, as president of the National City
Qo., had been primarily responsible for that ?
Mr. Russell. Yes.
Mr. Nehemkis. So when he went to Blyth as chairman of the
board, that account went with him ; is that correct?
Mr. Russell. That is correct.
Mr. Nehemkis. Mr. Russell, am I correct in understanding that
the Pacific Gas & Electric account had once, in the early days, been
an account of Halsev, Stuart; that is, before it came to the National
City Co.?
Mr. Russell. I don't know whether that is true or not.
the pacific gas a electric CO. ACCOUNT
Mr. Nehemkis. Did the account come to the National City Co.
about 1919; do you recall?
Mr. Russell. I would place it at 1920; I am not sure.
Mr. Nehemkis. About 1920. You became at the very early stage
of that business closely connected with its financial problems, did you
not, Mr. Rassell?
Mr. Russell. I did.
Mr. Nehemkis. And for many years you had enjoyed a close rela-
tionship with the then president of P. G. & E., Mr. Hockenbeamer ?
Mr. Russell. First with Mr. Creed, the president, and later with
Hockenbeamer.
Mr. Henderson. Ma^ I ask Mt-. Hockenbeamer's position with
P. G. &E.?
Mr. Russell. Origially vice president and treasurer; later, on Mr.
Creed's death, he became pre.-ident.
Mr. Henderson. Wlien he was vice president and treasurer, did he
handle most of the negotiations for financing?
Mr. Russell. He and Mr. Creed did.
Mr. Nehemkis. So that, Mr. Russell, until the break-up of the
National City Co., all P. G. & E. business was handled by the Na-
tional City Co. and by you as the vire president in particular?
Mr. Russell. Not entirely by me, but largely by me.
Mr. Nehemkis. But you were generally considered among your
colleagues as the expert in charge of that particular financing! It
was generally felt that you knew more about it than the other men.
Mr. Russell. That is true.
CONCENTKATION OF ECONOMIC POWER 11483
Mr. Nehemkis. You had perhaps lived with it longer than the
others. As a matter of fact, you had actually drafted or assisted in
drafting the first P. G. & E. mortgage, hadn't you ?
Mr. Russell. That is correct.
Mr. Nehemkis. Mr. Russell, will you look at this memorandum
which purports to bear your initials and tell me whether this comes
from the files of Lazard Freres?
Mr. Russell. Yes, sir.
Mr. Nehemkis. I offer the document identified by the witness in
evidence. It is a memorandum entitled "Pacific Gas & Electric Co.,
Official— Confidential," dated October 2, 1934, signed "S. A. Russell.'-
May I read a passage from that memorandum?
Mr. Hockeubeamer recognized my long standing acquaintance with his situa-
tion, dating from the first operation under his present mortgage, including the
drafting of that mortgage
Mr. Russell (interposing). I beg your pardon. I think that is a
different memorandum from the one you are reading.
Mr. Nehemkis. You are correct. My associate handed me a dif-
ferent memorandum. I withdraw that, Mr. Chairman. May I have
it back, please? So that the record may be correct, I shall ask you
to identify this memorandum which I now hand you. Was that
memorandum prepared by you, and does it come from the files of
Lazard Freres?
Mr. Russell. It does.
Mr. Nehemkis. I offer in evidence, Mr. Chairman, a memorandum
entitled "Pacific Gas & Electric Co.," dat^d September 22, 1934,
signed "S. A. Russell."
Acting Chairman Reece. It maj' be admitted.
(The memorandum referred to was marked "Exhibit No. 1598"
and is included in the appendix on p. 11648.)
Mr. Nehemkis. In view of the fact, Mr. Russell, that you had
been so closely associated with the earlier financing of P. G. & E.,
that it had been regarded as an account which you were personally
familiar with, it was not unnatural that after the dissolution of the
City Co. when you became associated with Lazard Freres, that you
should have some claims, perhaps, on that business ?
Mr. Russell. Well, I wouldn't express it as a claim. I had hopes
that my relationship with Mr. Hockeubeamer could be realized for
the firm of Lazard Freres & Co., and in a very tangible way.
Mr. Nehemkis. You have already identified a memorandum which
I had offered before the other one.
Mr. Russell. Yes.
Mr. Nehemkis. I now offer in evidence, and I will repeat the title
so that the reporter may have it correct, a memorandum entitled
"Pacific Gas & Electric Co., Official — Confidential," dated October 2,
1934, and initialed "S. A. R."
Acting Chairman Reece. It may be admitted.
Mr. Nehemkis. Mr. Chairman, may it please the committee, I
should like to read to you from that memorandum [reading from
"Exhibit No. 1599"] :
Today I lunched with Mr. George Leib of Blyth & Co. at his request. After
luncheon he wanted to see our offices and in my room before leaving expressed
great friendliness and a desire to coopera4:e in successful business whenevei
possible. At this point, I commented that we felt the same way and that om
11484 CONCENTRATION OF ECONOMIC POWER
of these days we might sit down and discuss the P. G. & E. situation, where-
upon he said that was a matter concerning which I should talk with Mr. Hock-
enbeamer. He Indicated that he had talked with Mr.' Hockenbeamer when he
was on the Coast about two weeks ago. He also mentioned that Mr. Hocken-
beamer was here for a few days recently, whereupon I said that Mr. Hocken-
beamer had come In to see me and we had discussed the situation. He, —
Meaning Leib —
apparently, was not aware that Mr. Hockenbeamer was in to see me. He
thereupon went on to say that, of course, I knew then that no financing was
contemplated for this year and it might be some time before financing was done.
He further commented that of course we, meaning Lazard Freres & Co., Inc.,
.s^hould be in the account, and stated that Mr. Hockenbeamer had a great liking
for me. However, at this point, he also said that he supposed it would be a
'free for all' like a lot of other things.
Mr. Leib, I take it, did not feel at this time that your prior asso-
ciation and affiliation with that account gave you any special prior-
ities and that whoever got the business would get it.
Mr. Russell. You had better ask Mr, Leib.
Mr. Nehemkis. I think we shall have an opportunity to do so,
Mr. Eussell [reading further from "Exhibit No. 1599"] :
The plain deduction from this comment is, in my mind, that they expect or
hope to get a leading position, if not the leading position, in the handling of
this business, but, as he went away, he said we are still, of course, good friends.
I conclude, therefore, we should not raise the question of P. G. & E. financing
with the firm of Blyth & Co. unless they do so with us. Our objective should
be to develop the situation directly with Mr. Hockenbeamer and others in-
terested in the Company even despite the fact that Blyth & Co. have the
strongest position on the Pacific Coast of anyone.
Do you consider, Mr. Russell, that you were really responsible for
bringing the P. G. & E. account to Lazard Freres?
Mr. Russell. Why, I think so.
(The memorandum refered to was marked "Exhibit No. 1599" and
is included in the appendix on p. 11648.)
FUTURE DISPOSITION OF NATIONAL CITY COMPANY ACCOUNTS
Mr. Nehemskis. Do you recall, Mr. Russell, following the enact-
ment of the Banking Act, whether there had been any conferences
between yourself and other officers of the National City Co. concern-
ing the future disposition of some of the City Co. accounts? You
may have heard Mr. Ripley testify on that.
Mr. Russell. I don't recall that.
Mr. NEHEMkis. You recall no such conversations. Did you your-
self have any conversations with any of your fellow officers concern-
ing the future disposition of National City business?
Mr. Russell. I recall none.
Mr. Nehemkis. You and Mr. Ripley might have been considered as
having been two of the major executive officers of the City Co. at
the time ?
Mr. Russell. Probably.
Mr. Nehemkis. Do you recall having any discussions with Mr. Rip-
ley concerning the future disposition of City Co. business?
Mr. Russell. No.
Mr. Nehemkis. Now, Mr. Russell, isn't it a fact that you did have
an agreement with Joseph Ripley concerning the disposition of Na-
tional City business?
Mr. Russell. It is not a fact.
CONCENTRATION OF ECONOMIC POWER 11485
Mr. Nehemkis. Mr. Russell, you have been good enough to stipu-
late concerning a number of documents obtained from your files which
were made available to us, and in lieu of asking you to identify each
and every one I am going to ask you to identify this stipulation. This
is the stipulation dated December 13, 1939, which you have entered
into, is it not ?
Mr. Russell. Yes, sir.
Mr. Nehemkis. These are the documents concerning which you have
stipulated ?
Mr. Russell. Yes, sir.
Mr, Nehemkis. Will you read the stipulation ?
Mr. Russell. Yes, sir.
Mr. Nehemkis. That is correct?
Mr. Russell. Yes, sir.
Mr. Nehemkis. Mr. Chairman, I offer the documents enumerated
in the attached stipulation in evidence.
Acting Chairman Reece. Do you wish these to be printed?
Mr. Nehemkis. Yes.
Acting Chairman Reece. They may be admitted.
(The documents referred to were marked "Exhibits Nos 1600-1 to
1600-16," and are included in the appendix on pp. 11649-11659.)
Mr. Nehemkis. I have no further questions of the witness, Mr,
Chairman, and I should like at this time to call Mr. George Leib.
Acting Chairman Reece. Do the members of the committee wish to
ask any questions?
Thank you, Mr. Russell.
Mr. Nehemkis. If it is not too inconvenient, will you remain in the
room, although you are dismissed at this time?
Mr. Russell. Yes, sir.
Mr. Nehemkis. Mr. George Leib, please.
Acting Chairman Reece. Do you solemnly swear that the testi-
mony you are about to give in this procedure shall be the truth, the
whole truth, and nothing but the truth, so help you God.
Mr. Leib. I do.
TESTIMONY OF GEORGE C. LEIB, VICE PRESIDENT AND DIRECTOR,
BLYTH & CO., INC., NEW YORK, N. Y.
Mr. Nehemkis. Mr. Leib, will you state your full name and ad-
dress, please?
Mr. Leib. My home address?
Mr. Nehemkis. Yes-
Mr. Leib. George C. Leib, 625 Park Avenue, New York City.
Mr. Nehemkis. And will you state your present business connec-
tion, Mr. Leib?
Mr. Leib. Vice president of Blyth & Co.
Mr. Nehemkis. Was not Blyth & Co. organized in 1914 by Charles
Blyth and yourself?
Mr. Leib. And several others-
Mr. Nehemkis. It was at that time primarily a Pacific Coast
house, was it not?
Mr. Leib. It started in San Francisco.
Mr. Nehemkis. And it had offices in San Francisco and Chicago,
and I believe in New York and some other cities ?
11486 CONCENTRATION OF ECONOMIC POWER
Mr. Leib. It started in San Francisco and then it extended its
offices over through the country gradually, year by year.
Mr. Nehemkis. Now, at this time, that is to sav, 1914, did Harrison
Williams have any stock interest in Blyth & Co. ?
Mr. Leib. He did not.
Mr. Nehemkis. Wlio, by the way, is Harrison Williams? Will
you tell me who he is? Identify him for me.
Mr. LiEB. Mr. Harris()n Williams is a very prominent public-utility
executive, a very prominent holder of securities of various public-
utility companies and investment trusts. I think he is on the execu-
tive committee of the North American Co. Whether he has any
official title in the North American Co. I do not know.
Mr. Nehemkis. Has Mr. Harrison Williams at any time had any
stock interest in Blyth & Co.?
Mr. Leib Never.^
Mr. Nehemkis. Will you give me. if you will, Mr. Leib, the names
of the officers of Blyth & Co. ?
Mr. Leib. I have not the names here. There are about twenty, I
would say 25.
Mr. Nehemkis. Will you glance at the sheet I am about to show
you and if you agree that these are the names of the officers and
directors of Blyth & Co., will you read them.
Mr. Leib. Yes, indeed. Those are they. Do you wish me to read
them ?
Mr- Nehemkis. Would you?
Mr. Leib. Chairman of the board, Mr. Charles E. Mitchell;
president, Mr. Charles R. Blyth; and there is a group of about 10
or 12 vice presidents, consisting of George Leib, Roy L. Shurtleff,
Thomas H. Boyd, Eugene Bashore, Stewart S. Hawes, Horace O.
Wetmore. James G. Couffer, Bernard W. Ford, Lee M. Limbert,
Donald N. McDonnell, Donald Royce, A. E. Pouting, David T.
Babcock. Mansel P- Griffiths, J. Lawrence Pagen, Robert L. Osswalt.
Tliose are the names.
Mr. Nehemkis. Thank you very much.
Mr. Nehemkis. About 1933, did you not have occasion to take
direct charge of your New York office?
Mr. Leib. In 1933, I came back to New York as one of the active
executives in the New York office. It was never, as far as I know,
designated that I was in charge of the New York office. I had been
with the firm longer than anyone in the New York office and as such
I might have been considered senior, but I was certainly not in charge
of many of the activities in the New York office except in a very
general way.
C. E. MITCHELL JOINS BLYTH & CO., INC.
Mr. Nehemkis. Now, 1933 was also the year which witnessed the
passage of the Banking Act, That meant, did it not, Mr, Leib, that
certain individuals that formerly had commercial banking connec-
tions would be free to make new connections with investment bank-
mg firms?
Mr. Leib. Tliat is correct.
•Mr. Leib siibse<ineutly eorrectvd tliis answer. See "Exlilbit No. 1757." lntrodiict»d
«n December 10, 19.39, .ind included In appendix, p. 11659.
(JONCENTRATION OF ECONOMIC POWER 11487
Mr. Nehemkis. And about the time that you came to your New
York office for the purposes which you have described, you began
looking about for an individual to take into the firm, someone who
had broad contacts on the street, a person who knew, shall we say,
the "deer runs" of the Wall Street district. Do you recall?
Mr. Leib. I recall that our New York office had not made any
headway and we were very active, very anxious to get someone in
New York who could be helpful in developing eastern business. The
word "deer runs" is a word I think you get from one of my letters.
I may have used it. It means to be familiar with the investment
banking activity as it exists in the East, just as we were with the
investment activity existing in the West. That means to have per-
sonal contacts with the executives of the large companies of issue, to
be familiar, to have known them for years, to have known the finan-
cial set-ups of a great many companies back here. That was what we
were working to do, very assiduously.
Mr. Nehemkis. And you found that individual who knew, if I may
again quote your excellent phrase, the "deer runs" of the Wall Street
district, in the person of Charles E. Mitchell, did you not?
Mr. Leiu. He was found for us. Everywhere that we went, we
would tell this story to our various friends around the street, asking
their opinion as to who would be a good man to help develop this,
and everywhere we kept getting high opinions of Charles E. Mitchell
as a man of ability, and as a man of integrity, and as a man who
did know the investment-banking business as it existed in the East,
as a man who should be helpful in the development of an investment-
banking business here in the East.
Mr. Henderson. Mr. Leib, you were the author of the term "deer
run." I think yesterday Mr. Nehemkis said "deer runs and salt
licks." Were you responsible for tlvat, or is that something
Mr. Leib. "Salt licks" is foreign to me. I am glad to have it in
my vocabulary.
Mr. Nehemkis. Now we have a situation where one who knows the
investment-banking community has to also know the "deer runs" and
the "salt licks." [Laughter.]
Mr. Leib. I didn't say anything about the salt licks.
Mr. Nehemkis. What had been Mr. Mitchell's previous banking-
position, do you recall?
Mr. Leib. In a general way. You can ask Mr. Mitchell when he
comes down, but you have got it. He was head of the National City
Co. for years and head of the National City Bank. Prior to that
time he had his own investment banking business.
Mr. Nehemkis. And Mr. Mitchell became chairman of the board of
Blyth & Co.. did he not?
Mr. Leib. That is correct.
Mr. Nehemkis. Wlien you made Mr. Mitchell chairman of your
board, did you have an}' knowledge of his relation to some oi the
partners of J. P. Morgan & Co., notably Mr. Harold Stanley and
Mr. George Whitney?
Mr. Leib. We knew Mr. Mitchell knew practically everyone of
importance and standing in the investment banking business here in
the East, and of course we knew that he knew Mr. Stanley and he'
knew Mr. George Wliitney and so forth.
11488 CONCENTKATION OF ECONOMIC ir'OVVER
Mr. Nehemkis. Mr. Leib, did you regard this relationship as far
as you were aware of it from your own personal knowledge as being
a close one?
Mr. Leib. Yes ; we thought Mr. Mitchell's relations, as I said before,
with all of the outstanding investment banking and banking fra-
ternity in the East was a very close one.
Mr. Nehemkis. Now, do you consider it to be of significance that
one should have a close relationship with Morgan Stanley because
of its position in the underwriting business?
Mr. Leib. ]l think Morgan Stanley — you are speaking of Morgan
Stanley?
Mr. Nehemkis. My question was Morgan Stanley.
Mr. Leib. It is a firm of high standing throughout the country,
there are in it individuals of great ability who have had contacts with
companies of issue for many j^ears. Naturally, I think that a
friendly relation with that firm is important, of course it is, just as it
is with any other good firm.
Mr. Nehemkis. Mr. Leib, I show you a photostat copy of what
purports to be an original document, a letter from Mr. Charles R.
Blyth to Mr. George Leib, dated September 14, 1935. I ask you to
examine this document and tell me whether it is a correct and true
copy of an original in your files.
Mr. Leib. It is a little longer than he generally writes, but it is a
correct copy of the original.
Mr. Nehemkis. I ask that this document identified by the witness
be admitted to the record.
Acting Chairman Reece. It may be received.
(The letter referred to was marked "Exhibit No. 1601" and is
included in the appendix on p. 11660.)
Mr. Nehemkis. I want to read a short paragraph from this docu-
ment, written to Mr. George Leib by his partner, Mr. Blyth.
It will be interesting to see how much of a relationship we shall have with
Morgan, Stanley & Co.
So I take it, Mr. Leib, your west coast partner, Mr. Blyth, like-
wise felt, as you did, that having a close relationship with Morgan
Stanley was important to a house, to any house, in the underwriting
business ?
Mr. Leib. Mr. Blyth recognizes better than many bankers in the
East the high standing that Morgan Stanley has on the coast, the
dealer following they have out there, and he realizes the importance
of that connection.
the p. g. ife e. financing
Mr. Nehemkis. With the break-up of the bank security affiliate
pursuant to the Banking Act of 1933, I take it that you were aware
that there would be a certain amount of competition for the ac-
counts of some of the former bank affiliates?
Mr. Leib. We did.
Mr. Nehemkis. And that certain of the executive personnel asso-
ciated with the old affiliates might endeavor to exert certain claims
on the form of business of those affiliates, and might perhaps be in
a position to make their claims stick?
Mr. Leib. Is this a question?
CONCENTRATION OF ECONOMIC POWER 11489
Mr. Nehemkis. It was intended to be a question.
Mr. Leib. I sort of lost it. You started over.
Mr. Nehemkis. We will have the reporter read it back. Will the
reporter repeat the question to the witness?
(The question was read.)
Mr. Leib. What am I supposed — did I think that?
Mr. Nehemkis. Did you think that?
Mr. Leib. I have forgotten whether I thought that or not.
Mr. Nehemkis. As you review the situation now, did you think
that might have been the situation at the time?
Mr. Leib. I am not going to do smy supposing, if you will pardon
me.
Mr. Nehemkis. All right; we will proceed and let you keep to
matters that you are clearly familiar with.
Now one of the accounts of the old National City Co. had been
Pacific Gas & Electric, had it not ?
Mr. Leib. That is correct, and it had also been one of Blyth &
Co.'s accounts. National City took it away from us.
Mr. Nehemkis. We will come to that in a moment.
Does P. G. & E., as far as you know, have any affiliation with any
larger utility system ?
Mr. Leib. Yes, It has no affiliation but the North American Com-
pany owns about 2,000,000 shares of the Pacific Gas & Electric's
five and one-half or six million shares.
Mr. Nehemkis. Was that true at the time we are discussing, 1933,
roughly speaking?
Mr. Leib. I would say "yes," if my memory is correct.
Mr. Nehemkis. Now you have already testified, I believe, that at
this time Mr. Hockenbeamer was the president of P. G. & E. ?
Mr. Leib. That is correct.
Mr. Nehemkis. And I believe also that Mr. Russell has so indi-
cated, to, in his testimony.
You also said a moment ago, if I recall, that Blyth & Co. had par-
ticipated in some of the earlier financing of this company, that in
fact it had been an account of Blyth & Co. and National City took
it away?
Mr. Leib. Correct.
Mr. Nehemkis. Am I correct that it was in 1919 that your house
brought out an issue of preferred stock for P. G. & E. ?
Mr. Leib. Correct.
Mr. Nehemkis. And in 1931, you held second position, I believe,
in the underwriting of the $25,000,000 first and refunding mortgage
gold bonds, series F?
Mr. Leib. That is my recollection.
Mr. Nehemkis. Do you mind if I interrupt your testimony just
for a moment and ask one of the members of my staff to identify
certain documents?
Mr. Leib. Not a bit.
Mr. Nehemkis. Mr. Lewis Evans, please. Mr. Evans, will you
come forward and be sworn?
11490 CONCENTRATION OF ECONOMIC POWER
TESTIMONY OF LEWIS N. EVANS, ASSOCIATE ATTORNEY, SECURI-
TIES AND EXCHANGE COMMISSION, WASHINGTON, D. C.
Acting Chairman Keece. Do you solemnly swear that the testimony
you are about to give shall be the truth, the whole truth, and nothing
but the truth, so help you God ?
Mr. Evans. I do.
Mr. Nehemkis. Mr. Evans, you are a member of the staff of the
Securities and Exchange Commission, are you not ?
Mr. Evans. I am.
Mr. Nehemkis. And in connection with certain investigations
which you have made for the Investment Banking Section of the
Commission you have had occasion, have you not, to examine the
tiles of the City. Co. of New York, Incorporated, in dissolution, for-
merly the National City Co.?
Mr. Evans. I did.
Mr. Nehemkis. I show you, Mr. Evans, two documents from the
files of that company and ask you to tell me whether or not these
documents were furnished to you by responsible officers of that com-
pany.
Mr. Evans. This was a compilation made up by Mr. Law of that
company.
Mr. Nehemkis. That is all, Mr. Evans, tliank you.
Mr. Chairman, I offer in evidence two documents just identified
by the witness, one pertaining to the $25,000,000 Pacific Gas & Elec-
tric Co. financing of the first and refunding mortgage gold bonds,
series F, due June 1, 1960, and offered in July of 1930, and the sec-
ond pertaining to the offering of January 12, 1931. The leading
company was the National City Co., with Blyth & Co. in second place.
American Securities Co. in third, H. M. Byllesby & Co. of Chicago,
fourth, E. H. Rollins of New York in fifth, 'Peirce, Fair & Co. of San
Francisco in the sixth.
I would point out that these memoranda contain the following-
footnote :
J. P. Morgan & Company and the First National Bank of New York each were
given a one-quarter interest in our participation.
I won't take your time at this moment to explain how that hap-
pened, as subsequent witnesses will go into that particular point at a
later time.
I now offer these documents in evidence.
Acting Chairman Reece. They may be admitted.
(The documents referred to were marked "Exhibits Nos. 1602 and
1603" and are included in the appendix on pp. 116G2 and 11C63.)
Mr. Nehemkis. Is it correct, Mr. Leib. that from the last piece
of financing that was referred to in those memoranda, the P. G. & E.
engaged in no subsequent financing until the issue of 1935 ?
Mr. Leib. That is correct.
Mr. Nehemkis. So that in 1935, when it was learned on the street
that P. G. & E. was to undertake further financing, the question at
once arose who would have the leadership over this financing?
Mr. Leib. That is correct.
CONCENTRATION OF ECONOMIC POWER 11491
Mr. Nehemkis. I suppose we might put the question differently.
Eeally, it was a question of who was to occupy the place formerly held
by National City?
Mr. Leib, Who was to head the business, that is correct.
Mr. Nehemkis. Now, Mr, Stanley Russell, I believe, testified that
he had been particularly associated with P. G. & E. financing, and
that he had enjoyed a close personal relationship with Mr. Hocken-
beamer, the president of the company. So that, Mr. Leib, at the time
when it first became clear that P. G. & E. was in the market for some
financing, did you at that time believe that Russell would be able to
exert a strong claim for the leadership of the business?
Mr, Leib. It is a pretty competitive business and we knew Mr.
Hockenbeamer held Mr. Russell in very high regard. He admired
him tremendously, and when Mr. Russell went over to Lazard Freres
we were confident in our own minds that Mr, Russell was going to
attempt to bring that business to Lazard Freres, very naturally.
Mr. Nehemkis. Now at this period that we have been discussing,
when you first became interested in the P. G. & E. financing
Mr. Leib (interposing). What period is that that we first became
interested ?
Mr. Nehemkis. 'Thirty-five.
Mr. Leib. We have been interested in it from 1919 and we were
leaders of two pieces of business, one in 1919 and one in 1920 as I
remember.
Mr. Nehemkis. That is correct, but the previous questions and an-
swers have led us to the point where you are now becoming aware that
P. G. & E. is interested m some new financing, the first new financing
since 1931,
Mr, Leib. I see. Yes.
Mr, Nehemkis. So that at this period when you became interested
again in possible P, G. & E. financing, were not various realignments
taking place in the investment banking business? That is to say, the
old security affiliates were out of business, some of their executive per-
sonnel had transferred to other firms? In, short, wasn't the whole
climate at tliat time one largely of forming new groups and solidify-
ing old established groups?
Mr. Leib. The business was in a state of flux.
Mr. Nehemkis. Weren't problems of that character being consid-
ered by officers of your company as they probably were by officers and
partners of other houses?
Mr. Leib. You mean, as to who was to head the Pacific Gas &
Electric business?
Mr. Nehemkis. And who was to head any other accounts and who
would have the leadership, and so on, and what readjustments were
being made?
Mr. Leib. They were being considered actively at that time.
Mr. Henderson. Anaconda was one of those?
Mr. Leib. Anaconda was one of those,
Mr, Nehemkis, Had not some of your fellow officers felt Mr. Ripley
had claimed to have inherited the old National City Co. business?
Mr. Leib. I do not know what my fellow officers thought. I never
personally heard Mr. Ripley ever claim that he inherited any of the
National City business. Maybe he did claim it, but my recollection is
never to have heard it.
11492 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. In 1936, v.'as Mr. Eugene M. Stevens a vice chair-
man of Blyth & Co. ?
Mr. Leib. He was.
Mr. Nehemkis. I show you two letters, of which I have photostat
copies, purporting to liave been written by Eugene M. Stevens, and
I ask you to examine the signatures of those copies and tell me whether
you believe them to be true and correct copies, and whether they bear
the signatures of Mr. Stevens.
Mr. Leib. Those are Mr. Stevens' signatures ; yes.
Mr. Nehemkis. I offer these two letters identified by the witness in
evidence.
Acting Chairman Eeece. They may be admitted.
(The letters referred to were marked "Exhibits Nos. 1604 and 1605"
and are included in the appendix on pp. 11665 and 11666.)
HEIRSHIP OF national CITY CO. BUSINESS
Mr. Nehemkis. Mr. Chairman, may I read to you from these letters
which I have just offered in evidence? This is a letter from Mr.
Eugene M. Stevens, a vice president of Blyth & Co., to Mr. Harris
Creech, president, Cleveland Trust Co., Cleveland, Ohio, dated April
14, 1936; and I read from the bottom of the first page [reading from
"Exhibit No. 1604"] :
As a matter of fact, no New York firm has inherited the right to the National
City Company business. Brown, Harriman & Co. have in their organization a
number of former National City men, but Brown Bros., Harriraan & Co , the
banking firm who started their investment banking business with a union of
former Brown Bros, and National City men, paid nothing to the National City
stockholders for the Company's good will, and have positively no claim of in-
heritance. Other investment banking firms, also, are now manned by former
National City men, including our own firm — not only in New York but scattered
across the country. As I have said, Mr. Mitchell, the Chairman of our Board,
was formerly the head of the National City Company and of the National City
Bank, and is responsible for the development of the National City Company
from a three man personnel to a point where it had become the largest organi-
zation of its kind in the country, all of which was entirely under his leader-
ship. He, in fact, was ultimately responsible for the negotiation and con-
summation of the pieces of financing which the Nationr.l City Company did.
It would definitely appear, therefore, that if there is any claim for the National
City business as a heritage, that we could make such a claim — perhaps on better
grounds than any other investment banking firm.
I remember this point came up in our discussion and I am giving you this
definite information in regard thereto.
Mr. Henderson. Mr. Nehemkis, how large was that volume of fi-
nancing which National City had before the divorcement?
Mr. Nehemkis. It was
Mr. Henderson. Wasn't that in the record yesterday ?
Mr. Nehemkis. It was offered yesterday,^ Mr. Commissioner, and
as I recall it, in 1926 it was well over 5U percent of all originations
and participations by all bank affiliates. But perhaps one of my
associates can furnish me with that particular exhibit, so that I can
be more precise.
Mr. AviLDSEN. The statement says 54.1 percent for 1927 for the
National City Co., a bank-affiliate origination.
Mr. Henderson. How large would that be?
Mr. AviLDSEN. Here is the statement.
1 "Exhibit No. 1534," appendix, p. 11611.
CONCENTRATION OF ECONOMIC POWER 11493
Mr. Henderson. That was $408,000,000 for 1927, and in 1930 it
was $227,000,000 even though at that time it was only 12 percent of
the originations of bond issues. It was a pretty big field you were
scrapping for, wasn't it?
Mr. Leib. Yes. Could I say a word about Mr. Stevens? He was
the head of the Federal Reserve Bank in Chicago for quite a few
years. He was only with us about a year, and he died very suddenly.
He was trying very hard to get this Firestone business for Blyth &
Co. Mr. Mitchell was also trying hard, but the personal relationship
between Mr. Ripley and the Firestone people was so strong that we
lost out, and Harriman Ripley got the business.
Mr. Nehemkis. I was just about to ask if I might read to you, Mr.
Chairman, a passage from another letter which was just introduced.^
This is a letter again from Mr. Stevens to Mr. Creech.
Mr. Henderson. Mr. Leib, you wanted an opportunity to say some-
thing, or had you finished ?
Mr. Leib. I am all finished, yes; thank you.
Mr. NEHEMias [reading from "Exhibit No. 1605"] :
You will recall that "I went down to see Shea in the latter part of July, and
he advised me that the whole matter was deferred, —
I take it that means the Firestone financing, Mr. Leib?
Mr. Leib. Yes.
Mr. Nehemkis (continuing reading) —
but with the implication that he felt that he had certain obligations to another
banking house, which I am quite sure was Brown, Harriman «& Company. This,
you will remember, appeared to be based on Joe Ripley of Brown Harriman
having sold Shea on the idea that Brown Harriman had inherited the National
City business. This, of course, is not a correct- assumption, as neither Brown
Harriman nor anyone else has ever paid a dollar to the National City Company
for its good will. Whatever there was of inheritance, and certainly from the
standpoint of the individuals concerned, we should inherit the business more
fully through Mr. Mitchell and others in our firm than any other banking house.
Mr. Leib. Again, I say, the man who wrote that letter, Mr. Stevens,
was ohly with us a year or so. He assumes there that Mr. Ripley
claimed that heritage. I never knew that .he did claim that in-
heritance. I think he got the business purely on his ability and past
financing, which he had done so successfully.
Mr. Nehemkis. Mr. Leib, I show you a photostat copy of a letter
written by you to Mr. James Black, dated February 21, 1935. I ask
you to tell me whether this is a true and correct copy of an original
letter in your files.
Mr. Leib. It is.
Mr. Nehemkis. Mr. Chairman, may it please the committee, I offer
the letter identified by the witness in evidence.
Acting Chairman Reece. It may be admitted.
(The letter referred to was marked "Exhibit No. 1606" and is in-
cluded in the appendix on p. 11666.)
Mr. Nehemkis. I read from the letter :
February 21, 193;>—
Mr. Leib, as we go along in here, will you help me —
As you know, Elsey
1 "Exhibit No. 1605/' appendix, p. 11666.
11494 CONCENTRATION OF ECONOMIC POWER
Mr. Leib. Mr. Elsey is the president of the American Trust; he
was the president of the American Trust.
Mr. Nehemkis (reading further) :
As you know, Elsey aud the American Trust would like to have us heirs to
their sixteen percent interest in the Pacific Gas business.
Now, the American Trust was one of the participants in the old
financing?
Mr. Leib. Correct.
Mr. Nehemkis [reading further from "Exhibit No. 1G06"] :
This, coupled with our historic connection with the business, would appear
to entitle us to head this account, particularly in view of the fact that the old
National City Company has no heir (according to public statement of its Presi-
dent, James Perkins) ; and further in view of the fact that even if there is
a heir, the legacy has been split between Brown Harriman and Lazard Freres.
Now, your reasoning, then, I take it, was that with the American
Trust 16 percent interest plus the Blyth former 22 percent interest,
you had the largest single claim on the business ?
Mr. Leib. Well, I wouldn't say that was quite my reason. It is a
very competitive business, as you know. We were using every effort
that we could to build up our position to head that business. The
American Trust Co. could not do any underwriting business, so we
went to Mr. Elsey and we asked him, in view of the fact that he could
not do it, would he be helpful to us in letting us say that he would
like to have us have his share of the business. He had no authority
to do that. We had no authority to ask him to do it. We did it
simply as another piece of twine making a rope to pull ourselves into
the leadership of that business.
As to the supposition about the legacy, I do not think there was
any legacy. Why I put that in there I couldn't tell you.
Mr. Nehemkis. You were apparently referring to the statement in
Mr. Perkins' letter which was offered here in evidence yesterday, in
which he said, I will quote it at this time : ^
In so far as it —
Meaning goodwill —
may be represented by personnel trained in the investment-banking business,
such personnel consist of free individuals whom the City Company is not in a
position to deliver to a prospective purchaser.
Mr. Leib. That is it.
Mr. Nehemkis. In the next statement you state — that even if
there is an heir, the legacy has been split between Brown Harriman
and Lazard Freres.
Was there to your personal knowledge, Mr. Leib, such an under-
standing between those two houses with respect to the allocation
of all National City Co. business?
Mr. Leib. There was not.
Mr. Nehemkis. What was the basis of your statement — that "even
if there is an heir, the legacy has been split between Brown Harriman
and Lazard Freres?"
Mr. Leib. I don't think that is a statement, Mr. Nehemkis. I
think that is a supposition. Why I put it in there I couldn't tell
you.
1 "Exhibit No. 1628," appendix, p. 11606.
CONCENTRATION OF ECONOMIC POWER 11495
Mr. Henderson. We hiue had, Mr. Leib, people from other busi-
nesses say that that is for its literary value.
Mr. Leib. I don't think it has any literary value. I would say
just the reverse.
Mr. Nehemkis. It has no significance -whatsoever?
Mr. Leib. It has no value.
Mr. Nehemkis. May I continue with this letter. Mr. Leib [reading
from "Exhibit No. 1606"] :
Giving no consideration to IIoclv's personal feelings —
Hock being Hockenbeamer, president of P. (L & E.?
Mr. Leib. Yes.
Mr. Nehemkis [reading further] :
for Stanley Russell, the following syndicate would seem to us to be the logical
syndicate, and one in which the iuteiests of the Pacilic Gas & Electric Company
would be best served :
Percent
Blyth & Co., Inc 37
Brown, Harriman & Co — 19
Lazard Frercs 1»
First Boston Corporation 7Vj
B. B. Smith & Co TV-
Witter & Company 5
E. H. Rollins & Sons ">
In this account, you will notice that I have simply taken the old National
City percentage interest and divided it between Brown Harriman and Lazard
Freres, which is the only possible, fair treatment to be given to this situation.
Now, were the figures that you arrived at and the division between
these houses likewise a matter of mere supposition, or was there
some basis ?
Mr. Leib. No; there was no basis. Brown Harriman and Lazard
Freres — the men in those two concerns were men of ability, they
had been connected with the Pacific Gas & Electric financing for
many, many years; they were both houses of capital and houses of
standing. It obviously was best for the interests of Pacific Gas &
Electric Co. that those houses be in the business. They had a historical
knowledge of the business. They knew where many of the securities
were placed, through their own organizations, and not to have given
them a good position in the account would have been hurtful to the
account in our opinion. Why they were in 19 — 19, that .seemed like
a simple figure, 19 percent for each. It might as well have been
18 or 17 or 22. That was just my own personal idea which I was
trying to get over to Mr. Black.
Mr. Nehemkis. May I ask at this point why you were writing at
all to Mr. Black about this matter? Wlio was Mr. Black, and why
should he have been interested in this matter in the first place?
Mr. Leib. Again I go back to the statement that this is a competi-
tive business, Mr. Nehemkis, and we were trying to get a piece of
business. James Black was the vice president of the North Ameri-
can Co. We were trying very hard to get Mr. Black to influence
Mr. Hockenbeamer to turn that business over to us. We were un-
successful in doing it. We thought at times that we were making
headway with Mr. Black, but then it would fall down and thej' would
go back on their policy of not interfering with the companies in
which they own an interest, and this was but one of innumerable
124491— 40— pt. 22— —10
11496 CONCENTRATION OF ECONOMIC POWER
efforts we made to influence Jim Black in our firm, just as we went
to Mr. Elsey of the American Trust and tried to influence him.
We tried to influence everyone we could to help us get this business.
Mr. Miller. Mr. Leib, had Mr. Black been an officer or an executive
in the Pacific Gas Co. before ?
Mr. Leib. He had been an officer in one of the component parts ol
Pacific Gas, that is, the Western Power. He had been a very active
officer, and when Western Power was purchased by Pacific Gas &
Electric for two million shares of its common stock, Mr. Black went
with the North American Co., but he was very familiar with the
operating conditions and the personnel of the Pacific Gas & Electric
Co., as he had been first a competitor and then his organization had
gone in.
Mr. O'CoNNELL. Was Mr. Black connected with the Pacific Gas at
the time this letter was written ?
Mr. Leib. No ; he was not.^
Mr. Hendekson. The North American, I think you said, had two
million shares?
Mr. Leib. Had approximately two million shares of the Pacific Gas.
Mr. Hendebson. Out of how many ?
Mr. Leib. In round figures, six million.
THE FIRST P. G. & E. FINANCING 19 35
Mr. Nehemkis. Mr. Leib, prior to this first offering, that was the
$45,000,000 series G 4 percent bonds by P. G. & E., as I recall it, there
had been scarcely any major utility financing up to this time?
Mr. Leib. I think only one or two pieces.
Mr. Nehemkis. So that for all practical purposes the P. G. & E.
offering of 1935 Avas the first major piece of utility financing in 1935?
Mr. LiEB. That is correct.
Mr. Nehemkis. And it was your firm in association with other
firms that was responsible for bringing that piece of business out?
Mr. Leib. That is correct; the syndicate brought it out, headed by
Lazard.
Mr. Nehemkis. That was my understanding. At this time, was not
Stanley Russell also active in negotiations with Mr. Hockenbeamer
for leadership over this financing?
Mr. Leib. I am sure he was. Not to my knowledge, but I am sure he
was.
Mr. Nehemkis. I show you, Mr. Leib, a telegram dated February 15,
1935, from yourself to your California partner, Charles R. Blyth.
This is a photostatic copy, and I ask you to tell me^ whether it is a
true and correct copy of an original in your custody and possession?
Mr. Leib. That is 2 months before this letter, isn't it ?
Mr. Nehemkis. That is right.
Mr. Leib. The letter is April 14 and this is February. That is
correct.
Mr. Nehemkis. I offer this telegram in evidence, Mr. Chairman.
Acting Chairman Reece. It may be admitted.
(The telegram referred to was marked "Exhibit No, 1607" and is
included in the appendix on p. 11667.)
' Mr. Leib subsequently liit'onueil tbe couiuiittee tbiit Mr. Black was a director of Pacific
Gas & Electric Co. at that time. See infra, p. 11510.
CONCENTRATION OF ECONOMIC POWER 11497
Mr. Nehemkis. May I read from it? Will you again, Mr. Leib,
help me in identifying some of the individuals mentioned [reading
from "Exhibit No. 1607"] ?
Patterson states Frank Anderson —
Who are those two individuals ?
Mr. Leib. Patterson was an employee of Blyth & Co. at that time.
Mr. Anderson was chairman of the board of the Bank of California
at San Francisco.
Mr. Nehemkis (reading further) :
Patterson states Frank Anderson talked to him in California about value of
California banking houses to California underwritings and deplored occasional
invasion of California business by eastern houses. Would it-
Mr. Chairman, this is a telegram written rather cryptically. May I
take the liberty of inserting occasional words so that the clarity is
plain?
Acting Chairman Reece. I think that is permissible.
Mr. Nehemkis (reading further) :
Would it possible for you to telephone him and solicit his advice regarding
bis business? Possibly Bernard—
That is Bernard
Mr. Leib (interposing). That is Bernard Ford.
Mr. Nehemkis (reading further) :
Possibly Bernard could telephone C. O. G. —
That is C. O. G. Miller, one of the directors of P. G. & E. ?
Mr. Leib. Correct.
Mr. Nehemkis (continuing to read from "Exhibit No. 1607") :
on same basis. I believe both these men vpould be flattered and keenly interested
helping us obtain senior position this business. Certainly it would allow us say
to Russell we would like delay for few days in order have additional conversations
with Anderson and Miller and I don't think Hock —
Meaning Hockenbeamer —
would insist upon closing if he knew those conversations going on between
them and us. iSeems to u.s we have everything to gain by delaying for week or so
and nothing to lose. Stop. Heading businessi and 371/2% interesf might be line
along which we should fight for week or so. Only person who must have speed
is Russell.
I take it by that you meant, Mr. Leib, that if Russell could keep his
advantage he might have obtained the leadership, but if the negotia-
tions could be prolonged, other forces perhaps might intervene and
crowd him out?
Mr. Leib. Russell — you are correct — Russell had the advantage at
that time and we figured that delay would be in our favor. However,
Mr. Russell held his advantage and got the business.
Mr. Nehemkis (reading further from "Exhibit No. 1607") :
Will advise you soon as we hear from Fogarty.
Who is Fogarty?
Mr. Leib. Mr. Fogarty was another man we were trying unsuccess-
fully to influence in our favor. He is the head of the present North
American Co., at least he was at that time. We were talking with
him, as I recall it, I was talking with him, telling him of the reasons,
as I saw them, why Blyth & Co. should be selected over anyone else
11498 (!0N<:5ENTRATI()N OF ECONOMIC POWER
to head that business. I was hopiii<; that Mr. Fogarty would be help-
ful to us, but he was not.
Mr. Nehemkis. Mr. Leib, I show you a photostatic copy of what
purports to be a letter written by Charles Blyth to you, dated Feb-
ruary 16, 1935. I ask you to tell me whether this is a true and cor-
rect copy of an original in your possession?
Mr. Leib. It is.
Mr. Nehemkis. The letter is oflFered in evidence.
Acting Chairman Reece. It may be admitted.
(The letter referred to was marked "Exhibit No. 1608" and is in-
chidod in tlie appendix on p. 11668.)
Mr. Nehemkis. I should like to read one paragraph from that
letter. You recall this is a letter from Charles Blyth, Mr. Leib's
west coast paitner [reading from "Exhibit No. 1608"] :
The fact is he —
Meaning Hockenbeamer —
Mr. Leib. Correct.
Mr. Nehemkis (continuing) :
and Stanley are close buddies. He considers Stanley and not the National City
or anybody el.se the Banking ag^-ncy which created the original mortgage and
has acted in the tinancial interest of the Company ever since. He stated that
to us yesterday and said Stanley knows more than any living person other than
himself, about P. G. & E. financial matters. Hock also said, when we urgently
agitated our heading the business that he had gone too far now with Stanley
to reverse himself.
Mr. Leib. I show you a photostatic copy of a telegram from your-
self to Charles R. Blyth, dated February 19, 1935. Is this a true and
correct copy of an original in your possession ?
Mr. Leib. Yes.
Mr. Nehemkis. The telegram is offered in evidence, Mr. Chairman.
Acting Chairman Reece. It may be admitted.
(The telegram referred to was marked "Exhibit No. 1609" and is in-
cUuled in the appendix on p. 11669.)
Mr. Nehemkis. It reads as follows :
Charles R. Blyth % Blyth &. Co. Inc., 215 W. 6th St., Los Angeles, Calif. Just
came from long talk witii .Tim Black. I clearly outlined our position in uhole
matter Stop Olf the record Jim thinks Brown Harriman attitude completely
untenable.
Mr. Leib, what was the Brown Harriman attitude, and why was it
completely untenable?
Mr. Leib. Well, you will have to wait a second until I look this
over. It doesn't come back to me.
Mr. Nehemkis. You glance at it. We will wait.
Mr. Leib. My recollection of that is that Brown Harriman was
insisting upon appearing in second position all over the country in
the advertisement offering this first issue of Pacific Gas & Electric
bonds. We felt very strongly that we should ai)pear in second posi-
tion. My memory is that by this time Stanley Ru.ssell had the busi-
ness in hand and we had lost it. Therefore, we were arguing over
the public appearance. As I remember it, Brown Harriman gave us an
ultimatum to the effect that if they couldn't appear in second posi-
tion, they would not appear, and we finally argued it out and com-
promised, as I remember, by Brown Harriman a]ipearing in second
C0X<JENTRAT10N OF KCONOMIC I'OWER 11499
I)osition east of the Mississippi, and Blyth & Co. appearing in sec-
ond position Avest of the Mississippi, and Lazard appearing in first
})osition all over the country.
Mr. Henderson. Mr. Lieb, is this order, of where the names appear
very important?
Mr. Leib. We consider it very iinpcjrtant. The nearer the top
Ml'. Hendeksgn. Is it something like the Avay the actors want their
names placed in lights and the like? It is a business proposition, isn't
it? Is it worth soin«'lhing to have second or first position as against
tliird or fourth?
THE BENEFnS OF POSITION IN ADVERTISING
Mr. Leib. The first position is the most important, because there
you head the business, and the nearer you can get to the first position,
the more important that is. It means you have the larger amount,
and it is of importance; yes.
Mr. Henderson. That is, the distri))Utois all ovei- the country rec-
ognize the importance of that?
Mr. Leib. 1 personally think that it is overemphasized, but it has
gone doMii througli the years in the investment banking industry
that the nearer the top you can sret. the better, and it is wortli wliile
fighting for.
Mr. IlENnERsoN. What prompted that question was that you said
Brown Harriman served an ultimatum that if they didn't get second
position thej' would drop out. I'hat means they would give up that
business ?
Mr. Leib. No; as I remember it, it means that they Avould not
appear in the advertisement Avhich would show their position in the
business.
Mr. Henderson. They would take the cash and let the credit go, is
that it ?
Mr. Leib. It may be. I have forgotten that argument. It comes
Ijack to me I'ather vaguely after 5 years, but I do not think it vvas
anything of any moment.
Mr. O'CoNNEix. If I understood you correctly, I should assume
that the ultimatum would have been entirely acceptable to you, if they
liad drojiped out of the business, and kept their percentage of the issue.
Wouldn't that make your company in second position?
Mr. Leib. Yes; that woukl seem to put us in a better position.
Maybe they were going to drop out of all the business, I don't know.
Maybe they said they wouldn t go in at all. I have forgotten.
Mr. Miller. A few minutes ago I asked you about Mr. Black. Was
lie not a director of the Pacific Gas & Electric Co. at that time ?
M]-. Leib. I do not think so. My memory isn't clear, but I do not
think he Avas a director. Was he, Mr. Nehemkis ?
Mr. Nehemkis. I do not think he was.^
Continuing with the telegram, Mr. Leib, I am now skipping some
sentences [reading from "Exhibit No. 1609"] :
Think we should be able trade splendid deal with Russell regarding api>earance.
etc. because he certainly on weak ground not having single friend in court
except Hock.
Now, who were your friends in court at this time?
^Mr. Black was a director at that time, see infra, p. 11570.
11500 CONCENTRATION OF ECONOMIC POWER
Mr. Leib. I will never understand how we lost that. We had so
many friends and he had so few, but we lost it. [Laughter.]
Mr. Nehemkis. Mr. Leib, I show you a photostat copy of a tele-
gram which purports to have been written by yourself to Charles R.
Blyth, dated February 19, 1935. Will you be good enough to tell
me whether this is a true and correct copy of the original in your
possession ?
Mr. Leib. It is.
Mr. Nehemkis. I ask that the telegram identified by the witness be
received for the record.
Acting Chairman Reece. It may be received.
(The telegram referred to was marked "Exhibit No. 1610" and is
included in the appendix on p. 11669.)
Mr. Nehemkis. I show you six telegrams from you and other of
your officers. I ask you to examine these documents and tell me
whether they are true and correct copies of originals in your pos-
session.
Mr. Leib. They are.
Mr. Nehemkis. I offer these documents in evidence.
Acting Chairman Reece. They may be admitted.
(The telegi'ams referred to were marked "Exhibits Nos. 1611-1 to
1611-6" and are included in the appendix on pp. 11669-11671.)
Mr. Nehemkis. Will the clerk hand back the telegram which was
marked "Exhibit No. 1610"?
QUESTION or AGREEMENT BETWEEN RIPLEY AND RUSSELL
Mr. Nehemkis. I am going to read to you, Mr. Leib, a telegram
which you have just identified, and ask you to listen to it very care-
fully. This is addressed to Charles R. Blyth, Russ Building, San
Francisco, Calif. [Reading from "Exhibit No. 1610"] :
I forgot to tell you that I told Brown Harriman yesterday that Russell had
told us he had an agreement with them under whi^li he would handle all of
his own accounts. Sylvester * • ♦
That is an officer of Harriman Ripley —
said yes but the understanding was that if Hock wanted him to head account
we were to have second position and equal percentage with Russell. In other
words these two without any consideration of us simply took first two positions
in business. It would serve them both right if we went in there and insisted
upon heading business ourselves and I believe we could come awfully close to
putting it over.
Mr. Leib, wasn't there some understanding between Brown Harri-
man, or rather Joe Ripley and Stanley Russell concerning which you
advised your partner, Charles R. Blyth?
Mr. Leib. Let me see that telegram, will you please? This has to
do more with appearance than anything else. It may be that there
was some understanding on the appearance. I can well imagine that
somebody in Brown Harriman might have said to Mr. Russell, "You
are so close to Hockenbeamer, he obviously wants to do the business
with you, so God bless you. However, if you get the business away
from Blyth & Co., don't forget our grand organization" — and words
to that effect.
We didn't feel that way. We felt very close to the business our-
selves and, uo+Av;[]T::;t;indin2f Mr. Russell's closeness with Mr. Hocken-
CONCENTRATION OF ECONOMIC POWER 11501
beamer, we expected to go after the business. I can imagine they
may have had a conversation along those lines, although I don't know.
Mr. Nehemkis. I read to you from your telegram, dated February
20, 1935, to your partner, Charles R. Blyth [reading from "Exhibit
No. 1611-1"] :
Reason Russell taking this position is because he had agreement about which
he did not tell us that if Hock elected Lazard to head business then Brown was
lo have second position with equal percentage interest.
In other words, as I understand it, Mr. Leib, there were really two
agreements or understandings. There was one on general Ci^^y busi-
ness and the second was on this specific deal.
Mr. Leib. I know nothing of any such agreements, Mr. Nehemkis.
Mr. Nehemkis. You must have had some idea about it, because at
this time you said:
Reason Russell taking this position is because he had agreement about which
he did not tell us.
Possibly you don't remember at this time, but your wire would
indicate that you may have had some knowledge at that time?
Mr. Leib. That wire must have been to the effect that Mr. Russell
said to me, going back five years, that "this business was my business
and Hockenbeamer wants me to have the business and I am going after
it, and no one else is going to get the business" and on that basis and
that Mr. Hockenbeamer did want him to have the business, as was
clearly evidenced by the after developments.
Brown Harriman might very well have said, "All right, good luck
to you."
Apparently Mr. Russell must have told me that there was some
understanding between Hockenbeamer and himself, that he was to get
that business. I have forgotten.
Mr. Nehemkis. Were you here, by chance, yesterday afternoon
when Mr. Joseph Ripley testified ?
Mr. Leib. I was not here; no.
Mr. Nehemkis. Let me read you from the transcript of that testi-
mony :
Mr. Nehemkis. Mr. Ripley, was one of your fellow officers in the National City
Co. Mr. Stanley Russell?
Mr. Ripley. Yes.
Mr. Nehemkis. Did you have an understanding with Mr. Stanley Russell con-
cerning the participations that the National City Co. formerly had and as to what
their future disposition might be?
Mr. Ripley. No.
Mr. Nehemkis. You had no understanding with Mr. Stanley Russell concerning
the originations of the National City Co. and what their future disposition
might be?
Mr. RiPLETY. No.
Mr. Nehemkis. So that you had, if I understand you correctly, no understanding
concerning either National City Co. originations or participations?
Mr. Ripley. No understanding.
Mr. Leib. What is the date on the telegram ?
Mr. Nehemkis. February 20^ 1935.
Mr. Leib. You see, by that time Mr. Russell had the business. He
was in constant conversation at that time, just as we Avere, with
Brown Harriman. This must have to do with some understanding
just 2 or 3 days after Russell had the business, between the time he
1X502 CONCKNTRATIOX OF E(()N(»M1C POWER
obtained the business and the time it was oflfered, because my recol-
lection is very clear that never did Mr. Russell tell me that Brown
Harriman had agi-eed to stay out of the business, that they were not
going to compete for the business, and so forth. My memory is clear.
T do not quite understand that telegiam, but tliat telegram must refer
to an agreement or to a conversation which Mr. Sylvester had — and I
do not think Mr. Ripley had anything to do with it, Mr. Sylvester
handles that kind of thing — the agreement they had which Mas just 3
or 4 days old. It docs not date back for a year or 6 months or any-
thing like that.
Mr. Henderson. You think it doesn't have anything to do Avith
the division of iiccouuts of the old National City?
Mr. Leth. Ml'. Henderson, I can't tell you ho'.v remote that is. 1
never heard it claimed in all the business we competed f(ii-. that we
ever divided up any business.
Mr. Henderson. You are not clear how it crept into your tele^rram ?
Mr. Leib. It must liave been an agreement of 2 or 3 days' standing
after Russell had the business, or when he was competing vigorously
for the business, Mr. Henderson, a week before or 2 weeks.
He may have had some conversation that he was going to get the
business and Bi'own Harriman said, "We want our position," and he
said, "You can have your position the same as mine, but I am going
to head the business."
Ml-. Henderson. Not to lay too much stress on Mr. Stevens' letter,
hut tl'.at was very clear as to what he thought about the matter, was it
not?
Mr. Leiu. It was clear what he thought about the matter, but Mr.
Stevens hadn't been in the investment business for more than a year.
He had been in Federal Reserve banking for years.
Mr. Henderson. WHien you take the limited experience you say Mr.
Stevens had and couple it with almost identical language appearing
in your telegram, isn't it a fact that it does relate to that?
Mr. Leid. I don't think so. It is very difficult to recall the circimi-
stances surrounding a telegram after 5 years, as you know,
Mr. Nehemkis. I notice in gazing over the audience there is a
witness in this room who I think can throw light on this problem.
Would you mind if we stopped for one moment? Mr. George
Woods, will you take the stand, please ?
Acting Chairman Reece, Do you solemnly swear the testimony you
aj-e about to give in this proceeding shall be the truth, the whole truth,
and nothing but the truth, so help you God ?
Mr. Woods. I do.
TESTIMONY OF GEORGE D. WOODS, VICE PRESIDENT AND DIREC-
TOR, THE FIRST BOSTON CORPORx\TION, NEW YORK, N. Y.
Mr. Nehemkis. JVIr, Woods, I show you a copy of a telegram dated
March 23, 1935, from George Ramsey to yourself.
Mr. Henderson. Will you have Mr. Woods identified?
Mr. Nehemkis. I shall in just a moment.
And I ask you to tell me whether this is a true and correct copy of
an original in the files of the First Boston Corporation?
Mr. Woods, Yes ; it is.
CONCENTRATION OF ECONOMIC POWER 11503
Mr. Nehemkis. You recognize that tlnit is a true and correct copy
of the original in your custody'^
Mr. Woods. I do.
Mr. Nehemkis. I ask that this document be received for the record,
Mr. Chairman.
Acting Chairman Reece. It may be received.
(The telegram referred to was marked "Exhibit No. 1612" and is
included in the appendix on p. 11672.)
Mr. Nehemkis. Mr. Woods, you are an officer of The First Boston
Corporation?
Mr. Woods. I am.
Mr. Nehemkis. And what is your position ?
Mr. Woods. I am a vice president and director.
Mr. Nehemkis. And how long have you been a vice prpsident and
director of The First Boston Corporation?
Mr. Woods. Since May or June 1934.
Mr. Nehemkis. Since June 1934?
Mr. Woods. Approximately.
Mr. Nehemkis. I am going to read a telegram wliich vras just iden-
tified. Mr. Woods, dated March 23, 1935; and this was apparently
Avritten by your associate, Mr. George Ramsey, to you and you were at
that time at Los Angeles?
Mr. Woods. That is correct.
Mr. Nehemkis [reading from '"Exhibit No. 1612"] :
Have just flniished long harangue Stanley Russel who has been in contact
' Baur by tel and tel stop Ho presented Addinsell with same arguments he gave
u>; L. A. and while not so bolligerent certainly will put up strong argument for
position ahead Brown Harriman. Will surely contact Bauer by telephone today.
Subsequently Joe Ripley called up and came over and we gave him usual song
and dance referring him to Bauer but asked his impression of understanding
with Stanley vis a vis business formerly participated in but not headed by City
Co. Stanleys statement to Harry —
Meaning Harry Addinsell ?
Mr. Woods. Correct.
Mr. Nehemkis (reading further) :
Stanleys statement to Harry and me today exactly opposite Ripleys under-
standing. This for your information when feathers start to fly on Monday.
So ajjparently, Mr. Woods, if you have been listening to this testi-
mony, as I take it you have, there was an understanding between Joe
Ripley and Stanley Russell concerning business formerly participated
in but not headed by City Co., and tliat was your understanding, I take
it, as it was reported?
Mr. Woods. As you have pointed out, that is a telegram sent by my
associate, w^ho was then located in New York, to me, and I was in Los
Angeles. I personally have no knowledge of these conversations to
which Mr. Ramsey refers. I have checked our files, at your sugges-
tion, and I have discussed the matter with Mr. Addinsell, and I can't
find any facts about the thing. The inferences from that telegram I
would prefer not to comment on.
Mr. Nehemkis. That is all, Mr. Woods, unless the gentlemen of the
committee have some questions.
Mr. Henderson. Mr. Chairman, would it be proper for counsel,
taking these documents which are admitted, to make a summary state-
ment for the benefit of the committee? I confess I am a bit confused.
11504 CONCENTRATION OF ECONOMIC POWER
Acting Chairman Reece. It would seem so to me. Unless there is
objection on the part of the committee, we will be very glad to have you
do so at the appropriate time.
Mr. Nehemkis. As I understand the situation, very briefly, there
would appear to have been some agreement reached between Mr. Rus-
sell and Mr. Ripley concerning the respective participations of their
firms in the Pacific Gas & Electric Co. business. Such appears to be
the evidence that has been offered to date.
Tliere would appear to be two understandings from the evidence
offered today, a general understanding on the National City business,
and a specific understanding on P. G. & E. business, and from the
telegram just read to you, obtained from the files of The First Boston
Corporation, it would appear that Mr. Ripley's testimony given to
this committee yesterday is in conflict with the understanding of
one of the officers of The First Boston Corporation who had conver-
sations with both Mr. Ripley and Mr. Stanley Russell concerning their
agreement or understanding between each other, for as you will re-
call, Mr. Ramsey of The First Boston Corporation felt constrained
to advise his associate, Mr. Woods, who was then on the West Coast,
that he had been given conflicting versions of the Russell-Ripley
understanding, and was further constrained to advise Mr. Woods so
that he could govern his own actions accordingly. Such is my un-
derstanding of this relationship or agreement.
Mr. Henderson. In view of this restatement, Mr. Leib, do you
want to add to what you have already said ?
Mr. Leib. Yes; I think it is very frequently the case that wishful
thinking will make all of us, being human, take a casual conversation
and translate it into an understanding if it fits our interests to do
that. We have a little conversation with someone and the first thing
we know, we go away and get to thinking it is an undertsanding.
I notice these are all telegrams from other people. Was there a tele-
gram from me in which I quoted Mr. Russell? Possibly he didn't
use the word "understanding." Possibly he said, "I am going to
give it to them and they know I am giving it to them."
IVIr. Nehemkis. That is a possibility, but what do you recall as an
actuality?
Mr. Leib, I do not recall anything, it is 5 years ago ; but I don't
believe, if they said they had no understanding, that they had an
understanding, and unfortunately, the man who sent the telegram to
Mr. Woods is dead — Mr. Ramsey. We can't get him.
Mr. Heitoerson. That is the reason we do not call him ourselves,
of course.
Mr. Leib. I know, but I believe that there were more incidental
conversations in which we may have used the word "understanding"
and often it was not an understanding, it was not an agreement: It
was an inference.
Mr. Henderson. Let me ask you this: Taking this together with
the actual fact that many of the accounts did pass along these lines —
that is, National City Co.'s accounts — what do you think this com-
mittee is entitled to infer?
Mr. Leib. I think this committee is entitled to infer that business
follows personalities, and it would very naturally be a split if two
strong personalities went in opposite directions; they would each
CONCENTRATION OF ECONOMIC POWEIl 11505
claim their share in the business. I believe if men like Mr. Russell
and Mr. Ripley and those men said they had no ^understanding — and
that has always been my understanding of it — then I am certain in
my own mind there was no question of it, and I don't care what
thought a telegram carries, it is not so.
Mr. Henderson. A)id your feeling is just the same when it appears
in two telegrams
Mr. Nehemkis. Six telegrams.
Mr. Henderson. I am speaking of his own and others by Mr.
Ramsey.
Mr. Leib. Mr. Henderson, there is no difference in my opinion.
I have known those men too long to think they would say they had
no agreement if they had an agreement. I don't care how many
telegrams people sent, unless I saw the agreement between those
men
Mr. Henderson. And you don't care how many telegrams you sent
yourself which reflect that understanding?
Mr. Leib. Yes, I did; and I am sorry they carry an impression
which I am convinced is a false impression.
Mr. O'Connell. Was that your impression until you learned Mr.
Ripley had testified?
Mr. Leib. I didn't know Mr. Ripley had testified, but it had
always been my understanding that there was no agreement to split
the business, that the business would flow to the strongest personality
who handled the business and handled it successfully in the past.
That has always been my understanding.
Acting Chairman Reece. No further questions?
Mr. Nehemkis. Do you wish to continue?
Acting Chairman Reece. Are you through? I should say we
might continue for another 15 minutes if there is no objection.
Mr. Nehemkis. Mr. Woods, I think you are dismissed now.
Mr. Woods. Is that for the entire hearing?
Mr. Nehemkis. I am afraid I can't say that, Mr. Woods.
Mr. Leib, I am sorry to have kept you waiting so long. I had
inadvertently misplaced an exhibit I wanted. We have carried the
Pacific Gas & Electric financing up to about 1935, and as I recall
it, about that same time the Congress was interested in the enactment
of the Rayburn bill. Do you remember the situation at the time ?
Mr. Leib. My memory is that it was a little earlier than that, but I
guess it was '35 ; yes.
PLAN or fight on rayburn bill
Mr. Nehemkis. Now, Mr. Leib, did you have any particular interest
in that legislation?
Mr. Leib. We were against it.
Mr. Nehemkis. You were very much against it?
Mr. Leib. Very much ; yes ; we thought it was bad legislation.
Mr. Nehemkis. Now, Mr. Leib, I show you a telegram from you to
your assoicate, Mr. Bernard W. Ford, dated February 22, 1935. I ask
you to identify this photostat copy and tell me whether if is a true
and correct copy of an original in your possession.
Mr. Leib. It is.
21500 CONCKN'L'KA'nON (»l Kt ( (NO.MK ' I'oU'KIt
Mr. Neheaikis. The telcj^riuii idcntifit'u by tin- wifucss i? oifored in
evidence.
Actiiifi: Chairman Reece. If may be admitted.
(Tlie telegram i-eferred to was marked "Exliibit No. 1013" fiid is ir»-
<luded in the appendix on p. 11672.)
Mr. Nehemkt'^. I now )-e.id. if lh<^ .•'•i>iii;i(ii'e please, from the tele-
jrram :
Apropos our (-onversation ypsterdiiy Loriny; Hoovi'r iu Wa.shinston with Fo-
garty aud other utility executives in fight- on Rayburn bill.
Plan now is to li.'ive anothor lull introdueed which will bo moderate and jiroppi
and then Blyth \- Co. will iminetlinifly oritrfiv.ize doalins of counfry to apimjach
jtooplp to whom they have sold utility securities to wire their Senators and Rep
re.sentatives in favor this new bill. Believe we can put seventy-five thousand
telegrams in WashingtoU within twenty days by this method. Sullivan ("rom
well
Wlio are Sidlivan & CrontueU?
Mr. Leib. Sullivan & Cromwell are attorneys, a firm of attorneys in
New York City.
Mr. Nehemkis [reading further from "Exhibit No. Ifii3"] :
Sullivan Cromwell preparing >.>\m- data, letters to dealers, etc., now and we
going to it tooth and nail.
Utilities have been our best friends and it certainly i-: rime for us to give
them complete support.
Confidentially, tried organize IBA
What do those initials represent?
Mr. Leib. Investment Bankers Association.
Mr. Nehemkis (reading furtlier) :
Confidentially tried organize^ IBA but encountered usual vacillation, inertia and
timidity, so we are going it alone. Best always.
(i»'.0R(iK Leib.
[Laughter.]
Mr. Leib. That is correct.
Mr. Nehemkis. Mr. Chairman, you were good enou^^li to allow
me 15 minutes. 1 think, if it is the pleaMire of the comnuttee, unles.s
you have any further questions, we might adjourn at tiiis time.
Acting Chairman Reece. If there are no questions to be asked, the
committee will stand in recess until 2 o'clock.
(Wliereupon. at 12: 12 p. m., a recess, was taken mitil 2 p. m. oi the
same day.)
AFTERNOON SESSION
(The committee resumed at 2:10 p, ni. on the expiration of the
recess.)
Acting Chairman Reece. The committee will come to order, please.
Are you j-eady to proceed, Mr. Nehemkis ?
Mr. Nehemkis. Mr. George Leib recalled, })lease.
TESTIMONY OF GEORGE C. LEIB. VICE PRESIDENT AND DIRECTOR,
BLYTH & CO., INC., NEW YORK, N. Y.— Resumed
Mr. Nehemkis. Mr. Leib, I believe you said l>efore leaving the
stand that you wanted to make some exphuuition in regard to the
last exhibit that was oflfered.
Mr. Leib. Well, I wanted to-
(CONCENTRATION UK ECONOMIC POWER 11507
Mr. Xehemkis. I was just goiiiir to say. Mr. Leib, that if that, is
your desire, T wish you would do so, but I wonder if I might rot
continue witli your direct examination and then, when we h-wc con-
cluded, you may niakc any statement you may wish.
Mr. T>r,m. I thinlc that Avould be a better procedure.
(Urr^TTON (iF PKKMANENCK OF 'I'HK r. <J. & E. CNDERWRITING <;H')irr
Mr. Nehemkis. You \vill j-ecall, Mr. Leib. tiiat you identified for
me a telegram dated February 21, 1935, which you had occasion to
send to your partner, Mr. Charles R. Blyth. and that telegram has
been offered in evidence. I would just like to read it and then ask
you a few questions [reading from "Exhibit No. 1611-3"] :
Hock suggested possibility joint account which you and Roy accepted. Russell
accepted this in its entirety as far as he was concerned, and Elsey was favorable.
Now ufler two days silence Russell comes back and suggests we take third
position.
Whole thing simijJy doc'S not make sense and is insulting to our intelligence
Mnd standing as a firm.
Have (old all this to Jim Black and told him we simply cannot understand
picture. He is equally niystitied. I have explained to him importance this
syndicate to company because unquestioiifibly this is way syndicate will stand for
years to come.
At this point, may I remind the committee that late yesterday
afternoon we had testimony on a similar subject, and the witnesses
who were A\ith us then indicated that syndicates do no* stand for
all eternity, but fluctuate from time to time.
Continuing with this telegram, Mr. Leib, you went on to say [read-
ing further] :
This is most important piece negotiation Blyth has had in years. If we miss
making gan^e on this hand with all honors we hold then there is something wrong
with us.
If I understand correctly the situation, Mr. Leib, the banking firms
which, would be invited to join the syndicate by Blyth, assuming it
obtained the leadership, would thereafter retain a vested right to
their interest in the business?
Mr. Leib. You might gather that from that wire, but that would
be an error. The best proof of the pudding is the eating and to show
how wrong I was in my deduction that it would stand for years is
the syndicate itself. It didn't stand for a year. It was changed
around, greatly amplified and changed.
Mr. Nehemkis. "V^Hio ultimately obtained the leadership of the first
piece of financing?
Mr. Leib. Lazard Freres.
Mr. Nehejikis. And in the second piece of financing who obtained
the leadership?
Mr. Leib. As I remember it, it was Lazard Freres for the first three
pieces of financing or the first two.
Mr. Nehemkis. The first two?
Mr. Leib. Y''es.
jNIr. Nehemkis. Then, for the third piece who had the leadership ?
Mr. Leib. Blyth & Co.
Mr. Nehemkis. And thereafter?
Mr. Leib. Blyth & Co.
11508 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. Now, if the situation continues to exist, it is under-
stood, is it not, as a result of bankers' courtesy, that this piece of
business, namely the P. G. & E. financing, will hereafter be done
under the leadership of Blyth & Co.?
Mr. Leib. Only so long as Blyth & Co. does the business success-
fully, economically, and to the complete satisfaction of the directors
of the Pacific Gas & Electric Co.
Mr. Nehemkis. And assuming that that condition is always satis-
fied, it will be understod in the banking community that the leader-
ship of the P. G. & E. business is Blyth & Co.'s?
Mr. Leib. I don't say it would be understood in the banking world
because the banking world has nothing to do with it, but the people
who have anything to do with it are the directors of the Pacific Gas &
Electric Co. They make the first, last, and every decision.
Mr. Nehemkis. Did you have any other meaning than that which
I am inferring, in the statement [reading from "Exhibit No. 1611-
3"]:
Because unquestionably this is the way the syndicate will stand for years to
come,
and
this is the most important piece of negotiation Blyth has had in years?
Mr. Leib. I thought that the financing, if it was headed by Lazard
Freres, would be satisfactory to the company, that they would do
the business successfully, and that it would stand that way because
the company would want it to stand. That is what I evideiitly meant
by the telegram.
Mr. Nehemkis. And then you further said in the telegram, [read-
ing from "Exhibit No. 1611-3"] :
If we miss making game on this hand with all honors we hold then there
is something wrong with us.
What were the honors which Blyth held ?
Mr. Leib. Well, we had been in Pacific Gas & Electric business for
years. We had headed two pieces of business in 1929 and 1930. We
had been up toward the top in the former financing. We had a
national organization. We knew the directors of the company verj'^
well and we knew that they held a very high opinion of Blyth and
Co. We knew the business of Pacific Gas & Electric, the financial
business, from top to bottom. We had been joint-account managers
of the financing of the San Joaquin Light & Power Co., one of the
most important parts of Pacific Gas. We had financed and headed
the business of the Western States, which was one of the companies.
We had sold the first preferred stock that was sold publicly by an
investment banking house. We had been connected with that busi-
ness for fourteen years, intimately connected with it. Those were
the trump cards that we felt we had.
Mr. Nehemkis. Didn't you have some other trumps ? For example,
Mr. Fogarty, of North American ?
Mr. Leib. We certainly tried to make him a trump but he turned
out not to be a trump for us.
Mr. Nehemkis. Didn't you have another trump in the personage
of James Black of the North American Co. ?
Mr. Leib. Off suit, no tnnnp.
CONCENTRATION OF ECONOMIC POWER 11509
Mr. Nehemkis. Harrison Williams, of North American?
Mr. Leib. Same thing.
Mr. Nehemkis. And C. O. G. Miller?
Mr. Leib. We had only one trump, and that was Mr. Hocken-
beamer.
Mr. Nehemkis. And Frank Anderson?
Mr. Leib. We tried.
Mr. Nehemkis. And Elsey, of the American Trust ?
Mr. Leib. We tried.
Mr. Nehemkis. And Guy C. Earl, of P. G. & E. ?
Mr. Leib, We tried.
Mr. Nehemkis. And Allen L. Chickering ?
Mr. Leib. Same answer.
Mr. Nehemkis. Who was Hock's friend in court ?
Mr. Leib. Stanley Russell.
Mr. Nehemkis. And who, in turn, was Stanley Russell's friend
in court?
Mr. Leib. Mr. Hockenbeamer.
Mr. Nehemkis. Mr. Leib, I have here a number of documents
obtained from the files of your company. If you will just glance
at them quickly and tell me if you think they are correct copies, I
should like to offer them in evidence.
Mr. Leib. I identify them.
Mr. Nehemkis. The documents which have been identified by the
witness are offered in evidence.
Acting Chairman Reece. They may be admittea.
(The documents referred to were marked "Exhibits Nos. 1614—1
to 1614-26" and are included in the appendix on pp. 11672-11686.)
Mr. Nehemkis. Mr. Leib, I assume your firm made available to
us all your correspondence in connection with the P. G. & E under-
writing pursuant to our request?
Mr. Leib. I think so.
Mr. Nehemkis. Now, during all of this period of negotiations, I
have been impressed by the fact that at no^ time has any reference
been made in the documentation which you have made available to
us, either by you or your associates, as to whether or not this piece
of financing, its terms or price, was to the best interests of the
P. G. & E. stockholders or prospective investors. Weren't you con-
cerned with this aspect of the problem at all ?
Mr. Leib. We were concerned but we really didn't have to be con-
cerned with Mr. Hockenbeamer at tlie head of the company. He
took care of that.
Mr. Nehemkis. Is it not a part of the dutj' and obligation of a
banker to concern himself with those problems?
Mr. Leib. Absolutely.
Mr. Nehemkis. I don't understand your answer.
Mr. Leib. Absolutely!
Mr. Nehemkis. It is part of his duty?
Mr. Leib. Yes; absolutely.
Mr. Nehemkis. But in this particular instance you had such im-
plicit confidence in Mr. Hockenbeamer that you felt his judgment
was satisfactory and that you didn't have to give it any additional
thought.
2] 510 (X>NC'ENTKA'riOiN' OF ECONOMIC HOWKK
Mr. Leib. No ; I would not say that. We didn't come to the point
of negotiating for the price of these bonds to the public and for the
spread yet. That didn't come up, that is one of the last things that
comes up.
Acting Chairman Reece. This last group of exhibits which were
introduced, do you wish to have introduced as a group or indi-
vidually ?
Mr. Nehemkis. Whichever is convenient for the reporter, as long
as they are printed.
Acting Chairman Reece. They will go in, then, as a group.
Mr. Nehemkis. In this connection, Mr, Leib, will you tell me pre-
cisely what judgments the investment banker exercises when his aid
is sought? Does he look for new construction or for the economic
value of the construction, or for the strategic position of the enter-
prise which he is asked to finance, or for its real productivity, or as
it would appear in the case we have been discussing, merely for thi-
probability that the bonds can be sold?
Mr. Leib. Well, I would say that he looks at all of those. He
naturally looks first at security because he is thinking of the security
of his client's money, and then he looks at the worth, the purpose of
the issue, to see that it is a worthy purpose and a proper purpose,
and then along the line he begins to thing about salability, because
there is not much use of thinking of tlie other things if it can't be
sold, and then he considers the other factors which you have brought
out, Mr. Nehemkis.
Mr. Nehemkis. He does, then, give consideration to these other
factors?
Mr. Leib. Yes.
Mr. Nehemkis. I have no furthei- (juestions of Mr. Leib. Is it the
committee's pleasure to hear Mr. Leib on the statement he wished to
make?
Acting Chairman Reece. Yes; we will be glad to hear you.
Mr. Leib, The principal statement I wanted to make was that T
made an inadvertent misstatement this morning.' Mr. James Black
was a director in 1935 of the Pacific Gas & Electric Co. That was
asked me this morning and I had forgotten. I do remember now
that he was a director and that is one of the reasons I went after
that quite vigorously. That is the only statement I have to make.
Acting Chairm.an Reece. Are there any questions by the members
of the committee?
If not, you may be excused.
(The witness, ^Ir. George C, Leib, was excused,)
Mr. AviLDSEN. I understand that Mr. Stanley Russell would like
to clarify some of the matters that were brought into the testimony
here today.
Acting Chairman Reece. If there is no objection by the committee.
Mr. Nehemkis. I understood that Mr. Russell desired to make a
statement to the committee.
Acting Chairman Reece. The committee will be glad to hear you.
' Supra, pp. 11496 uud 11499.
CONCENTRATION OF ECONOMIC POWER 11511
TESTIMONY OF STANLEY A. RUSSELL, LAZARD FRERES & CO., NEW
YORK, N. Y.— Resumed
DENIAL, BY MR. RUSSELL OF AGREEMENT BETWEEN HIMSELF AND MR. RIPLET
Mr. Russell. I want to endeavor to clear up what appears to be a
misunderstanding with reference to this question of an understanding
between mj'self and Mr. Ripley. 'I was asked, I believe, one question
this morning to the effect, Was it a fact that I had an agreement
with Mr, Ripley with respect to the participation or division between
us of old City Co. business. My answer was it was not a fact. I
cojifirm that answer. I had no understanding with Mr. Ripley with
respect to old City Co. business, and the records as regards division
of the business or business that Brown Harriman Co. subsequently
offered us proves that case, if you will look into the record.
As regards the Pacific Gas & Electric matters, you must realize
that I Avent to San Francisco to call on Mr. Hockenbeamer not
knowing there was any business in the offing. My play with Mr.
Hockenbeamer was to the effect that this was in essence the same
old account that had handled his business for 15 years. That old
account was the National City Co., Blyth & Co., and others, and in
presenting my case to Mr. Hockenbeamer I included Brown Harri-
man and Blyth. I tied Brown Harriman with ourselves because
that supported my contention that this was in essense the same old
account that had handled the business. Now, as regards Mr. Ripley,
I can only surmise.
My guess is that what happened was that prior to my leaving for
the coast I probably saw Mr. Ripley at lunch or at some meeting and
said I was going to the coast, and he said, probably, "Well, are you
going to get a P. G. & E. deal ?", I said. "I don't know."
"Well, don't forget us."
"Well, I certainly won't, and I would expect that you should be
with us in the business."
If there was any agreement of any kind or character, that is proba-
bly the essence of any conversation that happened between us. There
was no agreement of any general character. My whole case with
Mr. Hockenbeamer was to tie Brown Harriman in as close as possible
to give him a picture of the old account. That is as far- as I can recall
the sum and substance of any agreement or possible understanding
that may have existed between us. It had no general implication,
whatever it might have been. I just wanted to try to clear that up.
Acting Chairman Reece. Do the members of the committee have
any questions?
Thank you Mr. Russell.
(The witness, Mr. Stanley A. Russell, was excused.)
Mr. Nehemkis. Mr. Chairman, may it please the committee, I should
like to call the next witness, Mr. George D. Woods.
TESTIMONY OF GEORGE D. WOODS, VICE PRESIDENT AND
DIRECTOR, THE FIRST BOSTON CORPORATION, NEW YORK, N. Y.—
Resumed
Mr. Nehemkis. May I have an off-the-record discussion with the
witness for a moment?
(Consultation with the witness.)
124491 — 40 — ^pt. 22 11
11512 CX)NCENTRATION OF ECONOMIC POWER
ORGANIZATION ANP PREDECESSORS OF THE FIRST BOSTON a)RPORATION
Mr, Nehemkis. Mr. Woods, The First Boston Corporation is the
successor to the goodwill of the Chase Harris Forbes Corporation.
Is that correct ?
Mr. Woods. That is correct.
Mr. Nehemkis, And it was organized in 1932 as a consolidation of
Chase Securities Corporation and Harris Forbes & Co. and the First
National Old Colony Corporation?
Mr, Woods. No; that is not correct. At the 1932 date the Chase
Securities did not enter into the situation. It (The First Boston
Corporation) was organized in 1932 for the purpose of takinj? over
the assets and pereonnel of what was known as the First National
Old Colony Corporation, which was the investment affiliate of The
First National Bank of Boston,
Mr. Nehemkis. What two commercial banks were the predecessor
organizations of The First Boston Corporation ?
Mr. Woods. Well, if I understand your question correctly, the an-
swer is that the First National Bank of Boston had a security affiliate
which was known as The First of Boston Corporation, and the Old
Colony Trust Co. also domiciled in Boston had a securities affiliate
which was known as the Old Colony Corporation. The First National
Bank of Boston acquired the capital stock of the Old Colony Trust
Co., and coincidentally or at about that time the business formerly
conducted by The First of Boston Corporation and the Old Colony
Corporation were combined under the title, the First Old Colony
Corporation.
Mr. Nehemkis. In order to comply with the Banking Act of 1933,
as I understand it, the First National Bank of Boston offered its
shareholders an opportunity to acquire about 45 percent of the stock
of The First Boston Corporation?
Mr. Woods. That is correct.
Mr. Nehemkis. And the balance of the stock was offered to inves-
tors who had no interest in the bank ?
Mr. Woods. That is correct.
Mr. Nehemkis. Mr. John R. Macomber, formerly chairman of the
board of the Hai-ris, Forbes organization, Mr. Harry M. Addinsell,
formerly vice president of the Harris, Forbes organization, and others
of their associates had expressed a willingness at this time to become
associated with the management of The First Boston Corporaticm and
acquire some of its stock?
Mr. Woods. That is correct.
Mr. Nehemkis. As I further understand ttie transactions, approxi-
mately 45 percent of the stock was also offered to the stockholders of
The Chase Corporation, the stockholders of which were identical with
those of the Chase National Bank of the city of New York?
Mr. Woods. Correct.
Mr. Nehemkis. Can you tell me rather briefly, Mr. Woods, about
the rights to subscribe to the new stock, how much was offered, what
value the sluire was. just very briefly?
Mr. Woods. Five hundred thousand shares of the slock of our firm,
which at tliat point became known as Tlie First Boston Corporation,
were offered ai)p!-oxiniately 4.") ])ercent to tlie stockholders of the First
National Bank of B()ston and approximately 45 percent to the stock-
holders of the Chase Coi-poration, as you pointed out.
CONCENTRATION OF ECONOMIC POWER 11513
OFTER OF STOCK TO EMPLOYEES AND OFFICERS
Mr. Woods. The remainder of the stock was offered coincidentally
to those officers and employees of The First Boston Corporation who
evidenced desire to buy it, and some portion of the remainder was
offered and subsequently purchased by people who were neither offi-
cers of the corporation nor stockholders of either bank. Those people
presumably were desirous of making an investment in which they
had confidence.
The stock was offered at $18 a share, which obviously brings it to a
total of $9,000,000, and The First Boston Corporation started off
business on June 16, with a capital of $9,000,000. There were no com-
missions paid and the entire amount paid by the stockholders for the
stock was paid into the corporation.
Mr. Nehemkis. Mr. Woods, if I may interrupt at this point, the
series of transactions which you have described by which the prede-
cessor organizations of The First Boston Corporation were merged
into the new corporation is somewhat different from the testimony
which we have heard heretofore on the dissolution of the National
City Co.^ As I understand it, the banks felt that the stockholders
should have an opportunity to acquire an interest in the new organi-
zation which was being set up to conform to the requirements of the
Banking Act of 1933. Is that substantially correct?
Mr. Wood. That is substantially correct. The management of
each of the banks felt that to the extent that the banks, and there-
fore their stockholders, had made an investment over the years in
educating a group of people in the security business and underwriting
l)usiness, that those stockholders who had whatever value it was to
such an organization should have the first opportunity to participate
in it.
Mr, Nehemkis. And in this connection, it was recognized that the
lecords and the correspondence and the other documents relating to
the general securities issues of these predecessor organizations, to-
gether with the correspondence with former customers, would be
purchased and acquired by the new organization. And that, I take it,
was also part of the agreement?
Mr. Woods. With respect to the records and papers that you re-
ferred to of The First Boston Corporation, they had always been the
property of The First Boston Corporation; there was no change in
that, the bank in Boston merely sold its stock.
With respect to the files and records of the Harris, Forbes Co., or
the Chase Harris Forbes Co., there was an agreement, the effect of
which was that The First Boston Corporation and the Chase Cor-
poration both had access to all the files of the Chase Harris Forbes
Co., and to the Chase Harris Forbes group.
Mr. Nehemkis. Mr. Woods, I show you a letter addressed to coun-
sel, from Nevil Ford, vice president of The First Boston Corporation.
Can you tell me whether you are familiar with this letter and recog-
nize it as being one from your organization ?
. Mr. Woods. I recognize it as being one from our organization.
'Testimony of W. Avertll Hurrliuan and Joseph P. Riple.v, supra, pp. 11384-11426.
11514 CX)NCENTRATION OF ECONOMIC POWER
Mr. Neitemkis. I merely wish to offer it for the record. I don't
intend to examine you on the contents.
I offer tlie letter identified by the witness in evidence.
Acting Chairman Reece. It may be admitted.
(The letter referred to was marked "Exhibit No. 1615" and is in-
cluded in the appendix on p. 11686.)
Mr. Nehemkis. Mr. Woods, have you ever seen the printed letter
(hat Winthrop W. Aldricli, then chairman of the board of the Chase
Corporation, submitted to the stockholders on May 11, 1934?
Mr. Woods. I have.
Mr. Nehemkis. Is this a true and correct copy of that letter?
Mr. Woods. I recognize it and identify it.
Mr. Nehemkis. The letter is offered in evidence.
Acting Chairman Reece. It may be admitted.
(The letter referred to was marked "Exhibit No. 161 6*' and is
included in the appendix on p. 11687.)
Mr. Nehemkis. Have you ever had occasion to see the letter sub-
mitted by Daniel G. Wing, chairman of the board of the First Na-
tional Bank of Boston, to the stockholders of the First National
Bank of Boston and the Chase Corporation in connection with the
dissolution of the security affiliate?
Mr. Woods. I have, and I recognize this and so identify it.
Mr. Nehemkis. The letter is offered.
(The letter referred to was marked "Exhibit No. 1617" and is in-
cluded in the appendix on p. 11690.)
Mr. Nehemkis. Will you tell me, INIr. Woods, whether this is a
true and correct copy of an original letter in your files, written by
Allan M. Pope, to Mr. George W. Bovenizer, of Kuhn, Loeb & Co. ?
Mr. Woods. Yes. I recognize that letter.
Mr. Nehemkis. Before ^offering this, Mr. Chairman, may I read
two paragraphs from this letter written by Allan M. Pope to George
W. Bovenizer of Kuhn, Loeb? This letter is dated May 16, 1934
[reading from "Exhibit No. 1618"] :
We hope that .is the capital market may open up we may have considerably
more new issues than The First Boston Corporation formerly had. Mr. John R.
Macomber, as Chairman of our Board, and Mr. Harry M. Addinsell, as Chair-
nan of our Executive Committee, with five other officers who served with them
In Harris, Forbes & Co. for many years, will devote a larjre measure of their
time to such desirable new underwriting as may develop. We will have control
of the name of Harris, Forbes & Co. and succeed to the goodwill of that
orglanization.
The personnel of The First of Boston Corporation will continue intact under
the "slightly altered name of The First Boston Corporation and in the same
locations. Under this new title we hope to continue 1o make ourselves u.seful
to you and your associates and to continue what always has been to us a very
pleasant relationship.
That is offered.
(The letter referred to was marked "Exhibit No. 1618" and is m-
cluded in the appendix on p. 11695.)
acquisition by the first bostox corpor.^tiox of "preferential
rights" of the chase HARRIS FORBES COMPANIES
Mr. Nehemkis. I show you a copy of a letter signed by H. M.
Addinsell, chairman of the executive committee, addressed to Kuhn,
CONCENTKATION OF ECONOMIC i'OWKll 11515
Loeb & Co., dated July 2, 1934, and ask you to tell me whether this
is a true and correct copy of an original in your possession.
Mr. Woods. I recognize it.
Mr. Nehemkis. May I read from this letter, which is dated Julv
2, 1934 [reading from "Exhibit No. 1619"] :
In view of the past relationships between your firm and Harris, Forbes &
Company and subsequently Chase Harris Forbes Corporation, I am sure you
will be interested to know that The First Boston Coi-poi-ation has exercised Its
option to acquire the good will of the securities business of the Chase Harris
Forbes companies (other than as pertaining to certain governmental and mimic-
ipal financing) including preferential rights and the right to the name "Harris
Forbes."
Mr. Woods, would you enlighten me on the meaning of the phrase
"'including preferential rights"?
Mr. Woods. Well, '"preferential rights" obviously means somebody
by agreement has a right in preference to somebody else's right.
Mr. Nehemkis. And the implication here is that Harris, Forbes
had in the past entered into certain arrangements with companies
which involved preferential rights as to future financing, and that
the new organization had inherited those rights and would be in a
position to exercise them. Is that about what it comes to ?
Mr. Woods. Well, I think the first part of your statement I wholly
agree with. The second part of your statement I must comment on.
I don't believe that our new organization expected that we were
going to be able to exercise those preferential rights without the full
knowledge and consent of the people with whom the agreements had
been readied by Harris, Forbes & Co. or Chase Harris Forbes Cor-
poration.
We have never of elt, in point of fact, that those preferential rights,
so-called, which, parenthetically, are of questionable value and have
been since the latter part of 1935, could be transferred excepting
with the express consent of the people with respect to whose financ-
ing they were effective, and no effort was made to get such express
consent at the time. Since then, I might say for the information of
the committee, those preferential rights insofar as they exist have
been waived from time to time upon the request of the companies.
Mr. Nehemkis. AVliat would you say was the purpose of Mr.
Addinsell at this time, July of 1934, when the new organization was
being set up, in informing Kuhn, Loeb that these preferential rights
were also to be considered as part of the business relationship, shall
I say, of The First Boston Corporation?
Mr. Woods. Well, I wouldn't hazard a guess on that, Mr.
Nehemkis.
Mr. Nehemkis. At least, it wcnild appear, would it not, Mr, Woods,
that one of the factors that Mr. Addinsell was anxious to communi-
cate to Kuhn, Loeb & Co. was the existence of certain preferential
rights ; as to whether or not they could be exercised in the future or
what validity they might have, that is something else.
Mr. Woods. No ; I would think perhaps — I will make a guess — that
he was more probably trying to convey to the people at Kuhn, Loeb
& Co. that those of us who had grown up in the Harris, Forbes organ-
ization and were now with The First Boston Corporation were going
to do our level best to continue to carry on the business discussions
with the former clients of Harris, Forbes & Co.
11516 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. May I read another paragraph of this letter?
[reading from "Exhibit No. 1619"] :
We expect to be active in. the underwriting and distribution of new issues of
high grade bonds. In so far as Harris, Forbes & Company or Chase Harris
Forbes Corporation participated in underwritings and offerings headed by your-
selves, we will accordingly be pleased if you will substitute our name In your
syndicate records in order that we may have the opportunity of considering
future participations in such accounts.
I take it, Mr. Woods, that what Mr. Addinsell was here conveying
was that the old relationship between the two firms would continue
and he just wanted the synjiicate manager to note that there was a
new organization. The First Boston Corporation, and to make the
appropriate substitution on the KXi records ?
Mr. Woods. That is correct.
Mr. Nehemkis. I offer the letter in evidence, Mr. Chairman,
Acting Chairman Reece. It may be received.
(The letter referred to was marked "Exhibit No. 1619" and is in-
cluded in the appendix on p. 11695.)
Mr. Nehemkis. Mr. Woods has been good enough to have pre-
pared a statement regarding the organization of The First Boston
Corporation, which he has submitted to me and which I have read.
In his behalf I should like to offer it in evidence so it becomes a part
of the permanent record.
Acting Chairman Reece. It may be received.
(The statement referred to was marked "Exhibit No. 1620" and is
included in the appendix on p. 11696.)
EXECUTIVE PERSONNEL AND STOCKHOLDERS OF THE FIRST BOSTON
CORPORATION
Mr. Nehemkis. As I understand it, the executive personnel of The
First Boston Corporation is comprised almost entirely of individuals
previously associated with the former security affiliates of the Chase
National Bank of the City of New York and the First National Bank
of Boston.
Mr. Woods. That is correyct.
Mr. Nehemkis. I show you a letter from A. E. Burns, Assistant
Secretary of The First Boston Corporation, addressed to counsel,
dated April 13, 1939, and ask you to tell me whether you recognize
this as coming from your firm ?
Mr. Woods. I so recognize it.
Mr. Nehemkis. Perhaps you may want to refer to that i Will you
tell me who the principal officers and directors of The First Boston
Corporation are?
Mr. Woods. Well, the three principal officers and directors are
Messrs. Macomber, Pope, and Addinsell. In addition to that, the
following gentlemen are vice presidents and directors: James Cog-
geshall, Jr., Eugene I. Cowell, Nevil Ford, Duncan R. Linsley, John
C. Montgomery, William H. Potter, Jr., Arthur C. Turner, George D.
Woods. The board, in addition to the people I have just named,
includes Messrs. Hambuechen and Orr, neither of whom are officers
or regularly in the employ of the corporation. There are numerous
CONCENTRATION OF ECONOMIC POWER 11517
other vice presidents. There is a treasurer and a secretary and a
comptroller.
Mr. Nehemkis. I offer it in evidence.
Acting Chairman Reece. It may be admitted.
(The letter referred to was marked "Exhibit No. 1621" and is in-
v:'luded in the appendix on p. 11699.)
Mr. Nehemkis. How many stockholders are there of The First
Boston Corporntion, Mr. "Woods?
Mr. Woods. As of July 14, 1939, at which date a record was taken
for purposes of distribution of a dividend, there were 9,940 stock-
holders, with 500,000 shares of stock. I would like to add, that repre-
sents an average holding of just over 60 shares.
Mr. Nehemkis. Now, can you tell me as of June 17, 1939, the names
of the 10 largest stockholders of The First Boston Corporation ? Do
you have that information? Let's do two things at one time. I
show you a stockholders' list furnished us by your company and ask
you to tell me if this is the copy which was submitted?
Mr. Woods. It is.
yir. Nehemkis. "Wliy don't you use that for your own convenience
and give me tlie names of the 10 largest stockholders?
Mr. Woods. As of June 17, 1939, the 10 largest stockholders were
Stone & Webster, Inc.
Mr. Nehemkis. The number of shares as you go along.
Mr. Woods. Holding 18,480 shares, which I might say is less than
4 percent of the total, and they are the largest stockholder.
Harry M. Addinsell, holding 11,500 shares. Mr. Addinsell is
chairman of the executive committee and active in the management.
F. S. Moseley & Co., 11,430 shares.
Skelton & Co., 9,748 shares. Parenthetically I might say that it is
my belief that Skelton & Co. is the nominee for a bank in Boston
and that stock is held for a number of smaller stockholders.
John R. Macomber. who is chairman of the board of The First
Boston Corporation, owns 7,500 shares.
J. W. Hambuechen, who is one of our directois, owns 7,228 shares.
Albert H. Wiggin owns 7,176 shares.
Chase, Henderson & Tenant have 5,930 shares, registered in their
name. I might say that that is a London brokerage concern, and
my understanding is they hold it for numerous people in London.
Nevil Ford, who is a vice president and director of our firm, owns
4,400 shares.
Bertram M. Wilde owns, 4,000 shares.
Apparently those are the 10 largest stockholders.
Mr. Nehemkis. Did you give me the name of Cudd & Co.?
Mr. Woods. Cudd & Co. is the eleventh largest stockholder, and
owns 3,911 shares.
Mr. Nehemkis. Is that a nominee?
Mr. Woods. I believe Cudd & Co. is nominee for the Chase Na-
tional Bank personal trust department.
Mr. Nehemkis. Not the nominee for Albert H. Wiggin?
Mr. Woods. I have no kiK)wledge of that.
Mr. Nehemkis. Mr. Chairman, I should like to offer a list of the
Iiolders of 500 shares and over of The First Boston Corporation as
11518 CONCENTRATION OF ECONOMIC POWER
of record at the close of business June 17, 1939, identified by the w it-
ness now in the chair.
Acting Chairman Reece. It may be admitted.
(The list referred to was marked "Exhibit No. 1622" and is in-
cluded in the ajDpendix on p. 11700.)
Mr. Nehemkis. Of your stockholders, some have investment bank-
ing connections, do they not?
Mr. Woods. That is correct.
Mr. Nehemkis. Stone & Webster, Inc., which holds 18,000 shares,
has investment banking connections, has it not, through Stone &
Webster and Blodget?
Mr. Woods. I believe the latter is the wholly owned subsidiary
of the former.
Mr. Nehemkis. Of Stone & Webster, Inc.? Now, F. S. Moseley
holds 11,000 shares. What kind of business is conducted by that
company, do you know?
Mr. Woods. Investment banking business, general security busi-
ness. I believe they are members of the New York Stock Exchange.
Mr. Nehemkis. And I note that Jackson & Curtis owns some 3,000
shares. Do you happen to know the kind of business that company
is in?
Mr. Woods. Quite similar to that of Moseley & Co.
Mr. Nehemkis. And Lee Higginson Corporation owns 2,000 shares.
Mr. Woods. They also are in the investment banking business.
Mr. Nehemkis. And Ernest E, Quantrell is the holder of 2,000
shares. Do you happen to know whether Mr. Quantrell is asso-
ciated with an investment banking house?
Mr. Woods. Not to my knowledge. Mr. Quantrell, as far as I
know, has had no business association for several years past.
Mr. Nehemkis. I note that Brown Brothers Harriman have some
stock, 1,881 shares. Is that correct?
Mr. Woods. I didn't know that. If their name is on the list, it is
undoubtedly correct.
Mr. Nehemkis. I am reading from a list that has been prepared
from your other list. Tucker, Anthony & Co.
Mr. Woods (interposing). Brown Brothers Harriman, to go back
to them for a moment, are the private banking firm as distinguished
from the investment banking.
Mr. Nehemkis. That is correct, concerning whom we had testimony
yesterday.
Now, Tucker, Anthony & Co. I note has 1,300 shares. What is the
business of that house?
Mr. Woods. Similar to Moseley.
Mr. Nehemkis. Investment banking, general securities business!
Mr. Woods. That is right.
Mr. Nehemkis. And Ladenburg, Thalmann & Co. I note have 800
shares. Are they in the investment banking business too ?
Mr. Woods. Right.
Mr. Nehemkis. And J. Henry Schroder & Co. have some 600
shares. What is the nature of their business?
Mr. Woods. Investment banking business.
Mr. Nehemkis. And I note that White, Weld & Co. have 590
shares. White, Weld & Co. is likewise in the investment banking
business ?
CONCENTRATION OF ECONOJVllC POWEll 11519
Mr. Woods. That is true. I am very much flattered to find all these
banking firms have our stock.
Mr. Nehemkis. There is nothing like enlightening one's witness
about his own business.
Mr. Woods. I am inclined to think that to some extent in view of
the fact this list that was given to you was prepared at a dividend
record date, that these shares that are of record in these names may
be held to a greater or lesser extent for the account of customers and
others.
Mr. Nehemkis. If you would like to make a correction on the
material submitted, I would be very grateful.
Mr. Woods. I merely submitted a list of the registeied stockholders,
but I sense the implication that all of tliese people may own the
stock for their own account, and they may so own it, but there is
ft ^'^lestion in my mind as to whether some of them, such as Jackson &
Curtis, Tucker, Anthony & Co., Ladenburg Thalmann & Co., are not
holding it for the account of others. Moseley, I might say, was
among our original stockholders and bought the stock with the
avowed intention of holding it for investment purposes.
Mr. Nehemkis. I wa:s merely suggesting, Mr. Woods, if there is any
question in your mind about it, if you will send me a note about it,
I will be very glad to offer it for the record.^ If there is any cor-
rection to be made concerning statements 3'ou or I have made in the
past few moments, we will rectify them together.
Mr. Woods. Thank you very much.
INVESTMENT BANKING BY A PUBLIC CORPORATION
Mr. Nehemkis. As I understand it. The First Boston Corporation
is actually a public corporation in that it has stockholders who are
widely dispersed. Its balance sheets and financial condition are
matters of public record. Is that so ?
Mr. Woods. That is correct.
Mr. Nehemkis. Do you know of any other investment banking
houses among the major firms in the business which occup}' a similar
position to The First Boston Corporation?
Mr. Woods. Harris, Hall & Co., Chicago, are a publicly owned con-
cern. Blair & Co., New York, similarly are publicly owned. Those
are the only two that occur to me at the moment.
Mr. Nehemkis. Yesterday Mr. Ripley, who was testifying, was
asked a question :
How did it happen that you suggested the voting trust arrangement?
I don't think you were here, but it was in connection with the vot-
ing trust of Brown Brothers Harriman and Harriman Ripley.
How did it happen that you suggested the voting trust arrangement? You
must recall, if perhaps you can, wliat the discussions were at the time. What
prompted you to suggest that special type of instrument?
Mr. Ripley. For nine years, sir, I worked for the National City Company,
whose stock was traded on the public markets. It went up one day and it
went down another day. I observed the effect of that situation on an invest-
ment banking organization. I observed that some members of the staff were
^ Mr. Woods, under date of February 24, ]940, offered further clarificntion of this phase
of his testimony. It is included in the appendix on p. nS27.
11520 CONCENTRATION OF ECONOMIC POWER
watching the market for the stock of the company rather than tending to their
business. I vowed that if I could holp it, I would never wish to work for an
investment banking organization whose stock was spread all around and for
which there were public markets.
Now I am skipping some of the testimony of Mr. Ripley.
Now, feeling as I did that I had this obligation to my staff and to myself,
I made up my mind that I was going to try to do something to prevent getting
my.self back into the po.sition where the stock of this company was scread
around in various hands and the future w;\s distinctly uncertain.
Would you care to comment on that statement as it affects your
situation?
Mr. Woods. I have nothing to say other than I and my principal
associates are entirely happy witli our present situation.
Mr. Nehemkis. Do you think Mr. Ripley's observation, as I read
tt to you, of the undesirability of having the stock of an investment
l)anking house .spread around is sound?
Mr. Woods. In view of the fact that I am an officer and director
and active participant in tlie business of a concern whose stock is
verj' widely spread around, I just simply differ with that point of
view. The ownership of our stock causes us no difficulty. Unfor-
tunatel}', it does go up and it does go down, but we find ourselves
perfectly capable of carrying on our investment banking business as
we are situated.
Mr. Nehemkis. So, may I say, if this be a correct statement, that
you and your associates feel that there is nothing undesirable in
having a public corporation functioning in the investment banking
business.
Mr. Woods. There is nothing undesirable about it in my judgment;
no.
Mr. Nehemkis. Now in the allocation of First Boston business,
iiave there been any participations given to Stone & Webster and
Blodget^
Mr. Woods. Oh, yes; from time to time Stone & Webster and
lilodget have been included in our syndicate lists.
Mr. Nehemkis. Have they been substantial participations^
Mr. Woods. I dare say there are cases when they liave liad sub-
stantial participations.
Mr. Nehemkis. You testified, I believe, that Stone c*c Webst<'r and
Blodget was one of the substantial holders of stock of The First
Boston Cor})oration.
Mr. Woods. The parent of Stone i\c Webster and Blodget.
Mr. Nehemkis. Stone & Webster, Inc.?
Mr. Woods. That is correct.
Mr. Nehemkis. And the investment banking house is known as
Stone & Webster and Blodget?
Ml-. Woods. That is correct.
Mr. Nehemkis. Do you have any notion offhand in how many
originations of The First Boston Corporation participations have
been given to Stone c'c Webster and Blodget; just roughly?
Mr. Woods. Not offhand. I can't state a figure offliand, but I
would say in a A'cry substantial number of iinderwritings Stone &
Webster and Blodget are included. We regard them highly as dis-
tributors and they have ample capital.
CONCENTRATION OF ECONOMIC POWER 11521
Mr. Nehemkis. I should like to offer a table, Mr. Chairman, show-
ing the participations of Stone & Webster and Blodget in issues
managed by The First Boston Corporation, from June 14, 1934, to
June 30, 1939. These data were compiled from the registration state-
ments relating to the respective issues on file with the Securities and
Exchange Commission, and the table was prepared by the staff of
the Investment Banking Section.
Acting Chairman Reece. It ma}^ be admitted.
(The table referred to was marked "Exhibit No. 1623" and is
included in the appendix on p. 11704.)
Mr. Nehemkis. Would you excuse me for a moment, Mr. Woods,
while I call another witness ? You may remain seated.
Mr, Lloyd Mathers, please.
Acting Chairman Reece. Do you solemnly swear the testimony you
are about to give in this proceeding shall be the truth, the whole
truth, and nothing but the truth, so help you God ?
Mr. Mathers. I do.
TESTIMONY OF LLOYD MATHERS, SECUKITIES ANALYST, SECURI-
TIES AND EXCHANGE COMMISSION, WASHINGTON, D. C.
Mr, Nehemkis. Mr. Mathers, are you a member of the staff of
the Securities and Exchange Commission?
Mr, Mathers. Yes, sir,
Mr. Nehemkis. And in the course of your investigations have you
• had occasion to examine the files of Lehman Brothers?
Mr. Mathers. I have.
Mr. Nehemkis. I show you certain documents obtained from the
files of Lehman Brothers and furnished you by responsible officials
of that organization and ask you to tell me whether those are the
documents which have been submitted to you by partners of Lehman
Brothers.
Mr. Mathers. They are.
Mr. Nehemkis. Thank you very much.
(The witness, Mr. Mathers, was excused.)
realignments in IN\TDSrMENT BANKING BUSINESS 1!>;?3-1934
Mr. Nehemkis. Mr. Woods, about the time of the organization
of The First Boston Corporation, the investment banking business
was undergoing certain readjustments, new alignments were taking
place, and old contracts were being renewed, certain of the old banks
were out of the underwriting business. This meant, I take it, that
the financing formerly done by these organizations would be sought
after?
Mr, Woods. That is correct.
Mr. Nehemkis. And, on the other hand, there was some uncer-
tainty among the houses as to the disposition of the accounts for-
merly handled by some of the bank affiliates, as to whether they
would fall to the successors of the old affiliates or whether other
banking houses would obtain this business; is that cofrect?
Mr. Woods. I dare say.
Mr. Nehemkis. Do you know it to be so? You were a member
of a very important house at that time and I assume you and your
fellow officers were thinking a good deal about these problems.
11522 CONCENTRATION OF ECONOMIC POWER
Mr. Woods. We spent surprisingly little time thinking about what
was going to happen to the business formerly carried on by the
Guaranty Co. or the National City Co. We did spend a very sub-
stantial portion of each business day devising ways and means of
seeing to it that The First Boston Corporation did its full share of
the business that had been formerly done by Harris, Forbes & Co.,
and those of us who were primarily in the buying and underwriting
end of the business went to great length to acquaint the former
clients of Harris, Forbes and Chase Harris Forbes of our new situa-
tion and our abilitv to do business. But what the others were doing,
really my opinion wouldn't be worth very much.
Mr. Nehemkis. I didn't intend you to comment about what others
were doing. 1 intended that you would give me the atmosphere of
yourself and your own associates. I had in mind more particularly
this kind of discussion between Mr. Nevil Ford, one of your fellow
officers, and Mr. Dorsey Eichardson, of Lehman Brothers, who on
April 4, 1934, had this to say in a memorandum entitled "Relations
with l^uccessor Company to First of Boston Corporation."
Mr. Henderson. Has that been identified?
Mr. Nehemkis. It has. [Reading from "Exhibit No. 1624":]
Last Thursday I lunched at The First of Boston Corporation with Mr. Nevil
F'ord who, jointly with Mr. Pope, is one of the senior oflBcers of the Corpora-
tion. Mr. Ford is a personal friend of long standing.
We discussed two subjects, first, the reorganization plan whereby the new
company "The First Boston Corporation" will be established to continue in the
issuing business, and second, —
Note this, Mr. Woods —
the possibility of this new company and Lehman Brothers working more closely
together, especially through the inclusion of Lehman Brothers in certain under-
writing groups in place of bank affiliates and/or private firms which have gone
out of business or have weakened as to ability to assume commitments. * * *
With regard to the future relations between the new company and Lehman
Brothers, Mr. Ford was most optimistic that cooperation would be possible, and
was quite definite in expressing a desire on the part of himself and his asso-
ciates to include Lehman Brothers in business in which we had not been rep-
resented previously. He said that a reconstitution of groups had not been dis-
cussed with the Chase Harris Forbes people, but that as soon as the legal for-
malities for the establishment of the new company had been finished attention
would be turned to a survey of existing business in both organizations. Mr.
Ford said that he recognized that there would be many holes in previous groups
and that wherever it was possible he wmild try to discuss with us the possi-
bility of our joining.
I oifer the memorandum from which I have read in evidence, Mr.
Chairman.
Acting Chairman Eeece. It may be admitted.
(The memorandum referred to was marked "Exhibit No. 1624"
and is included in the appendix on p. 11704.)
Mr, Nehemkis. It was, then, in this atmosphere, so to speak, Mr.
Woods, that early in 1934 First Boston commenced negotiations for
the financing of the Southern California Edison issue of 1935, correct,
sir?
Mr. Woods. That is correct.
l\Ir. Nehemkis. And there was some uncertainty at this time as to
whether First Boston would obtain this account even though it had
been associated with the earlier financing of the company?
Mr. Woods. That is correct.
CONCENTRATION OF ECONOMKJ POWKK 11523
Mr. Nehemkis. There were other firms actively competino; for the
business; for example, Blyth & Co., Lazard Freres, Field, Glore; is
(hat correct?
Mr. Woods. Yes ; those firms and several others.
Mr. Nehemkis. I show you, Mr. Woods, a letter by John R. Ma-
comber, addressed to Albert W. Harris, and dated August 3, 1934.
I ask you to tell me whether this is a true and correct copy of an
original letter in your files ?
Mr. Woods. It is.
Mr. Nekemkis. The letter is offered in evidence, Mr. Chairman.
Acting Chairman Reece, It may be admitted.
(The letter referred to was marked "Exhibit No. 1625" and is
included in the appendix on p. 11705.)
Mr. Nehemkis. I read from the third paragraph thereof. You
will recall this is a letter from Mr. Macomber, Mr. Woods' associate,
to Mr. Albert W. Harris.
By the way, Mr. Albert W. Harris was at that time and still is
president of the Harris Trust & Savings Bank of Chicago?
Mr. Woods. No; I think at that time IVIr. Harris may have been
chairman of the board.
Mr. Nehemkis. Chairman of the board.
Mr. Woods. And he may still be chairman of the board.
Mr. Nehemkis. But he was in any event connectod with the Harris
Trust & Savings Bank in Chicago?
Mr. Woods. Yes; he is the son of the founder and no doubt the
largest stockholder.
Mr. Nehemkis [reading from "Exhibit No. 1625"] :
When I was in New York last week, I had luncheon with Mr. Burnett Walker at
his request.
Can you tell me who Mr. Burnett Walker is?
Mr. Woods. Mr. Burnett Walker is a partner of Smith, Barney
& Co.
Mr. 'NEHEMkis (reading further) :
Walker, you will remember, was with us in the early days and then became
vice president of the Guaranty Company. In the unwinding of that organiza-
tion, he is now a partner of E. B. Smith & Co., which firm, without any formal
agreement, has, I am sure, the goodwill of the Guaranty Trust Company itself
as far as business which the company cannot transact is concerned, and I
think they will be a fairly important factor in certain classes of issue business
in the future. Joe Swan, the old prefident of the Guaranty Company, also
is a partner of Edward B. Smith & Co.. and one or two others of the old
Guaranty men are associated there also. They are a pretty energetic and
resourceful group.
I now read from the fourth paragraph of that letter :
Walker told me that he was going to the Pacific Coast to spend a week or
two with his family at Santa Barbara but in the course of his visit he was
going to see Mr. H. J. Bauer, Chairman of Southern California Edison Company,
and he asked me if we had any objection to his so doing.
Now, may I pause there. Would you care to enlighten me, if you
will, why it was necessarv for Mr. Burnett Walker to ask Mr.
Macomber whether Mr. "Macomber had any objection to Burnett
Walker's talking to the President of the Southern California Edison
Co.?
Mr. Woods. I don't believe it was necessary, Mr. Nehemkis. I
think Mr. Walker was merely being courteous.
11524 (X)NCB]NTRATION OF ECONOMIC POWER
Mr. Nehemkis. In other words, this is what we call or what is
called banker's courtesy ? Mr. Burnett Walker, recognizing that this
was an open field for the business, was simply courteous and called
on your people just to ask if it was all right for him to drop in to
see Mr. Bauer, this having been an old historical account of yours.
Is that about the substance of the matter?
Mr. Woods. Well, I doubt, knowing Burnett Walker, if he asked
Mr. Macomber if he could drop in on Mr. Bauer. I would say he
probably said to Mr. Macomber that he was going to do so, and
knowing both of the gentlemen quite intimately, I imagine Mr.
Walker's mind worked along the line that A. W. Harris was, and
had been for years, a director of the Southern California Edison Co.,
and Mr. Harris and Mr. Macomber, who are more or less contempo-
raries, were old, old friends, and Mr. Walker probably recognized the
fact that Mr. Harris might look to Mr. Macomber for his point of
view with respect to investment banking matters.
Mr. Nehemkis. Suppose Mr. Macomber had said after this cour-
tesy call, "No, I don't think you ought to tallc to Harry Bauer," what
then?
Mr. Woods. Bankers' courtesy, since you coined that phrase, is such
that Mr. Macomber never would have said that.
Mr. Nehemkis. You don't think that is possible under banker's
courtesy ?
Mr. Woods. That is correct.
Mr. Nehemkis. May I continue from the letter [reading from
''Exhibit No. 1625"] : '
I told him that this business had always been headed np by the Harris Trust
& Savings Bank, although as their eastern associates, Harris, Forbes had had
a share in it, but more than that, any business had particularly been headed
up in your good self —
meaning, I take it, Albert Harris?
Mr. Woods. Correct.
Mr. Nehemkis [Heading further] :
Therefore, I really ^vas nut in a position to say very much about it but,
naturally, couldn't object to his calling on them. I .said to him, however,
that I would suggest that, as he was spending a day or two in Chicago, before
seeing Mr. Bauer on this phase of the business, I thought it would be courteous
for him to see you.
So at this period in the summer of 1934, Mr. Woods, the Harris
Trust & Savings Bank being barred from the underwriting business,
there existed a general impression among the investment banking-
firms that the Southerji California Edison business was, so to speak,
open territory?
Mr. Woods. I dare say that is true.
Mr. Nehemkis. And that would account for E. B. Smith's interest
and Mr. Walker's trip to the west coast to see Mr. Bauer?
Mr. Woods. That is correct.
Mr. Nehemkis. Now during the period of the 20's, and up until
1932, was there not in existence a reciprocal arrangement whereby
Harris Trust & Savings Bank and Harris, Forbes & Company, a
predecessor of The Fiist Uoston C\)rporation, shared in each other's
business?
Mr. Woods. There was.
CONCENTRATION OF ECONOMIC POWER 11525
THE HARRIS TRUST & SAVINGS BANK AND HARRIS, FORBES <fe COMPANT
AGREEMENT
Mr. Nehemkis. And under this arrangement, did not Harris,
Forbes & Co. have the right to participate on original terms to the
amount of 70 percent in security originations of Harris Trust &
Savings Bank?
Mr. Woods. That is true.
Mr. Nehemkis. And conversely, did not Harris Trust & Savings
Bank have the right to participate on original terms in security
originations of Harris, Forbes & Co.
Mr. Woods. That is true. In addition, I would like to take just a
moment to enlighten the committee on the background of that gen-
eral method of operation. As was pointed out in this statement with
regard to The First Boston Corporation which Mr. Nehemkis was
kind enough to put in the record, the firm of N. W. Harris & Co.
Mr. Nehemkis (interposing). Are you reading, Mr. Woods?
Mr. Woods. No, I am just looking for a date. The firm of N. W.
Harris & Co. was organized in Chicago as a partnership in 1882.
Subsequently, N. W. Harris & Co. changed its corporate form of
existence and ultimately became known as the Harris Trust & Sav-
ings Bank. At or about the time that happened, the eastern partners
of tlie old N. W. Harris partnership did business in New York under
the name of Harris, Forbes & Co. and continued for some years to do
business in Boston under the name of N. W. Harris & Co.
Because of the fact that there liad been a long business association
between those two groups of men, one in the East and one in the
West, when the western group incorporated under the banking law
and became the Harris Trust & Savings Bank, this arrangement
which Mr. Nehemkis has referred to was entered into.
It was an arbitrary division between partners, and as Mr. Nehemkis
has said, the undei-writing business originated by the eastern partners
was shared with the new western firm. Conversely, the business
originated by the western partners was shared by the eastern concern.
Tliere was no corporate identity but, because jointly the individuals
had built the business up, they felt it was only fair to continue it on
some sharing basis, and Mr. Nehemkis' statement is quite correct, that
through August 1930 the business was divided on the basis of 70
percent to the East and 30 percent to the West, and that was true
of the Southern California Edison business over a period of a great
many years.
Mr. Nehemkis. Mr. Woods, have you ever seen a copy of the orig-
inal contract entered into between these two organizations?
Mr. Woods. I may have.
Mr. Nehemkis. I Show you a copy of the contract entered into be-
tween Harris, Forbes & Co., Inc., by Harry M. Addinsell, vice presi-
dent, and Harris Trust & Savings Bank, Chicago, 111., dated July
25, 1930. Will you examine this and tell us if you have ever seen
a copy before, or a similar copy?
Wliile the witness is examining that, Mr. Chairman, so that there
may be no question concerning the authenticity of this agreement, I
read to you from a letter addressed to Mr. W. S. Whitehead, care
of Securities and Exchange Commission, Washington, D. C, from
1 1526 CONCENTRATION OF ECONOMIC POWER
Harris Hall & Company: Mr. Whitehoad is a member of my staff
[reading from "Exhibit' No. 1626-1"] :
Referring to our telephone conversation of Saturday, I have obtained for
you a letter of July 25, 1930, addressed to the Harris Trust and Savings Bank,
Chicago, and signed by Harris, Forbes & Company, New Yorli, and Harris.
Forbes & Company, Inc. of Boston, confirming the reciprocal arrangement
which had hitherto existed between these concerns with respect to the purchase
and marketing of securities. This is the only written memorandum with respect
to this matter which we have been able to find, and I recall that it was reduced
to writing at that time because the Chase Securities Corporation had on or
about July 1, 1930, purchased all the stock of Harris. Forbes & Company and
Harris, Forbes & Company, Inc.
Mr. Woods, I return to my previous question.
Mr. W(X)DS. Yes; I have seen this before.
Mr. Nehemkis. And you recognize this as a correct copy of the
original agreement ?
Mr. Woods. That is the substance of it. I ani sure it is a correct
(•opy.
Mr. Nekkmkis. Mr. Chairman, the letter from which I have just
read, together with the copy of the agreement, as identified by this
witness, are now offered in evidence.
Acting Chairman Reece. They may be admitted.
(The documents referred to were marked "Exhibits Nos. 1626-1
and 1626-2'' and are included in the appendix on pp. 11707 and
11708.).
Mr. Neitemkis. Mr. Woods, HaiTis, Hall & Co. is in effect, I
believe, the successor to the investment banking business of Harris
Trust & Savings Bank. Do you know whether that is correct?
Mr. Woods. I think in effect that is correct; yes.
Mr. Nehemkis. I have here, Mr. Chairman, a co[)y of a prospectus
i*f Harris, Hall & Co., a public document, and I read to 3'ou one
f)aragraph, if I may:
The company —
lleferring to Harris, Hall & Co. —
is entitled to the benefits of a proposal made to Harris Trust and Savings Bank
under date of October 28, 1935 and accepted by resolution of the Board of
Directors of Harris Trust and Savings Bank adopted October 28, 1935. The
said proposal, as accepted, contemplates that, when Harris, Hall & Co. sliall
commence business after the sale of the Preferred and Common Stock offered
hereby, Harris Trust and Savings Bank shall, insofar as it may without violation
of any confidence reposed in it and without impairment to its best interest and
position in respect of dealings in securities which under existing applicable law
and/or regulations it is permitted to distribute, on its own premises make
Jivailable to Harris, Hall & Co. all information now in its possession in respect
of its former connections and sources of securities other than those before
mentioned, together with all contracts and/or established relations heretofore
I'xisting between Harris Trust and Savings Bank and the issuers and/or sellers
of securities and all pertinent data in possession of the Bank in respect of the
issuance of securities; and that Harris Trust and Savings Bank shall, in so far as
its own best interests may permit, further endeavor to direct to Harris, Hall & Co.
all opportunities coming to or to the knowledge of the Bank for the purchase
of securities for distribution and shall permit Harris, Hall & Co. publicly and
at all times and places to identify It.self as successor to the said Harris Trust
and Savings Bank in relation to the purchase of securities.
I have a letter, Mr. Chaii-man, addressed to counsel, dated Septem-
ber 18, 1939, from Mr. Norman W. Harris, vice president of Harris,
Hall & Co., pcitaining to cei-tain information at his house on stock
ownership, and so on. It is not pertinent to this discussion, but I
CONCENTRATION OB" ECONOMIC POWER 11527
wish it to be in the record so the presentation may be complete. Ac-
cordingly, I offer it in evidence.
Acting Chairman Reece. It may be admitted.
(The letter referred to was marked "Exhibit No. 1627" and is in-
cluded in the appendix on p. 11709.)
OWNERSHIP or STOCK IN HARRIS, HALL & CO. BY OEFICEKS OF THE FIRST
BOSTON CORPORATION
Mr. Nehemkis. Mr. Woods, are not certain of the officers of The
First Boston Corporation holders of preferred stock in Harris, Hall
«& Co. ?
Mr. Woods. Not to my knowledge, Mr. Nehemkis.
Mr. Nehemkis. You have no recollection whether or not Mr. Ad-
dinsell or ^Mr. Linsley or Mr. Macomber or yourself hold any stock in
Harris, Hall & Co.?
Mr. Woods. Well, when the stock was originally offered, I bought
two or three hundred shares of the common stock. I subsequently
sold it. I tliink that — I know that IVIr. Macomber and Mr. Addin-
sell similarly bought a few shares of the common stock. Whether
they still own it, I have no information.
Mr. Nehemkis. Will the reporter return to me the last letter that
was offered and will the reporter be good enough to read the last
question put to the witness ?
Reporter :
Mr. Nehemkis. Mr. Woods, are not certain of the officers of The First Boston
Corporation holders of preferred stock in Harris, Hall & Co.?
Mr. Woods. Not to my knowledge, Mr. Nehemkis.
Mr. Nehemkis. Mr. Woods, would you be good enough to recon-
sider my question?
Mr. Woods. Well, I v\'il] be glad to reconsider it but as far as I am
concerned I don't know of anybody that
Mr. Nehemkis (interposing). Did you ever hold any stock?
Mr. Woods. I hri\e held common stock. I understood you to say
preferred stock.
Mr. Nehemkis. You have never held any preferred?
Mr. Woods. Not t(^ the best of my knowledge.
Mr. Nehemkis. And you have no knowledge of any of the other
officers holdings preferred?
Mr. Woods. That is correct.
Mr. Nehemkis. Have any of the other officers held any common
stock ?
Mr. Woods. Yes ; I believe they have. As I said, I owned, I think,
200 shares of it at one time, which I purchased at the organization
and subsequently disposed of.
Mr. Nehemkis. Do you know whether Mr. Addinsell still holds any
common stock?
Mr. Woods. I don't know whether he still holds his stock. I
imagine he does, and I imagine Mr. Macomber does.
Mr. Nehemkis. Mr. Linsley?
Mr. Woods. I don't know about Mr. Linsley.
Mr. Nehemkis. Would you be good enough to furnish the com-
mittee with a statement on that point?
124491—40— pt. 22 12
11528 CONCENTRATION OF ECONOMIC POWER
Mr. Woods. I would be delighted.^
Mr. Nehemkis. Will you send it to me and I will duly offer it?
Mr. Woods. Yes, sir.
Mr. Nehemkis. Mr. \^'oods, does the arrangement which existed
between Harris, Forbes & Co. and Harris Trust & Savings Bank still
prevail as between Harris, Hall & Co. and The First Boston Corpo-
ration ?
Mr. Woods. No. The arrangement that existed between the former
firms you mentioned does not prevaU as between The First Boston
Corporation and Harris, Hall.
Mr. Nehemkis. Has not Harris, Hall & Co. occasionally attempted
to claim the old 30-percent interest of First Boston originations?
Mr. Woods. I am sure they may have ; yes.
Mr. Nehemkis. And what disposition was made of those endeavors
by you or your other officers ?
Mr. Woods. Well, various endeavors developed in the light of
various sets of facts, and an agreement eventually was reached as to
the interests of all the underwriters, including Harris, Hall.
Mr. Nehemkis. Has not The First Boston Corporation had occasion
to intervene with the manager of an underwriting group in order to
get Harris, Hall & Co. included in a syndicate?
Mr. Woods. Yes ; I believe we have done that.
Mr. Nehemkis. Do you know in which syndicate?
Mr. Woods. I can't tell you right offhand.
Mr. Nehemkis. If I told you the Los Angeles Gas & Electric Co.
syndicate, would that refresh your recollection?
Mr. Woods. Yes; definitely, it would. I remember we did have
some discussion with Blyth & Co. about the inclusion of Harris, Hall.
Mr. Nehemkis. Blyth & Co. was the leader of that financing?
Mr. Woods. That is my recollection.
Mr. Nehemkis. This morning, Mr. Chairman, may it please the
committee, Mr. Leib was good enough to stipulate concerning the
authenticity and identification of certain letters which I propose to
offer at this time. I would like to read from one letter to Mr. Harry
M. Addinsell, chairman, executive committee. The First Boston Corpo-
ration, 100 Broadway, New York, from Mr. Charles E. Mitchell,
chairman of the board of Blyth [reading from "Exhibit No. 1628-5"] :
Referring to our talk this afternoon regarding the underwriting of $40,000,000
Los Angeles Gas & Electric Corp. Krst and General Mortgage bonds, series of
4s, due 1970, now in registration, it is agreed that your underwriting position
in this business shall be revised from $3,000,000 to $2,500,'000, and that this differ-
ence of $500,000 shall be offered to Harris, Hall & Company, 111 West Monroe
Street, Chicago, which has been done by letter today.
The remaining documents are confirmations between the respective
parties to this arrangement. The letters are offered.
Acting Chairman Reece. They may be admitted.^
(The documents referred to were marked "Exhibits Nos, 1628-1 to
1628-8" and are included in the appendix on pp. 11710-11712.)
> Mr. Woods subsequently submitted the information requested. See "Extjlbit No. 169C,"
introduced DccenilxT 11), lO:!!), and iippearinK i" appendix, p. 11826.
* Additional material on this subiect was offered in evidence on December 14, 1939.
See "Exhibits Nos. 1640-1 to 1640-4," appendix, p. 11746.
CONCENTRATION OF ECONOMIC POWER 11529
MR. addinsell's records of the first boston corporation participations
Mr. Nehemkis. Does not Mr. Addinsell, chairman of your execu-
tive committee, make a practice of keeping notations of the participa-
tions which The First Boston Corporation receives in the originations
of other banking firms?
Mr. Woods. Yes; he does for his personal edification.
Mr. Nehemkis. And of the participation ceded by First Boston
to other firms from its originations?
Mr. Woods. I believe that is included in his record.
Mr. Nehemkis. And these records also contain notations with re-
spect to estimated syndicate profits and comments thereon?
Mr. Woods. That I do not know.
Mr. Nehemkis. Do you know whether these records to which I
have referred are generally called in your shop "the little black
books"?
Mr. Woods. I don't know whether thej' are generally called "the
little black books."
Mr. Nehemkis. What do you refer to them when you have occa-
sion, if you do, to refer to these records?
Mr. Woods. I think I probably refer to them as Mr. Addinsell's
records of participations.
Mr. Nehemkis. I hand you two volumes of the so-called little
black books. Would you look at them and tell me whether you have
ever seen them before ?
1 should say that when Mr. Addinsell was good enough to make
these available to the subpena of this committee, they were bound
in black covers, and the originals having been returned, they are now
in the more mundane covers of the commission.
Mr. Woods. Yes; I recognize them,
Mr. Nehemkis. Have you seen those before ?
Mr. Woods. That is right.
Mr. Nehemkis. Now, let me just show you a typical record from
ojie of these entries. It happens by chance to be Harris, Hall & Co.
Will you examine this and tell me what the various notations are?
Mr. Woods. This apparently is a record of the participation of
our firm in issues headed by Harris, Hall.
Mr. Nehemkis. Well, what are the various notations? Suppose
you start at the beginning.
Mr. Woods (reading from "Exhibit No. 1630") : On March 26, 1936,
Iowa Electric Light & Power Co., 4's, 1955, total principal amount
$3,600,000. Harris, Hall participation, stated in percentage, 36.8 per-
cent. First Boston Corporation participation stated in percentage,
36.8 percent ; in dollars, $1,325,000. Estimated syndicate profits, $21,-
200. Under the heading "Comments" the notation is made "In previ-
ous issue."
Mr. Nehemkis. That is enough, just as an indication.
May I have that back, please?
Now, can you tell me, Mr. Woods, of your own personal knowledge
whether it is customary for other banking houses to keep similar
records of business ceded to other houses and the reciprocity in turn
received from other houses?
Mr. Woods. I have no personal knowledge of other houses keeping
records such as Mr. Addinsell keeps.
11530 GONCEMTKATION Ot ECONOMIC POWEK
Mr. Nehemkis. I have before me four sheets ^ pertaining to Harris,
Hall & Co., and I note that Central Maine Power Co. 4's of 1960,
amount $15,600,000, First Boston participation 20.7 percent, Harris,
Hall's participation 3.2 percent, the amount of the participation being
$500,000, contains this comment : "Succeeded Harris Trust interest" ;
and I note in the next issue of 11-21-35, Kansas PoAver & Light Co..
41/2 's of "65, $30,000,000 amount; First Boston participation 22.5 per-
cent; Hams, Hall participation 1.7 percent; amount of the partici-
pation $500,000; comment: "Succeeded Harris Trust interest."
Skipping along, I find 4-6-36, California Oregon Power Co. 4's,
and so on; comment: "Harris Trust interest." NaiTagansett Electric
Co. with the various entries similar to the one I have read, "Harris
Trust interest."
Southern Kraft Corporation, and so on, "Harris Trust in parent
company financing."
Now, Mr. Woods, I repeat to you the question I asked you earlier.
Has not Harris, Hall & Co. attempted to claim and has it not claimed
successfully, the old arrangement which existed between your prede-
cessor organization and the Harris Trust & Savings Bank?
Mr. Woods. In point of fact, Harris, Hall hasn't made any such
claim, Mr. Nehemkis. I would like to say to the committee that at
the time your representative came into our office and approached Mr.
Addinsell on the subject of borrowing this book of records that he
keeps, both Mr. Addinsell and myself pointed out that these records
had nothing to do with The First Boston Corporation. There is no
member of the buying corporate underwriting department that passes
on these comments that go in there. I subsequently discovered that
most of the entries are all made by Mr. Addinsell's secretary and I
wouldn't even hazard a guess as to the authorship of most of those
comments. Speaking for The First Boston Corporation, I say to you
frankly that the Harris, Hall people made no claim of a continua-
tion of the arrangement that existed between the Harris Trust and
Harris, Forbes & Company up through 1930. It is true that we in
our organization recognizing that Harris, Hall has a very definite
standing among the highest in the Middle West and has an adequate
capital, do use our efforts insofar as we reasonably can, to see to it
that they have a place in underwriting where it is possible to do so.
That is by no implied or written agreement, though. It is by reason
of no implied or written agreement.
Mr. Nehemkis. Mr. Woods, did I understand you to say that your
impression is that Mr. Addinsell's secretary made these entries?
Mr. Woods. That is as I understand it.
Mr. Nehemkis. You mean the secretary, whoever she be, of her
own volition, goes to these little records and makes notations without
any instructions?
Mr. Woods. I explained to your man when he came to take these
book's, as did Mr. Addinsell, that these were in no sense official rec-
ords 0 r The First Boston Corporation. I pointed out clearly that I
had no opinion as to whether the notations with respect to each firm
Jiamc'd were complete, or incomplete, and I had no way of saying that
tJie percentages that other firms had in our business or we had in
other films' biu'iness was accurate. I said we kept those records as
^irisfc/ExhibJt No. 1630," appendix, p. 117K5
CONCENTRATION OF ECONOMIC POWER 11531
a firm matter elsewhere. This is a book that Harry Addinsell keeps,
as I said a few moments ago, for his own edification and it was given
to your man, who has just recently left the room, with that express
miderstanding.
Mr. Nehemkis. Do you wish the connnittee to understand, Mr.
Woods, that a responsible, important person like Mr. Addinsell merely
amuses himself by occasionally making entries in books and that
otherwise these entries which are rather clearly labeled and con-
cerning which you have identified them, "Percentage Participation,
Estimated Syndicate Profit, Comments," are merely the idle amuse-
ment of a rather busy person?
Mr. Woods. No; I don't wish to imply they are the idle amuse-
ment of a rather busy person, but I do want to have perfectly clear
that they are not the official records of The First Boston Corporation.
Mr. Neiiemkis. Assuming thej^ are not the official records of The
First Boston Corporation, would you care to venture a guess as to
what the purpose is in keeping these notations? What significance
is there to these notations? "Wliy should Mr. Addinsell feel it nec-
essary to make these entries, and as you have observed, these are two
fairly voluminous volumes, and from our examination they concern
every underwriting house in America. ^^Hiat do you suppose Mr.
Addinsell wants to make these entries for if they have no signi-
ficance?
Mr. Woods. Well, I have discussed the matter with Mr. Addinsell.
Mr. Nehemkis. Before your testimony?
Mr. Woods. I beg your pardon ?
Mr. Nehemkis. You said you discussed the matter with Mr. Ad-
dinsell, and I just asked. Before this testimony you are now giving?
Mr. Woods. At the time your man came into our office.
Mr. Nehemkis. Wliat did Mr. Addinsell indicate was the purpose
of these notations?
Mr. Woods. Well, he didn't make clear to me what the purposes of
the notations were.
Mr. Nehemkis. Then the committee is to understand, Mr. Woods,
that the senior officer of your organization keeps fairly careful and
precise records, going back many years, and with contemporaneous
notations of participations given to other firms, participations re-
ceived by The First Boston Corporation, syndicate profits, comments
on the historical origins of those businesses, for his own edification
and that that has no bearing upon the business relationship of your
house. Is that what you want the committee to understand? I
want to be thoroughly clear about that, Mr. Woods.
Mr. Woods. May I have the reporter read that question?
(The reporter read back the immediately preceding question of
Mr. Nehemkis.)'
Mr. Woods. By '"no bearing on the business relationship of mv
house," I presume you mean with the names listed?
Mr. Nehemkis. I will give you a concrete illustration of what I
understand might happen.
Mr. Addinsell and your associates are in the process of starting a
piece of syndication. You have a rough idea of the number of
houses you want to include in it. Now, if this thing has any signifi-
cance, the first thing Mr. Addinsell would want to do would be to
refer back here to see whether he is under some reciprocal obligation.
11532 CONCENTRATION OF ECONOMIC POWER
in view of the fact that business has been ceded to First Boston by
other liouses, and he will then find what his obligation is. He got this
business from so and so, or he received this business from this house,
therefore he ma}' be under an obligation to include that house in his
origination. Does that sound plausible to you?
Mr. Woods. It is entirely plausible.
Mr. Nehemkis. But you don't know whether it is a fact?
Mr. Woods. On the contrary, I know that it is completely at var-
iance with the facts, Mr. Nehemkis. We explained to the gentleman
from your office, whose name escapes me, that came in to get this
book for the purposes of having it photostated, that that very morn-
ing, as a mere coincidence, those of us in the buying and selling end
of the business who Avere particularly interested had sat around and
worked up, together with the sellers of the securities, a syndicate for
an issue Avhich we proposed to register the very next day. In point
of fact, the issue was not registered and probably will not be regis-
tei'ed until the turn of the year, but we said at the time, which was
the fact, that we didn't refer to this book at all. In point of fact, I
say to you that as a group of executives in our board meetings, to the
extent we discuss makeups of syndicates in tlie board meetings, we
never refer to this book.
Mr. Nehemkis. Let me read you from the entry under the name,
''Morgan Stanley & Co., Participation of The First Boston Corp. in
Issues Headed by Morgan Stanley & Co." Then, as the committee
will recall from Mr. Woods' explanation, the various captions appear.
The importiint things here are the comments [reading from "Exhibit
No. 1631"] :
Ohio Edison Company in previous issue : Central New York Power Corporation,
in old Utica Gas & El. issues; Consolidated Edison Co., Inc., of New York, in
previous issue —
and so on, all comments on the relation of The First Boston Cor-
poration or its predecessors to that business.
Do you suppose that Mr. Addinsell merely instructs his secretary
to fill up that space and those comments are without significance?
Or do you wish the committee to understand that those comments
really have significance because they indicate the extent to which
your firm is under a reciprocal obligation to Morgan Stanley & Co..
Inc., or any other firm that has ceded your house business and to
AA'hom you nuist in turn cede business?
Mr. Woods. Mr. Nehemkis, what I have said over the last lo
minutes wntli respect to the manner in which we conduct our busi-
ness and set up tliese underwriting groups in consultation with the
issuing companies are the facts and I really have nothing more to
say about what tlie conmiittee may understand from tliese papers.
Mr. Nehemkis. Mr. Chairman. I don't tliink it is necessary to
print the.se two voluminous volumes. I think it will be satisfactory
for the purposes of the record if we ofTer samples as illustrations of
the larger content.
Acting Chairman Avildsen. I think so. Have you selected the
samples?
Mr. Nehemkis. I have, sir. And I offer five sheets dated as of
February 28, 1939, headed, "Underwriting Participations * * *
by the various firms in business, headed by The First Boston Cor-
CONCENTRATION OF ECONOMIC POWEK 11533
poratioii.'' The second column contains tliis notation : "The First
Boston Corporation's participations in business headed by the re-
spective underwriting houses." There then appears the list of names
and the dollars of the respective amounts.
I offer these five pages.
Acting Chairman Avildsen. They may be received.
(The pages referred to were marked "Exhibit No. 1629," and are
included in the appendix on p. 11713.)
Mr. Nehemkis. I now otfer four sheets pertaining to Harris, Hall
& Company, concerning which testimony has been given,
(The sheets referred to were marked "Exhibit No. 1630" and are
included in the appendix on p. 11716.)
Mr. Nehemkis. And I now offer eight sheets pertaining to partici-
pations received in Morgan Stanley & Co. Incorporated originations.
(The slieets referred to were marked "Exhibit No. 1631" and are
included in the appendix on p. 11717.)
Mr. Henderson. What is to be the disposition of these books, Mr.
Nehemkis? I can readily see that they would be of tremendous
value to competing houses, and have no purpose, I believe, to be
served here.
Mr. Nehemkis. May I suggest that the committee impound these
volumes and keep them in its own possession.
Mr. Woods. Mr. Henderson, there is nothing in these books that
isn't to be found in the registration statement covering the various
security issues.
Mr. Henderson. All this work has been done, but might 1 just say
that the last column of the notation — do we have a column like that,
Mr. Bane?
Mr. Woods. The last column wouldn't be covered. I withdraw^ that.
Mr. Henderson. We don't attempt to trace who had the previ-
ous piece of business and what the shares were, I believe.
Mr. Bane. A great many of these Averen't registered. They were
prior to that time.
Mr. Henderson. I am not suggesting that there is anything sinister
in these volumes. I am suggesting that they w^ould be highly valuable
to other people in the business. I don't believe we ought to make
I hem generally available.
Mr. Woods. Let me say for my firm that as far as we are concerned
anybody in the business could look at them.
Mr. Henderson. If that is your attitude, it is strange that we had
such difficulty in getting them.
Mr. Woods. Mr. Henderson, the reason that there was difficulty
about getting these books was because Mr. Addinsell considered them
his personal property and we went to great pains to make it clear to
Mr. Nehemkis' group with whom we had no other even small differ-
ences of opinion — we worked along very well — that this was not infor-
mation from the files of The First Boston Corporation, and I didn't
realize it was going to be discussed at this length here today, and I
just really want to have that quite clear because it was clear at the
time the books were taken.
Mr. Nehemkis. Mr. Henderson, I think the record should clearly
show that what Mr. Woods has said is correct. I think my staff has
liad the most cordial relations with Mr. Woods and his associates, and
that The First Boston Corpovation has cooperated with us fidly and to
11534 CONCENTRATION OF ECONOMK; POWER
every extent possible. It is also correct that it was told to a member
of the staff that these two volumes were the personal property of Mr.
Addinsell and that if we desired them for purposes of this study they
would be furnished to us under subpena. This committee duly upon
request issued a subpena for these volumes. However, when the time
came for serving the subpena — you bear me out on this, Mr. Woods, if
you will — Mr. Addinsell voluntarily relinquished them and no sub-
pena was served upon him.
I think that is a correct statement of the facts. Is that so, Mr.
Woods?
Mr. Woods. That is wholly correct.
Acting Chairman Avildsen. The committee will recess for a couple
of minutes to discuss the matter of whether these shall be admitted
into the record. Will you just stay there, Mr. Woods?
(Short recess.)
Acting Chairman Avildsen. The committee will be in order.
Acting Chairman Avildsen. We will resume the hearing. Mr.
Henderson, will you please state for the benefit of the record your
understanding of these sample pages from Mr. Addinsell's "little black
book"?
Mr. Henderson. I understand that there is no objection if the
entire record is made available, as suggested.
Acting Chairman Avildsen, You mean to say Mr. Addinsell so
expressed himself, or his counsel?
Mr. Henderson. His counsel.
Mr. Nehemkis. To be correct, Mr. Arthur Dean, of Messrs. Sulli-
van and Cromwell, who is representing Mr. Woods, has so indicated.
Isn't that correct?
Mr. Woods. That is correct, and I will confirm that. There is no
secret about any figure that is in these papers that were given to the
committee, and I see no reason for treatinjr them in a confidential
fashion. If there is some mechanical objection to including them in
the record, that is another question entirely.
Mr. Henderson. I was about to suggest, in order to saA^e burdening
the record, that we use the sample pages and place the rest of it
in the committee's files as we do with similar documents.
Acting Chairman Avildsen. Then the reporter will include these
three sets^ of sample pages in the record.
Mr. Woods. May I make one comment, Mr. Nehemkis, before we
leave this part of our discussion ? It may have been left in the com-
mittee's mmd through the series of questions and answers that there
was the possibility of some connection between the fact that Stone &
Webster, Inc., own a block of stock which is, as I pointed out, less
than 4 percent of the total of our stock, and the fact that that is a
list of our underwritings in which Stone & Webster have had par-
ticipations, and I would like to make perfectly clear in the minds
of the committee that those of us who fix the participations have
given consideration to fixing them from time to time to Stone &
Webster's capital and their ability to distribute, and their general
standing in the business. To my personal knowledge. Stone & Web-
ster and Blodget have never made a request for a participation in a
1 "Exhibits Nos. 1629, 1630. and 1631." The rest of the books are on file with the
committee.
CONCENTRATION OF ECONOMIC POWER 11535
piece of business which we were handling, and mentioned or implied
or suggested the ownership of that stock as being a factor in their
making the request.
REI.ATI0N or ALBERT W. HARRIS TO THE FIRST BOSTON CORPORATION AND TO
SOUTHERN CALIFORNIA EDISON CO.
Mr. Nehemkis. Mr. Woods, I show you a photostat of a letter to
John R Macomber, Esq., 1 Federal Street, Boston, Mass., from Mr.
Albert W. Harris, dated August 6, 1934. Will you be good enough to
to tell me whether this is a true and correct copy of the original in
your files?
Mr. Woods. It is.
Mr. Nehemkis. It is offered in evidence.
Acting Chairman Avildsen. Admitted.
(The letter referred to was marked "Exhibit No. 1632" and is
included in the appendix on p. 11721.)
Mr. Nehemkis. I should like to read a paragraph from that letter
[reading from "Exhibit No. 1632"] :
I note what you have to say in connection with the Southern California
Edison and Mr. Walker.
The committee will recall that I previously offered and read from
a letter ^ referring to Mr. Walker's then pending visit to the west
coast to see Mr. Bauer about this business [reading further from
"Exhibit No. 1632"] :
I think I will repeat to you what I said to Mr. Walker. I told him that
we were not out of the investment business, that we proposed to do as much
bond business as we could do, that in the past six months we had done more
municipal bond business than we ever had in any six months before, that we
expected the Banking Law and the Securities Law to be changed so that the
investment houses and banks could do more business, and that, while it might
be necessary and desirable for us to make new connections, we did not propose
to make any until we were off with the old ; certainly we did not propose to help
anybody who did not help us and if he wanted us to do anything for him he
would have to do something for us first ; that we were in the municipal bond
business and the banking business and we wanted more trust business such as
appointments as active trustees under mortgages, transfer agents and registrars
for stock issues, and anything we conld legitimately do, we expected to use our
influence to help anybody that would use their influence to get business for
us of the kind we could handle ; that up to date we had not severed our con-
nections with the old Chase Harris Forbes crowd; that we had not got down
to considering any of the present rules and regulations very seriously, as we
were confident they would have to be changed before business would improve;
and incidentally, as far as the Soutliern California Edison and the San Diego
situation were concerned he could talk to Mr. Bauer or he could talk to me and
it did not make any difference which one he talked to, because he would be
talking to the same fellow.
[Laughter.]
Now, Mr. Woods, according to Mr. Harris' philosophy, if an invest-
ment banking firm placed business with his bank in the way of
deposits, trustee, or transfer agent business, and so forth, Mr. Harris
was prepared to use his influence with corporations to obtain busi-
ness for that investment banking firm. That would appear to be
correct, would it not?
iSee "Exhibit No. 1625," appendix, p. 11705.
11536 <X>NCENTRATION OF ECONOMIC POWER
Mr. Woods. Well, I dare say Mr. Harris would throw into the
scales his judgment of the ability of the given investment banking
firm to do the job in mind.
Mr. Nehemkts. And if Mr. Walker expected to do any business
with the Southern California Edison people, he would haA-e to do
something, apparently, first for Mr. Harris. In other words, as far
as Mr. Harris was concerned, it was a case of "cash on the barrel.'*
In the letter which I have just read, Mr. Harris said, "that up
to date we had not severed our connections with the old Chase Harris
Forbes crowd." Did this mean that the close working relationship
between the two groups was still operative, despite the fact that the
Banking Act had barred the Harris Trust & Savings Bank from
underwriting activities?
Mr. Woods. Well, Mr. Nehemkis, I sujipose that Mr. Albert Harris
and Mr. John Macomber have been intimately associated with each
other in a business way for at least 40 years, and probably closer to
45 years, and a relationship of that sort which has been a happy
one over such a long period of time obviously is not going to be
severed overnight. I don't know what was in Mr. Harris' mind
when he wrote this letter, but knowing Mr. Harris reasonably well I
think the phrase to which you refer merely means that he knows the
people in the old Chase Harris Forbes organization, he loiows the
way their minds work and their ability, and he probably means that
he proposes to contiiuie to do business with them at least for the
present.
Mr. Nehemkis. In the letter from which I have been reading, Mr.
Woods, Mr. Harris said ["reading from "Exhibit No. 1632*'] :
As far as the Southern California Edison and the San Diego situation were
concerned he —
Burnett Walker —
<'ould talk to Mr. Bauer or lie could talk to me and it did not make any diflfei-
t^uce which one he tjilked to, because he woilld be talking to the same fellow.
Now, Mr. Bauer is president of the Southern California Edison Co.,
and, I assume, a responsible official of that company ?
Mr. Woods. And Mr. Albert Harris, if my memory serves me, is
the oldest director of Southern California Edison Co.. and his asso-
ciation with it dates back many, many years; it certainly antechites
Mr. Bauer's incimibency as president by many years. My recollection
is that Mr. Bauer 25 years ago was one of the junior members of the
legal staff of the Southern California Edison Co., subsequently left,
and went into the practice of law independently; and I am quite
^ure that when Mr. Bauer was a younger man in the legal division
of the Edison Co., Mr. Harris made his acquaintance. I judge that
Mr. Harris is using that rather picturesque way of saying that he and
Mr. Bauer respect each other's judgment and enjoy a very close
personal relationship.
Mr. Nehemkis. Mr. Harris was also at that time either president
of the Harris Trust & Savings Bank or cliairman of the. board?
Mr. Woods. Either one or the other, although it is fair to say that
the active management of the bank at this time was in the hands of
Mr. Howard Fenton, and T believe Mr. Fenton was president of the
bank at this time.
CJONCENTRATION OF ECONOMIC POWKR 11537
Mr. Henderson. Mr. Woods, I could go further toward accepting
your explanation about Mr. Bauer and Mr. Harris were it not for
some of the clauses that precede, namely, "that up to date we had not
severed our connection with the old Chase Harris Forbes crowd;
that we did not get down to considering any of the present rules and
regulations very seriously." I mean, if it were taken separately, I
think I could get this elder-junior relationship and this talking to
the same fellow, though perhaps not so readily as you do. But
it seems to me very plain that what Mr. Harris is saying is that "We
are still in this thing, and you talk to me as you always have about
the disposition of this business."
Mr. Nehemkis. Well, Mr. Commissioner, there was a ((iiestiou that
occurred to me. It grows out of the same point you raised, and 1
wonder if Mr. Woods could enlighten me upon it. Is it customary —
and you have had considerably more experience than I have in finan-
cial matters — for directors to be- going around and telling bankers,
"You don't have to speak to the president, you speak to me. I am his
alter ego." Is that customary ?
Mr. Woods. Of course, it is not customarj^, Mr. Nehemkis, and I am
quite sure that a relationship such as the one that Mr. Harris enjoys
with the Southern California Edison Co. is even less customary. Mr.
Harris, as I say, is probably the oldest member of the board of direc-
tors of the Edison Co., not only in point of years, but in point of
years of service as a director.
Mr. Henderson. But it does say that anybody who wants to do
business with us better be prepared to give us something we could
legally take, does it not ? In other words, if you want to do business
on this particular item, we have to have a quid pro quo of some kind,
in the way of trusteeships, transfer agencies, registrarships, and so
forth.
Mr. Woods. Well, Mr. Commissioner, your interpretation of this
paragraph is just as good as anybody else's; certainly just as good as
mine. But I would like to suggest you read the entire letter because
if my memory serves me, most of it is taken up with the discussion
of the relative merits of Arabian horses and kindred subjects and it
is a chatty letter from one old friend to another old friend, and I
am certain if Mr. Harris thought it was gomg to be subjected to the
minute scrutiny that it is receiving here, he would have been very
much more careful. [Laughter.]
The connotation of this paragraph should be taken for the entire
letter.
Mr. Henderson. I have read the letter and it is a good salty letter.
In fact, I think he is one of the best letter writers we have had before
this committee in absentia.
Mr. Nehemkis. Mr. Woods, I show you a copy of a letter from the
Harris Trust and Savings Bank, by Mr. Howard Fenton, addressed
to Harry M. Addinsell and ask you to tell me whether it is a true
and correct copy of an original in your possession ?
Mr. Woods. It is.
Mr. Nehemkis. I show you a letter to John R. Macomber, from
Duncan R. Linsley, dated May 16, 1935, and ask you to tell me
whether you recognize this as being a true copy?
Mr. Woods. I do.
11538 CONCENTRATION OF ECONOMIC POWER
Mr. Neiiemkis. And I show you a letter from B. W. Lynch of H.
M, Byllesby & Co., addressed to Mr. Linsley, and ask yon to tell me
whether you recognize this as being a true copy.
Mr. Woods. It is.
Mr. Nehemkis. I ask, Mr. Chairman, that the three letters just
identified be offered in evidence.
Acting Chairman Avildsen. "Without objection, they may be
admitted.
(The letters referred to were marked "Exhibits Nos. 1633 to 1635"
and are included in the appendix on pp. 11722-11723.)
Acting Chairman Avildsen. Mr. Nehemkis, could you tell the com-
mittee about how much more time you will require for this witness?
Mr. Nehemkis. I am going to try to finish in as short order as
r can.
Acting Chairman Avildsen. Any estimate?
Mr. Nehemkis. If you press me, sir, let's make it 20 minutes.
Acting Chairman Avildsen. That will conclude the hearing today?
Mr. Nehemkis. That will conclude the hearing today ; yes. I offer
the seven documents previously identified from the files of Lehman
Brothers.
Acting Chairman Avildsen. They may be admitted.
(The seven documents referred to were marked "Exhibits Nos.
1636-1 to 1636-7" and are included in the appendix on pp. 11723-
11726.)
Mr. Nehemkis. Now, in the letter from Mr. Fenton of the Harris
Trust Bank to Mr. Addinsell, of which I show you a copy — suppose
I give you it so you may follow it — I note that Mr. Fenton writes
as follows, in the second paragraph of that letter [reading from "Ex-
hibit No. 1633"] :
H. M. Byllesby & Compauy aud their allied corporations keep substantial
balances with the Harris Trust and Savings Bank and it certainly is good busi-
ness for us to do everything we possibly can for them.
This would indicate, would it not, one of the advantages to be
derived by an investment banker in keeping a substantial deposit
account with a bank?
Mr. Woods. Well, it would only indicate that if you assume the
bank has some ability to function in behalf of the investment banker.
Mr. Nehemkis. Are such favors generally expected by investment
bankers who keep substantial deposit accounts with a bank?
Mr. Woods. They are not expected by my firm.
Ml. Nehemkis. Have you any personal knowledge as lo whether
other banking houses might expect such favors?
Mr. Woods. No; I do not have.
Mr. Nehemkis. Generally speaking, Mr. Woods, is not the choice
of wliich bank is to seive as registrar, transfer agent or trustee left
lo the investment banker who has been pvimarily responsible for
setting up tlu> syndicate and handling the underwriting?
Mr. WooD.s. No; I wouldn't say that generally speaking that was
true. In more recent years, the reverse is more generally true. The
commercial banks are very diligent in pursuing issuing companies,
with respect to those jobs. And I think it is becoming more and more
customary for the issuing company to designate its trustee, its trans-
fer agent, and its registrar.
Mr. Nehemkis. Let me read you from a letter just offered, from
Edwaid J. Frost, of Wni. Filene's Sons Co., to Paul M. Mazur of
CONCENTRATION OF ECONOMIC POWER 11539
Lehman Brothers, 1 William Street, New York, August 6 [reading
from "Exhibit No. 1636-1"].
What arrangements are suggested with respect to Registrars and Transfer
Agents for the new Federated Preferred Stoclf ?
In this connection, the Old Colony Trust Company and The First National
people, Boston, would like to act as Transfer Agents and Registrars, respectively.
And Mr. Mazur's reply [reading from "Exhibit No, 1636-2"] :
Ten days ago I spoke to Jack Kaplan on the telephone in reference to regis-
trarship and transfer agency for Federated.
Note the next sentence:
Generally speaking, the choice of these two offices is usually left to the
banker. Jack Kaplan told me that it was quite satisfactory for us to go
ahead and name both registrar and the transfer agent. In line with that, we
have selected J. P. Morgan & Co. as transfer agent, and have not yet reached
ii conclusion about the registrar.
So that at least one banker does think it is one of the functions
of an investment banker to have something to say about who is to
be the registrar or transfer agent.
Mr. Woods. You have apparently uncovered a difference of opin-
ion between Mr. Mazur and myself. What is the date of that letter?
Mr. Nehemkis. August 6, 1936.
Mr. Woods. Well, as I said
Mr. Nehemkis. (interposing). The reply was August 10, 1936,
and while we haven't time for it, the record will show in connection
with other letters that I have offered, dated June 26, 1937, March 3,
1938, February 28, 1938, June 20, 1938, that other bankers in your
profession apparently think that a banker has something very specific
to say about who gets a trusteeship.
As an indication of what other bankers think, I wish to read to
you a memorandum, the authenticity of which has been stipulated to
by Mr. Harold L. Stuart, under date of December 13, 1939. This is a
memorandum to Mr. F. K. Shrader, Chicago Office [reading from
"Exhibit No. 1637"] :
Samuel Armstrong, a Vice President in the Corporate Trust Department
of the Chase whom I have known for a long time, telephoned today regard-
ing the new issue of Pu1)lic Service Company of Northern Illinois, which
explained my wire to you. He inquired first whether the Bonds would be
issued under a new mortgage and apparently we do not know the answer
in this office. He then said that, of course, he was looking for trust business
and in the event that there will not be a new mortgage, he wants to go after the
New York paying agency job, unless we should be figuring on it for ourselves
in which case he would do nothing about it * * *
If there is no conflict with our interests, he has in mind having his man in
r'hicago see what he can do and will you please wire me what I should say to
him.'
I offer this memorandum in evidence, Mr. Chairman.
Acting Chairman Reece. Without objection, it will be admitted.
(The memorandum and the accompanying letter of stipulation were
marked "Exhibit No. 1637" and are included in the appendix on
p. 11727.)
Mr. Nehemkis. Mr. Woods, I show you a number of documents
which purport to come from the files of The First Boston Corpora-
» See "Exhibit No. 1669," appearing in Hearings. Part 2.S, appendix, p. 12210, for
supplementary Information on "Exhibit No. 1637."
11540 CONCENTRATION OF ECONOMIC POWER
tion. Will you be good enough to examine them and tell me whethe
they are true and correct copies?
Mr. Woods. They are
Mr. Nehemkis. They are true and correct copies?
Mr. Woods. That is riglit.
Mr. Nehekis. They are offered in evidence.
Acting Chaiiiiian A\ildsen. Without objection, they may be
admitted.
(The documents referred to were marked "Exhibits Nos. 163&-1 to
1638-5" and are included in the appendix on pp. 11727-11730.)
PREPARATION OF SOUTHERN CALIFORNIA EDISON CO. SYNDICATE
Mr. Nehemkis. About March 2, 1935, after a considerable period of
negotiation about Southern California Edison financing, your people
began to consider the problem of syndication and the various houses
that you would include in the group. I show you, Mr. Woods, a
document ^ obtained from the files of your company, showing various
syndicate percentage participations of the houses that you were con-
sidering. Is this a true and correct copy of an original in your
possession ?
Mr. Woods. It is.
Mr. Nehemkis. Are you familiar willi tliat sheet?
Have you ever seen it before?
Mr. Woods. Yes; I have seen it before.
Mr. Nehemkis. Now, I note, Mr. Woods, that you have included
20 houses in your tentative list, and against these houses you have
indicated certain order of appearances, and then you have indicated
apparently in the first typewritten draft, percentage of participations
and dollar participations, and then apparently, your syndicate man-
ager has had occasion to make various changes and readjustments.
Very briefly, will you indicate to the committee how it happens that
the various changes take place. By way of suggestion to you, are
there conversations between your syndicate manager and other houses
as to whether or not the percentage to be allotted is satisfactory,
discussions back and forth on that phase?
Mr. Woods. Well, the answer to that is technically, yes. But those
discussions have very little, if any, effect on the participations. This
list that you have, which is from our files, is a very preliminary draft
of an underwriting group which was prepared in connection with
many discussions with Mr. Bauer, the president of the Southern
California Edison Co., in the early part of 1935. It contemplates
total underwriting of $68,000,000, whereas the issue in fact was
$73,000,000, so that tliat would date this particular list, perhaps
three or four weeks in advance of the actual filing of the registration
statement.
In this particular situation, Mr. Bauer, the president of the cgm-
pany, had a few fixed and definite ideas of his own, and he indi-
cated early in the proceeding that he was going to rely on us with
respect to syndicate matters, primarily to inform him with respect
to the financial ability and the ability to perform in the matter of
distribution of the various bankers.
•Exhibit No. 1639-1," appendix, p. 11730.
CONCENTRATION OF ECONOMIC POWER 11541
Mr. Bauer encouraged members in the investment banking frater-
nity to come and discuss the contemplated financing with him, it
being his point of view that he was desirous of personally forming
an opinion of the various houses by discussion with their partners.
I don't know just who actually made the numerous changes indi-
cated on this list. I don't recognize the handwriting, but the list
was arrived at ultimately in discussion between Bauer on the one
hand and myself on the other, and I had the benefit of the point of
view of my associates who were, of course, in the East at the time,
:ind I communicated with them quite frequently.
Mr. Nehemkis. Mr. Woods, is it customary for your people who
work up the syndication to keep a series of records similar to the
one that we have been examining?
Mr. Woods. No ; it is most unusual.
Mr. Nehemkis. This is rather an unusual document?
Mr. Woods. That is right.
Mr. Nehemkis. What do you do with your preliminary records
after you get these various scratchings on the paper ? Do you destroy
them?
Mr. Woods. Dispose of them; after all, the only one that is im-
portant is the final one.
Mr. Nehemkis. Now, one statement in your testimony of a moment
ago, if I understand you correctly, you said Mr. Bauer had not exer-
cised any particular interest or veto power over the make-up of the
syndicate, but left it pretty much to your people ?
Mr. Woods. No; you misunderstood me. I said that he was very
much interested in the make-up of the underwriting group and en-
couraged bankers to come to him, although he indicated early that
he was going to leave us the business of checking up on the financial
ability and the ability of the people to distribute. He wanted our
judgment on that question.
Just generally, I would like to say, on the subject of the syndicate,
as far^s The First Boston Corporation is concerned, that our method
of approach results in a great many of these preliminary drafts of
a syndicate, all of which, as we have pointed out, are ultimately
destroyed, because there is no real purpose in keeping them.
Our buying department, the officer in the buying end of the busi-
ness— that is, the man in charge — invariably prepares a preliminary
list. Similarly, the selling-department people prepare a list. The
two lists are worked over and finally, after the buying and selling
end of the business come more or less into an agreement on the
make-up of the list, it is discussed with either Messrs. Macomber,
Addinsell, or Pope for their final approval.
The matter is discussed with the company through the buying
department as a ruiming, continuous thing. You, of course, un-
doubtedly have in mind as the result of your very complete exami-
nation of our business that during the period of preparation of the
list of underwritings, officers of the company, directors of the com-
pany, and officers and directors of that firm which has been desig-
nated as the syndicate manager, are simply besieged by requests for
participations, and the question of working those things out is not
left to any one person. They are always worked out in meeting by
various departments in our firm and the issuer.
1 1542 (X)NCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. Mr. Bauer, as a matter of fact, had a very active
part in the make-up of the s>mdicate. For example, as I recall it, he
objected to several underwriting houses being included. He didn't
want Bonbright or Byllesby in the group, and he called your specific
attention to the fact that you had omitted the Pacific Co.
Mr. Woods. Mr. Bauer has a very definite point of view about any-
thing he is associated or identified with, and anybody that is in the
immediate neighborhood never has any misunderstanding of what
his point of view it, and he did have a lot to do with the make-up
of that syndicate.
Mr. Nehemkis. Would you venture to say, Mr. Woods, that it
should be the active duty of corporate management to concern itself
with the make-up of a syndicate rather than leave it to the exclusive
judgment of a banking house?
Mr. Woods. I definitely think that, and I furthermore think that
has gotten to be a quite general practice.
Mr. Nehemkis. In other words, there is a trend in that direction?
Corporate management is assuming more and more of an active part
in the make-up of the syndicate list?
Mr. Woods. There was a trend in that direction, and I think that
objective has been pretty much achieved.
Mr. Nehemkis. Now, Mr. Woods, I show you a document ^ from
your files showing the historical participants in the business of the
Southern California Edison Co. on the 5's of 1952 which were offered
in 1927, and will you be good enough to tell me whether this as a
true and correct copy of an original in your custody and possession?
Mr. Woods. It is.
Mr. Nehemkis. And while you have that list in your hands, will
you be good enough to read off the percentage allotments that were
given to the group on that early offering?
Mr. Woods. This offering,^ which was made in the middle of Sep-
tember. 1927, indicates Harris. Forbes & Co. with an interest of 30%,
E. H. Rollins & Sons, 30% ; National City Co., 10% ; Coffin & Burr,
3% ; First Securities Co. of Los Angeles, 7% ; Blyth, Witter & Co.,
4% ; Wm. R. Staats of Los Angeles, 4% ; Security Trust Co. of Los
Angeles, 2i/o%; American National Bank, San Francisco, 2% ; Bond,
Goodwin & Tucker of San Francisco, 7i/2%-
Mr. Nehemkis. Mr. Woods, can you tell me, if you can from mem-
ory, the members of the group that composed the 1935 syndicate and
their percentage allotments?
Mr. Woods. I can't possibly do that from memory.
Mr. Nehemkis. Perhaps this will refresh your memory. This is
from your own files.
Mr. Woods. Yes; this does refresh my memory. Would you like
me to read the participations?
Mr. Nehemkis. Just give us the names of the members of the 1935
group and tell us as you go along which of those people were in the
earlier group.
Mr. Woods. In April 1935, Southern California Edison had an
issue of $73,000,000 of mortgage bonds. First Boston Corporation
had a 25 percent interest.^ We have discussed the connection between
'"EyViiblt No. ]<!30-2." appendix, p. 11731.
8 Ibid, also "Exhibit No. 1639-14." appendix, p. 11737.
CONCENTRATION OF ECONOMIC POWER 11543
First Boston Corporation and Harris, Forbes & Co. E. H. Rollins &
Sons had a 11V^% interest; in the '27 business their interest was 30%.
Blyth & Co. had a 107o interest ; in the '27 business Blyth, Witter &
Co. had a 4% interest, Brown Harriman & Co. had a 7i/2% interest;
they were not in the '27 business.
Mr. Nehemkis. Did they take anyone's place who was in the '27
business ?
Mr. Woods. That is difficult for me to say five years after. My
recollection is that we had Brown in there because they were really
very good people,
Mr. Nehemkis. Would you pass nie that historical sheet for a
moment? Would you venture the suggestion that Brown was invited
in because you wanted Brown to take the position of National
City Co.?
Mr. Woods. No; I wouldn't, Mr. Nehemkis.
Mr. Nehemkis. That is just pure coincidence?
Mr. Woods. Lazard Freres in the '35 business had a 7^2% interest.
E. B. Smith & Co. in the 1935 business had a 7i/2% interest.
Mr. Nehemkis. May I ask whether E. B. Smith was invited to
take anyone else's place?
Mr. Woods. No; I wouldn't think so. There is nobody on the old
list that might justify that thought.
D^an Witter & Co. had a 7i/2-percent interest in the '35 business.
At the time the '27 business was done, Mr. Witter was a partner of
Blyth, Witter & Co, Field, Glore & Co. had a 5-percent interest in
the '35 business. William R. Staats. Co. had It 4-percent interest in
the '35 business and that firm had a 5-percent interest in the '27
business. Kidder, Peabody & Co. had a 4-percent interast in the '35
business. Their name doesn't appear on the previous list. White,
Weld & Co., 4 percent. Their name doesn't appear on the earlier
list. Coffin & Burr, 3i/^ percent ; Coffin & Burr had 3 percent in the
"27 business. Pacific Co, of California, 2 percent. Their name does
not appear on the earlier list. Stone & Webster and Blodget, 1 per-
cent ; their name does not appear on the earlier list.
Mr. Nehemkis. I have one more question to ask you, Mr. Woods.
A short time ago, If I understood you correctly, you said that Mr.
Bauer left it to the discretion of your house to check up on the
financial responsibility of the prospective members of the under-
writing group that you were considering. How does an underwriter
go about ascertaining that kind of information ?
Mr. Woods. Well, there are various ways of having a point of view
about it. Of course, the obvious, the most straightforward way is to
ask the partners of the house concerning which the question is raised
for a statement of their condition.
Mr, Nehemkis. Do you ever have occasion to do that?
Mr. Woods. We have done it on infrequent occasions,
Mr. Nehemkis. I am sorry, I didn't hear that.
Mr. Woods. We have done it on infrequent occasions. Being in the
business, Mr. Nehemkis, on a day-to-day basis over a long period of
years, and following the general activities of the numerous firms and
partnerships, one learns to have a' point of view about the relative
ability from the standpoint of both capital and distribution of the
various firms. I wouldn't attempt in a casual, offhand fashion to
124491— 40— pt. 22 -13
11544 CONCENTRATION OF ECONOMIC POWER
describe to the committee just how one with that experience and
background goes about i^.
Mr. Nehemkis. Do you make it a practice generally, Mr. Woods,
in making up your syndicate list, to check on the financial position
or the outstanding underwriting commitments of the various houses
that you contemplate mcluding in the list?
Mr. Woods. I wouldn't put it as formally as to say that we check
on it.
Mr. Nehemkis. But you somehow or other, maybe through a
process of osmosis, get that information.
Mr. Woods. We have it in mind ; yes.
Mr. Nehemkis. I wish you would enlighten the committee as to
just how you go about it. I have perhaps mistakenly been under the
impression that that is rather confidential information. People don't
go around giving out their balance sheets unless they are subpenaed
by this committee. Just how do you get that information ? Let me
be very blunt, if I may. This is a purely hypothetical question, and
of course would never happen. Suppose your firm contemplates in-
cluding Morgan Stanley & Co., Incorporated, in a syndicate. Would
you by chance pick up the telephone and call Harold Stanley and say,
"Harold," if you so address him, "I would like to come over and get
a look at your financial condition." Would Harold say, "Come ahead,
George, I'll show it to you." Is that the way it is done ?
Mr. Woods. Well, perhaps J[ might answer you by saying that with-
in the past 3 weeks there was an issue, registered under the Securities
Act, and finally offered to the public with the various approvals re-
quired under the Holding Company Act, of a utility in Indiana, and
the president of that company addressed a letter to each prospective
underwriter and requested that the prospective underwriter, in view
of the fact that busmess was progressing, furnish him with a state-
ment of his condition as of some recent date, certified either by a
public accountant or by a competent officer of the company. That is
one way of doing it.
Another way of doing it, which is perhaps more usual, although the
way I have outlined may well be coming into fashion — I have no
opinion on that^ — is on a day-to-day basis to follow the business that
is carried on by various concerns. We have in our organization two
men who are intimately acquainted with the partners of a great
number of investment banking firms all over the country. What an
investment banker does nowadays is entirely public, there is no diffi-
culty at all to be apprised of the activities of the firm.
Mr. Nehemkis. Could you obtain the reports submitted to the New
York Stock Exchange by partnership houses as a further method of
ascertaining the capital position of a house?
Mr. Woods. I am not familiar with the conditions under which
those reports are furnished to the stock exchange.
Mr. Nehemkis. Could you possibly obtain the reports that are filed
by corporations in those States which require corporations to file
balance sheets?
Mr. Woods. Under their various "blue sky laws"?
Mr. Nehemkis. Yes.
Mr. Woods. Yes; I am quite sure that is public information.
Mr. Nehemkis. Does your house ever have occasion to utilize that?
Mr. Woods. Not to my knowledge.
CONCENTRATION OF ECONOMIC POWER 11545
Mr. Nehemkis. In other words, if I understand you correctly, the
people m your house who are intimately acquainted with this problem
and charged with the responsibility ol' knowing the financial position
o^ other houses, through the familiarity and acquaintanceships that
they have on the street, somehow or other get to know this.
Mr. Woods. They have a very good idea of the ability of the vari-
ous firms. Of course, while it is difficult to arrive at a mathematical,
so to speak, answer to the question that you have raised, since we
have been in business in The First Boston Corporation we have never
had a particle of difficulty in the direction of a failure of either an
underwriter, or, for that matter, a member of the selling group, to
take up his securities. I don't mean to say that in perhaps remote
cases one or two members of a selling group have not called up and
said they would rather cancel, but it doesn't amount to a thing and
there is usually a very good reason for it, but the system, as far as
we are concerned, work because we have been through some rather
difficult times, and as you well know there have been two or three
issues which underwriting bankers were forced to take up and pay
for on the delivery date which hadn't approached public distribution.
Mr. Nehemkis. I have no further questions, Mr. Chairman.
Acting Chairman AviiiDSEN. Are there any other questions?
Mr. Nehemkis. Before dismissing the witness, I should like him
to identify for the record several documents. Mr. Woods, do you
want to look at these documents? Will you run over them quickly
and tell me whether they come from your files ?
Mr. Chairman, you may be interested to know the witnesses whom
we propose to call for tomorrow's session before the committee. At
the morning session the witness will be Mr. Charles E. Mitchell, and
at the afternoon session Mr. B. A. Tompkins, vice president of the
Bankers Trust Co., of New York.
Acting Chairman Avildsen. The Chair also wishes to announce
that a subcommittee of this committee will meet in Room 357 of this
building tomorrow morning at 10 : 30 to resume the insurance hear-
ings.^ Mr. Herndon will be the witness at that hearing.
Mr. Woods (handing over documents) . They come from our files.
Mr. Nehemkis. I oner for the record, Mr. Chairman, this file of
documents, identified by the witness.
Acting Chairman Avildsen. Without objection they may be ad-
mitted.
(The documents referred to were marked "Exhibits Nos. 1639-1 to
1639-23" and are included in the appendix on pp. 11730-11744.)
Acting Chairman Avildsen. This committee may be adjourned
until 10 : 30 tomorrow morning.
(Whereupon at 4:40 p. m. a recess was taken until 10:30 a. m.,
Thursday, December 14, 1939.)
' Hearings on reinsurance and rewriting of insurance held before a subcommittee of this
Committee December 7, 8, 14, 15, 20, 21, and 22, 1939 ; includfd in Hearings, Part 13,
pp. 6601-6950.
INVESTIGATION OF CONCENTRATION OF ECONOMIC POWER
THURSDAY, DECEMBER 14, 1939
United States Senate
Temporary National, Economic Committee,
Washington, D. C.
The committee met at 10:45 a. m., pursuant to adjournment on
Wednesday, December 13, 1939, in the Caucus Room, Senate Office
Building, Senator 'Joseph C. O'Mahoney presiding.
Present: Senator OMahoney, chairman; Representative Reece;
Messi*s. Henderson, O'Connell, Arnold, Avildsen, and Brackett.
Present also : Charles L. Kades, Treasury Department ; Ganson
Purcell, Securities and Exchange Commission; Hugh B. Cox, De-
partment of Justice; Clifton M. Miller, Department of Commerce;
Theodore J. Kreps, economic adviser to the Committee; and Peter
R. Nehemkis, Jr., special counsel, and Samuel M. Koenigsberg, asso-
ciate attorney. Securities and Exchange Commission.
The Chairman. The committee please come to order. Mr.
Nehemkis, are you ready to proceed?
Mr. Nehemkis, I am, sir.
The Chairman. Will you call your first witness.
Mr. Nehemkis. Mr. Charles Huff, please-
TESTIMONY OF CHARLES HUFF, ASSOCIATE UTILITIES FINANCIAL
ANALYST, SECURITIES AND EXCHANGE COMMISSION, WASH-
INGTON, D. C— Resumed
Mr. Nehemkis. ]\Ir. Huff, you have -had occasion to examine the
files of Harris, Hall & Co. in Chicago, have 3'ou not?
Mr. Huff. I have.
The Chairman. You have been sworn, have you not?
Mr. Nehemkis. He has, sir.
T show you certain documents which you have obtained from the
files of that company and ask you to tell me whether they were
furnished to you by responsible officials of Harris, Hall & Co.?
Mr. Huff. Yes, sir.
Mr. Nehemkis. That is all, Mr. Huff.
Mr. Chairman, may I just explain to you, having been absent
yesterday, we were discussing the relationship between Harris, Hall
& Co., which succseded to the investment banking business of
the Harris Trust & Savings Bank of Chicago, and the relationship
of those two organizations to The First Boston Corporation.
The material which has just been identified arrived by mail from
Chicago this mornmg and of course was not available for intro-
duction to the record yesterday.
So I should like at this time to introduce this material.
11547
11548 CONCENTRATION OF ECONOMIC POWER
The Chairmajst. Without objection, the material may be received.
You wanted it printed in the record?
Mr. Nehemkis. I do, sir.
The Chaikman. It may be received for printing.
(The documents referred to were marked "Exhibits Nos. 1640-1
to 1640-45" and are included in the appendix on pp. 11746-11768.)
RELATIONSHIP BETWEEN HARRIS, HALL & COMPANY AND THE FIRST
BOSTON CORPORATION
Mr. Henderson. Do you feel that this bears on any particular ques-
tion that was up for consideration yesterday? I mean, what is the
purpose of introducing that material?
Mr. Nehemkis. I think, sir, if it is the pleasure of the committee,
the question can readily be answered by a slight reading of two of
the documents. Thus, for example, a letter from Mr. Hall to Mr.
John E. Barber, vice president of the Middle West Corporation,
dated December 4, 1935 [reading from "Exhibit No. 1640-39"] :
I am writing you to say that the firm of Harris, Hall & Company is actively
engaged in business, having joined in underwriting several old Harris utility
issues and having up for consideration several originations of our own.
You know, I think, that we have succeeded to the corporation bond business of
the Harris Trust and Savings Bank. Under the Banking Act of 1933. the
Bank can no longer perform its longstanding function as investment banker for
a large group of corporations, many of them utilities. We have thought that
the passing of the Harris Trust and Savings Bank out of this field in Chicago,
left a gap and we are going to attempt, with due modesty, but with lots of
confidence, to fill this gap. We think we have fallen heir to a unique position
in the Middle West and are anxious to bring before your Company our facilities
for serving you.
And the other letters are of a similar tenor. Now you may recall,
Mr. Commissioner, and gentlemen of the committee, that the question
was put to witness Woods yesterday whether pursuant to the old
agreement that existed between the Harris Trust & Savings Bank and
Harris, Forbes and Company, Harris Hall, the successor to the busi-
ness of the bank, had attempted to claim any of the new business of
First Boston, pursuant to the old arrangement, and the next telegram
bears upon that point.
This is a telegram from Mr. G. B. Heywood, to Norman W. Harris
of the Harris Trust & Saving Bank, dated November 4, 1935, and
Mr. Henderson (interposing). WTio is the writer of the telegram?
Mr. Nehemkis. Mr. Heywood is an official, I believe, of Harris,
Hall & Co. Is that correct? [to Mr. Huff.]
Mr. Huff. He is vice president.
Mr. Nehemkis. I call to your attention that the telegram is directed
to the bank. The first word was apparently a code word, which
means Los Angeles Gas & Electric Co. officials [reading from "Ex-
hibit No. 1640-1"] :
" — say deal ell made with underwriters too late include us. Only chance
would be to get Blyth who will head deal to give us position stop Plense pass
information on to Bower —
Bower being an officer of Harris, Hall —
and Hall and suggest they see Blyth in New York soon as possible.
Regards.
G. B. Heywood.
CONCENTRATION OF ECONOMIC POWER 11549
Now, the evidence yesterday ^ showed that Blyth & Co., at the re-
quest of Mr. Addinsell, gave up an interest in that business so as to
take in Harris, Hall & Co., and these documents are further cor-
roboration of the line of testimony which was presented to you
yesterday.
Mr. Henderson. You mean the line of inheritance?
Mr. Nehemkis. That is a more accurate statement ; thank you, sir.
Mr. Miller. Mr. Nehemkis, if I may ask, are any witnesses being
called from Harris, Hall & Co. with relation to these documents that
you are introducing?
Mr. Nehemkis. It is not contemplated, sir, to call any witnesses
from that company unless it is the pleasure of the committee to do
so. It had seemed to us that Mr. Woods was competent to discuss
the whole matter, and at that time these documents were not avail-
able to us, and you will recall only two documents were introduced
yesterday from that particular firm, and it seemed like an imposition
to ask somebody to come from Chicago merely to identify two
documents.
Mr. Henderson. Let me ask you this, Mr. Counsel : Harris, Hall is
aware of what documents have been taken by the investigators?
Mr. Nehemkis. Yes; it is always our practice to sign a statement
in which all documents taken from the files are enumerated, and that
statement is left with the official who has been aiding the particular
member of the staff.
Acting Chairman Reece (as the chairman leaves the table tempo-
rarily). Without objection, the documents referred to may be
received.
Mr. Nehemkis. I should like to call as our first witness this morn-
ing Mr. Charles E. Mitchell.
Acting Chairman Reece. Do you solemnly swear the testimony you
are about to give in this proceeding shall be the truth, the whole
truth, and nothing but the truth, so help you God?
Mr. Mitchell. I do.
TESTIMONY OF CHARLES E. MITCHELL, CHAIRMAN, BLYTH & CO.,
INC., NEW YORK, N. Y.
Mr. Nehemkis. Mr. Mitchell, will you be good enough to state your
full name and address, please ?
Mr. Mitchell. Charles E. Mitchell.
Mr. Nehemkis. And what is your present business connection.
Mr. Mitchell?
Mr. Mitchell. Cliairman, Blyth & Co., Inc.
Mr. Nehemkis. And prior to that what was your business connec-
tion and association ?
Mr. Mitchell. Just prior thereto I had a small corporS,tion of my
own and did some business, and prior thereto I was chairman of the
National City Bank of New York and the chairman of the National
City Co.
Mr. Nehemkis. Mr. Mitchell, in response to a communication from
me dated August 18, 1939, did you cause to have prepared certain
1 Supra, p. 11528.
11550 CONCENTRATION OF ECONOMIC POWER
schedules showing the originations and participations and profits of
Blyth&Co.?
Mr. Mitchell. I did.
Mr. Nehemkis. I show you a document which purports to be those
schedules and ask you to identify this document.
Mr. MiTCHEix. That is the document furnished.
Mr. Nehemkis. I ask that the document identified by the witness
be marked for identification.
Acting Chairman Reece. It may be so marked.
(The document referred to was marked "Exhibit No. 1641" for
identification.)
Mr. Nehemkis. There was, Mr. Chairman and gentlemen of the
committee, offered in evidence yesterday a letter ^ from a former
associate of Mr. Mitchell's, Mr. Eugene M. Stevens, to Mr. Harris
Creech, president of the Cleveland Trust Co. With leave of the
committee, I should like at this time to read a passage from that
letter [reading from "Exhibit No. 1604"] :
As I have said, Mr. Mitchell, the Chairman of our Board, was formerly the
head of the National City Company and of the National City Bank, and is
responsible for the development of the National City Company from a three man
personnel to a point where it had become the largest organization of its kind
in the country, all of which was entirely under his leadership. He, in fact,
was ultimately responsible for the negotiation and consummation of the
pieces of financing which the National City Company did. It would definitely
appear, therefore, that if there is any claim for the National City business as a
heritage, that we could make such a claim — perhaps on better grounds than any
other investment banking firm.
And the committee will also recall the testimony of Mr. George
Leib, a fellow officer of Mr. Mitchell. The question was put to Mr.
Leib:
Mr. Nehemkis. Now, 1933 was also the year which witnessed the pa.ssage of
the Banking Act. That meant, did it not, Mr. Leib, that certain individuals that
formerly had commercial banking connections would be free to make new con-
nections with investment banking firms?
Mr. Leib. That is correct.
Mr. Nehemkis. And about tlie time that you came to your Now York oflSco for
the purposes which you have described you began looking about for an individtial
to take into the firm, someone who had broad contacts on the street, a person
who knew, shall we say, the "deer runs" of the Wall Street district, do you recall?
Mr. Leob. I recall that our New York office had not made any headway and
we were very active, very anxious to get someone in New York who could be
helpful in developing eastern business. The word "deer ru'ns" is a word I
think you get from one of ray letters. I may have used it. It means to bo
familiar with the investment banking activity as it exists in the East, just as
we were with the investment activity existing in the West. That means to
have pei^sonal contacts with the executives of the large companies of ■ issue,
to be familiar, to have known them for years, to have known the financial
set-ups of a great many companies back here. That was what we were
working to do, very assiduously.
Mr. Nehemkis. And you found that individual who knew, if I may again quote
your excellent phrase, the "deer runs'' of the Wall Street district in the i)erson of
Charles E. Mitchell, did you not?
Mr. Leib. He was found for us.
Mr. Mitchell, can you tell me who found you for Mr. Leib?
Mr. Mitchell. I am sorry I can't.
.' See "Exhibit No. 1604," appendix, p. 11665.
CONCENTRATION OF ECONOMIC POWEli 11551
Mr. Nehemkis. I thouglit possibly as 1 read the transcript over
last night that you might have been able to enlighten me as to who
the finder was.
Mr. Henderson. I would suggest a finder's fee.
Mr. Nehemkis. Heaven forbid, Mr. Commissioner !
IfETURN OF ''tHK MORGAN PEGPEE*' TO THE INVESTMENT BANKING BUSINESS
Mr. Nehemkis. Mr. Mitchell, I show you a letter written by you to
your San Francisco partner, Mr. Charles Blyth, dated July 31, 1935.
Will you examine it and tell me whether this is a true and correct
copy of the original in your files?
Mr. Mitchell. Excuse my time.
Mr. Nehemkis. Quite all right.
Mr. Mitchell. It is.
Mr. Nehemkis. It is a true and correct copy ?
Mr. Mitchell. I would say so.
Mr. Nehemkis. It is identified by the witness and is offered.
The Chairman. The letter may be received.
(The letter referred to was marked "Exhibit No. 1642" and is
included in the appendix on p. 11768.)
Mr. Nehemkis. The letter reads:
I am satisfied as a result of my talk witli Whitney^ —
Is that Mr. George Whitney ?
Mr. Mitchell. Yes.
Mr. Nehemkis (reading further) :
this afternoon that th^ Morgan people will shortly be back in the investment
banking business, possibly within the next fortnight and certainly by the first
of September. I think they are waiting at the moment to see if the underwrit-
ing amendment in the banking bill will pass, and regarding this they are more
optimistic than they have been.
Mr. Mitchell, was that one of the subjects of your conversation
with Mr. Whitney at the time?
Mr. Mitchell. I assume it was. When was that letter written?
Mr, Nehemkis. This was written July 31, 1935. To the best of
your recollection?
Mr. Mitchell. It must have been.
Mr. Nehemkis [reading further from "Exhibit No. 1642"'] :
If it does not pass I am sure they are prepared to act in another direction, my
guess being that they will set up Drexcl & Company as an investment banking
house, leaving J. P. Morgan & Company in the commercial banking business.
May I assume also, Mr. Mitchell, that that subject ^vas part of
your discussion with Mr. Whitney?
Mr. MiTCHEix. I can hardly say so. If I hazard a guess, I would
say that it was probably not a subject that was discussed.
Mr. Nehemkis [reading further from "Exhibit No. 1642] :
I have a feeling that their re-entry in one form or another will be to our
benefit.
By that you meant, to the benefit of Blyth & Co. ?
Mr. Mitchell. I would have said, it would have been to the benefit
of the Street and Blyth. What I had in mind at that time I can't
say, but certainly to the benefit of the entire situation.
11552 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. I think you had that in mind, as the next phrase
indicates. [Keading further:]
As they will be constructive in leadership and I am sure will count us as
close allies.
How did you envisage, Mr. Mitchell, that the return of the Morgans
to business would constitute constructive leadership ?
Mr. Mitchell. I think after 25 years of experience in the Street
t hat that was a sound assumption on my part.
Mr. Nehemkis. Well, I wonder if you couldn't expound that just
a little more?
How did the Morgans manifest constructive leadership in the
banking business?
Mr. Mitchell. I would say that from the time the investment
banking business was conducted by J. P. Morgan & Co., in my experi-
ence, and I would say as well with respect to commercial banking
and general banking business, that that firm stood at the very peak
as to ethics, understanding, and leadership, always working for the
best, and making order many, many times out of chaos.
Mr. Nehemkis. Would you say, Mr. Mitchell, that other members
of the financial community likewise regard the House of Morgan as
symbolizing constructive leadership in the business?
Mr. Mitchell. I would say so. Of course, no man is so great that
he hasn't enemies.
Mr. Nehemkis. Continuing with this letter ["Exhibit No. 1642"] :
The only lingering doubt that I have regarding our position in their groups —
Did that mean the Morgan syndicates?
Mr. Mitchell. That is, such groups as might be» made up by any-
one, by anyone handling the investment banking business.
Mr. Nehemkis. I was inquiring, Mr. Mitchell, about the phrase,
"their groups"? Did that mean the Morgan syndicates to be organ-
ized in the future ?
Mr. Mitchell. Yes.
Mr. Nehemkis [reading further from "Exhibit No. 1642"] : '
lies in the fact that historically they have what you and I would probably
consider an undue respect for capital and are inclined to use that yardstick
in their line-ups to far too great a degree.
Now, don't the Morgans have other yardsticks than capital? For
example, shall we say, the historical relation of a h&use to a piece of
business ?
Mr. Mitchell. Mr. Counselor, I think that I expressed myself
quite accurately there when I said they perhaps put too great a
stress, too great emphasis. Of course, they consider all of these other
things and the historical relation, but I think I expressed my thought
accurately in that statement.
Mr. Nehemkis. Then you continued [reading further from "Ex-
hibit No. 1642'']:
I am sure that they —
meaning the Morgans —
are already laying out fall business in volume.
By "they" you meant the Morgans?
Mr. Mitchell. Yes.
Mr. Nehemkis. Because you have earlier indicated
CONCENTRATION OF ECONOMIC POWER 11553
Mr. Mitchell (interposing). Mr. Whitney was the one I had
talked about.
Mr. Nehemkis [reading]
I am sure that they are already laying out fall business in volume.
I assume that you had that impression as a result of your talk with
Mr. Whitney? '
Mr. MrrcHELL. I would not go that far, Mr. Counselor. I think
that the Street, in general, knowing what financing would have to
come, and knowing that financing to have been the business of J. P.
Morgan & Co., knowing that new financing must come, would assume
that there was being laid out financing in volume from that mass of
business.
Mr. Nehemkis. If I understand correctly what you are saying, Mr.
Mitchell, it was the general impression on the Street that the old
Morgan accounts were coming up for refunding, maturities had to
be met, and the Morgans would continue to handle that business.
Mr. Mitchell. I think that is a fair assumption. I hope that in
these letters you realize that I am writing informally to a partner
of mine and not selecting my words for interpretation in a hearing
sucli as this sort. It is rather my general impression, stated at that
time, and to go back and pick words out of the air 5 years back is
a little difficult.
Mr. Nehemkis. I assume that is correct and I shall try and help
you as much as possible in that particular.
To continue with the letter [reading from "Exhibit No. 1642"] :
and that this will include a substantial amount of Telephone business and,
I regret to say, Consolidated Gas business.
Do you recall the reason for the phrase, "I regret to say, Consoli-
dated Gas business," Mr. Mitchell?
Mr, Mitchell. Yes ; I recall that quite well.
Mr. Nehemkis. Well, I will have occasion at a later moment to
go into the subject with you. I wanted to be sure your memory
was clear on the subject.
Now, at the time that you became chairman of the board of Blyth
& Co., were you not indebted to J. P. Morgan & Co. in a considerable
sum?
Mr. Mitchell. I certainly was, and the world knew it.
Mr. Nehemkis. Are you indebted now?
Mr. Mitchell. I am not.
Mr. Nehemkis. One of the reasons which made you extremely
valuable to Blyth & Co. was the extent of your intimate relations
with the firm of J. P. Morgan & Co., was it not?
Mr. Mitchell. Oh, I would say my knowledge of the Street,
through a very long period of years, but I doubt very much, indeed,
if Blyth & Co. became interested in me at all through my special
acquaintance with J. P. Morgan & Co.
Mr. Nehemkis. Now, after you wrote to your partner on the west
coast, Mr. Blyth, you received from him a letter of reply. I show
you that letter dated August 2, 1935, and ask you to tell me whether
it is a true and correct copy of an original in your possession?
Mr. Mitchell. Such a bad copy. You are going to read this,
aren't you ?
Mr. Nehemkis. Well, I hope to be able to read it.
11554 CONCENTRATION OF ECONOMIC POWER
Mr. Mitchell. I will grant that it is true, but a very bad copy.
Mr. Nehemkis (to assistant). Do you have any mimeographed ma-
terial that Mr. Mitchell might look at?
Tlie letter identified by the witness is offered in evidence.
The Chairman. It may be received.
(The letter referred to was marked "Exhibit No. 1643'' and is in-
cluded in the appendix on p. .)
Mr. Nehemkis [reading from "Exhibit No. 1643"] :
I'm not particularly concerned that J. P. Morgan & Co. are going to return
to the investment banking business — it was inevitable. Our main job is to
get under the covers and as close to them as is possible.
Now, I think I know what that phrase means, but I wonder if you
couldn't enlighten me and perhaps clarify it so that there might not
be any misunderstanding.
Mr. Hendkrson. We can go on without that.
Mr. Nehemkis (reading further) :
While I recognize the eloquence of adequate capital, I also am a believer in the
efficacy of strong personal relationships. That you have such with the Llorgan
institution is a certainty. * * ♦
Of course Morgan & Co. will naturally fall heir to some of the bigger utility
accounts, but that doesn't mean they won't recognize us in a substantial way —
certainly in distribution and probably also in underwriting.
I suppose Mr. Blyth had in mind such accounts as Niagara
Hudson ?
Mr. Mitchell. I can't tell you what Mr, Blyth had in mind. He is
a very picturesque writer and I would not attempt to fathom his
mind through his letters.
Mr. Henderson. You think of those letters as having a literary
quality ?
Mr. Mitchell. A very fine literary quality.
the ILLINOIS BELL nXEPHONE FINANCINO, 19.1.5
Mr. Nehemkis. I show you a letter dated September 26, 1935, from
you to your associate, Mr. Blyth, and ask you to tell me whether that
is a true and correct copy of an original in your possession ?
Mr. Mitchell. I remember such a letter and grant that it is.
Mr. Nehemkis. The letter is offered. This letter is dated Septem-
ber 26, 1935.
Evidence previously introduced into the record indicates and
shows that Morgan Stanley & Co. was organized on September 15,
so that it would appear this letter was written 11 days after the
organization of Morgan Stanley & Co. It reads as follows [reading
from "Exhibit No. 1644"] :
Harold Stanley, of the new firm of Morgan, Stanley & Company, asked me to
lunch with him yesterday and we had an hour and u half's discussion, the
main points of which I am sure you will find of interest.
He opened the conversation by saying that he wanted to get the bad news
off his chest first and he was doing that not only because of our relation, but
because George Whitney, who had to leave town the night before for several
days, asked him particularly to see me and explain the situation. The bad
news was that we were not going to bo in the underwriting of the boll Telephone
of Illinois.
As I recall it, Mr. Mitchell, that was one of the first of the offerings
under the leadership of Morgan Stanley, is that correct?
Mr. Mitchell. I' think so,
CONCENTRATION OF ECONOMIC POWER 11555
Mr. Nehemkis. I am particularly impressed by the fact that Mr.
George Whitney, a partner of J. P. Morgan & Co., should have been
constrained to ask his former partner and associate, Mr. Harold
Stanley, to inform you that it was not possible for your firm to have
a position in the Illinois Bell Telephone underwriting group. Isn't
that somewhat anomalous, Mr. Mitchell ?
Mr. Mitchell. I can't make an assumption of that sort.
Mr. Nehemkis. Do you recall having this conversation?
Mr. Mitchell. Oh, yes, indeed.
Mr. Nehemkis. And there is no question that Mr. Stanley told you
what you wrote?
Mr. Mitchell. I don't think I would have put it in the letter if
it was not so.
Mr. Nehemkis. And j'ou can't indicate why it was necessary for
Mr. George Whitney to convey this information ?
Mr. Mitchell. No.
Mr. Nehemkis. Isn't it a fact that Mr. George AVliitney at the time
was actively engaged in the make-up of the syndicate list of the
telephone issue?
Mr. Mitchell. I don't know anything about that.
Mr. Nehemkis [reading from "Exhibit No. 1644"] :
To make a long story short, they fiound that if they were to go beyond the
very short underwriting list that they have, and are bound to more or less
by past relations to the business, to a point of including us, they would
necessarily have to include four or five firms more. * * *
He added that not having our name on theke first three pieces of business
that they are going to do is a real embarrassment to them, as they recognized
it must be to me, because they are very anxious indeed to give public evidence
to the close relationship that they have always had with me, and continue to
feel. He said that he could assure me in every way that there would never be
an issue where our name as a possible underwriter would be forgotten —
Mr. Mitchell (interposing). May I interrupt? That is the type
of word that is used in a letter that may be misleading. The word
"embaj-rassed" is used. I don't believe I have ever had a talk with
Harold Stanley where I found that he was embarrassed about any-
thing. [Laughter.] And I certainly have never experienced a feel-
ing of embarrassment in talking with him. That is a word that slips
into an intimate letter that has not been carefully chosen. You will
excuse the interruption.
Mr. Nehemkis. Certainly, sir. I understand.
Mr. Henderson. Mr. Chairman, could you not assure the witness
that .when he wants to give his own interpretation of a word used,
this committee has always permitted that.
The Chairman. Well, I think that is quite well understood with
respect to the processes of this committee. I am curious to know
what your definition' of the word is. As it was used, I mean.
Mr. Mitchell. I would say that I probably mean that after our
very, very long years of relationship, Howard Stanley was a little
sorry that circumstances didn't make it possible for our entry in that
business, and frankly, I think I was more sorry than he. [Laughter.]
But as far as embarrassment, Senator, I would hardly say that there
was that between Stanley and myself.
Mr. Nehemkis. Do you recall, Mr. Mitchell, what the circumstances
were that made it impossible for Mr. Stanley to include your firm in
that first telephone business that Morgan Stanley brought out?
Mr. Mitchell. I didn't get the question.
11556 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. I said, do you recall the circumstances that madb
it impossible for Mr. Stanley to include your firm in the early Tele-
phone ofi'ering?
Mr. Mitchell. No ; I would have to guess at that. I don't recall the
circumstances well enough to testify to it.
UTILITY HOLDING COMPANIES TO WHICH MORGAN STANLEY & CO.,
INCORPORATED HAD SUCCEEDED J. P. MORGAN & CO. AS BANKER
Mr. Nehemkis. May I continue [reading from "Exhibit No. 1644"] :
He was good enough to say that he considered that there was no one on the
Street with whom he had had as close relations in the issuance business over
a long period than myself, or whom he considered, by reason of talliing the
same language, could be more helpful than I could.
I am skipping to the second page.
Stanley was particularly interested in what our policy might be with regard
to the distribution of preferred or common stocks. I told him the name of a
security meant little to me as I could name many preferreds that were better
than bonds, and many commons that were better than preferreds, and I felt
that our policy would be to handle any security that was prime in the category
in which it was placed. I told him that we were now looking into a prime
public utility common stock with the idea of developing a syndicate for national
distribution and he expressed the hope that we would find conditions right to
go ahead with this kind of business, and indicated that with the probable ne-
cessity of breaking up stock holdings of some of the public utility holding cor-
porations that they had to do with, they would be glad to see such a house as
ours to whom they could turn.
I am a little bit puzzled by that paragraph, Mr. Mitchell, because
I have had no understanding, until I read this letter, that Morgan
Stanley & Co. ever had any stockholdings in public utilities. Am I
correct in assuming that the reference to "they" was to J. P. Morgan
&Co.?
Mr. Mitchell. I wouldn't say so. I would think it was the holding
companies to which I referred in that letter.
Mr. Nehemkis. Yes; and I also referred, as I have read, to the
break-up of stockholders of some of the public utility holding corpo-
rations that they had to do with. Now, Morgan Stanley do not hold
stock in public- utility corporations?
Mr. Mitchell. Holding companies that they had to do with, not
stock that they had to do with.
Mr. Nehemkis. Let me continue then [reading from "Exhibit No.
1644"] :
they would be glad to see such a house as ours to whom they could turn
Turn for the distribution of such stock?
Mr. Mitchell. Yes.
Mr. Nehemkis. Well, now, it then cannot obviously refer to Morgan
Stanley.
Mr. Mitchell. The second "they" obviously refers to Morgan Stan-
ley. The first "they" refers to the holding companies. ■
Mr. Nehemkis. Well, now
The Chl^mrman (interposing). What paragraph are you reading?
Mr. Nehemkis. On the third full paragraph on page 2. I think I
would normally not dwell on the point, Mr. Chairman, but I think it
is a problem here involving a little more than grammar. I am
going to, if I may, Mr. Mitchell, read to you once again that sentence
CONCENTRATION OF ECONOMIC POWER 11557
with which we differ on the use of the word "they" and see if you
can't enlighten me [reading from "Exhibit No. 1644"] :
and indicated that with the probable necessity of breaking up stock holdings of
some of the public utility holding corporations that they had to do with * * *
Now, that first "they"; I will put the question specifically. You
indicate by your own answer which it refers to. Does "they" refer
to J. P. Morgan & Co. ?
Mr. Mitchell. No.
Mr. Nehemkis. To whom does it refer?
Mr. Mitchell. The holding company, the holding companies that
they, Morgan Stanley & Co., had to do with.
Mr. Nehemkis. Now I ask you another question. Wliat do Morgan
Stanley have to do with holding companies? Morgan Stanley is an
underwriting house. They don t hold stock in utility holding com-
panies, they distribute securities. Are you sure that you didn't have
in mind J. P. Morgan & Co., which at that time dir" iiold stock in
utility companies?
Mr. Mitchell. I am very sure of niy intent in that sentence.
Mr. Henderson. Mr. Nehemkis, could I ask a question there? This
letter, Mr. Mitchell, was written within 11 days, I think, after the
formation of Morgan Stanley, am I correct in that?
Mr. Nehemkis. That is correct, sir.
Mr. Henderson. Had they, Morgan Stanley, brought out any
issues relating to holding companies in those 11 days?
Mr. Mitchell. No, Mr. Conmiissioner ; but I think that I was
assuming tliere that Morgan Stanley would succeed to the invest-
ment-banking business that had been carried on by J. P. Morgan &
Co., and would be the entity in touch with the issuing companies, for
whom J. P. Morgan & Co. had acted.
Mr. Henderson. Thank you.
Mr. Nehemkis. Mr. Commissioner, I was interrupted; I am sorry.
I have not heard the full answer of the witness. May I havt it read,
please*
(The preceding question and answer were read.)
Mr. Nehemkis. Continuing with the letter [reading from "Ex-
hibit No. 1644"] :
Incidentally, speaking of public utilities he —
Stanley —
voluntarily remarked that while he did not want to be committed, he would
personally consider that my contact with Consolidated Gas and its subsidiaries
in past years would justify the expectation that Blyth & Co. would be in the
second underwriting position in that business as it develoi)ed, and he thought
he would want to be talking to me about future financing for that Company
within the next ten days. I judge this would be on business likely to develop
before the end of the year.
Mr. Mitchell, I show you a letter.
The Chairman. ,Have you finished with that letter ?
Mr. Nehemkis. I have sir.
The Chairman. Have you developed to your own satisfaction the
meaning of the second clause in that paragraph with all the "theys" ?
Mr. Nehemkis. I have not developed it to my full satisfaction,
but apparently Mr. Mitchell is unable to clarify his own rhetoric.
11558 CONCENTRATION OF ECONOMIC POWER
The Chairman. Well, it is not a matter of rhetoric; I think it is
a matter of understanding. Ma}' I ask you one or two questions
about it, Mr. Mitchell?
Mr. Mitchell. Certain l3\ sir.
The Chaikmax. Do you have a copy of the letter?
Mr. MiTCHEix. Yes; I have it.
The Chaihmax. If there is anything significant in the clause, I
would just like to get it clear.
Mr. Mitchell. May I ask what paragraph that is?
The Chairman. Page 2, the third full paragraph, "Stanley was
particular * * *." I am referring now to the four last lines of
that paragraph. Let's read the whole sentence [from "Exhibit No.
1644"] :
I told him that we were now looking into a prime public utility common
stock with the idea of developing a syndicate for national distribution and
he expressed the hope that we would find conditions right to go ahead with
this kind of business.
Now it is all perfectly clear up to there. "And indicated" — now T
assume you mean "I indicated."
Mr. Mitchell. No; I think that means he indicated.
Mr. Nehemkis. Stanley indicated.
The Chairman. All right, then, that means that he indicated, that
Stanley indicated, reading as it was intended to convey the meaning
[reading further] :
that with the probable necessity of breaking up stock holdings of some of the
public utility holding corporations that they had to do with
Now what does that "they" mean?
Mr. Mitchell. That "they," Morgan Stanley & Co.
The Chairman. Morgan Stanley & Co.
Mr. Mitchell. Who I assumed had succeeded in the relationship
of J. P. Morgan & Co., to such issuing companies.
The Chairman. All right; "had to do with, they would be glad";
what does it mean ?
Mr. Mitchell. They, Morgan Stanley & Co.
The Chairman [reading]
Would be glad to see such a house as ours to whom they could turn.
Mr. Mitchell. Morgan Stanley & Co.
The Chairman. So you wish the committee to understand "they"
refers to Morgan Stanley & Co. ?
Mr. Mitchell. Yes.
The Chairman. And no other outfit?
Mr. Mitchell. Yes.
Mr. Miller. Mr. Commissioner, might I ask a questions of the
witness ?
Mr. Mitchell, just why was Morgan Stanley interested in develop-
ing a subject of distribution of equities ? Was that the type of busi-
ness that they normally did, or was it not the type of business?
Mr. Mitchell. No; I would say it was not the type of business
that J. P. Morgan had done, and Mr. Stanley, through this con-
versation, very evidently had given me the impression that that was
business that they would not be likely to do.
Mr. Miller. But Blyth & Co. had done that type of business
and had the distributing organization?
Mr. Mitchell. Yes, Mr. Miller ; we had.
CONCENTRATION OF ECONOMIC POWER 11559
Mr. Nehemkis. Mr. Mitchell, I show you a letter from your Cali-
fornia partner, Mr. Blyth, addressed to you, dated September 30,
1935. Will you examine the letter and tell me whether it is a true
and correct copy of a letter in your possession or custody?
Mr. Mitchell. I recall this letter and grant that it is a true copy.
Mr. Nehemkis. Thank you, Mr. Mitchell. I ask that the letter be
offered for the record.
(The letter referred to was marked "Exhibit No. 1645" and is
included in the appendix on p. 11771.)
The Chairman. Before we proceed, will you please indicate which
of these letters you want to go into the record? They have been
accumulating here. They have not been marked.
Mr. Nehemkis. The letter dated July 31, 1935, if the committee
please, I should like to have admitted in full.^ The letter dated
August 2, 1935, I should like to have printed in full. Similarly with
the letter dated September 26, 1935.
The Chairman. These three letters may be admitted to the record
for printing.
(The letters referred to were marked "Exhibits Nos. 1643 and 1644"
and are included in the appendix on pp. 11769 and 11770.)
Mr. Nehemkis. Your partner, Mr. Blyth, wrote to you on Septem-
l)er 30, 1935, as follows — I skip to the fourth paragraph [reading
from "Exhibit No. 1645"] ;
Your talk with Harold Stanley was by no means disappointing to ine. I do
not for one minute tliink that we can expect to preempt the entire field of
original financing and in all cases be a major participant or the originator.
It also seems true that, notwithstanding discontinuance of the City Company,
Guaranty Company and others, that their mantles have fallen, to a considerable
extent, upon Brown Harriman, E. B. Smith, and so on.
I think, Mr. Mitchell, that you have indicated in your previous
testimony that the mantle of J. P. Morgan & Co. had fallen to a con-
siderable extent upon Morgan Stanley.
Mr. JSfiTCHELL. Yes; but I would never grant what Blyth put in
his letter.
_Mr. Nehemkis. I did not ask you whether you granted it. We are
discussing Mr. Blyth's letter. At the appropriate time you can tell
me in response to a question what you thought. Let's wait until we
come to it.
Mr. Mitchell. All right.
Mr. Nehemkis (reading further from "Exhibit No. 1645") :
Otherwise Stanley wouldn't have apparently felt obligated to a continuation
of certain groups formerly associated together, even though under different
names. ASide from your personal relationship with the Morgan firm, and
perhaps the scarcity of major league players, there is no particular reason
why Morgan Stanley should do more for us than the business advantages
involved in the deal would amount to. If they adopt a policy of taking positions
in other business, as Kuhn Loeb does and if we are able to bring them business
which shows substantial profits, that is a horse of another color.
Now, Mr. Mitchell, you have at the outset of your testimony iden-
tified for me certain materials which has come from your files, and
one of the letters ^ which I had occasion to offer in evidence referred
to a conversation, which you had with Mr. Stanley in regard to the
possible inclu ion of your firm in second position in Consolidated Gas
» Admitted supra, p. 11551, as "Exhibit No. 1642."
a "Exhibit No. 1647," appendix, p. 11773.
124491 — 40 — ^pt. 22 14
11560 CONCENTRATION OF ECONOMIC POWER
financing. Has your firm been given second position in Consolidated
Gas financing?
Mr. MrrcHEiiL. It has.
POSITION or BLYTH & CO. IN THE CONSOLIDATED EDISON CO. FINANCING
PERCENTAGE PARTICIPATION OP BLTTH & CO. TO PARTICIPATION OE
MORGAN STANLEY & CO., INCORPORATED
Mr. Nehemkis. In all financing of Consolidated Edison Co., as it is
now known?
Mr. Mitchell. Yes; it has.
Mr; Nehemkis. I note, Mr. Mitchell, that your firm not only has
second position, but it has the largest percentage participation of any
member of the underwriting group in all of the Consolidated Edison
and subsidiaries' financing. Thus, for example, in the first piece
of financing your percentage participation was 40 percent, exceeding
that of any other house and being second alone to Morgan Stanley.
In the second piece, your participation was 40 percent. In the third.
41 percent; in the fourth, 41 percent; in the fifth, 42 percent; in the
sixth, 33 percent; in the seventh, again, 33 percent; and, continuing,
33 percent, 31 percent, and until the mo^t recent, 40. Always, the
second highest position to Morgan Stanley, always exceeding all other
members of the underwriting group.
Mr. Mitchell. It sounds right, except those percentages.
Mr. Nehemkis. These percentages have been compiled from the
registration statements relating to the respective issues and from the
files of the S. E. C. If you wish, Mr. Mitchell, you can have one of
your technical men examine these percentages as they appear in the
record, and if yoii find any error, you can, at an appropriate time,
offer corrections.
' Mr. Mitchell. I simply raise the question because I know that as
to thei whole, if I understood your statement, you say that of the
total issue we underwrote 40 percent.
Mr. Nebcemkis. No; your percentage participation in the under-
writing was 40 percent.
Mr. Mitchell. Forty percent of what?
Mr. Nehemkis. This table is expressed as percentages of Morgan
Stanley & Co., Incorporated, participations in each issue. You got
40 percent of what Morgan Stanley underwrote.
Mr. Mitchell. Ah; 40 percent of <^^eir participation; is that it?
Not 40 percent of the issue.
Mr. Nehemkis. No; it couldn't be. There wouldn't be anything
left for Morgan Stanley & Co.
Mr. Mitchell. Yes ; 60 percent would be left.
Mr. Nehemkis. Well, there were 40 other underwriters.
Mr. Mitchell. That is why I question it.
Mr. Nehemkis. Do you have any questions about it now, is it
thoroughly clear now ?
Mr. Mitchell. I assume that you are correct, if that shows it,
that we had 40 percent.
Mr. Nehemkis. Of the amount underwritten by Morgan Stanley?
Mr. Mitchell. Yes. In other words, if Morgan Stanley under-
wrote $10,000,000 out of the $50,000,000 issue, we had $4,000,000.
CONCENTRATION OF ECONOMIC POWER 11561
Mr. Nehemkis. Right. And where I say, you had a S^Vs-percent
participation, that means you had a participation amounting to
331/^ percent of what Morgan Stanley underwrote?
Mr. Mitchell. That is right.
Mr. Nehemkis. I'm sorry if I was not quite clear at the outset.
Mr. MrrcHELL. That's all right.
Mr. Miller. I am not clear, Mr, Nehemkis. When you say 40
percent, does that mean the relation between the amount that Mr.
Mitchell's firm had, as compared with what Morgan Stanley had^
They were not subunderwriters, they were not taking part of Morgan
Stanley's share?
Mr. Nehemkis. No; Mr. Mitchell gave a very correct illustration,
I think. If Morgan Stanley on a $50,000,000 issue took for itself
$10,000,000, Mr. Mitchell's firm's participation would be, as the per-
centages indicate, 40 percent of the $10,000,000, or, in another in
stance, perhaps 30 percent of the $10,000,000 taken by Morgan Stanley
& Co., and so on.
Mr. Miller. Then it is the relationship; it is not part of Morgan
Stanley's?
Mr. Nehemkis. Oh, heavens, no. The relationship of the amount
taken by Blyth & Co. that was underwritten or taken by Morgan
Stanley. Is that clear, sir ?
Mr. Miller. Yes; it is.
Mr. Nehemkis. Fine.
Now, Mr. Mitchell
The Chairman (interposing). Has this table been offered?
Mr. Nehemkis. It has not.
The Chairman. Do you want to ?
Mr. Nehemkis. Not necessarily, unless you care to have it in, sir.
I have given it to the record.
Mr. Mitchell, from information which you have furnished us, the
participations of Blyth & Co. in the Consolidated Edison business
amounted to $33,750,000, and your profits in that business, before
overhead, amounted to $375,703.
Mr. Chairman, I am going to offer a table. The fundamental data
from which this table was prepared has been identified by the witness.
The table is now offered.
Mr. Mitchell. Mr. Chairman, I am perfectly content so long as
on all of these figures of profits it will be recognized that they are
gross profits, and I wish that I could say that gross and net were
pretty close figures, but in our business they are not.
The Chairman. Well, the table ^ handed to me contains several
columns of figures, one of which is labeled "Size of issue" ; one under
a subhead of "Participations," is called "Amount"; and the next,
"Percent of total," then the final column is entitled "Net profit before
overhead."
Mr. Mitchell. That is all right, so long as you understand, Sena-
tor, that profit before overhead is gross profit, and that there is a
very great difference between gross and net. I don't think I need to
tell anybody that.
The Celaibman. That is clearly understood.
Who prepared this?
' "Exhibit No. 1646," appendix, p. 11773.
11562 CONCENTRATION OF^ ECONOMIC POWER
Mr. Nehemkis. Prepared by the staff of the Commission.
Mr. AviLDSEN. Why did they use the word "net," instead of "gross'' 'i
Mr. Nehemkis. We didn't. Oh, I beg your pardon. It does appear.
I think that must be taken from Blyth's own material.
The Chairman. What is your definition of that phrase, "Net profit
before overhead"? Let's get an understanding between the S. E. C.
and the witness.
Mr. Nehemkis. I am not interested in giving any definition. That
is taken from the material submitted by Blyth & Co.^
The Chairman. But when it is prepared, you understand what
you are submitting.
Mr. ]\IiLLER. Are these really profits, or commissions? Do you
think gross profits, or are they simply the spread between the issue
price, and the price paid to the company? Are they gross commis-
sions or really profits?
Mr. MiTCEiELL. Well, we hope that they are profits, but when any-
thing is set down as a profit before overhead, 1 am never sure it is a
profit in the ultimate. It means
The Chairman (interposing). You are making a distinction, then,
between the actual profit, which is finally measured, and that which
you call net profit before deducting the overhead ?
Mr. Mitchell. Precisely.
The Chairman. That is all you want to be understood as saying, in
'iefining this phrase?
Mr. Mitchell. That is right.
The Chairman. With that understanding, the table is admitted.
(The table referred to was marked "Exhibit No. 1646" and is
included in the appendix on p. 11773.)
Mr. Henderson. This footnote is from the material supplied by
Blyth & Co.,^ and it is a footnote to the heading, "Net Profit Before
Overhead, see Footnote." I now read the note :
Net profit before overhead. The figures shown are the gross profit less syndi-
cate expense, documentary tax stamp and other direct expense or losses attrib-
utable to the particular issue. No deductions have been made for salesmen's
compensation or general operating overhead of any character.
The Chairman. I think that is what the witness was trying to
bring out.
Mr. Mitchell. Thank you very much.
Mr. Nehemkis. Mr. Chairman, I ''hould like, howe^-er, that the
record be perfectly clear that the phrase "net profit" was taken from
the official records of Blyth & Co.
The Chairman. Ye^, sir.
Mr. Mitchell. Thank you, sir.
Mr. Nehemkis. Mr. Mitchell, were you not fomerly a trustee of
Consolidated Gas Co.?
Mr. Mitchell. I was.
Mr. Nehemkis. Was Mr. Floyd Carlisle a trustee of Consolidated
Gas Co.?
Mr. Mitchell. He was.
Mr. Nehejsjkis. Is Mr. Carlisle presently known to you?
Mr. Mitchell, He is.
i "Exhibit No. 1641," supia, pp. 11549-11550, which was marked for ident'flcatlon only.
CONCENTRATION OF ECONOMIC POWER li0t)5
Mr. Nehemkis. Is it not a fact, Mr. IMitchell, that you were instru-
mental in obtaining a position on the board of trustees for Floyd
Carlisle ?
Mr. Mitchell. I would say that that was a true statement.
Mr. Nehemkis. Is it not also a fact, Mr. Mitchell, that you were
instrumental in obtaining a position on the board of directors of
Consolidated ^^^as Co. for Mr. George Whitney, partner of J. P.
Morgan- & Co.?
Mr. Mitchell. If I was, it was very incidental. I think that with
some stretch of the imagination that might be true, but I certainly
was not fully responsible for his coming on the board.
Mr. Nehemkis. Mr. Mitchell, I show you a letter from you to
your California associate, Mr. Blyth, dated October 5, 1937. I ask
you to examine the stamp at the bottom of that letter containing
your name and tell me whether in your judgment this is a true ana
correct copy of an original in your possession.
Mr. Mitchell. Yes.
Mr. Nehemkis. The letter is offered for the record, Mr. Chairman.
The Chairman. The jptter is received.
(The letter referred to was marked "Exhibit No. 1647" and is in-
cluded in the appendix on p. 11773.)
Mr. Nehemkis. I read to you, Mr. Mitchell, from the letter you
wrote to Mr. Blyth ["Exliibit No. 1647^'] :
I talked the Consolidated Edisou situation over with him —
Meaning Stanley —
ihoroughly and after ceding (1) that I had been instrnmental in bringing Floyd
Carlisle into that situation ; (2) that I had been influential in getting a position
on the Board for George Whitney, and (3) that Carlisle had promised me in
the Spring of 1935 that if Morgan & Company did not get back into the investment
banking business, the financing of Consolidated Edison would be thrown over
to me, he —
Meaning Stanley —
allowed that we had a real right to our present position in all Consolidated
Edison business and assured me that if there was any rearrangement in the
account we would in no case be cut in percentage beyond the percentage cut that
Morgan Stanley themselves took ; in ether words our jwsition would be
maintained.
Mr. Mitchell, do you want to add anything to the former statement
you made as to how Mr. Whitney obtained his position?
Mr. MrrcHELL. No. It supports exactly what I said.
discussion with FLOYD CARLISLE RELATR-E TO FITTURE CONSOLIDATED
EDISON CO. BUSINE.SS
Mr. Nehemkis. Now, did you, as your letter would indicate, dis-
cuss the prospective financing of Consolidated Edison and its sub-
sidiaries with Mr. Carlisle in the spring of 1935 ?
Mr. MrrcHELL. Yes ; I did.
Mr. Nehemkis. And Mr. Carlisle agreed that you might have the
leadership in that business if the Morgans didn't return to the invest-
ment-banking business ?
Mr. Mitchell. Well, since we are harping on words I would light
on that word "agreed." I would say that that was an improper use
of the word for that discussion.
1 1564 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. Well, since you talked this over with Mr. Car-
lisle, what word would you suggest ?
Mr. Mitchell. Well, let me give you the fact. In the National
City Bank, in the National City Co., the financial operations, issues
of the Consolidated Gas Co. and subsidiaries, had been carried on for
a great many years, in fact long before I became connected with the
institution, which was in 1916. During that entire time it had hap-
pened that I personally had been the one to sit down with the com-
pany officials and to arrange their financing. I think it might be
truthfully said that I knew as much about their finances as any single
man on the street and I personally had been the contact between the
City Bank, the City Co., and the Consolidated Gas Co. and subsid-
iaries. Knowing their financial structure and with the historical
past, as it was, I recall that Mr. Carlisle in the spring of 1935, at a
time when I had gone to him for his personal advice to me as to
the acceptance of an invitation from Blyth & Co. to join them and
the relative value to me of an invitation that had come concurrently
from another large house, he had voluntarily said to me — I won't
attempt to give the exact words, but approxunately this — that if I
returned to the investment-banking business as contemplated in our
discussion, that he would think it proper and likely that I would be
qualified to continue financial advice and relations with the Con-
solidated Gas Co., and he made this proviso (again I don't pretend
to quote his exact words), he said — "This is assuming that the invest-
ment banking business formerly conducted by J. P. Morgan & Co. is
not carried on by them through some other organization. Under those
circumstances I would think that it was proper that they — whoever
they might be" — I don't like this, I am getting all mixed up with this
word "they" — "would be the likely house for Consolidated Gas Co. to
turn to, and if that occurs, I think you can be assured in any event of
very great consideration."
Now, you see, that is very far from agreement. He didn't agree
with me about anything. There was only one blow struck, and with
his having that I was content to go out of the door, but I don't think
I could call it an agreement.
Mr. Nehbmkis. The word used in your letter of October 5, 1937,
Mr. Mitchell, was "promised me." ^ Shall I continue to use the word
"promised" ?
Mr. Mitchell. Well, "promised me" is a
The Chairman (interposing). There is a song about that, Mr.
Mitchell.
Mr. Mitchell. I was thinking of that. There is some sentiment in
it, and it certainly is not an agreement. If it had been promised me
it would be in the law courts all the time.
The Chabrman. Well, I think what you are getting at is that by the
use of the woiai "agree" and the use of the word "promise" you did
not mean that there was any binding agreement that would be up-
held in a court of law, but perhaps that there was an understanding?
Mr. Mitchell. A distinct intimation — let's put it that way, sir.
The Chairman, On which you thought you would rely ?
Mr. Mitchell. Yes.
Mr. Nehemkis. Mr. Mitchell, the earlier financing of Consolidated
Gas had been under the leadership of the National City Co., had it
not?
9thU>tt No. 1647."
CONCENTRATION OF ECONOMIC POWER 11565
Mr. MiTCHELii. It had, yes.
Mr. Nehemkis. Now, I am a bit confused by the fact that Mr.
Carlisle indicated to you at the time of your discussion that if the
Morgans didn't return to business, the intimation was that you might
have this business. Now, why the interjection of the Morgans?
They had no claim on this business. They had never been the leader.
You had always been the leader. They had been a mere participant.
Would you care to clarify that situation for me ?
Mr. Mitchell. Well, at that time, Mr. Whitney was a member of
the board of directors, I was not. Mr. Whitney had been on the
board, I think, of the United Corporation, which was the largest
single holding of the shares of Consolidated Gas Co. This is my
recollection. I think that Mr. Carlisle's reaction was quite proper
and quite correct.
Mr. Nehemkis. Now, Mr. Mitchell, as I recall the letter, on or
about October 5, 1937, you discussed this situation with Mr. Stanley.
You were writing about that conversation?
Mr, Mitchell. You are referring to this letter?
Mr. Nehemkis. Yes, sir; that is correct.
Mr. Mitchell. Yes.
Mr. Nehemkis. And Mr. Stanley conceded your various conten-
tions, (1) that you had been instrimiental in bringing Floyd Carlisle
into the picture, and (2) that you had been helpful in getting George
Whitney on the board. That is correct, isn't it ?
Mr. Mitchell. Yes.
Mr. Nehemkis. And that as a result of your efforts in behalf of
the House of Morgan, Mr. Stanley conceded that Blyth was entitled
to the second ranking position in Consolidated Edison financing?
Mr, Mitchell. Mr. Counsellor, I think you are assuming some-
thing in that question that I have not testified to at all.
Mr. Nehemkis. I want to be thoroughly sure that I don't mis-
understand you.
Mr. Mitchell. Well, you are saying this, as I understand it, that
because I had been influential in getting Mr. George Whitney on the
board, I was entitled to special consideration from the firm of Mor-
gan Stanley, with respect to Consolidated Edison business.
Mr. Nehemkis. Now, is that not correct ?
Mr. Mitchell. That is as I understood you.
Mr. Nehemkis. That was the inference I was drawing. Do you
say it is improper?
Mr. Mitchell. Yes; because
Mr. Nehemkis. Why?
Mr. Mitchell. Because the real reason why we were entitled to
that — and, in my opinion, why Harold Stanley thought we were en-
titled to that — was the very close contact that I haa had with Con-
solidated Gas financing over a long period of years. I would say
that, knowing Harold Stanley, these reasons in here were purely inci-
dental to that long relationship. If I were going to claim any
rights— and I am not any different than a lot of other fellows on
the Street, I claim a lot of things that are the bunk, [Laughter.]
I'd slide over those claims and base it very definitely on my per-
sonal understanding of the affairs of Consolidated Gas Co. over a
period of years and the help that Blyth & Co., by virtue of the knowl-
edge that I personally had, could be in that situation.
11566 CONCENTRATION OF ECONOMIC POWER
Mr. Nekemkis. Mr. Mitchell, witnesses that have appeared before
the committee have indicated the situation similarly to what you are
saying. In other words, business in the investment banking field has
a habit of following certain individuals, men get associated with a
piece of financing and that financing follows them?
Mr. Mitchell. Just exactly as it would be in a law office,gentlemen,
or in any other type of business. Yes; I would say that business
generally, especially where it is of a personal and professional char-
acter, follows the individual.
Mr. Nehemkis. Just as, for example, you Avere the man in the
National City Co. who probably knew more about Anaconda than
the others, you were intimately associated with its affairs, you under-
stood the ramifications of it, so it was inevitable that when new
financing came ground and you transferred to a new association, that
business followed you ?
Mr. Mitchell. I don't want to be a stickler on words, but that
word "inevitable" I don't like.
Mr. Nehemkis. Weil, it gravitated toward you?
Mr. Mitchell. I would say that the chances were more favorable
to me than to anybody else.
Mr. Nehemkis. As I recall the situation, Mr. Stanley Russell, who
appeared here yesterday, was also interested in that business, wasn't
he?
Mr. Mitchell. Yes; and not only Stanley Russell. There were
others that were interested.
Mr. Nehemkis. Was Mr. Ripley interested?
Mr. Mitchell. Of course, Mr. Ripley was interested.
Mr. Nehemkis. Wliy do you say "of course"? That is an mter-
esting phrase.
competition in investment banking
Mr. Mitchell. This is a monopoly investigation. My long expe-
rience on the Street tells me that the investment-banking business is a
dog fight. There is no monopoly about it, gentlemen. And -where a
piece of business presents itself every house is immediately inter-
ested, and there is more or less of a scramble. Now, when you are
going directly to an issue you have to go in a very dignified manner
and you have got to have a real road to travel. You can't just go
down because you think somebody is going to lilce the color of your
eyes. It's got to be a real basis for an approach.
Now, when I say that Mr. Ripley was interested in that business,
that is exactly what I mean.
Mr. Stanley Russell was interested in the business. I could name
other houses that were interested in the business, and actively inter-
ested in trying to get it.
Mr. Nehemkis. But the fact remains, that when the financing
ultimately came out, you got it?
Mr. M'itchell. That is the ver}' important fact, we were really
the only matter of importance in the entire situation. [Laughter.]
Mr. Nehemkis. I am glad you recognize that, Mr. Mitchell.
[Laughter.]
Now, in connection with your conversatiim with Mr. Stanley, when
yvu. were discussing the Consolidated Edison situation, Mr. Stanley
CONCENTRATION OF ECONOMIC POWER 11567
conceded your right to a very important position in that financing,
because as you say, your past relationship
Mr. Mitchell (interposing). Are you speaking of Anaconda?
Mr. Nehemkis. No; returning to Con. Gas. Mr. Stanley con-
ceded your right to a substantial place in that business because of
your past relationship?
Mr. Mitchell. A right of claim, I would say.
Mr. Nehemkis. And, according to the testimony already offered,
that right has ripened.
In other words, you have indicated to me, and the testimony so
shows, that your firm has always had second position in Consolidated
Edison and subsidiary financing and the second largest amount after
Morgan, Stanley; right?
Mr. Mitchell. Well, you used "right" a couple of times, now
Mr. Nehemkis (interposing). Is that correct, sir?
Mr. Mitchell. Rights — I don't — ^there is no legal right.
Mr. Nehemkis. I am sorry, you mir^understood me.
Mr. Mitchell. I see words — since we are discussing words — that
creep in here. I noticed some testimony that came into somewhere
that I have seen in the last day or two, the words "right" and "pro-
prietary."
Mr. Nehemkis. Mr. Mitchell, I think you should answer my ques-
tion.
Mr. Mitchell. I am going to answer your question, if the Com-
missioner will permit me to do it. I simply want to say that when
I use the word "right," or when you use it in this case, I want it
understood it is a right to claim. It is an ethical and moral term.
There is nothing legal in it ; nothing whatsoever.
Mr. Nehemkis. I think you are unduly sensitive to the use of
words, and the confusion has arisen because I asked a question after
my sentence. Unfortunately, I used the word "right," meaning "is
that correct?"
Mr. Mitchell. I don't know who started this discussion about
words.
Mr. Nehemkis. Well, let's proceed, sir. I think we may get along
all right.
The Chaibman. We may have to bring Mr. Webster before we are
through.
Mr. Henderson. Or the semantics experts. But I just have one
question; may I ask it?
Right in line with what you have been saying concerning the dis-
tinction between the legal and the ethical or moral right, is it not a
fact that this right to claim — I think that is the way you express
it — very frequently does develop into a piece of businesvS, and that a
large number of the pieces of business folloMing the divorcement did
go along the lines of those Avho had the right to claim ?
Mr. Mitchell. Or thought they had.
Mr. Henderson. Well, I accept that.
Mr. Nehemkis. Now, your right to claim — and I use your phrase,
sir — the second position in the Consolidated Gas business has always
been maintained. You have always had that position?
Mr. Mitchell. Please understand, I have never claimed second
position in that business.
11568 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. You were given it?
Mr. Mitchell. We were given it.
Mr. Nehemkis. Now, in March, toward the end of March of 1936,
the Consolidated Edison Co. brought out a $60,000,000 issue, and the
number of underwriters was increased in that issue from 29 to 66.
Do you recall that piece of financing, Mr. Mitchell ?
Mr. Mitchell. Yes.
Mr. Nehemkis. And what was your firm's position in that syndi-
cate ? Did it remain second place ? -
Mr. Mitchell. Yes, sir.
Mr. Nehemkis. Do you recall what Morgan Stanley's interest was ?
Mr. Mitcheix. In dollars of underwriting?
Mr. Nehemkis. Yes; in rough amount.
Mr. Mitchell. No ; I don't.
Mr. Nehemkis. About $9,000,000?
Mr. Mitchell. I couldn't tell without reference.
Mr. Nehemkis. Mr. Mitchell, I show you a memorandum written
by you dated March 29, 1936, to members of your staff. I ask you
to examine this memorandum and see if it doesn't refresh your
memory.
Mr. Mitchell. Well, this is the type of usual record I make for
the executive committee.
Mr. Nehemkis. What was Morgan Stanley's interest in that piece
of financing?
Mr. MrrcHELL. It was stated that it will be $9,000,000.
I don't know whether it was actually that or not.
Mr. Nehemkis. At the time you wrote this memorandum, what did
you understand, even though the underwriting group was to be in-
creased from 29 to 66, that Blyth ft Co.'s position would be ?
Mr. Mitchell. Exactly what is stated here.
Mr. Nehemkis. What is stated?
Mr. Mitchell. $3,600,000.
Mr. Nehemkis. Is that second position?
Mr. MiTCHEix. It is.
Mr. Nehemkis. That is all I wanted to have you tell me, sir. The
memorandum, identified by the witness, is offered in evidence.
The Chairman. It may be received.
(The memorandum referred to was marked "Exhibit No. 1648"
and is included in the appendix on p. 11774.)
Mr. Nehemkis. Now, so far as you can tell, will Blyth & Co. con-
tinue to have second position in Consolidated Edison business?
Mr. Mitchell. I think as long as they deserve it, though I regard
nothing as static in the investment banking business or the position
of firms in underwriting.
The Chaibman. How will they continue to deserve it?
Mr. Mitchell. By being helpful in the financing, as it occurs, by
showing that in initial distribution, interest as we may have it in
trading, contacts with various holders and our treatment of their
interest, as long as Blyth & Co. maintain the services and the scope
and the position that it has today, I would say that that second posi-
tion was well assured.
The Chairman. Who is to be the judge as to whether or not Blyth
& Co. does maintain that position ?
CONCENTRATION OF ECONOMIC POWER 11569
Mr. Mitchell. It is difficult for me to say, because that is some-
thing that is usually determined by the issuer and the head of the
account. Sometimes entirely by the issuer, sometimes in other pieces
of business entirely by the underwriting group manager. In this
case, I assume that it would be the issuer, plus Morgan Stanley &
Co., assuming they were to lead the account.
The Chaieman. What circumstances are there then that enter into
the determination of the relative positions of these various houses?
Mr. Mitchell. Senator, I assume that when any house is selected
to act as manager of an account, their first thought is the success of
the business. That is number one.
The Chaikman. By that you mean, the success of the flotation and
the distribution <
Mr. Mitchell. Yes. Second, historical relationship. If a certain
house of good reputation has been connected with a piece of business
historically over a period of years, and is eliminated, let us say, to
make the case extreme, eyebrows are raised. Is there some difficulty
between the issuer or the house of issue, or is this particular house
degrading and gone down to a place where they should be elimi-
nated? If a, house maintains its position and has been historically
connected with Tarious issues of the issuer, that house has a right to
be considered, and the management, looking to the good of the busi-
ness, will give consideration to historical relationship. Now, there
are other things that are considered by the manager of an account.
Certain houses, for instance, have been specialists, let us say, in
public utilities, certain have been specialists in rails. Those houses
would have to be considered by a manager in accordance with his ex-
pertness to judge. Their names, for instance, in the utility issue, the
name of a house that has been known particularly as a utility house
would add to the prestige of the issue itself as it came out, if their
name were attached. That is something that is always considered.
Then, geographical — we would say that if an issue had to do with
the Pacinc coast, let us say it comes out of a company operating
specially on the coast, coast underwriters should be particularly con-
sidered. It is advantageous for the issuer, it is advantageous for the
business itself to have the support of the houses that are geographi-
cally located where their knowledge of the particular business would
be considered as prime. Again, in the selection of an underwriting
group, and I put this last because I frankly think that it is the last
of all to be considered, is the reciprocal relation between one house
and the house that may be considered.
Now, that combination, and probably several other things that in
my hasty answer to your question I have left out of mention, consti-
tute what passes through the mind of the manager of an account
when he is making up a syndicate.
The Chairman. With regard to a large number of these accounts,
it would appear that the relative position of the different houses
remains approximately the same?
Mr. Mitchell. Yes; and yet. Senator, as I said earlier in this hear-
ing, I don't believe that the investment banking business and the
position of the various houses in the field of investment banking can
be static at all, and I don't believe in the static character of any
account.
11570 w-ONCENTltATlON OF ECONOMIC POWER
Frankly, with a house that is coming along as I consider my house
is coming along, that is my claim.
The Chairman. Now, this is as you have testified, not by way of
any hard and fast legal agreement that could be upheld in court, but
a sort of gentlemen's understanding of those concerned?
Mr. Mitchell. Yes. There are a great many accounts on which
there is no gentlemen's understanding at all — accounts that are made
up where the members of the account have been told or should know
if they have not been told that their position may be very different
in the next piece of business. It is a matter of reconsideration.
There are few accounts I consider truly frozen.
Mr. Nehemkis. Is this an account you consider truly frozen?
Mr. Mitchell. I would hope it wouldn't be.
Mr. Nehemkis. As far as Blyth & Co. would be concerned up to
the present time — -I suppose there have been eight or nine issues —
your position having remained fixed, would you regard your position
as frozen or crystallized ?
Mr. Mitchell. I would hope that it wasn't frozen just so long as
we deserve it, and the minute that Blyth & Co. in their service ren-
dered and ability to serve degrades, if that should ever happen —
while I am choosing words I would rather put it that way
The Chairman. Which you hope will not happen, and which you
will endeavor to >?ee does not happen. [Laughter.]
THE telephone ACCOUNT
Mr. Mitchell. I will do my best. But if that should happen, I
wouldn't consider that they had a right to that position, and I don't
believe whoever is the leader of an nccoiuit would consider it so,
either.
The Chairman. Noav, those irozen accounts, to use your phrase, are
the most desirable accounts, I take it, those which are issued by
corporations of permanent standing, of good reputation, the securities
of which the public might desire to have?
Mr. Mitchell. You can't be trulj' comprehensive of the situation
in making that remark. There are certain accounts that are frozen
to a far greater extent than other.-. T*"'<^v instance, what we know as
the Telephone account.
The Chairman. Is that a frozen account?
Mr. Mitchell. As to its leadership and the first few names on that
account, I think it is more nearly frozen, perhaps, than most
accounts.
Mr. Nehemkis. Who is the leader of that account?
Mr. Mitchell. Morgan Stanley.
Mr. Nehemkis. And who are the first few names on that account?
Mr. Mitchell I would rather go back to the records than to try
to give it to you from memory.
Mr. Nehemkis. Will you have that available for us when we
resume this afternoon? ^
Mr. Mitchell. Yes ; I will.^
Mr. Nehemkis. Roughly speaking at this particular moment, can
you tell me about how nuiny houses are in that particular group in
^ Infra, p. 1157:1.
CONCENTRATION OF ECONOMIC POWER 11571
a frozen, crystallized group? Roughly your assistant will give us
the exact figures later.
Mr. Mitchell. I would say, offhand, six or eight hduses,
Mr. Nehemkis. Blyth & Co. is not one of those companies?
Mr. Mitchell. We are not; we hope to be.
Mr. Nehemkis. But you are not yet?
Mr. Mitchell. No.
Mr. Nehemkis. Is Brown Harriman one of those frozen houses in
that account?
Mr. Mitchell. I am going to produce a list for you.
The Chairman. The houses are not frozen ; it is the issues.
Mr. Nehemkis. Mr. Chairman, it is getting rather late. I wonder
if you want us to conclude.
The Chairman. Mr. Mitchell was about to explain his view of a
particular frozen account when we interrupted him. You said, for
example, the Telephone account.
Mr. Mitchell. The leading names on that account, I would say,
was as nearly a frozen account as any. Mind you, I don't say any
of them are frozen. If they are, I would lie down and say there is
no use fighting. So I won't grant that is a frozen account. I say it
is an account that has been held together as those top names for a
good many years, and I hope that it won't always be so.
The Chairman. Wliat is the effect of this practice upon the issues
themselves, upon the rates of interest that obtain, and upon the result
to the issuer?
Mr. Mitchell. Oh, on those big accounts, bv and large, I think
that the issuer has always gotten top prices.
The Chairman. You don't think that this plan of operation by
gentlemen's understanding, dividing the issue among a number of
nouses, eliminates any competition among these houses with respect
to the issue?
Mr. Mitchell. No; I frankly don't. That price is set as a rule
by the leader of the account. Morgan Stanley are the head of that
account, and if they didn't give that company the most favorable,
treatment that the market would afford they would not only jeopard-
ize their position with the company but they would lose their prestige
on the Street. They must continue to do the fine job that they have
done over the years or they lose their prestige and no *irm has held it
any better.
The Chairman. And this is the way it is done?
Mr. Mitchell. This is the way it is done.
The Chairman. By dividing the account in certain definite pro-
portions, approximately, among certain selected firms?
Mr. Mitchell. In this particular case. Senator, I think it could
be said that the historical relation of firms to the Telephone business
was given particular consideration. I mentioned several things that
are considered, but in the Telephone account the historical relatioi>
is given preponderance of consideration.
The Chairman. Does this plan of dividing an issue in this man-
ner have the effect of excluding from participation houses which
might otherwise have participated?
Mr. MiTCHiXL. Senator, it is my experience that if a house comes
up, it doesn't matter how far down the line, but if it comes forward
it is going to get increasing consideration. It will start way down
11572 CONCENTRATION OF ECONOMIC POWER
in the selling group and it will come forward high in the selling
group, and the first thing you know you will find them entering the
underwriting group and if they go on to a higher position of ef-
ficiency and importance, they will go higher constantly in the under-
writing group.
Mr. Nehemkis. Mr. Mitchell said, if I heard him correctly, that
in Telephone financing the historical relation is given prepondenant
consideration. Do you know that of your own personal knowledge?
Mr. Mitchell. Oh, no ; I know it from observation only, and when
I say I know it I assume that to be from my observation.
Mr. Nehemkis. We are almost finished, sir, with this phase of
the examination.
There are about two or three more questions, and I think this is
a good place to adjourn. I just want to button up the testimony Mr.
Mitchell has given.
I want to return — we have been on a long detour, Mr. Mitchell —
to your correspondence on October 5, 1937, with Harold Stanley with
reference to Consolidated Gas financing. I am going to read you
once again what you wrote ai that time to your associate, Mr. Blyth
[reading from "Exhibit No. 1647"] :
He-
Stanley —
allowed that we had a real right to our present position in all Consolidated
Edison business and assured me that if there was any rearrangement in the
account we would in no case be cut in percentage beyond the percentage cut
that Morgan Stanley themselves took. In other words our position would be
maintained.
In other words, if there should be any percentage rearrangement
in the account of Consolidated Gas financing, your altered position
will never be any worse proportionately to that of Morgan Stanley's.
Mr. Mitchell. You have used the word "never." I think that
I would certainly not let that carry through except in the immediate
future. In other words, I think that is what Stanley meant, and it
is certainly what I conceived, and I certainly never conceived the
word "never."
Mr. Nehemkis. That is all, sir.
The Chairman. Are there any other questions to be asked of Mr,
Mitchell at this time ?
When the committee adjourns, it will be the adjournment of the
public session. The members of the committee are requested to re-
main in the room for just a few moments. The committee will stand
in recess until 2 o'clock.
(Whereupon, at 12 : 20 p. m., the committee recessed until 2 p. m.
of the same day.)
AFTERNOON SESSION
The meeting resumed at 2:20 p. m.. Chairman O'Mahoney
presiding.
The Chairman. The committee will please come to order.
Mr. MrrcHELL. May I ask, just for the accuracy of the record, there
is some confusion, even in the mind of the stenographer, I know, as
to a question and answer this morning. As I understood, this was
(X)NCENTRATION OF ECONOMIC POWER 11573
the question : "Were you not indebted to J. P. Morgan & Co. in a con-
siderable sum?"
Answer : "I certainly was, and the world knew it."
The next question: "Are you indebted now?"
And the answer was: "I am not." Is that according to the record?
The Chairman. That was my understanding of your answer.
Mr. Mitchell. I just wanted to clarify that.
Mr. Nehemkis. Mr. Mitchell, we left off this morning with a dis-
cussion of Telephone matters. You were good enough to indicate to
the committee that you would make available certain infoi-mation.
Let me repeat to you some of the questions at this time. You had
this to say :
Mr. MiTCHEix. There are certain accounts that are frozen to a far greater
extent than others. For instance, what we know as the Telephone account.
The Chaieman. Is that a frozen account?
Mr. MiTOHEHX. As to its leadership and the first few names on that account,
I think it is more nearly frozen, perhaps, than most accounts. * * *
Mr. Nehemkis. Roughly speaking at this particular moment, can you tell me
how many houses are in that particular group, in a frozen group? ♦ * *
Mr. Mitchell. I would say, offhand, six or eight houses.
Does that refresh your recollection on it ?
Mr. Mitchell. It does.
Mr. Nehemkis. Have you available now, sir, what you indicated
you would produce.
Mr. Mitchell. I have.
Mr. Nehemkis. And now will you tell me which of those six or
seven houses are regarded as being members of the Telephone group ?
the telephone group
Mr. Mitchell. I would say that for a long period of years — and I
give that from recollection — the business has been headed by J. P.
Morgan and latterly, by Morgan Stanley & Co.; and there have
always been in that group, always, according to my recollection,
Kuhn, Loeb & Co. ; Kidder, Peabody & Co. ; Lee, Higginson & Co. ;
and latterly, Lee Higginson Corporation. Since Morgan Stanley &
Go. have handled this financing, those names have headed the list.
There have also followed them in all of the issues, the First Boston
Corporation ; Brown, Harriman & Co. ; and Edward B. Smith & Co.,
and those names, by and large, have been the names that have appeared
in the public advertising.
Mr. Nehemkis. And it was that list of names and those underwrit-
ing houses which you have just enumerated that you regard as being
the group?
Mr. Mitchell. Those names have appeared so often with the head
of the group, with the head of the underwriting syndicate, that I
would say tnat they were regarded as the principal names in the
Telephone business. I would say that in certain issues, that list has
been materially enlarged. If I might be permitted to just expand
on that for a moment, in October 16, 1935, being the first issue of the
Illinois Bell Telephone Co., to which reference was made this morn-
ing, in that issue there were nine underwriters and the names which I
have given headed the list and two others only were added, Mellon
11574 CONCENTRATION OF ECONOMIC POWER
Securities Co., and Bonbright & Co., and their names did not appear
in the public offering of the issue, advertising and prospectus.
The second issue was the Southwestern Bell Telephone Co. issue,
made on December 12, 193^, an issue of $44,000,000, in which the list
of underwriters Avas increased by (me. In other words, 10 under-
writers.
Mr. Nehemkis. But the same seven names appeared ?
Mr. Mitchell. The same nine names as previously, and tlie firm of
Dillon, Reed was added.
Mr. Nehemkis. May I just interrupt you for a moment so that the
record may be clear? I asked you whether the same seven names that
you originally enumerated also appeared in the Southwestern Bell
issue?
Mr. MncHELii. They did.
To continue: The third issue Avas an issue of April 16, 1934, $30,-
000,000 of the Pacific Telephone & Telegraph Co. The number of
underwriters in that issue was 10, and consisted of those 7 names
previously mentioned, and Blyth & Co., Incorporated, Dean Witter
& Co., and Harris, Hall & Co.
The next issue was the large issue of October 15, 1936, an issue of
$150,000,000 of American Telephone & Telegraph Co. That issue had
47 underwriters, and in addition to the particular names enumerated
before, wlio headed that list, were — I will simply state the first 3 or
4— Blyth & Co.. Incorporated, Mellon Securities Corporation, Bon-
bright & Co., Lazard Freres.
The next issue was again an issue of the American Telephone &
Telegraph Co., offered on December 2, 1936. At that time the under-
writing list was extended to 97 names.
Mr. Nehemkis. Did the first seven houses appear in the same order
as in the previous issues?
Mr. Mitchell. The first houses were as before, they were followed
by Blyth, Mellon, Bonbright, and Lazard.
The next issue was an issue of the Pacific Telephone & Telegraph
Co., dated December 17, 1936, a smaller issue of $26,000,000, and 10
underwriters.
Mr. Neitomkis. Of the first seven, then, I take it, the original
group appeared?
Mr. Mitchell. And in addition to those seven names, Blyth &
Co., Dean AVitter & Co., and Harris, Hall appeared.
And the next issue was an issue of $42,500,000 of Southern Bell
Telephone & Telegraph Co., dated May 5, 1937. In that issue there
were 48 underwriters. The names previously mentioned were the
only ones appearing.
The next issue was the New York Telephone & Telegraph Co., an
issue of $25,000,000 on June 24, 1937, with the same list of houses
appearing and only one additional underwriter, making eight in
total, that underwriter being Harris, Hall.
The next i,ssue, an issue of $27,750,000, Mountain States Telephone
S: Telegraph Co., brought out under the date of June 9, 1938. In
that issue there were 37 underwriters, the same names appeared as
heretofore in the advertising and were followed by Blyth, Bon-
bright, Mellon Securities, and Lazard Freres.
CONCENTRATION OF ECONOMIC POWEK 11575
The next issue was $28,900,000 Southwestern Bell Telephone Co.,
brought out July 14, 1938. There were 43 underwriters. The same
names as originall}' stated were the ones appearing in the adver-
tising.
The next issue, and the last, was $22,250,000 Southern Bell Tele-
phone & Telegraph Co., dated July 20, 1939, the issue was under-
written with 47 names and was advertised under the same names as
we first mentioned.
May I add, it is an unusual situation that persists, I think, through-
out this Telephone business. For instance, in the issue of December
2 there was $140,000,000, there were
Mr. Nehemkis (interposing). That is the American Telephone &
Telegraph Co. issue?
Mr. Mitchell. Yes. There were 97 names in these issue \ The
unusual feature appears of the manager of the account guaranteeing
to the issuer the responsibility of the underwriters. You will bear
in mind that over a long period of years, the underwriting house
first bought the issue outright, then formed a separate banking group
that might be followed by a purchase group and a selling group.
The underwriter, the principal underwriter, took the sole responsi-
bility. Since we had the Securities Act, it will be borne in mind
that the responsibility of the underwriters is several.
Now, when one finds a list of 97 names scattered all over the coun-
try, we meet immediately the problem of due diligence on the part
of all of these underwriters and the work of the underwriting mana-
ger, the work of the lawyers, becomes doubled and redoubled. In
fact, I will say that one of the principal difficulties in the long under- '
writing list today is to really satisfy the requirements of the law
on the subject of due diligence by underwriters. I am making that
point in passing, Mr. Chairman, as a point of particular interest,
and I mention it because in this Telephone financing we find some-
thing that is rather unusual. The obligation is several, ordinarily,
but in these Telephone issues, Morgan Stanley guaranteed to the
issuer the responsibility of their entire vmderw^riting list.
The Chairman. Well, Morgan Stanley would undertake the pri-
mary responsibility. That is what you mean?
Mr. Mitchell. Yes.
The Chairman. Now, how about the other underwriters ?
Mr. Mitchell. The other underwriters assume the same responsi-
bility that they do where it is distinctly a several obligation.
The Chairman. But do they do it on independent investigation?
Mr. Mitchell. They are supposed to. Not necessarily independent,
but they are supposed to.
Tlie Chairman. Well, they satisfy themselves.
Mr. Mitchell. They must satisfy themselves and be duly diligent
in the process.
The Chairman. That is right. But all of the terms are fixed by
the first underwriter, are they not?
Mr. Mitchell. Yes.
The Chairman. And the others come in without going through
any negotiation^ witli rpc;r)ect to the actual terms?
124491— 40— pt. 22 15
11576 CX)NCENTRATION OF ECONOMIC POWER
Mr. Mitchell. Without negotiations with the issuer, though very
often there are corrections and changes made after conference witn
the principal underwriter and counsel.
The Chairman. But the price paid to the issuer and the price of
resale to the public is fixed by the first primary house ?
Mr. Mitchell. Not in all cases by any means. For instance, we
have a case of our own in the Anaconda Copper financing. In that
case, the issuer was not satisfied until he knew the price views of
every single member of that underwriting group, and among the
papers that were photostated for the benefit of your committee, you
will find a statement that I made to the president of the Anaconda
Copper Co., giving the price views of each one of that underwriting
group for the record.
The Chairman. Does each of the group participate on the same
terms, though not in the same proportion ?
Mr. Mitchell. On exactly the same terms, except there was a fee
to the manager.
The Chairman. In other words, the manager gets a special fee
as manager, but then the spread is the same for all of the partici-
pants ?
Mr. Mitchell. That is tiTie ; yes.
Mr. Nehemkis. Mr. Mitchell, you stated a moment ago that Mor-
gan Stanley guaranteed the Telephone account. Do you know of
your personal knowledge whether Morgan Stanley did that at the
specific request of the Telephone Co. ?
Mr. Mitchell. Of my personal knowledge I do not know; I can
only say that there are other instances of their issues where it has
been done, but it is not universal practice.
Mr. Nehemkis. So that there are other Morgan Stanley issues in
which Morgan Stanley does guarantee the liability of all members
of the account?
Mr. Mitchell. Yes.
Mr. Nehemkis. Mr. Mitchell, you have made frequent reference
as you went over the various underwriting groups on the Telephone
issues to the original seven houses that we referred to at the outset
of your discussion. Am I to understand that it is to that group that
you had reference when you said that account was "more nearly
frozen than most accounts"?
Mr. Mitchell. Yes.
Mr. Nehemkis. Now, in your testimony this morning you said that
there were other accounts that came into that general frozen cate-
gory. Will you just run over a few that you have knowledge of that
have the same situation as the Telephone group that we have been
going over?
Mr. Mitchell. Mr. Counselor, I don't think I would be quite pre-
pared to do that without a little research. I think it would apply
to certain of the railroad accounts.
Mr. Nehemkis. Would you be willing to send us a memorandum
on that, have your staff give us the bencnt of your views?
Mr. Mitchell. I will do so gladly, though I want to be sure that
[ am not trying to present the names of a frozen account, because,
as I said this morning, I won't agree that any account is frozen.^
CONCENTRATION OF ECONOMIC POWER 11577
Mr, Nehemkis. I think you covered yourself very well. You said
you can't be truly comprehensive of a situation in making that
remark. There are certain accounts that are frozen to a far greater
extent than others. You have given us vividly an example of one
account in j^our testimony this morning, and if you will give us a
memorandum on some of the other accounts, I think the committee
would be very appreciative.
Mr. MncHELL. I will be glad to do my best.
VALUE or OPENING DEPOSn ACCOUNT WTTH J. P. MORGAN & CO. TO AN
INVESTMENT BANKING HOUSE
Mr. Nehemkis. You identified for me, Mr. Mitchell, a letter dated
September 30, 1935, from your West Coast partner, Mr. Blyth, to your-
self. I will read you a part of that letter. This is Mr. Blyth ad-
dressing you [reading from "Exhibit No. 1645"] :
I had at one time thought as soon as we could maintain a reasonable balance,
say nothing less than $500,000, it might be well to try to get under the tent in
that way, but of course I realize that we would then be somewhat in competi-
tion with other banking organizations which perhaps could keep several times
that amount on deposit and if the deposit line were an influencing factor, would
far over-top us.
Now, to what did Mr. Blyth have reference when he suggested the
advisability of getting "under the teqt" in that way ?
Mr. Mitchell. I am sure Mr. Blyth wouldn't mind my saying that
his suggestion arose from a lack of perfect understanding regarding
the — what expression did he use?
(Mr. Henderson took the chair.)
Acting Chairman Henderson. The "deer runs," and we added the
"salt licks."
Mr. MrrcHELL. Yes; I'd say that, I told Mr, Blyth at the time
that that was not a thing that was either necessary or that would help
us in our position at all, I was in favor of it for only one reason.
Mr. Nehemkis. Will you tell us before you continue with your
explanation — forgive me for interrupting so that we may follow
you clearly — to whom did Mr. Blyth have reference when he sug-
gested opening up this deposit bank? What bank was it?
Mr. Mitchell. J. P. Morgan.
Mr. Nehemkis. I just wanted to make sure I understood that,
Mr. Mitchell. One reason I was prepared to concede to the open-
ing of the comparatively small account there was that we very often
have occasion to ask for information as one may do with their own
bankers, and J. P. Morgan & Co. are unusually equipped to give the
kind of information that I would want to have from time to time,
and having an account there did give us an entree to the banking
department of J. P. Morgan & Co. We had, incidentally, never
used that account in any way, shape, or manner. I don't believe that
Morgan Stanley & Co. have had any knowledge that that account
was there. We have never borrow^ed a cent there, and it is purely a
casual account such as we maintain with many banks.
Mr. Nehemkis. Now, this morning you were also good enough to
identify for me, Mr. Mitchell, a letter from Mr. Blyth to you, dated
11578 CX>NCENTRATION OF ECONOMIC POWER
August 2, 1935, and I should like to read you from that letter
[reading from "Exhibit No. 1643"] :
I have just read your letter of July 31st and have acknowledged the message
which Tom McCarter conveyed in his letter to you. It is too bad this deal
didn't work out but the best fishermen in the world cannot catch all of the
fish.
I'm not particularly concerned that J. P. Morgan & Co. are going to return
to the investment banking business— it was inevitable.
You will recall we have some discussion as to my use of the word
"inevitable," but apparently Mr. Blyth also felt the way I did about
the use of that word.
Mr. Mitchell. Your word was "never."
Mr. Nehemkis. Not "inevitable"?
Mr. Mitchell. No.
Mr. Nehemkis. I see; I am sorry.
[Reading further from "Exhibit No. 1643"] :
Our main job is to get under the covers and as close to them as is jxjssible.
While I recognize the eloquence of adequate capital, I also am a believer in
the efficacy of strong personal relationships. Tliat you have such with the
Morgan institution is a certainty.
I wonder if we would not make our weather eye function better if we were
to open an account with J. P. Morgan & Co. whether or not that organization
or the Drexel organization are to be active in investment banking. I should
think our cash capital must be at the moment, or very shortl.v will be, $3,000,-
000 or more and if it seems advisable to have an account with Morgan, we
ought to be able easily to maintain a balance of $400,000 or $500,000 which, in
their way of looking at things, isn't of much importance but it is a very
definite evidence of our desire and ability to cooperate to some extent.
Now, was it your general impression as a result of your discus-
sions with your New York associates, and with Mr. Blyth, that
regardless of the set-up which would be devised for handling under-
writing, the attitude of the parent house, J. P. Morgan & Co., would
be important and its good will influential ?
Mr. Mitchell. So far as your inquiry pertains to the letter which
you are introducing in evidence I would say, from my standpoint,
absolutely not.
Mr. Nehemkis. But Mr. Blyth, not being familiar as you said a
moment ago, with thp. "deer runs," apparently was under that mis-
apprehension ?
Mr. Mitchell. Yes.
Mr. Nehemkis. And it was Mr. Blyth's belief that irrespective of
the way in which the Morgans set up their in>estment-banking de-
partment, it was desirable to have the good will of the House of
Morgan ?
Mr. Mitchell. I just question your language when you say "ir-
respective of the way J. P. Morgan might decide to set up their
banking department." I am not qualified to answer on that partic-
ular basis.
Mr. Nehemkis. Well, if you will answer the second part of my
question, I think that would be satisfactory, that Mr. Blyth thought
that opening up a deposit account with the. INlorgans was desirable in
order to have the good Mill of that banking house?
Mr. Mitchell. I think the assumption 'is that that is what he
thought. It was not what I thought.
Mr. Nehemkis. I am confining my questions to what Mr. Blytli
thought in his commimication to you. Apparently he also thought
CONCENTRATION OF ECONOMIC POWER 11579
that a proper way to do this was through the deposit-account
machinery ?
Mr. MrrcHELL. Apparently.
Mr. Nehemkis. And that open.ing up the deposit account would
also show a cooperative spirit ?
Mr. MicTHELL. That is apparent from the words of his letter,
though he is wrong.
Mr. Nehejikis. So that irrespective of how the investment banking
business would be handled subsequently, and irrespective of the for-
mal separation of J. P. Morgan & Co. from the underwriting busi-
ness, it was your partner's belief that getting under the Morgan
"tent" would be useful in obtaining participations in Morgan Stanley
underwritings ?
Mr. Mitchell. I am sure that was his erroneous thought, sir.
Acting Chairman Henderson. On this question of Mr. Blyth : Now
Mr. Blyth had been in the investment banking business quite a long
time, had he not?
Mr. Mitchell. A very long time. The firm, our firm now, is,
dating from its original, about 25 years old.
Acting Chairman Hendeeson. And although he wasn't a veteran,
perhaps, still his license and his red cap and the like were not new,
were they ? He knew something about the investment banking busi-
ness and what passed for cooperation and other important items?
Mr. Mitchell. Mr. Commissioner, I wish I could really be elo-
quent enough to make clear what great misunderstandings are had in
the minds of bankers that are far removed from New York City
regarding what happens in New York.
Acting Chairman Henderson. You know, Mr. Mitchell, you almost
tempt me to ask for time to discuss that. I think it would be inter-
esting. But you would say that this would come under the heading
of a great misunderstanding as to what actually does happen ?
Mr. Mitchell. I wouldn t say great misunderstanding, I would
say a lack of understanding.
Acting Chairman Henderson. Well, I think I am obliged to take
your judgment on that.
Mr. Nehemkis. Mr. Chairman, I should like to offer in evidence
now a letter which has been previously identified by the Avitness.
This is a letter dated August 2, 1935.
(The letter referred to was marked "Exhibit No. 1649" and is
included in the appendix on p. 11775.)
Mr. Nehemkis. Mr. Mitchell, I show you a letter addressed to you
by Mr. Blyth, dated January 4, 1936. Will you examine this and tell
me whether it is a true and correct copy of an original in your
possession ?
Mr. MrrcHELL. That is a copy of the letter.
Mr. Nehemkis.- The letter is offered in evidence.
Acting Chairman Henderson. It may be received.
(The letter referred to was marked "Exhibit No. 1650", and is
included in the appendix on p. 11776.)
Mr. Nehemkis. I read you from that letter Treading from "Exhibit
Mo. 1650"] :
As I wired you, on further thought and talking the matter over with Rov
Shurtleff— '
He is in the San Francisco office?
11580 CONCENTRATION OF ECONOMIC POWER
Mr, MiTCHELi.. He was.
Mr. Nehemkis (reading further) :
We both feel the idea of opening an account with J. P. Morgan & Co. has much
that might prove valuable, and certainly nothing that could be a disadvantage.
It is true our account won't be very imiwrtant, at lea.st at the beginning, but
it should show that our hearts are in the right place.
In other words, Mr. Mitchell, keeping a stationary account with
the bank, with J. P. Morgan & Co., or the Guaranty Trust Co., or
any other large bank is important. It indicates, to use the phrase of
Mr. Blyth, that one's heart is in the right place?
Mr. Mitchell. Yes; but as I again repeat, the only reason I
wanted it there was for the particular purpose as stated, in order
to be able to approach them when it was essential for us to have
information regarding corporations or individuals where their infor-
mation was first-hand and would be sound.
Mr. Nehemkis. In other words, one of the advantages, if it be an
advantage, in having a deposit account with J. P. Morgan, is to ob-
tain information concerning other large corporations which have
deposit accounts with J. P. Morgan?
Mr. Mitchell. It is what is called a banking relationship. Our
relationship on investment-banking matters is entirely with Morgan
Stanley & Co. Our relationship with J. P. Morgan is solely that of
carrying with them a comparative small account, but being on their
books and having a way to approach them.
Mr. Nehemkis. Now, on or about May 5, 1936, did Blyth & Co.
open up a deposit account with J. P. Morgan ?
Mr. Mitchell. We opened one about that time.
Mr. Nehemkis. Do you recall about how much of an average bal-
ance you have carried with the Morgans?
Mr. Mitchell. I think you have a copy of the transcript of the
account, have you not? It was taken, a copy was taken from our
files. I can't give you the exact amount. It is not an important
amount. I should say that it probably ran from $125,000 to $300,000.
Mr. Nehemkis. Correct.
Mr. Chairman, I should now like to offer in evidence a schedule
prepared by J. P. Morgan & Co., giving a list of the deposit accounts
of mvestment-banking firms, that is, members of the Investment
Bankers' Association of America, with J. P. Morgan & Co., Drexel
& Co., as of July 1, 1939. I read you, sir, the letter of transmittal
so that there will be no question concerning the authenticity of these
schedules. The letter is addressed to counsel [reading from "Exhibit
No. 1651-1"] :
TWEITTY-THREE WALL STREET, NeW YORK,
September 22, 19S9.
I wish to acknowledge receipt of your letter of September 19, 1939.
I am enclosing schedules which we have prepared and are submitting in
response to your inquiry of August 17, 1939.
There is another paragraph ; it is irrelevant.
I now read to you the names of the investment-banking firms car-
rying deposit accounts with J. P. Morgan & Co.
A. E. Ames & Co., Ltd., Toronto, Canada. The account as
opened
CONCENTRATION OF ECONOMIC POWER 11581
Acting Chairman Hendeeson (interposing). Just a minute. Has
that been identified previously?
Mr. Nehemkis No, sir; I think the letter of transmittal should
be suflScient identification.
Acting Chairman Hekderson. All right.
Mr. Nehemkis. The letter is addressed, as I said, to counsel. [Re-
ferring to "Exhibit No. 1651-1."]
The account was opened on June 29, 1939. The maximum monthly
average balance is $30,000. The minimum monthly average balance
is $30,000.
Blyth & Co. Tlie account as opened on May 5, 1936. And the
maximum monthly average balances have been $250,000, the mini-
mum monthly average balance, $71,000.
Acting Chairman Henderson. Is it your purpose to read all these?
Mr. Nehemkis. If it would save time, I will just put it into the
record.
Acting Chairman Henderson. Unless you have some reason
Mr. Nehemkis (interposing). The other schedules show loans by
J. P. Morgan & Co. to various investment banking firms that are
members of the Investment Bankers' Association. I think in all
there are 25 accounts.
I offer it in evidence.
Mr. AviLDSEN. Is the record clear as to what is meant by "maxi-
mum monthly average" and "minimmn average"? How can you
have a maximum average and a minimum average? I don't under-
stand that.
Mr. Nehemkis. Well, I would hesitate to explain a schedule coming
from J. P. Morgan & Co. If you wish to interrupt the proceedings,
there are a number of the partners of the firm here; we could call
them; or if you wish to take the matter up subsequently — whatever
your pleasure is.
Mr. AviLDSEN. Do you know the meaning of the term ?
Mr. Nehemkis. I have an impression; but I don't care to testify
as to what a partner of J. P. Morgan would consider those terms
to mean.
Mr. AviLDSEN. Do you understand what that term means? [To
Mr. Henderson.]
Acting Chairman Henderson. Yes; but I am not a witness. If
I were a witness, I'd want to be on a more important thing. Mr.
Nehemkis, I suggest we get a definition and submit it.
(Senator O'Mahoney resumed the Chair.)
The Chairman. I might suggest that the letter of transmittal
signed by Henry C. Alexander, stat-es as follows [reading from "Ex-
hibit No'. 1651-1"] :
I am enclosing schedules which we have prepared and are submitting in
response to your inquiry of August 17, 1939.
To what was your inquiry addressed?
Mr. Nehemkis. Those schedules.
The Chairman. And what did you ask for, what sort of a schedule?
Mr. Nehemkis. Exactly the information furnished.
The Chairman. Did you ask for a maximum monthly average
balance and a minimum monthly average balance?
Mr. Nehemkis. To the best of my recollection, we did.
11582 CONCENTRATION OF ECONOMIC POWER
The Chairman. Then, Tf you did, what did you mean when you
asked for them?
Mr. Nehemkis. We meant the same thing as J. P. Morgan meant
when they furnished it to us. If j'ou wish, I will call one of the
partners.
Mr. Mitchell. If I might try to be helpful, in a bank the average
balance for a month becomes a part of the record. Now, in any
year, there would be several months of different balances. This is
the low minimum, and the other is the maximum for any one month.
When they speak of averages they mean the average balances during
any particular month.
That statement means that their balances ran from a high average
of such amount to a low average of another.
The Chairman. I thought that I understood what it meant when
the schedule was presented, because, of course, the balance in any
bank, if it is a current, an active account, is constantly changing.
Mr. Mitcheix. That is so.
The Chairman. But since the question was raised, I think it ought
to be defined definitely for the record.
Mr. Avildsen. You mean there, Mr. Mitchell, that this is the maxi-
mum monthly average for a period of a year out of this 5-year
period?
Mr. Mitchell, I don't know whether it is a 5-year period.
Mr. Avildsen. It is approximately 5 years.
Mr. Mitchell. I would say that is a maximum or minimum during
that period.
Mr. Nehemkis. Mr. Chairman, may I subniit to you at the morn-
ing session a memorandum indicating the precise and technical mean-
ing of those various terms as we understood them and as I assume
that the banking house of J. P. Morgan understood them? ^
The Chairman. That will do very well.
The exhibit, together with the letter of transmittal, may be ad-
mitted for printing in the record. The additional information will
be forthcoming in the morning.
(The letter documents referred to were marked "Exhibits Nos.
1651-1 to 1651-3" and are included in the appendix' on pp. 11777-
11778.)
Mr. Nehemkis. Mr. Mitchell, I show you six letters, photostat
copies of what purport to be originals in your files. Will you glance
at these letters and tell me if they are true and correct copies?
Mr. Mitchell. Yes ; I recall these letters.
Mr. Nehemkis. May it please the committee, the letters identified
by the witness are offered in evidence.
The Chairman. The exhibits may be received.
(The letters referred to were marked "Exhibit^ Nos. 1652-1 to
1652-6" and are included in the appendix on pp. 11778-11781.)
MORGAN STANLET & CO. "sURVEY OF STREET CONDITIONS"
Mr. Nehemkis. You were good enough to identify a letter for me
this morning, dated October 5, 1937, from yourself to your West
iThe additional information referred to was supplied in "Exhibit No. 1668," Intro-
duced on December 15, 1939, and in'luded in appendix, p. 11827.
CONCENTRATION OF ECONOMIC POWER 11583
Coast associate, Mr. BIyth. 1 read to you from that letter [reading
from "Exhibit No. 1647"] :
Harold Stanley, of Morgan Stanley «& Company, telephoned yesterday and
told me that in light of certain commitments of Street houses where losses were
likely to be substantial, and in view of the further heavy commitments that
must be taken on additional business in the near future, they were making a
general survey of Street conditions and asked if I would care to let them see
our picture. I naturally acceded and spent a full hour with him yesterday
afternoon.
I gave him, as of September 30th, our figures of net worth ; our nine months
operating profits ; a general statement of our inventories broken down as
to classes ; a statement of our cash and loan position, and a full statement
of our commitments. I also gave him a description of our operating set-up and
its cost and a "horseback" opinion as to how rapidly, under pressure, we could
liquidate inventories, and to what extent and how rapidly we could cut operat-
ing expenses. When I got through he was most laudatory in his expression
and indicated that from the standpoint of profit record, inventory and commit-
ments, our record was one of the finest that he had seen on the Street.
In turn he gave me a confidential look at the Morgan Stanley statement, which
showed a net worth of about $10,UOO,0(X) and was practically 100% liquid.
Of your own personal knowledge, Mr. Mitchell, can you state
whether the underwriting firm of Morgan Stanley conducts surveys
of general conditions of the financial community ?
Mr. Mitchell. I have never known of anything that I could call
a general survey, Mr. Counselor.
Mr. Nehemkis. Then you don't wish me to take literally the sen-
tence that you used, "they were making a general survey of Street
conditions?"
Mr. Mitchell. That is what he told me, but I have no knowledge
of there having been a general survey, I don't say there wasn't one,
but I have no knowledge of it.
Mr. Nehemkis. Now, as I recall it, perhaps you can tell me, please,
October 5, 1937, was a period of market crisis, was it not ?
Mr. Mitchell. Yes. That was a period following a rather disas-
trous experience of underwriting houses in two issues, Bethlehem
Steel bonds and Pure Oil preferred stock.
Mr. Nehemkis. And after you received Mr. Stanley's request, you
complied with it?
Mr. Mitchell. I did.
Mr. Nehemkis. Wasn't this request rather unusual coming from a
competitor, that is to say, in other businesses would it not be con-
sidered most unusual if the leading competitor audited the books of
its rivals at a time of crisis ?
Mr. Mitchell. I think I have referred, in my testimony this morn-
ing, to J. P. Morgan & Co., and following them, Morgan Stanley, as
leaders in the Street, and the entry of Morgan Stanley & Co. being
assurance that it was for the benefit of the Street.
Mr. Nehemkis. That is what you meant, sir, I take it, by "con-
structive leadership" ?
Mr. Mitchell. "Constructive leadership," and I would consider
that constructive leadership.
Mr. Nehemkis. Mr. Mitchell, would you have made information as
confidential as this available to any other house than Morgan Stanley?
Mr. MiTCHELL. Yes ; I think so. I think that if I had recognized
It as in such complete good faith, made by, for instance, Kuhn, Loeb
& Co., I would have been very frank about it.
11584 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. Has any house other than Morgan Stanley ever
requested such similar information from you?
Mr, Mitchell. No.
Mr. Nehemkis. So, to the best of your knowledge, you have never
exchanged such information with other houses?
Mr, Mitchell. No.
Mr. Nehemkis. Would you say it was a customary procedure on
the Street for houses to exchange such confidential information be-
tween themselves?
Mr. Mitchell. Well, it may seem peculiar to answer that in the
way I will. Wliile it is not customary to exchange such information,
I would hazard a guess, I could come pretty near to stating the con-
dition of most houses on the Street, their capital and wnere they
stand from time to time, by virtue of what one sees and feels and
hears, it becomes — a combination of all those becomes knowledge. I
wouldn't have to ask for a questionnaire and I doubt if Morgan
Stanley would have to ask for a questionnaire from most houses on
the Street.
Mr. Nehemkis. Nevertheless, on or about October 5, 1937, Morgan
Stanley was constrained to ask for information on the general finan-
cial condition.
Mr. Mitchell. Mr. Stanley did it with me in a very informal way,
and I don't know to what extent he went further on that.
performance records kept by MORGfN STANLEY & CO., INCORPORATED
Mr. Nehemkis. Yes. Does Morgan Stanley keep records of the
performance of underwriters who are members of their syndicates?
Mr. Mitchell. I don't know whether they keep general records.
I assume they do. We always do, and I think most every house in
the Street does, and the very fact that they have more than once given
to me their record of our performance would indicate that they
had done so with us, and if they did do with us, they must have with
others.
Mr. Nehemkis. Your answer is that Morgan Stanley does keep
performance records?
Mr. Mitchell. I can't answer that, but I would think it probable.
Mr. Nehemkis. Now, at the time you visited Mr. Stanley and dis-
cussed your financial situation with him, did he not give you a copy
of your performance record which you took back with you?
Mr. Mitchell. At one time he gave me a brief memorandum of
some performance record, I can't recall what it was, but I do recall
vaguely having sent that record to my partner, Mr. Blyth.
Mr. Nehemkis. That is correct, and I shall read to you from the
letter that you wrote to Mr. Blyth [reading from "Exhibit No.
1647"] :
Stanley bowed me the records that they currently keep with respect to our
performance. On certain items where they took back securities from us where
we had been slow in selling, the record was not so good, but on the whole I
thought it made a pretty good showing, especially with respect to the bonds
that they had bought back in the open market from our distributions. My
impression was that they considered the record fair to good. He showed me
one memorandum of the so-called profit that we had had from their under-
writings since they started business. With his consent I took the sheet away
with me and am attaching hereto a copy.
CONCENTRATION OF ECONOMIC POWER 11585
I show you a copy of the sheet and ask you to identify it for me.
Mr. MrrcHELii. Yes, that is it, as I recall it.
Mr. Nehemkis. Now, on the bottom of the sheet there is a peculiar
notation, if my memory serves me correctly. There are some figures
there.
Mr. MrrcHELii. Yes.
Mr. Nehemkis. Would you explain that to me, if you will, sir?
Read it, just the asterisk.
Mr. Mitchell. It says [reading from "Exhibit No. 1653-1"] :
This includes $769,425. being theoretical profit on Bonds and Stocks retained
by them.
Mr. Nehemkis. I was very much confused by the reference to
theoretical profit on bonds and stocks retained by them and I thought
possibly you might be able to enlighten the committee.
Mr. Mitchell. I assume that that means this: We may have an
underwriting position of $1,000,000. They may decide that it is best
for the business that we should have the direct responsibility for
distribution of, say, 60 percent of that million, or $600,000, and that
$400,000 of the amount should be distributed through a general and
very broad selling syndicate; and so they would make a delivery to
us of 600,000 bonds, for our own distribution, and they would retain
400,000 of our bonds to distribute through a broad selling syndicate ;
and they figured that this profit was the profit to us on the amount
of the underwriting and the profit on the distribution thereof and
included in addition to the 600,000 the profit on the 400,000 that was
distributed with the discount to a selling group. I think with that
explanation, this asterisk becomes clear. This includes $769,000 being
theoretical profit on bonds and stocks retained by them.
The Chairman. Why did you take it away and why did you send
it to Mr. Blyth?
Mr. Mitchell. Simply as a matter of information. I think you
will agree, if Blyth was sitting across the desk from me in New York
and I had come back with that, I should have tossed it to him and
said, "Charlie, this is interesting"; and our correspondence, so much
of which is brought up here as being interesting, is because instead
of being able to throw that on his desk and say ]ust that casually, I
am forced to write a letter.
The Chairman. You don't get my point. This is a record, I take
it, which Morgan Stanley kept without your knowledge of the profit
you were supposed to be making on your dealings with Morgan
Stanley.
Mr. Mitchell. That is right.
The Chairman. And when Mr. Stanley called you on this October
day in 1937 to find out what the condition of your company was,
you let your hair down between one another, as the saying goes, and
you disclosed what the position of your company was and he in turn
gave you a confidential look at the Morgan Stanley statement,
according to your letter.
Mr. Mitchell. That is right.
The Chairman. And then he handed you this. You took it and
without any comment in this letter to Mr. Blyth, you transmitted it
to him.
11586 CONCENTRATION OF ECONOMIC POWER
Now, the question that has arisen in my mind is, what is your judg-
ment of the accuracy of that statement and was it for any purpose
of testing its accuracy that you sent it on to Mr. Blyth ?
Mr. Mitchell. I can assure you, Senator, that I never tested the
accuracy of it.
The Chairman. Did you attach any importance to it?
Mr. Mitchell. "Wlien one talks about gross figures, they never
interest me. We can't pay off on gross figures and very often there
is a big gross and you couldn't put the net in your eye and have it
hurt you. [Laughter.] <
The Chairman. I mean, did you attach importance to this state-
ment?
Mr. Mitchell. None.
The Chairman. Why, then, did you transmit it?
Mr. Mitchell. Simply because it was just interesting informa-
tion and it was interesting to see how they kept their record. It
had no meaning.
The Chairman. Of course, I assume from this letter that if Mr.
Stanley called up almost any one of these houses and asked for the
same information that he asked you, that information would be forth-
coming very promptly?
Mr. Mitchell. I would think so.
Mr. Nehemkis. The document is offered.
The Chairman. The document may be admitted to the record.
(The document referred to was marked "Exhibit No. 1653-1" and
is included in the appendix on p. 11781.)
Mr. Nehemkis. Is it customary for a house that has the leadership
of the account to keep a record of profits similar to the record you
took away from Morgan Stanley? To be specific, does your house
keep similar records on the accounts for which you have leadership?
Mr. Mitchell. No ; there may be memoranda regarding it, but we
have no books of record in which we list that or give it significance.
Mr. Nehemkis. jMr. Mitchell, my assistant tells me you have
already identified this letter for me. I now read you a letter from
your partner, Mr. Charles Blyth, to you, dated October 7, with refer-
ence to the letter which we have just been discussing [reading from
"Exhibit No. 1653-2"] :
Your letter of October 5th is naturally of the greatest interest. What Is
most surprising, I think, is the change in times and customs which maices
possible with Morgan & Company an exchange of the most confidential kind
of information. Aside from that, I get no little satisfaction in having authentic
and informed opinion confirming our own belief, or maybe it was hope, that
so far this year our organization has handled itself about as well as conditions
would allow.
Furthermore, It is & satisfaction to have our affairs in such shape that we
can freely erpose them to Harold Stanley, while harboring no mental reserva-
tions or anything to be ashamed of.
The letter, which has been previously identified, Mr. Chairman, is
now offered in evidence.
The Chairman. It may be received.
(The letter referred to was marked "Exhibit No. 1G53-2" and is
included in the appendix on p. 11781.)
CONCENTRATION OF ECONOMIC POWER 11587
THE OCTOBER 1937 CRISIS POSSIBLE READJUSTMENTS AMONG INVESTMENT
BANKING FIRMS
Mr. Nehemkis. I show you a letter dated October 21, 1937, ad-
dressed to Charles R. Blyth. I ask you to examine this letter and
tell me whether it is a true and correct copy of an original in your
possession.
Mr. Mitchell. Yes; it is.
Mr. Nehemkis. The letter is now offered in evidence, Mr. Chair-
man.
The Chairman. The letter may be admitted.
(The letter referred to was marked "Exhibit No. 1654" and is
included in the appendix on p. 11782.)
Mr. Nehemkis. I read from the letter, Mr. Mitchell [reading from
"Exhibit No. 1654"] :
I have had occasion to sit down for informal chats today wfth both Harold
Stanley and Elisha Walker-
Will you identify Elisha Walker, Mr. Mitchell ?
Mr. Mitchell. He is a partner of Kuhn, Loeb & Co.
Mr. Nehemkis (reading further) :
and to each of them I said about this : "It may possibly be that before the
year-end there will be some readjustments among the investment banking houses
that will mean consolidations, buy-outs or takings-over. We have no desire to
change our own status but if there is any development in which it would be
helpful to the situation for us to act, and at the same time distinctly to our
benefit to act, we would be glad to have it at least brought to our attention."
Mr. Mitchell, what was the occasion for those chats on or about
October 21, 1937? Do you recall the situation at that time?
Mr. Mitchell. Yes. I think we have spoken of the situation as
it prevailed in October of 1937.
Mr. Nehemkis. In other words, 16 days later we still were in a
period, reverting to the past, of market crisis, of Pure Oil, Bethle-
hem ^teel. Northern States, and so on?
Mr. Mitchell. It is a very much longer period, Mr. Counselor,
longer than 30 days.
Mr. Nehemkis. And there was a stock-market crisis at that time?
Mr. Mitchell. I can't tell you whether there was.
Mr. Nehemkis. Do you recall whether foreign balances were being
withdrawn at that time, and whether or not there was talk of closing
down the Exchange, whether the situation, in short, was not a panic
situation comparable to the October days of 1929 ?
Mr. Mitchell. I wouldn't say so, or anything like that. It was
an acute situation among the investment banking community, but I
wouldn't say that it extended itself to the point of being a crisis of
major importance.
Mr. Nehemkis. But there was some disturbance on the Street at
the time, was there not?
Mr. Mitchell. Yes; and it pertained particularly to the invest-
ment banking houses.
Mr. Nehemkis. Now, how did you think you might be helpful in
this situation? You referred to your desire to be helpful.
Mr. Mitchell. Well, I don't know that I can define that quite for
you. There were concerns, especially some of the concerns with
smaller capital, that were in fairly dire straits at the moment, con-
11588 CONCENTRATION OF ECONOMIC POWER
cerns with excellent personnel, but lack of capital in certain situa-
tions. I couldn't say exactly how we could be helpful, but believing
that Morgan Stanley & Co. and Kuhn, Loeb & Co. would be likely
to know of situations where help might be needed, where taking over
might be desired, I thought it best to let them know that we were
prepared to consider any suggestion that either one of them had
to make.
Mr. Nehemkjs. How would Kuhn, Loeb and Morgan Stanley be
in a position to know about consolidations and takings over and buy
outs? Through the kind of questionnaire to which we have already
referred ?
Mr. Mitchell. I wouldn't say so exactly. You see, both of those
houses are distinctly underwriting houses.
Mr. Nehemkis. Houses of issue?
Mr. Mitchell. Houses of issue; yes; and as such their business
would be in contact to a greater degree than would be the case of a
house such as ours, for instance, who do an underwriting business,
to be sure, but in which that constitutes merely a part. Our services
are many. Their services are concentrated in bringing them more
directly in touch with the houses that are comparable to ours.
Mr. Nehemkis. You referred in your letter to benefits that might
be derived by your firm. What benefits did you have in mind, Mr.
Mitchell?
Mr. Mitchell. Well, I can't define that, because they would be
different in many different cases, but as I say, certain of these firms
had very good personnel that we would have been glad to take over,
and had offices, for instances, in cities other than the cities where we
have offices. They had good distribution in places where we lacked
distribution. By taking over a concern, for instance, with a strong
New England distribution, it would have been very beneficial to us.
Mr. Nehemkis. Were you thinking, perhaps of acquiring new
business, new leaderships, new accounts, as a result of these read-
justments?
Mr. Mitchell. I couldn't answer that directly. I was out looking
for a chance to consider situations should they develop.
Mr. Nehemkis. And wanting to be helpful in such situations?
Mr. Mitchell. Wanting to be helpful always where it would be
helpful to us.
Mr. Nehemkis. But you are not clear as to how you would benefit?
Mr. Mitchell. I think it would be different in almost every case
presented to us, Mr., Counselor.
Mr. Nehemkis. I continue reading, Mr. Mitchell [reading from
"Exhibit No. 1654"] :
Elisha Walker said that he would consider it more than probable that there
would be some readjustments and if they came to their attention he certainly
would bear us in mind. Harold Stanley said that it was the view of his firm
and of the "corner" that there were too many houses in the business now,
that there ought to be a smaller number and that number ought to be stronger,
that he was delighted to know how we would view the situation in case develop-
ments might occur, and he further added that he would make our attitude
known to the "corner."
Will you tell me what is meant by the phrase, "the Corner"?
Mr. Mitchell. J. P. Morgan & Co.
Mr. Nehemkis. That is the usual phrase used in the financial
community ?
CONCENTRATION OF ECONOMIC POWER 11589
Mr. MrrcHFXL. It has been ever since I have been on the Street.
Mr. Nehemkis [reading from "Exhibit No. 1654"] :
Harold Stanley said that it was the view of his firm and of the "corner"
that there were too many houses in the business now, that there ought to be a
smaller number, and that number ought to be stronger, that he was delighted to
know how we would view the situation in case developments might occur and
he further added that he would make our attitude known to the "corner."
So that I gather that Elisha Walker and Harold Stanley, in view
of the intimate knowledge that they had of the condition of the Street
at that time, both felt that readjustments would take place and prob-
ably were necessary ?
Mr. Mitchell. The}- might take place.
Mr. Nehemkis. Since you instituted these chats, Mr. Mitchell, you
must have been aware that some of the firms on the Street were expe-
riencing financial difficulties at the time, were you not?
Mr. Mitchell. I was.
Mr. Nehemkis. Well, now, you went, then, to Morgan and Kuhn,
Loeb to discuss the situation rather than to the firms which were
having financial difficulties themselves?
Mr. Mitchell. Oh, yes.
Mr. Nehemkis. Now, was this because you recognized that if any
redistribution of business was to take place, K., L. and Morgan Stan-
ley might have the decisive voide in the redistribution ?
Mr. Mitchell. No; I wouldn't say they would have the decisive
voice; but they certainly would be called important listening posts
as far as the Street is concerned.
Mr. Nehemkis. Would you say, Mr. Mitchell, that Morgan Stan-
ley & Co. is an important listening post for J. P. Morgan & Co. ?
Mr. Mitchell. I can't answer that.
Mr, Nehemkis. Now, was it a realization on your part, when you
instituted these chats, that Morgan Stanley, having just completed
a survey of Street conditions, would obviously be in a position to
know what firms were either "broke" or on the verge of going "broke" ?
Mr. 'Mitchell. I think that they would know at all times, and I
think that Kuhn Loeb would know at all times pretty well what the
situation was on the Street.
Mr. Nehemkis. And did you agree with Mr. Stanley that there were
too many firms in the business?
Mr. Mitchell. I didn't agree or disagree. We didn't discuss it.
Mr. Nehemkis. Do you know, of your own knowledge, whether or
not Harold Stanley discussed with "the Corner" the results of his
recent survey on Street conditions?
Mr. Mitchell. I do not.
nonreceptivity of blyth & CO. inc. to special capital
Mr. Nehemkis. I continue reading from your letter, Mr. Mitchell
[reading further from "Exhibit No. 1654"] :
Stanley said that since our talk of a week ago the question had arisen as to
whether any part of our capital was "special," and when I answered in the
negative he asked whether we would be receptive to a suggestion of "special"
capital coming into our business.
Isn't that a rather anomalous conference or discussion between
banking houses ? Of what interest would it be to Mr. Stanley whether
11590 CONCENTRATION OF f:CONOMIC POWER
or not there was special capital in your firm or whether you would
be interested in getting special capital?
Mr. Mitchell. Well, I think perhaps you are putting undue stress
on that. Mr. Harold Stanley has been more or less an intiniate friend
of mine for 25 years, and I would chat informally with him on any
subject, and he would say he would chat, I think, with me with equal
intimacy. And just jotting down casually the talk that I had with
him doesn't mean that he was putting stress or emphasis on this
particular point; it was a casual conversation.
Mr. Nehemkis. I understand, Mr. Mitchell, and may I ask you
another question? Who would have supplied this special capital?
Would it have come from the partners of J. P. Morgan & Co. ?
Mr. Mitchell. That never crossed my mind.
The Chairman. What is special capital?
Mr. Mitchell. Special capital in a corporation such as ours is a
little difficult to define, but I assume it would be special' capital that
would, perhaps, come in in the shape of some prior preferred stock
with, a j/articipation in profits, or something of that sort. That is
the way it might develop. The conference was never pursued and
we have no such special capital, so thnt it is difficult for me to
answer, Senator.
The Chairman. Of course, your letter indicates that you did not
attach a great deal of significance to it. and you say, as a matter of
fact, that you have not the slightest inkling of what he was trying
to get at. I took that to mean, in what he was trying to offer.
Mr. Mitchell. That is right.
The Chairman. I assume that you and Mr. Blyth and Mr. Stanley
all knew exactly what was meant by special capital and your answer
to me now indicates that you do have
Mr. Mitchell (interposing). You have to come in in some such
way, just what I don't know.
The Chairman. Would it be a justifiable inference for me to draw
that Mr. Stanley was intimating to you that if it were desirable to
you "the Corner'' might be willing to offer some special capital to your
firm at this time?
Mr. Mitchell .1 wouldn't say that. Senator. He might have had
in mind very different capital, capital that would come from some
other individuals or it might come from some investment trust, I
couldn't say, but the intimation was never given to me, nor did it ever
cross my mind that the capital that he was speaking of would come
from the partners of J. P. Morgan & Co.
The Chairman. Do you know of any houses operating in the Street
at this time which did have special capital of this kind?
Mr. Mitchell. No; I don't know the detail of this, but at one tiriie
some years ago a firm on the Street did get into some financial diffi-
cultj^ and I think for a long time capital "which came through "the
Corner" — whether it came from partners or directly from J. P. Morgan
& Co. I don't know — I never have had the interest really to find
out — came through their intervention certainly and went into that
firm and has since been paid out. In what way it went I can't tell
you.
Mr. Henderson. Mr. Mitchell, would you consider the investment
of J. P. Morgan c^ Co. in the preferred stock of Morgan Stanley
special capital ?
CONCENTRATION OF P:CONOMIC POWER 11591
Mr. Mitchell. I have really no information as to the preferred
stock of Morgan Stanley, and I am not in position to answer that
question, Mr. Commissioner.
Mr. Miller. What about partnership capital where you have spe-
cial capital in a partnership with limited liability ? Do many houses
have that sort of set-up?
Mr. Mitchell. Oh, yes ; and you will find certain of the houses that
are in the investment-banking business, such as E. B. Smith, or
Smith, Barney, I assume, who have special capital. That is capital
with limited liability.
Mr. Miller. Isn't that really what is meant here by special capital ?
Mr, Mitchell. Yes; that in general is what we mean by special
capital. They might have an interest in the profits of the business
but that capital is a prior lien, as one might say, over the general
partners' interest.
Mr. Miller. Isn't it generally limited as to liability?
Mr. Mitchell. It is always limited as to its liability.
The Chairman. You see we have an interesting picture drawn into
the testimony now, Mr. Mitchell. In the first place, the story about
the practically invariable percentages of participation in various
issues dominated by Morgan Stanley. Secondly, the deposits main-
tained in the J. P. Morgan bank by these various companies, and
now an intimation from Mr. Stanley of the possibility of investing
special capital in an investment-banking house, all tending to show
a certain amount of, shall we say, concentrated leadership in the
Corner.
Mr. Mitchell. Senator O'Mahoney, in all my experience on the
Street I have known J. P. Morgan as a constructive leader, especially
in times of difficulty.
The Chairman. There is no conflict between the two ideas; it
might be altogether constructive and still be concentrated leadership.
Mr. Mitchell. Certainly. Wliat I was going to say was this:
That when they talk of special capital I would think it more than
probable that they were constantly in touch with capital that might
be induced to enter situations where they thought it desirable that
such capital enter. It never crossed my mind at that time and not
until this hearing that Stanley might be speaking of an interest of
the partners of J. P. Morgan & Co. or of the firm. They are natu-
rally in touch with large capital that might be used for such purpose.
Mr. Nehemkis. Mr. Mitchell, one further point about this letter
and then I shall pass on to another matter. I am very much inter-
ested in the fact that you discussed such a serious matter with Mr.
Stanley and yet you wrote to your partner: "I haven't the slightest
inkling of what he was trying to get at and your conjecture would
'be just as good as mine." Do you want the committee to under-
stand that you carried on a discussion as serious as this without ever
once asking Stanley what he had in mind about the talk of special
capital ?
Mr. Mitchell. Yes, Mr. Counsel; because we were not interested
in that kind of capital. My notion of the development of Blyth &
Co. is that it shall build itself up through its own development, and
I would be opposed to outside capital coming in at any time^ and
we have built ourselves up to the point today that is very different
than it was in 1935 when I first came with the concern, and I have
124491— 40— pt. 22 16
11592 CONCENTRATION OF ECONOMIC POWER
every expectation that unless the legs are knocked out from under
that we will take our place sufficiently in importance in the invest-
ment banking fraternity to increase that capital to definitely put us
where I feel that we should belong, and incidentally in the
Mr. Nehemkis (interposing). First seven.
Mr. Mitchell. First seven.
Mr. Nehemkis. I hope so for your sake.
Mr. Arnold. The special capital would deprive you of control over
your own affairs?
Mr. Mitchell. More or less. To me it is undesirable capital.
Mr. Arnold. It would increase the domination of the groups who
had special capital in other groups?
Mr. Mitchell. Well, not if the capital came from individuals. If
it came from perhaps houses on the Street — I wouldn't want any
bouse on the Street to have an interest in us because I would feel
that that was just as you say, possibility of domination might enter
there. John Smith & Co. at some point removed from Wall Street
might have capital of a different character and I wouldn't feel to the
extent that domination, but I just would rather not have it.
The Chairman. If John Smith were induced to supply that special
capital by another house on the Street, the result would be the same?
Mr, Mitchell. Senator, I would just rather not have it anyway.
The Chairman. And for that reason, that it leads to domination,
as Mr. Arnold said. It would open the door to the possibility?
Mr. Mitchell. I don't say that it would lead to domination. I
^hink probably at that point we would split if domination started,
but I don't want to get into the position where that split would be a
likelihood,
Mr, Nehemkis, Mr, Mitchell, I show you a letter from yourself to
Mr, Charles R. Blyth dated August 8, 1938. This is a photostat
copy. I ask you to tell me whether it is a true and correct copy of an
original in your possession?
Mr. Mitchell. Yes; I recall this letter. That is a copy.
(The letter referred to was marked "Exhibit No. 1655" and is
included in the appendix on p. 11783.)
Mr. Nehemkis. I show you a letter, the original, dated August 16,
1939, addressed to me, with an enclosure. I ask you to look at these
two papers and tell me whether they ar6 the originals which you
submitted to me on the dates specified.
Mr. Mitchell, They are.
Mr. Nehemkis. The three papers identified by the witness are
offered in evidence, Mr. Chairman.
Tlie Chairman. Without objection they may be received.
(The letters referred to were marked ^'Exhibits Nos. 1656-1 and
1656-2" and are included in the appendix on pp, 11783 and 11784.)
morgan STANLEY cfc CO, QUESTIONNAIRE ON UNDERWRITING ACnviTIES OF
BLYTH & CO., INC.
Mr. Nehemkis, The letter to which reference has been made, Mr,
Mitchell, contains the following, which you wrote to Mr, Blvth
[reading from "Exhibit No. 1655"] :
CONCENTRATION OF ECONOMIC POWER 11593
Here is a matter of more than passing interest. Last Friday, John Young,
of Morgan, Stanley & Co., talked with Roy
Roy Pagen ?
Mr. MrrcHELii. Shurtleff.
Mr. Nehemkis. Shurtleff [reading further] :
on the telephone, and asked him if we would mind giving them, in confidence, a
statement of the amount of underwriting we had done during the past 3 years.
Mr. Mitchell, I call to your attention the date of that letter, August
S, 1938 [reading further] :
Enclosed is a copy of Jack Pagen's memorandum to Roy which gives the
specific questions and answers in the form requested, and which Roy is sending
over to the Morgan Stanley oflGice this afternoon. One can merely conjecture
what they are getting at.
Do I understand correctly that your firm was requested to submit
in confidence a statement of the amount of underwritings done dur-
ing a period of years, 3 years to be exact, that you did furnish this
information and you never inquired of Morgan Stanley to what pur-
poses it would be put?
Mr. MrrcHELL. I wasn't the one that had the conversation with
Morgan Stanley. This letter recies John Young of that firm talked
to Roy Shurtleff and asked him for this information.
Mr. Nehemkis. But apparently your associates were likewise in
ignorance as to what uses this might be put because in reporting this
to your west coast partner you say, "One can merely conjecture what
they are getting at."
Mr. Mitchell. That question was brought in to me by Mr. Shurt-
leff and we sat and discussed it. I remember my reaction was, "I
don't know what this is about but I see no objection whatsoever to
doing it."
Mr. Nehemkis. Usually information as confidential as this, one is
loath to make available unless one knows the reasons or what is in
mind as to the uses to which it might be put. Nevertheless, you did
make it available, and you also informed your partner :
Of course, the information asked for is of a character that we would not
want to give to any other inquirer than Morgan Stanley or the Federal Reserve
Bank.
So that in your mind, Mr. Mitchell, Morgan Stanley & Co. occupies
the same position as the Federal Reserve Bank and the Temporary
National Economic Committee since we too have asked Tor similar
information ?
Mr. Mitchell. Well, for diff .rent reasons we give the Federal
Reserve Bank anything that they want.
Mr. Nehemkis. I think the committee is familiar with the kind of
information that yoif furnish the Federal Reserve Bank.
Mr. Mitchell. And to our good friends Morgan Stanley would be
glad to give anytliing regarding our business at any time. I
wouldn't want to scatter that around the Street. I have found over
the years that anything given to them is confidential and I can rely
upon that.
Mr. Hendei?son. You wouldn't have any other good friends in that
s&me relationship ?
Mr. Mitchell. No.
11594 CONCENTRATION OF ECONOMIC POWER
Mr. Nehemkis. In other words, a questionnaire from the Stanley
National Economic Committee— —
Mr. Mitchell. What's that?
Mr. Nehemkis. A questionnaire from the Stanley National Eco-
nomic Committee receives the same treatment that a questionnaire
does from the Temporary National Economic Committee in your
eyes?
Mr. Mitchell. I hardly agree to that. I think that is quite unfair.
Mr. Nehemkis. I withdraw the remarks.
Mr. Henderson. That is just a little byplay, Mr. Mitchell. I think
he is entitled to a little. "■
Mr; Nehemkis. I wasn't serious, Mr. Mitchell.
Mr. Mitchell. I don't resent it.
Mr. Nehemkis [reading further from "Exhibit No. 1655"] :
If I casually find out — as it is more than probable I will in the next few
days — the reason back of this questionnaire, I will advise you.
Now I show you a letter dated August 10, 1938, from you to your
West Coast partner, Mr. Blyth. Will you identify it for me?
Mr. Mitchell. I have identified it.
Mr. Nehemkis. The letter dated August 10, 1938, Mr. Chairatian,
is offered in evidence.
(The letter referred to was marked "Exhibit No. 1657" and ap-
pears below.)
Mr. Nehemkis. In this letter ^ou wrote as follows :
August 10, 1938.
Dear Charley,
In talking with Harold Stanley today, I found that their questionnaire on
underwritings and participations, concerning which I wrote you early this
week, was prompted solely by the thought that they may be called in one day
to answer a charge of monopoly, and that they are getting together as much
information as they can to answer promptly any questions which may be asked.
Of course, such a charge could not possibly be sustained, but these are queer
days and I can readily understand that the charge may be forthcoming.
Sincerely,
CEM-JI
[Laughter.]
Mr. Mitchell. Thanks for reading the last paragraph.
The Chairman. Did I understand you to say that you underwrite
the last paragraph? [Laughter.]
Mr. Mitchell. Part of it.
Mr. Arnold. You were afraid, perhaps, that someone might con-
strue the term "constructive leadership" as monopoly?
Mr. Mitcheix. Quite so.
Mr. Nehemkis. Mr. Mitchell, I show you four sets of documents
obtained from your files. Will you be good enough to examine them
and tell me whether they are true and correct copies of originals in
your possession and custody? By the way, have you got your own
originals here with you of this material?
Mr. Mitchell. I haven't.
Mr. Nehemkis. I suggested to Mr. Dean that you bring them along,
but suppose you use my set.
Mr. Mitchell. I will tell you about that.
Mr. Nehemkis. I shall ask you about them.
(X>NCENTRATION OF ECONOMIC POWER 11595
Mr. Mitchell. ^ I'll tell you about it. You have got the wrong
man.
Mr. Nehemkis. These documents just identified by Mr, Mitchell,
Mr. Chairman, are offered in evidence.
(The documents referred to were marked "Exhibits Nos. 1658-1 to
1658-4" and are included in the appendix on pp. 11784-11792.)
The Chaipman. The documents have been received.
MR. LEIB's RECOBD OF RECIPROCAL OBLIGATIONS
Mr. Nehemkis. I think you had better follow them rather closely
on that set.
Mr. Mitchell. All right. May I say a word about what these
documents are?
Mr. Nehemkis. I would rather you let me give you questions and if
at the end of the question period you want to make a statement I am
sure the committee will be delighted to have you do so.
Mr. Mitchell. All right.
Mr. Nehemkis. Will you take out the document entitled "Morgan
Stanley & Co."? Do you have that before you, sir?
Mr. Mitchell. Yes.
Mr. Nehemkis. The first account listed on this sheet is the New
York and Queens Electric Light & Power first issue of $25,000,000.^
It is indicated on that sheet that your participation was 16 percent.
Is this the customary percentage allocation on this account, Mr.
Mitchell?
Mr. Mitchell. I couldn't answer that.
Mr. Nehemkis. The next item is the Ohio Edison Co. first and
consolidated mortgage. 4 percent series, due November 1, 1965, and
then there appears an asterisk :"* Buying Group— $1,000,000 (214%)"
and on the right-hand side, $10,000, and then the explanation for
the asterisk — are you following me, Mr. Mitchell?
Mv. Mitchell. Yes; I am.
Mr. Nehemkis. This reciprocal obligation is divided equally with
Bonbright & Co. ($1,000,000—214 percent— $10,000 each).
Now, I notice that on the right-hand side you have credited Mor-
gan Stanley with $10,000.
Mr. Mitchell. I really feel under the necessity. Senator O'Ma-
honey, of explaining these sheets because I am going to be a bad
witness on them. If you will just give me the opportunity of doing
it I would appreciate it.
The Chaiiunian. I see no objection.
Mr. Mitchell. These are not what I construe in any sense as com-
pany records. Mr. Leib keeps in his own file as made up by his own
stenographer and for his own purpose a record of reciprocal business,
business given to us by firms and what we give them and what the
profits may be. I will promise you that I haven't seen that book
more than three times — it is always available for me if I want to see
it — I haven't seen that book three times since I went with the firm.
The Chairman. What is the book?
Mr. MiTCHELj.. And I am not interested in it.
The Chairman. Wliat is the book?
1 See "Exhibit No. 1659-1, " api)€ndix, p. 11784.
11596 CONCENTRATION OF ECONOMIC POWER
Mr. Mitchell. It is a book that he keeps for his own memorandt^
The figures are not company figures. They are figures that ar\
drawn off by his stenographer onto these sheets and are currently
made up, giving a general idea of the business that comes to us from
certain firms on the Street and what that figures in dollars and cents
and the business that we give to those same firms and what that
figures in dollars and cents.
The Chairman. Though they may not be company records, do I
understand that they correctly reflect situations that are described?
Mr. Mitchell. I don't know whether they do, and they certainly
are not in any sense checked either as to their completeness or as to
the figures by our accounting division. They are purely memoranda.
When I said you have got the wrong man in this — these are Mr.
Leib's figures. I wouldn't and couldn't testify as to the accuracy
of them, and, as I said to you this morning, in developing syndicates,
reciprocal relations are to me the last item to look for.
The Chairman. He is a reliable associate?
Mr. MrrcHELL. Oh, I'll say he is.
The Chairman. You would depend on his memoranda, wouldn't
you?
Mr. MrrcHELL. Yes ; but I laugh at him in keeping this book.
Mr. Henderson. I am interested in this, Mr. Mitchell. We had
another book yesterday. What is the color of this book ?
Mr. Mitchell, I have seen it so seldom that I couldn't tell you
what the color of it is. Blue, black, white, yellow, or red, it's no
good ! [Laughter.] He thinks it's good, but I don't.
Mr. Hjbnderson. But doesn't it have a value in this matter of recip-
rocal obligation which you put way out here on the. items to be con-
sidered ?
Mr. Mitchell. Yes. Three times in the last 3 years I have thought
it had enough value to look at it with some particular account.
Mr. Henderson. You wanted to see how much business you had
gotten from a firm and to see what your reciprocal obligation was ?
Mr. Mitchell. Yes. I never, with a firm like Morgan or accounts
that are shown here, would pay any attention to the book on that
score. In the first place, it isn't an accurate book, it can't be; it is
just a memorandum made up by his stenographer.
Mr. Henderson. Do you mean that she determines the entries?
Mr. Mitchell. Yes.
Mr. Henderson. Here is an item that says [reading from "Exhibit
No. 1658-1"] :
Mr. Wlllkie told Mr. Hoover he suggested our name in Ohio Edison.
Does the stenographer make that up ?
Mr. Mitchell. Mr. X/eib undoubtedly told his stenographer just to
make a note ofi that.
Mr. Henderson. You mean he dictated it, in other words ?
Mr. Mitchell. He must have.
Mr. Henderson. What I was getting at is that it isn't something
a stenographer does and makes determinations about.
Mr. Mitchell, You are quite right.
Mr. Henderson. Let me ask you another question. Evidently you
are gomewhat familiar with these data. How closely does the actu-
ality follow these notations?
CONCENTRATION Of ECONOMIC POWER 11597
Mr. Mitchell. I haven't been over the book to be able to tell you
that at all. I would guess that that book must be filled with inac-
curacies, but for the general purposes, the general picture it gives, it
IS of value to Mr, Leib. But you have got the wrong fellow, as I say.
Mr. Nehemkis. Mr. Commisisoner, may I interject a comment at
this point? This material is not being offered for its accuracy. Mr.
Mitchell identified for us this morning and at a later time we will
give you the accurate figures for participations of Mr. Mitchell's
firm and all other firms on the street. This documentation is being
offered because it illustrates an important and vital practice in the
investment banking business, and I am not interested in examining
Mr. Mitchell on the accuracy of these figures. I want Mr. Mitchell's
aid in helping us understand what this custom of reciprocity is. Now
I was very much interested to note that Mr. Woods, who appeared
before us yesterday, likewise said that the entries of the two "little
black books" of the First Boston Corporation were made by a
secretary.
Mr. Henderson. Mr. Nehemkis, in view of accuracy I think you
ought to say, "little black books which were kept by the secretary to
Mr. Addinsell." Mr. Woods' testimony, as I recall, was distinctly, as
is Mr. Mitchell's, that it was not a part of the company records.
Mr. Nehemkis. My associate calls my attention to a statement —
I subsequently discovered that most of the entries are all made by Mr. Addin-
sell's secretary, and I wouldn't even hazard a guess as to the authorship of
most of those comments.
The committee has been examining into a number of industries
and it is of interest, I should think, to know whether anything as
vital as this can be entrusted to a secretary.
Mr. Henderson. You are introducing these, as I understand it,
not to get at the practice of keeping books — whether they are kept
by a partner or a secretary — but to ^et at the thing Mr. Mitchell
has referred to, that is, reciprocal obligation?
Mr. Nehemkis. Correct, sir.
I notice, if you will refer to the sheet we have before us, Mr.
Mitchell, that you have credited Morgan Stanley with $1,000,000.
Was this your entire participation, do you recall ?
Mr. Mitchell. I would say so, yes ; that was in the buying group,
that is, a syndicate.
Mr, Nehemkis. May I correct my statement? There has been
credited to Morgan Stanley $10,000.
Mr. Mitchell. No, this shows a profit here of $10,000 which is,
of course, gross, and it indicates that we made a gross of $20,000
on that participation and in Mr. Leib's book he has indicated that
half of it on a reciprocal basis should be credited to Morgan Stanley
and half of it to Bonbright & Co.
The Chairman. What is this reciprocal arrangement?
Mr. Mitchell. There is no reciprocal arrangement at all. This
is the sort of thing that is really of interest. Let us say that a
firm on the .Street — to make the case clearer, if it is a firm that we
rarely have relations with — comes to us and says, "We think that
you ought to give us larger interests in your business, your syndi-
cate; we find that we have given you syndicate participations that
11598 CX>NCENTRATION OF ECONOMIC POWER
carry a gross of $20,000, and we find that you have given us business
that has given us a gross of 5. We think you owe us larger par-
ticipations." In other words, they think that on a reciprocal basis
we should treat them more liberally.
HOW RECIPROCITY WORKS IN PRACTICE SIGNIFICANCE OF RECIPROCITY
The Chairman. Well, that might mean that if the investment
house "A" were disposing of a particular issue, it would bring in-
vestment house "B" into participation in the distribution of that
issue, and in reciprocity for that grant, when investment house ''B"
was bringing out an issue, it would accord the same privilege to
investment house "A." Now, that is one type of reciprocity, isn't it ?
Mr. Mitchell. Yes.
The Chairman. Is that what is represented here?
Mr. Mitchell. Your theory is all right, but if you were to study
his sheets, which I haven't done —
The Chairman (interposing). Neither have I. They have come
to my attention now for the first time.
Mr. Mitchell. I think I can cite a number of cases where we have
given a great deal more than we have received and other cases where
we have received a great deal more than we have given.
The Chairman. The question that is in my mind now is with
respect to this first item on this sheet, whether or not your company
handled this entire distribution of the amount allotted to you and
allowed Morgan Stanley to participate in the profits that you had
made?
Mr. Mitchell. Oh, no.
The Chairman. That is not what is meant by this ?
Mr. Mitchell. Oh, no, indeed.
The Chairman. I wanted to be quite clear about that. That
$10,000, then, that goes to Morgan Stanley and the $10,000 that goes
to Bonbright & Co. represents what?
Mr. Mitchell. That is a cuff memorandum; that is what I con-
sider it to be, a cuff memorandum, showing that here is a house
that has shown us consideration by giving us a participation here
that has shown a gross profit of so much.
Now, let me try to make it clearer. Bonbright & Company are
essentially a public utility house. They have a certain number of
utility issues. We have a great deal larger, perhaps, volume of indus-
trial and other issues. Bonbright isn't a house that we Avould ordi-
narily think of in connection with some industrial issue. We
wouldn't think of them as wanting to participate as underwriters
and distributors in that, because it is a little out of their line. But
we would look at the situation and we would say, "They have given
us participations in their syndicates that have run to pretty large
figures."
Now, when we have got some situation like that Pacific Gas &
Electric, may we say, where their name and their distributing power
clearly justify a strong position for Bonbright & Co. in the P. G.
& E. syndicate, and we are inclined to say, "Well, in dividing this
up they might be entitled to $5,000,000," and Mr. Leib would come in
and say to me, "All right, we have gotten a great deal from them ;
CONCENTRATION OF ECONOMIC POWER 11599
can't we make that $6,000,000?" And his background for that state-
ment would be his cuff memorandum, which is this.
Mr. Nehemkis. These sheets?
Mr. MrrcHELL. Yes.
Mr. Henderson. Would you recognize that as an obligation which
you speak of as a reciprocal obligation?
Mr. MrrcHELL. Absolutely not.
Mr. Arnold. But they would do the same thing for you under
similar circumstances, wouldn't they?
Mr. MrrcHELL. I think they would.
Mr. Arnold. And therefore this policy of reciprocity might well
have been one of the things which they were worrying about when
they spoke of the charge of monopoly which might be made against
them?
Mr. Mitchell. No; I don't se« how they could possibly have had
that particular thing in mind.
. Mr. Arnold. You can conceive how a suspicipus-minded person
might think that reciprocal obligations built up in this way, in little
books which were cuff memorandums, indicated that a monopoly
practice was going on.
Mr. Mitchell. I vrould hardly say that with respect to Morgan
Stanley & Co., because Morgan Stanley & Co. are the issuing syndi-
cate house and they very, very rarely participate in the issues of
others, and never to my knowledge except in a silent position, and
we have asked them to participate in only one of our issues, and that
was the large issue of the Pacific Gas & Electric which was $90,000,-
000, and we wanted to take off the overload on that particular issue
in syndication, and invited in that particular case Morgan Stanley,
Kuhn, Loeb and Dillon to participate, but that is the only thing — if
they kept a cuff book, that is the only thing they would find we
had ever done for them that yielded them a profit.
The Chairman. I am trying to get this memorandum through
my head.
Let me call your attention to the item on the first page under the
date of March 19, 1936,^ "$55,830,000 Consumers Power Co. 31/2 per-
cent first mortgage. In parentheses a little bit below I find this
statement :
"(We had a total interest of $1,000,000 divided between Mor-
gan Stanley and Bonbright.)"
What does that mean to you ?
Mr. Mitchell. That would mean to me that Morgan Stanley and
Bonbright were the joint managers of an account of the Consumers
Power Co. and that any offering to us by those joint names would be
recorded by Mr. Leib in his cuff book as half the gross profit on that
business, credit for it going to Morgan and half going to Bonbright.
The Chairman. In other words, Stanley and Bonbright were the
original managers of this issue ?
Mr. Mitchell. Consumers Power issue; yes.
The Chairman. And they were entitled, therefore, to a 50-50 parti-
cipation in the profit that you had ?
1 "Exhibit No. 1658-1."
11600 CONCENTRATION OF ECONOMIC POWER
Mr. Mitchell. No; there is no profit. This is merely a memo-
randum of what we might in a tangible way owe to them on future
business.
The Chairman. All right.
Now, you had a total interest of one million out of the fifty-five
million-odd dollar issue?
Mr. Mitchell. Yes.
The Chairman. And you received 50 percent of that from Morgan
Stanley and 50 percent from Bonbright. Is that the idea?
Mr. Mitchell. No. I am trying to make it clear to you, Senator,
because I can see that this confuses you. This is a million dollar
participation given to us by the joint managers. When they come
to us
The Chairman (interposing). In other words, you had one million
dollars of these securities to distribute?
Mr. Mitchell. Yes, sir. Morgan Stanley would say, "On behalf of
ourselves and Bonbright & Co., we want to offer you a participation
of $1,000,000 in this $55,000,000 underwriting." Now, that is offered
on behalf of both of them. When the job is done we look at it and
we say, "Here is a gross profit resulting from this transaction of
$20,000," Now, if we are making up a reciprocal memorandum, we
will say that we want to show how much profit has come from busi-
ness given to us by Bonbright, and we would say, "There was $10,000
that came from profit on one of their accounts," and we would say,
"There is $10,000 that came to us from Morgan Stanley & Co.," and
that would be noted on Mr. Leib's cuff book, and that is what
The Chairman (interposing). In the hope that some time later on
he would induce you or the company to make a reciprocal arrange-
ment with these companies in something like these proportions?
Mr. MrrcHELL. No; but Morgan Stanley & Co. never would be-
cause the balance is never except on one side ; in other words, there is
all give and practically no take.
Mr. Nehemkis. You can't ever hope really to reciprocate to Mor-
gan Stanley?
Mr. Mitchell. No; oh, no. They are not in our line of business.
Mr. Nehemkis. And that results from the fact that they have so
many high-grade originations which nobody else can touch that the
great run of houses simply can't on their cuff books put down, as
Mr. Leib did here, anything that could possibly reciprocate to them ?
Mr. Mitchell. It is not quite that. I am sorry to be getting into
the intricacies of this so far.
Mr, Nehemkis. That is what the committee wants you to do, I
am sure, Mr. Mitchell.
Mr. Mitchell. When we have a syndicate to make up, our syndi-
cates are not made up on the basis of what we would call under-
writers; in other words, people who merely do underwriting and no
distributing. Our syndicates are made up almost entirely of dis-
tributors, people who underwrite and distribute. It is only in such
cases as the Pacific Gas & Electric where the issue is very large and
our group of underwriters — we don't want to extend for one reason
or another or enlarge their participations too heavily, and in that
case we bring in, knowing that we will have a very broad selling
syndicate to take up any bonds that come from their underwritings —
we put them in merely to take the overweight off that group, but we
CONCENTRATION OF ECONOMIC POWER 11601
have very little of that to give. Our business is with underwriters
who are distributors.
Mr. Nehemkis. I think I understand.
May I ask you, Mr. Mitchell, to turn to the Kuhn, Loeb "cuff
sheets" and look at page 3, if you will. You will find there the third
entry [reading from "Exhibit No. 1658-2"] :
November 10, 1936, $25,000,000 Republic Steel Corp. Gen. Mtge. 41/2% series C,
Due November 1, 1956. Buying Group=$375,000 (11/2%).
That means your interest in the buying group. On the right side
[reading further] : "$4,219." Then an asterisk, and now I read to
you the asterisk [reading further] :
(Our full participation was $750,000 and the profit $8,438 divided 50-50 be-
tween Kuhn Loeb and Field Glore. Same method applies to our percentage
of 3% in the deal.)
Now, if I correctly understand the testimony which you have given
to the committee during the past few minutes, Mr. Leib's entry means
the following: You got a participation of $750,000 in the Kepublic
Steel issue; you got half of that from Kuhn, Loeb and the other
half from Field, Glore. Therefore, this being the cuff sheet under
the heading "Kuhn, Loeb & Company," Mr. Leib recorded that your
reciprocal obligation to Kuhn, Loeb was in the amount of $4,219.
On the other sheets which we do not have but which would be headed
"Field, Glore" there should be a corresponding similar entry?
Mr. Mitchell. That is correct.
Mr. Nehemkis. Now, it is hoped in your business that when the
next origination comes around, all things being equal, you hope that
you will be in a position to extend a courtesy to these two houses
which have extended this courtesy to you. Correct?
Mr. Mitchell. At some time or another where the balance is even
as to the desirability of having them come into account as a tail-end
thought, as explained this morning, we might give this consideration.
(Mr. Henderson took the chair.)
Mr. Nehemkis. Just glance down the same sheet, page 3, if you
will, and follow with me on the second entry under the year 1937
[reading from "Exhibit No. 1658-2"] :
February 16, 1937. 500,000 shs. Tide Water Associated Oil Co., $4.50 cum.
pfd * * * Buying group — 3,167 shares.
Then the parentheses and your percentage participation over on the
right, gross $26,625. Asterisk, and follow with me, if you will, on the
asterisk notation:
Our position was completely dictated by the management, therefore no
reciprocal credit is due.
If I understand your testimony correctly that means that your
position in that svndicate was due to the fact that the management.
Tide Water itself, requested of the syndicate manager that "I want
BlT^th & Co. included." Therefore Mr. Leib noted : "I am under no
reciprocal obligation to K. L.," and accordingly he has not entered
any dollar amount on the right-hand side where he normally does.
Do I understand that?
Mr. Mitchell. That is completely correct.
Mr. Nehemkis. Fine, then let me ask you a few more questions
on this problem and I think I won't have to burden you any further.
11602 CONCENTRATION OF ECONOMIC POWER
As a result of this system of reciprocity which exists between invest-
ment banking firms, does not each firm have in effect a proprietary
interest in the business of the other?
Mr. MrrcHELL. I would like to have our expert on words help me
with what "proprietary" means.
Mr. Nehemkis. Well, I will put it to you differently. Perhaps
this will aid you in following my thought. As a result of this recip-
rocal obligation arrangement which exists between investment bank-
ing firms, these firms are in effect partners in a community business,
aren't they ?
Mr, Mitchell. Oh, no ; oh, no !
Mr. Nehemkis. Let me ask you another question to see if this
doesn't help clarify the thought. These various firms possessing
claims upon other bankers for past favors and the ability to confer
favors in the future, there is no compelling reason to compete among
each other, is there? In other words, once you are in a group, as
you testified earlier, you have got a fixed position, so there is no reason
why you should want to compete against any other house?
Mr. Mitchell. Oh, yes, there is; there is a reason for us to com-
pete wherever competition is possible and we do so compete.
Mr. Arnold. May I ask a question with relation to the letter of
August 10 where you write that Harold Stanley is concerned ' about
a possible charge of monopoly.^ Wasn't it these reciprocal obliga-
tions that laid the basis for that fear?
Mr. Mitchell. I wouldn't say so at all. We had no reciprocal
Mr. Arnold (interposing). Your reciprocal obligations in the
business.
Mr. Mitchell. No, I wouldn't think so at all. I wouldn't think
(hat that had even entered into it.
Mr. Arnold. These reciprocal obligations, you testified, were the
tail-end thought in distributing this business?
Mr. Mitchell. That is right.
reciprocal obligations as "combinations in restraint of trade"
Mr. Arnold. Had they been the front-end thought, there would
have been a combination in restraint of trade, wouldn't there?
Mr. Mitchell. I should think so.
Mr. Arnold. So that the sole question arising as to whether there
is a monopoly here or not is the difference between a tail-end thought
and a front-end thought?
Mr. Mitchell. I would think there is a very great difference.
Mr. Arnold. But that would reside only in the mind of the fellow
that was thinking, wouldn't it?
Mr. Mitchell. I would think that Street practice would be unani-
mous in the thought to the contrary.
Mr. Arnold. I should imagine all the testimony would be to that
effect.
Now, suppose that this tail-end thought so worked out that its
results were identical to the results which would have occurred had
it been the front-end thought. In such a case the sole distinction
as to whether there was monopoly or not would be the subjective
1 See "Exhibit No. 1657," supra, p. 11594.
CONCENTRATION OF ECONOMIC POWER 11603
frame of mind of the people who went into the arrangement, wouldn't
it?
Mr. MncHELL. Yes, but may I just say this, Mr. Arnold. To an
increasing degree the issuer is determining who shall participate
in these accounts. I need only to refer to one account that con-
stitutes perhaps as large, if not the largest, financing of last year
which was the Commonwealth Edison of Chicago. I have reason
to believe, and sound reason, I think, that the names in that ac-
count and the amounts for the various underwriters were determined
solely by the issuer and that Mr. Simpson, the head of Common-
wealth Edison, handed to the manager of the account that list of
names and that settled it. Now there are other cases of that sort,
and many of them, that are .coming up constantly. It isn't the
idea, but the trend, taking it right on your basis, is very far away
from monopolistic tendency.
Mr. Arnold. I don't know what the evidence shows as to how these
reciprocal obligations have worked out here, but nevertheless, if they
did work out so that the cuff books and the total results at the end
of the year were substantially identical there would be some real
evidence of monopoly practice, wouldn't there?
Mr. Mitchell. I agree with you if it were possible for all these
firms to interchange business and when you came to the end of the
year what they had given and taken in even amounts you would have
the equivalent of one group which would constitute a monopoly, but
that is very far from what the situation actually is.
Acting Chairman Henderson. You say it is tending away from
that. Perhaps it has been more nearly like monopoly in the past. Is
that your thought ?
Mr. Mitchell. Let me say this. Now, I have been through these
days when 'we had bank affiliates and had the largest one of those
under my supervision, and let me directly say this to Mr. Arnold, too.
If we had gone along with the bank affiliate — I didn't think this at
the time but I know it now — if we had gone along with the develop-
ment of the bank affiliate in investment banking we would have
worked quite completely to a monopoly in this investment banking
business. Now, the great change for the benefit of the country and
for the benefit of investors has in my opinion been that which at the
time I regarded as a great disaster, the breaking off of the investment
banking affiliate. Today I regard it as one of the great steps of
progress that has been made.
Acting Chairman Henderson. Take this thought that you recorded
in a letter to your partner, that there were too many houses, that
there ought to be, to paraphrase, a fewer number of bigger ones;
that is what the Corner thought. Suppose we had a smaller number
of more powerful firms. Would the possibility of monopoly exist in
the same way, as you now describe it, that it was tending toward in
the day of the old banking affiliate ?
Mr. Mitchell. I wouldn't say that it was parallel. To give that
that answer I have got to draw a little picture for you. The under-
writing managements would be very glad indeed to take in small
firms, but you have got several things which block you. One is cap-
ital. Another is a separation of the functions of the few people that
may be in a small concern where you would expect there to be an
expert who would be capable of giving that firm the requirements un-
11604 CONCENTRATION OF ECONOMIC POWER
der the due diligence provision. It is just weakening underwritings
when you get in very small firms, small firms of capital or small
organizations. They really are not fitted for the job of underwriting,
and with due respect to some of these long underwriting*? — I referred
to this underwriting of Morgan Stanley where they had, I think,
what was it, 97 names — I haven't examined that but I know that
personally I could pick out certain names, the propriety of which
in an underwriting syndicate I would challenge on very sound
grounds.
I am not speaking for Mr. Stanley who made that remark to me,
but I can tell you that there is an advantage in having more houses
with more capital; in other words, not having to run down so
quickly as we do now to houses with very small capital.
(Senator O'Mahoney resumed the chair.)
Mr. Nehemkis. I have no further questions.
The Chairman. Do the members of the committee desire to ask Mr.
Mitchell any questions? Then you have finished with this witness?
Mr. Nehemkis. I have, sir.
The Chairman. Mr. Mitchell, on behalf of the committee, let me
thank you for your very prompt response to the many inquiries and
your patience under this continued barrage. We are very much
indebted to you. We have all participated, of course, in the barrage.
Mr. Mitchell. Thank you very much, sir.
(The witness, Mr. Mitchell, was excused.)
The Chairman. Do you have another witness?
Mr. Nehemkis. No, sir.
The Chairman. Mr. Henderson will make a statement with respect
to the hearing tomorrow.
Mr. Henderson. Tomorrow the matter under consideration will be
the financing of American Telephone & Telegraph Co. and the wit-
nesses will be Dr. N. R. Danielian, author of "A. T. & T.: The Story
of Industrial Conquest," Director of Research, Senate Civil Liberties
Committee ; Mr. George Wliitney, J. P. Morgan & Co. ; Mr. John R.
Chapin, Kidder, Peabody & Co. ; Mr. Albert H. Gordon, Kidder, Pea-
body & Co. ; Mr. H. L. Stuart, Halsey, Stuart & Co., Inc. ; Mr. Harold
Stanley, of Morgan Stanley & Co.
I may say it is the desire of the S. E. C. to finish by 3 o'clock in
order that a number of people may be free to attend the financial
writers' dinner tomorrow evening in New York.
Mr. Nehemkis. To that end, Mr. Chairman, would it be the pleas-
ure of the Committee if we started our proceedings at 10 o'clock ?
The Chairman. That is quite agreeable to the chairman. If there
is no objection, when the Committee adjourns it will adjourn imtil
10 o'clock in the morning.
Mr. Nehemkis. I think someone raises a question here. We had
better make it at 10 : 30. Apparently there are some mechanical
arrangements on mimeographing that might interfere.
(Discussion off the record.)
The Chairman. The suggestion is withdrawn.
Mr. Henderson. We are agreed on 10 o'clock.
The Chairman. The Committee will now stand in recess until 10
o'clock tomorrow morning.
(Whei-eupon at 4:25 p. m., the meeting recessed until 10 a. m.
the following day, Friday, December 15, 1939.)
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11605
1160(i CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1528
[From the files of the National City Bank of New York)
The National City Bank of New Yoek,
New York, June Jf, 1934.
To the Shareholders:
The Banking Act of 1933 passed last June required divorcement of commer-
cial banking from investment banking within the period of a year. I have
felt that The National City Bank of New York should support the policy of
Congress in both letter and spirit. In the year past we have been endeavoring
to find a way fully to meet this policy and at the same time to preserve any
good-will value there might be in the business of The City Company of New
York, Inc., formerly The National City Company.
Good-will is a nebulous thing. In so far as it is attached to the name of
the City Company it cannot be realized on, because the continued use of the
name would identify the user with the Bank and that cannot be permitted
without control by the Bank, which is forbidden by law. In so far as it
may be represented by personnel trained in the investment banking business,
such personnel consists of free individuals whom the City Company is not in
a position to deliver to a prospective purchaser.
The ownership of the control of an investment banking company by the
shareholders of the Bank would be unlawful, whether such ownership came
from the distribution of the stock of the City Company, or from the purchase
of the business of the City Company.
The organization of a new investment banking concern as successor to the
City Company and in which the shareholders of the Bank would be offered less
than a controlling interest, would involve, in the first place, a recommendation
by the Bank to its shareholders to place new capital, or to leave a substantial
amount of the old capital, at the risk of the future of the securities business,
and, in the second place, the sponsorship by the Bank of the new investment
banking concern without power on the part of the Bank to control its policies.
Your Directors after mature consideration have been unwilling to place the
Bank back of such a plan. I personally believe that in future the Bank
should be free from any connection, either directly or in any other way which
might be taken by the public to indicate a relationship, with any investment
banking house. I think the Bank should keep itself free to do legitimate
business with any responsible house on equal terras with any other.
The City Company will accordingly discontinue the securities business im-
mediately, and will proceed to wind tip its affairs. This will take time, as
it will be necessary to liquidate slow assets and dispose of pending claims.
When the Trust Agreement relating to the stock of the City Company was
recently amended, by the written consent of the Trustees and of the holders of
upwards of 75% in amount of the common stock of the Bank, among the
additional powers vested in the Trustees was the power to place the Company
in voluntary dissolution and to transfer and deliver the stock of the Company
to the Bank, thereby terminating the trust. These steps have been taken, and,
in connection with the discontinuance of the securities business, they bring the
relationship between the Bank and the Company into conformity with the
Banking Act of 1933. The Federal Reserve Board has so ruled, under Section
20 of the Act, the so-called "divorce" section. The program has also been
submitted to the Comptroller of the Currency and approved by him. The
capital of the City Company was originally derived from a special dividend
paid by the Bank, and it seems appropriate that the money at present invested
in the business of the Company be returned into the Bank.
Some of the officers and employees of the City Company will be retained to
handle the liquidation of its affairs. A number of the principal officers have
resigned and will, I hope, make other connections satisfactory to them.
Neither the name, nor the files nor other indicia of the good will of a business,
will be sold or given to anyone.
The Bank will continue that part of the business of the City Company
which has to do with imderwriting and trading in United States Government,
state, and municipal securities, as permitted by law.
There will bo no successor to the City Company.
Yours very truly,
.Tamks H. Perkins.
Chairman of the Board of Directors.
CONCENTRATION OF ECONOMIC POWER
11607
Exhibit No 1529
[Copy]
[From the files of The City Company of New York, Incorporated (in dissolution) formerly The National
City Company]
Senior Officers of The City Company of New York, Incorporated {in dissolu-
tion) {formerly The National City Company) , who were serving January 1,
19S5, hut have left the service since that date
Position
Duties
Date re-
• signed
Now with
Mitchell, C. E.
Baker, H. B -.
Sylvester, H. C.
Davis, P. v..
Russell, S. A-
Buckley, O. D
Schoepperle, V. F.
Ripley, J. P
Morrison, W. R.
Mayer, H. F
Jolles, n. R
Morier, Gordon.
Mann, Henry.. .
Shrewsbury, W.
Baldwin, S. W..
JUNIOR OFnCERS
Custard, A. A
Beebe, H. W
Wells, Wm. C-
Niller, Wm..
Castle, S. L..
Smith, P. L_
Scarff, J. O
Cross, M. C
Chairman
President
Vice Pres. _
Vice Pres
Vice Pres...
Vice Pres
Vice Pres-
Vice Pres.-
Vice Pres
Vice Pres. &
Comptroller.
Vice Pres.-
Resident V. P
Resident V. P....
Resident V. P....
Treasurer
Asst. V. P.
Asst. V. P.
Asst. V. P.
Asst. V. P.
Asst. V. P.
Asst V. P.
Asst. V. P.
Asst. V. P.
Executive.
Executive.
Govt. (US & Can.)
State & Mun. Buy-
ing & Selling.
Raih-oad Buying.
Industrial & Public
Utility Buying. '
Publicity
Foreign Sec...
Industrial & Public
Utility Buying.
Trading
Operating
Foreign Sec
Executive— London. .
Executive— Berlin
Executive — Foreign
(Qenl.).
Treasury.-
Selling (Phila.).
Selling..
Selling.
Selling (Wash.).
SeUing(Chic.)..
Pub. U tility Buyhig. .
Industrial & Pub.
Utility Buying.
Industrial & Pub.
Utility Buying.
2/27/33
2/27/33
5/31/34
5/31/34
6/31/34
3/29/33
6/31/34
5/31/34
5/31/34
6/31/34
5/31/34
6/31/34
5/31/34
6/13/33
5/15/34
5/31/34
5/31/34
5/31/34
5/31/34
5/31/34
12/30/33
5/31/34
5/31/34
Blyth & Company.
Baker, Weeks & Harden
(brokers).
Harriman, Ripley & Co.
Harriman, Ripley & Co.
Lazard Freres & Company.
Deceased.
National City Bank of
New York.
Harriman, Ripley <Se Co.
East River Savings Bank.
Unknown now — formerly
with Harriman, Ripley
& Co.
Harriman, Ripley & Co.
Harris, Upham & Co.
(Brokers— London).
Harriman, Ripley & Co. —
Abroad.
Retired.
Retired.
Unknown.
Harriman, Ripley <!: Co,
Deceased.
Harriman, Ripley & Co.
Lazard Freres & Com-
pany.
Public Service Co. of No.
Illinois— Chicago.
Harriman, Ripley & Co.
Harriman, Ripley & Co.
Exhibit No. 1530
Banking Act of 1933
sections pertaining to the divorcement of security affiliates and the
segregation of commercial from investment banking.
Sec. 20. After one year from the date of the enactment of this Act, no mem-
ber banli shall be affiliated in any manner described in section 2 (b) hereof
with any corporation, association, business trust, or other similar organization
engaged principally in the issue, flotation, underwriting, public sale, or dis-
tribution at wholesale or retail or through syndicate participation of stocks,
bonds, debentures, notes, or other securities.
For every violation of this section the member bank involved shall be subject
to a penalty not exceeding $1,000 per day for each day during which such
violation continues. Such penalty may be assessed by the Federal Reserve
Board, in its discretion, and, when so assessed, may be collected by the Federal
Reserve Bank by suit or otherwise.
If any such violation shall continue for six calendar months after the member
bank shall have been warned by the Federal Reserve Board to 'discontinue the
same, (a) in the case of a national bank, all the rights, privileges, and fran-
chises granted to it under the National Bank Act may be forfeited in the
manner prescribed in section 2 of the Federal Reserve Act, as amended (U. S. C,
124491 — 40 — pt. 22 17
11608 CONCENTRATION OF ECONOMIC POWER
title 12, sees. 141, 222-225, 281-286, and 502), or, (b) in the case of a State
member bank, all of its rights and privileges of membership in the Federal
Reserve System may be forfeited in the manner prescribed in section 9 of the
Federal Reserve Act, as amended (U. S. C, title 12, sees. 321-332).
Sec. 21. (a) After the expiration of one year after the date of enactment
of this Act it shall be unlawful —
(1) For any person, firm, corporation, association, business trust, or other
similar organization, engaged in the business of issuing, underwriting, selling,
or distributing, at wholesale or retail, or through syndicate participation, stocks,
bonds, debentures, notes, or other securities, to engage at the same time to any
extent whatever in the business of receiving deposits subject to check or to
repayment upon presentation of a passbook, certificate of deposit, or other
evidence of debt, or upon request of the depositor ; or
(2) For any person, firm, corporation, association, business trust, or other
similar organization, other than a financial institution or private banker subject
to examination and regulation under State or Federal law, to engage to any
extent whatever in the business of receiving deposits subject to check or to
repayment upon presentation of a passbook, certificate of deposit, or other
evidence of debt, or upon request of the depositor, unless such person, firm,
corporation, association, business trust, or other similar organization shall
submit to periodic examination by the Comptroller of the Currency or by the
Federal reserve bank of the district and shall make and publish periodic reports
of its condition, exhibiting in detail its resources and liabilities, such examina-
tion and reports to be made and published at the same times and in the same
manner and with like effect and penalties as are now provided by law in respect
of national banking associations transacting business in the same locality.
(b) Whoever shall willfully violate any of the provisions of this section shall
upon conviction be fined not more than $5,000 or imprisoned not more than five
years, or both, and any officer, director, employee, or agent of any person, firm,
corporation, association, business trust, or other similar organizaition who know-
ingly participates ih any such violation shall be punished by a like fine or
imprisonment or both.
Sec. 2. As used in this Act and in any provision of law amended by this
Act—
(a) The terms "banks", "national bank", "natioijal banking association",
"member bank", "board", "district", and "reserve bank" shall have the meanings
assigned to them in section 1 of the Federal Reserve Act, as amended.
(b) Except where otherwise specifically provided, the term "affiliate" shall
include any corporation, business trust, association, or other similar organi-
zation—
(1) Of which a member bank, directly or indirectly, owns or controls either
a majority of the voting shares or more than 50 per centum of the number of
shares voted for the election of its directors, trustees, or other persons exer-
cising similar functions at the preceding election, or controls in any manner
the election of a majority of its directors, trustees, or other persons exercising
similar functions ; or
(2) Of which control is held, directly or indirectly, through stock ownership
or in any other manner, by the shareholders of a member bank who own or
control either a majority of the shares of such bank or more than 50 per centum
of the number of shares voted for the election of directors of such bank at
the preceding election, or by trustees for the benefit of the shareholders of any
such bank ; or
(3) Of which a majority of its directors, trustees, or other persons exer-
cising similar functions are directors of any one member bank.
(c) The term "holding company affiliate" shall include any corporation,
business trust, association, or other similar organization —
(1) Which owns or control-s, directly or indirectly, either a majority of the
shares of capital stock of a member bank or more than 50 per centum of the
number of shares voted for the election of directors of any one bank at the
preceding election, or controls in any manner the election of a majority of the
directors of any one bank ; or
(2) For the benefit of whose shareholders or members all or substantially all
the capital stock of a member bank is held by trustees.
Sec. 18. Section 5139 of the Revised Statutes, as amended (U. S. C, title
12, sec. 52; Supp. VI, title 32, sec. 52), is amended by adding at the end thereof
the following new para^aph :
"After one year from the date of the enactment of the Banking Act of 1933,
no certificate representing the stock of any such association shall represent the
CONCENTRATION OF ECONOMIC POWER 11609
stock of any other corporation, except a member bank or a corporation existing
on the date this paragraph takes effect engaged solely in holding the bank
premises of such association, nor shall the ownership, sale or transfer of any
certificate representing the stock of any such association be conditioned in any
manner whatsoever upon the ownership, sale, or transfer of a certificate repre-
senting the stock of any other corporation, except a member bank."
Banking Act of 1935
amendments to certain sections of the banking act of 1933
Sec. 302. The first paragraph of section 20 of the Banking Act of 1933, as
amended, is amended by inserting before the period at the end thereof a colon
and the following : "Provided, That nothing in this paragraph shall ajiply to any
such organization which shall have been placed in formal liquidation and which
shall transact no business except siach as may be incidental to the liquidation
of its affairs."
Sec. 303. (a) Paragraph (1) of subsection (a) of section 21 of the Banking
Act of 1933, as amended, is amended by inserting before the semicolon at the
end thereof a colon and the following: "Provided, That the provisions of this
paragraph shall not prohibit national banks or State banks or trust companies
(whether or not members of the Federal Reserve System) or other financial
Institutions or private bankers from dealing in, underwriting, purchasing, and
selling investment securities to the extent permitted to national hanking asso-
ciations by the provisions of section 5136 of the Revised Statutes, as amended
(U. S. C, title 12, sec. 24; Supp. VII, title 12, sec. 24) : Provided further, That
nothing in this paragraph shall be construed as affecting in any way such right
as any bank, banking association, savings bank, trust company, or other banking
institution, may otlierwise possess to sell,- without recourse or agreement to
repurchase, obligations evidencing loans on. real estate."
(b) Paragraph (2) of subsection (a) of such section 21 is amended to read
as follows:
"(2) For any person, firm, corporation, association, business trust, or other
similar organization to engage, to any extent whatever with others than his or
its officers, agents or employees, in the business of receiving deposits subject to
check or to repayment upon presentation of a pass book, certificate of deposit,
or other evidence of debt, or upon request of the depositor, unless such person,
firm, corporation, association, business trust, or other similar organization (A)
shall be incorporated under and authorized to engage in such business by, the
laws of the United States or of any State, Territory, or District, or (B) shall
be permitted by any State, Territory, or District to engage in such business
and shall be subjected by the law of such State, Territory or District to exam-
ination and regulation, or (C) shall submit to periodic examination by the
banking authority of the State, Territory, or District where such business is
carried on and shall make and publish periodic reports of its. condition, ex-
hibiting in detail its resources and liabilities, such examination and reports
to be made and published at the same times and in the same manner and under
the same conditions as required by the law of such State, Territory, or District
in the case of incoiporated banking institutions engaged in such business in the
same locality."
Exhibit No. 1531
[Prepared by Harriman Ripley & Co., Incorporated. Stock Ownership of Harriman
Hipley & Co., Incorporated]
Percent of total voting stock, preferred cmd common, including voting trust
Certificates.
W. A. Harriman (Including % of undivided interests of three com-
panies) 30. 59%
E. R. Harriman (Including % of undivided interests of three com-
panies) 30. 59%
4 Children, each 8.52% (Trust) 34.08%
Ripley & Staff (26 persons) 4.74%
Total 100.00%
12/12/39
11610
CONCENTRATION OF ECONOMIC POWER
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CONCENTRATION OF ECONOMIC POWER
11611
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11612 CONCENTRATION OF ECONOMIC POWKll
Exhibit No. 1535
The National Citt Bank,
New York, February 10, 1931.
Mr. Julian W. Blount,
Clerk, United States Senate Committee on Banking and Currency,
Washington, D. C.
Dear Mr. Blount : In the course of my hearing before the Senate Committee
on Banking and Currency on February 2, Senator Walcott requested me to
gather some data regarding the increasing importance in recent years of bank-
ing aflSliates in the investment banking business, and I agreed to do so. As a
result of a study made by our people, I am now able to send for your records
the attached sheets.
The first is a record of the past four years of the origination of bond issues
by all houses who originated $20,000,000 or more per annum. From this table
it will be noted that banking affiliate originations during this period increased
from 12.8 per cent of the total in 1927 to 23.3 per cent in 1928, 41.5 per cent in
1929, and 39.2 per cent in 1930.
The second tabulation shows the volume of issues, in addition to their own
originations, participated in by the same group as covered in the first tabula-
tion. Of course, the dollar figures represent the sum total, of the issues, and not
the participations themselves, and in that particular is misleading. But this
does not affect the percentage figures showing to what extent various groups
participated generally in distribution. From this tabulation, it will be noted
that the participations of banking affiliates increased from 20.6 per cent in
1927 to a high of 54.4 per cent in 1930.
Yours very truly,
C. E. MlTCHEU..
Source : "Operations of the National and Federal Reserve Banking Systems" (Hear-
ings, Part II, Pursuant to S. Res. 71, 71st Congress, 3rd Sessions, 1931, p. 299.
ORIGINATIONS OF BOND ISSUES BY ALL HOUSES ORIGINATING $20,000,000 OR MORE
PER ANNUM
[Amounts in thousands of dollars]
1927
Per
cent
of
total
1928
Per
cent
of
total
1929
Per
cent
of
total
1930
Per
cent
of
total
National bank afldliates
692, 075
162, 714
10.1
2.7
649, 572
320,664
16.6
7.7
714, 998
489, 400
24.6
18.9
1, 279, 485
530, 779
27.6
11.6
♦
Total, bank affiliates . . .
754, 789
540, 711
4, 566, 574
12.8
9.2
78.0
970, 236
258,803
2, 923, 975
23.3
6.2
70.5
1,204,398
115,201
1,585,933
41.5
4.0
54.5
1,810,264
248, 980
2, 550, 841
39.2
Commercial banks and trust corn-
5.4
Private bankers -^
55.4
Total
5,862,074
100.0
4,153,014
100.0
2, 905, 532
100.0
4, 616, 085
100.0
VOLUME OF ISSUES, IN ADDITION TO THEIR OWN ORIGINATIONS, PARTICIPATED
IN BY ALL HOUSES ORIGINATING $20,000,000 OR MORE PER ANNUM
National bank affiliates .
1, 661. 037
1, 050, 690
12.6
8.0
908, 968
1,174,504
8.9
11.5
1,238,306
1, 905, 869
17.6
27.2
4, 323, 183
2. 676, 056
33.6
Other bank affiliates
20.8
Total, bank affiliates . ..
2,711,727
2,131,368
8,310,011
20.6
16.2
63.2
2, 083, 472
1, 191, 380
6, 956, 949
20.4
11.6
68.0
3, 144, 165
440,509
3, 427, 000
44.8
6.3
48.9
6, 979, 239
877, 603
4, 992, 085
54.4
Commercial banks and trust com-
6.8
Prlvate baokors
38.8
Total
13, 163, 106
100.0
10, 231, 801
100.0
7, Oil, 674
100.0
12, 848, 927
100.0
Source. "Operations of the National and Federal Reserve Banking Systems.' (Hearings,
Part 11, Pursu:int to S. Res. 71, 71st Congress, ."ird Session), 19;n, p. 209.
CONCENTRATION OF ECONOMIC POWER 11613
Exhibit 1536
r Letter from W. A. Harriman to Investment Banking Section, Monopoly Study, Securities
and Exchange Commission]
Washington, D. C, December 6, 19,V>.
Petijr R. Nehemkis, Jr., Esq.
Securities and Exchange Commission, Washington, D. C.
Dear Mr. Nehemkis: In accordance with our conversation this morning I
give below the answers to the four questions which you aslced me :
(a) Capital interest of my brother and myself in the private hanking firm
of Brown Brothers Harriman & Co. My brother and I have substantially
all the paid-in capital of the firm and our capital interests are equal m
amount. This situation has not changed materially since 1932.
(b) Ririht of capital partners with respect to firm commitments. Under the
articles at present in effect (dating from January 1, 1936) Section 25 pro-
vides "No commitment shall be taken as against the objection of any partner
having any of the ordinary capital of the firm." The word commitment here
refers, of course, to financial commitment.
While the phraseology of the articles in effect in 1934 (dating from January
1, 1932) with respect to firm commitments was different from that in the
1936 articles presently in effect, the result was that either my brother or
I, by objecting, could prevent the firm taking a financial commitment.
(c) Method of admission of new partners. The 1936 articles, still in
effect, provide in Section 26, that "Two-thirds of the partners of the firm may
amend, modify, or alter any of the provisions of the partnership articles,
upon the condition that any partner who shall consider himself to be adversely
affected thereby may, upon written notice given the firm, retire from the
firm 30 days after being notified of any such amendment, modification, or
alteration, and such amendment, modification, or alteration of the provisions
of the partnership articles shall not affect the rights or interests of a partner
so retiring, except with his written approval. The introduction of a new
partner shall be deemed an amendment for the purposes thereof."
The effect of the corresponding provision in the articles of 1934 was that
my brother and I acting together, but neither of us acting alone, had the
right to amend, modify, or alter the articles. The introduction of a new part-
ner was deemed an amendment.
While your inquiry did not extend to the termination of membership, I
might add that, under the present articles. Section 17 requires the action of
two-thirds of the partners to terminate the membership of any partner in-
voluntarily. Prior to 1934, my brother and I, acting with at least two other
partners, could have terminated the membership of any partner involuntarily.
The effect of the retirement of four partners as the result of the discontinu-
ance of the securities business in June 1934, was to give my brother and me,
without any change in this provision of the articles, the right, acting together
but not singly, to require the involuntary retirement of any partner. There
have been no involuntary retirements.
(d) Method of determining distribiiti-on of profits. The authority to deter-
mine the distribution of profits from time to time is contained in the pro-
vision of the articles regarding amendment, modification, or. alteration. Hence
under the 1936 articles now in effect the distribution of profits is determined
by the vote of two-thirds of the partners, each partner being entitled to one
vote: and under the articles in effect in 1934, my brother and I, if we acted
together, could have established the method of determining the distribution
of pi'ofits. Neither of us could have accomplished this singly.
As a matter of fact, I can recall no instance in which action was taken
on any of the above matters without full discussion and unanimous agree-
ment of all the partners.
I trust that the foregoing meets your needs.
Very truly yours.
W. A. Haeriman.
"Exhibit No. 1537," introduced on p. 11425, was marked for identification only
11614 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1538-1
[Letter from Chicago, Milwaukee, St. Paul and Pacific Railroad Company to Investment
Banking Section, Monopoly Study, Securities and Exchange Commission]
Chicago, Milwaukee, St. Paul and Pacific Railroad Company
bBNBT A. SCANDRBTTT, WAiyTBR J. CUM MINGS, GEOHGB I. HAIGHT, TfUSteeS
874 Union Station, Chicago, Illinois
November 15, 1939.
Mr. PEjfEB R. Nehemkis, Jr.,
Special Counsel, Investment Banking Section,
Monopoly Study, Securities and Exchange Commission,
Washington, D. C.
Dear Mr. Nehemkis : I have your letter of November lOth, and enclose copy
of my letter to the Senate Committee on Interstate Commerce regarding your
use of copies of documents relating to the financing of the Chicago Union Station
Company obtained from our files by the Senate Committee.
Yours very truly,
H. A. Scandrett.
Chicago, Milwaukee, St. Paul and Pacific Railroad Company
Henbt a. Scandhett, Waltbr J. Cum MINGS, Geobgb I. Haight, Trustees
874 Union Station, Chicago, Illinois
November 16, 1939.
Senate Committee on Interstate Commesck,
45 Broadway, New York, N. T.
Gentlemen: I enclose copy of letter dated November 10th from Special
Coimsel Nehemkis of the Investment Banking Section, Monopoly Study, Securi-
ties and Exchange Commission, concerning documents relating to the financing
of the Chicago Union Station Company obtained from our files by your Com-
mittee in the Railroad Finance Investigation.
We are agreeable to your making these documents available to the Securities
and Exchange Commission for use in its Investment Banking Study.
Yours very truly,
[Original signed] H. A. Scandrett.
Exhibit No. 1588--
[ Letter from Kuhn, Loeb & Co. to Investment Banking Section, Monopoly Study, Securities
and Exchange Coniniission]
Kuhn, Loeb & Co.,
WiujAM AND Pine Streets,
New York, November 13, 19S9.
Peter R. Nehemkis, Jr., Esq.,
Special Counsel, Monopoly Study, Investment Banking Section,
Securities and Exchange Commission, Washington, D. C.
Dear Sir: We have your letter of November 10th with regard to copies of
documents made by (he Senate Committee on Interstate Commerce when its
staff examined our files relative to the financing of the Chicago Union Station
Company. In accordance with your suggestion, the basis of which we appre-
ciate, we have consented to the Senate Committee's making this data available
to you and enclose a copy of our today's letter to that Committee authorizing
its so doing.
Faithfully yours,
Kuhn, Loeb & Co.
CONCENTRATION OF ECONOMIC POWER 11615
[Copy]
KUHN, LOEB & Co.,
November 13, 1939.
United States Senate Commitfee on Interstate Commerce,
45 Broadway, New York, N. Y.
Dear Sirs : We enclose herein copy of a lei ter dated November 10th from
Mr. Peter R. Nehemkis, Jr., Special Counsel of the Monopoly Study of the
Securities and Exchange Commission, Washington. We think you will find
this letter self-explanatory and this is to advise you that if you are prepared
to make available to the Securities and Exchnuge Commission the copies of
such documents as you made when you examined our files in connection with
the financing of the Chicago Union Station Company as indicated in Mr.
Nehemkis' letter, we hereby consent to your so doing.
Respectfully yours,
[s] KuHN, LOEB & Co.
GC
Enc.
Exhibit No. 1538-3
[Copy of letter from The Pennsylvania Railroad Company to Senate Committee on Inter-
state Commerce]
The Pennsylvania Railroad Company,
November 24, 1939.
Senate Committee on Interstate Commerce,
45 Broadway, Netc York, N. Y.
Gentemen : There is enclosed herewith a copy of a letter of November 10,
1939, from Mr. Peter R. Nehemkis, Jr., Special Counsel, Investment Banking
Section, Monopoly Study, of the Secm'ities and Exchange Commission, which is
self-explanatiory.
You are hereby requested to make available, for the use of the Investment
Banking Study of the Temporary National Economic Conuuittee, copies of papers
which your Committee obtained from the files of The Pennsylvania Railroad
Company relating to the financing of the Chicago Union Station Company.
Very truly yours,
[S] Geo. H. Pabst, .Jr., Asst. Vice-President.
Copy to: Peter R. Nehemkis, Jr., Esq., Special Counsel, Investment Banking
Section, Monopoly Study, Securities and Exchange Commisison, Washington,
D. C.
Geo. S. Pabst, Jr.
Exhibit No. 1539-1
[Copy]
[Letter from Investment Banking Section, Monopoly Study, Securities and Exchange
Commission, to Kuhn, Loeb & Co.]
November 10, 1939.
Kuhn Loeb & Co., 52 Williams Street,
New York, N. Y.
GmTLEMEN : The Temporary National Economic Committee, established by
Public Resolution 113, Seventy-Fifth Congress, has authorized the Securities and
Exchange Commission to undertake certain studies in the field of Investment
Banking.
One of the subjects which the Securities and Exchange Commission, pursuant
to the above authorization, is inquiring into relates to the financing of the
Chicago Union Station Company. It has recently come to our attention that
the Railroad Finance Investigation of the Senate Committee on Interstate Com-
merce has examined your files on this subject and has made copies of material
from them. The Investment Banking Study may be concerned with certain
transactions already covered in the investigation of the Senate Committee. It
has occurred to us that your staff might be relieved of some additional duties
and inconvenience if instead of our examining your files on these subjects we
11616 GONCENTllATION OF ECONOMIC POWER
tirst obtaiu from the Senate Committee copies of such documents as they have
on the matter.
Legal provisions concerning the use of documents in the possession of the
various Congressional Committees make it desirable to obtain your consent to
have this material made available to us.
If this procedure meets with your approval, will you kindly send a letter to
the Senate Conamittee on Interstate Commerce, 45 Broadway, New York, N. Y.,
requesting them to make available for the use of the Investment Banking Study
of the Temporary National Economic Committee copies of documents which they
obtained from your tiles relating to the financing of the Chicago Union Station
Company.
We will appreciate it, in the event of your following this suggestion, if you
send us a copy of the letter which you address to the Senate Committee on
Interstate Commerce.
Sincerely yours,
Petek R. Nehemkis, Jr.,
Speckil Counsel, Investment Banking Section, Monopoly Study.
SMK :FL
Exhibit No. 1539-2
[Letter from Investment Banking Section, Monopoly Study, Securities and Exchange Com-
mission, to The Chicago, Milwauiiee, St. Paul and Pacific Railroad Company]
NOVEMBEK 10, 1939.
The Chioaqo, Milwaukee, St. Paul & Pacific Railroad Co.,
516 West Jackson Boulevard, Chicago, III.
Gentlemen : The Temporary National Economic Committee, established by
Public Resolution 113, Seventy-Fifth Congress, has authorized the Securities
and Exchange Commission to Undertake certain studies in the field of Invest-
ment Banking.
One of the subjects which the Securities and Exchange Commission, pursuant
to the above authorization, is inquiring into relates to the financing of the
Chicago Union Station Company. ,It has recently come to our attention that
the Railroad Finance Investigation of the Senate Committee on Interstate
Commerce has examined your files on this subject and has made copies of
material from them. The Investment Banking Study may be concerned with
certain transactions already covered in the investigation of the Senate Com-
mittee. It has occurred to us that your staff might be relieved of some addi-
tional duties and inconvenience if instead of our examining your files on these
subjects we first obtain from the Senate Committee copies of such documents
as they have on the matter.
Legal provisions concerning the use of documents in the possession of the
various Congressional Committees make it desirable to obtain your consent to
have this material made available to us.
If this procedure meets with your approval, will you kindly send a letter to
the Senate Committee on Interstate Commerce, 45 Broadway, New York, N. Y.,
requesting them to make available for the use of the Investment Banking
Study of the Temporary National Economic Committee copies of documents
which they obtained from your files relating to the financing of the Chicago
Union Station Company.
We will appreciate it, in the event of your following this suggestion, if you
send us a copy of the letter which you address to the Senate Committee on
Interstate Commerce.
Sincerely yours,
PETTEai R. Nehemkis, Jr.,
Special Counsel, Investment Banking Section, Monopoly Study.
SMK : FL
CONCENTRATION OF ECONOMIC POWER 11617
Exhibit No. 153»-3
[Letter from Investment Banking Section, Monopoly Study, Securities and Exchange
Commission, to Tlie i'eunsylvania Railroad Co.]
NOVEMKEB 10, 11)39.
Peinnsylvania Railboad Co.,
Broad Street Station Building, Philadelphia, Pa.
Gbintlemen : The Temporary National Economic Committee, established by
Public Resolution 113, Seventy-Fifth Congress, has authorized the Securities
and Exchange Commission to undertake certain studies in the field of Invest-
ment Banking.
One of the subjects w^hich the Securities and Exchange Commission, pursuant
to the above authorization, is inquiring into relates to the financing of the
Chicago Union Station Company. It has recently come to our attention that
the Railroad Finance Investigation of the Senate Committee on Interstate
Commerce has examined your files on this subject and has made copies of
material from them. The Investment Banking Study may be concerned with
certain transactions already covered in the investigation of the Senate Com-
mittee. It has occurred to us that your staff might be relieved of some addi-
tional duties and inconvenience if instead of our examining your files on these
subjects vs^e first obtain from the Senate Committee copies of such documents
as they have on the matter.
Legal provisions concerning the use of documents in the possession of the
various Congressional Committees make it desirable to obtain your consent to
have this material made available to us.
If this procedure meets with your approval, will you kindly send a letter to
the Senate Committee on Interstate Commerce, 45 Broadway, New York, N. Y.,
requesting them to make available for the use of the Investment Banking Study
of the Temporary National Economic Committee copies of documents which
they obtained from your files relating to the financing of the Chicago Union
Station CJompany.
We will appreciate it, in the event of your following this suggestion, if you
send us a copy of the letter which you address to the Senate Committee on
Interstate Commerce.
Sincerely yours,
Peteb R. Nbhemkis, Jr.,
Special Counsel, Investment Banking Section, Monopoly Study.
SMK : FL
Exhibit No. 1540
[Copy of original signed letter in Kuhn, Loeb & Co. file 532-1, Chicago Union Station
Company]
Boston Chicago
Lee, HiGGiNSON & Company
NEW YORK
HiGGINSON & Co.
LONDON
43 Exchange Place.
New York, January 18, 191b.
By Beabjeb
Dear Mh. Schtff: With reference to our conversation, I have dug up from
our files this telegram from Mr. Lane to our Chicago partner, Mr. Schweppe.
This was the arrangement that I understood Mr. Paul Warburg ratified last
Spring as a result of three or four conversations oh the matter with me.
Yours very truly,
(Signed) F. L. Higginson, Jr.
FLH— M
Enclosure
Mr. Mortimer L. Schiff,
o/o Messrs. Kuhn, Loeb d Co., 52 William Street. New TorJc City.
11618 CONCENTRATION OF ECONOMIC POWER
[Copy of an original coi)y of a telegram, unsigned, in Kuhn, Lo<,>b & Co. file 532-1, Chicago
Union Station Company]
[Copy]
Boston, Mass., May 11, 1012.
Telegram to C. H. Schweppe :
Talked with Kubn, Loeb & Company yesterday about Chicago Terminals.
We came to a tentative rigrecment as follows:
Kuhn, Loeb & Company syndicate and L. II. & Co. syndicate are to join
hands and both try to get the Chicago Terminal Inisiness. One half the isstie
is to be apportioned to Kuhn, Loeb & Co. and their friends; one half to L. H.
& Co. and their friends. We are to sell and i.ssue with Kuhn, Loeb & Co. If
any buying commission is charged, one half is to come to us and one half to
Kuhn, Loeb & Co. We may decide upon a selling commissioti ; in that event
Kuhn, Loeb & Co. and friends are to be allowed to sell half the bonds, if they
can, and we are to be allowed to sell half if we can. If either Kuhn, Loeb &
Co. or L. H. & Co. sell more than their half, then they are to have commission
on such amount of bonds as they may sell over and above their half. The
London situation was taken up and discussed, but not definitely settled. We
stated that we should want to have H. & Co. issue in London. Kuhn, Loeb &
Co. said they wanted to have some one of their correspondents also issue over
there. We hope to miike an arrangement by which H. & Co. and Kuhn, Loeb
& Co.'s representatives will issue together. I am to see Warburg of Kuhn,
Loeb & Co. next week and arrange further details.
Exhibit No. 1541
[Copy of original signed letter in Kuhn, Loeb & Co. file 532-1, Chicago Union Station
Company ]
Boston Chicago
Lee, Higginson & ('ompant
NEW YOKK
Higginson & Co.
LONDON
43 EXHANGE Pt>ACE.
New York, January 19, 1915.
Messrs. Kuhn, Loeb & Company,
52 William Street,
New York City.
De:ae Sirs : We beg to confirm the conversation today between Mr. Mortimer
L. Schiff and Mr. F. L. Higginson, Jr., by which we understand that the groups
represented respectively by our two firms shall share equally in the financing
of the Chicago Terminal Company.
We should be glad to have you advise us if this is also your understanding.
Very truly yours,
(Signed) Lee Higginson & Co.
FLH-C.
Exhibit No. 1542
[Copy of hectograph copy of unsigned letter in Kuhn, Loeb & Co. file 532-1, Chicago
Union Station Company]
Stamped "Official"
Confidential.
Jan. 20, 1915.
Messrs. Lee, Higginson & Company,
■is Exchange Place, City.
■ Dear Sirs: We beg to acknowledge receipt of your favor of yesterday's date
in regard to eventual financing of the Chicago Terminal Company, which we
have been discussing, and confirm that it is in accordance with our understanding.
We further understand that the Illinois Trust and Savings Bank of Chicago,
Messrs J. P. Morgan & Company and the First National Bank of New York are
CONCENTRATION OF ECONOMIC POWER 11619
included in your group, and that The National City Bank and Messrs. Clark,
Dodge and Company are to be included in our share.
Yours very truly.
H
Exhibit No. 1543
[Copy of original signed memorandum in Kuhn, Loeb & Co. file 532-2, Chicago Union
Station fJompany]
Stamped : Official
Memorandum in Regard to Chicago Union Station Financing
February 1st, 1915.
I have agreed that this business, if it develops, is to be done Joint Account
between Lee, Higginson & Co. and ourselves, each having one-half. Lee, Higgin-
son's group includes Morgans, the First National Bank of New York and the
Illinois Trust and Savings Bank of Chicago.
In our group are included The National City Bank and Messrs. Clarke, Dodge
& Company. I have today agreed with McRoberts that they are to have one-
third interest and we two-thirds interest in our share, subject to such allotment
on original terms as we may determine to make to Messrs. Clark, Dodge &
Company.
(Signed) Mortimer L. Schiff.
S.
"ExceiBiT No. 1544" appears in full in the text on p. 11432
Exhibit No. 1545
[From the files of First National Bank of the City of New Yorli. Memorandum from
Francis D. Bartow to George F. Baiter, Jr.]
[Copy]
June 16, 1915.
Memorandum for Mr. Baker, Jr., in re Union Station Bonds
f
At Mr. Hine's request I attended a meeting at Kuhn, Loeb's office this morn-
ing at which were present Messrs. McRoberts, Hanauer, Higginson, Haskell and
Bartow. The object was to determine the price at which the new bonds should
be bought. These are guaranteed jointly and severally by the Pennsylvania
Co., St. Paul, C. B. & Q., Pan-Handle and Pittsburg, Ft. Wayne & Chicago. The
Pennsylvania Co. in the lease is guaranteed by the Pennsylvania Railroad.
They are to bear 41/2% interest and mature in 50 years. .Mr. Higginson said
951/2; Mr. McRoberts and Mr. Haskell 96; I said 961/2- Mr. Kahn and Mr.
Hanauer said 97i/2. a'i<l surely 97. It was felt that 3 points gross profit should
accrue to the Syndicate from the selling price, to be apportioned as follows :
2Vi>% to the purchasers,
1/4% for brokerage
%% for expenses
On this basis it was finally agreed to start the bidding at 93.
At 2 o'clock Mr. Hine attended a meeting at K L's and upon his return told
me they had agreed to pay 93%, and offer the bonds for re-sale at QQV2, which
is about a 4.65% basis. Howe\er, Mr. Holden and his associates decided that
they would prefer to get the consent of the Illinois Public Service Commission
to a minimum price of 91, and then come back and deal firm with the Group.
There was also a question of clearing up some small mortgages which are now
a lien upon the property. This will be done before the present bonds can be
sold. In their negotiations the Group did not come to the question of discussing
prices with Mr. Holden and his associates. They, therefore, do not know of the
determination reached to pay as high as 93%.
11620 CONCENTRATION OP ECONOMIC POWER
At the meeting in the morning the question was brought up of participants
in the business and it was understood that there will be five signatories, made
up as follows:
Kuhn, Loeb & Co.
Lee, Higginson & Co.
Illinois Trust & Savings Bank, Chicago
First National Bank, New York
National City Bank, New York
The issue to be approximatelj' $25,000,000., to be divided equally between
K L & Co.
Lee, H. & Co.
K L & Co. will take care of the National City Bank L. H. & Co. will divide
$12,500,000 equally into four parts.
14 111. Trust & Sav. Bk.
% J. P. M. & Co.
14, First of New York
14 Lee, H & Co.
F. D. B.
"ExHUiiT No. 1546" appears in full in text on p. 11434
Exhibit No. 1547-1
[Copy of hectograph copy of unsigned letter in Kuhn, Loeb & Co. file 532-la, Chicago
Union Station Company]
February 9, [191] 6.
Confidential.
Messrs. Clark, Dodge & Co.,
51 Wall Street, New York City.
Dear Sirs : We beg to advise you that we have purchased jointly with the
National City Bank, Messrs. Lee, Higginson & Co., the Illinois Trust & Savings
Bank and the First National Bank $30,000,000 Union Station Company First
Mortgage 4Vj% Bonds at 97%% and accrued interest, and we beg to confirm,
on behalf of the National City Bank and ourselves, that you are interested
in the one-half of the purchase which the National City Bank and we have
.jointly to the extent of $2,000,000 Bonds on original terms, subject to these
bonds being included in the syndicate which is to be formed.
Kindly confirm that this is in accordance with your understanding, and be-
lieve us,
Yours very truly, .
E.
Exhibit No. 1547-2
[Copy of original signed letter in Kuhn, Loeb & Co. file 532-12, Chicago Union Station
Company]
Stamped: Official
Clark, Dodge & Co.
r,i WALL stkej;t
Messrs. Kuhn, Loeb & Co., New York, February <J, 1916.
New York, N. Y.
Deab Sirs: We are in receipt of your letter of February 9th, advising us that
you have purchased jointly with the National City Bank, Messrs. Lee, Higgin-
son & Co., Illinois Trust & Savings Bank and First National Bank :
$30,000,000 Union Station Company
First Mortgage 4^!% Bonds at 97V8 and accrued interest,
and that jointly on behalf of yourselves and the National City Bank, you have
ceded to us an interest to the extent of $2,0(X),000 Bonds, on the original
CONCENTRATION OF ECONOMIC POWER 11621
erms, subject to these Bonds being included in the Syndicate which is to be
ormed.
We hereby confirm that the above is in accordance with our understanding.
Thanliing you for the same, we are,
Very truly yours,
(Signed) Clark, Dodoe & Co.
D. G. G/M
(In pencil) F.
Exhibit No. 1548
Chicago Union .Station Company
$30,000,000 First Mortgage Bonds, -i%%, Series A, Dated January 1, 1916, due
July J, 1963, and Offered FeWuarij, 1916
Kuhn, Loeb & Co., $15,000,000 (50%) :
Kuhn, Loeb & Co $8,666,667 (28.88%)
National City Bank $4,333,333 (14.44%)
Clark Dodge & Co $2,000,000 ( 6.67%)
I^e Higginson & Co., $15,000,000 (50%) :
Lee Higginson & Co $4,000,000 (13.33%)
First National Bank $4,000,000 (13.33%)
J. P. Morgan & Co $4,000,000 (13.33%)
Illinois Trust & Savings Bank $3,000,000 dO. 00%)
$30,000,000 (100.00%)
Compiled by the Staff of the Investment Banking Section, Monopoly Study, Securities
and Exchange Commission, from ledger transcripts, memoranda and correspondence of the
several companies.
Exhibit No. 1549-1
[Copy of original signed letter in Kuhn, Loeb & Co. file 822, Chicago Union Station
Company]
Stamped : Official
Chicago Union Station Company,
Chicago, April 27, 1920.
(In pencil) G
Messrs., Kuhn, Loeb & Co., New York,
Messrs. Lee, Higginson & Co., New York,
Illinois Trust and Savings Bank, Chicago,
National City Compai^, New York,
First National Bank, New York.
Dear Sirs: Referring to the $10,000,000. principal amount Chicago Unioa
Station Company Six and One-Half Per Cent. First Mortgage Bonds, Series C,
due July 1, 1963, which you have agreed to purchase, I beg to state as follows :
These bonds are to be unconditionally guaranteed, by endorsement, as to both
principal and interest, jointly and severally, by Chicago, Burlington and Quincy
Railroad Company, Chicago, Milwaukee and St. Paul Railway Company, The
Pittsburg, Cincinnati, Chicago and St. Louis Railroad Company and Pennsylvania
Company, each of which Companies owns one-fourth of the Company's outstand-
ing capital stock, amounting to $2,800,000, par value, which has been fully paid.
The Chicago Union Station Company owns extensive station and terminal
properties in the City of Chicago, now under reconstruction, including the
property heretofore used as a terminal by the guarantor companies, and prop-
erties adjacent thereto. The entire development extends for about eleven
blocks from Carroll Avenue to West Twelfth Street, principally between the
Chicago River and North and South Canal Street, and including the present
city block bounded by West Adams, West Jackson, Clinton and North Canal
Streets, on all of which properties (subject as to certain parts thereof to
easements of no material importance) the bonds are secured by a first mortgage.
The purpose of the sale of the $10,000,000. First Mortgage 6y2% Bonds
is to reimburse the Station Company for capital expenditures theretofore made,
some of which have been temporarily financed, and to place the Company ic
funds to be used for additional capital expenditures.
11622 CONCENTRATION OF ECONOMIC POWER
These bonds are part of an issue limited to $00,000,000. principal amount,
maturing July 1, 19G.3, secured by First Mortgage, dated July 1, 1915, made
by (he Station Company to the Illinois Trust and Savings Bauk as Trustee, and
of which $30,Sr)0,000., Series A, 41/^% Bonds have been heretofore issued and
ar<> out.standing, and $6,150,00(K Series B H'/f Bonds will upon the completion
of this transaction be free in the treasury of the Station Company. The Series
C I.onds are to bear interest at the rate of 01/2% per annum, payable semi-
annually on January 1 and July 1. The entire Series is to be redeemable at the
option of the Company on January 1, 1935, or any interest date thereafter at
110% and accrued interest upon ninety days' previous notice. The principal
and interest of the bonds are to be payable in gold without deduction for any
tax or taxes (except any Federal Income Tax) which the Company or the
Trustee may be required to pay or retain therefrom under any present or future
law of the United States or of any State, County or Municipality therein. The
Iwnds are to be either in coupon form or in fully registered form. Coupon
bonds are to be in denominations of $1,000. and $500. each, with privilege of
registration as to principal, and are to be exchangeable for bonds registered
fas to both principal and interest. Fully registered] bonds will be exchangeable
for coupon bonds upon terms stipulated in the mortgage.
Pending the engraving of the definitive bonds, interim certificates will be
issued which will carry a coupon for two months' interest, from May 1, 1920, to
July 1, 1920, from which latter date the definitive bonds will draw interest.
The issue and guaranty of the bonds and their sale to you are subject to the
approval of the necessary public authorities and to the opinion of your counsel.
Application will be made to list the bonds on the New York Stock Exchange.
Yours very truly,
(Signed) J. J. Turner,
P/f.si .'e«<, Chicago Union Station Company.
M
Exhibit No. 1549-2
[Copy of original signed letter in Kuhn, Loob & Co. file 822, Chicago T'nion Stntion
Company]
Chicago Union Station Company,
Neio York, April 27th, 1920.
Messrs. Kuhn, Loeb & Co., New York,
Messrs. Lee, Higginson & Co., New York,
Illinois Trust and Savings Bank. Chicago,
National City Company, New York,
First National Bank, New York.
Dear Sirs: This Company hereby confirms the sale to you, at 95% of their
principal amount and accrued interest to date of deliv.ery, of $10,000,000. prin-
cipal amount, Chicago Union Station Company Six and One-half Per Cent.
First Mortgage Cold Bonds, Series C, due July 1, 1963, to be issued under the
First Mortgage dated July 1, 1915, made by the Station Company to the Illinois
Trust and Savings Bank, as Trustee and to be unconditionally guaranteed, by
endorsement, as to both principal and interest, jointly and severally, by Chicago,
Burlington [? (in pencil)] and Quincy Railroad Company, Chicago, Milwaukee
and St. Paul Railway Company, the Pittsburgh, Cincinnati, Chicago and St.
Louis Railroad Co., and Pennsylvania Company. The entire feeries will be sub-
ject to redemption at the option of- the Company, at 110% of their principal
amount and accrued interest on any interest date on or after January 1, 193-"),
upon ninety days' previous notice.
The above sale to you is subject to the Issue, guaranty and sale of said bonds
as aforesaid being approved by all necessary public authorities. In case this
approval should not be given on or before May 31, 1920, or if by that date
this Company shall not be prepared to deliver the temporary guaranteed bonds
or interim certificates as hereinafter described, you shall be at liberty to cancel
this purcha.se at any time after May 31, 1920.
Pending the preparation of definitive bonds, the Company may execute and
deliver a temporary bond or bonds to the Illinois Trust and Savings Bank, of
Chicago, which will Issue its interim certificates in such denominations as you
may request, said interim certificates being exchangeable for engraved bonds,
when ready, at the option of the holder, either in Chicago or New York. The
CONCENTRATION OF ECONOMIC POWER 11623
interim certificates will carry a coupon for two .months' interest, from May
1, 1920, to July 1, 1920, from which latter date the definitive bonds will draw
interest
It is understood that, prior to the payment for said bonds, we shall furnish
you with opinions satisfactory to you and your counsel, as to the validity of
the bonds and of counsel of the respective guarantor companies, as to the
validity of its guaranty. The validity of the bonds and of the guaranties is to
be subject to the approval of your counsel.
Application will be made to list the Bonds upon the New York Stock
Exchange.
Please confirm that the above is in accordance with your understanding.
Yours very truly,
Chicago Union Station Company,
H. by (Signed) J. J. Tubnek, President.
Exhibit No. 1550
Chicago Union Station Company
$10,000,000 First Mortgage Bonds, 6%%, Series C, Dated January 1, 1920, due
July 1, 1963, and Offered in April, 1920
Kuhn Loeb & Co., $5,000,000 (50%) :
Kuhn Loeb & Co $3,000,000 (30.00%)
National City Co $1,500,000 (15.00%)
Clark Dodge & Co $ 500,000 ( 5.00%)
Lee Higginson & Co., $5,000,000 (50%) :
Lee Higginson & Co $1,333,333 (13.33%)
First National Bank $1,333,333 (13.33%)
J. P. Morgan & Co $1,333,333 (13.33%)
Illinois Trust & Savings Bank $1,000,000 (10.00%)
$10,000,000 (100.00%)
Compiled by the Staff of the Investment Banking Section, Monopoly Study, Securities
and Exchange Commission, from ledger transcripts, memoranda and correspondence of the
several companies.
Exhibit No. 1551-1
[Copy of original signed letter in Kuhn, Loeb & Co. fllo "863*, Chicago Union Station Co."]
Stamped "Official"
Chicago Union Station Company,
Chicago, III., May 26, 1921.
Messrs. Kuhn, Loeb & Co., Nevy York,
Messrs. Lee, Higginson & Co., New York,
IixiNois Tbust and Savings Bank, Chicago, III.
The National City Company, New York,
FmsT National Bank, New York.
Dear Sirs: This Company confirms the sale to you, at 97i/^% of their prin-
cipal amount and accrued interest to date of delivery, of $6,000,000. principal
amount, Chicago, Union Station Company 61/2% First Mortgage Gold Bonds,
Series C, due July 1, 1963, to be issued under first mortgage dated July
1, 1915 made by the Station Company to the Illinois Trust and Sav-
ings Bank, as Trustee, and to be imconditionally guaranteed by endorse-
ment as to both principal and interest, jointly and severally, by Chicago,
Burlington and Quincy Railroad Company, Chicago, Milwaukee & St. Paiil
Railway Company, The Pittsburgh, Cincinnati, Chicago & St. Louis Jlailroad
Company and Pennsylvania Company. The entire series will be subject to
redemption at the option of the Company at 110% of their principal amount
and accrued interest on any interest date on or after January 1, 1935, upon
ninety days' previous notice.
The above sale to you is subject to the issue, guarantee and sale of said
bonds, as aforesaid, being approved by all the necessary public authorities.
124491 — 40 — pt. 22 18
11624 CONCENTItATION OF ECONOMIC POWER
In case this approval should not be given on or before July 1, 1921, or if,
by that date, this Company shall not be prepared to deliver the temporary
guaranteed bonds or interim certificates as hereinafter described, you shall be
at liberty to cancel this purchase at any time after July 1, 1921.
Pending the preparation of definitive bonds, the Compaiiy may execute and
deliver a temporary bond ' or bonds to the Illinois Trust and Savings Bank of
Chicago, which will issue its interim certificates in such denominations as you
may request, said interim certificates being exchangeable for engraved bonds
when ready, at the option of the holder, either in Chicago or in New York.
It is understood that, prior to the payment for said bonds, we shall furnish
you with opinions sati.sfactory to you and your counsel as to the validity of
the bonds and of counsel of the respective guarantor companies as to the
validity of its guarantee. The validity of the bonds and of the guaranties is
to be subject to the approval of your counsel.
Application will be made to list the bonds upon the New York Stock Exchange.
Please confirm that the above is in accordance with your understanding.
Very truly yours,
Chicago Union Station Company
by (Signed) J. J. Txtrnkr,
President.
L
Exhibit No. 1551-2
[Copy of unsigned carbon copy of letter In Kuhn, Loeb & Co. file "863, Chicago Union
Station Co."]
Stamped "Official"
New York, May 26, 1921.
J. J. Turner, Esq.,
President, Chicago Union Station Company,
Chicago, Illinois.
Dear Sir : We beg to acknowledge receipt of your letter of even date and
to confirm our purchase upon the terms stated in your letter, of $6,000,000.
Six and One-Half Per Cent. First Mortgage Gold Bonds, Series C, due July
1, 1963, of your Company, to be guaranteed and to be redeemable as therein
set forth.
Yours very truly,
(Without signature)
GWB : M
Exhibit No. 1.'j52
Chicago Union Station Company
3,000,000 First Mortgage Bonds, 6^%, Series G, Dated Joniiury 1, 1920, due
July 1, 1963, and Offered May, 1921.
Kuhn, Loeb & Co., $3,000,000 (50%) :
Kuhn, Loeb & Co $2,000,000 (33.33%)
National City Co $1,000,000 (16.67%)
Lee Higginson & Co., $3,000,000 (50%) :
Lee, Higginson & Co .$800,000 (13.33%)
First National Bank ,<R800, 000 (13.33%)
J. P. Morgan & Co .$S00, OOO (13.33%)
Illinois Trust & Savings Bank $600,000 (10.00%)
$6,000,000 (100.00%)
Compiled by the Staff of the Investment Banking Section. Monopoly Study, Securities
and Exchange Commission, from ledger transcripts, memoranda and correspondence of the
several companies.
CONCENTRATION OF ECONOMIC POWER 11625
Exhibit No. 1553-1
[Copy of unsigned carbon copy of letter in Kuhn, Loeb & Co. file "863-1, First National —
111. Trust — Lee, Higginson — National City."]
Stamped "Official"
May 27, 1921.
Confidential.
JVIessrs. Lee, BLigginson & Co.,
Illinois Tbust and Savings Bank, Chicago,
First National Bank, New Yoek, New York.
Deab Sms : Referring to the purchase of $6,000,000. Chicago Union Station
Company First Mortgage 6% Bonds made by you jointly with the National
City Company and ourselves upon the terms of the letter of the Company
dated May 26, 1921, we beg to confirm that you are interested in this business
to the extent of one-half.
Will you kindly confirm that the above is in accordance with your under-
standing, and believe us,
Very truly yours,
(Without signature)
GWB.MEG.
End.
Exhibit No. 1553-2
[Copy of carbon copy of unsigned letter in Kuhn, Loeb & Co. file "863-1, National — 111.
Trust — Lee, Higginson — -National City."]
Stamped "Official"
May 27, 1921.
Confidential
PiBRPONT V. Davis, Esq.,
Vice President, The National City Company,
55 Wall Street, New York City.
Deab Sib: Referring to the purchase of $6,000,000 Chicago Union Station
Company First Mortgage QV2% Gold Bonds, made in accordance with the
terms of the enclosed copy of a letter to the Company, dated May 26th, 1921,
we beg to confirm that Messrs. Lee, Higginson & Co. of New York, the Illinois
Trust & Savings Bank of Chicago and the First National Bank of New
York are jointly interested in this business to the extent of one-half, and that
you and we are interested to the extent of one-half of which your participa-
tion is one-third and ours twp-thirds.
Will you kindly confirm that the above is in accordance with your under-
standing, and believe us.
Very truly yours,
(Without signature)
GWB-MM
Exhibit No. 1553-3
[Copy of original signed letter in Kuhn, Loeb & Co. file '363^1, First National — 111
Trust — Lee, Higginson — National City."]
Boston - Chicago
Higginson & Co., London
Lee, Higginson & Company
43 Exchange Place
Messrs. Kuhn, Loeb & Co. i^Ew Yobk, May 27, 1921.
William and Pine Streets,
New York City, N. Y.
Deab Sibs: We thank you for your letter of May 27th, addressed to Lee,
Higginson & Co., Illinois Trust & Savings Bank and the First National Bank
of New York, and confirm that we are interested to the extent of one-half
in the purchase of $6,000,000 Chicago Union Station Co. First Mortgage
6%% Bonds, upon the terms of the letter of the Company, dated May 26, 1921.
Very truly yours,
(Signed) Lee, Higginson & Co.
11626 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1553-4
[Copy of original signed letter in Kuhn, Loeb & Co. file "863-1. First National — 111.
Trust — Lee, Higginson — National City."]
Cable Address :"Nacitco"
Stamped "Official Copy"
The National City Company
National City Bank Building
New York, May SI, 1921.
Messrs. Kuhn, Loeb & Company,
William and Pine Streets, New York.
Dear Sirs : We beg to acknowledge receipt of your letter of the 27th in-
stant, setting forth our interest in the purchase of $6,000,000 Chicago Union
Station Company First Mortgage Q^/2% Gold Bonds, together with copy of the
letter of Mr. J. J. Turner, President of the Chicago Union Station Company,
addressed to the group. We hereby confirm that our interest is as stated
by you.
Very truly yours,
(Signed) Piekpont V. Davis.
Vice President.
Exhibit 1554-1
[Copy of original signed letter in Kuhn, Loeb & Co. file 924, Chicago Union Station
Company.]
Chicago Union Station Company,
Stamped "Official"
Chicago, May 23, 1922.
Messrs. Kuhn, Loe:b & Co., New York,
Messrs. Lee, Higginson & Co., New York,
Illinois Tbust & Savings Bank, Chicago,
The National City Company, New York,
Piest National Bank, New York.
Deab Sirs: Referring to the $6,150,000, principal amount Chicago Union Sta-
tion Company 5% First Mortgage Bonds, Series "B", due July 1, 1963, which you
have agreed to purchase, I beg to state as follows :
These bonds are to be unconditionally guaranteed, by endorsement, as to both
principal and interest, jointly and severally, by Chicago, Burlington and Quincy
Railroad Company, Chicago, Milwaukee and St. Paul Railway Company, The
Pittsburgh, Cincinnati, Chicago and St. Louis Railroad Company and Pennsyl-
vania Company, each of which Companies owns one-fourth of the Company's out-
standing capital stock, amounting to $2,800,000 par value, which has been fully
paid.
The Chicago Union Station Company owns extensive station and terminal
properties in the City of Chicago, now under reconstruction, including the prop-
erty heretofore used as a terminal by the guarantor companies, and properties
adjacent thereto. The entire development extends for about eleven blocks from
Carroll Avenue to West Twelfth Street, principally between the Chicago River
and North and South Canal Streets, and including the present city block bounded
by West Adams, West Jackson, Clinton and North Canal Streets, on all of which
properties (subject as to certain parts thereof to easements of no material im-
portance) the bonds are secured by a first mortgage.
The purpose of the sale of the .$6,150,000 First Mortgage 5% Bonds is to place
the Company in funds to be used for additional capital expenditures.
These bonds are part of an issue limited to $60,000,000, principal amount ma-
turing July 1, 1063, secured by first mortgage dated July 1. 1915, made by the
Station Company to the Illinois Trust «& Savings Bank, as Trustee, of which, in
addition to the present issue of $6,150,000 Series "B" 5% Bonds, there will be
outstanding $30,850,000 Series "A" 41/2% Bonds and $16,000,000 Series "C" 6yo%
Bonds. The Series "B" Bonds bear interest at the rate of 5% per annum, payable
semi-annually on January 1st and July 1st. All or any part of the Series "B"
5% Bonds are subject to redemption at the option of the Company on any in-
CONCENTRATION OF ECONOMIC POWER 11627
terest date ou or after January 1, 1&24 at 105% and accrued interest. The prin-
cipal and interest of the bonds are to be payable in gold without deduction for
any tax or taxes (except any Federal Income Tax) which the Company or the_
Trustee may be required to pay or retain therefrom under any present or future'
law of the United States or of any State, County or Municipality therein. The
bonds are to be either in coupon form or in fully registered form. Coupon bonds
are to be in denominations of $1,000 and $500 each, with privilege of registration
as to principal, and are to be exchangeable for bonds registered as to both prin-
cipal and interest. Fully registered bonds will be exchangeable for coupon
bonds upon terms stipulated in the mortgage. Pending the engraving of the
definitive bonds, interim certificates will be issued.
The issue and guaranty of the bonds and their sale to you are subject to the
approval of the necessary public authorities and to the opinion of your counsel.
Application will be made to list the bonds on the New York Stock Exchange.
Yours very truly,
Chicago Union Station Company,
By: (Signed) J. J. Turner, President.
Exhibit 1554-2
[Copy of original signed letter in Kuhn, Loeb & Co. file 924, Chicago Union Station
Company.]
(Red Stamp) Official
New York, May 23, 1922.
J. J. Turner, Esq.,
President, Chicago Union Statimi Company, Chicago, Illinois.
Dear Sir: We beg to acknowledge receipt of your letter of even date and to
confirm our purchase upon the terms stated in your letter of $6,150,000. Five Per
Cent. First Mortgage Gold Bonds, Series B due July 1, 1963, of your Company,
to be guaranteed and to be redeemable as therein set forth.
Yours very truly,
(Sgd) Kuhn, Loeb & Co.
" Lee, Higginson & Co.
" Illinois Trust & Savings Bank
by Lee Higginson & Co.
The National City Company
by PiERPONT H. Davis, Vice-President.
First National Bank of the City of New Yokk
by Eustace B. Sweezy, Vice-President.
GWB-MM
Exhibit No. 1555
Chicago Union Station Company
$6,150,000 First Mortgage Bonds, 5%, Series B, Dated January 1, 1919, due July
1, 1963, and Offered in May, 1922
Kuhn, Loeb & Co., $3,075,000 (50%) :
Kuhn, Loeb & Co $2,050,000 (33.38%)
National City Co .$1,025,000 (16.67%)
Lee Higginson & Co., $3,075,000 (50%) :
Lee Higginson & Co $820,000 (13.33%)
First National Bank $820,000 (13.33%)
J. P. Morgan & Co $820, 000 (13.33% )
Illinois Trust & Savings Bank $615,000 (10.00%)
.$6,150,000 (100.00%)
Complied by the Staff of the Investment Banking Section, Monopoly Study, Securities
and Exchange Commission, from ledger transcripts, memoranda and correspondence of the
BBTeral companies.
11628 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1556-1
[Copy of original signed letter in Kuhn, Loeb & Co. file 1018, Chicago Union Station
Company.]
Chicago Union Station Company,
Bboad Stbeitt Statio.n,
Philadelphia, January 11, 1924-
Messrs. Kuhn, Lobb & Co., New York,
Messrs. Lee, Higoinson & Co., New York,
Illinois Mebchants Trust Co., Chicago,
The National City Company, New York,
FiBST National Bank, New York.
Dear Sirs : This company confirms the sale to you at 94%% of their principal
amoimt and accrued interest to date of delivery of $7,000,000 principal amount
Chicago Union Station Company 5% First Mortgage Gold Bonds, Series "B",
due July 1, 1963, to be issued under the First Mortgage, dated July 1, 1915, and
to be unconditionally guaranteed by endorsement as to both principal and
interest, jointly and severally, by Chicago, Burlington & Quiucy Railroad Com-
pany, Chicago, Milwaukee & St. Paul Railway Company, The Pittsburgh, Cin-
cinnati, Chicago and St. Louis Railroad Company and Pennsylvania Company.
All or any part of the Series "B" 5% Bonds are subject to redemption at the
option of the Company on any interest date on or after January 1, 1924, at
105% and accrued interest
The above sale to you is subject to the issue, guarantee and sale of said
bonds, as aforesaid, being approved by all the necessary public authorities. In
case these approvals should not be given on or before February 18, 1924, or if
by that date this Company shall not be prepared to deliver the bonds, you
shall be at liberty to cancel this purchase at any time after February 18,, 1924.
It is understood that prior to the payment for said bonds we shall furnish
you with opinions satisfactory to you and your coimsel as to the validity of
the bonds and of counsel of the respective guarantor companies as to the
validity of its guarantee. The validity of the bonds and of the guarantee is
to be subject to the approval of your counsel.
Application will be made to list the bonds upon the New York Stock
Exchange.
Please confirm that the above is in accordance with your understanding.
Very truly yours,
Chicago Union Station,
By (Signed) Samuel Rb:a.
Exhibit No. 1556-2
[Copy of carbon copy of unsigned letter in Kuhn, Loeb & Co. file 1018, Chicago Union
Station.]
New Tobk, January 12, 1924.
Samuel Rea, Esq.,
President, Chicago Union Station Co., Chicago, III.
DOAB Sir: We beg to acknowledge receipt of your letters of even date and to
confirm our purchase upon the terms and conditions stated therein of $7,000,000
face value of your Company's First Mortgage 5% Gold Bonds Series "B" due
July 1, 1963, to be guaranteed and to be redeemable, as therein set forth.
Very truly yours,
GWB.TS
CONCENTRATION OF ECONOMIC POWER 11629
Exhibit No. 1557
Chicago Union Station Company
$7,000,000 First Mortgage Bonds, 5%, Series B, Dated January 1, 1919, due
July 1, 1963, and Offered in January, 192Jf
Kuhn, Loeb & Co., $3,500,000 (50%) :
Kuhn, Loeb & Co $2, 333, 33.S (33.33%)
National City Co $1, 160, 667 ( 16. 67% )
Lee Higginson & Co., $3,500,000 (50%) :
Lee Higginson & Co $933,333 (13.33%)
First National Bank $933,333 (13.33%)
J. P. Morgan & Co $933,333 (13.33%)
Illinois Merchants Trust Co ^ $700,000 (10.00%)
$7,000,000 (100.00%)
Compiled by the Staff of the Investment Banking Section, Monopoly Study, Securities
and Exchange (Commission, from ledger transcripts, memoranda and correspondence of the
several companies.
Exhibit No. 1558-1
[Copy of original signed letter in Kuhn, Loeb & Co. file 1081, Chicago Union Station
Company.]
Stamped : Official.
Chicago Union Station Company,
Chicago, III., November 12th, 1924.
Messrs. Kuhn, Loeb & Co., New York,
Messrs. Lee, Higginson & Co., New York,
Illinois Merchants Trust Company, Chicago,
The National City Company, New York,
First National Bank, New York.
7(inink)
Dear Sirs : ( In ink : S. R. ) This Company has agreed to sell to you $8,000,000
principal amount Chicago Union Station Company 5% Guaranteed Gold Bonds
due December 1, 1944, at 96%% of their principal amount and accrued interest
to date of delivery. The bonds are to be unconditionally guaranteed by endorse-
ment as to both principal and interest jointly and severally by Chicago, Burling-
ton & Quincy Railroad Company, Chicago, Milwaukee and St. Paul Railway
Company, The Pittsburgh, Cincinnati, Chicago and St. Louis Railroad Company
and The Pennsylvania Railroad Company, and are to be otherwise as described
in my letter to you of even date herewith.
The above sale to you is subject *to the issue, guaranty and sale of said bonds
as aforesaid being approved by all the necessary public authorities. In case
these approvals should not be given on or before December 26th, 1924, or if by
that date this Company shall not be prepared to deliver the temporary bonds,
you shall be at liberty to cancel this purchase at any time after such date.
It is understood that prior to the payment for said bonds, we shall furnish you
with opinions satisfactory to you and your counsel as to the validity of the bonds
and of counsel of the respective guarantor companies as to the validity of their
respective guaranties. The form and terms of the bonds and of the trust inden-
ture under which they are to be issued, are to be subject to your approval and
that of your counsel.
Please confirm that the above is in accordance with your understanding.
Yours truly,
(Signed) Samuel Rea, President.
11630 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1558-2
[Copy of carbon copy of signed letter in Kuhn, Loeb & Co. file 1081, Chicago Union
Station Company.]
Stamped: Officxal
(In pencU)?
New Yokk, N. Y., November 1^, 1924.
Samuel Rea, Esq., President,
Chicago Union Station Cj).,
Chicago, Illinois.
Dear Sib: We beg to acknowledge receipt of your letters of the 12tli instant,
and to confirm our purchase upon the terms and conditions stated therein of
$7,000,000. face value principal amount of your Company's 5% Guaranteed Gold
Bonds, due December 1, 1944 to be guaranteed and to be redeemable as therein
set forth.
Very truly yours,
(Stamped:) (Sgd.) Kuhn, Loeb & Co.
GWB:GO
Exhibit No. 1559
Chicago Union Station Company
$7,000,000 Guaranteed Gold Bonds, 5%, Dated December 1, 1924, due December 1,
1944, and Offered November, 1924
Kuhn, Loeb & Co., $3,500,000 (50%) :
Kuhn, Loeb & Co $2,333,333 (33.33%)
National City Co $1,166,667 (16.67%)
Lee Higginson & Co., $3,500,000 (50%) :
Lee Higginson & Co $ 933,333 (13.33%)
First National Bank $ 933,333 (13.33%)
J. P. Morgan & Co $ 933,333 (13.33%)
Illinois Merchants & Trust Co $ 700,000 (10.00%)
$7,000,000 : 100.00%)
Together with this issue there were also purchased and sold $850,000 First
Mortgage 4^^% Bonds, Series A, dated January 1, 1916, and due July 1, 1963.
Compiled by the Staff of the' Investment Banliing Section, Monopoly Study, Securities
and Exchange Commission, from ledger transcripts, memoranda and correspondence of the
several companies.
"Exhibit No. 1560" appears in full in the text on p. 11438
"Exhibit No. 1561," introduced on p. 11439, is on file with the Committee.
"Exhibit No. 1562," introduced on p. 11439, i.s on file with the Committee.
"Exhibit No. 1563," Introduced on p. 11440, is on file with the Committee.
"Exhibit No. 15&i," introduced on p. 11440, is on file with the Ct»mralttee.
CONCENTRATION OP ECONOMIC POWER 11631
Exhibit No. 1565
tOopy of carbon copy of letter in Kuhu, Loeb & Co. file No. 1.505-01
W. W. K. Sparrow,
Vice-President and Comptroller.
Chicago Union Station Company,
736 Union Station,
Chicago, Jnhj 12, 1D34.
Mr. W. W. Atteiibury,
President, Chicago Union Station Company,
Philadelphia, Pa.
Deae General Attekbuey : The Chicago Union Station Company has three first
mortgage issues outstanding, as follows :
Series "A" $30,850,000 41/0%
"B" 13,150,000 5%
"C" 16,000,000 61/2%
These issues all mature July 1, 1963, with the Series "A" and "JB" callable at
105 and Series "C" at 110. The bonds are guaranteed by the Pennsylvania RR.
Co., the Pittsburgh, Cincinnati, Chicago & St. Louis Ry. Co., Burlington and
Milwaukee.
I have had some discussion with Mr. Newcomet of your company and have also
had some correspondence with Mr. Pierpont V. Davis, Vice President, Brown
Harriman & Co. Incorporated (formerly National City Company), and Mr. Geo.
W. Bovenizer, of Kuhn, Loeb & (.'o., New York, concerning the possibility of
refinancing the Series "C" QV2% issue on a better basis.
When in New York yesterday I discussed this quite fully with Mr. Bovenizei
and Mr. Davis, and it is their opinion that under present market conditions thi
Station Company should be able to sell a $16,000,000 issue, with a 50-year ma
turity and 4% coupon, at 98 to the public, which, allowing a commission of tw.
points, would be 96 to the Station Company, or on a 4.2% basis. With this dis-
count and premium the Station Company would have to provide $18,333,333 to
retire the $16,000,000 outstanding bonds. No additional First Mortgage Bonds
could be sold as that mortgage is a clo«xI mortgage. If the Commission will
Iiermit the issuance and .sale of additional bonds without the creation of additional
property, a new issue of Guaranteed Gold Bonds in the amount required could
be put out under a new indenture, with the provision that so long as these
bonds were outstanding no additional First Mortgage Bonds or Guaranteed Gold
Bonds issuable under the indenture created in December, 1924 could be issued.
If such a refinancing could be brought about the direct saving in interest to the
Station Company would be $306,067 per annum, and the actual saving over the
fifty years, after providing for the amortization of the ten points premium and
four points discount, would be $294,560 per annum.
The Series "C" bonds are callable January 1st on notice being given October
1st. I do not think the Station Company would wish to take the risk of calling
the bonds before it had made provision for retiring them, in which case if we
are to do anything in the matter it will be necessary for the Station Company
to act on it in ample time before October 1st to permit of final arrangements
being made after discussions with the Commission and the bankers.
Yours very truly,
(Stamp) (Signed) W. W. K. Sparrow,
Vice President and Comptroller.
bc-Mr. H. E. Newcomet,
Mr. Pierpont V. Davis,
Mr. Geo. W. Bovenizer.
11632 CONCENTRATION OF ECONOIvfiC POWER
Exhibit No. 1566
[From the files of the Chicago, Milwaukee, St. Paul & Pacific Railroad Co., Mr. Sparrow's
file — Chicago TTiflon Station Co.]
The Pennsyxvania Rait.koad Company,
GENE31AL Office,
Philadelphia, August 6, 193 J/.
Mr. W. W. K. Sparbow,
Vice-President d Comptroller,
Chicago Union Station Company,
135 Tfnion Station, Chicago, III.
Deab Mr. Sparrow : I have yours of August 3rd respecting the possibility of
refunding $16,000,000. 6^^% bonds of the Chicago Union Station Company.
This week I leave for vacation, and if anyone is needed from our standpoint,
call on Mr. Geo. H. Pabst, Jr., Treasurer of the Pennsylvania Railroad.
I note that you are interviewing Mr. Davis, of Brown Harriman & Co., as
well as Mr. Bovenizer. I am not sure that Brown Harriman & Co. participated
in the previous bond issue. If not, I assume that it would not be neces.sary
to bring them in now, although they are a very high class firm and Mr. Pier-
pont V. Davis is a good adviser.
In addition to the various questions you raise, I think the question of a
sinking fund will have to be considered ; also consideration will have to be given
to the question as to whether the bonds \vill require the endorsement of the
proprietary companies. Furthermore, my recollection is that the Milwaukee
used the advances mentioned as security for Government loans, which would
have to be released ; aqd, in view of present Government loans, this might need
some negotiation unless in the meantime this security has been replaced by
some other security.
It would be a splendid achievement if a 4% bond could be sold at 98 to the
public and net the Station Company 96, but I have been rather doubtful about
it myself, although I am by no means so close to the situation as the bankers,
who will be able to advise you as to the possibility of this when you take the
subject up with them.
Very truly yours,
(Signed) A. J. County.
Exhibit No. 1567
[From the files of the Chicago, Milwaukee. St. Paul & Pacific Railroad Co., Mr. Sparrow's
file — Chicago Union Station Co.]
September 1, 1934.
Mr. A. J. County,
Vice President, The Pennsylvania Railroad Compa/ny,
. Philadelphia, Pa.
Mr. Bruce Scott,
Vice Pres. d General Counsel, Chicago, Burlington d Quincy Railroad Co..
Chicago, III.
Gentlemen: With reference to proposed refinancing of $16,000,000 Chicago
Union Station Company Series "C" 6%% bonds, maturing July 1, 1963:
I discussed the matter with Mr. Geo. Bovenizer, of Kuhn, Loeb & Co. and Mr.
Pierpont Davis, of Brown Harriman & Co., on August 15th and again on the 23rd.
Since the discussion I had with them on July 11th the bond market, as you both
know, has weakened, and at times has been quite sloppy. Until the market rights
it.self, and there is greater demand for a high grade investment bond, there is no
possibility of our being able to dispose of a new issue of Station Company bonds
on the terms previously discussed. However, both Mr. Bovenizer and Mr. Davis
had hopes that in view of the financing the Government is going to do in Septem-
ber and October the bond market would improve before October 1st to a point
where we could dispose of the new issue of bonds, with a 4% coupon, at a price
of 95 or 96 to the Station Company.
I saw Director Sweet of the Bureau of Finance in Washington on Saturday
August 18th. I went into the matter with him and a member of his staff quite
fully. We had a long discussion, at which practically every feature, including
investment, valuation and capitalization, was gone into. The result of it all was
that Director Sweet said that in order that this large interest saving could be
CONCENTRATION OF ECONOMIC POWER 11633
effected he would, if a 4% bond could be sold on a reasonable basis, be in favor of
authorizing the Station Company to sell an issue of $16,000,000 First Mortgage
Bonds, to replace a like amount of 6V2% bonds now outstanding, and $2,000,000 of
its Guaranteed Gold 5s to provide for the premium and discount. This premium
and discount would be in excess of $2,000,000, but the Director felt we ought to
be able to raise the additional amount in cash. The additional issue of $2,000,000
would be conditioned upon the Station Company and proprietary companies
agreeing to apply the saving in interest to the retirement of the $2,000,000 of addi-
tional bonds. In addition, the proprietary lines would agree to cancel advances
in a like amount. No question was raised as to setting up a sinking fund to retire
the $16,000,000 of bonds, and I see no reason why such a condition should bo
imposed. There is no sinking fund to retire the bonds now outstanding and the
mortgage does not provide for one. Commissioners Mahaffie and Meyer were
away on vacation, so I did not have ah opportunity of talking with them.
Mr. County in his letter to me of August 6th raised the question of whether
these additional bonds would have to be endorsed by the proprietary companies.
The $7,000,000 of outstanding Guaranteed Gold Bonds bear the endorsement of
the proprietary lines guaranteeing principal and interest, and it is my under-
standing any additional issue would have to bear the same endorsement.
Mr. County also raised the question of the Milwaukee's ability to cancel its
proportion of the advances which, if the additional bonds are limited to $2,000,000,
would be $500,000. As of May 31, 1934, the advances made by each of the pro-
prietary companies, as shown by the books of the Station Company, amount to
$4,318,360.60. The Milwaukee pledged with the Reconstruction Finance Corpora-
tion advances it had made to the Station Company in the amount of $3,971,232.78.
The Milwaukee, therefore, would have to get a release from the Reconstruction
Finance Corporation of $152,873 of these advances. I am sure we can do this.
Mr. County raised the further question as to Mr. Pierpont Davis, now with
Brown Harriman & Co., being brought into the discussion for the reason that
Brown Harriman & Co. did not participate in the previous bond issue. Mr. Davis
represented the National City Company at the time the last, issue was put out
and participated in it. He was invited into these discussions by Mr. Geo.
Bovenizer, and I was very glad to have the benefit of his counsel and advice.
I am in close touch with Mr. Bovenizer. He called me Thursday to say there
was nothing new in the situation and did not expect there would be until after
Labor Day and more information was available as to the Government's plans
for its September and October financing. In the meantime, if you have any
further suggestions I shall be glad to hear from you.
Yours very truly,
(Signed) W. W. K. Spaeeow.
"BxHiBrr No. 1568" introduced on p. 11443, appears in full in text
Exhibit No. 1569
[Prom the files of Smith, Barney & Co.. diary entries by J. W. C. (J. W. Cutler) and
K. W. (Karl Weisheit) ]
Chicago Union Station
JRS or JWC to speak to Bovenizer regarding possibility of refunding the 5s
and 6y2S, as per KW's memo of August 10th.— JWC— 9/5/34.
RC Jr. and I spoke to George Baveuizer today when he was in the oflSce for
Chesapeake syndicate meeting. He sai,d they had had the thing set up for several
months and had hoped to do it in Octobfer but did not go ahead then on account of
St Paul situation. They are considering refunding only the 61/28 ($18,000,000,
I think ) . Will probably take it ■ up again in February. Might be well to say
something to County of P. R. R. if opportunity presents. JPM&Co. had interest
In old account thru their connection with Burlington. Question whether or not
we might see George Whitney about this. — JWC — 12/7/34.
Last bonds sold November 1924 were the 5s of 1944. Following firms appeared :
Kuhn Loeb, Lee Higginson, National^ City, First National NY, Illinois Mer-
chants.—JWC— 12/8/34.
11634 CONCENTRATION OF ECONOMIC POWER
Spoke to Mr. Whitney reference Morgan's former interest in business and he
said that their position in the various accounts came from LH&Co. (Schweppe
of that firm has been verj- active in the earlier negotiations). Therefore, any-
thing he might do would have to be after talking with LH&Co. Question:
Should we say anything to them directly'/ — JWC — 12/11/34.
Talked with Bovenizer reference my conversation with Whitney. He said he
might be able to say something to Higginson in our behalf. — JWC — 12/14/34.
Company's G^/^s to be refunded by equal amount of 4s and approximately
$2,500,000 4% debentures. Kuhn Loeb to manage business jointly with Lee
Higginson. We have been granted 10% interest which is coming from Lee
Higginson's proportion, (see JWC memo to HDM 5/6/35 ) —KW— 3/16/35.
Exhibit No. 1570
[From the files of Glore, Forgan & Co. Letter from Cliarles F. Glore to Ralph Budd]
FEBRUARY 28, 1935.
Mr. Ralph Budd,
President, Chicayo, Burlington d Quincy R. R. Co.,
5'f7 West Jackson Blvd., Chicago, Illinois.
Dear Mr. Budd :
Some time ago I discussed with you briefly the possibility of calling the out-
standing Chicago Union Station 6y2's, at that time asking if I could count on the
Burlington's help to be included in this business if it were done. Your answer
was that I could.
I later found that Mr. Sparruw was handling the matter and that it was being
negotiated largely by the Pennsylvania with Kuhn Loeb. The old Union Station
group was compo.sed of Kuhn Loob, Lee Higginson, National City Company, First
National of New York, and the Continental Illinois Company. The latter three
are now out of business, but Kuhn Loeb are recognizing Brown Harriman in the
National City Company's place, inasmuch as practically the entire personnel of
the National City Company are now associated with Brown Harriman.
The Continental Illinois have advised Kuhn Loeb that they would like to see
their former interest in our hands and from conversations I have had with Kuhn
Loeb there is no objection to our being included.
I understand that this matter is now being discus.sed actively again and I am
wondering if you could consistently call Mr. Sparrow, asking him to do whatever
he can in our behalf, which probably simply means passing word on to the
Pennsylvania, who I know are extremely friendly to us and I am sure if word
came from Mr. Sparrow would be only too glad to strengthen our position.
Anything you can properly do in our behalf will be very much appreciated.
Very truly yours,
CFG/M
Exhibit No. 1571
[From the files of Glore, Forgan & Co. Telegram from Charles F. Glore to J. Russel
Forgan]
Telegram sent o^er the private wire of
FlEU), GlX>RE & Co.
Chioaoo, March 5, J 935.
'J'o : J R F :
Clement was in Chicago last week and Budd spoke to hlra. He also spoke to
Sparrow of the Milwaukee, who was going to pass word on to County.
C. F. G.
10 a m
"Exhibit No. 1572" appears in full in text, p. 11448
"Exhibit No. 1573" appears in full in text, p. 11449
CONCENTRATION OF ECONOMIC POWER 11635
Exhibit No. 1574
[From the files of Gloro, Forgan & Co. Letter from Charles F. Gloro to J. Uubscll Forgan]
Confidential. March 11, lO'.i^t.
Mr. J. RO'SSEL J'OROAN,
Xew York Office.
Dt.\B Rubs: Refunding of Chicago Union Station G'J/s seems all set and new
bonds will be offei-ed very shortly.
Kuhn-Loeb and Lee-Higginson ^'ill head the bu.siuess as in the past — Brown
Harriman and ourselves will follow, and probably Smith and the First of Boston
follow us. I don't know yet what our interest will be, nor do I particularly care.
I am much more interested in the position.
What I had not understood until reftutly is that the Chicago Union Station
account is a consolidation of two groups that were working on the issue, Kuhn-
Loeb and the National City being one, Lee Higginson being the other. Associated
with Lee Higginson were the First National, Morgan with a silent interest, and
the old Illinois Merchants Bank. Our interest will have to come out of the Lee
Higginson participation and we probably will be considered as taking the old
Continental interest. Apparently the First National and Morgan are the ones
suggesting Smith and the First of Boston.
Nothing is to be done until we hear from Kuhn-Loeb.
Very truly yours,
CFG/M
Exhibit No. 1575
[From the files of Glore, Forgan & Co.]
[Copy]
Lee Higginson Corporatiun,
37 Broad STREm",
New York, March 23, 1935.
By hearer.
Mbssbs. Field, Glore & Co.,
S8 Wall Street,
'New York City.
Dear, Sirs : This is to advise that in the purchase of $16,000,000 principal
amount Chicago Union Station Company 4% First Mortgage Bonds, Series "D",
due July 1, 1963, and $2,100,000 principal amount of the same Company's 4%
Guaranteed Bonds, due April 1, 1944, made by a group including Messrs. Kuhu,
Loeb & Co., Brown Harriman & Co., Inc. and ourselves, all in accordance with
the terms of the letter of the Company dated March 22, 1935, a copy of which is
enclosed, we have included you in this business with an interest of 10%.
In addition to the above, the following have been included in this business :
Messrs. Edward B. Smith & Co.
The First Boston Corporation
Messrs. White, Weld & Co.
Lazard Freres & Co., Incorporated
On any offering circular or public advertisement, if any, used in connection
with an offering of the^e bonds, the following names will appear in the order
indicated :
Kuhn, Loeb & Co.
Lee, Higginson Corporation
Brown Harriman & Co., Inc.
Edward B. Smith & Co.
Field, Glore & Co.
The First Boston Corporation
As verbally agreed, it is understood that including you in this business does
not constitute a precedent in connection with any future financing for Chicago
Union Station Company.
11636 CONCENTRATION OF ECONOMIC POWER
Please confirm that the foregoing is in accordance with your understanding by
signing and returning to us the enclosed copy of this letter.
Very truly yours,
(Signed) James -J. Lee, Assintant Secretary.
JJL:B
Enclosure
Exhibit No. 1576
[From the files of BHrst National Bank of New York. Memorandum by Leverett F. Hooper]
Makch 7, 1935.
Mr. Jesup called today, saying that the Chicago Union Station Company was
considering redeeming its $16,000,000 First Mortgage 6%% Bonds, Series "C" on
July 1 by the issuance of a like amount of 3%% or more probably 4% bonds.
If this is done, the company expects to sell at the same time an isteue of
12,100,000 debentures. Mr. Jessup said that Field, Glore & Company had in-
herited the underwriting interest of the Illinois Merchants Trust Company.
J. P. Morgan had been a-sked if they cared to name an underwriting house to
have their share, and decided not to do so. He asked us if we cared to name
some one to take over our 13%% interest, intimating that E. B. Smith & Com-
pany would be welcome partners to them. '
After talking to" Mr. Reynolds and Mr. Welldon (Mr. Sturgis away on vaca-
tion; Mr. Nagle home sick), I told Ed Jessup that we were most appreciative
of this consideration from the account, and if agreeable, we would like to
nominate E. B. Smith & Company to receive one half, Lazard Freres one quarter,
and White, Weld one quarter of our previous interest. After discussing this with
Kuhn, Loeb, Jessup called ine back, saying that the account would be composed
of Kuhn Loeb, Lee Higginson, Brown Harriman, E. B. Smith, and Meld Glore.
A part of J. P. Morgan's interest goes to Brown Harrimon and enough additional,
after our contribution, to E. B. Smith to make the latter firm's interest 10%.
These five houses will be on an appearing basis. Lazard EYeres and White Weld
will be in on the ground floor for the amounts we requested but will not appear.
Jessup asked me not to speak to the houses who are to receive our interest at the
present time since he was not sure that the financing would be consummated.
He said, however, that he would let us know before he spoke to them so that we
could do so first.
L. F. H.
Exhibit No. 1577
[From the flies of First National Bank of New York. Memorandum by Leverett F. Hooper]
Mabch 13, 1985.
Mr. Jesup telephoned me that while consummation of this business was at least
ten days away and the price of the new bonds was as yet undetermined, they were
now forming their group. Of our interest amounting to 13%%, one half or 6%% of
the business would be offered to B. B. Smith & Company, one quarter of our interest
or 3%% of the business would be offered to White Weld, and one quarter of our
interest or 3%% of the business would be offered to Lazard Freres. Accordingly,
S. A. W. telephoned John Cutler of E. B. Smith and I telephoned Alec White of
White Weld and Jack Harrison (Stanley Russell away) of Lazard Freres that at
our request the account would offer them the above interests in the business on
original terms. E. B. Smith & Company will appear. White Weld and Lazard
Freres will not. We added that we hoped that banks were not permanently out of
the underwriting business and if and when we could legally do so, we would expect
to recapture this business from them. We also said that we would probably call
upon them for bonds.
L. F. H.
CONCENTRATION OP ECONOMIC POWER 11637
Exhibit No. 1578
[From the files of Smith, Barney & Co., memorandum from J. W. Cutler to Mr. Moore]
Private Telegram or Memorandum
Edwabd B. Smith & Co.,
31 Nassau Street,
Hew York, 5/6/S5.
Memo to mb. mooeb —
Chioago Union Station
I coufirmed with Mr. Welldon and Mr. Hooper of the Blrst National Bank that
they requested 6%% of their former interest in the business be allocated to us. I
would like to make this a matter of record. I think you should add that they
asked that they be allowed to consider taking this interest back should banks
sometime in the future be permitted to underwrite.
The balance of our interest, namely 3%%, came from Lee Higginson & Co.
JWO
Exhibit No. 1579
[From the files of Smith, Barney & Co.]
Buying Department Memorandum
Maeoh 22, 1935.
$16,000,000 Chicago Union Station Company, Fibst Mobtgaqb 4% Bonds,
Sebies "D", Due July 1, 1963
pubchase gboup
Fob beoobd only.
As a matter of record, it should be noted that our 10% interest in the pur-
chase group formed in connection with the above issue, which watf granted to
us through Lee Higginson Corporation, was obtained in the following manner:
Financing of this Company in the past was handled by Kuhn, Loeb & Co.
and Lee, BUgginson & Co., each having a 50% interest.
The First National Bank of New York were members of the Lee Higginson
group ^ith an interest of 10% of the total business. Inasmuch as they could
not be identified with this issue, they directed that 6%% out of their 10% be
allocated to us, and the remaining 3%% of our 10% was ceded to us by Lee
Higginson Corporation.
The interests of the various members of the purchase group were as follows :
Kuhn' Loeb & Co 27y2% ,
Lee Higginson Corporation 15%%
. Brown, Harriman & Co., Inc 25%
Edward B. Smith & Co 10%
Field, Glore Sc Co ^ 10%
The First Boston Corporation 5%
White, Weld & Co 3%%
Lazard Freres & Co., Inc 3%%
It was stated in the purchase group letter to us from Lee Higginson Cor-
poration, dated March 23, 1935, that our interest in this business was not to
constitute a precedent for future financing of this Company. Also it was Mr.
Cutler's understanding with the First National Bank that the Bank should be
allowed to consider taking this interest back tjometime in the future if banks
were i)ermitted to underwrite the issuance of securities again.
H. D. MoORE,
[s] H. D. Moore,
(per W. W. Hoge.)
HDM/f
11638 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1580
[From the flies of The First Boston Corporation]
Chicago Union Station
As has been stated in the public press, this company proposes to call its
$16,000,000 61/2S at 110. This is to be financed by an issue of 25 or 30 year
First Mortgage 4s, $16,000,000, and an issue of debentures due 1944 of $2,500,000,
with a sinking fund adequate to retire the issue by maturity. This has always
been Kuhn Loeb-Lee Hlgginson business, aud Lee Higginson has extended to us
an invitation to participate on original terms to the extent of 5%.
The names that will appear are Kuhn, Loeb, Lee Higginson, Brown Harriman,
Edward B. Smith, Field Glore and First Boston. White Weld aud Lazard will
liave small interests, but it has not j'et been definitely determined whether
they will appear. We were recpiested by Mr. Hallowell of Lee Higginson who
extended this invitation, which we have accepted, to keep confidential the names
(if the syndicate and tlie order of their appearance. The business is supposed
to come this week and will be done on a 2^/2 point spread.
Mr. Hallowell said they were tentatively dividing the 2i/^ points into one
point originating, one-half percent banking group if it is feasible to have a
banking group, and one percent for selling.
While some of the old members of the syndicate have gone out of business
{ind this is a reallignment, this is an invitation to appear as a principal in a
new piece of business that neither Harris Forbes nor First Boston appeared
in in the past. Field Glore is injected on account of Mr. Charles Glore's being
a director of the C. B. & Q.
H. M. Addinseix.
March 18th, 1935.
Exhibit No. 1581
[From the flies of the Chicago, Milwaukee, St. Paul & Pacific Railroad Co., Mr. Sparrow's
lilc — Chicago Union Sr.-ition Co.]
Kuhn, Loeb & Co.,
WnxiAM AND Pine STREEn-s,
New Ym-h, March 15, 1935.
AiB mail
W. W. K. Spareow, Esq.,
Vice President, Chicago Union Station Company,
736 Union Station, Chicago, Illinois.
Dbab Mb. Spareow : I have your letters of yesterday's date with the various
enclosures, for which please accept my thanks.
On the Union Station Company statements I have dropped out, in using these
for the prospectus, your numbers in front of the various accounts which, I pre-
sume, are ledger page numbers and trust this is satisfactory to you. As to the
delivery of the bonds to the Chase or some other bank, I do not believe this would
work out very well from our standpoint and, as I wrote you yesterday, I believe
the Trustee should have no objection to delivering them in a similar manner to
us and accept our escrow receipt the same as they would anybody else's. Will
you inquire again as to this?
I want at this time to tell you that Messrs. Field, Glore & Co. will be associated
with ourselves and the Lee Higginson Corporation on original terms in this
financing. As you probably know, Mr. Glore is a director of the C. B. & Q. I
suggest therefore that it might be well if you called that Railroad's attention to
this .so that they may determine for themselves whether, in view of this director-
ship, there is any danger that the sale of these bonds, guaranteed by the Burling-
ton, will be in violation of the Clayton Act.
Very truly yours,
(Signed) Pekcy M. Stetwabt.
PMS:H
CONCENTRATION OF ECONOMIC POWER 11639
ExHTBiT No. 1582-1
Extract From Section 20 of the Clayton Aar
§ 20, Purchases fty common carriers in case of interlocking directorates, etc.
No common carrier engaged in commerce shall have any dealings in securities,
supplies, or other articles of commerce, or shall make or have any contracts for
construction or maintenance of any kind, to the amount of more than $50,000, in
the aggregate, in any one year, with another corporation, firm, partnership, or
association when the said common carrier shall have upon its board of directors
or as its president, manager, or as its purchasing or selling oflScer, or agent in the
particular transaction, any person who is at the same time a director, manager,
or purchasing or selling oflacer of, or who has any substantial interest in, such
other corporation, firm, partnership, or association, unless and except such pur-
chases shall be made from, or such dealings shall be with, the bidder whose bid
is the most favorable to such common carrier, to be ascertained by competitive
bidding under regulations to be prescribed by rule or otherwise by the Interstate
Commerce Commission.
* * • «
(15 U. S. C. 20, Oct. 15, 1914, c. 323 Sec. 10, 38 Stat. 734.)
Exhibit No. 1582-2
Extract From Section 20a (12) op the Interstate Commerce Act
20a (12) Restrictions on actions of officers and directors; penalty. — It shall
be unlawful for any person to hold the position of officer or director of more
than one carrier, unless such holding shall have been authorized by order of
the commission, upon due showing, in form and manner prescribed by the com-
mission, that neither public nor privlate interests will be adversely affected
thereby. It shall be unlawful for any officer or director of any carrier to
receive for his own benefit, directly or indirectly, any money or thing of value
In respect of the negotiation, hypothecation," or sale of any 'securities issued or
to be issued by such carrier, or to share in any of the proceeds thereof, or to
participate in the making or paying of any dividends of an operating carrier
from any funds properly included in capital account. Any violation of these
provisions shall be a misdemeanor, and on conviction in any United States
court having jurisdiction shall be punished by a fine of not less than $1,00(>
nor more than $10,000, or by imprisonment for not less than one year nor
more than three years, or by both such fine and imprisonment, in the discretion
of the court (49 U. S. C. 20a (12), Feb. 4, 1887, c. 104, § 20a; Feb. 28, 1920,
c. 91, § 439, 41 Stat. 494.)
Exhibit No. 1583
[Letter from Glore, Forgan & Co. to Investment Banking Section, Monopoly Study, Securi-
ties & Exchange Commission]
GliORE, FOEGAN & CO.
Chicago — New York
123 South La Saixe Street,
Chicago, November 17, 1939.
Mr. Peter R. Nehemkis, Jr.,
Special Counsel, Investment Banking Section, Monopoly Study,
Securities and Exchange Commission, Washington, D. C.
Dear Mr. Nehemkis : Answering the question contained in your letter of
November 15, we had no occasion to obtain opinion of counsel on the legality
of our firm's participation in the four issues of Chicago Union Station Com-
pany bonds issued in 1935 and 1936.
Our interest in the banking group purchasing these issues was a minor one—
in no case being over 10%. We had no part in negotiating the issue, which
was handled by others, and we were simply offered the small interest mentioned
abo>e.
Trusting this answers your inquiry, I am
Very truly yours,
CFG/M C. F. Globe.
124491 — 40 — pt. 22 19
11640 CONCENTRATION OF ECONOMIC POWER
"Exhibit No. 1584" appears in full in the text on p. 11457
Exhibit No. 1585
[Letter from Chicago, Burlington & Qulncy Railroad Company to Investment Banking Sec-
tion, Monopoly Study, Securities and Excliange Commission]
A. T. Williams Edith J. alden
Treasurer and Asst. Secretary Secretary and Asst. Treasurer
A. W. Anderson A. D. McLanb
Cashier Asat. Secretary
W. C. HnNTINQTON
Paymaster
Chicago, Buklington & Quincy Railroad Company,
547 W.f:8T Jackson Boulevabd,
Chicago, III., November SO, 1939.
Mr. Peteb R. NEHEMkis, Jr.,
Special Counsel, Investment Banking Section, Monopoly Study,
Securities and Exchange Commission, Washington, D. C.
Deab Sib : Replying*to your letter of November 21st having relation to the issue
by Chicago Union Station Company of $16,000,000, 4% First Mortgage, Series D,
and $2,100,000, 4% Guaranteed bonds in the year 1935 :
Our records do not shovp that any question was raised as to the participation
of Field, Glore & Co. in these bond issues by reason of the fact that Mr. Charles
F. Glon a partner in Field, Glore & Co., was at that time a director of Chicago,
Burlingfon & Quincy Railroad Company. The only opinion of which we have
record is the opinion of our Vice President and General Counsel made a part
of the application filed with the Interstate Commerce Commission, a copy of
which is hereto attached. I am advised that it is not likely that any such ques-
tion was raised or considered so far as this company was concerned in view of
the fact that the bonds in question were issued and sold by the Chicago Union
Station Company. ' The Chicago, Burlington & Quincy Railroad Company's con-
nection with the transaction was as guarantor of the bonds and, of course, in
order to make such guarantee it was required to secure the authority of the
Interstate Commerce Commission.
The Chicago, Burlington & Quincy Railroad Company had no dealings what-
soever with Field, Glore & Co. in connection with these bonds and is not aware
of any reason why the Chicago Union Station Company was not free to have
dealings with respect to said bonds with Field, Glore & Co. if it saw fit.
Yours truly,
Edith J. Alden, Secretary.
end.
[Copy]
Exhibit No. 13. Chicago, Bxjelington & Quincy Railroad Company
Chicago, Illinois, March 14, 19S5.
IN RE: APPLICATION TO INTERSTATE COMMERCE COMMISSION BY CHICAGO
UNION STATION COMPANY FOR ORDER TO ISSUE AND SELL $16,000,000 SERIES
"D" FIRST MORTGAGE 4% BONDS AND $2,500,000 GUARANTEED 4% BONDS
It is my opinion from the facts stated in the foregoing application, that the
guaranty of said bonds for which authority is asked is :
(a) For some lawful object within the corporate purposes of the carrier
and compatible with the public interest, which is necessary or appro-
priate for or consistent with the proper performance by the carrier of
service to the public as a common carrier and which will not impair
its ability to perform that service, and
(b) Is reasonably necessary and appropriate for such purpose, and
(c) Is or will be legally authorized and valid if approved by the Commission.
Beuce Scott,
Vice President and General Counsel,
Chicago, Burlington d Quincy Railroad Company.
CONCENTRATION OF ECONOMIC POWER 11641
Exhibit No. 1586-1
[Copy of carbon copy of letter in Kuhn, Loeb & Co. file 1504-1]
March 22, 1935.
Confidential.
Lee Higginson Cobpobation,
37 Broad Street, New Torlc, 'N. Y.
Deab Sirs: Referring to the purchase of $16,000,000 principal amount,
Chicago Union Station Company 4% First Mortgage Bonds, Series "D", due
July 1, 1963, and $2,100,000 principal amount of the same Company's 4% Guar-
anteed Bonds, due April 1, 1944, made by you, jointly with Brown Harriman
& Co., Inc., and ourselves, all in accordance with the terms of the letter of the
Company dated March 22, 1935, six copies of which are enclosed, we beg to
confirm that you are interested in this business to the extent of one-half. We
understand that of your one-half interest in this business, you have ceded
certain participations, on original terms, to Messrs. Edward B. Smith & Co.,
Field, Glore & Co. and The First Boston Corporation, all of whose names
are to appear on the offering circular and public advertisement, if any, in that
order, and in addition, certain participations to Messrs. White, Weld & Co. and
Lazard Freres & Co., Incorporated, whose names will not so appear.
Will you kindly confirm that the above is in accordance with your under-
standing and, upon completion of your agreements with the above participants,
be good enough to forward us copies thereof for our records.
Very truly yours,
J.
encs.
Note. — This carbon copy is signed in pencil "Kuhn, Loeb & Co."
Exhibit No. 1586-2
[Copy of original signed letter in Kuhn, Loeb & Co. file 1504-1]
New York Boston Chicago
Lee Higginson Corporation,
37 Broad Street,
New York, March 23, 19S5.
Messrs. Kuhn, Loeb & Co.,
52 WUliam Street, New York, N. Y.
Dear Sirs : We acknowledge receipt of your letter of March 22nd in which
you advise of the purchase of $16,000,000 principal amount .Chicago 'Union
Station Company 4% First Mortgage Bonds, Series "D", due July 1, 1963 and
$2,100,000 principal amount of the same Compai^y's 4% Guaranteed Bonds,
due July 1, 1944, made by you jointly with Brown Harriman & Co., Inc.
and ourselves all in accordance with the terms of the letter of the Company
dated March 22, 1935 of which you enclosed six copies.
We confirm that we are interested in this business to the extent of one-half
and that of our one-half interest we have ceded certain participations on
original terms to Messrs. Edward B. Smith & Co., Field, Glore & Co. and the
First Boston Corporation, all of whose names are to appear on the offering
circular and public advertisement, if any, in that order ; and in addition certain
participations to Messrs. White, Weld & Co. and Lazard Freres & Co., Incorpor-
ated, whose names will not so appear.
We confirm the above terms are in accordance with our understanding and
will forward you, when received, copies of agreements with the participants
to whom we have ceded interests in this business.
Very truly yours,
(Signed) James J. Lee,
Assistant Secretary.
JJL:R.
"Exhibit No. 1587" faces this page
11642 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1588-1
rCompiled by the StafiP of the Investment Banking Section, Monopoly Study, Securities
and Exchange Commission, from ledger transcripts, memoranda and correspondence of the
several companies.!
Chicago Union Station Company
$16,000,000 First Mortgage Bonds, 0o, Series D, Dated January /, 1935, due
July 1, 1963, and Offered in March, 1935
Kuhn, Loeb & Co., $8,000,000 (50%) plus. 2i/..% ceded
out of the 50% of Lee Higginsoa Corp., making a
total of $8,400,000 (52% %) :
Kuhn, Loeb & Co .$.^ Gcm), ( 0<t (35.00%)
Bi:own Harriman & Co. Incorporated $2,800,000 (17.50%)
Lee Higginson Corp., $8,000,000 (50%) less 2'/.% ceded
to Kuhn, Loeb & Co., leaving a total of $7,600,000
(47yo%) :
Lee Higginson Corporation .$2, 533, .33.S. (15.84%)
Field, Glore & Co $1,600,000 (10.00%)
Edward B. Smith & Co $1,600,000 (10.00%)
The First Boston Corporation $800,000 (5.00%)
White, Weld & Co $533,334 (3.33%)
Lazard Fr^res & Co., Incorporated $533, 334 (3. 33%)
$16,000,000 (100.00%)
Exhibit No. 1588-2
rCompiled by the Staff of the Investment Banliing Saction, Monopoly Study, Securities
and Exchange Commission, from ledger transcripts, meiuoranda and correspondence of the
several companies, i
Chicago Union Station Company
$2,100,000 Guaranteed Bonds, i%, Dated April 1, 19S5, due April 1, 19U, and
Offered in March, 1935
Kuhn, Loeb & C<1., 50% plus 2Vj% ceded out of the 50% interest of Lee
Higginson Corporatiou, making a total of 52%%:
Kuhn, Loeb & Co 35.00%
Brown Harriman & Co. Incorporated 17. 50%
Lee Higginson Corporation, 50% less 2^^% ceded to Kuhn, Loeb & Co.,
leaving a total of 47i^'% :
Lee Higginson. Corporation 15. 84%
Field, Glore & Co 10.00%
Edward B. Smith & Co 10. 00%
The First Boston Corporation 5.00%
White, Weld & Co 3. 33%
Lazard Fr^res & Co. Inc ; 3. 33%
100. 00%
Note. — The amounts of bonds taken down by these houses varied fractionally
from the above percentages. The latter, however, were the basis for the dis-
tribution. The amounts of bonds are as follows :
Kuhn, Loeb & Co $725. 000
Brown Harriman & Co. Im. , 375, 000
Lee Higginson Corporation.^^ . 335, 000
Field, Glore & C5o 210,000
Edward B. Smith & Co _- 210,000
The First Boston Corjwration 105,000
White, Weld & Co 70.000
Lazard Fr^res & Co., Inc ^ 70,000
$2, 100, 000
CONCENTRATION OF ECONOMIC POWER 11643
Exhibit No. 1589
[From the files of First National Bank of New York. Memorandum from Henry S.
Sturgis to Leverett F. Hooper]
[Copy]
Febeuaby 27, 1936.
IMemorandura for Mr. Hooper :
Mr. Jesup, of Lee Higgiuson & Co., came to see me today to report that Chicago
Uuiou Station will issue about $43,000,000 bonds for the purpose of calling the
4y2's and 5's. They will probably be 3%'s at a premium.
He came in the second instance to explain that they were making some changes
in the percentage interest which various members of the group would have in
this issue as against the former one, all caused by the presence now of Morgan
Stanley & Company in the business. It appears that in the former issue J. P.
Morgan & Co. advised Lee Higginson to allocate that interest wherever they
wished. They gave 5'7c to the First of Boston and divided the remainder be-
tween themselves and Kuhu, Loeb & Company. Field, Glore & Company got the
10% interest of the Continental Bank. Mr. Jesup reported that Mr. Stanley
felt that this interest was too large; it has, therefore, been cut to 7%%, and
Morgan Stanley & Co. will have 15%, with Lee Higginson a like amount. The
First of Boston will have the same 5%, allocated half from Kuhn, Loeb & Co.
and half from the Lee Higginson & Co. group. This cuts to 10% the interest
which we would ordinarily have to allocate to our friends and they propose to
allocate it in the same manner as last time : one-half to E. B. Smith & Co. and
one-quarter each to Lazard and White Weld & Co.
Mr. Jesup asked what our reaction would be. I told him that our main interest
was to retain for ourselves such business as we had formerly had should banks
again be put into the underwriting business, and that if he would assure me
that if we were again permitted to underwrite we would have our former
Interest, we then wLshed him to act in the present instance in any way which
best suited his purpose. It is his expectation that we will inform our three
friends of their interest and why they were cut down.
H. S. S.
February 28: These bonds are coming more quickly than at first anticipated,
and Messrs. E. B. Smith, White Weld and Lazard Freres have already been
informed of the reduction in their interest. We have decided to buy 700 of the
bonds and I have asked for 350 from E. B. Smith and 175 each from the other
two.
H. S. S.
Exhibit No. 1590
[From the files of Glore, Forgan & Co. Letter from Charles F. Glore to Ralph Budd]
January 25, 1936.
Ralph Bxidd, Esq.,
Chicago, Burlington d Quincy R. R. Company,
5^1 West Jackson Blvd., Chicago, Illinois.
My De:ak Me. Budo: I have just learned this morning that the Chicago Union
Station plan to do some additional refinancing.
If you will remember, in the recent issue of $16,000,000 4's Field, Glore & Co.
secured a position very largely, if not entirely, through your help. Normally,
I would not bother you again on this subject, but with tne return, througli
Morgan, Stanley & Company, of J. P. Morgan & Company to the bond business,
there may be some discussion of interests in the proposed business that might
or might not affect the position that we secured in the last financing.
With this thought in mind, I am wondering if you would be willing to drop
Mr. County of the Pennsylvania Railroad a note to the effect that you would
like to have us continued in Union Station business. I suggest Mr. County for
the reason that I understand Mr. Clement is away from his office.
If entirely consistent and you can write such a letter, it will be very much
appreciated.
Very truly yours,
CFG/M.
11644 CONCENTRATION OF ECONOMIC POWER
"Exhibit No. 1591" appears in full in the text, p. 11468
"Exhibit No. 1592" appears in full in the text, p. 114G8
Exhibit No. 1593
[From the files of Smith, Barney & Co., diary entries by J. W. C. (J. W. Cutler) —
Chicago Union Station]
H. Sturgis of First National Batik called today and said business would probably
come next week. $43,000,000 3%s. Same group, with addition of Morgan
Stanley, on account of their being back in business. Therefore, participations will
be reduced and ours will be 5% instead of 6%%, as it was in the old issue. ( ?)
We may expect to bear oflBcially from Mr. Jesup of Lee Higginson. — JWC —
2/27/36.
Mr. Jesup of Lee Hig telephoned later. His conversation was as follows : "We
are planning to call the 4%s and 5% bonds of Chicago Union Station, which will
involve an issue of about $48,000,000 of new bonds. The group will be the same,
ourselves, Kuhn, Loeb, etc., — Kuhn Loeb heading. The bonds will probably be
3%s, to be sold at a premium. Price not definitely fixed — somewhere aroimd
3.50 to 3.55 basis. The Road wants the premium in order to avoid putting up new
money.
The account becomes more complicated this time, as Henry Sturgis probably
explained to you, as Morgan Stanley is back in business, and that slices everybody.
Out of the 10% interest that the First Natl, had left out of their ISVa, Henry said
he wanted to divide 50% to EBS&Co. and 25% each to Lazard and White Weld,
giving EBS&CO. an interest of 5% and Lazard and White Weld each 2Vi'%.
The spread will probably be a gross of 2 points. This is not definite but I
think it will be something like this:
Vs management to KL & Lee Hig.
% in the original purchase, out of which % will come for expenses.
% of 1% in an underwriting group, and it is planned to have each member
of the Purchase Group have 50% of his original purchase group interest in
underwriting, with % of 1% in the selling.
It might come along around the 8th to 10th, but can probably" be shaped up to
come along next Tuesday or Wednesday. It should be an attractive bond." —
JWO— 2/27/36.
Exhibit No. 1594
[From the files of Smith, Barney & Co., diary entry by K. W. (Karl Weisheit) — Chicago
Union Station]
JWC asked Ed Jesup if they were expecting to give us a participation out of
their interest as in the last deal where we got 3%% from them. Jesup explained
that the 3%% had come out of J. P. Morgan & Co.'s interest which they could not
at that time take themselves and that since Morgan Stanley were now in business
they would take the interest which J. P. Morgan & Co. formerly had so that there
was nothing to give us in addition to the 5% out of the First National Bank's
interest. Jesup remarked that as in previous case this was not to be construed as
a precedent foi* future financing of this company.— KW-2/28/36.
Exhibit No. 1595
[From the files of Smith, Barney & Co.]
March 3, 1936.
$44,000,000 Chicago Union Station Company First Moetqage 3%% Bonds,
Series "E" Due July 1, 1963
fubchasb gboijp
Our interest in this business amounted to 5%, or $2,200,000 compared to the
10% interest which we had in the purchase group formed in connection with the
CONCENTRATION OF ECONOMIC POWER 11645
sale of $16,000,000 First 4s of 1963 in March, 1935. The decrease in our interest
came about in the following way :
The First National Bank of New York had an interest of 10% in Chicago Union
Station financing in the past. When the First 4s, Series "D", were sold in March,
1935, their interest was increased to 13%% because of the fact that J. P. Morgan
& Co. was not in the business. The First National Bank directed that 50,% of
their interest (or 6%% of the total business) be allocated to us and we received
an additional 3%% interest through Lee Higginsou Corporation out of their
proportion of J. P. Morgan & Co.'s interest.
In the case of the present financing the interest of the First National Bank was
reduced to their former 10% because of the fact that Morgan Stanley & Company
took over the old J. P. Morgan & Co. interest. Half of this 10%, or 5% of the
total business, was allocated to us, 25% each (or 21/2% of the total business)
being given to White, Weld & Company and Lazard Freres & Company, Inc. We
received no interest in the present purchase group through Lee Higginson Cor-
poration because the 3%% which we had thus received when the First 4s, Series
"D", were offered was taken by Morgan, Stanley & Company. Consequently our
final interest in this financing was limited to the 5% allocated to us by the First
National Bank.
As in the case of the previous financing it was stated in the purchase group
letter to us from Lee Higginson Corporation that our interest in the business was
not to constitute a precedent in connection with any future financing for Chicago
Union Station Company.
G. W. Speee.
GWS/f
Exhibit No. 159^1
[From the files of Lee Higginson Corporation]
KUHN, LoEB & Co.,
March 2, 1936.
Confidential.
Lee Higginson Cobpoeation,
57 Broad Street, New York, N. Y.
Dear Sirs : Referring to the purchase of $44,000,000, principal amount, Chicago
Union Station Company 3%% First Mortgage Bonds, Series "E", due July 1, 1963,
made by you, jointly with Brown, Harriman & Co., Incorporated, and ourselves
and associates, all in accordance with the terms of the letter of the Company dated
March 2, 1936, six copies of which are enclosed, we beg to confirm that you are
interested in this business to the extent of one-half. We understand that of your
one-half interest in this business the following have certain participations on
original terms : —
Messrs. Edward B. Smith & Co.
Field. Glore & Co. and
The First Boston Corporation,
all of whose names are to appear on the offering circular and public advertise-
ment, if any, in that order, and in addition
Messrs. White, Weld & Co.
Lazard, Freres & Co., Incorporated, and
Morgan, Stanley & Co., Incorporated,
whose names wiU not so appear.
We understand that you wiU advise the participants above mentioned that their
participation will be subject to a management charge of %% and their pro rata
share of all exi)enses (including any losses which may result from purchases or
sales in trading in these bonds or in other securities of the Station Company).
Will you kindly confirm that the above is in accordance with your understand-
ing and, upon completition of your agreements with the above participants, be
good enough to forward us copies thereof for our records.
Very truly yours,
(Signed) Ktjhn, Loeb & Co.
VS
11646 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1596-2
[Prom the ^les of Lee Hlgglnson Corporation]
Lee ^IGQINSON Cobporation,
By bearer. March 2, 1936.
MoEOAN, Stanubt & Co., Incorporated,
2 Wall Street, New York, City.
Deab Sirs : Referring to the proposed purchase and public offering of $44,000,-
000 principal amount of Chicago Union Station Company 3%% First Mortgage
Bonds, Series E, due July 1, 1963, made by a Group Including Messrs. Kuhn,
Loeb & Co., Brown Harriman & Co., Inc., and ourselves, all in accordance with
the terms of the letter of the Company dated March 2, 1936, copy of which is
enclosed, we beg to confirm that we have included you in this purchase with an
interest of $6,600,000 principal amount.
You agree that Messrs. Kuhn, Loeb & Co. shall be Managers of the Account
and shall have authority to arrange all details in connection with the public
offering and sale of the Bonds.
Your participation in this purchase will be subject to a management fee of
%% and your pro-rata share of all expenses (including any losses which may
result from purchases and sales in dealing in these Bonds).
In addition to yourselves, the following have also included in this pur-
chase, with interests as indicated :
Messrs. Edward B. Smith & Co. (5%) $2,200,000
Messrs. Field, Glore & Co. (71/2%) 3,300,000
The First Boston Corporation (5%) 2,200,000
Messrs. White, Weld & Co. {2^^% ) 1, 100, 000
Lazard Freres & Co., Inc. (2i^%) 1,100,000
Of the interest of $2,200,000, principal amount to The First Boston Corporation,
$1,100,000 (i. e. 21/2%) has been offered to them by Messrs. Kuhn, Loeb & Co.,
and $1,100,000 (i. e. 2y2%) by Lee Eigginson Corporation.
On any offering circular or public advertisement, if any, used in connection
with an offering of these Bonds, the following names will appear, in the order
indicated : Messrs. Kuhn, Loeb & Co. ; Lee Higginson Corporation ; Brown Harri-
man & Co., Inc. ; Messrs. Edward B. Smith & Co. ; The First Boston Corporation.
Please confirm that the foregoing is in accordance with your understanding
by signing and returning to us the enclosed copy of this letter.
Very truly yours, ^ Assistant Secretary.
JJL:R
Enclosures
Confirmeb: March 2, 1936.
Morgan Stanley & Co. Incorporated,
(Signed) Harold Stanley, President.
Exhibit No. 1596-3
[From the files of Harriman Ripley & Co., Incorporated]
Kuhn, Loeb & Co.,
William and Pine Streets,
Confidential. New York, March 2, 1936.
PiERPONT V. Davis, Esq.,
Vice President, Broken Harriman d Co., Incorporated,
63 Wall Street, New York, N. Y.
Dear Sir: Referring to the purchase of $44,000,000. principal amount Chicago
Union Station Company 3%% First Mortgage Bonds, Series "E", due July 1,
1963, in accordance with the terms of the enclosed copy of a letter from the
Company dated March 2, 1936, we beg to confirm that Lee Higginson Corpora-
tion and certain associates are jointly interested in this business to the extent of
one-half and that you and we are interested to the extent of one-half. The
First Boston Corporation has an interest of 2yn% in our % share and we
confirm that in the remaining 47%%, your participation is '^^ and ours %.
Your participation will be subject to a management charge of %% and your
pro rata share of all expenses (including any losses which may result from
purchases or sales in trading in these bonds or in other securities of the
Station Company).
CONCENTRATION OF ECONOMIC POWER 11647
We enclose for your information copy of a letter which we have addressed to
Lee Higginson Corporation in regard to the above.
Please confirm that the above is in accordance with your understanding, and
oblige,
Yours very truly, (Signed) Kuhn Loeb & Co.
V.
End.
Exhibit No. 1597-1
Chicago Union Station Company
$.i,]f,000,000 First-Mortgage, 3%%, Series E, Dated January 1, 1936, due
July 1, 1963, and Offered in April, 1936
Kuhn, Loeb & Co., $22,000,000 (50% of which 21/2%
was ceded to The First Boston Corporation and
the remainder divided as follows : )
J^uhn, Loeb & Co $13,933,000 (31.67%)
Brown Harriman & Co. Incorporated $6,967,000 (15.83%)
The First Boston Corporation $2,200,000 (5.00%)
Lee Higginson Corporation, $22,000,000 (50%, of which
2y2% was ceded to The First Boston Corporation
and the remainder divided as follows:)
Lee Higginson Corporation $6,600,000 (15.00%)
Morgan Stanley & Co. Incorporated $6,600,000 (15.00%)
Field, Glore & Co $3,300,000 (7.50%)
FJdward B. Smith & Co $2,200,000 (5.00%)
White, Weld & Co $1,100,000 (2.50%)
Lazard Fr^res & Co. Inc $1,100,000 (2.50%)
$44,000,000 (100.00%)
Compiled by the Staff of the Investment Banking Section, Monopoly Study, Securities
and Exchange Commission, from ledger transcripts, memoranda and correspondence of
the several companies.
Exhibit No. 1597-2
Chicago Union Station Company
$7,000,000 Guaranteed Bonds, S^%, Dated Septemler 1, 1936, due September 1,
1951, and offered in August, 1936
Kuhn, Loeb & Co., $3,500,000 (50% of which 21/2% was
cedec" to the Mrst Boston Corporation and the re-
mainder divided as follows : )
Kuhn, Loeb & Co $2,217,000 (31.67%)
Brown Harriman & Co. Incorporated $1,108,000 (15.83%)
The First Boston Corporation $350, COO (5. 00%)
Lee Higginson Corporation, $3,500,000 (50% of which
2%% was ceded to the First Boston Corporation and
the remainder divided as follows:)
Lee Higginson Corporation $1,050,000 (15.00%)
Morgan Stanley & Co. Incorporated $1,050,000 (15.00%)
Field, Glore & Co $525,000 (7.50%)
Edward B. Smith & Co $350,000 (5.00%)
White, Weld & Co $175,000 (2.50%)
Lazard Frferes & Co. Inc $175,000 (2.50%)
$7,000,000 (100.00%)
Compiled by the Staff of the Investment Banking Section, Monopoly Study, Securities
and Exchange Commission, from ledger transcripts, memoranda and correspondence of
the several companies.
11648 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1598
[From the flies of Lazard Frferes & Co.]
[FUe — Confidential]
Super C. F. For officers only. C. F. 6c. 9-22-34. cop. 1.
Septembeb 22, 1934.
cop. 1.
Memorandum
Pacific Gas & Electbic Company
This morning Mr. Hockenbeamer came in to see Jie and in the couroe of the
conversation we discussed the matter of my relationship with him and with
P. G. & E. and also the possibility of our new company having relations with
P. G. & E. Mr. Hockenbeamer recognized my long standing acquaintance with
his situation, dating from the first operation under his present mortgage, in-
cluding the drafting of that mortgage by me. He recognized the high position
of the firm of Lazard Freres, both in this country and abroad, and in fact volun-
tarily stated he had always known of the firm since he was a boy.
He seemed to be impressed with the possibilities of our situation and indicated
while we were a new company that our chances were as good, if not better,
than anyone else, to maintain with them a banking relationship. However,
he said there was no likelihood of any financing by P. G. & E. certainly this
year and possibly for a year or more afterward. On the other hand, if the
bond market were to show extraordinary strength, so that a refunding of the
$45,000,000, 5%% Bonds could be undertaken at a substantial saving, he might
be interested. I told him that I expected to be on the Coast in due course and
would make it a point to come in and see him and discuss matters further.
On the question of monthly statements, he said he was sending no monthly
statements to anyone and he was disinclined to do so. I urged upon him the
advantage of having a central source of information here to which insurance
companies and other holders of P. G. & E. securities could come for discussion
of the company. He said he would think it over further, but he doubted whether
he would be inclined to supply us with monthly statements. Furthermore, he
said that even if he were to supply them to us he would under no conditions
permit copies to be delivered to anyone else, even the Prudential or other
insurance outfits of that kind.
S. A. RUSSEUL
SAR.FVB
Exhibit No. 1599
[From the flies of Lazard Freres & Co.]
C. Official Confl. 6c. 10-2-34. Cop. 1.
OorOBEB 2, 1934.
Mbmoeandum
Pacxfio Gas & Eleotkio Company
official OONFIDHaJTIAL
Today I lunched with Mr. George Leib of Blyth & Co. at his request. After
luncheon he wanted to see our offices and in my room before leaving expressed
great friendliness and a desire to cooperate in successful business whenever
possible. At this point, I commented that we felt the same way and that one
of these days we might sit down and discuss the P. G. & E. situation, whereupon
he said that was a matter concerning which I should talk with Mr. Hocken-
beamer. He indicated that he had talked with Mr. Hockenbeamer when he was
on the Coast about two weeks ago. He also mentioned that Mr. Hockenbeamer
was here for a few days recently, whereupon I said that Mr. Hockenbeamer had
CONCENTRATION OF ECONOMIC POWER
11649
come in to see me and we had discussed tlie situation. He, apparently, was not
aware that Mr. Hockenbeamer was in to see me. He thereupon went on to say
that, of course, I knew then that no financing was contemplated for this year and
it might be some time before financing was done. He further commented that
of course we, meaning Lazard Freres & Co., Inc., should be in the account, and
stated that Mr. Hockenbeamer had a great liking for me. However, at this
point, he also said that he supposed it would be a "free for all" like a lot of
other things. The plain deduction from this comment is, in my mind, that they
expect or hope to get a leading position, if not the leading position, in the
handling of this business, but, as he went away, he said we are still, of course,
good friends. I conclude, therefore, we should not raise the question of P. G. & E.
financing with the firm of Blyth & Co. unless they do with us. Our objective
should be to develop the situation directly with Mr. Hockenbeamer and others
interested in the Company even despite the fact that Blyth & Co. have the
strongest position on the Pacific Coast of anyone.
S. A. R.
SAR.FVB
Exhibit No. 1600-1
Stipulation
It is hereby stipulated and agreed that the documents listed below are true
copies of original communications or carbon copies from the files of Lazard
Frdres & Co. and that they were received or sent, as the ease may be, by Lazard
Freres & Co. or Lazard Freres & Co. Inc.
Date
Description
To-
From —
Feb. 16, 1935
Postal Telegraph
Letter
John D. Harrison
A. F. Hoclcenbeamer..
Mr. Russell
S. A. Russell
April 15, 1935
S. A. Russell
December 1934
Memorandum
Memo of Telephone
Conversation.
Postal Telegraph
Postal Telegraph
Letter
Dec. 27, 1934
S. A. Russell
Feb. 18, 1935 .
Stanley Russell
Stanley A. Russell
James K. Lochead
John D. Harrison
Stanley A. Russell
Stanley A. Russell
Roy L. Shurtlefl
Ramsey Harrison
Feb. 20, 1935
Feb. 21, 1935 .
Feb. 28, 1935
Postal Telegraph
Letter ..
April 6, 1935
Sept. 6, 1935,
Letter
Roy L. Shurtleff.
8. A. Russell.
Sept. 12, 1935 -.-
Letter
Feb. 8, 1936
Postal Telegraph
Memorandum
S A. Russell
Feb. 27, 1936
S. A. Russell.
April 1, 1936
Letter
James B. Black
Mr. Russell
S. A. Russell.
April 3, 1936
Telegram
Dec. 13, 1939.
Stanley A. Russell
Exhibit No. 1600-2
[From the files of Lazard FrSres & Co.]
Postal Telegraph
San Francisco, Calif., February 16, 1935.
John D. Haeeison,
Lazard Freres and Company, Inc.,
15 Nassau St., N. Y. C.
Referring Brown Harriman have always contemplated they should have
interest as large as ours if they wished. Stop. If they have any other im-
pression please be sure to correct. Stop. Blyth talked with president this
morning and later with me at luncheon while very friendly and cooperative he
wants equal interest with us and is adamant for position preceding Brown
Harriman even to the extent of being willing to face their withdrawal from
11650 CONCENTRATION OF ECONOMIC POWER
business and their possible hostility as a consequence. Stop. He feels that
neither they nor any of their personnel have had any connection or position in
this business heretofore whereas he has continuou.sly been in the business for
many years. Stop. I have told him frankly I thought he was asking for
more interest than he was entitled and in addition to several other arguments
have also advised him strongly in his own selfish interest against a policy
which might result in antagonizing Brown Harriman. Stop. He also brought
up his local position and relations with many directors and president of
company. Stop. We must recognize that we have to face this local situation
in which pre.sident is quite sympathetic to local people who have been helpful
to him in different ways. Stop. I have not endeavored to discuss this situa-
tion further with president as believed it wiser to delay until Monday, how-
ever, after all we must realize the final decision will probably be made by the
president as has always been the case in the past. Stop. Will take this up
again probably on Monday in the meantime if you have any comments please
advise. Stop. Better let consideration remaining members imderwritlng group
rest for time being.
S. A. Russell.
Exhibit No. 1600-3
[Frctin the filps of Lazard B'reres & Co. : Letter from S. A. Russell to .\. F. Hockenbeamer)
Apkil 15, 1935.
Personal and confidential. Via air mail.
Mr. A. F. Hockenbeamer,
President, Pacific Gas d Electric Company,
2^/5 Market Street, San Francisco, Cat.
My Dear Hock: With respect to your letter of April 6th concerning which
I wired you from Chicago, I will answer you in part now, although before
mailing this letter I may add to it or write you a supplemental letter because
Mr. Bauer either arrived today or will tomorrow, and in any event, further
information will doubtless be available inside of the next twenty-four to forty-
eight hours.
With i-fespect to the matter of law firms in the Southern California Edison
situation, my information is there were three law firms originally involved,
namely, a local firm, independent of the Company's own counsel, also a Chicago
firm, and finally Sullivan & Cromwell. It appears that in the early stages of
the work out there, there developed some difference of opinion between these
law firms and the Chicago firm withdrew from the situation. Consequently,
there remained two law firms to complete the job. What the aggregate fees may
be for them I do not know, but, in due course, the Registration Statement
will- disclose this information.
As regards the question of auditors, it is true that only one firm, namely,
Arthur Andersen & Co. was involved in the Southern California situation.
However, at the time of the Pacific Gas & Electric job, it was tiie feeling that
a brief check-over in principle by another auditing firm was an element of
protection, to be sure in theory only, both to the underwriters and to OflScers
and Directors of the Company, and in this connection, it was my understanding
that Mr. Bosley regarded this check-over favorably. While I was not partic-
ularly close to what Arthur Andersen & Co. did, nevertheless, from what I
have heard I really think it was desirable because they made certain sugges-
tions which were in clarification of important points in the statements as
finally filed with the Commission.
As regards the statement made by Mr. Bauer, from which you quote in
your letter of April 6th. I am advised that the underwriting agreement as
proposed (of which, so far as I know, no underwriting group member has yet
received a copy) will provide tor indemnity by the Southern California Edison
Company. In fact, as the matter has been told to me, although I cannot vouch
for it, because I have not yet seen a copy of the underwriting agreement, it is
my understanding that the indemnity will be broader than in the case of the
Pacific Gas & Electric Company. However, we will know more about this
later when the underwriting agreement becomes available. Incidentally, just
for your own information, I have beard some rather severe criticism in im-
portant quarters of Mr. Bauer's statement, the comment having been made that
it was unnecessary and reflected upon the Directors.
CONCENTRATION OF ECONOMIC POWER 11651
Mr. Bauer's remark to you that he would not sign any prospectus and would
not, therefore, have liability under it, is, I am informed, incorrect. The latest
copy of the prospectus provides for his signature and his name appears thereon.
I have no doubt that he will sign it. However, I am advised whether or not
he did sign it, he would still be liable for the statements in the prospectus be-
cause of his signature on the registration statement proper to which the pros-
pectus is attached.
I think the foregoing covers specifically the questions raised in your letter
of April 6th. However, there are some broader aspects of the situation which
I feel impelled to discuss with you.
In the period from early February until late March during which the Pacific
Gas & Electric Company business was initiated and brought to fruition, you
and I at various times commented upon the pioneering character of the job.
I do not think we fully realized just how much' pioneering we really were
doing and the results to be expected. Certainly, I did not in the light of
subsequent developments.
As I look back, I almost marvel at the change which took place in market
conditions during the period of somewhat less than two months. You will re-
call that during the greater part of February the investment markets were vir-
tually stagnant awaiting the gold clause decision of the Supreme Court. Be-
cause of the uncertainties surrounding that decision, you and I on different
occasions spoke with some doubt regarding the possible consummation of any
piece of business. Then came the decision which gave the markets a fillip.
Following that, came your registration with the Commission, the press release
of the Commission accompanied by the dramatic episode of airplane travel
across the continent, all of which received widespread publicity. The effect was
almost electric. The investment market began to show animation with respect
to new issues, the like of which had not occurred in months, if not in years.
Here was the largest piece of public utility financing in a period of about four
years and the long-awaited breakup of the capital jam was about to take place.
It was also the first operation of magnitude under the Securities Act involving
an underwriting group and a nationwide selling group. The attitude of the
underwriting group members and of counsel was one of extreme caution both
from the standpoint of liability under the Securities Act and from the stand-
point of the market recepfiveness of such a large issue. When you were here,
I think I gave you some idea of the diflBculty we experienced with certain of the
underwriting group members with respect to their last minute views on the
question of price. I think I also told you of my feeling a day or two before
the Pacific Gas & Electric Company offering when the Chicago Union Station
Bonds which were offered at 101 had jumped to 104 and over. However, these
variou^ elements are a part and parcel of the price of being a pioneer.
That this financing has cost you somewhat more than would have been the
case had a major pioneering job been done prior to your financing, I have little
doubt, in view of subsequent developments. However, I am equally convinced
that such excess cost, whatever it may have been, is more than offset by other
advantages involving the credit and public estimation of the Pacific Gas &
Electric Company. That the reception of the issue, its performance in the mar-
ket, and even if I do say it myself, the manner in which it was handled, is a
source of credit to you and to ourselves, I likewise have no doubt. We have
had scores of comment from all over the country of the most complimentary
character. The following quotation taken from a letter to me from one of your
important Pacific Coast dealers is a sample.
"This issue was and is the top spot of them all and everybody out here that
I know has commented on the beautiful way it was handled."
I really think, considering all the factors involved, and particularly the pio-
neer character of the operation, it was a job well done from every angle, and It
will redound to the advantage of the Company in the future.
Now a little bit about the future. There is no question that your financing
has stirred up a tremendous amount of interest in similar operations ; appar-
ently there are simply scores of them under contemplation. Southern Cali-
fornia Edison, of course, will be the first one of major importance to be offered.
The underwriting group, so fsTV, has had no discussion of price. From the calls
which have been made upon us by dealers, insurance companies, etc., there is
a distinct feeling that there may be an effort to price the bonds too high, despite
the fact that the legality feature is. apparently clean-cut, and a clean-cut state-
ment in regard thereto is embraced in the prospectus. I have also learned,
11652 CONCENTRATION OP ECONOMIC POWER
although I was not so advised at the time of the formation of the underwriting
group, that Mr. Bauer has laid down a condition of 2% points' spread. This is
a reflection of his intense desire to accomplish a lower cost of money than you
did. This he is likely to do if for no other reason than that he is not pioneer-
ing and you were. I assume we shall know more later on in the week on the
price situation. It will be very interesting to obtain the views at a group
meeting, and in due course I will give you the benefit of that discussion.
At this moment, I rather doubt if the Southern California Edison business
is as well received and is as successful as yours was. If, on the other hanfl
the operation should be emin*ently successful on approximately the price and
cost 'basis that Mr. Bauer evidently has in mind, then I should say there is
likely to be a very considerable volume of new financing largely refunding. In
this connection also, I should say that there is likely to «levelop — in fact, there
already is developing — a tendency to cut spreads from what the investment
banking fraternity has been accustomed to in times past. This tendency will
exist so* long as market conditions make it possible, and until a distinctly un-
successful operation, or a series of them, provides a check which will cause a
reconsideration of the basis upon which business is done. However, so long as
current conditions and tendencies exist, I want you to know that we are quite
prepared to adapt ourselve* accordingly, and to bring about a similar point of
view on the part of the underwriting group which handled the recent Pacific
Gas & Electric business. I assume that you are proceeding on the program
which you had in mind when you left here and that in due course you will take
steps toward its fulfillment. In this connection, I venture to raise the question
whether you should reconsider the matter of acquiring municipal franchises
which would remove the question of legality beyond the realm of any doubt.
I am prompted to raise this- question in view of the apparently clean-cut posi-
tion of Southern California Edison business on this point, of which I was not
aware previously, believing, as I did, their situation was comparable with yours.
Apparently, however, such is not the case. I merely mention this as a matter
to be considered in connection with the other steps of your program should you
proceed to carry it out.
I will keep you advised from time to time of any developments which arise
here and particularly in connection with the Southern California Edison offering
or others of a* similar nature.
With kindest regards, I am
Yours faithfully.
SAR.FVB
Exhibit No. 160(M
[From the flies of Lazard Pr^res & Co.]
December 1934.
Memorandum to Mr. Russell.
Pacofio Gas & Electric Company, San Feanciscx)
I saw Mr. Hockenbeamer, President, at his office and again when I was having
lunch at the Pacific Union Club. His company has $22,000,000. on deposit in
its banks and can probably take care out of earnings and depreciation charges
of its near maturity as well as any construction program that might come up,
with one exception, and that is a third gas line to the north from Kettleman
Hills field. This however is not immediate.
Nevertheless, if it were not for Schedule "A" in the Securities and Elxchange
Act I think that he would like to take advantage of low money rates and do a
substantial refunding operation which would save him a considerable sum of
money. However, none of these men wants to undertake the burden of prepar-
ing the information involved in the present requirements. They would, of
course, if they had to ; but unless it is a matter of necessity I doubt if any of
them do it.
Blyth & Company have an interest in this business, but their connection Is
by no means as close as in the case of Pacific Lighting Company and I do
not think that we need to discuss it with them. I did not mention this company
in my conversations with that firm. Mr. Hockenbeamer has very satisfactory
CONCENTRATION OF ECONOMIC POWER 11653
recollections of the business which he had in the past with Mr. Russell aud I
think there is no danger in our going alone after a position in this business.
Mr. Hockenbeamer would like to work with us and at the conclusion of my
conversation with him said, "Do not worry. You will not be forgotten."
Nevertheless, no matter as important as this should be left to go its own way.
Geobgb L. Bubb,
En route, San Francisco, to Neiv York.
Note: Power to be available from Boulder Dam will probably lessen for
some time the requirements of all of these California utilities for central station
construction work.
Exhibit No. 1600-5
[From the fllea of Lazard Fr6res & Co.]
December 27, 1934.
Memorandum.
Pacific Gab & Eleotrio Company
I telephoned Mr. Hockenbeamer today to ascertain if he was giving any con-
sideration to the possibility of a piece of private financing for the purpose of
refunding his outstanding 5%% Bonds, as was somewhat indicated in the con-
versation I had a week ago with Mr. James Black. Mr. Hockenbeamer said that
the matter had been up for some consideration but that he did not have it
actively in mind. In fact, he was rather disinclined to consider favorably a
private deal. He thought that such deals were not contemplated by the Securi-
ties Act and it might eventually lead to some trouble. He did say that he was
very much interested and was waiting to receive the modified registration re-
quirements from the Securities Exchange Commission which he understood
would be available around the middle of January. He indicated that if the
modifications were sufficient and market conditions were right that he might
possibly consider favorably an operation which in effect refunded his present
outstanding 5%s. These bonds are callable on June 1st next, upon a public call
notice of sixty days and ten days additional to the Trustee, making seventy days
in all, thus necessitating arrangements for the deal by not later than the 15th
of March. "We should follow this closely in connection with the promulgation
of the modified registration requirements.
As regards the lease of the Sierra & San Francisco properties, he stated he
rather thought they would allow the lease to lapse because, with the present
ownership, it was an unnecessary complication.
S. A. BUSSHLL.
SAR.FVB
Exhibit No. 1600-6
[From the files of Lazard Frferes & Co.]
Postal Telegraph
New Yokk, N. Y., February 18, 1935.
Stanley Russell,
Palace Hotel:
Second talk with Davis Sylvester. Stop. They maintain original position.
Stop. Would consider Blyths insistence second position extremely unfriendly
and not to best interest of company. Stop. Would definitely withdraw from
business rather than accept third place. Stop. Much surprised Blyths attitude
in view friendly relations here. Stop. They intend to discuss with Leib
immediately.
John D. Harbison.
11654 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1600-7
[Prom the files of Lazard Frferes & Co.]
Postal Telegraph
New York, N. T., February 20, 19S5.
Stanley A. Russell,
Palace Hotel.
Sylvester and Davis both definitely favor withdrawal from group rather than
accept third position. Stop. Because of importance tbis business Sylvester
says they would naturally wish discuss with their associates before reaching
tinal decision to withdraw completely.
John D. Habeison.
Exhibit No. 1600-8
[Prom the files of Lazard Frtres & Co.]
Febbuabt 21, 1935.
Mr. James K. Loghead,
American Trust Company, San Francisco, California.
Deab Jim : I tried to reach you by telephone before leaving but could not
find you.
I had a talk with Shurtleff here and with Charley Blyth over the telephone.
They demurred at giving up any of their interest to others. I explained thai
1 had made that suggestion thinliing it fitted their book — if it did not fit their
book I would withdraw the suggestion and we would either leave others out of
the account entirely or we would arrange it between ourselves and give up
accordingly. This was satisfactory to them.
I also told them I had secured a concession from Brown Harriman whereby
Blyth would appear second on the Coast and Brown Harriman third, whereas
in the east Brown Harriman would appear second and Blyth third. This was
unacceptable and Roy Shurtleff departed.
Frankly, I think the attitude was a little unreasonable. Tliey apparently
feel the matter can be left in abeyance until I get baclq here next week. In the
meantime, however, I am authorizing our people to go ahead with E. B. Smith
and First Boston, in the belief that it is a strong group for P. G. & E.
If there is anything you can do to help in this situation I will deeply appre-
ciate it. I will telephone you upon ipy return.
Yours faithfully, '
Exhibit No. 1600 9
[Prom the files of Lazard Frgres & Co.]
Postal Telegraph
San Fbancisco, Calif., February 28, 19S5.
John D. Harkison, Lazard Freres and Company, Inc.,
15 Nassau Street, New York City.
Banking group formed with definite acceptance by Blyth Smith and First
Boston. Stop. Blyth understand they appear second on coast and third in
East. Stop. Although they wish to again raise question of appearance with
president they accept on above basis. Stop. Manner in which First Boston
situation has been handled appears very peculiar to me however this is matter
for later consideration. Stop. Please say to Brown Harriman that I am
proceeding on theory they are in this group even with third place everywhere
however it is my present anticipation that they will be second in the East
and third on the coast. Stop. Banking group members here meet tomorrow
Blyth's office eleven thirty for consideration price views therefore if you or
Brown Harriman have anything further on this subject please wire me early
as possible. Stop. In this connection Woods feels three and three quarters
coupon at three eighty five basis to public perfectly feasible. Stop. Walker
CONCENTRATION OF ECONOMIC POWER 11655
Blyth and I feel fours at par or very slight discount probably perfectly
feasible with only slight improvement market conditions. Stop. Foregoing
refers thirty year bond. Stop. In my opinion this group unquestionably has in-
side position and can pull business through provided group can unite on price
views. Stop. In this connection Woods feels Brown Harriman views thirty year
bond ridiculously low. Stop. Suggest you recheck market. Stop. At present
thirty year straight maturity has preference over serial although serial not en-
tirely eliminated. Stop. Woods discussion with president decidedly unfortunate
and in my opinion entirely uncalled for under circumstances existing as I have
advised him in no uncertain terms however believe matter can be handled in
ultimate. Stop. Lawyers appear optimistic.
S. A. Russell.
Exhibit No. 1600-10
[From the files of Lazard Frferes & Co. Letter from A. F. Hockenbeamer to Stanley A.
Russell]
A. F. Hockenbeamer,
President.
Pacific Gas and Electkic Company,
245 Market Street,
San Francisco, California, April 6, 1935.
Personal and Confidential. .
Mr. Stanley A. Russell,
President, Lazard Freres & Co., Ltd., 15 Nassau St.,
New York, N. T.
Dear Stanley; I have just been looking over Securities and Exchange Com-
mission Press Release No. 328, to appear in the morning newspapers of Monday,
April 1st, relating to Southern California Edison Company's 3%% refunding
issue of $73,000,000, and it makes me weep to think that one law firm, Sullivan
& Cromwell, was the only counsel employed by The First Boston Corporation,
whereas we had to pay for three. They had but one auditor regularly em-
ployed by them, namely, Arthur Andersen & Co., whereas our regular auditors
were not deemed sufficient and all of their work had to be pawed over by
Arthur Andersen & Co.
I am also interested in the following paragraph appearing in this press
release :
"In my opinion the underwriting group which has been formed by The First
Boston Corporation is by far the largest and most representative which has
made a public offering of securities since the enactment of the Securities Act
in the spring of 1933. It may be pointed out that so far as I know no member
of this outstanding group of investment bankers had any hesita/ncy in accepting
the liabilities of the Securities Act as amended."
Does the foregoing mean that the Southern California Edison was not
required to indemnify the underwriters as Pacific Gas was required to do?
Harry Bauer also told me that he didn't sign any prospectus and would,
therefore, have no liability under it.
Sincerely yours,
A. F. H.
AFH : T J
Exhibit No. 1600-11
[From the files of Lazard Frferes & Co.]
New York Los Angeles
Chicago SBATdLB
Boston Portland
San Francisco
Blyth & Co., Inc.
EUSS BUILDINO
Cable address : BLYTHCO
Mr. Stanley A. Russeix, San Francisco, September 6, 1935.
President, Lazard Fr6res d Co.,
15 Nassau Street, New York City.
My Dear Stanley : Just as a matter of record, I outline herein my recollection
of the conversation had p^esterday between you, Mr. Hockenbeamer and myself
124491 — 40— pt. 22 20
11656 CONCENTRATION OF ECONOMIC POWER
regarding the future status of the Pacific Gas & Electric Co., bond syndicate
management.
1. I stated that Blyth & Co., Inc., were not happy with the present arrange-
ment wherein Lazard Fr^res & Co., were Syndicate Managers, and Blyth & Co.,
Inc., were Pacific Coast Managers; that we felt our historical connection with
the business entitled us to the claim which we had put forward when the first
Issue of 4% bonds was under discussion, namely, that we have joint heading
of the business.
2. You stated that as regards our claim to joint syndicate management of the
Pacific Gas & Electric account, you were sympathetic, and you agreed that
prior to the next issue of bonds, you and ourselves would sit down and discuss
the matter out to our mutual satisfaction.
3. Mr. Hockenbeamer stated that he wanted your firm and ours to fix the
matter up as between ourselves, without reference to him.
What a difference there is in the ease of bringing out an issue, once it is
registered ! I regret that this one was so easy that it required your time in
San Francisco only a few days, as against several weeks for the first issue.
I hope to be back in New York sometime toward the end of October, and
will give myself the pleasure of dropping in and seeing you and Jack Harrison,
at that time.
Sincerely yours,
Roy.
RLS Rot L. Shtjbtleff.
HKE
Exhibit No. 1600-12
[From the files of Lazard Fr6res & Co. Letter from S. A. Russell to Boy L. Shurtleff]
Mr. Rot L. Shtjbtleff, September 12, 1935.
Blyth d Co., Inc.,
Russ Building, San Francisco, California.
Dear Rot: Upon my return I find your letter of September 6 regarding your
recollection of the conversation that you and I had in Mr. Hockenbeanier's
office and in which he participated to some extent. Generally speaking I think
you and I understand thoroughly what we discussed and what is in our respec-
tive minds. Frankly, I do not think your letter covers the situation fully nor
all the points which we discussed. For instance, you spoke of your present
national status in which I concurred. Furthermore, bearing on your point
number 2, I think the words I used were that I was not "totally unsympathetic
to your suggestion." I also stated that there were other factors in the situa-
tion which I did not feel at liberty to discuss at that time but which in my
mind dictated the desirability of deferring serious consideration of your sug-
gestion until the next issue of bonds, which is likely to occur in the spring of
1936. There were also some other minor points raised but I do not feel they
are suflBciently important to set down here. As a matter of fact, as stated
above, I think we understand each other suflBciently and you may rely on my
nssurance to you that we will sit down and discuss this situation to a conclusion
which I hope will be mutually satisfactory, prior to the financing next spring.
When you are here in October please be sure to come in and see us as we
would like very much to have you spend some time with us.
With kindest regards, I am
Yours faithfully,
, President.
SAR/hbn
Exhibit No. 1600-13
[From the flies of Lazard Prferes & Co.]
Postal Telegraph
San Francisco, Calif., February 8, 19S6.
Ramset Harrison,
Lazard Freres d Co., Inc., 15 Nassau St., N. T. C:
No joint managership However Charley has no commitments to any one and
promises discuss matter with us first We decided not press him too hard for
CONCENTRATION OF ECONOMIC POWER • 11657
second position however expect see Black Saturday morning and will endeavor
secure some expression on this point from him We are playing golf with Charley
and Bernard Saturday afternoon and under present plan expect to leave for Los
Angeles either Saturday night or Sunday night.
S. A, Russell.
Exhibit No. 1600-14
[From the files of Lazard Frferes & Co.]
FebbuabY 27, 1936.
memorandum
Pacific Gas and Electkic Company
Yesterday, Mr. Jackson and I called upon Mr. C. E. Mitchell, at his request, to
learn of the group arrangement on the forthcoming $90,000,000 Pacific Gas and
Electric Company business. He specifically stated that the present group arrange-
ment was special for this deal alone and embraced :
Blyth & Co $14, 000, 000
Morgan, Stanley 10, 000, 000
Kuhn, Loeb 7,500,000
Dillon, Read 7, 500, 000
Brown, Harriman 8, 000, OOO
E. B. Smith __-^ ^____ 8, 000, 000
First Boston Corp 8, 000, 000
Lazard Freres & Co., Inc 6, 000, 000
Dean, Witter , 6, 000, OOO
Bonbright 4, 000, 000
Byllesby 4, 000, 000
Rollins 4, 000, 000
and 6 Pacific Coast houses 500, 000 a piece.
The latter six houses would appear only on the Coast ; the three new names in the
account would not appear in any advertisement,
Mr. Mitchell then related the terms of the business and asked for our answer
as soon as possible.
In respect to our position and account, he said that it had been the desire of
himself and his associates in New York to maintain us in second position, but that
the line-up of the account had been settled on the Pacific Coast and they were
unable to do better than the foregoing.
Later I telephoned Mr. Blyth, who indicated he had no objection to an improve-
ment in our position but he did not think it was possible to change the account,
but would talk to Mr. Black. I then called Mr. Black and Recalled to him his will-
ingness to have us commimicate with him in event the situation did not work out
to our satisfaction. Consequently, we were availing ourselves of that opportunity.
I told him we had no particular question regarding the amount retained by Blyth,
nor the introduction of the three new names in the account, but that we were
dumbfounded at reducing our position, both in amount and appearance, below or
after Brown, Harriman, E. B. Smith and First Boston. I emphasized to him the
job we had done in the past years' financing and our appearance before the public
in first position. In response to my question as to what justified this change, he
said there was no particular reason. I also emphasized the fact that our appear-
ance ahead of these three houses would merely be a continuation of the appearance
in previous offerings. I asked him to reconsider the situation, which he promised
to do and communicate with me today.
This afternoon we received from him the following telegram :
"Have restudied situation in view our conversation yesterday and regret
advise deal now in such shape impossible to make changes you suggest Stop
Am insisting you have special attention with respect selling allotment and
reserving right reconsidering your situation subsequent deals"
and responded as follows:
"Naturally regret conclusion but understand your position and deeply
grateful for your interest and your reservation for reconsideration with re-
spect to subsequent business Stop In event situation affecting present deal
11658 CONCENTRATION OF ECONOMIC POWER
should change to make possible suggested changes sincerely hope you will
bear us in mind Stop Without wishing to make your life burdensome would
like to call to your attention today's offering New York Edison bonds in which
our name in advertisement, prospectus and registration statement preceded
other names having larger underwriting interests If it were possible to
effect this result in present Pacific Gas offering without necessarily changing
amounts of underwriting interests the continuity of appearance of names
would be preserved as in previous Pacific Gas offerings and we would greatly
appreciate it In other words from our point of view at the moment the ques-
tion of appearance is really of mpre importance than amount Furthermore
from your point of view in the eyes of the public we have appeared in first
position for the past year as the company's primary bankers My kindest
regards"
There is also in the file a letter in confirmation of (he telegiam. We should
discuss this situation with him at the first opportunity and prior to the next piece
of business.
S. A. Rdssell.
FUTUBB DIARY — APEIL 1.
To check up on when the next P. G. & E. financing may come along.
Exhibit No. 1600-15
[From the files of Lazard Freres & Co. Letter from S. A. Russell to James B. Black]
APRir, 1, 1936.
Air Mail
Mr. James B. Black,
President, Pacific Oas d Electric Company,
2Ji5 Market Street, San Francisco, California.
Dear Jim : I heard a rumor today in the "Street" to the effect that you con-
template shortly another issue of about $30,000,000 which, if true, I presume
covers the refunding of Great Western Powers, etc. However, whether or not
this is true the job will doubtless come along sooner or later. This prompts me to
refer to your telegram of February 27 last, in which you stated you were reserving
the right to reconsider our situation in subsequent deals. I certainly don't ■nunt
you to feel that I am on your back continuously, but needless to say, I would
sincerely appreciate it if you would exercise the right of reconsideration so indi-
cated and would accomplish the objective for us as discussed in our telephone
conversation at that time.
You will recall in that conversation you were encouraging enough to say, as did
Mr. C. E. Mitchell when he talked to us regarding our position in the last piece of
business, that that particular deal and group constituted a more or less special
situation which did not set a precedent for future financing. I think I need not
again go into the reasons which prompt our feeling a sense of justification in
suggesting that you give this matter the reconsideration above mentioned. SuflJice
it to say that we organized, under very real ditflculties, the underwriting group
which sponsored the initial issue of last year and as you know lead the whole
procession of refunding operations and blazed the trail which was subsequently
followed by other national houses of issue. At one time or another in each of the
three operations of last year there was required real leadership, in the first
instance to organize the united support of tlie group and in the later instances to
maintain their support for new offerings at exactly the then existing market.
The manner in which those issues were^haudled served to build a very friendly
and cooperative dealer relationship which has contributed largely to the enviable
credit position now occupied by the Pacific Gas & Electric Company.
We placed a large amount of the bonds in retail distribution and there is no
question of our ability to handle as large a portion of your business as anyone
else: In the recent issue we could have placed a great many more bonds ; in fact,
we not only took our selling group allotment but purchased additional bonds from
dealers and in the market, and wound up with a short position due to the require-
CONCENTRATION OF ECONOMIC POWER 11659
ruents of our clients which we felt compelled to meet so far as possible. EMrther-
more, in our price views we were firm throughout in our support of the manager
of the account, and in fact, were on the high side.
In conclusion, may I express the hope that you will give this matter your
parnest consideration, whether or not the next issue is or is not imminent. With
kindest personal regards, I am
Yours faithfully,
, President.
P. S. — Since writing the above I am told the rumor referred to has appeared on
the ticker which presumably gives it some substance.
SAR/hbu
Exhibit No. 1600-16
[From the files of Lazaid Frferes & Co.]
April 13, 1936.
Telegram
LN Mb. Russell:
My suggestions follow ur letter to Jim Black quote in our recent conversation.
U were encouraging enough to say that the last piece of Pacific Gas & Electric
financing constituted a special situation which did not set a precedent for
future financing and that U had reserved to yourself entire freedom of action
with respect to the order of appearance and the interests of the individual
underwriters in subsequent flotations.
It occurred to me, therefore, that U might wish to have before U, in handy
manner so to speak, our reasons for believing that we should have an improved
position so far as percentage amount of underwriting interests is concerned
and certainly an improved position in the advertising.
Prior to the recent issue we had definitely established ourselves in the invest-
ment public's mind as the company's bankers. This was a natural result of the
successful flotation of three important refunding loans during 1935.
We organized under very real diflSculties the underwriting group which spon-
sored the $45,000,000 issue of March last year, which as U know led the whole
procession of refunding operations and blazed the trail which was subsequently
followed by other national houses of issue.
We believe that the terms which we obtained for the company were the most
advantageous obtainable at the time and under the circumstances in each case.
The first issue it is true moved soon after public offering to a substantial
premium, the group however would not have followed us to a higher price for
this issue and, as a matter of fact, it took real leadership to obtain their
united support for the terms realized.
The other two issues were offered exactly at the then existing market for the
outstanding 4s of 1964.
All three of the issues placed under our leadership met with a highly success-
ful reception and the strong after markets which resulted contributed largely
to the enviable position which your company's credit, bow occupies.
We were also successful in building up a very friendly and cooperative
dealer relationship, the importance of which from your company's standpoint
you fully realized without emphasis on my part.
As far as retail distribution is concerned we were responsible for the place-
ment among our own customers of blank dollars bonds at the time of original
offering, and of course were subsequently identified as a leading market and
distributing factor for all outstanding Pacific Gas and Electric issues unquote.
You will also probably wish to comment on your own identification with the
business previous to 1935 and the contribution which you and Lazard Freres
& Company made in preparation for last year's financing.
Habbison, L. P.
11660 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1601
[From the files of Blyth & Co., Inc. Letter from Charles R. Blyth to George Lleb]
For Inter-OflBce Air Mail Use Only
Blyth & Co., Inc.,
San Francisco, September 14, 19S5.
Mr. Gbokgh TiKTB,
New York Office.
Dbae George: I have read with pleasure more than once your letter of Septem-
ber 6th and now I shall conmient on certain points which you raise.
On the question of uniform submission of all proposed commitments by New
York to the Executive Committee prior to execution: I tried to write into the
Minutes of the last Executive meeting as near an expression of the Executive
opinion as I could phrase. I believe the statement is clear. If either Roy or I
have ever been unreasonable, I am sure by having that fact pointed out, we did
our best to mend our ways. There is no disposition whatever to hamstringing the
New York office, or any other office. I haven't the faintest fear that an opinion
out of New York, based on the combined judgment of, let us say, Leib, Mitchell,
Bashore, Hawes and Limbert, will ever subject us to any real risk of substantial
proportions. I think the combined market views of that group may or may not
be right, because I think New York's bankers as a whole have a way, at times, of
going completely hay-wire, resulting in judgment which is by no means as calm
and deliberate and unprejudiced as that which might originate from so distant a
point as San Francisco. But I do not believe the occasion will rise enough times
to even consider it. I think we should maintain our practice as is now provided
in our Manual, but I also think we should be perfectly willing to have exceptions
made by you from time to time when conditions prevent your doing otherwise.
There is no one more inclined to act independently of the Coast than I am, when
I am in New York, and I fully appreciate your feeling and I realize also the
necessity which occasionally aiises to do that very thing. I belie^ve there is no
difference of opinion between us, as to the functions of the Executive Committee.
It is of course a grand experience, particularly for you, to have Charlie Mitchell
reveal himself as such a congenial, cooperative, high calibre partner. We fully
expected htm to be that, otherwise we wouldn't have asked him to join, but
expectations and realizations are different, and the latter means something.
Then too, your associate executives, I mean Gene, Stew, Lee and Loring, are
all blossoming out in a way which is probably a greater pleasure to us, if such a
thing is possible, than to them. It is great to see ability and character develop-
ing in these men. This sounds as though they started without either, but you
know what I mean.
Your Revere Copper & Brass deal is, among other things, entertaining. Inci-
dentally, I have before me a long letter written by Walton Moore to C. O. G.,
stating that John S. Logan of Kidder Peabody is his new son-in-law. That said
individual wants a position in Pacific Lighting business and is asking his father-
in-law to solicit it from C. O. G. Among other statements is this — He (Legan)
understood that Blyth & Co. were heading an underwriting group and because of
some previous business difference between that firm and his, he did not anticipate
an offering to his firm to participate ; that it would be a definite feather in his
cap if, through him, or his efforts, such an offer were secured. Well, I will pluck
that in the bud, so far as C. O. G. is concerned and I am only repeating it for
possible interest which it may have.
I assume Kidder will be included to some extent in the selling Syndicate, which
I told C. O. G. I thought would be done and I think he in turn will say to Walton
Moore that he has taken the matter up with me and he is hopeful we can get them
into the business. You are under no commitment to do this, but I assume in the
ordinary course of things it will be done anyway.
It wiU be Interesting to see how much of a relationship we shall have with Mor-
gan, Stanley & Co.
Fortunately we are under no pressure •v<'ith reference to Hearst financing. I
quite agree with you that it presents a real problem. What we must specifically
aj^raise is what effect Mr. Hearst's death or Incapacity, which, under a reasonable
assumptloa, would take place in a few years, will have on the $125,000,000 intangi-
ble value set up in the Ripley report.
T^ere are a lot of people who believe in Hearst and in the Hearst enterprise, as
is evidenced by the holders of some $40,000,000 Preferred Stock. I do liot believe
CONCENTRATION OP ECONOMIC POWER 11661
the proposed issue could be sold, if the interest rate was not well above the going
rate of an industrial like Armour, for example. I should think 5% would be the
minimum at this time for the issue, but I do not know whether we could sell it at
that. Anyway, you have as complete a picture of the whole enterprise in Ripley's
report as is possible to get regarding any business and it will be up to us to
employ enough brain power to decide whether the business could be done or not.
Allan Pope has been out here and I have seen quite a bit of him. Dean gave
him a lunch the first day he was here, inviting a few dealers ; the second day I
had him for lunch alone. He came in yesterday, after returning from Los Angeles
on his way North and raised the question about his participation in Pacific
Lighting, about which I wired you. It is of no particular moment to me what I
tell him, but I hope I shall have some answer from you this morning so I can tell
him something.
I have your letter advising that Mr. Mathews will be in town presently. I
shall endeavor properly to handle him.
I saw a great deal of Jim Black while he was here. Allen gave him one of those
stuffed-shirt lunches, at which our "representative men" were there. But I
thought one was enough. Jim and 1 played golf one day and he was in the oflice
six or eight titnes, chatting over various matters. Nobody could be nicer, more
friendly, or more anxious to help, but as I said before, I think there is a North
American policy which interferes with any of them going to the extreme Unlit
which we would like. I think you can rest assured the joint management of
P. G. & E. financing will be a reality the next time, but it will be a reality as
much because of Stanley Russell's acquiescence as anything. Possibly he realizes
that the real shooting is over for some time to come and maybe now that the jem
has been removed from the casket it is all right to share the casket.
Frank Anderson was 72 years old on his last birthday. He is losing ground
rapidly, and I imagine won't last very many more days.
I have been having some very interesting preliminary talks with the American
Trust Company, about which no one knows anything except Roy. It is all too
nebulous as yet to do anything, but I will say it begins to look as if we might
move in. Please do not say anything to Odium on this subject, if you should
happen to run across him.
I am in receipt of your letter of the 12th regarding the proposed make-up of
the Anaconda Syndicate, which is very interesting. I told Charlie when I last
talked to him on the phone that I was sorry we hadn't been a little more daring
and taken a $10,000,000 position in the Anaconda business, but he told me the
demands from others were such that certainly there was no chance of extending
ourselves and probably it is wiser anyway. I agree with you that is the most
important piece of business we ever did, particularly because of the hand-outs we
could give to our contemporaries and at the same time sit on top of the heap.
I shall advise A. P. and Dean of their interest and if any objections are advanced
I will endeavor to smooth them out.
I should think if tj^e Los Angeles Gas financing materialiTses, which it should,
we can do much the same thing again and thereby build up some real obligations
to us.
Bob Miller is going East by plane Tuesday night. He goes first to Washington,
1 think, but will doubtless be in New York for awhile. I haven't any particular
suggestions by way of having you adopt the same policy that I have adopted.
You know of course that Bob is subject to periodic changes of mind. He doesn't
mean to change any deal as agreed upon, but he does come forth with occasional
and sometimes a little pressing suggestions for modification. I haven't definitely
got his agreement on the 2% jwint spread on the Los Angeles Gas Bonds, but I
have every belief that we shall get 2^/^ points. I did not want to engage in atiy
discussions on this subject until the time comes and then I want to put it right
to him pretty directly that what we are asking is the fair and proper compensa-
tion and not one which necessarily favorably competes with all others in similar
operations. I think Bob is entirely resigned to having us determine what indi-
vidual firms are included in the group. For a time he seemed to take some notice
of who they were and perhaps Bernard was inclined to discuss individual houses
a little too much. It is quite natural that Bernard is at somewhat of a disad-
vantage in dealing with Bob and C. 0. G., whereas both of them are inclined to
accept our statements without a lot of conversation.
Best always,
Chablet.
CRB
H
11662
CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1602
IFrom the flies of The City Company of New York, Inc., in dissolution, formerly the National City
Company]
$25,000,000 Pacific Oas and Electric Compavy, First and Refunding Mortgage
Gold Bonds, Series F, \^h.%. Due June 1, 1960
[Date released, July 28, 1930]
ORIGINAL TERMS PARTICIPANTS
Participa-
tion
National City Company (Manager)
Blyth & Co., Inc., New York.
American Securities Co., San Francisco
H. M. Byllesby & Co., Chicago
E. H. Rollins & Sons, New York
Peirce Fair & Co., San Francisco
' 8,125,000
5,000,000
4, 062, 600
4, 062, 600
1, 876, 000
1,875,000
25, 000, 000
32.50
20.00
10.25
18. 25
7.50
7.60
100.00
' J. p. Morgan & Company and the First National Bank of New York each wore given a one-quarter
Interest in our participation.
Compiled from records of The City Company of New York, Inc., in dissolution (formerly The Nationil
City Company).
$25,000,000 Pacific Gas and Electric Company, First and Refunding Mortgage
Gold Bonds, Series F, hy^%, Due June 1, 1960
DISTRIBUTING GROUP
Name
City and State
Participa-
tion
California Securities Co -
Citizens National Co -.
Security First National Co
Anglo California Trust Co
Crocker First Company
National Bankitaly Co -
Messrs. Tucker, Hunter, Dulin & Co.
Dean Witter & Co -
First National Co
Citizens & Southern Co -
Brokaw & Co —
Central-Ulinois Co
First Union Trust & Savings Bank....
Foreman State Corporation
The Northern Trust Co
Lawrence Stern & Co -
Whitney Trust & Savings Bank
Alex. Brown <Si Sons
Atlantic Corp. of Boston..
The First National Old Colony.Corp.
The Shawmut Corp. of Boston
Tucker, Anthony & Co
United States Tr. Sec. Corp
First Detroit Company, Ino
Guardian Detroit Co., Inc
Banc Northwest Co
Wells Dickey Co
First Securities Corp. of Minn
Commerce Trust Co
First National Co
Mercantile-Commerce Co
Anglo- London-Paris Co
Bankers Company of New York
C. D. Barney & Co.
Bonbrlgbt St Co., Inc
Brown Brothers & Co
Chatham Phenix Corp
Chemical National Co., Ino
Continental Illinois Co., Inc
Domlnick & Dominick
Du Bosque, George A Co ■
Los Angeles, Calif....
..--.do
do
San Francteco, Calif..
do
do
do
do
Atlanta, Oa
Savannah, Ga
Chicago, 111
do...
do
do
do
do
New Orleans, La
Baltimore, Md
Boston, Mass
do
.do.
.do.
.do.
Detroit, Mich
do
Minneapolis, Minn.
do
St. Paul, Minn
Kansas City, Mo...
St. Louis, Mo
do
New York. N. Y....
do
.do.
.do.
.do.
.do.
-do.
.do.
.do.
.do.
50,000
50,000
50,000
50,000
150,000
50,000
100,000
200,000
25,000
36,000
60,000
60,U00
150,000
50,000
60,000
60,000
25,000
100,000
80,000
100,000
60,000
60; 000
2ft, 000
60,000
60,000
50,000
60,000
60,000
25,000
26,000
26,000
100,000
200,000
60,000
400,000
2oaooo
100,000
100,000
200,000
60,000
25,000
CONCENTRATION OF ECONOMIC POWER
11663
$25,000,000 Pacific Gas and Electric Company, First and Refunding Mortgage
Gold Bonds, Series F, 4Mi%, Due June 1, 1960 — Continued
Name
City and State
Participa-
tion
Eastman, Dillon & Co
Field, Qlore & Co., Inc
Hambleton & Co., Ino
Hemphill, Noyes & Co
Hibernia Securities Co., Inc
Ingraliam & Ashmore, Ine --
Kean, Taylor & Co — --.
W. C. Langley & Co
Minsch, Monell & Co., Inc..
O. M. P. Murphy & Co
Q. L. Ohrstrom & Co., Inc
L. F. Rothschild & Co
Edward B. Smith & Co
Spencer, Trasii & Co
Marine Trust Co. of Buffalo
First National Bank.
Hayden Miller & Co
Hord, Curtis and Co...
Mitchell, Herrick & Co
The Union Cleveland Corp __
Banc Ohio Securities Co
Cassatt & Co ..-
Graham, Parsons & Co
The Philadelphia National Co
Thayer, Baker A Co., Inc
First National Bank
Mellon National Bank
Peoples Pittsburgh Trust Co
The Union Trust Co _.
First Seattle Dexter Horton Sec. Co-
Paciflc National Co
First Wisconsin Company —
Blyth& Co., Inc
American Securities Co
H. M. Byllesby & Co., Inc.
E. H. Rollins & Sons
Peirce. Fair & Co
The National City Co
New York, N. Y.
-..-do
do-
-...do
do
do-.
do -
do
do-
do
do...
do
do
do
Buffalo, N. Y
Cincinnati, Ohio..
Cleveland, Ohio-..
do
do.....
.....do
Columbus, Ohio..
PhUadclphia, Pa -
do -
do -.
do
Pittsburgh, Pa
do -.--
do- -
.....do -.
Seattle, Wash
do
Milwaukee, Wise.
New York, N. Y
San Francisco, Calif.
Chicago, 111
New York, N. Y
San Francisco, Calif -
25, 000, 000
Compiled from records of The City Company of New York, Inc., in dissolution (formerly The National
City Company).
Exhibit No. 1603
,000,000 Pacific Gas and Electric Company, First and Refunding Mortgage
Gold Bonds Series F, ^1/2%, Due Juve 1, I960
[Date released, January 12, 1931]
Name
Participa-
tion
National City Company (Manager)
Blythit Co., Inc., New York -
American Securities Co., San Francisco.
H. M. Byllesby & Co., Inc., New York
E. H. Rollins & Sons, New York
Peire*, Fair & Co., San Francisco
'8,750,000
6, 625, 000
4, 062, 500
4, 062, 500
1,250,000
1, 250, 000
25, 000, 000
35.00
22.50
16.25
16. 25
5.00
6.00
100.00
' J. P. Morgan & Company and the First National Bank of New York each were given a one-quarter
Interest in our participation.
Compiled from records of The City Company of New York, Inc.. In dissolution (formerly The National
City Company).
11664 CONCENTRATION OP ECONOMIC POWER
$25,000,000 Pacific Oas d Electric Company, First and Refunding Mortgage Gold
Bonds, Series F, 4',j%, Due June 1, 1960
Name
City and State
Participa-
tion
California Securities Co
Citizens National Company
Security First National Company
Anglo California Trust Co
Bankamerica Company
Crocker First Company...
Tucker, Hunter, Dulin & Company..
Dean Witter & Co
First National Company
Citizens & Southern Compani^
Central-Illinois Company
First Union Trust & Savings Bank...
Foreman State Corporation
The Northern Trust Company
Lawrence Stern & Co
Whitney Trust & Savings Bank
Alex. Brown & Sons
Atlantic Corporation of Boston
The First National Old Colony Corp.
The Shawmut Corp. of Boston
First Detroit Company, Inc
Guardian Detroit Company, Inc
Wells-Dickey Co.
First Securities Corp. of Minn
Commerce Trust Company
First National Company
Mercantile-Commerce Company
Anglo-London-Paris Company
Bankers Company of New York
C. D. Barney & Co
Bonbright & Company, Inc
Brown Bros., Harrlman & Co
Chatham Phenix Corporation...
Chemical Securities Corp ,
Continental Illinois Company, Inc
Dominick & Dominick.
DuBosque, George & Co
Eastman, Dillon & Company
Field, Qlore & Co., Inc
Guaranty Company of New York
Hemphill, Noyes & Co. ,
Ingraham & Ashmore, Inc
Kean, Taylor & Co... ,
W. C, Langley & Co.
Lee, Higginson & Co
Minsch, Monell & Company, Inc
O. M. P. Murphy & Co.
O. L. Ohrstrom & Company, Inc
L. F. Rothschild & Co
Edward B. Smith & Co...
Stone & Webster and Blodget, Inc
Spencer Trask & Co.
Marine Trust Co. of Buffalo
First National Bank
Hayden Miller & Company..
Hord Curtis and Company
Midland Corporation
Mitchell, Herrick & Co
The Union Cleveland Corporation
Banc Ohio Securities Company
Cassatt & Company
Graham, Parsons & Co ^
Janney & Company
The Philadelphia National Co
Thayer, Baker & Company, Inc..
First National Bank...
Mellon National Bank
Peoples Pittsburgh Trust Co
The Union Trust Company
First Seattle Dexter Horton Sec. Co...
Pacific National Company
First Wisconsin Company
Blyth & Co., Inc
American Securities Co
H. M. Byllcsby & Co., Inc..
E. H. Rollins A Sons, Inc
Pelrce, Fair & Co., Inc
The National City Company.
Los Angeles, Calif
do..
do
San Francisco, Calif.
do
do..
do
.....do
Atlanta, Ga
Savannah, Ga
Chicago, ni
do
do
do...
do.
New Orleans, La
Baltimore, Md
Boston, Mass
do...
do
Detroit, Mich.
do
Minneapolis, Minn.,
St. Paul, Minn.
Kansas City, Mo
St. Louis, Mo
do
New York City
do...
do..
do
do...
do..
do
do
do
do...
do
do
do
do
do _
do....
do
do
.....do..
do
do
do...
do..
do
....do
Buffalo. N.Y.
Cincinnati, Ohio
Cleveland, Ohio
do..
....do
do...
..-.do
Columbus, Ohio
Philadelphia, Pa
do
....do
.-..do
-...do .....
Pittsburgh, Pa
--..do--
...-do-.
....do-.
Seattle, Wash
-..-do-.
Milwaukee, Wise
New York City
San Francisco, Calif-
New York City
do
San Francisco, Calif..
50,000
50,000
100,000
50,000
50,000
150,000
100,000
250,000
65,000
25,000
60,000
150,000
100.000
75,000
50,000
2S,000
100,000
60,000
100,000
50,000
100,000
100,000
60,000
100,000
25,000
25,000
25,000
100,000
500,000
50,000
300,000
250,000
100,000
100,000
250,000
50,000
25.000
60,000
50,000
750,000
100,000
25,000
50,000
500,000
600,000
50,000
60,000
50,000
60,000
100,000
50,000
76,000
75,000
50,000
50.000
25,000
25.000
25,000
75,000
50,000
200,000
100,000
25,000
50.000
60.000
60.000
100,000
50.000
100.000
100,000
50.000
100,000
7. 590. 000
3, 917, 000
2. 829, 000
2. 829. 000
871,000
871,000
6. 093. 000
25, 000, 000
Compiled from records of The City Company of New York, Inc., In dissolution, (formerly Ths National
City Company).
CONCENTRATION OF ECONOMIC POWER 11665
Exhibit No. 1604
(From the files of The Cleveland Trust Company]
Eugene M. Stevens^
Vice Ohatrman.
BLYTH & Co., Inc.
135 SOtTTH LA SALLE STEEET
Cable address : BLYTH CO
Chicago, April 11,, 1936.
Mr. Hakbis Cbeech,
President, The Cleveland Trust Company,
Cleveland, Ohio.
Deab Mb. Creech : It was a real pleasure to see you again the other day,
and to meet your associates again at luncheon. I am very grateful to you for
the time which you gave me and your courtesy to me.
I understand that you are proceeding with the exploration of the necessary
legal procedure in connection with the refunding of the capital debentures of
your bank held by the R. F. C. If, in connection with such investigation, you
desire to confer with our counsel, and will so advise me, I will be glad to arrange
it. It does seem to me that from the standpoint of a banker, this is a very sound
operation and I am convinced that my present firm is exceptionally well equipped
to handle such financing, and in a way whicli would be entirely agreeable to you
and your great institution. I can give you my personal assurance to this end.
I hope, therefore, that when you are ready to discuss this matter further, that
you will let me know.
With respect to the other matter which we discussed and the evident feeling
on the part of the Treasurer of the interested corporation, that the business of
the National City Company had been inherited by Brown, Harriman & Co., I
have this to say, based on advices I have had direct from Mr. Charles E. Mitchell,
formerly the head of the National City Company and the National City Bank,
who is now Chairman of our firm.
As a matter of fact, no New York firm has inherited the right to the National
City Company business. Brown, Harriman & Co. have in their organization a
number of former National City men, but Brown Bros., Harriman & Co., the
banking firm who started their investment banking business with a union of
former Brown Bros, and National City men, paid nothing to the National City
stockholders for the Company's good will, and have positively no claim of in-
heritance. Other investment banking firms, also, are now manned by former
National City men, including our own firm — not only in New York but scattered
across the country. As I have said, Mr. Mitchell, the Chairman of our Board,
was formerly the head of the National City Company and of the National City
Bank, and is responsible for the development of the National City Company
from a three man personnel to a point where it had become the largest organiza-
tion of its kind in the country, all of which was entirely under his leadership.
He, in fact, was ultimately responsible for the negotiation and consummation of
the pieces of financing which the National City Company did. It would definitely
appear, therefore, that if there is any claim for the National City business as a
heritage, that we could make such a claim — perhaps on better grounds than any
other investment banking firm.
I remember this point came up in our discussion and I am giving you this
definite information in regard thereto. I shall be glad to hear from you when
you have talked with Mr. Shea, or in case anything further develops along these
lines. I am always prepared to come to Cleveland at any time when you
would like to discuss any of these matters further.
With cordial personal regards, I am
Sincerely yours,
EuoBNB M. Stevens.
EMS.Q
11666 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1605
[From the files of The Cleveland Trust Company]
EUGENE- M. Stevens,
Vice-Chairmati.
Blyth & Co., Inc.,
135 SOUTH LA SALLE STRE>:T
Cable address: BLYTH CO
Chicago, October 14, 1936.
Mr. Harbis Creech,
I \ Clevelwnd Trust Company, Cleveland, Ohio.
My dear Mr. Creech : Is there anything new in Ihe Firestone situation, about
which I have talked to you once or twice?
You will recall that I went down to see Shea in the latter part of July, and
he advised me that the whole matter was deferred, but with the implication
that he felt that he had certain obligations to another banking house, which I am
quite sure was Brown, Harriman & Company. This, you will remember, ap-
peared to be based on Joe liipley of Brown Harriman having sold Shea on the
idea that Brown Harriman had inherited the National City business. This, of
course, is not a correct assumption, as neither Brown Harriman nor anyone else
has ever paid a dollar to the National City Company for its good will. What-
ever there was of inheritance, and certainly from the standpoint of the indi-
viduals concerned, -we should inherit the business more fully through Mr.
Mitchell and others in our firm than any other banking house.
Both Ml-. Mitchell and I feel very strongly that we can make them a propo-
sition as to terms and price which would he more advantageous to them than
they can obtain any where else, and the question with jas is how to get this to
Mr. Firestone's personal attention in an endeavor to show him that we have
and can sell to the public a higher appreciation of the credit of his company
through our direct association with him. Mr. Mitchell or myself, either of us,
would be glad to talk to Mr. Firestone personally along these lines when it can
be arranged, and to make him a very definite proposition, if he is so minded.
It is a little difficult to do this by correspondence without a thorough under-
standing of just what he wants. If he is still minded to use $40,000,0<X), I think
this can be arranged on a more attractive basis to him than we could have
talked last spring.
I venture to speak my mind freely to you, primarily, to learn what the pres-
ent status of the situation is, and because I feel so strongly that we are in a
position to submit a proposition which would be distinctly to the advantage of
the company and to those interested in it, including yourself.
Cordial regards.
Sincerely yours,
Euoene M. Ste^tins.
EMS : WG
Exhibit No. 1606
[From the flies of Blyth & Co., Inc., Letter from George Leib to James Black]
February 21, 1935.
James Black, Esq.,
% North American Company, 60 Jiroadicay, New York City.
1»E.\R Jim: As you know, Elsey and the American Trust would like lo have us
heirs to their sixteen percent interest in the Pacific Gas business. This, coupled
with our historic connection with the business, would appear to entitle us to head
this account, particularly in view of the fact that the old National City Company
has no heir (according to public statement of its President, James Parkins) ;
and further in view of the fact that even if there is a heir, the legacy has been
split between Brown Harriman and Lazard Freres.
Giving no consideration to Hock's personal feelings for Stanley Russell, the
following syndicate would seem to us to be the logical syndicate, and one in
which the interests of the Pacific Gas & Electric Company would be best served :
CONCENTRATION OF ECONOMIC POWER 11667
Blyth & Co., Inc _. 29%
Brown, Harriman & Co 19%
Lazard Freres lO^'
First Boston Corporation 'Ty%%
B. B. Smith & Co .- 71/2%
Witter & Company 5%
E. H. Rollins & Sons 5%
In this account, you will notice that I have -simply taken the old National City
percentage interest and divided it between Brown Harriman and Lazard Freres,
which is the only possible, fair treatment to be given to this situation.
As it is always necessary to give consideration to the practicabilities of situa-
lions, and as we must give consideration to Hock's personal desire to favor
Stanley Russell and his new firm (Lazard Freres), I believe that the foUow'ng
syndicate would give the Pacific Gas & Electric Company a good syndicate, and
would give the heirs to the National City Company business (if there are such
heirs) a tremendous increase in their percentage interest
Blyth & Co., Inc 25%
Brown Harriman & Co 25%
Lazard Freres , 25%
First Boston Corporation 7%%
E. B. Smith & Co 71/2%
Witter & Company 57o
E. H. Rollins & Sons 5%
I believe that we represent the best balanced outfit in the syndicate. We have
our own wire and private telephones to Boston-Philadelphia-Cleveland-Chicago-
San Francisco-Los Angeles-Portland-Seattle. We use these wires and telephones
exclusively. No one else is on them.
We have nineteen offices, and we have one hundred and twenty-five salesmen.
Wo have a large dealer following as we trade daily with most of the important
dealers throughout the country.
Our historic connection with Pacific Gas & Electric Company dates back many
years, and we have not changed our identity throughout the past few years.
I believe that Blyth & Co., Inc. should head this syndicate. We appear to be
the logical selection from every standpoint.
I shall keep you advised of developments.
Sincerely yours,
GL.JD.
Exhibit No. 1607
[From the files of Blyth & Co.. Inc.]
Western Union
D*AT LETIEB
February 15, 1935.
Charles R. Blyth,
Rus8 Building, San Francisco, Calif.:
Patterson states Frank Anderson talked to him in California about value of
California banking houses to California underwritings and deplored occasional
invasion of California business by eastern houses. Would it possible for you tele-
phone him and solicit his advice regarding this business? Possibly Bernard could
telephone COG on same basis. I believe both these men would be flattered and
keenly interested helping us obtain senior position this business. Certainly it
would allow us say to Russell we would like delay for few days in order have ad-
ditional conversations with Anderson and Miller and I don't think Hock would
insist upon closing if he knew those conversations going on between them and us.
Seems to us we have everything to gain by delaying for week or so and nothing
to lose. Stop heading business and 37^2% interest might be line along which we
should fight for week or so. Only person who must have speed is Russell. Will
advise you soon as we hear from Fogarty. Bashore sending you wire in few
minutes regarding banking ideas our 37% interest.
George Leib.
11668 CONCENTRATION OF ECONOMIC POWER
Exhibit 1608
[From the flies of Blyth & Co., Inc. Letter from Charles R. Blyth to Geoijge Lelb]
For Inter-oflace Air Mail Use Only
Blyth & Co., Inc.,
Mr. Gexjbge Leib, San Francisco, Februa/ry 16, 1935.
Neic York Office:
Dfab George: I think there is little to add to what we have said over the phone
with regard to PG&E financing. I realize how difficult it is for you to visualize
exactly what has transpired, and I will say it came as a surprise to us, because
both Roy and I have attempted to keep in touch with Hock and thought he would
at least mention to us any intention he had in starting negotiations.
The fact is, he and Stanley are close buddies. He considers Stanley and not
the National City or anybody else the Banking agency which created the original
mortgage and has acted in the financial interest of the Company ever since. He
stated that to us yesterday and said Stanley knows more than any living person
other than himself, about PG&E financial matters. Hock also said, when wo
urgently agitated our heading the business that he had gone too far now with
Stanley to reverse himself.
You know, and I do, that all of the directors of P G & E have encouraged Hock
to accept, and repeatedly placed upon him the full, unrestricted responsibility of
making his financial arrangements. With this background, naturally Hock
proceeded with Russell and while never intending to keep us out of the business,
on the other hand intending we should be substantially in it, he did propose to
proceed with the program quite considerably before advising us.
There is no sense whatever in being other than extremely cooperative and cor-
dial with Russell. Any other policy would be highly unproductive of results.
What degree of value Lazard or any other single banking organization will be to
us in future accounts has no bearing on our attitude toward Russell in the
PG&E business, except of course I do npt refer to the value of certain firms
against others, whom we jointly (if a joint arrangement can be put across) will
invite into the business.
I have your wire and will do all I can in the way of including the names which
you suggest and I think without doubt we can fully talk over the program before
the individuals are definitely approached, at least that is true if Stanley and
ourselves are joint account as originators.
I fully appreciate your desires with reference to Brown Harriman and I am
sure they are right, but at the moment I am sure and we all are sure it will be
unwise to attempt to tell Brown Harriman how much we want them in the busi-
ness, even though it is the honest truth, until we are definitely clear with Russell.
I may not hear from Russell today, but he is coming down to the country tomorrow
and will certainly have something further to say then.
I assume you are familiar with the work which Loring Hoover is doing. I refer
particularly to such things as the New England Fiber Blanket Company. Possibly
Loring is following this in the belief that the business might be of some interest
to some of us individually. That of course is wrong, because his activities should
be concentrated on business for the firm. This is a very small company, with a
declining record of earnings, engaged in a specialty business, which may or may
not be in process of being supplanted by some other kind of product. The very
size and general aspect of it is such that it would not lend itself to any sort of
public financing and if we were seriously to consider it, would take us right back
to the days when we were handling junk.
I have tried to write a diplomatic and understanding letter to Loring, stating
that we are rather indifferent to small operations, believing they present much
greater hazards than larger operations and that innovations are rather hard to
handle anyway. This subject is difl3cult to handle by correspondence and if you
could say something to him that will cause him to think we are not showering
him with wet blankets on every occasion, it may serve to not get him too discour-
aged. I realize a man coming into this organization as he has, finds few immediate
opportunities to produce any real results and is therefore apt to clutch at all sorts
of straws in an effort to demonstrate his creative ability. I am returning the data
herewith so that, if you haven't seen it, you may look it over and you will know
more of what I am talking about.
Best always, Chabuct.
ORB
H
CONCENTRATION OF SCONOMIG POWER 11669
Exhibit No. 1609
[From the files of Blyth & Co., Inc.]
Western Union
"day lbtteb"
Febbuaey 19, 1935.
Chables R. Blyth,
% Blyth d Co. Inc. 215 W. 6th St., Los Angeles, Calif.:
Just came from long talk with Jim Black. I clearly outlined our position in
whole matter stop Off the record Jim thinks Brown Harriman attitude com-
pletely untenable. Fogarty out town. Sent you airmail letter this morning to
San Francisco regarding our views Harriman ultimatum which I understand will
be delivered through Russell. Think we should handle wholesaling and syndica-
tion for joint account as we have facilities. Russell to handle negotiations with
company. Think we should be able trade splendid deal with Russell regarding
appearance etc. because he certainly on weak ground not having single friend
in court except Hock.
Geobob Leob.
Exhibit No. 1610
[From the flies of Blyth & Co., Inc.]
Western Union
"night lettkb"
Febrxjaey 19, 1935.
Charles R. Blyth,
Russ Building, San Francisco, Calif.
I forgot to tell you that I told Brown Harriman yesterday that Russell had
told us he had an agreement with them under which he would handle all of
his own accounts. Sylvester said yes but the understanding was that if Hock
wanted him to head account we were to have second position and equal per-
centage with Russell. In other words these two without any consideration of
us simply took first two positions in business. It would serve them both right
if we went in there and insisted upon heading business ourselves and I believe
we could come awfully close to putting it over.
Geoege Leib.
Exhibit No. 1611-1
[From the files of Blyth & Co., Inc.]
Western Union
"day letteb"
Febbuaby 20, 1935.
Chables R. Blyth,
Russ Bldg., San Francisco, Calif.
Am sure several directors and large stockholders have doubts regarding ad-
visability Lazard heading jointly Pacific business. In view fact we not encour-
aging these doubts thereby standing with Russell seems unbecoming for him
tell Brown he strongly in favor giving them second position but we standing
in way. This results turning Brown against us. Reason Russell taking this
position is because he had agreement about which he did not tell us that if
Hock elected Lazard to head business then Brown was to have second position
with equal percentage interest. Russell playing game which is going to result
in Blyth sort of being enemy of everyone and Russell everyone's friend. Think
we should have immediate showdown with him and if he wants poison Brown's
ear we should know it. I again suggest if we are to have Joint management
no discussion be had with other houses and no telegrams be sent or shown
other houses without our joint approval.
Geobge Lbib.
11670 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1611-2
[From the files of Blyth & Co., Inc.]
Western Union
"day letteb"
Fkbbuaby 21, 1935.
Charles R. Blyth,
Russ Building, San Franoisco, Calif.
Ben Clark told me last night of terrific trouble he has had with Brown on
their position in National Steel. Said he simply had to get up on hind legs
and fight otherwise would have been crowded out picture entirely.
I think time has come for us show our teeth and attempt take leadership
away from Lazard. Russell obviously ti*ading in interests Brown and I be-
lieve manly theory fight is only way to obtain proper recognition. Hock's and
Russell's po.sition weak and ours strong. I know if we accept second position
we would distinctly weaken our position and if we accept third position would
be disgraceful and I for one would not be able hold my head up with my own
associates here.
Ltic.
Exhibit No. 1611-3
[From the files of Blyth & Co., Inc.]
Western Union
"day letter"
Febeuaby 21, 1935.
Charles R. Blyth,
Russ Building, San Francisco, Calif.:
Hock suggested possibility joint account which you and Roy accepted. ■Rus-
sell accepted this in its entirety as far as he was concerned and Elsey was
favorable.
Now after two days silence Russell comes back and suggests we take third
position.
Whole thing simply does not make sense and is insulting to our intelligence
and standing as a firm.
Have told all this to Jim Black a^d told him we simply cannot understand
picture. He is equally mystified. I have explained to him importance this
syndicate to company because unquestionably this is way syndicate will stand
for years to come. He agrees.
He is talking with Hock daily but so far personnel of syndicate has been
only vaguely discussed.
This is most important piece negotiation Blyth has had in years. If wo
miss making game on this hand with all honors we hold then there is some-
thing wrong with us.
Leib.
Exhibit No. 1611-4
[From the files of Blyth & Co., Inc.]
Western Union
"day letter"
February 21, 1935.
Charles R. Blyth,
Russ Building, San Francisco, Calif.:
I have just returned from hour and half talk with Jjm Black. I have just
sent following letter to him by hand :
Quote Confidentially this is syndicate which I think would be best from
standpoint both Pacific Gas and its stockhold«»rs : Blyth Lazard Brown each 25%
CONCENTRATION OF ECONOMIC POWER 11671
first Boston and E. B. Smith 7i/^% each and Witter Rollins each 5%. I believe
we represent best balanced outfit in syndicate having own wires and private
telephones to Boston Philadelphia, etc. which we use exclusively. We have 19
offices and 125 salesmen. We have large dealer following throughout country.
Our historic connection with Pacific Gas dates back many years. I believe we
should head syndicate as we are logical selection from every standpoint. Shall
keep you advised developments. Unquote.
Leib.
Exhibit No. 1611-5
[From the flies of Blyth & Co., Inc.]
Western Union
"NIGHT LEnrrEB"
Fkbeuaby 22, 1935.
Roy L. Shubtlefp,
% Blyth & Co., Inc., Russ Building, San Francisco, Calif.:
Situation now at impasse with each banker refusing give way. Therefore Hock
must settle positions and interests after consultation his directors and important
stockholders.
Jim Black has written to Earle who represents them on board. Miller will
certainly go to bat for Bernard and us. Therefore we have two largest stock-
holdings on our side also we have right on our side.
Think we should again tell Elsey possibly through Toms and Lockhead that
as most important western house doing business with his bank we naturally
expect him stand with us. Then you should see Anderson again explain our
position and explain exactly what Lazard trying do to us. Anderson has always
been strong for western banking houses against eastern interests.
Do not believe Hock will again go against North American and Miller interests
as he did when he cut dividend. Am confident we here can hold North American
steadily with us if you fellows on coast can hold Miller and possibly some of other
directors. It looks like cinch to me.
Have no concern about Brovra dropping out. They will not do so regardless
of whether they have first or third position. It is purely bluff. Naturally Russell
could gain their gratitude if he can crowd them in second position. However
if Hock says it is going to be our way and no other way Russell's skirts are
cleared.
It is time for Hock to take leadership. Please show this to Bernard.
Gborqe Leib.
Exhibit No. 1611-6
[From the files of Blyth & Co., Inc.]
Western Union
"DAT letier"
Febbuaby 22, 1935.
Bebnard W. Foed,
2135 Ralston Ave., Burlingame, California:
Delighted hear you in the fight. I know you will be firm as Rock Gibraltar
and trade hard.
We have big hand Bernard and as winning poker player of years' standing
I know you will not let them bluff you out with such a hand. We have every-
thing to gain and nothing to lose so go to it old boy.
Am sending you another telegram which you might like show to Cog Roy
and possibly one qr two Pacific Gas directors. I do not see Lazard or any
of the eastern bankers doing any real work in support of utilities.
Love to Marion.
Gboboe Leib.
124491 — 40— pt. 22-
llt)72 (JONCENTUATION OF ECONOMIC POWPHl
Exhibit No. 1612
[From the flies of The First Boston Corporation 1
[Copy]
First of Boston Corp., Wihe Dept. No. 1.
Woods, LA., Mar. 23, 1935.
Have just finished long harangue Stanley Russel who has been in contact
Baur by Tel and Tel Stop He presented Addinsell with same arguments he
gave us L. A. and while not so belligerent certainly will put up strong argument
for position ahead Brown Harriman. Will surely contact Bauer by telephone
today. Subsequently Joe Ripley called up a*id came over and we gave him
usual song and dance referring him to Bauer but asked his impression of under-
standing with Stanley vis a vis business formerly participated in but not
headed by City Co. Stanleys statement to Harry and me today exactly opposite
R pleys understanding. This for your information when feathers start to fly
on Monday. We will be ready submit Monday after Bauer rings beU first ten
or twelve names of group but should know just how Bauer feels about posi-
tion of Blythe. Your wire regarding Howe just arrived. I talked Snow this
morning who primarily called to object to being cut down to ten percent which
information he got over telephone from Howe. I told him nothing. Regarding
possibility their being upped or participating formally in discussions make up
of syndicate. No one here has much patience this idea particularly latter.
As matter of fact great question our minds whether they should have ten per-
cent. I will be at farm tonight leaving oflBce shortly home at three p. m. but
you could call me eight thirty our time Lebanon New Jersey 32 repeat Lebanon
N J 32. Can you get idea Bauer whether he will want Smith name ahead
of Brown and/or Lazard. Personally dont see why unless Bauer insists.
GEOKtiE Ram SKY.
RL. Uppei>.
Exhibit No. 1613
[From the flies of Blyth & Co., Inc.]
Charge to : Blyth & Co., Inc., 120 Broadway.
Western Union
"DAY letter"
B)-aiiNAKD W. Ford, February 22, 1935.
2135 Ralston Ave., Biirlivgame., California:
Apropos our conversation yesterday Loring Hoover in Washington with
h'ogarty and other utility executives in fight on Rayburn t)ill.
Plan now is to have another bill introduced which will be moderate and
proper and then Blyth & Co. will immediately organize dealers of country to
approach people to whom they have sold utility securities to wire their Senators
and Representatives to favor this new bill. Believe we can put seventy-five
thousand telegrams in Washington within twenty days by this method our data,
letters to dealers, etc., now and we going to it tooth and nail.
Utilities have been our best friends and it certainly is time for us give
them complete support.
Confidentially tried, organize I. B. A. but encountered usual vaccillation
inertia and timidity, so we are going it alone.
Best always.
GeOBOB LEUi.
Exhibit No. 1614-1
[From the files of Blyth & Co., Inc.]
San Francisco, Gaif., Febi-uary 2,-T.
Geoboe Leib,
Blyth d Co., Inc.:
Hock called on Cog Saturday Stop Deal not closed and will not several
days Russell evidently told Hock only two could head business which I Inter-
pret mean have top line advertising told Cog this was not so that three can have
GONCENTRATiON OF ECONOMIC POWER 11673
top line positiOT* but that we waut it and that it Is very important for us Stop
Discussion of capital arose and Cog has asked me to determine Lazard Freree
capital wants informatfon by two our time Tuesday Stop Am confident our
position improving.
Ford.
Exhibit No. 1614-2
[From tht. files of Blyth & Co., Inc.]
Mabch 4, 193".
Leib bn gas synd rounding into shape nicely has been agreed Lazard BH
Blyth head biz on first line in east and Lazard Blyth and BH in west step Rus-
sell now discussing with Hock inclusion of Witter Rollins and psbly Byllesbj
****** ^ will cut the three major participants proportionately we are
to be given courtesy inviting Dean Witter in and posbly Rollins. They are
aiming complete registration statement Tuesday altho directors hv not yet defi-
nitely decided on a <^-^?''y nr.r whf»ther if there is a deal it will he serial or long
term 4s our px views on latter dirt not prevail and discussion with company has
been on basis oneri-'ig price dTVi stop this is OK because it tend; force then-
toward the seriai wnicu we much prefer Russell unwilling talk yet regarding
synd sc that po:-^lG i'^ Bashcres wire will pbly have to be taken up with him
when he arrives East wnich will pbly be end of week shurt bs.
Exhibit No. 1614-3
[From the flies ol' Blyth & Co.. Inc.]
Mabch 4.. 1935.
Bashobe, bn .
Russell enroutr N. Y. so no further PGE. negotiations here Beckett advises has
mailed prospectus registration statement to you we have one here stop came nc
conclusion re synd with Russell so matter masi be ironed out in N. Y. with Jack
Harrison Russeil foned Saturday had reed wire from Harrison questioning if
our activity ia puh util biil wld not affect our standing in PGE synd stop seems
ridiculous to me but you mite check HarrLson as to what he had in mind shurt
bs.
Exhibit No. 1614-4
[Frofl-' the tiles of Blytti & Co., Inc.]
Makch 5, 1935.
Leib, B. N. :
Gas synd pow T tnk, finally set, altho bonds have not yet been bought. The
three major participants have given up proportionately to include others. Svnd
now is LF, BH and Blyth each 20 pet. First Boston Smith 10 pet. Stop Wit-
ter, Byllesby Boi3 bright and Rollins each 5 pet. Understand Hock has agreed
to above. Stor We h«d opportunity protcit Bonbright but aftet Hock Brown
Harri and Lazard had approved so we thot best not protest. Stop We invited
Witter this morning. Stop Bonbrights man Mitchell getting Invitation today
from Russell in ovr joint names.
Shuet BS. . B.
Exhibit No. ie''4r-5
[From the files of Blyth & Co.. Inc'l
Makce 14, 1935.
IJDIB, BN :
Pac. Qas ii Eleo.:
It was agreea by Russell and myself that there was to be a three way heading
of Pac. Gas Elec. busine.ss altho there was no concrete definition of wh.it heading
* Copy illegible.
11674 CONCENTRATION OF ECONOMIC POWER
meant. Stop I understand it meant equal management and equal voice in
selection of participants, determination of price, and the amounts withdrawn
by each original underwriter for retail. No memorandum was made on the
subject however.
Shurt BS.
Exhibit No. 1614-6
[From the files of Blyth & Co., Tno.l
PBTVATE WIRE OUTGOING
Bltth & Co., Inc.
March 14, 1935.
Shubtlefp, BS. :
Was any management fee to Lazard discussed. We nave not taken this up yet
but will unquestionably do so tomorrow.
Lkir.
Exhibit No. 1814-7
[From the files of Blyth & Co., Inc.]
Private wire
March 14, 1935.
Shurtleff, BS :
Apparently difference opinion between you and RusspI! who states three-way
management never discussed except as regards origins! oli'enTig to Smith First
Boston Bonbright Witter. We offered Witter five percent interest In name
Lazard Brown ourselves and Russell, made same formal offering in same names
to Sid Mitchell for Brown. Due to misunderstandirg Jack Harrison offered
ten percent interest to First Boston Smith in name Lazard alone Russell says this
will be immediately corrected.
I explained to Russell my understanding right along has been Lazard to have
toanagement mechanics account but three-name offering to any banking and
selling groups which may be formed. Russell states this method offering was
never raised and further this method joint management never di.scussed with
Brown and that his understanding clearly as follows :
Lazard to handle mechanics and send out buying and selling group participa-
tions over their own name acting as managers for entire gronp.
We are going to have syndicate meeting in morning so please let me have your
understanding today.
L£IB.
Exhibit No. 1614-8
[From the files of Blyth & Co., Inc.]
Pac Gas & El.
Leib, BN :
No management fee was ever discussed or agreed to for Lazard. Step. Re
3 way management I cant add anything to my wire of yesty. Part of conversa-
tions were with Bl^th Has he any other slant on it?
Shurt, BS.
New Yoek
CHICAGO
Boston
philadelphia
ATLANTA
COxNCENTKATION OF ECONOMIC POWER
Exhibit No. 1614-9
[From the flies of Blyth & Co., Inc.]
FOK INTEK-OFFIOE USE ONLY
Bltth & Co. Inc.
120 Broadway
Cable address : BLYTHCO
NEW YORK
1167^
San Fkancibco
Los Angeles
Seatitlb
Portland, Okeo
I-ONDON
San Fhancisco, March 26, i9^o.
Mr. Gbobge Lkib,
New York.
Mr. Eugene Bashore,
Nfi/P York.
My Deab Geoegb and Gene :
Subject : Pacific Gas & Electric Co. syndicating in San Francisco.
This is of course a iwst mortem, but as a matter of interest I would like to
know just how Lnzard selected its San Francisco dealers. It is not so much
their sins of commission which I object to, but their sins of omission. The
dealers whom they included were all right, but they only picked 14 of them, and
apparently completely ignored our syndicate list. Had they set about making
the Pacific Gas & Electric Company as unpopular as possible amongst the dealers
in its own territory, they could not have succeeded better.
About a month ago I wrote to Mr. Hockenbeamer and suggested that fof the
good of public relations, he might consider it advisable to see that San Francisco
dealers were pretty well taken care of. I guess Hock didn't consider it of enough
importance to take up with Lazard Freres. The unfortunate part is that the
Company is now engaged iu fighting several bills in the legislature, and has asked
San Francisco Security Dealers to help them. You can imagine with what
enthusiasm this request will be answered, when the majority of dealers got no
bonds at all.
I assume the First of Boston will not make a similar error in the Edison busi-
ness. You might, if you have an opportunity, talk to them well in advance, about
a syndicate list. They will probably have fully as good a list as ourselves because
they are currently in touch with dealers, which Lazard Freres were not.
One other thing in connection with the Edison, I think it will not be the tre-
mendous sell-out that Pacific Gas & Electric was. Edison, in the past, has not
had as good a credit as Pacific Gas, and I think the price and coupon has stretched
this credit just a little. However, this is a v^fy rash prognostication, because
no one knows what the market will be 30 days hence.
[Signed] Roy.
Roy L. Shcbtleff,
RLS
HKE
Exhibit No. 1614-10
[From tbe flies of Blyth & Co.. Inc. Letter from Eugene Bashore to Roy L. Shurtleff]
April 2nd, 1935.
Mr. Roy L. Shubtueff,
San Francisco Office.
Mt Deab Roy : I have had so many complaints from all directions on the way
the wholesaling of the Pacific Oas d Electric issue was handled that were it
not for the fact that everyone has complained, I should feel that it was badly
done. I am personally responsible for whatever Blyth & Co., Inc. did or failed
1167G CONCEN'J'UATION OF ECONOMIC POWER
to do lu counection with the wholesaling and hence must answer for the
complaints.
About a week before the offering, and without prior notice, T was Invited late
one evening to have dinner with Jack Harrison of Lazard Freres & Co., and
Harmon Brown of Brown, Harriman & Co. at the Uuivecsity Club to talk over
preliminary arrangements for wholesaling. I suspected Liiuc :Ms luight be our
only shot at wholesaling and so took with me letters and memoranda from all of
our offices suggesting dealers whom we wished to have included, t did not, how-
aver, have suggestions from your oflBce, but was at no oartlcular disadvantage
because of this.
We worked until 3 o'clock in the morning on the list of dealers and while
Brown, Harriman had pet dealers in various localities, cur =u>igestious were by
far the most numerous. At the start we tried to set up amounts of bonds, but
we realized these figures required considerable adjustment and so the net effect
was largely the notation of the dealers who should be offered uad an indication
about the amount which they should have if bonds were available. A totaling
of these rough figures indicated that we were over by several millions of
dollars.
Subsequent to this meeting, suggestions which came to me from our various
offices or dealer n>en or by direct application of dealers, were itferred to Lazard.
Some names which we suggested were not offered bonds at all, and others were
severely reduced as they had to be from the prelimiap.ry Sgares w^ich had
been set tip.
When we came to the San Francisco territory, Jack Harrison said that
Hockenbeamer had advised that he wished to determme che amounts of bonds
to be placed in San Francisco and the dealers with whom they were to be
placed, making particular note of Cavalier, Mark Slsworthy and Schwabacher.
This statement of Hockenbeamer's interest in the San S'rancisco wholesaling
came third handed and I am not sure just what was the extent of his interest
in It. I gave Jack Harrison a brief characterization or each of .lie various San
Francisco dealers and made a particular request for some of our friends, but
it was considered that the San Francisco list would be prepared only under
Hockenbeamer's supervision.
On the day before the offering I attended a meeting at Lazard's office at which
the final airangements were reviewed. A list of allotments to dealers was avail-
able for our inspection with the notation that it was too late to make any changes
as the amounts had been filled in on Selling Group letters which were then ready
for mailing. I made only a cursory examination of the list.
I haven't any particular criticism of Lazard's handling of this business and
believe they did it from their viewpoint about as we should have done it from
ours had we headed the business. That is to say, they courteously invited sug-
gestions and showed every disposition to cooperation, but in the final analysis
made the allotments to dealers in a manner that paid reasonable respect to
the wishes of their associates, but primarily served their own purposes to an
extent not inconsistent with the general good of the deal. If the wholesaling in
the San Francisco territory was "hot in accordance with the best interests of the
company, Hockenbeamer himself must be responsible for this for he had some-
thing more than a mere veto of what was done.
The Pacific Coast territory, contrary to your preliminary understanding, was
not handled any differently than the New England or any other territory. We
were not joint managers of the account, we did not participate in making alloi-
ments to dealers, but we did submit suggestions of dealers that should be offered
and designated their importance or ability to distribute. Our own syndicate rec-
ords are in no better shape than Lazard's. Everyone registered as a dealer
whether engaged presently as a broker or as a dealer in municipal bonds claimed
a right to participate and these requests amounted to a deluge in the midst of
which some worthy dealers were ignored, others not entitled to it received par-
licipations and the amounts finally alloted were perfectly screwy.
Very truly yours,
EB : AH
CONCENTKATION OF KCONOftUC POWER 11677
Exhibit No. 1614-11
[From the files of Blyth & Co.,. Inc. Letter from Ooorge I.elb to Roy L. Shurtleffl
Apku. .3, 1935.
Mr. Rot L. Shuktleff.
San Francisco Office.
De:ab Rot: I was very much interested in your letter of March '28th regarding
the "mishandling" of the Pacific Gas Syndicate by Lazard Freres.
I am having lunch with Jim Black either today or tomorrow, and I shall
simply show nim your letter.
Post-mortems are, at best, unsatisfactory, Roy, but I still believe that we
could have headed this business had we stood par, because I do not believe Hock
is strong enough to have forced Lazard Freres into first position over the pro-
test of Jim Black and C. O. G. It was such a completely illogical selection.
Jim Black was tremendously surprised that we did not 'lead the business
jointly, because he practically gave instructions to Hock that he would like to
have it this way. He asked Hock why we did not, and Hock put on that silly
smile of his and said "Well, Stan Russell simply won out." Jim then said to
him "G. D. it, who was running the Comp:iny — you or Stan?", to which query
Hock did not answer.
I am sure you all appreciate that Hock has further weakened his position
by his silly actions in this financing — that is, weakened his position with the
North American crowd back here.
When I explained to Jim about the % ^of 1% which Russell was cutting out of
the situation for himself, he was amazed.
Needless to say, at the very first meeting we had back here, Russell and I
had an open and complete disagreement; so after that Charley attended the
meetings and I retired.
Jim Black is completely sympathetic to us, and has told me that his mind is
definitely open as to who shall head the next syndicate. I really believe that
if Jim Black and C. O. G. will bring pressure on Hock we will head the next
syndicate, and I believe that they ere both willing to bring that pressure.
I would suggest that Bernard show to C. O. G., in confidence, copy of your
letter of March 2Stti addressed to Gene Bashore and myself.
I would also like to say that Hock is definitely "on his way out", and that
it may well be that he will be more or less retired to Chairmanship on the Board
by the time the next issue comes along. Let's keep up the good fight. We are
entitled to this leadership by every yardstick, and I am convinced that if we
do not obtain it, it will be simply our own fault.
You will be interested to know that the thing on which Stan Russell and I
locked horns was the subject of joint management. I said that I clearly under-
stood that we were to manage jointly with them and Brown Harriman, whereupon
Russell looked me coldly in the eye and said' that we were not entitled to that
position because we were not a house of issue, and that we were not so regarded
by several of our good friends in San Francisco.
Of course, I disagreed violently on this subject, and expressed myself as being
absolutely certain that we are a house of issue. Charley adopted (and I am sure
correctly) a more temporate attitude, and kept the situation from breaking wide
open. However, I sort of have a feeling that if it had broken wide open, we would
have finished up with joint managership.
I am sure that Stan Russell undermined us with Hock, and through Hock with
Fred Elsey, by telling Hock that we are not regarded as a top house here m
the east, and that they would belittle the dignity of the Pacific Gas business to
have us head it In my own mind, that completely explains the about-face which
was made by Fred Elsey. I think some v^ork must be done with Elsey to disabuse
his mind. Surely, it would have been more dignified for the Pacific Gas
business to have been headed by Blyth & Co. than by a bunch of who
are completely unknown in the investment banking field, and who only occupy
a speculative position in international finance.
AH of which is water over the dam. The thing to aim our sights at now is the
next issue. Lorlng Hoover and I will do our share of the work with the North
American Company back here, and I know you, Charley and Bernard will do
your share on the Coa.'«t. Let's go after it cold-bloodedly, and we will win — and
we will also show Stan Russell whether or not we are "a house of issue."
11678 CONCENTRATION OF ECONOMIC POWER
As you can certainly gather, I have no friendly feelings toward Stan Russell.
He is never going to give us anything. He has hit below the belt, and has broad-
cast his opinion in our home town of Blyth & Go's standing, and what he
considers to be Blyth & Go's lack of capital.
On this subject, Charley had a most satisfactory talk yesterday with Potter,
of the Guaranty. Charley discussed our capital position with him (it came up
accidentally) and a.sked Potter's opinion as to whether or not we should ask some
more capital into our business. Potter recommended definitely against it, saying
we had ample capital, in his opinion, and that he would recommend that we
just retain our earnings and let our capital grow in that way. Incidentally, he
assured Charley that we are going to be in the new Bethlehem Steel business, in a
substantial way — that is, if his (Potter's) influence can put us in; and Charley
and I are both sure that it can. All in all, it was a most satisfactory interview
with Potter, and Charley was in high spirits last night, as was your old associate.
GL.JD.
GL.JD.
P. S. — I am sure Bernard will be interested in this letter.
Exhibit No. 1614-12
[From the flies of Blyth & Co., Inc.]
Pnn'ATE WIRE — OUTGOING
Blyth & Co., Inc.
May 31, J935.
San Francisco Office :
If Shurtleff out reach him wherever he is and get answer race.
Shurtleff, BS :
Sierra & San Francisco jumped 2% points today. Stan Russell just called up
and said inquiry came from Weeden. I told Stan the truth which is that Hock is
up to something but I don't know exiictly what. Stan asked me shoot you race wire
and ask if you know any recent developments and do you think he should get out
there. Please race answer as I am leaving ofl5ce in about five minutes.
Lexb.
Exhibit No. 1614-13
[From the flies of Blyth & Co., Inc.]
Mat 31, 1935.
FL Leib BN tell Stan that Hock is preparing new issue & expects to call
Sierras San Joaquins & Midlands Tuk advisable Stan to come out here but not
to tell Hock we have suggested It.
Shun BS.
Exhibit No. 1614-14
[From the flies of Blyth & Co., Inc.]
June 4, 1935.
LiEB BN :
Result Stanleys talk with Hocknebeamer appears be that if our group gets
bonds we will handle at two points profit and Blyth will be Pacific Coast man-
agers with a ratable split in management fee Stop Believe Hockenbeamer will
do business our group although he has registration statement all prepared with
no underwriters in it which if filed that way would result in swarm of com-
petitors attempting buy business and would react unfavorably on old under-
writing group Stop We urging Hock and other directors not allow statement
to be filed In this form although June 7th is date of filing and very little time
to effect change Stop Believe advisable yo« ge* ooopcration ^lA people as
this seems unnecessary slap at underwriters and undignified method of inviting
competition.
Shttbtleff BS.
CONCENTRATION OF ECONOMIC POWER 11679
Exhibit No. 1614-15
[From the flies of Blyth & Co., Inc.]
Leib BN :
Gas deal ail set. We pay 102 with market out clause with provision that if
we can sell at higher 104 we get the extra up to one half S!c>p Synd same as
before" excepting Witter upped 2 percent and First Boston and Smith cut 1 pc
Stop If we get too much adverse kickback on this cut we will have to cut the
three principals each one-half and First Boston and Smith each Stop We
are to be coast managers of account with first position coa.st advertising
Stop Will handle all coast syndicating and east must give up sufficient bonds
to satisfy California dealers Stop Will share in management fee but haven't
yet been able get Stanley down to rate of sharing Shurt BS.
Exhibit No. 1614-16
[From the nles o* Blyth & Co., Inc. Letter from George Leib to Charles R. Blyth]
June 7, 1935.
Mr. Chables R. Blyth,
San Francisco Office.
Deak Charley : Apparently the Pacific Gas business is a "tragedy of errors."
After your, Roy's, and my talk, I have stayed carefully away from Jim Black,
as I thought it would be unfair to in any way attempt to influence the North
American Company against Stanley Russell's leadershiji. I had a feeling, how-
ever, that Jim Black was working on Hock because I knew the way Jim felt
over the last issue.
When Stan offered us western management jand a part of the management
fund, I was certain, in my own mind, that the North American crowd had sug-
gested to Hock that we be given joint management, and that Hock had told
Stan such must be the case — and Stan, quickly realizing that something must
be done, had offered us western leadership and a portion of the management
fund (percentage not discussed at that time) : and when we accepted this ar-
rangement, lie went back to Hock and told him that we were perfectly satisfied
with what he had done.
Now, giving us the west and keeping the east, to the uninitiated, would appear
to be a 50-50 break ; but we all know that such is not the case. It is about an
80-20 break. I immediately sent the enclosed wire to Roy, but apparently it
had no effect because Roy accepted a one-third interest in the management fund.
During this time, I have stayed completely away from Jim Black, as that was
the spirit of our understanding. Jim Black called up this morning and asked
me if we had gotton the joint management which apparently he had vigorously
suggested to Hock. I said "no," that we had been offered by Stan the western
leadership and one-third of the management fund, and that we had accepted it
simply because we were not in a position to trade with the Company against
our Partner.
Jim said that was not what he had suggested to Hock. He said he had sug-
gested joint management throughout the country, with equal rights. I said,
"Jim, I am not in a position to ask for anything. All I can tell you is this :
we will go ahead on the present arrangement unless Hock instructs the Banking
Syndicate that the management shall be joint throughout the country and that
all interests between Laza' 1 Freres and Blyth & Co. .shall be equal. If tha*
suggestion is made, then we will of course acquiesce ; but I want to go on record
now with you that Blyth & Co. is not asking for anything."
Jim understands and appreciates our position, and he further expressed their
appreciation of the cleanness of the stand that we are taking. Whether or not
he will discuss this matter further with Hock, I do not know. At any rate,
I shall do nothing back here which would in any way embarrass Lazard Freres.
Sincerely yours,
GL.JD.
P. S. I do think we should have at least traded and obtained one-half of
that management fund, as our interest in the business is so obviously 50-50.
GL.JD.
J 1080 ( ;< >i\(JEJNTHATiON OF ECONOMIC POWEK
Exhibit No. 1614-17
[From the flies of Blyth & Co., Inc. Letter from George Lelb to Charles a. Blyth]
August 20, 1935.
Mr. Chables R. Blyth,
Lake Tahoe, California.
Dear Chakley, Beknard and Roy: Yesterday I went to lunch with Jim
Black, and we had an hour and a half discussion on the subject of the coming
i'acific Gas Financing. It was very opportune as Jim is leaving for California
tomorrow.
1 reviewed in detail the negotiations incident to the first Pacific Gas issue.
I reviewed the misunderstanding regarding the joint nianagemenl of the first
issue; namely, that Blyth had understood that it was to be a joint management
at.'count, and Rus.sell had understood that it was to be managed .solely by
Ijazard Freres.
Incidentally, Jim said (ott the record) "Had you stood pat, the worst that
v/ould have happened to you would have been joint management'. Jim also
went ahead and said "For the life of me, I cannot understand how they ever
gave Lazard Freres the management of this account, particularly with all of
Rlyth's friends in San Francisco, such as COG — Anderson — Chickering, eco.
1 explained to him how Hockenbeamer had simply railroaded it through, and
how Hockenoeamer apparently had controlled Fred Elsey. I also explained to
.Jim my personal belief that Stanley had questioned our capital position with
Hockenbeamer, Elsey, etc. in (California, and had also broadcast an opinion to
ihem that we were not a 'house of issue".
Jim told me that when Hockenbeamer was back here on the first issue, he
had a very frank and blunt talk with him which he was sure bad indicated
to Hockenbeamer his own surprise at the way the financing had been handled.
We then went into a discussion of the second Pacific Gas & Electric issue.
Jim told me that neither he nor Fogarty ever told Hockenbeamer *^o do any-
rhing— that all they ever did was to suggest. However, Hockenbeamer had
always been amenable to suggestion. He inferred that which I know to be a
fact; namely, that in several telephone conversations with Hockentieaoier, he
had suggested the possibility of Blyth jointly managing the new business with
l/a/^ard Freres.
I Llien oxplaiued to him that Hockenbeamer must have told Stanley this was
what he (Hock"nbfcam<r) wanted, because Stanley suddenly rushed into our
office one day and said that due to the fact that we were such good fellows,
and had been ,^o helpful to him in the Pacific Gas account, he was going to
Ut us head the business on the Pacific Coast, and give us an interest in the
override charge which was afterwards agreed upon at one-third for Blyth & Co.
1 told Jim from my personal knowledge of Stanley, i did not believe he
operated along such broad lines, and that I personally believed that, realizing
that the company wanted joint management, he had made a quick deal with
us on a less than a joint management basis, and then had gone back and told
Hockenbeamer that we were perfectly happy and satisfied with the deal as
outlined. In other words, I do not believe that Stanley ever told us that which
I he company told him; namely, that they would be pleased to see joint
inaiiogement.
I explained to Jim how, in the second Pacific Gas issue, we had gone to Stanley
and told him to get on t'le train and get out there as the issue was well along
toward registration and the company was irritated at the banking syndicate, all
of which was complete news to Stanley.
1 explained to Jim how perfectly ridiculous it was for Stanley Russell to head
the Pacific Gas business when his firm has not an oflBce west of Now York.
Jim asked me what I thought of Lazard Freres' price ideas, and I said that nat-
urally with a small organization it was necessary to buy as low as possible in
order to insure salability of the issue in professional quarters. I explained to him
that our own price ideas of western securities were always high, and gave as an
example the recent controversy on the price of Southern California Gas, when we
wore perfectly satisfied with a price of 101 iX> and certain other eastern houses
felt that par was the top price — incidentally, our price judgment was vindicated.
I told Jim that the first issue should have been headed by Blyth & Co., and 1
thought that all the houses on the Coast felt the same way. I told him that I felt
many men of standing on the Coast were surprised when Lazard Freres headed
Ihe business and Blyth & Co. took .seco: d place.
CONCENTH^TION OB^ ECONOMIC POWER 11681'
Jim said he would like to r-hock tip with some men such as I had in mind, and
I suggested that he talk w'.fc C. O. G. Miller, Ken Kingsbury, Frank Andersoii,
Alien Chickering, and W. H. Crocker. Jim dropped the remark that he would
(■ertaluly discuss it with Ken Kiugsbury if he had a chance, as he had n high
regard for his cool nose judgn;ent. ■' I think -t might be v^eil worth while to g-ve
a little lunch for Jim Black ui the Pacific Union Club and let him sit next to Ken
Kingsbury and possibly let Ken know in advance of this conversation wi'V Jiiu
Black).
I told Jim that if we accopted our position in the secmid Pacific Gas & 'Biec'^iii''
syndicate for one more Pacific Gas issue, then it would be most difiicult to change ;
and that- any change which the company felt should be n'.ade should be made in
rhe next issue. Jim uEkexl me what I want'^d, and I said tMs : —
My own personal view is that Blyth & Co. should head the business. Howover.
in view of the original mistaKe made by Hockenbeamtr, which placed Lnsard
Freres at the heiid of the business, 1 do not think we would be. willing to have
Lazard Freres thrown out uf the leadersMp east and west. If would be a serioii?-
blow at their firm's prestige, and would be a serious blow at -Stanley Russeli per-
sonally— juat as Hockerbe:"nei's unwilliiigness to havo Blyth & Co. head this
business was a serious blow at our prestige both individually i>nd as a firm.
I told Jim I did feel that a great ifi-jasnce had been done us, and that it ^^p
company felt the same way about it, rhefi it could and • nould make amends.
Jim asked me what I meant by joint management, and I said that joint laun-
agement meant that all wire? should go out over the names of Lazard Freres r.nd
Blyth & Co. as joint managers — Lazard's name first east .-f ^he Mississippi, and
our name first west of the Mississippi : that all answers should I5e made to Lazard
Freres, New York, on east of the Mississippi invitations, ai:d to Blyrh & Co., San
Francisco, on west of the Mississippi invitations. I said-tbat all syndicari! lists,
both east and west, should be approved by Lazard Freres and Blyth .i Go.
I said that any override should be divided fifty-fifty. I said that m t^he
advertisement Blyth & Co. should appear first west of the Mississippi, and
Lazard Freres first east of the Mississippi. I told him I did not think 'hat
would in any way disturb Lazard Freres' prestige, and would go a long way to
remedying the blow which was delivered to our prestige in the first instance.
Jim said he would give the matter much thought, and would discuss it with
his important friends in California.
I gathered the impression, at the close of the interview, that he was favorable
to Hockenbeamer insisting upon such an arrangement.
Loring Hoover is going to see Jim Fcgarty at the first convenient opportunity,
and enlarge upon this idea. Some work aiust be done in California. One of the
first people Jim Black will check with is C. O. G. Miller (Jim has the highest
regard for his ability and judgment). I know that C. O. G. will be completely
ready for him when he arrives. Anderson and Chickering should be prepared,
along with Ken Kingsbury. I imagine it would be dangerous to do anything with
Elsey, as apparently he. is dominated by Hockenbeamer.
I believe this is our last chance to "get a place in the sun" on the Pacific Gas
business, and that if we fail to obtain joint management in the next issue, then
for years we will continue to slouch along among the "also rans".
We will be very much interested in hearing of any developments in California,
and please advise us regarding any way in which we can be helpful here in
the east.
Sincerely yours,
GL.JD.
(Mr. Leib had to leave before this letter was written)
EXHTBTT No. 1614-18
[From the flies of Blyth A Co., Inc.]
For Inter-Offlce Air Mall Use Only
Bltth & Co., Inc.,
San Francisco, September 5, 19S5.
Mr. Georgk Leib,
New York.
My Dear Gkoroe: I wired you twice to-day on the subject of the negotiation
for the P. G. & E.. with particular reference to our Joint managerial po.sitlon.
11682 CONCENTRATION OF ECONOMIC POWER
Apparently Jim Black's suggestions to Hockenbeamer regarding us had no
effect ;it all because when I went after Hockenbeamer, he refused to change
the present status in any respect. I got Stanley and Hock together, and the
sum of my accomplishment was that Stanley gives a defiiiite promise that
prior to the $20,000,000 issue which will come in May, he will sit down with us
and settle the matter to our mutual satisfaction. He said he was not unsym-
pathetic to our claim, and I judge that by sticking to our guns we can put it
over next time.
I feel pretty sure wc can get the joint appearance as managers. I am not
so confident that we will be able to get an equal division of the managerial
fee — that, however, is a matter still to be worked out.
Stanley, naturally, was difficult to handle, in view of no request for the
change on the part of the Company, and, in fact, a resistance of such a change
as expressed by Hockenbeamer. Stanley also resented being left out of the
Southern California Gas business, and you may expect to hear from him
regarding inclusion in the Pacific Lighting business. He said he thought his
attitude toward us had been consistently friendly, down to the point of offering
us substantial position in the Anaconda business when he thought it was his,
prior to his knowledge of Charley Mitchell's association with us. I told him
that the matter of Eastern members in the Southern California Gas business
and in the Pacific Lighting Corpoi-ation business was strictly in the hands of
yourself and Charley Mitchell.
Sincerely yours,
[Signed] Rot.
Rot L. Shubtleff.
KLS
HKE
Exhibit No. 1614-19
(Froin the files of Blyth & Co., Inc. Telegram from Roy L. Shurtleff to George Leib)
September 30, 1935.
Leib BN:
Have had no cooperation from Hock at all re change management position
PGE. He specifically requests that it be left as it is. Stop. Finally secured
definite promise from Stanley that prior to nest issue which will come in spring
we will sit down together and matter to our piutual satisfaction which I take
to mean that in next 20 million issue next spring we should be able force our-
selves joint managerial position Shurt BS.
Exhibit No. 1614-20
[From the flies of Blyth & Co., Inc. Letter from George Leib to Roy L. Shurtleff]
September 6, 1935.
Mr. Rot L. Shubtleff,
San Francisco Office.
Dear Roy : I have your letter regarding Stanley Russell — Hockenbeamer — Jim
Black.
Let me urge you to write a letter to Stanley Russell outlining the fact that
Hockenbeamer told us he wanted us to get together with Lazard Freres before
the next is.sue of bonds and iron out a satisfactory working arrangement.
Let me suggest that in that letter you refer to the definite promise made by
Stanley Russell that prior to the next $20,000,000 issue which will come in
May, he would sit down and settle the matter to our mutual satisfaction.
I would also include in the letter the fact that Stanley made the statement
that he is not un.«!ympathetic to our claim.
Please write that letter in such a way that we can show it to Jim Black and
Jim Fogarty. I have a feeling that these latter two men have more influence
with Hockenbeamer than you apparently believe.
CONCENTRATION OF ECONOMIC POWER 11683
I am hopeful that if we keep hammering away on this situation we will get
joint mnnagement. At least, let us not fail through lack of effort on our part.
Sincerely yours,
GL.JD.
P. S. — Please send copy of the letter you write to Stanley Russell so that
Loring Hoover and I can use it here with the North American people. We
would like to go on record that we expect an adjustment on the issue iu May.
GL.JD.
Exhibit No. 1614-21
[From the flies of Blyth & Co., Inc.]
San Francisco, December 19, 19S5.
Memorandum for Charles R. Blyth.
Re Pacific Gab & Elexjtric Financiwq
Alien Chickerirg told me today that he had already approached Jim Black
on the subject of the syr.dicate that would handle the next Paciflc Gas &
Electric Financing. Allen stated that he and other directors had been dissat-
isfied from the beginnini^ with. Lazard Freres heading the syndicate but tJaat
he had been unable to eve** get anywhere with Hock.
Black attempted to put the matter ofi! ^j stating that there was no imminent
financing and tlie^efore ho recessity of discussing the n'atter at this time but
Allen is evidently .i-r:termiued that the luuttpr be talked -r-nt now. Allen's posi-
tion is tbat Lazaril Freres should not head the business -md that Blyth & C^.
should head the bu&iness, and that Dean Witter & Co. should have a prominent
place in the business, and he told Black so yesterday, Allen told me that Trbile
he was talking with Black, 0. O. G. came along and he brought C. O. ^. into
the discussion. Allen also stated that as Blyth & Co. was a member of the
syndicate headed by Laaard Freres that it was very dlfBcult for them to do
anything in the matter and therefore he felt that be could be of service.
Apparently nothing was decided except Lhat Black will linow that the Eiiacutivs
Committee, which n"w '-■or;?ists of Black, Elsey, Miller, Ghickering and N'roian
Livermore, will want to make a change. It was my thought that I should speak
to Norman Livermore but Allen seemed to think it was not necessary to do
anything at this time.
Bernabd W. Fosd.
BWF
EM
Copies to
George Leib, N. T.
Roy Shurtleff. 3. F,
Exhibit No. 1614-22
[From the files of Blyth & Co,, Inc. Letter from George r'r'L> to Charles R. Blyth]
.fANUARY 36, 1936.
Mr. Charles R. Bt.tth,
San Francisco Office.
Dear Charley, Yes, some treatment on George Wallace -s necessary. Maybe
some time when you are in Los Angeles you can get Dave to take him out for
limch with you and apply 'gentle pressure".
Charley, I hdve oeen giving an awful lot of thought to the Pa<;iflc Gas financ-
ing, and the roar which is going to go out when, as and if we head that busi-
ness. Having accepted the Lazard leadership, our position is very delicate -
and to avoid a wide open rupture with Lazard and a certain amount of criti-
cism on the Street, it may be necessary for the Executive Committee of the
11684 CO.f.CENTKATlON OF ECONOMJC POWEK
Pacific Gas and Electric Company to direct us to head the business. I know
you are as fully alive to the situation as we are, and I know you realize that if
it does not come about ta this way we will be acirjsed of boring from withiu
agsinst a Partner — unethical practices'— etc., etc. If necessary, this cririeisn:
eo-^ be borne, for the leadership of Pacific Gas financing Is worth the punish-
ment. However, we certainly want to avoid criticism if we possibly can.
Under any circumstances, we are going. to hear Stan Russell's yells from
here to San Francisco — and, as you know, those yells will aiford me a certain
amouut of sadistic pleasure.
This whole crowd here is pulling for you tooth anr! nail in this Pacific Gas
matter. We well realize how diflicult it is to get a banking house out of first
position once it is in ; but we feel that with any kind of luck you will be
successful. We will be jubilant if v/e v.'iu, and If we lose we will have tin-
satisfaction of knowing that we "7.ea(; dovvc fighting".
Best always.
GLJD.
Exhibit Na 1G14-22
[From the files of Blyth & Co., Inc. Letter from C. T'. Mitchell to Charles R. Blyth]
January J6, 1936.
DsAE Chaelet: Harrison Williams asked me to luucli with him in his private
dining room today and held me for about an hour and three-quarters, during
whict. cime we discussed atfnirs in whT.?h ho is Interested from A to 2*. The
high .spots that I carried away were tnese.
He said with positiveuess chat he is no more tied to I/i'loij Head & Co. for
his financing than hi is tied to us, and that he would like very much indeed to
see us active in his matters as opportunity presented.
We discussed the P. G. & E. situation and he Uiseiosed his desire to see that
the Executive Committet au4 Black, si> far as possible, ruled the roost. He
would be very glad to find that they were recommenciJig that Blyth & Co. head
whattve) financing they had to dc as he certainly had nc, looming for Lazard
Fiepes. He did not want to see any of the P. G. & E stock held by his trusts
sold, and especially that stock held by the North American Company as that
Company had really issued a large amount of its own common against the
F. G & E. common and he liked to eonsidei that a fi.;ea invesjiment. Further-
more, he considered P. G. & E. exceedingly cheap in the light ot their earnings
and tpeir probable increased dividend rate this year
He is very much interested in the Detroit Edison development and through
the- United acquisitiOu has increased his holdings materially. With Dillon's
9% investment in that Company, that business wouid naturally flow his way
on any changes in the banking set-up.
Hit^ recent acquistions of investment trust equit'es hpve put him in a position
where be felt that he had a definite influence on the matter of investment of
sometning over $260,000,000; he is lookiog for prohtalne investments for these
traits and wants us to be watchful for money making possibilities in the pur-
chase of blocks of stock in various enterprises and he wouW look sympatheti-
cally or any suggestion we cared to rooke him at ariv tar.'<r \^m felt that the
doing of business of this sort would bring us closer ai-d develop other possibili-
ties of relationship
i leel that the meeting of today was a very satsfactory one and only hope
for the opportunity of seeing him again soon on some coucreie business. Let
me know if you have, any suggestions.
Sincerely,
Mr. Chabijm R. Blyth,
San Francisco Offlce.
CONCENTRATION OF ECONOiMIO POWER 11685
Exhibit No. 1614-24
[From the files of Blyth & Co., Inc.]
C, E. MrrcHKLL,
Chairman.
Blyth & Co., Inc.
120 Broadway
Cable address : BLYTHCO
New York, January 17, 1936.
Deab Charley : George has seen my letter of yesterday to you regarding my
talk with Harrison Williams, and has sugge.sted that it might be helpful if you
had a letter that you could show to Black or any other member of the Executive
Committee which would evidence Harrison's attitude.
I therefore enclose such a letter which you may or nKiy not find useful.
Sincerely,
Charles.
.\Ir. Chahi^s R. Blyth.
-9ffw, Frnvcisro Office.
Exhibit No. 1614-25
[Prom the files of E ,'th & Co.. Inc. Letter from C. E. Mitchell tc Charles R. Blyth]
January 16, 1936.
Dear Charley: In the course or a long talk which I had with Harrison
Williams •:oday, the Pacific Gas & Electric .situation was thoroughly discussed.
He seemed to be very happy indeed that Blact is there and thar. he has such a
strong local Executive Committee. He seemed to be hopeful that they would
be autonomous in their control of all affairs of the Company and said that it
would be pleasing to him if he was to find that they were recommending that
Blyth & Co. head whatever financing they had to do, and especially so as he
certainly had no leaning toward Lazard Freres.
You will be interested to know that inasmuch a>: I had heard some talk about
the possibility that some of the P. G. & E. common held by North American,
or certain of the trusts in which Harrison is interested, might be sold, I
broached this subject with him and can tell you that there is nothing to it. He
was vf^y enthusiastic about the Company ; he saw no necesRit.? of selling the
stock ; the North American Company had really issued a large amount of its
own common directly against the P. G. & E. eoiisraon in its trn^ury, and he
liked to consider that as a fixed and permanent investment. He added by the
way, that he considered P. G. & E. stock at its present pri;^e eiceedlngly cheap
in the light of the Company'.s earnings, through which he appareritly saw the
possibility of some increase in the dividend rate later in the j'ear
Harrison told me that if we were to head P. G, & E. business he would like to
have ^s receptive when the time came to 'iome revising of the account, and
mentioned Field Glorc & Co. and J. & W. Seligman as names to which he wouTd
like consideration given. Of course these two particular hcuse.^^ are those con-
trolling investment trusts in which he has recently established « position.
Sincerely,
Mr. Charles R. Blyth,-
San Francisco Office.
11686 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1614-2f>
[From the flies of Blyth ft Co., Inc. Letter from George I.eib to Charles R. Blyth]
January 17, 1830.
Mr. Charles R. Blyth,
San Francisco Office.
Dear Charley: Charlie Mitchell and I have been talking further regarding
the Pacific Gas situation. We know that you are hopeful of being told by the
executive management of the Company to head the business, and to send your
men dovrn to help prepare registration.
Lazard will put up a terrific yell and claim "bad faith" and "partner knifing",
and of course we will plead that we could not refuse to do what the Company
directed us to do.
Charlie and I both i'eel that there might be a slip if we let our men report
to the ofiice of the Pacific Gas & Electric Company to help with registration
without immediately advising Lazard. Certainly, we should advise them within
twelve hours dfter our men have gone in.
Please do not think us presumptuous in making these suggestions, but we
all feel that we are walking on dangerous grounds, and that mucn thought
should be given to each step we take.
Charlie feels that, if possible, we should be ruthless and shove our name
right smack up on the top line, with Lazard and Brown Harriman on the
second line, in the order named.
Charlie is writing you an additional letter today regarding his talk with
Williams, which he thinks you may want to use with Black — Chickering —
Elsey — or some of the others. At any rate, he is writing the letter so that
you can show it if you think wise.
In the last analysis, Jim Black will probably do what Harrison Williams
suggests, because I am sure that after working in the North American Com-
pany for seven or eight years, he is thoroughly imbued with the power of
Williams.
You fellows must be having an exciting time out there with the Americai'.
Trust deal. I only wish some of us could be there to lend a hand. However,
things are popping fast back here. It is great fun, isn't it. to again have
business in motion, and the old firm forging forward to a real "place in the
sun".
Best always,
GL.JD.
Exhibit No. 1615
[ Letter from The First Boston Corporation to Investment Banking Section, Monopoly
Study, Securities and Exchange Commission]
The First Boston Corporation,
100 Broadway,
New York, August 23, W39.
Mr. Peteb R. Nehemkis, Jr.,
Special Counsel, Investment Bwnking Section, Monopoly Study,
Securities and Exchange Commission, Washington, D. C.
Deab Mr. Nehemkis : I acknowledge receipt of your letter of August 17th and
am replying to ('he questions raised in your letter in the light of a further
conversation »vith Mr. McEldowney held on his visit to me yesterday.
You ask an explanation of the method by which The First National Bank of
Boston, in compliance with the Banking Act of 1933, disposiBd of its security
aflaiiate The First Boston Corporation. Enclosed is copy of a printed letter
sent by the Bank under date of May 12, 1934 to the stockholders of The First
National Bank of Boston and The Chase Corporation, which gives in detail
the method used. Also enclosed is copy of a printed letter sent by Winthrop W
Aldrich, Chairman of the Board of Directors of The Chase Corporation to the
.stockholders of that corporation giving the details, among other things, of an
offer of a certain proportion of stock of The First Boston Corporation to the
shareholders of The Chase Corporation. I believe these letters, read in con-
junction, will give you the information you desire.
CONCENTRATION OF ECONOMIC POWER 11687
You will note that the stock of The First Boston Corporation was owned by
The First National Bank of Boston, which was the sole stockholder and literally,
therefore, the "old stockholders", there being only one, was not given an
opportunity to continue its interest in the business, this opportunity being
given to the stockholders of the "old stockholder" and those of The Chase
Corporation and certain others described at the bottom of Page 2 of the letter
of The First National Bank of Boston.
Inasmuch as the present list of stockholders of The First Boston Corporation
number 9,940 and the list of them comprises a formidable document of well
over 300 pages, which would be extremely laborious and exijensive to copy,
I am enclosing, at Mr. McEldowney's suggestion, a list of holders of 500 shares
and over, as of record, at the close of business on June 17, 1939. Should you
desire further information as to the complete list of shareholders we shall be
glad to arrange to make the complete list available to your inspection at the
oflSce of the transfer agent in Boston.
Your letter further states that you are interested to study the security
originations of The First Boston Corporation and the participants therein,
and that it may be necessary for members of your staff to confer with some
of us in regard to them, and to obtain copies of certain documents. Mr.
McEldowney has discussed this request with me and tells me he will return
to our oflBce, with certain of his assistants, to obtain the information you
desire. I assume that this is satisfactory to you.
Being a publicly owned Corporation, my co-directors and I feel that we are,
in a sense, in a trustee relationship to the stockholders of the Corporation in
respect to its assets, among which are its records. We, therefore, wish to state
that we are making these records available to you and your staff at your
request in your capacity as a government official under the authority granted
you in Public Resolution No. 113, 75th Congress.
Sincerely yours,
Nevil Ford,
(Nevil Ford), Vice President.
Exhibit No. 1616
[From the flies of The First Boston Corporation]
The Chase Corporation
60 cedar btbbet, new tork
Mat 11, 1934.
To the Stockholders :
The Banking Act of 1933 contains two requirements which must be complied
with within one year from' the enactment of. such Act, >i. e. by. June 16, 1934,
The first of these requires that after the date in question no member bank of
the Federal Reserve System shall be affiliated in any manner with a corporation
engaged in the securities business. The second requires that after the date
in question the sale or transfer of any certificate representing the stock of any
national bank shall not be conditioned in any manner upon the sale or transfer
of a certificate representing the stock of any other corporation other than a
member bank. In this letter I am summarizing what has been done and what
remains to be done to comply with these two requirements within the time limit
fixed in the statute.
In entering into the arrangements hereinafter described for the divorcement
of the securities business, and In riecommending the further action which is
necessary for the termination of the joint transfer of shares hereinafter set
forth, the Board of Directors is aware of the proposals now pending before
Congress to extend the date for complying with one or both of the above-
mentioned requirements. The Board of Directors believes, however, that the
entire program hereinafter get forth should be carried out as rapidly as possible,
regardless of whether such, extension of time is granted by Congress.
DIVORCEMENT OF SECURITIES BUSINESS
Before the enactment of the statute, I recommended the termination of the
securities business of The Chase Corporation (then caUed Chase Securities
124491 — 40— pt. 22 -22
11688 CONCENTRATION OF ECONOMIC POU
Corporation) which, since July 1, 1931, had been conducted through its sub-
sidiaries, the Chase Harris Forbes companies. On May 16, 1933 the stock-
holders approved tliis program, and since that date The Chase Corporation and
the several Chase Harris Forbes companies (hereinafter referred to as the
Harris Forbes organization) have cea&ed to function in the purchase and
sale of securities and have been proceeding with the liquidation of such
business. This liquidation has progressed as rapidly as possible. A large
part of the as.sets of the Harris Forbes organization has been converted into
cash or government securities. Upon completion of the liquidation and the
legal formalities incident to the dissolution of the Harris Forbes organization,
the net proceeds of such liquidation will go to The Chase Corporation as the
sole stockholder.
During the course of this liquidation, consideration has been given to the
problem of arranging for the custody of the securities records of the Harris
Forbes organization and the handling of the incidental inquiries and similar
matters which are bound to arise from time to time in connection with the
previous public distribution of the securities. Consideration has also been
given to the possibility of realizing something on account of the good will of
the Harris Forbes organization, which includes the right to the use of the name
"Harris, Forbes & Co." To meet both of these situations the arrangements
outlined below have been made with The First National Bank of Boston and
The First Boston Corporation.
The First National Bank of Boston at present owns all the outstanding
stock of The First Boston Corporation, its securities affiliate, and under thr
Banking Act of 1933 is required, by June 16, 1934, to dispose of such stock
in such manner as to avoid an affiliation within the provisions of that Act.
This means that the shareholders of such Bank can not hold a controlling
interest in The First Boston Corporation. To this end. The First National Bank
of Boston desired to effect arrangements for the offering of not exceeding 45%
'f such stock to its own shareholders and the balance to investors not at
present interest^ in such Bank. Mr. John R. Macomber, formerly Chfirman
of the Board of the Harris Forbes organization, and Mr. Harry M. Addinsell,
formerly President of the Harris Forbes organization, and certain associates,
have expressed their willingness to become associated with the management
i>f The First Boston Corporation and to become interested in the purchase of
its stock. These gentlemen and The Ficst Boston Corporation have proposed
Mint provision be made for the acquisition by The First Boston Corporation
of the good will of the Harris Forbes organization and the right to use the
name "Harris, Forbes & Co.", and that an opportunity be given to the stock-
liolders of The Chase Corporation to purchase pro rata not exceeding 45%
of the stock of The Fir.st Boston Corporation at the same price as substantially
Mie same amount of such stock is offered to the shareholders of The First
National Bank of Boston. An arrangement to this end hits been approved
by the Board of Directors of The Chase Corporation and by reason thereof
'ITie First National Bank of Boston proposes to make the offer to the stock-
holders of The Chase Corporation above referred to.
Accordingly, an agreement has been entered into between The First Boston
<'orporation. The Cha.se Corporation and the Harris Forbes organization, under
which The First Boston Corpoi-ation acquires the right at any time within
six months to take over the name "Harris Forbes" and the good will thereof
incident to the general securities business, other than government, state,
municipal, political subdivision or governmental instrumentality financing, in
consideration whereof The First Boston Corporation (a) shall have the right
(if access to, and agrees to maintain, to the extent requested, the custody of
the correspondence, records and other documents of the Harris Forbes organ-
ization (including any such files, documents or other papers of The Chase
Corporation then in the custody of the Harris Forbes companies) relating to
general securities issues; (b) agrees to furnish from time to time from the
records in its custody all data required in routine correspondence with former
customers of the Harris Forbes organization or The Chase Corporation or in
connection with any claims asserted against either of the two Harris Forbes
companies or The Chase Corporation ; (c) agrees to take over certain persons
formerly in the employ of the Harris Forbes organization not actually required
to handle the details of liquidation; and (d) agrees, to the extent not incoTi-
sistent with any interests which it may then represent, or be obligated to
CONCENTRATION OF ECONOMIC POWER 11689
represent, to provide, if requested so to do, a suitable persou to become a
member of any protective committee formed to represent securities in the puWie
distribution of which the Harris Forbes organization (or any corporation the
securities business of which may have been acquired by the Harris Forbes organ-
ization) were Interested. As a condition of this agreement becoming effective,
The First National Bank of Boston is to offer for subscription approximately
45% of the stock of The First Boston Corporation pro rata to the stockholders
of The Chase Corporation of record May 22, 1934.
The Board of Directors believes that the arrangements outlined above are
advantageous to The Chase Corporation and its subsidiaries, the Chase Harris
Forbes companies, in that they will facilitate the completion of the liquidation
of the Harris Forbes organization in an economical and satisfactory manner
through the reduction of the overhead to a nominal amount and through the
provision made for taking care of inquiries and similar matters that are
bound to arise in connection with the securities issues previously made.
This letter is not intended as and shall not be deemed to be an offering or
recommendation of the purchase of the stock of The First Boston Corporation.,
Its purpose is to acquaint the stockholders with the progress which is being
made in completing the liquidation of the Harris Forbes organization and to
explain the reason why they may shortly expect to receive a communication
from The First National Bank of Boston, offering for subscription the stock of
The First Boston Corporation.
TERMINATION OF JOINT TBANSFEB OF SH.4BES
Under the arrangements now existing, which date back to the formation of
(Jhase Securities Corporation in March 1917, each holder of common stock of
The Chase National Bank of the City of New York owns an equal number of
shares of the common stock of The Chase Corporation, the shares of the two
institutions being transferable only in units of an equal number of shares of
each corporation. These arrangements are embodied in an agreement entered
into under date of March 21, 1917, between all the shareholders of both insti-
tutions, which, as heretofore amended from time to tune, is still in force, and
are also embodied in the provisions of the Certificate of Incorporation of The
Chase Corporation.
To comply with the provisions of the Banking Act of 1933, requiring the
termination of these joint transfer arrangements, it will be necessary to secure
the consent of the stockholders of the two institutions to the termination of
the above-mentioned agreement of March 21, 1917, as heretofore amended, and
to the amendment of the Certificate of Incorporation of The Chase Corporation
by eliminating therefrom all provisions relating to the joint transfer of the
shares of stock of said Corporation with shares of stock of The Chase National
Bank. After the date when such changes become effective, the shares of the
two institutions will be separately transferable, as a result of which in the
course of time the identity of stock holdings in the two institutions will dis-
appear. The Board of Directors has therefore concluded that it would be
advisable to eliminate the word "Chase" from the name of the Corporation at
the same time that the termination. of the joint transfer arrangements is passed
upon by the stockholders. The new name will be submitted for approval ai
the meeting of the stockholders. The Board of Directors also feels that it
would be advisable to consider at the same time a reduction in the number
of directors of the Corporation from ten to seven with an appropriate change
in the By-laws decreasing from five to three the number necessary to constitute
a quorum of the Board, and also a change in the par value of the shares of
the Corporation, increasing the same from $1 to $10 i)er share, thereby reduc-
ing the number of shares outstanding from 7,400,000 to 740,000 shares. The
result of this change will be to readjust the outstanding shares on the basis
of one new share of $10 par value for each ten old shares of $1 par value,
but it will not affect the relative stock interests of the stockholders in the
Corporation. At the same time it is proposed to provide for the issuance of
scrip certificates covering fractional shares.
For the purpose of passing upon the matters incident to the termination of
the existing arrangements for the joint transfer of shares, referred to above,
~'"""ial meeting of stockbohleis of The Cha.se Corporation has been called
11690 CONCENTRATION OF ECONOMIC POWER
for June 14, 1934, formal notice of which is enclosed herewith. Action by a
substantial percentage of iall the outstanding shares is required. Unless you
expect to attend the meeting, you are requested to sign the enclosed proxy,
consent and power of attorney and to return it promptly in the enclosed
envelope, in order that your stock may be voted at the meeting.
Very truly yours,
WiNTHEOP W. AlDEICH,
Chadrmwn of the Board of Directors.
Exhibit No. 1617
The First National Bank of Boston
To the Stockholders of
The Fiest Natiowax Bank of Boston
The Chase Corpokation
The First Boston Corporation is a security aflaiiate of The First National
Bank of Boston within the meaning of the Banking Act of 1933. As such, it
must, under the law, be disposed of by the Bank on or before June 16, 1934.
The Corporation management and control must be divorced from the Bank and
stockholders holding a stock control of the Bank may not own or control,
directly or indirectly, a majority of the stock of the Corporation. Although
Congress may extend the time for compliance, it is deemed desirable to carry
out at this time the plan described below.
The Corporation was incoi-porated under Massachusetts laws as of June 27,
1932. It is, we believe, an efficient organization with an enviable reputation
nnd earnings record; its business is mainly trading in Government, state,
municipal and corporate bonds, but it is also authorized to do a general securi-
ties business ; it has about 675 oflBcers and employees and maintains twenty-two
offices in principal cities throughout the United States, the chief executive office
being in New Yo^rk City. It . is performing an important function in the
securities field, and its continued existence would seem desirable.
In planning for the disposition of the Bank's interest in the Corporation, we
have sought to comply with the spirit and letter of the Banking Act ; to provide
that such of our stockholders as desire may have an opportunity to subscribe
for a proportion of the stock in the Corporation within the amount which the
law permits our stockholders to own; to extend an opportunity to the present
officers of the Corporation, who are neither officers, directors nor employees of
the Bank, to acquire stock in the Corporation ; and to bring in as stockholders
bona fide investors who will lend strength to the organization.
Certain members of the old "Harris Forbes" group have expressed a desire to
become purchasers of stock and a willingness to become identified with the
present management of the Corporation in its future operations. It was their
suggestion that provision be made for the acquisition by the Corporation of the
right to use, if desired, the name Harris Forbes and good will, but not other
assets, of the Chase-Harris Forbes companies (two corporations organized
respectively under Massachusetts and New York laws owned or controlled by
The Chase Corporation), but without any assumption by The First Boston Cor-
poration of Chase-Harris Forbes liabilities, and that an opportunity be given to
Stockholders of The Chase Corporation to purchase stock of The First Boston
Corporation.
To provide for the carrying out of this suggestion a contract has been entered
into between The First Boston Corporation, the two Chase-Harris Forbes com-
panies and The Chase Corporation, under which The First Boston Corporation
acquires the right at any time before December 15, 1934, on ten days notice to
take over the good will of the securities business of the Chase-Harris Forbes
companies, including preferential rights and right to use the name "Harris
Forbes" without restricting in any way the right now or hereafter of The
Chase Corporation and Its affiliated interests, to deal in and solicit contracts
and maintain existing positions respecting any government, state, mupicipal, or
governmental Instrumentality financing. In consideration of such rights granted
to it. The First Boston Corporation agrees at its expense to preserve and
maintain certain correspondence flies, documents and other papers of the
CONCENTKATION OF ECONOMIC POWER 11691
Harris Forbes companies and of The Chase Corporation with the right of
access thereto at reasonable times by the representatives of the Harris Forbes
companies or The Chase Corporation. The First Boston Corporation further
undertakes to furnish from time to time from the records in its custody all data
required by the Chase-Harris Forbes interests and The Chase Corporation in
connection with any claims made uuon them, but without assumption of any
liability for such claims or for any expenses of legal defence; and to such
extent as is not inconsistent with any interests which it may represent, to
provide, on request, a suitable person to act on any Protective Committee
formed to represent securities in the public distribution of which Chase-Harris
Forbes companies or any corporation the securities business of which may have
been acquired by them have been interested.
It is the intention to continue the operations of the Corporation in all cities
in which it at present has offices with the following list of directors and
officers :
Directors. — Harry M. Addinsell, James Coggeshall, Jr.,* Eugene I. Cowell,*
Nevil Ford,* Duncan R. Linsley, John R. Macomber, Allan M. Pope,* William H.
Potter, Jr.* George Ramsey, Arthur C. Turner,* George D. Woods.
0/^cer.?.^Chairman of the Board, John R. Macomber; President, Allan M.
Pope* ; Chairman of Executive Committee, Harry M. Addinsell ; Vice President,
James Coggeshall, Jr.*; Vice President, George Ramsey; Vice President,
Eugene I. Cowell* ; Vice President, Frank Stanton ; Vice President, William
Edmunds* ; Vice President, Winthrop E. Sullivan ; Vice President, Nevil
Ford* ; Vice President, Arthur C. Turner* ; Vice President, R. Parker Kulin* ;
Vice President, A. H. Wenzell; Vice President, Duncan R. Linsley; Vice Presi-
dent, Herbert T. C. Wilson* ; Vice President, L. Meredith Maxson* ; Vice Presi-
dent, George D. Woods; Vice President, Louis G. Mudge* ; Vice President, Wil-
liam H. Potter, Jr.* ; Treasurer, Alfred A. Gerade* ; Secretary Arthur B.
Kenney.*
The Corporation's balance sheet as of April 21, 1934, together with statement
of income and analysis of surplus, prepared and certified by Messrs. Haskins &
Sells, Certified Public Accountants, are appended hereto. The capital of the
Corporation is $5,000,000 and its sui-plus $4,000,000, a total of $9,000,000, repre-
sented by 500,000 shares of stock of a par value of $10 each.
Just prior to the balance sheet audit above referred to a distribution from
surplus was authorized to be made to the Bank reducing capital and surplus
of the Corporation to $9,000,000 which is deemed by the management adequate
for its operations, with the result that the present working capital and surplus
is approximately $2,000,000 less than the average employed during the period
to which the accountants' statement of income applies.
During the period of operation covered by the accountants' statement the
general security market was not entirely satisfactory, but since January 1, 1934,
conditions, chiefly on account of general activity and price stability in the
market for Government bonds, have been very favorable to the Corporation.
Earnings from April 21, 1934 to June 15, 1934 are to be withdrawn and any
other necessary adjustments made to the end that on June 15, 1934 the net
worth of the Corporation as shown on a balance sheet, to be prepared and
certified by Messrs. Haskins & Sells, shall be $9,000,000. Except with reference
to ordinary current expenses and commitments accruing after April 21, 1934
the Corporation knows of no liabilities not shown on its balance sheet.
Right to subscribe at the rate of $18 per share for 222,500 shares of the
Corporation is to be offered to stockholders of The First National Bank of
Boston of record May 22, 1934 on the basis of one share of Corporation stock for
each ten shares of Bank stock held. Similar right to subscribe at the rate of
$18 per share for 222,000 shares is to be offered to stockholders of the Chase
Corporation of record on the same date on the basis of one share of Corporation
stock for each 33% shares of Chase Corporation stock held.
Subscription warrants will be mailed as soon as possible after the close of
transfers on May 22, 1934, to the address used for the mailing of this notice.
Stockholders desiring to buy or sell subscription warrants or fractions thereof,
should make their own arrangements as the Bank can not undertake to do this.
•Oflaeers and directors against whose names an asterisk appears are present officer*.
The others named have hitherto been Identified with Harris Forbes iHterests.
11692 OONCENTKATION OF ECONOMIC POWER
It is planned to sell the balance of the stock at the same price to the personnel
of The First Boston Corporation who are neither officers, directors nor em-
ployees of The First National Bank of Boston, to the several members of the
Harris Forbes group- referred to above, and to others who, the officers of the
Corporation believe, will lend strength to the organization. Such persons will
be required to certify that they are buying for bona fide investment and not for
purpose of redistribution.
The FiEST National Bank of Boston,
By Dandx G. Wing,
Chairman of the Board.
Boston, May 12, 1934.
ACCOTTNTANTS' REPORT
The Fibst Boston CoapoRATiON :
We have made an exiamination of the balance sheet of The First Boston
Corporation as of April 21, 1934, and of the statement of income and surplus
ior the period from the date of 'incorporation, June 27, 1932, to April 21, 1934.
In connection therewith we examined or tested the accounting records of The
First Boston Corporation for the period from date of incorporation, June 27,
1932, to April 21, 1934, and the operating accounts of The First Boston Corpo-
ration of Massachusetts for the period from June 27, 1932, to December 31,
193J, during which period the latter Corporation acted as agent for The First
Boston Corporation in connection with the purchase and sale of certain secu-
rities in New England.
The profits of The First of Boston Corporation of Mlassachusetts derived
from trading in securities and its expenses apportioned thereto for the period
from June 27, 1932, to December 31, 1933, have been included in the accom-
panying statement of income and surplus.
During the period covered by the statement of income and surplus certain
facilities and services including space in the Bank premises and auditing,
statistical, and other services were furnished to the Corporation without charge
by The First National Bank of Boston. The value of such facilities and services
has been estimated and agreed upon by the officers of the Bank and of the
Corporation on a basis which in our opinion is reasonable and a charge therefor
has been included in the accompanying statement of income and surplus, to-
gether with a charge for interest on money which was borrowed without
interest from the Bank during the period.
The First Boston Corporation's policy of determining profits or losses on
security transactions, on the basis of average cost, has been followed consist-
ently throughout the period under review. The security positions at April 21,
1934, are valued at bid quotations with respect to long positions, and offered
quotations with respect to short positions, except those securities traded in on
recognized stock exchanges on April 21, 1934, which are vtilued at the last
sale price on that date.
In our opinion, subject to the foregoing, the accompanying balance sheet
fairly presents the financial condition of The First Boston Corporation at April
21, 1934, adjusted to give effect to the subsequent distribution in cash of net
worth in excess of $9,000,000.00, and the accompanying statement of income
and surplus fairly presents the results of operations of the business for the
period from Jime 27, 1932. to April 21, 1934.
BLA8KTN9 & Sells.
Nkw Tokk, Ma/}/ 10, 19SJ,.
CONCENTRATION OF ECONOMIC POWElt 11693
ThK FIUST BObTON CORPOSAIION
(Incorporated in Massachusetts)
BALANCE SHEET, APRIL 21, 1U34
(Adjusted to give effect to the subsequent distribution iu cash of net wortn in
excess of $9,000,000.00)
ASSETS
(JasL on Hand and on Deposit at April 21, 1934, Less Declared
Distribution as of Same Date $4, 813, 870. 40
J^eposits on Securities Borrowed 10, 028, 502. 78
Banliers' Acceptances 1, 218, 982. 00
Trading Securities (Valued at market quotations) :
United States Government securities $25, 055, 882. 11
Municipal bonds and tovrn notes 648, 765. 00
Miscellaneous bonds and stocks 5, 006, 883. 98
31, 311, 531. 09
Securities Carried for Joint Accounts (Valued at market quo-
tations) ^_ 713, 159. 00
Accounts Receivable :
Securities sold not yet delivered $-51,833,707.83
Accrued interest receivable 197, 144. 04
Miscellaneous 65, 163. 30
7)2, 096, 015. 17
Furniture and-l^'ixtures (Less depreciation) 330,800.18
Tax Stamps 4, 292. 52
Deferred Charges ( Prepaid salaries, prepaid leiit, unexpired
iii.surance, etc.) ^ 57,523.37
Total $100, 374, 676. 53
LIABILITIES
Collateral Loans Payable $56, 422, 538. 85
Deposits on Securities Loaned 51,969.51
Trading Securities Sold Not Yet Purchased (Valued at market
quotations) :
United States Government securities $4,810,071.69
Municipal bonds 30, 850. 00
Miscellaneous bonds and stocks 320,607.01
5, 161, 528. 70
Securities Sold for Joint Account Not Yet Purchased (Valued
at market quotations) 147,913.75
Accounts Payable:
Securities purchased not yet received $28,143,047.07
Customers' deposits 1, 127, 682. 24
Accrued interest 36. 395. 81
Unclaimed coupons and dividends 27,963.40
Accrued taxes— due in 1934 19,711.68
Miscellaneous 34,989.75
29, 389, 789. 95
Reserve for Taxes 192, 858. 52
Deferred Credits (Unearned discount, agency fees, 6tc.) 8,079.23
Capital Stock (Authorized and issued, 500,000 shares of $10.00
each) - 5, 0(X>, 000. 00
Paid-in Surplus 4, 000, 000. 00
Total $100, 374. 676. 51
Notes. — Assets having a market value of $59,749,445.12 are pledged to collat-
eral loans payable.
The accrual of the liability for Federal capital stock and excess profits
taxes at April 21, 1934 has been made on a basis of a proposed declared value
of $16,000,000.00 for the Corporation's capital stock.
At April 21, 1934 the Corporation had contingent accounts as follows :
Bankers' acceptances sold with endorsement (not confirmed) $382,477.91
Securities purchased on a "When Issued" basis 1,408,938.99
Securities sold on a "When Issued" basis 2,322,251.82
11694
CONCENTRATION OF ECONOMIC POWER
The profit on the "When Issued" position at April 21, 1934 based on market
values where available and in other cases the subsequent transaction price was
$7,879.60.
The First Bobton Corporation
Statement of Income and Surplus, by Periods, for the Period from June 27, 1932,
April 21, 1934
Period from
January 1,
1934, to April
21, 1934
Year ended
December 31,
1933
Period from
June 27, 1932,
to December
31, 1932
Income (including tradinfj profits of The First of Boston
Corporation of Massachusetts):
Profits from trading on own account:
United States Government securities
Municipal bonds and town notes
Miscellaneous bonds and stocks
Acceptances
Profit from trading on joint accounts
Profit from participations in syndicate and group
accounts -- -
Commissions on trades executed by others.. ,.
Interest, discount, and dividends earned on securi-
ties held -.
Interest earned on repurchase and resale agreements
Miscellaneous income .-
Total
Bkpenses and Charges (including proportion of ex-
penses of The First of Boston Corporation of Massa-
chusetts and other estimated charges):
Interest on bank loans
Other interest chargts -
Compensation of officers and employees.
Rent ---.-
Telephone, telegraph, and wire commumcations —
Taxes fother than Federal Income and excess profits
taxes) - - •
General expenses
Expenses and charges borne by The First National
Bank of Boston as estimated and agreed to by
officers of the Corporation and of the Bank
Provision for:
Depreciation of furniture and fixtures-.
Loss on impounded bank balances —
Federal income and excess profits taxes —
Miscellaneous charges. -
Total
Net Income as Adjusted -
Add— To eliminate revenue and expenses of the First of
Boston Corporation of Massachusetts and other
adjustments included above but not on books of the
First Boston Corporation - -■
Net Income as shown by the books of the First Boston
Corporation -
Earned Surplus at beginning of the period (including
transfers from "Reserve for Initial Operating Ex-
penses") -
Surplus Credits:
Arisinp from adjustment of balance sheet at date of
organization. . . — - --
Transfers from "Reserve for Initial Operating Ex-
penses" acquired at organization
Total -
Writedown of book value of securities to market
value at April 21, 1934
Dividend distributions -
Total -
Earned Surplus at End or the period (including
transfers from "Reserve for Initial Operating Ex-
penses") - -
$1,018,049.72
212,651.64
689, 837. 5q
24,971.45
18, 276. 65
90, 956. 78
28, 889. 93
214, 980. 22
718. 75
48, 989. 61
$1, 629, 308. 37
374,601.33
763, 033. 04
59,511.89
61, 586. 28
206, 053. 28
58, 262. 16
538,3'^1.09
5, 467. 74
60, 145. 14
2, 248, 222. 26
71,570.63
1,181.37
500,412.30
37, 408. 52
137, 929. 53
61,849.03
176,072.18
28, 580. 00
16, 715. 64
178, 022. 04
7,471.83
3.756,290.32
157, 102. 90
4, 025. 48
1, 600, 794. 24
122, 868. 80
374, 390. 70
127,978.85
471,560.26
144,125.00
79, 235. 00
66,892.41
53, 232. 86
10, 029. 45
1,216,212.97
3,112,233.95
1,032,009.28
21,860.11
•644,066.37
266, 177. 63
1,053,869.39
1, 656, 720. 47
910,234.00
897,646.02
1,028,640.45
2, 710, 689. 86
2, 836, 720. 47
«S0,373.04
2, 650, 216. 82
1,180.000.00
2, 710, 689. 86
1,180,000.00
Nil
$791,137.80
228. 084. 22
629,411.18
43, 210. 89
28, 620. 44
392, 062. 35
22, 423. 80
199,661.54
72, 028. 05
54,882.84
2,361,623.11
29, 582. 98
2, 136. 27
762,314.77
63.931.31
172,725.98
77, 165. 83
255, 499. 97
72, 050. 00
40, 766. 88
89, 593. 08
6, 962. 87
1, 571, 728. 94
789, 794. 17
19, 523. 07
9, 317. 24
88,328.78
660,000.00
1, 457, 646. 02
660, 000. 00
660,000.00
897,646.02
Note.— The average capital employed in the business (exclusive of borrowed money) wa^approxlmately
$11,000,000 for each of the periods under review.
CONCENTRATION OF ECONOMIC POWER 11695
Exhibit No. 1618
[From the flies of The First Boston Corporation]
K. L. & Co. 1934
[Copy]
The Fikst Boston Corporation,
100 Broadway, New York,
May 16, 1934.
Mr. George W. Bovenizer,
Kuhn, Loeb d Company, 52 William Street,
New York, N. T.
Dear Mr. Bovenizer : You have undoubtedly seen the announceaent in the
newspapers of the plan for the separation of The First of Boston Corporation
from The First National Banlj of Boston, due solely to the requirements of the
Banking Act of 1933.
Consummation of the plan will necessarily take some few weeks, but in the
meantime we hope tiiat you and your associates will ask us any questions
regarding ourselves that may be of interest to you as one dealer doing business
with anotlier.
Anticipating some questions, however, we might say that the management has
no intention of changing in any way the present policy of The First of Boston
Corporation. While in Boston and New York, where our executive offices are
located, we will continue to maintain local sales offices as heretofore, we have no
intention of increasing our sales force elsewhere for the purpose of the distribu-
tion of securities to the individual investor.
We hope that as the capital market may open up we may have considerably
more new issues than The First of Boston Corporation formerly had. Mr.
John R. Macomber, as the Chairman of our Board, and Mr. Harry M. Addinsell,
as Chairman of our Executive Committee, with five other officers who served
with them in Harris, Forbes & Co. for many years, will devote a large measure
of their time to such desirable new underwriting as may develop. We will have
control of the name of Harris, Forbes & Co. and succeed to the good will of that
organization.
The personnel of The First of Boston Corporation will continue intact under
the slightly altered name of The First Boston Corporation and in the same
locations. Under this new title we hope to continue to make ourselves useful
to you and your associates and to continue what always has been to us a very
pleasant relationship.
Yours very truly,
/s/ Allan M. Pope,
President.
Exhibit No. 1619
[Fronj the files of The First Boston Corporation]
K. L. & Co. 1P34
[Copy]
The First Boston Corporation,
One Hundred Broadway,
July 2, 1934.
Kuhn, Loeb & Co.,
52 William Street, New York, N. Y.
Gentlemen ; In view of the past relationships between your firm and Harris,
Forbes & Company and subsequently Chase Harris Forbes Corporation, I am
sure you will be interested to know that The First Boston Corporation has
exercised its option to acquire the good will of the securities business of the
Chase Harris Forbes companies (other than as pertaining to certain govern-
mental and municipal financing) including preferential rights and the right to
the name "Harris Forbes."
We expect to be active in the underwriting and distribution of new issues
of high grade bonds. Insofar as Harris, Forbes & Company or Chase Harris
Forbes Corporation participated in underwritiugs and offerings headed by your-
11696 CONCENTRATION OF ECONOMIC POWER
selves, we will accordingly be pleased if you will substitute our name in your
syndicate records in order that we may have the opportunity of considering
future participations in such accounts.
We enclose a leaflet which indicates the scope of our organization and we
look forward with pleasure to increasing the past pleasant relationships of your
firm and our Corporation.
Yours very truly.
/s/ II. M. Adui.nbeix.
Chnirmoti nf thf tJ.rcnutirp. (IfrmmUffp..
HMA/g
End.
Exhibit No. 162(I
(Stateiiu-nt submitted by Qoorge r>. Woods, The FirHt Boston Corporation, New York.
N. T.l
A St.atemknt Reo.\bi)Kv<; the Fikst Boston Cokporation
ORGANIZATION
The First Boston Corporation was organized as of June 27, 1932, under tht
laws of Massachusetts. The original title of the corporation was The First of
Boston Corporation. It was organized for the purpose of taking over certain
of the assets and personnel of The First National Old Colony Corporation, the
investment affiliate of The First National Bank of Boston. Its capital stock was
held by The First National Old Colony Corporation until January 1934 when The
First National Bank of Boston took the stock into its own portfolio pending sah'.
The First National Old Colony Corporation was organized in 1929 as a suc-
cessor to The First National Corporation (organized in 1918 as an affiliate of The
First National Bank of Boston) and Old Colony Corporation (organized in 1917
;is a security affiliate of Old Colony Trust Company, Boston). At about the
same time The First National Bank of Boston acquired the capital stock of Old
Colony Trust Company.
NFX)ESSITY FOR FIRST NATIONAL BANK OF BOSTON TO lUSPOSE OF THE CORPORATION
In order to comply with the provisions of the Banking Act of 1933 (requiring
that after June 16, 1934, no member bank of the Federal Reserve System should
be affiliated in any manner with a corporation engaged in the securities business)
The First National Bank of Boston in May 1934 decided to dispose of its holdings
of the capilal stock of The First of Boston Corporation.
SIMir.AR SITUATION CONFRONTING THE CHASE NATIONAL BANK OF THE CITY OF
NEW YORK
At. the same time The Chase National Bank of the City of New York was
similarly faced with the necessity of finally liquidating the corporate securities
business formerly conducted by the Chase Harris Forbes Companies, subsidiaries
of Chase Securities Corporation the capital stock of which was held by the
stockholders of the Chase National Bank.
Chase Harris Forbes Companies was the name adopted by The Harris Forbes
Companies, a Delaware corporation, on July 1, 1931, at which time the security
business of Chase Securities Corporation and a substantial number of its per-
sonnel were combined with that of the subsidiaries of The Harris Forbes Com-
panies, viz., Harris, Forbes & Co. (New York) and Harris, Forbes & Co., Inc.
(Massachusetts) following the acquisition of the entire capital stock of The
Harris Forbes Companies by Chase Securities Corporation on August 18, 1930.
The Harris Forbes group had been one of the oldest and foremost underwriters
and distributors of public utility securities in the country. It originated as a
partnership in Chicago in 1882 under the name of N. W. Harris & Co., opened
an office in Boston in 1886 and one in New York in 1890. Starting in December
1911 its eastern business was carried on under the name of Harris, Forbes &
CONCENTRATION OF ECONOMIC POVVIOlf 11697
Company. The western business was continued as the bond depuitment of
Harris Trust & Savings Bank. There was no corporate connection between these
two organizations.
PLAN FOE BRINGING ABOUT THE PUBLIC OWNEHSHn' OF THE FIKST BOSTON COEPOEATION
The First of Boston Corporation had at no time employed a large corporate
buying or underwriting staff. Its outstanding function was the buying and
selling of government, municipal and corporate securities in the open market
for customers and participating in underwritings beaded by others. Chase Harris
Forbes Corporation had a personnel trained in the underwriting of security issues.
ConsequentJy, a combination of these organizations seemed logical as they would
.supplement rather than duplicate each other. Accordingly, an arrangement was
worked out whereby provision was made:
(a) for The First of Boston Corporation to chanue its name to The First
Boston Corporation,
(b) for 222,000 shares, or about 44.4%, of the capital stock of The First
Boston Corporation to be offered under rights to the stockholders of The Chase
Corporation,
(c) for 222,500 shares, or about 44.5%, of the capital stock of The First
Boston Corporation to be offered under rights to the stockholder,s of The First
National Bank of Boston,
(d) for the remaining 55,500 shares of the capital stock of The Fir.st Boston
Corporation (together with any amounts unsuliscribed for under (b) and (c)
above), to be offered te certain officers and employees of The First Boston
Corporation and to certain others who had evidenced a desire to buy stock
for investment,
(e) for The First of Boston Corporation to take over certain of the remain-
ing employees of the Chase Harris Forbes Companies,
(f ) for The First of Boston Corporation to acquire the right to use the name
'Harris, Forbes & Co." and the good will incident to the security business of
Chase Harris Forbes Corporation (other than that of government, state, mu-
nicipal, political subdivision or governmental instrumentality financing).
The offering to stockholders of the two banks was made to stockholders of
record on Alay 22, 1934 ; the total capital stock amounting to 500,000 shares
was subscribed at $18 per share and payment was made for the stock by the
new stockholders on June 16, 1934. Upon completion of the sale of the stock,
The First Boston Corporation became, for the first time, a publicly held cor-
poration, no shares of which were owned either directly or indirectly by The
First National Bank of Boston or The Chase National Bank of the City of
New York.
The first record of stockholders made as of June 16, 1934 disclosed that there
were approximately 7,5(K) stockholders with average holdings of approximately
67 shares. The largest stockholder at that time held 4.8% of the stock. The 10
largest stockholders at that date held in the aggregate approximately 33.4%
of the stock.
On June 16, 1934 The First Boston Corporation had 692 oflBcers and em-
ployees. Eight former ofiicers and eleven former employees of the Chase
Harris Forbes companies joined The First Boston Corporation in that month.
Such officers and employees represents, therefore, approximately 2.8% of the
total. The Board of Directors of the Corporation then comprised eleven indi-
viduals, of whom five were former officers of the Chase Harris Forbes com-
panies. The oflScers of the Corporation consisted of a chairman of the board,
president, chairman of the executive committee, sixteen vice presidents, a
treasurer and a secretary, or a total of twenty-one officers. Of the twenty-one,
eight were former officers of Chase Harris Forbes companies, or approximately
one-third of the total.
IMPORTANCE OF NEW PERSONNEL TO THE FIEST BOSTON CORPORATION
The First Boston Corporation is not the corporate successor of the Chase
Harris Forbes Companies. By virtue of acquisition of certain of the latter's
personnel, however, it was in position to develop the business of underwriting
11698 (iONCENTliATlON OF ECONOMIC POWER
corporate securities. Tlie principal individuals who had formerly been em-
ployed by the Chase Harris Forbes Companies and who joined The First Bos-
ton Corporation in May 1934 were as follows :
John R. Macomber, formerly Chairman of the Board of Chase Harris Forbes
Corporation, who became the Chairman of the Board ;
Harry M. Addinsell, formerly President of Chase Harris Forbes Corpora-
tion, who became Chairman of the Executive Committee ;
Duncan R. Linwley, formerly a vice president of Chase Harris Forbes Cor-
porartion, who became a vice president and director ;
George D. Woods, formerly a vice president of Chase Harris Forbes Corpora-
tion, who became a vice president and director ;
George Ramsey (since deceased), formerly a vice president of Chase Harris
Forbes Corporation, who became a vice president and director;
A. H. Wenzell, formerly a vice president of Chase Harris Forbes Corpora-
tion, who became a vice president ; and
F. M. Stanton, formerly a vice president of Chase Harris Forbes Corpora-
tion, who became a vice president.
All of these men were engaged primarily in the underwriting end of the
securities business of Chase Harris Forbes Corporation and all of them had been
trained in the old firm of Harris, Forbes & Co. Tliis group, together with certain
of the other nineteen former employees of the Chase Harris Forbes companies
who joined The First Boston Corporation, constituted the nucleus of the corporate
buying department of The First Boston Corporation.
THE CORPORATION TODAY
The First Boston Corporation is an investment banking organization engaged
primarily in the underwriting and distribution of governmental, municipal and
corporate bonds, in the underwriting and distribution of corporate stocks and
in the buying and selling of governmental, municipal and corporate bonds and
bank and insurance stocks. It is the outgrowth of an investment security busi-
ness started in Boston over twenty years ago and a similar business stnrted in
Chicago over sixty years ago. The Corporation maintains executive offices In
New York and Boston and operates oflBces in Buffalo, N. Y., Chicago, 111., Cleve-
land, Ohio, Hartford, Conn., San Francisco, Cal., Philadelphia and Pittsburgh,
Pa., Providence, R. I., St. Louis, Mo. and Springfield, Mass. It has a representa-
tive in Albany, N. Y., Los Angeles, Cal., Rutland, Vt., Scranton, Pa. and Buenos
Aires, Argentina and a European correspondent in London. On October 31, 1839
the Corporation had 416 employees, including three senior oflScers, seventeen vice
presidents, a treasurer and a secretary.
The Board of Directors of The First Boston Corporation comprises twelve
members, of whom ten are officers of the Corporation, one is the Chairman of the
Board of the Corporation's European correspondent and one is the president of an
investment service organization which owns no securities of the Corporation and
none of whose securities are owned by the Corporation.
The Corporation on October 31, 1939 had a paid-in capital stock and surplus of
$9,000,000 and an earned surplus of approximately $2,000,000, a total of approxi-
mately $11,000,000. The capital stock is represented by 500,000 shares of $10
par value each. At July 14, 1939 there were 9,940 stockholders with average
holdings of just over 50 shares each (representing at the present market price an
average investment of only $800 each). At that date the largest single stock-
holder owned but 3.7% of the stock. Only three stockholders owned as much as
2% of the stock. The ten largest stockholders held in the aggregate only 87,202
shares of stock, or an average holding representing less than 1.75% of the voting
power. Four of the ten largest stockholders are directors of the Corporation.
Among the security Issues for which The First Boston Corporation has been
the principal underwriter are those of a number of companies for which Chase
Harris Forbes Corporation or Harris, Forbes «& Co. had been the principal under-
writer. It is my belief that the Corporation became the principal underwriter in
such situations because of three facts: (a) The Corporation, as a publicly owned
company, started operations with and continued to have abundant and liquid
capital — never less than $9,000,000; (b) the Coriwration had a strong and com-
petent sales department for the distribution of securities and an excellent general
reputation with investors; (c) the trained and experienced corporate buying
staff which the Corporation acquired in 1934 aggressively sought in every legitl-
CONCENTRATION OF ECONOMIC POWER
11699
mate way to convince the former clients of Chase Harris Forbes Corporation and
Harris, Forbes & Co. — with most of whom the staff had previously had business
relationships over a period of many years — that The First Boston Corporation
was entirely competent from every point of view to do a better job for them than
could auy other investment banking house.
Except as from, time to time The First Boston Corporation may purcha.se shares
of stock for distribution to clients or other dealers, the Corporation has no own-
ership of securities in commercial banks or public utility operating or holding
companies.
Commencing as of December 31, 1934, The First Boston Corporation has pub-
lished and distributed to its stockholders and to the general public upon request
annual reports containing certified financial statements.
December 12, 1939.
Exhibit No. 1621
[Letter from The First Boston Corporation to Investment Banlfing Section, Monopoly
Study, Securities and Exchange Commission]
The Fiest Boston Corporation,
100 Broadway,
New York, April 13th, 1939.
Mr. Peteb K. Nehemkis, Jr.,
Special Counsel, Investment Banking Section, Monopoly Study,
Securities and Exchange Commission, Washington,, D. C.
Dear Sib: As requested in your letter -dated March 25th, we take pleasure
m sending you herewith a list showing the present officers and directors of this
corporation, indicating the date when each became associated with our corpora-
tion, and specifying for each such person his affiliation during the period from
January 1, 1929 to date.
We hope this statement is entirely clear and that it will fill your requirements.
If you require further information or explanation, we will be glad to have you
advise us.
Very truly yours,
A. E. Bubns, Assistant Secretary.
Ends.
The First Boston Corporation — Officers and Directors
Name
AffiUation
Title
Period
John R. Macomhe'-
Harris, Forbes & Co., Inc.
(Mass.)..-
President and Di-
rector.
Chairman of Board.
Chairman of Board .
President and Di-
rector.
Vice-Pres., Secy, and
Director.
President and Di-
rector.
Chairman Exec.
Comm. <fe Direc-
tor.
Vice President and
Director.
Vice President and
Director.
Vice President and
Director.
Vice President
Jan. 1, 1929 to
Chase Harris Forbes Corp
The First Boston Corp
July 1, 1931 to
Dec. 31, 1933.
May 7, 1934 to
date.
January 1,1929 to
date.
Allan M. Popo
The First Boston Corp. and Its
predecessors.
Harry M. Addinsell
Chase Harris Forbes Corp
The First Boston Corp
June 30, 1931.
July 1, 1931 to
Dec. 31, 1933.
May 7, 1934 to
date..
Jany. 1, 1929 to
date.
Jany. 1, 1929 to
date.
Jany. 1, 1929 to
date.
Jany. 1, 1929 to
date.
The First Boston Corp. and its
. predecessors.
*rhc First Boston Corp. and lU
predecessors.
The First Boston Corp. and its
predecessors.
The First Boston Corp. and its
predecessors.
Harris, Forbes & Co
Eugene I. Cowell ...
Nevll Ford
R. Parker Kuhn
Duncan R. Llnsley... ....
Id
Aupust, 1930.
August, 1930,
June 30, 1931.
July 1, 1931,
Dec. 31, 1933.
May 7 1934 to
Chase Harris Forbes Corp
The First Boston Corp
Vice President
Vice President and
Director.
date.
11700 CONCENTRATION OF ECONOMIC POWER
The First Boston Corporation — Offlcers and Directors — CoatiQue<l
Name
Ty. Meredith Maxson . .
John C. MontgoiTiery.
Lnnis '}. Muflgp -- -
WHllam H. Potter, Jr
Oeorge B. Seager
Frank M. Stanton
AflQliation
Winthrop E. Sullivan.
Arthur C. Turner
Adolphe H. Wen/.ell .
Herbert T. C. Wilson.
Oeorge D. Woods
Thomas Coggeshall
Alfred A. Qerade _.
Arthurs. Kenney
Joseph W. Hambuechen.
James H. Orr.
The First Baston Corp. aud its
predecessors.
The First Boston Corp. aud its
predecessors.
The First Boston Corp. and its
predecessors.
The First Boston Corporation
and its predecessors.
The First Boston Corporation
and its predecessors.
Harris. Forbes & Co
Title
Vice President
Vice Pres., Treas.
and Director.
Vice President
Id.
Chase Harris Forbes Corp
The Tint Boston Corporation...
The First Boston Corporation
and its predecessors.
The First Boston Corporation
and its predecessors.
Harris, Forbes & Co . . .
Chase Harris Forbes Corp
The First Boston Corporation.. .
The First Boston Corporation
and its predecessors.
Harris, Forbes & Co
Vice President and
Director.
Vice President
Employee
Director
Vice President.
Vice President.
Vice President.
Period
Vice President and
Director.
Employee.
Id.
Chase Harris Forbes Corp ..
The First Boston Corporation.
The First Boston Corporation
and its predecessors.
The P'irst Boston Corporation
and its predecessors.
The First Boston Corporation
and its predecessors.
Wassermann & Company, Ber-
lin, Germany..
The First British American Cor-
poration, Ltd., London, Eng-
land.
The First Boston Corporation. .
Stone & Webster Investing
Corp., 49 Federal St., Boston,
Mass.
Investment Service Corp., 49
Federal St., Boston, Mass.
The First Boston Corporation. -
Vice President...
Vice President...
Vice President..
Employee
Director
Vies President...
Vice President and
Director.
Foreign Vice Presi-
dent.
Comptroller
Secretary and Direc-
tor.
Partner. _
Chairman of Board.
Director.
Vice President and
Director.
President.
Director...
Jany. 1, 1929 to
date.
Jany. 1, 1929 to
date.
Jany. 1, 1929 to
date.
Jany. 1, 1929 to
date.
Jany. I, 192S to
date.
Jany. 1, 1929, Au-
gust, 1930.
August, 1930,
June 30, 1931.
July 1, 1931, Dec.
31, 1933.
May 7, 1934 to
date.
Jany. 1. 1929 to
date.
Jany. 1. 1929 to
date.
Jany. 1, 1929.
June 30, 1931.
July 1, 1931, Dec.
31, 1933.
June 1, 1934 to
date.
Jany. 1, 1929 to
date.
Jany. 1, 1928, Au-
gust, 1930.
August, 1930,
June 30, 1931.
July 1, 1931, Dec.
31, 1933.
May 7, 1934 to
date.
Jany. 1, 1929 to
date.
Jany. 1, 1929 to
date.
Jany. 1, 1929 to
date.
January 1929 to
1935.
1935 to date.
June 12, 1935 to
date.
1929-1931.
1931 to date.
Feby. 16, 1939 to
date.
Exhibit No. 1622
[Prepared by The First Boston Corporation]
The First Boston Corporation
List of holders of 500 shares and over as of record at the close of business Jwne It,
19S9
Stone & Webster, Inc., 49 Federal St., Boston, Ma^^s 18,480
Addlnsell, Harry M., % The First Boston Corp.. 100 Broadway, New York. 11. 500
Moseley, F. S. & Co., 50 Congress St.. Boston, Massr,). 11, 430
Skelton & Co., 67 Milk St, Boston. Mass „ 9,748
OONGENTRATION OF ECONOMIC POWER 11701
LiM of hr)id(rs of dOO xhares and over an of record at the cloxe of bH.si»)f.v.v
June 17, i939— Continued
Macomber, John R., % The First Boston Corp., 1 Federal St., Boston, ,
Mass - 7, nOO
Hambuechen, J. W., % Foreign Dept., The First Natl. Bank of Boston,
67 Milk-St., Boston, Mass 7, 228
Wiggin, Albert H., 20 Pine St., New York, N. Y., Room 2G01 7, 176
Chase, Henderson & Tenant, 56-69 New Broad St., Loudon E. C, England. 5, 930
Ford, Nevil, % The First Boston Corp., 100 Broadway, New York, N. Y_- 4, 40O
Wilde, Bertram M., 1529 Walnut St., Philadelphia, Pa 4, OOO
Cudd & Company, % Chase Natl. Bank, Personal Tr. Dept., 11 Broad
St., New York, N. Y 3, !)11
Jackson & Curtis, 10 P. O. Sq., Boston, Mass 3,271
Wilmington Trust Co., Wilmington, Dela 2, 5(J0
Pickering, L. D. & Co., 40 Wall St., New York, N. Y 2,238
Oldwood, Inc., 734 Hospital Tr. Bldg., Providence, R. I 2,040
Branch-Brook, Inc., % Merchants & Newark Tr. Co., 763 Broad St.,
Newark, N. J 2,000
Pearl Assurance Company, Limited, High Holborn, London, W. C. 1,
England 2,000
Lee, Higginson Corporation. 50 Federal St., Boston, Mass 2, 000
Potter, William H., Jr., % The First Boston Corp., 1 Federal St., Boston,
Mass : 2,00(t
Quantrell, Ernest E., 15 Broad St., New York. N. Y 2,000
Brown Brothers Harriman & Co., 59 Wall St., New York, N. Y 1, 881
Ince & Co., % Guaranty Tr. Co. of N. Y., 140 Broadway, New York. N. Y__ 1, 725
Hare & Co., % Bank of N. Y. & Tr. Co., 48 Wall St., New York, N. Y 1, 661
Pierce, E. A. & Co., 40 Wall St., New York, N. Y 1, 561
Scherer, Clifford F., % British Assets Tr. Limited, 26 Journal Sq., Jersey
City, N. J 1,500
King & Co., % City Bank Farmers Tr. Co., 22 William St., New York,
N. Y 1, 441
Sigler & Co., % Cen. Hanover Bank & Tr. Co., 70 Broadway, New York,
N. Y 1, 410
Lombard & Co., 214 St. James St., W., Montreal, Quebec 1,400
Cutwater, Leonard & Co., 52 William St., New York, N. Y 1, 400
Hirshbergq, Julian R., 1301 Citizens & Southern Natl. Bank Bldg., Atlanta,
Ga J 1, 355
Tucker, Anthony & Co., 120 Broadway, New York, N. Y 1, 335
Pratt Bros., 90 Broad St., New York, N. Y 1, 229
Creighton, Albert M., 50 Congress St., Boston, Mass 1,200
Garner & Co., 140 Broadway, New York, N. Y 1, 200
Doering, O. C, 333 N. Michigan Ave. Bldg., Chicago, III 1, 162
Green Estate Inc., Ill Broadway, Rm. 1104, New York, N. Y 1, 014
Anderson, George L., % Grace R. Anderson, Excrx., 417 Stockton St., San
Francisco, Calif 1, 000
Babson, Roger W., 67 Wellesley Ave., Wellesley, Mass 1, 000
Batterman, Henry L., 60 E. 42nd St., New York, N. Y 1, 000
Carey, Ralph C, % The Scottish American Investment Co., Limited, 26
Journal Sq., Jersey City, N. J 1,000
Countway, Francis A., 164 Broadway, Cambridge, Mass 1,000
Ferris, Cyrus Y., 49 Federal St., Boston, Mass 1, 000
Gunn & Co., 40 Wall St., New York, N. Y 1, OOo
Hill, Lucy W., 19 Commonwealth Ave., Boston, Mass 1, 000
Wood, Willis D., % Wood Low & Co., 63 Wall St., New York. N. Y 1, 000
Maryland Casualty Company, 701 W. 40th St., Baltimore, Md 1,000
Moberly, Edward E., % Marine Midland Tr. Co., 130 Chambers St., New
York, N. Y 1,000
Stone, Charles A., % Investors Records Corp., 90 Broad St., New York,
N. Y 1, 000
Westaway, Robert, 40 W. 40th St., New York, N. Y 1,000
11702 CONCKNTRATION OF ECONOMIC POWER
List of holders of 500 shares and over as of record at the close of business
June 17, i959— Continued
Kollstede, Chas. A., % Goodbody & Co., Ill Broadway, New York, N. Y_. 995
Monks, Mrs. Olga E., 10 P. O. Sq., Rm. 1022, Boston, Mass 992
Moore, Charles B., 420 Pine St., Texarkana, Texas 990
Glavin, Charles F., Escanaba, Mich 930
Mead, Theodore S., % The First Boston Coi-poration, 1616 Walnut St.,
Philadelphia, Pa 925
Sargent, Albert J., R. F. D., Boxboro, West Acton, Mass 845
The National Bank & Trust Co. of Erie, trustee under agreement with
David N. McBrier, dated Dec. 31, 1934, Erie, Pa 836
Tarr & Co., % Old Colony Trust Co., Box 2017, Boston, Mass 810
Addinsell, Florence Moberly, % The New York Tr. Co., 1 E. 57th St.,
New York, N. Y 800
Gardner, George P., G. Peabody Gardner, Jr., trustees under will of
George A. Gardner, 10 P. O. Sq., Boston, Mass 800
Kuhn, R. Parker, % The First Boston Corp., 100 Broadway, New York,
N. Y 800
Ladenburg, Thalmann & Co., 26 Broad St., New York, N. Y 800
Herrick, Robert F., Philip Stockton «& Edward A. Taft, trustees under
will A. J. Tower, 1 Federal St., Boston, Mass 773
Gude, Winmill & Co., 1 Wall St., New York, N. Y 730
Hubbard, Mrs. Annie, 192 Hancock St., Everett, Mass 725
Bonifas, William, 750 Lake Shore Dr., Escanaba, Mich 712
Amory, William, 160 State St., Boston, Mass 700
Brown, Emma J., % George R. Brown, 140 Federal St.. Boston, ^Mass 700
Heidelbach, Ickelheimer & Co., 40 Wall St., New York, N. Y 700
Moore, D. T. & Co., 50 Broad St., New York, N. Y 700
Quantrell, Mrs. Lulu M., 5 Leonard Rd., Bronxville, N. Y 700
Sinn, Herbert C, 4700 Ramona St., Frankford, Philadelphia, Pa 700
Smith, Lloyd W., Madison, N. J 700
Ziegler, Gladys W., % the Chase Natl. Bank, Tr. Dept., 11 Broad St.,
New York, N. Y 700
Oliver, James, 2nd, Gertrude Oliver Cunningham, Joseph D. Oliver Jr.,
& Susan Catherine Oliver, trustees under indenture dated Dec. 30,
1919, South Bend, Ind 687
Adams, Charles F., 101 Milk St., Boston, Mass 672
Kane & Co., % the Chase Natl. Bank, Personal Tr. Dept., 11 Broad
St., New York, N. Y 666
Hanks, Robert C, 20 Cobane Terr., West Orange, N. J 653
Rosenthal, Morris, 204 Summer St., Boston, Mass - 650
Prince, F. H. & Co., Ames Bldg., Boston, Mass 621
Carmen, Jacob, 68 Devonshire St., Boston, Mass 620
Brown, Nannie Inman, Glen- Cove, Long Island, N. Y 600
Dryfoos, Stephen M., 424 Madison Ave., New York, N. Y 600
The Economic Trust, Limited, London Agency, 25-31 Moorgate, London
E. C. 2, England 600
Homblower & Weeks, 40 Wall St., New York, N. Y 600
Merrill, Mrs. Martha S., % Old Colony Trust Co., Box 2017, Boston,
Mass 600
Morss, John Wells, % Boston Safe Dep. & Tr. Co., 100 Franklin St.,
Boston, Mass 600
Parris, Larkin H., % The Citizens & Southern Natl. Bank, Atlanta. Ga__ 600
Schroeder, J. Henry & Co., 145 Lendenhall St., London, E. C. 3, Ensrland. 600
Young, Moore & Co. (Co-Partnership), Kanawha Valley Bldg., Charles-
ton, W. Va 600
White, Weld & Co., 40 Wall St., New York, N. Y 590
Winckler, Onderdonk "i Co., 35 Nassau St., New York, N. Y 590
Linsley, Duncan R., % the First Boston Corporation 100 Broadway, New
York, N. Y :! 589'
Draper Corporation, Hopedale, Mass 572
CONCENTRATION OF I-X'ONOMIC POAVEli 11703
I/ist of holders of 500 shares and over as of record at the close of business
June 17, i939— Continued
Stephenson, Florence B., % George R. Brown, 140 Federal St., Boston,
Mass 557
Wainwright, H. C. & Co., 60 State St., Boston, Mass 557
Shearson, Hammill & Co., 14 Wall St., New York, N. Y 552
Aunclncloss, Parker & Redpath, 719— 15th St., N. W. Washington. D. C 540
Bow & Co., % Second Natl. Bank, Tr. Dept.. Wilkes Barre, Pa 532
Ernst, Alfred G., 63 Wall St., New York, N. Y 528
Welles, C. E. & Co., 23 Broadway, New York, N. ¥ 510
Bamford, Robert T. & Mrs. Isabel E. Bamford, joint tenants with right of
survivorship and not as tenants in common, 8 Central St., Ipswich,
Mass . 500
Bankmont & Co., % Bank of Monti;eal, Montreal, Quebec, Canada 500
Best, Frederick W., 295 Madison Ave., New York City, N. Y 500
Boca Land Co., % Mr. Herman Coggins 354 Pine St., San Francisco,
Calif 500
Canadian Investors Corporation Limited, 900 Metropolitan BIdg., Toronto,
2, Ontario, Canada 500
Coe, Francis L., % .Jefferson Mfg. Co., Jefferson, Mass 500
Colt, Mrs. Frances C, 16 Colt Rd., Pittsfield, Mass 500
Conley, John S., 265 W. Promenade, Portland, Me 500
Dodge, Henry H., 385 Water St., Ellsworth, Me 500
Dreiske, Louis F., 6063 Yucca, Los Angeles, Calif 500
Frost, Edward J., 426 Washington St., Boston, Mass 500
Gardner, George P., G. Peabody Gardner Jr., trustees under indenture
dated Dec. 21, 1934. 10 P. O. Sq., Boston, Mass 500
Greenough, Malcolm W., P. O. Box 31, Boston, Mass x 500
Herb, Jacob, 192 Drake Ave., New Rochelle,N. Y 500
Heidrich, Arthur G., % Peoria Cordage Co., Peoria, 111 500
Hirsh, Louise B. T., % Tradesmens Natl. Bank & Tr. Co., 1420 Walnut St.,
Philadelphia, Pa 500
Kerney, J. Edwards, 221 Waterman St., Providence, R. I 500
Kitcat & Aitken, 9 Bishopsgate, London. E. C. 2, England J__ 500
Kuhn, Mrs. Margaret N., % the New York Trust Co., Income Collection
Dept., 100 Broadway, New York, N. Y 50O
Maher & Co., 40 Wall St., New York, N. Y 500
Massachusetts General Hospital, 1 Fe<leral St., Boston, Mass 50O
Merrill, Joseph L., 20 Lamiugton Rd., Bedminster, N. J 500
Morton, Miss Mary R., 15 Beech Tree Lane Bronxville, N. Y 500
Oberempt & Co., 100 Broadway, New York, N. Y 500
Richardson, Howard P., % The First Boston Corporation 100 Broadway,
New York, N. Y 500
Tucker & Co., 46 William St., New York. N. Y_-^ i _• 500
Turner, Paul N., % New York Trust Co., Income Collection Dept., lOO
Broadway.^ New York, N. Y 500
Walter, C. U & Co., 66 Beaver St., New York, N. Y 500
Whitten. Charles E., 57 Carter Rd., Lynn, Mass 500
Old Colony Trust Company,
By ,
Assistcutit Secretary.
124491 — 4(V-pt. 22 23
.11704
CONoExNTHATK^X OK EC:(>N().MKJ POWEK
Exhibit No. 1623
Prepared by the staff of the Investment Banking Section, Monopoly Study, Securities and Exchange
Commission]
Participations of Stone & Webster and Blodget, Inc., in issues managed by The
First Boston Corporation from June 14, 1934, to June 30, 1939
[Amounts In thousands of dollars]
Date uf
OCerlng
Prospec-
tus
Amount
of Issue
Amount
of First
Boston
Partici-
pation
Amount
of Stone &
Webster
and
Blodget,
Inc. Par-
ticipation
Stone &
Webster
and
Blodget,
Inc. Par-
ticipation
as Percent-
age of
Amount
of Issue
Stone &
Webster
and
Blodget,
Inc. Par-
ticipation
as Percent-
age of First
Boston
Corpora-
tion Par-
ticipation
7/2/34
10/29/34
7/19/35
4l22l'i5
7/1/35
9/17/35
y/17/35
5/1/35
6/16/36
10/8/36
6/16/37
7/18/35
10/2/35
11/14/35
10/26/36
3/26/36
4/20/36
7/16/36
4/31/36
12/15/36
10/6/37
10/28/37 i
8/10/38 I
4/2i'39 1
Edison Elec. III. Co. of Boston 3s
ofl937-. - --
Edison Elec. 111. Co. of Boston 3s
of 1937
Edison Elec. 111. Co. of Boston 3Hs
ofl965 -. - -- .
So. Cal. Edison Co., Ltd. 3Ms of
I960-
So. Cal. Edison Co., Ltd. 3^s of
of 1960 -_
So. Cal. Edison Co., Ltd. 4s of
1960
So. Cal. Edison Co., Ltd. Deben-
tures due 1936-45
Commercial Credit Co. 5H%
Conv. Pfd. Stock. ..-
Commercial Credit Co. 43^2%
Cum. Conv. Pfd. Stock... .. .
Commercial Credit Co. SJ^s of
1951 .
Commercial Credit Co. 25^3 of
1942 .- .-
Duquesne Light Co. 3Hs of 1965..
Atlanta Gas Light Co. 4J^s of
1955 - ..
Central Maine Power Co. 4s of
I960...- .
Central Maine Power Co. 3Hs of
1966 . .
Eastern Gas & Fuel Associates 4s
of 1956 -.
Wisconsin Gas & Electric Co. 3>$s
0/1966
Narragansett Electric Co. 3J^s of
1966
Wisconsin Michigan Power Co.
3Jisof 1961.
Missouri Power <Se Light Co. 3Jis
of 1966
Idaho Power Co. 3;isofl967 ...
North Boston Lighting Properties
3Hsofl947
The Toledo Edison Co. 3Ms of
of 1968.
Oatineau Power Co. SJis of 1969..
35,000
20,000
53, 000
73,000
3.5,000
30,000
27,500
19, 372
25,000
30,000
35,000
70,000
5,000
15,600
14,000
75,0p0
10,500
34,000
10,500
9,000
18,000
13,000
30,000
52,500
8,750
5,000 i
10,600 I
IS, 250 t
I
8. 750 i
7,500
12,125
2,061
4,000
4,000
6,500
15, 475
1,450
3,240
3,000
9,000
1,625
8,075
1,625
2,000
4,300
2,500 I
5,000 ■
0,990 i
875
500 !
I
1,52.0 1
730
SM j
300
205
3.50
900
1,400
1,400
700
250
459
575
3,000
250
1,000
250
650
300
250
1,000
867
2.5
2.5
2.9
1.0
l.O
1.0
0.7
1.8
3.6
4.6
4.0
1.0
5.0
2.9
4.1
4.0
2.3
3.0
2.3
7.2
1.7
1.9
3.3
1.6
10.0
10.0
14.4
4.0
4. U
4.0
1.7
16. H
22.5
35.0
21.5
4.5
17.2
14.3
19.2
33.3
15.4
12.4
15.4
32.6
6.9
20.0
12.4
Source: Compiled from the registration statements relating to the respective issues on file with the
Securities and Exchange Commi.ssion.
ExHUUT No. 1624
[From the flies of Lehman Brothers]
Ariiii, 4, 1934.
Mkmokandum' Re Rexations With Succbmsob Company to Fibst of Boston
Corporation
Last Thursday I lunched at the First of Boston Corporation with Mr. Nevil
l''ord who, jointly with Mr. Pope, is one of the senior officers of the Corporation.
Mr. Ford is a per.sonal friend of long standing.
CONCENTRATION OF ECONOMIC POWER 11705
We discussed two subjects, first, the reorganization plan whereby the new com-
Ijany "The First Boston Corporation" will be established to continue in the
issuing business, and second, the possibility of this new company and Lehman
Brothers working more closely together, especially through the inclusion of
Lehman Brothers in certain underwriting groups in place of bank affiliates and/or
private firms which have gone out of business or have weakened as to ability to
assume commitment's.
With regard to the future organization plans of the First of Boston Corpora-
tion, I gathered that final legal details had not been agreed upon by attorneys,
but that the program in general contemplated a joining of forces of the First of
Boston Corporation and the Chase Harris Forbes organizations under a plan
whereby sul)scription rights could be offered to the present shareholders of the
First National Bank of Boston and the Chase National Bank ip such proportions
as would give neither of these share holding groups control of the new company.
A percentage of the shares of the new company \\ould be reserved for subscription
by certain senior oflScers of the existing organizations who would become the
senior management of the new company, namely, Mr. Pope, Mr. Ford and two
senior oflBcers of Chase Harris Forbes.
With regard to future relations between the new company and Lehman
Brothers, Mr. Ford was most optimistic that cooperation would be possible, and
was quite definite in expressing a desire on the part of himself and his associates
to include Lehman Brothers in business in which we had not been represented
previously. He said that a reconstitution of groups had not been discussed with
the Chase Harris Forbes people, but that as soon as the legal formalities for
the establishment of the new company had been finished attention would be
turned to a survey of existing business in both organizations. Mr. Ford said
that he recognized that there would be many holes in previous groups and that
wherever it was possible he would try to discuss with us the possibility of our
joining. I mentioned one specific case, — that of Bo.ston Edison. He replied
that in this particular instance he doubted whether anything could be done since
the credit of this company is so well known that every member of the existing
group is constantly pressing for a larger participation and a number of Boston
houses previously not included have almost irresistible prior claims to include
them. As he humorously remarked, "it was always a fight for the First of
Boston to stay in the business itself because of the pressure from other Boston
houses to slice off pieces of the First of Boston's participation".
I shall follow up my conversations with Mr. Ford again, and shall arrange to
have him over to lunch with the firm in the near future.
D. R
DoRSETi- Richardson.
CC: Mr. Robert Lehman
Mr. Gutman
Mr. Mazur
Mr. Hertz
Mr. Hammerslougli
Exhibit No. 1625
[From the files of The First Boston Corporation]
The First of Boston Coepobation,
Boston, Massachusetts, August third, 1934-
Mt Deae Mr. Harris : I received a letter from Mr. A. B. Hancock which I think
finally closed the business sale of the four yearlings for $4,500 as the prospective
buyer has not shown uf. with the money, so we will put the yearlings through
the sales ring. If yoi7 have no objections, I think I will bid on the Firetop filly
and try to buy her if she does not go too high. It may be possible we shall be
agreeably disappointed in the prices that these yearlings bring for, as I told you,
I do not think they will bring very much. On the other hand, there is a scarcity
of prospective racers due to the opening up of many new tracks on account of
the liberalization of the betting laws of various states. I am going to try to go
up to our sale, although it comes on a Wednesday, but I want to be there If
possible.
I don't know whether you heard that Harry has been laid up with a bad foot,
which goes back to a splinter he got in it some time ago. He has been fussing
with it at intervals for a considerable period and it has been bothering him very
11706 CONCENTRATION OP ECONOMIC POWER
much for the last few weeks. This resulted in what Harry calls a minor opera-
tion a few weeks ago but which looked quite like a major cue to me and which
will keep him off his foot for a matter of several weeKS. I spent last Tuesday
night with him and he is progressing very satisfactorily and I think he will be
hobbling about on crutches in a week or so, but he will bave to use them for at
least another six weeks. Harry said at that time that as soon as he was around
again he wanted to join with me in a visit to Chicaj^o, when you would surely
be there, to talk over various matters, which leads 'p : to comment on one in
particular which has come up in the last two or three :lays.
When I was in New York last week, I had luncheon with Mr. Burnett Walker
at his request. Walker, you will remember, was with its in the early days and
then became vice president of the Guaranty Company. In the unwinding of
that organization, he is now a partner of E. B. Smith x Co., which firm, without
any formal agreement, has, I am sure, the goodwill of the Guaranty Trust Com-
pany itself as far as business which the company cannot trunsact is concerned,
and I think they will be a fairly important factor in certain classes of issue busi-
ness in the future. Joe Swan, the old president of the Guaranty Company, also
is a partner of Edward B. Smith & Co., and one or tvvo others of the old Guaranty
men are associated there also. They are a pretty enorgetic ar.d resourceful group.
Walker told me that, he was going to the Pacific Coast to spend a week or two
with his family at Santa Barbara but in the course of his "'sit he was going to
see Mr. H. J. Bauer, Chairman of Southern California Ediscii Company, and he
asked me if we had any objection to his so doing, with the thought in mind that
Edward B. Smith & Co. would like to look forward to a participation in any
Southern California Edison financing. I told him that *his lusiness had always
been headed up by the Harris Trust & Savings Bank, although as their eastern
associates, Harris, Forbes had had a share in u, but more tnan that, any business
had particularly been headed up in your good self. Thoretore, I really was not in
a position to say very much about it but, naturally, couldn't object to his calling
on them. I said to him, however, that I would suggest that, as he was spending
a day or two in Chicago, before seeing Mr. Bauer on Lhii- phase of the business,
I thought it would be courteous for him to see you.
You will recall that while the Guaranty Company waa still in existence, they
spent some time trying to effect the sale of the San Diego Consolidated Gas &
Electric Company to the Southern California Edison Company and in connection
with these discussions Mr. O'Brien made several trips so .he Coast. Nothing
developed from these conversations. Confidentially, I rather feel that Mr. Walker
may reopen the San Diego discussion with Mr. Bauer and it might be natural for
him to say to Mr. Bauer that in the event he was interested In acquiring San
Diego, E. B. Smith & Co. would be glad to assist in raising the sioney.
I myself feel that if there are any discussions reopened ;ibout the sale of the
San Diego Gas to Southern California Edison, I fail to see the necessity of any
outside intermediary in view of the close relationships existing with the Byllesby
people and your close relationship with Mr. Bauer. I dont know that there is
any new issue business for Southern California Edison Co'^oany imminent at
the present time but as the Bank, under tbe new laws, wo'iiii apparently be
excluded from doing it, we just wanted to register the idf"' w'th you, if there
were any, that if and when any business comes aloi.t, v.:u».i i.s outside of the
Bank's province, we, in view of Harris Forbes' long asscci 'tion with it, would
naturally like very much to carry on. Under the pircr,m«*nnfes. we have not
felt that we should communicate with the company, but as it is apparent that
another investment banker, and possibly several, may conremplate becoming
active on this subject, we do not want, so to speaK, to be left at the post.
Nevertheless, we should not think of doing auythiug ab( at it without your
entire approval in advance, but it you have any thoughts, v/e would be grateful
of a line from you at this time.
Things are going fairly well with us here in the Corporation. We -were very
fortunate in having two good pieces of business in the first month of operation
with the Edison and Western Mass. loans md, as yea can weil realize, this
helps tremendously and particularly just as wo were ge^tlr-T quared away. I
should have disliked very much io see us run Into a deficit, which might be
possible but which, fortunately, is taken care of for a while.
CONCENTRATION OF ECONOMIC POWER 11707
We have had some ^racc! rains in New England the past week and while the
trees look a bit ragged through the country, the lawns and fields are green
again, and the country does look delightful.
■ Hope Harry and I can make our visit when we can spend a day in the country
with you, for" I feel absolutely out of touch with all of your sporting activities.
and as things seem to be getting on a pretty even keel here, I do not propose
to neglect this side of life entirely as I have done for the past year.
My love to Mrs. Harris and yourself.
Cordially,
JRM : HEA
Mr. Albfbt W. Kabris,
115 West Monroe Htreet, Chicago, Illinois.
Exhibit No. 1626-1
[Letter from Sarris, Hull & Company, Incorporated, to Investment Panking Section,
Monopoly Study, Securities and Exchange Commission]
HARBIS, HAIX & COMPAN-i
(Incorporated)
111 WE3T MONROE STREET
Telephone Randolph 542:rS
Chicago, September 25. 1939.
Mr. W. S. Whitehead,
% Securities and Exchange Commission,
Washington, D. C.
Deab Me. Whitehead : Referring to ouv telephone conversation of Saturday,
I have obtained for you a letter of July 25, 1930, add'-essed to the Harris Trust
and Savings Bank, Chicago, and signed by Harris, Forbes & Company, New
York, and H^irris, Forbes & Company, Inc. of Boston, confirming the reciprocal
arrangement which had hitherto' existed between these concerns with respect
to the purchase and marketing of securities. This is the only written memo-
randum with respect to this matter which we have been able to find, and I
recall that it was reduced to writing at that time because the Chase Securities
Corporation had on nr about July 1, 1930, purchased all the stock of Harris,
Forbes & Company and Harris, Forbes & Company, Inc.
I was with the Bond Departmeht of the Harris Trust and Savings Bank from
1909 until 1935 when Harris, Hall & Company was incorporated, and from 1929
to 1935 was a vice president of the Bank with duties in the Bond Department.
I am glad to give you the following brief outline of the his^Lory of the Harris
Organization, whicii I give from personal knowledge except as to some of the
very early history.
The firm of N. W. Harris & Company began business in Chicago May 1, 1882.
The Boston office was opened In September, 1886; the New York oflQce in
October, 1890.
The Harris Trust and Savings Bank was incorporated in 1907 and took over
the business of N. W. Karris & Company in the territory including the Central
States and extending west to the Pacific Coast. The New York and Boston
ofiices Cvjntinued as a co-partnership with Mr. N. W. Harris the senior partner.
In 1911 the eastern ofiices were incorporated, the name in New York becoming
Harris, Forbes' & Company and N. ^V. Harris & Company, Inc. in Boston. In
1916 the name in Boston was also changed to Harris, Forbes & Company.
In 1930 the stock of Harris, Forbes & Co. was sold to the Chase Securities
Corporation, and in 1931 the business of Harris, Forbes & Co. was consolidated
with that of the Chase Securities Corporation and the name was changed to
Chase Harris Forbes Corporation.
For a brief period, namely, from sometime in 1929 until 1934 when the provi-
sions of the Banking Act of 1933 having reference to securily aflSliates became
effective, an afiSliate of the Harris Trust and Savings Bank called The N. W.
11708 <:()N(JKNM'KAT1UN OF t<X;ONOMl(J IH/WKK
Harris Company was iu business. The stock of The N. W. Harris Company was
not owned by the Bank but was held by trustees for the ratable benefit of all
stockholders of the Bank. This company did some business In stocks in 1921) and
1930 and then in 1931 after Chase Harris Forbes Corporation had taken over the
eastern business so that the division of territory no longer was appropriate, The
N. W. Harris Company opened an office in New York to handle bond business iu
the East as a correspondent of the Bank's Bond Departuieut.
When bank affiliates were outlawed by the Banking Act, The N. W. Harris
Company discontinued business and was liquidated.
From the early part of 1929 until July 1, 1931, when the Chase Harris Forbes
Corporation was formed, the Harris TrAist and Savings Bank was given the
'ippoitunity to participate on original te)ms to the amount of 30% of total pur-
chases of corporate bonds purchased by Harris Forbes & Company. These were
simply opportunities to participate and not in every case were they accepted.
( 'o'lversely, Harris Forbes & Company were given the opportunity to participate
t<» tlie extent of 70% in purchases of corporate bonds made by Harris Trust and
Savings Bank. This participation was not always accepted by Harris Forbes &
('ompany.
For several years prior to the above the percentages were Harris Trust and
Savings Bank 33%%, Harris Forbes & Company 66%%.
We are unable to locate the exact date when that practice came into operation
l)ut it extended over many years.
When the business of Harris, Forbes & Co. was transferitd to the Chase Harris
F'orbes Corporation in 1931, tie agreement referred to was terminated and no
agreement of similar nature between its parties or any of their successors h:is
been in existence since that time.
Yours very truly,
Epavajjd B. Haij..
ISdward B. Hall.
IMN
Exhibit No. 1626-2
[Enclosed with "Exhibit No. lo26-l"j
[Copy]
July 25th, 1930.
HAJiRis Tkust & Savings Bank,
Chicago, Illinois.
Deab Sikb: This letter will serve to confirm our understanding that we have
mutually agreed to continue until December 31st 1932, our nov/ existing reciprocal
arrangements with respect to the purchase and marketing of securities. Under
these arrangements you shall be given an opportunity to participate on original
terms, to the amount of thirty percent of our interest therein, in our purchases of
issues of bonds, notes or debentures. Similarly in connection with the purchase
of stocks we are to offer your securities company, namely The N. W. Harris
Company, a twenty percent interest in such purchases. Conversely, we under-
stand that in connection with issues of bonds, notes or debentures that yon pur-
chase, we shall be given an opportunity to participate on original terms to the
amount of seventy percent of your interest therein. Similarly iu connection with
the purchase of stock you are to offer us an eighty percent interest in such
purchases.
As regards marketing securities so purchased by either of us It is agreed that
you shall have the exclusive right as between you and us to advertise and offer
for sale both at wholesale and retail any and all securities in a territory including
the States of Michigan, Indiana, Kentucky, Tennessee, Arkansas, Texas and all
states lying West thereof and in the Territory of Hawaii. We and our sub-
sidiary companies have exclusive sales rights elsewhere in the United States
and in Canada and Europe.
It is understood that the above arrangement does not apply to any securities
that you may purchase in the ordinary conduct of your general banking and trust
business or to any purchase by us for investment or not in the usual course of our
respective businesses.
The foregoing outlines the basis on which we mutually desire to continue
the existing reciprocal arrangement, the principlp back of which Ts that your
organization and ours shall endeavor to operate as a national organization in
CONCENTRATION OF ECONOMIC POWER 11709
the purchase and sale of securities on the basij» outlined, and it is our mutual
understanding that the general details of the administration of the foregoing
shall be conducted as heretofore.
If the foregoing is in accordance with your understanding will you please
confirm by signing the attached copy of this letfcr.
Yours very truly,
Haj<ki8, Fokbks & Company.
By (Signed) H. M. Addinselt,.
Vice President.
Haj'Ris, Forbes & Company. Inc..
By (Signed) W. E. McGbe(Wb,
Vice President.
The foregoing correctly states our understanding.
Harris Trust and Savinos Bank,
By (Signed) Frank McNaib,
Vice President.
RxH3iT No. 1627
Il.ottpr from Harris, Hall & Company, Incorporated, to luvestment Banking Section,
Monopoly Study, Seenrltiea and Kxctiantte rommissionl ■
Harris, Hall & (.ompany
( Incorporated )
1 1 1 WEST MONROE STREET
Telephone Kandolph 5422
Chicago, September 18, 1939.
Mr. Pkteb R. Nehemkis, Jr.,
Special Counsel, Investment Banking Section,
Securities and Exchange Commission, Washington, D. C.
Dear Mr. Nehemkis : In accordance with youi request of September 15, I am
pleased to furnish you with the following information regarding our present
capitalization, the most recent list of stockholders, and the original capitaliza-
tion at the time of formation.
The present capitalization of Harris, Hall & Company is as follows:
Preferred Stock (par value $100)
Authorized 2, 500 shares
Outstanding 2,500 "
Common Stock (par value SIO)
Authorized 80, OOOshares
Outstanding 61,000 "
Paid-in Surplus — ^267, 000 "
Note. — 1.000 shares of the cotnmon stock outstanding was sold to two
officers who joined the organization in 1936, at $25 per share.
The preferred stockholders list as of March 20, 1939, and the common stock-
holders list as of March 25, 1939, are being forwarded under separate cover.
We will appreciate your returning the preferred stockholders list after you arc
finished with it.
The original capitalization at the time of formation and a statement as to
how and by whom this original capital was subscribed is given in detail in the
enclosed prospectus which was issued at the time that the avoek was sold. As
'stated in the prospectus, 20% of the Company's stock was given to the stock-
holders of the Harris Trust and Savings Bank and teaid stockholders were
given the right to subscribe io 20% more of the stock at the same price as that
sold to the public, namely, $17,75 a share. This payment was made for the
privilege of carrying on the corporate bond business formerly done by the
Bond Department of said Bank. At no time have stockholders of the Harris
Trust and Savings Bank held more than 40% of said Harris, Hall & Company
common stock, and I am advi.sed by the Transfer Agent that as of July 10,
1939, stockholders of the Harris Trust and Savings Bank held 86.69% of said
stock.
11710
CONCENTRATION OF ECONOMIC POWER
The preferred stock, as stated in paragraph (e) on page 3 of the prospectus,
has no voting power, nor shall the holders thereof as such be entitled to notice
of meetings of stockholders, all rights to vote and all voting power being
vested exclusively in the holders of the common stock.
If there is any further information you might desire in this connection, we
will be glad to furnish same.
Yours very truly,
NOEMAN W. BUbKIS,
Vice President.
Norman W. Harris
IMN
Exhibit No. 1628-1
Stipulation
It is hereby stipulated and agreer* that the documents listed below are true
copies of original communication.s or carbon copies from the files of Blyth & Co.,
Inc., and that they were received or sent, as the case may be, by Blyth & Co., Inc.
Date
Description
TO
From
Nov. 6,1935
Nov. 6. 1935
Letter
Letter
Letter
Letter
Letter
Letter
Letter
C. E. Mitchell.
H. M. Addinsell.
Mr. Hall of Harris, Hall & Co
Nov. 6, 1935
Mr. Hall of flams. Hall & Co - .
E. B., Vice President.
Nov. 6, 1935
Henry M. A'''l"'n3eU ... . ...
C. E. Mimhell.
Nov. 7, 1935
C. E. Mitehei;
n. M. Addinsell.
Nov. 8, 1935
C. E. Mitcboll
Nov. 9,1935
C. E. Mitchell.
Dko. 13, 1939.
Geoeqe Lktr.
Exhibit No. 1628-2
[From the files of Blyth & Co., Inc.]
H. M. Addinsell,
Chairman Executive Committee.
The First Boston Corporation,
One HuNDREa) Broadway,
New York, November 6th, 19S5.
Blyth & Co., Inc.,
120 Broadway, New York City.
Attention— Mr. C. E. Mitchell.
Dear Sirs: We acknowledge receipt of your letter of November 1st with
reference to the proposed issue of $40,000,000 Los Angeles Gas & Electric Cor-
poration First and General Mortgage Bonds Series of 4s due 1970 now in
registration.
We accept with pleasure the proffered interest In this business of $3,000,000.
for which please accept our thanks.
Yours very truly,
H. M. Addinsell,
Chairman Executive Committee.
Ethibit No. 1628-3
[From the files of Blyth & Co., Inc.]
November 6, 1935.
Harris Hall & Co.,
Ill W. Monroe Street, Chicago, III.
Attention Mr. Hall.
Gentlemen : Following your call upon us this morning, Mr. Addinsell of The
First Boston Corporation came tu see me regarding the underwriting of the
CONCENTRATION OP ECONOMIC POWER 11711
proposed issue of $40,000,000 Los Angeles Gas & Electric Corp. First and Geu-
eral Mortgage bonds, series of 4s due 1970, now in registratioii. Under the
circumstances as discussed when you were in our office, Tht^ First Boston
Corporation has agreed to give up $500,000. of the amount of their participation
iii this underwriting, and we are thus enabled to offer to you a participation of
$500,000. and would be giad to have your early reply as to whether this is
acceptable.
The issue will be broaidly advertised throughout various states of the coun-
try and to the extent that you are registered as a dealc^, we shall be glad to
include your name. Assuming that you will want to be so included, please let
us know to what extent you are registered or will be regibttted, bearing in
mind that it is expected that the issue will be ready for offering on November
18th.
Copies of the registration and other necessary documents for study will be
sent to you by mail tonight.
Very truly yours,
P. S. — We find that we do not have extra copies of the documents that could
be sent from this office and have wired our San Francisco office to forward
them to you from there by airmail today.
Exhibit No. 1628-4
[From the files of Blyth & Co., Inc.]
NovEiiBBS 6th, 1935.
Hauris, Ham. & Company,
111 West Monroe Street, Chicago, Illinois.
Attention of Mr. Hall.
Gentlemen : We are enclosing herewith certain letters addressed to the several
underwriters of the proposed issue of Los Ang'eies Gas and Electric Corporation
Bonds which we think are fully self-explanatory.
The enclosed letters refer to the registration statement ana exhibits which are
being air expressed direct to you from our Los Angeles Office.
You will note that certain information is to be suppii'_d by you, and we
should appreciate a prompt response from you in this connection.
Very truly yours,
Bltth & Co., Inc.
By
Vice President.
EB:m
End.
Exhibit No. 1628-5
[From the files of Blyth & Co., Inc.]
November 6, 1935.
Mr. Henry M. Addinseix,
Chairman, Executive Committee, The First Boston Corporation,
100 Broadway, New York City.
Dear Mr. Addinseli.: Referring to our talk this afternoon regarding the
underwriting of $40,000,000. Los Angeles Gas & Electric Corp. First and General
Mortgage bonds, series of 4s, due 1970, now in registration, it is agreed that
your underwriting position in this business shall be revLsed from $3,000,000. to
$2,500,000. and that this difference of $500,000. shall be offered to Harris, Hall
& Company, 111 W. Monroe Street, Chicago, which has been done by letter today.
Very truly yours,
CEM.R
H7I2 CONCENTKATION OF ECONOMIC PoWElt
Exhibit Iso. 1628-6
[From the files of Blyth & Co., Inc.]
H. M. Addinsell, Chairman Executive. Committee.
The First Boston CoitPOBATiON,
One Hundred Broadway,
New York, November 1th, 19S5.
C. E. Mitchell, Esq.,
Chairnuin, Blyth d Co., Inc.,
120 Broaduny, Ncir Yoik Citij.
Ueae Mr. Mitchell: I ackisowUdfecj receipt uf your letter of November 6th witL
reference to the adjustment ih our interest in the proposed issue of Los Angeles
Gas & Electric Co. First and General Mortgage bonds whicli I understand is now
$2,500,000. I also understand that you are offering .|500,(XX) to Harris Hall & Co.
in Chicago.
Thanking you very much for your con.sideration in this matter, I am
Yours very truly,
H. M. Addinsexl,
Chairman Executive Committee.
E.xHiuiT No. 1628-7
[Krom the files of Blyth & C©., Ino.]
IIAIUUS, HaIX & CO.MPANY,
Harris Trust Building.
Chicago, November 8, 1935.
Blyth & Company, Inc.,
120 Broadway, New York Vitii, New York.
Attention of Mr. C. E. Mitchell.
Gentlemen: I wish to acknowledge receipt of your letter of November 6tu,
offering us a participation of $500,000 in the underwriting of the protxjsed issue of
.$40,000,000 Los Angeles Gas and Electric Corporation First and General Mortgage
Bonds, Series of 4s, due 1970. We are pleased to accept this amount, and wish to
express our appreciation for your efforts in our behalf in this connection.
We are advised by counsel that our name may appear in the advertising in any
state with the exception of Pennsylvania, if the customary clause is used stating
that the offering is made only by such dealers as are registered in the particular
state involved. We hope that this clau.se will be used in your advertising so that
our name can appear in all states except Pennsylvania.
We have already received from San Francisco copies of the registration and
other necessary documents regarding the issue.
Very truly yours,
Norman W. Harius.
Vice rresidenl.
Norman W. H:irri.s
fed
Exhibit No. 1628-8
(From the fileH of Blyth & ('o., Inc. Letter from C. E. Mllchell to Noruum \V. Harris)
NovEMBr { 9, 1 !):>.">.
Habbis, Hall & Company,
Harris Trust Buildiny, Chicago, III.
Attention Mr. Norman W. Harris, Vice Pres.
Gentlemhk : We have your letter of November 8th and note your acceptance
of our offer of a participation of $500,000. in the proposed Los Angeles Gas &
Electric Corporation offering and also that you are prepared to have your
name appear in all advertising other than in the State of Pennsylvania. I*^or
your information it is our custom to u.se the clause referred to in all ailvcrtislng.
Very truly yours,
CEM.K
(JONCENTRATIOX OB^ ECONOMIC POWEIi 11713
ExHiHiT No. 1629
[From tlie filos of Tlio Fir-st Bustoii f'orporatlon 1
As of Fi'.BKUARy 28, lviS9.
UNDKRWUITTNG PAKnclPATIONS
The first ooluruu \'oiitniiis ijarticipntions by tho viirious firms in b; siuess
Iieaded by The First Boston Corporation.
The second oolnmn con'ains The First Bo8tou Corpomtion's participatjonf! in
business headed by the respective underwriting houses.
Aldred & Company $1,000,1)00 5=0
A. C. Allyn & Company 20,010,000 0
A. E. Ames & Co 6,150,000 0
Bacon, Whipple & Co 350,000 0
J. E. Baker 150.000 0
Halcer, Watts & Co 1,700,000 0
Baker, Weeks (J'. Harden. _ 1,200,000 0
Baker, Young & Co 850,000 C
Baldwin & Company _ 700,000 0
Bancamerica Blair Corp 11,470,000 7,941,000
Bankamerica Company 810,000 0
Bancohio Securities Co 260,000 0
Chas. D. Barney & Co. (l'.)35-()7i 2,650,000 0
A. G. Becker & Co 850,000 0
Blake Bros. & Company 1,700,000 0
Blvth & Company 45,899,000 23,750,000
Bodell & Co 10,225,000 0
Bonbright & Co '18,154,000 17,919,000
Bond & Goodwin, Inc 1,800,000 0
Edward U. Bradley & Co 200,000 0
Alex. Brown & Sons 2,925,000 0
Brown Brothers Harriman iV; Co 1,7.50,000 0
Brown Harriman & Co 59,381,000 21,357,500
Brown, Lisle k Marshall 500,000 0
Burr, Gannett & Co 7,962,500 0
H. M. Bvllesby & Co 30,435,000 2.750,000
Frank B. Cahn & Co. (Connn. Cred.) 750,000
Cassatt & Co., Inc 11,270,000 0
Wm. Cavalier & C<> 200,000 0
Central Republic Co 3,205,000 0
Chace, Whiteside & Co 200,000 0
Clark, Dodge & Co 3,100,000 0
E. W. Clark & Co 2,750,000 0
Coffin & Burr "19,936,000 '15,198,685
Paul H. Davis & Co 700.000 0
R. L. Day & Co 7,090,000 0
Dean, Witter & Co 14,498,000 0
Dick & Merle-Smith 250.000 0
Dillon. Read & Co 19,370.000 42 589.200
Dominick & Dominick 3,810,000 0
Dominion Securities Corp 6,150,000 0
Eastman. Dillon & Co. (Comm. Cred.) 1,300,000 0
Edgar Rlcker & Co 1,500,000 0
Emanuel & Co _.. 5.375,000 0
Estabrook & Co 7, 940.000 1.550,000
Evans. Stillman & Co . 6,750,000 0
Farwell Chapman & Co 100,000 0
Field, Glore & Co. (1935-6) 16.254,000 4,856.2.50
First Boston Corporation (The)
First of Michigan Corp 4.990,000 0
Morris F. Fox 3.50,000 0
Francis Bro. Co 2.50,000 0
1 81.06.5.000 private deal Included.
= $735,000 private deal included.
« ?2. -"90.000 private deal included.
11714 CONCF>" . JN OF ECONOMIC POWER
Robert Garrett & Sons ,$3,9C0,O0O ^
Chai ': Oilman & Co 250. 000 0
Glore, Forgan & Co 1,900,000 0
Goldman, Sachs & Co 19,007,500 11,860,412
Gnihnm Parsons i^ Co - 3,000,000 0
Granbery, ifford & Co. .'1SS.^> 3,250.000 0
Granbery, Marache & LOi- 200.000 0
Green, Ellis & Aadevson 500,000 0
Hale, Waters & " 150,000 0
Hallgarten & (. ; 2,200,000 0
Halsey, Stuart. . 24,182,000 10,809,0(39
Hammons & Co 400,000 0
Harris. Hall k Co 17,300,000 3,029,120
Hawlev. Huller & Co 350,000 0
Haydt Miller & Co 1.200,0(.X) 0
Havdsn; Stone & Co-^ 13, 925, 000 3, 499, 033
Heinphill, Noyes & Co 2,350,000 0
Hornblower & Weeks 6,290.000 1,000,000
W. E. Hutton & Co 8,020,000 9,000.000
Investors Trust Co 500.000 0
Jackson &' Curtis 6,795,000 0
Arnold W. Jones & Co 100,000 0
Ke.an, Tavlor & Co 3,000,000 0
Kidder, Peabody & Co 49,267,400 5,227,900
Kuhn, Loeb & Co 4, 700, 000 70, 426, 400
Ladenbarg. Thalman & Co 6,350,000 1,500,000
Laird & Co 250,000 0
Laird, Bissell & Meeds 500.000 0
W. W. Lanahan & Co 1,100. OfiO 0
W. C. Langley & Co 24, 508, 0(X) 9, 869t 000
Lazard Freres & Co 22,128.000 9,000,000
Leadenhall Securities Corp— 2, .500, 000 0
Lee Higglnsot) Corp * 31. 329, 000 " 3. 727. 000
Lehman Li\ , 13,250,000 3,286,000
Adolph Lewisohn & Sons 100.000 0
Makubin, Legg & Co 2,600,000 0
McLeod, Young, Weir & Co 6, 150, 000 0
Maine Securities Corp 390. 000 0
Lawrence M. Marks & Co 700. 000 0
Mellon Securities Co 14, 400, 000 20, 842. 000
Merrill, Turbin & Co 350,000 0
Minsch, Monell & Co ^ 2.50,000 0
Mitchum. Tully & Co 1,600,000 0
Moore, Leonard & Lynch 500, 000 0
Morgan, Stanley & Co 0 157.194,250
F S. Ai-JF^Ie & Co 32, 739, 000 0
G. a?.-^ '•-•-"by 1,550,000 0
W. H. Newbold's Son & Co 350, 000 0
Newton, Abbe ^\c Company 725,000 0
Otis & Co 4, 100. 000 0
Pacific Co. of California 3,920.000 0
Paine, Webber & Co 6.155,000 0
Pask & Wf.r Ige - 100,000 0
H M ^'ivb' -Co — 813,000 250,000
^rt) ' Co' ' 4,685,000 0
R. W. Pressprich & Co 810, 000 0
Putnam & Co 2, 200. 000 1. 050, 000
Richardson & Clark 528. 800 0
Reynolds* Co «^^'^ ^
ix.cc-. (CK.O - 2. 480, 000 0
E. H. Rollins Tco-'- 26. 298, 000 1. 750, OOO
Roval Securities Corp ^•'^^^'^ 5
*age. Rutty & Co., Inc -, IJi'SX S
Schoellkopf, Hutton & Pomeroy 1.800,000 O
• Includes $.52(5.000 private deals.
» Includes $667,874 private deals.
CONCENTRATION OF ECO^'"MIC POWEK 11715
Scliroeder, RockeMler & Co $3,100,000 $0
Ghas. W. Schranton 1,000,000 1,050,000
Securities Co, of Milwaukee 6,160,000 0
J. & W. Seligman & Co 5, 650, 000 2, 000, 000
Singer, Deane & Scriber 600,000 0
Edward B. Smith & Co. ; 1S34-5-6-7 ) 56,456,000 38,343,000
Spiith, Barney & Co 5, 887, 000 1, 250, 000
Spencer, Trask & Co 10,590,000 0
Speyer & Co 500,000 0
William R. Staats Co 6,340,000 0
Starkweather oc Co 3,040,000 0
Stein Bros. & Eoyce 950,000 0
Lawrence Stern & Co 2,910,000 0
Stone & Webster & Blodget 22, 399, 000 18, -^.74, 000
Strother, Brogden & Co —- - 600,000 0
Stroud & Co 350,000 0
Tenney & Co .200,000 0
Tifft Brothers 1, 540, 0(iO 0
Tucker, Anthony & Co ^ 3,355,000 0
G. H.- Walker & Co 500,000 0
117it)
C()N(;WNrKATI()N Ol-' lOCONOMKJ l*(3WKU
CONCENTRATION OF ECONOMIC POWER
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11720
CONCENTRATION OF ECONOMIC POWEFc
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GONCKNTRATiON OF ECONOAllO PUWEK 11721
Exhibit No. 1632
[From the files of The First Boston Corporation]
[Oris. & Copies in files. A. W. Harris. (Genl. files — Corp. — Buying Dept.)]
AX3EBT W. Harris,
115 Wkst Monroe Street, •
Chicago, August 6, 1934.
John R. Macombeb, Esquire,
1 Federal Street, Boston, Mass.
Deab John: I am very sorry indeed to learn that Harry has been laid up
and I can .sympathize with him, as I had a similar thing happen to me not so
many years ago. I had a growth on the bottom of my foot that didn't amount
to anything and, while 1 didn't take it very seriously, the first thing I knew I
was going around on crutches and had to go finally and have the growth cut
out of the bottom of my foot and then I got better right away. I hope Harry
will have the same experience — that is, that his recovery will be as rapid.
About the colts, I guess race horse prospects are about the only kind of horses
that can be sold these days, as it costs too much for feed for anybody to afford to
keep them for any other purpose than racing.
To go back to Harry, I hope you and he will not put off coming out until
he throws his crutches away. As soon as he gets out all he wants is about ten
days to get used to going around on one foot and it won't take him long to
feel so at home on the crutches that he will hate to throw them away ! You
better plan on coming out and bringing hito along in a couple of weeks from
now. Of course, a fellow can't be expected to work if he has to use crutches,
so we could spend a day or two up in the country. We have plenty of auto-
mobiles :ind boats and we can take Harry around very comfortably or park him
in the shade while we are taking a horseback ride.
I note what you have to say in connection with the Southern California
Edison and Mr. Walker. I think I will repeat to you what I said to Mr. Walker.
I told him that we were not out of the investment business, that we proposed
to do as much bond business as we could do, that in the past six months we
had done more municipal bond business than we ever had in any six months
before, that we expected the Banking Law and the Securities Law to be changed
so that the investment houses and banks could do more business, and that,
while it might be necessary and desirable for us to make new connections, we
did not propose to make any until we were off with the old ; certainly we did
not propose to help anybody who did not help us and if he wanted us to do
anything for him he would have to do something for us first ; that we were in
the municipal bond business and the banking business and we wanted more
trust business such as appointments as active trustees under mortgages, transfer
agents and registrars for stock issues, and anything we could legitimately do,
we expected to u.se our influence to help anybody that would use their influence'
to get business for us of the kind we could handle ; that up to date we had not
severed our connection with the old Chase Harris Forbes crowd; that we had
not got down to considering any of the present rules and regulations very seri-
ously, as we were confident they would have to be changed before business
would improve ; and incidentally, as far as the Southern California Edison
and the San Diego situation were concerned he could talk to Mr. Bauer or he
could talk to me and it did not make any difference which one he talked to,
because he would be talking to the same fellow.
I had rather hoped that you and Harry could get out before long, because
I think in self-defense we shall have to make some different alignments unless
we can make some satisfactory offensive and defensive relations with you
fellows, and I do not imagine we can stand the matter off very much longer
than around the first of next month. We have had the building spend a little
money and we are spending a little of our own in remodeling the fourth fioor
and we are rearranging our banking floors a little and will put our Bond
Department up on this fioor. We ought to have it 'in shape about this time
next month. After we get all done we ought to look pretty good. Certainly
we shall be very much better coordinated and I am quite pleased with the
set-up, also with the earnings of the Bank so far this year. We hope to
have $500,000 more in The N. W. Harris Company to disburse about the first
of the year. There is nothing I should like better than to show our stockholders
that they got practically all their money back. Our reserves are coming up
in good shape, so perhaps some time next year we shall have our reserves
11722 CONCENTRATION OP ECONOMIC POWER
back to where they were some few years ago and be able to return to a 12%
dividend at least.
Another thing you probably noticed was that the directors had elected Howard
as Chairman of the Executive Committee, which means that I am going to try
to pay a little less attention to detail. I have rented an office up on the twen-
tieth floor and may be in that next month, at least part of the time, and when
you and Harry get out this way you can have either one of my offices.
Everybody is well as far as I know. We have had a very, very dry year,
but the drought seems to be broken with a couple of light rains. Anyway, if
we had not had these rains the country around northern Illinois and southern
Wisconsin would have been ruined. As it is, it is in pretty bad shape. Instead
of having hay to sell, Norman and I between us have bought about seventy-five
tons. No hay has been put up. Most of the dairy farmers have been pasturing
their grain fields, and the only thing we are going to have to see us through
is corn and silage, with what hay they can afford to buy if we get the corn.
Saturday morning before the first bhower I was driving around the country
looking it over and I thought our prospects for getting anything at all were
about as good as those of the fellow who said if he had some ham he would
have some ham and eggs if he had some eggs !
I guess that is about all the news from this part of the country. With
kind regards,
Sincerely yours,
(Sgd.) Albert W. Habbis.
Exhibit No. 1633
[From the flies of The First Boston Corporation]
Office of the Pbesidknt
Harris Trust and Savings Bank
Organized as N. W. Harris & Co. 1882 Incorporated 1907.
' Chicago, April 13, 1935.
Dkar Harry : A few days ago in talking with John O'Brien of H. M. Byllesby
& Company, my attention was called to the fact that they are still in the
securities IJusiness.
As you know, we think a great deal of John O'Brien and regret that he
is not now a director of the bank. H. M. Byllesby & Company and their
allied corporations keep substantial balances with the Harris Trust and Sav-
ings Bank and it certainly is good business for us to do everything we possibly
can for them.
John did not mention any specific business and he may not have had South-
ern California Edison in mind but, on the other hand, he may and I would
greatly appreciate your making arrangements for H. M. Byllesby & Company
to participate in some way. I realize that this is a late date at which to
make this request but I also know that you will be willing to strain matters
a little if necessary in order to accommodate us.
Cordially yours,
H. W. Fenton.
Mr. H. M. Addinseix,
The First Boston Corporation,
100 Broadway, Neiv York City, New York.
Exhibit No. 1634
[From tbe files of The First Boston Corporation. Letter from D. R. Llnsley to J. R.
Macomber]
The First Boston Corporation,
Neio York, N. Y., May 16, 1935.
J. R. MAcoMBEHt, Esquire,
The First Boston Corporatiw), 1 Federal Street, Boston, Massachusetts.
Dear Mr. Maoomber : Mr. Fenton came into the office today to talk with me
about the matter of making the Harris Trust the Paying Agent in Chicago and,
CONCENTRATION OF ECONOMIC PDWER 11723
if possible, tbe Authenticating Agent in San Diego and I covered the situation
in some detail with him, assuring him that we would root for them just as hard
as possible.
During the course of the conversation he referred to the forthcoming Edison
Electric Illuminatirg of Boston Mortgage issue and said they would like very
much to be the Chicago Paying Agent. It seems to me quite logical that in
view of the size of the issue and tlie nation-wide distribution the Company
would want to have a paying agent in Chicago. I told him that I would mention
this to both you and Nevil so that you both would have it in mind.
I also tipped him off — in coutidence — to the Texas Coq}oration business, which,
while presumably there isn't any possibility of their being Chicago Paying
Agent in view of the strong tie-in between the company and the Continental,
nevertheless he might be able to chisel in on the bank credit which the Guaranty
Trust Company is setting up. He was quite grateful for the tip and as he was
leaving I again assured him that we were more than appreciative of the efforts
of the Harris Trust on our behalf and would do everything we could to
reciprocate.
I am marking a copy of this letter for Nevil Ford and Jim Lyles so that they
may have in mind the question of the Chicago Paying Agency on the Edison
when, as and if it arrives.
With kindest regards.
Sincerely yours,
DRL/g
Exhibit No. 1635
[From the files of The First Boston Corporation. Letter from B. W. Lynch to Duncan R.
Linsley]
H. M. BYIiKSBT AND COMPANY
INVESTMENT SECURITIES
231 South La Salle Street
Chicago, April 15, 1935.
Personal.
Mr. Duncan R. Linsley,
Vice President, The First Boston Corporation,
100 Broadway, New York City, N. Y.
Dear Dung; As I told yo"u in New York, Baxter Jackson called me about
trusteeship for San Diego and I explained it was necessary to have local
trustee. I think I did not mention that Alan Pease inquired on the same subject
and put in a strong bid for the paying agent in New York. To me there is no
question this should go to Chase on account of their performance on our recent
Northern States and even Louisville.
I wish you would discuss this with Victor or anyone else you think advisable
and let me know if you agree with me.
Sincerely yours.
Best.
BWL:R
Exhibit No. 163&-1
[From the flies of Lehman Brothers. Letter from Edward J. Frost to Paul M. Mazur]
Executive offices
Wm. Fixene's Sons Company
Boston, August 6, 1936.
Mr. Paul M. Mazur,
Lehman Brothers, 1 William Street,
New York City.
Dear Paul : "What arrangements are suggested with respect to Registrars and
Transfer Agents for the new Federated Preferred S'tock?
11724 CONCENTRATION OF PXX)NOMIC POWER
In this counection, the Old Colony Trust Company and The First National peo
pie, Boston, would like to act as Transfer Agents and Registrars respectively.
Kaplan and I think this might be desirable as presumably considerable amounts
of new Federated Preferred will be held in this territory.
Cordially yours,
B. J. F.
EJF : H.
Exhibit No. 163(^-2
[From the files of Lehman Brothers. Letter from Paul M. Mnziir to Edward J. Frost]
August 10, 1936.
Mr. Edward J. Fbost,
Wm. Filene'a Sotis Co., Boston, Mass.
My DEAR E. J.: Ten days ago I spoke to Jack Kaplan on the telephdue in
reference to registration and transfer agency for Federated.
Generally speaking, the choice of these two oflices is usually left to the banker.
Jack Kaplan told me that it was quite satisfactory for us to go ahead and name
both registrar and the- transfer agent. In line with that, we have selected J. P.
Morgan & Co. as transfer agent, and have not yet reached a conclusion about the
registrar. So far as the Boston house is concerned, I believe this would only be a
duplication of expense, as practically all of the trading of the stock will be done
in New York.
There are also so many different agencies already in the field by reason of the
fact that there was one of each for the first stock issue of each compauy, that it
was my opinion that it would be better to assume there was no obligation and
name the new registrar irrespective of all previous associations. Rightly or
wrongly, we thought this would create less ill will.
I will be glad to talk the matter over with you when I see you next.
With best wishes, I am,
Sincerely,
pmm/hh
Exhibit No 1636-3
[From the files of Lehman Brothers]
James S. Rogan, President
American National Bank,
Indianapolis, Indiana, June 26, 19S7.
Mr. Jos. A. Thomas,
Partner, Lehman Brothers,
One William Street, New York, N. Y.
Dear Joe : Apropos of our conversation the other evening when you were in
Indianapolis, I discussed with one of my officers the following day the corre-
spondence which he had had relative to working out an arrangement for fa-
cilitating payments to the Internal Revenue Department covering stamps used
by the distilleries at LavsTenceburg. However, I found that I was confused as
his correspondence had been with Seagrams instead of Schenley Products
Corporation.
On the other hand, I find that our Mr. Q. H. Mueller has called two or three
times on Mr. Nantz, Manager of your Lawrenceburg plant, who handles pay-
ments for revenue stamps by giving a certified check on a local bank in Law-
renceburg, and in turn that account is reimbursed by your Treasurer
transferring funds as needed. It occurs to us that that arrangement is doubt-
less working satisfactorily with the possible exception that it might occasion
your having larger balances at times in a small bank than might be desirable.
Insofar as we can determine, your company does not carry an account in In-
dianapolis and we have not approached your Trejj&urer either direct or through
correspondence. In looking over checks issued \>j a couple of our local cus-
tomers, the Klefer-Stewart Company and Mooney-Mueller-Ward Company, given
to your company for purchases in sizable amounts, we observe that deposits are
I UNCKiNTKATlOiN OF ECONOMIC FOWEK 11725
usually made at the Bankers Trust Company or the Bank of the Manhattan
Company, New York.
The purpose of this letter is to correct my statements to you the other eve-
ning in view of my confusion with the other major distillery operation in
Lawrenceburg. Nevertheless, it is my rather strong conviction that some of the
other factors mentioned are worthy of further thought.
I very much enjoyed you» visit to Indianapolis this week and earnestly trust
that you may find occasion to repeat it in the not too distant future. Inci-
dentally, I might mention that my as.sociate, Elmer Stout, told me that he was
going to insist at the Board meeting which he attended yesterday that your
good firm be given an opportunity to discuss any potential refinancing for the
[ndianapolis Power & Light Company.
With kind regards, I am
Cordially yours,
JAS. S. RoGAN, Pj'esident.
p:thibit No. 1636-4
I from the tiles of Lehman Brothers. Letter from Lehman Brothers to Klmer W. -tout.]
Mabch 3, li 58.
Mr. Elmer W. Stout,
Chairman of the Board, American, National Bank,
Indianapolis, Indiana.
Deab Mr. Stout : Thank you very much for your letter of the twenty-eighth.
It was nice to hear from you and I regret that we haven't had an opportunity
to see each other since our last brief visit in New York.
I have again written the Schenley Company today of our very keen Interest
in you and Mr. Rogau and the welfare of the American National, and I feel
sure that if there is any way in which Schenley can make use of an Indian-
apolis depository, the American National will receive the fullest consideration.
It is my understanding that except for a pay roll account which is carried in
Lawrenceburg, the company has maintained its cash reserves to a very great
(Xtent in New York. Confidentially, one very good reason for this is that the
company has been rather light in cash during recent years while undergoing
the process of building up its stocks, and it has been prudent to keep its funds
with the banks from which it has been borrowing very substantial sums of
money. Its loans, however, have been declining in recent months and I trust
that this situation will continue to undergo a further change.
I am glad to have the news about the Indianapolis Power & Light Company,
and I hope that the final hearing before the Commission will result in a satia
factory finding and disposition of a case which has been both long and ex-
pensive. We are, as you know, extremely anxious to serve the Company and
it seems a great shame that several past periods of strength in the bond market
have gone by while the company has been hampered by the rate case.
With very best regards to yourself and Mr. Rogan,
Yours sincerely,
Exhibit No. 1636-5
[From the files of Lehman Brothfisl
Elmer W. Stoot,
Chairman of the Board.
[Copy]
American National Bank,
Indianapolis, Indiana, February 28, 19S8.
Mr. Joseph A. Thomas,
Lehmun Brothers, I William Street, New York City.
Deab Mb. Thomas : You may recall that when I was in New York last fall
I had a brief chat with you and Mr. Robert Lehman concerning the Schenley
products of Lawrenceburg, Indiana. At that time, as I recall, both of you
thought there might be a chance of the company's making use of a bank account
in Indianapolis.
11726 CONCENTRATION OF ECONOMIC POWER
I do not wish to become a pest but hope you will permit me to remind you,
the next time an opportunity presents itself, to bring the matter up for consid-
eration with the company. I am enclosing you a copy of our last statement,
also a copy of Mr. Regan's annual report to the stockholders. For your informa-
tion, we have no items in the bank with a doubtful or loss classification and I
might add we have a very substantial appreciation in our bond account not
shown in the statement.
I assure you that we shall be very grateful to you for anything you may do
for us with the Schenley Corporation. We think they can use us to advantage.
We had a meeting of the board of directors of the Indianapolis Power and
Light Company today and have every reason to believe that within a very
short time the company will receive a satisfactory finding of value. The com-
mission has set March 8 as the date for final hearing.
With kindest personal regards.
Yours very truly,
[s] Elmer W. Stout,
Chairman of the Board.
Exhibit No. 163G-6
[From the files of Lehman Brothers]
Frank K. Hocston, President.
Chemical Bank & Tbust Company,
165 Broadway,
New York, June 20. 1938.
Mr. Joseph A. Thomas,
Lehman Brothers, 1 'William Street,
New York City.
Deab Mr. Thomas: With reference to the proposed financing of the Indian-
apolis Power & Light Company, I understand that there will be two issues, each
requiring a trustee, and I bespeak for our bank consideration for one of these
appointments or as New York paying agent.
If this is not a matter in your hands as underwriter I will be obliged for
any suggestion you can make that might lead to our sel ction to act in one of
the capacities mentioned.
Your kindness will be much appreciated.
Very truly yours,
F. K. Houston, President.
F. K. H.
Exhibit No. 1636-7
[From the files of Lehman Brothers]
June 22, 1938.
Mr. Frank K. Houston,
President, Chemical Bank & Trtist Company,
165 Broadway, Ncic York City.
Dear Mr. Houston : I have your letter of June 20th with reference to the pro-
posed financing for the Indianapolis Power & Light Company.
It doesn't make me very happy not to be able to write more encouraging
news with reference to the trusteeship and paying agencies. Unfortunately,
this matter was not in our hands, as both the company and the trustee of
Utilities Power & Light had very strong convictions as to where the agehcies
should be placed. It is my belief that commitments to other banks have already
been made, but if I am not correct, I feel that the only possible approach for
you would be through the trustee, Mr. Charles T. Adams, or Mr. H. T. Pitchard,
President of the Indianapolis Power & Light Company.
I regret our Inability to be of more service to you in this connection.
Very truly yours,
Joseph A. Thomas.
CONCENTRATIOxX OB' ECONOMIC POWER 11727
Exhibit No. 1637
New York Office,
August n, 1938.
Ansd. by wire, we will have nothing to say aiout It and Chase can do whatever they
like*
Mr. F. K. Shkadek,
Chicago Office.
Dear Frank : Samuel Armstrong, a Vice President in The Corporate Trust
Department of the Chase whom I have Icnowii for a long time, telephoned today
regarding the new issue of Public Service Company of Northern Illinois, which
explains my wire to you. He inquired first whether the Bonds would be issued
under a new mortgage and apparently we do not know the answer in this office.
He then said that, of course, he was looking for trust business and in the event
that there will not be a new mortgage, he wants to go after the New York paying
agency job, unless we should be figuring on it for ourselves in which case he
would do nothing about it. They are paying agent for the Series I issue of thi.i
Company.
If there is no conflict with our interests, he has in mind having his man in
Chicago see what he can do and will you please wii'e me what I should say to
him.
LB/M. L. B.
Stipulation
It is hereby stipulated and agreed that the document listed below is a true
copy of a communication from the files of Halse.v, Stuart & Co. Inc.
Date
Description
To—
From —
Aug. 17, 1938—
Letter
V K Shrnilpr
L B New York Office
(s) H. L. Stuart.
Dek;embeb 13, 1939.
♦In pencil on original.
Exhibit No. 1638-1
[From the files of The First Boston Corporation]
The FmsT Boston Cobporation
private wire
Received from Los Angeles, 3-11-1935.
YESTEaiDAT'S WIRE
So Cal. Ed.*
Pope,
Addinsel-l, N .Y. :
We had a reasonably satisfactory talk with our friend here this morning. Con-
trary to first reports he has no interest in refunding 1939 maturity although that
has been the point of approach for many bankers. These will be taken care of
out of earnings and small bank loan not exceeding 6.000.000. His idea is to take
advantage of market of next 90 days for say 40 pet of his refunding. Then if
market holds so or better strengthens as he feels it will do an additional amount
and balance at another favorable time in the future. This resolves itself as to
best issue to call for first operation which for various reasons we will not go into
is the 55 million 5s of 51. First call date on these is May 1 60 days notice for
July 1 payt. 10 days previous notice to trustee or say Apr 20th. Situation on
leadership somewhat complicated as you may realize for we .judge he feels obli-
11728 CONCENTRATION OF ECONOMIC POWER
patious to several but our guess Is that Blyth & Co is probably the one about
whom we need to worry most. We could not get him this morning to commit
himself on this altho feel that he wants to keep a free hand on this in talking
with his directors. Wants to be sure house leading is ace high in administration
circles in Wash on which point we of course gave him definite assurance. We
named our associates if we head the business which was quite satisfactory to him.
As to possible price on a 25 yr bond all agreed that this must wait until outcome
of PG & E offering but am sure of one thing we will have to better a 4 pet basis
to public or the business will not be done. With background already laid by our
Chicago friends and after our talk this morning feel we have gained some ground.
•In pencil on original. J. Macombkr LA.
Exhibit 1638-2
[From the tiles of The First Boston Corporation 1
Mar. 14, 1939.*
So Cal. Ed.*
The following persons were present at a meeting in Bauer's office on the morn-
ing of Thursday, March 14, 1035: Messrs. Macomber, Ramsey and Woods, repre-
senting First Boston Corporation ; Messrs. Albert W. Harris, Mullendore, Reppy,
Trott and Bauer representing Edison Company.
Mr. Bauer expressed the private understanding he had with Mr. Macomber
that the First Boston, withoitt any compensation therefor, would assist Edison to
prepare registration certificates and prospectus for filing with the S. E. C. in con-
nection with the calling on July 1, 1935 of certain bonds of Edison. First Boston
has retained Sullivan & Cromwell to assist in the preparation of these documents,
with the understanding that the question as to whether Edison shall pay any
part of their fees or what part shall be hereafter determined by Bauer. As to
who shall constitute tlie group that will offer the refunding bonds to the public,
and the extent, if any, to which First Boston shall participate is left for further
discussion. The foregoing is a full and complete statement, and represents the
extent to which any obligations were incurred or commitments made by anyone
in this connection.
•Tn jjenoi] on original. B.
W. C. M.
J. R. M.
Exhibit No. 1638-^
[From the t\\es of The First Boston Corporation]
The Fibst of Boston Corporation
private wibe
So Cnl. Ed.*
Received from San Francisco, March 18, 1935.
Macomueb.
Chas. Blyth will call on you today. Stop. I advised his partner hr tt
subj Bauer appvl we expected hv them in grp if we headed it but as yet we cUl
not be mr specific. Stop. Also asked abt Pac Ltg and sub biz ptd out Chase Sec
had 15 pc in So. Cal. Gas Harris headed La Gas & Elec ask DRC abt these. Stop.
He stated they wr talking to co but ntg wld be done imtll franchise qn decided
at Apr 4 elecn altho co wkg on regrn blank suggest you make pt of saying to
Blyth tt we feel our historic posn this biz strong altho willing recongize Blyth
Idrshlp. Stop. Bent on Field Glore arrives today to see Baer. Stop. Rumor
Is Walker of Smith will return and sm indication tt his firm is doing talking on
pvt deal. Stop. Good progress over wkend on So. Cal. blank hope for proof one
Tuesday am. Stop. Bauer asks when can we talk re call pxs etc I replied later
in wk when blank further along wire me yr ideas details issue so I can hv them
before me when talking with Bauer.
•In pencil on original. WOODS LA.
CONCKN'L'UATION OF ECONOMK" i'OWKK 11729
Exhibit No. 1638 4
(From the flle.s of The First Boston Corporation)
Thk FiKST OF Boston Ck)BPORATiON,
215 West Sixth Street,
Los Angeles, California, March 21, 1935.
At?' mail
Mr. Geobqe Ramsey,
The First Boston Corporation, 100 Broadway, New York, N. Y.
Re: Southern California Edison Company, Field "Glore & Company
Deab George: Garry Dulin states that Bauer's law firm has been his counsel
for many years and that he has been Bauer's partner in several real estate
operations here in Los Angeles. They are jointly interested, it appears, in
the office building which Bauer told us about. Garry further states that about
a month ago Bauer discussed the possibility of selling about $15,000,000 of bonds
privately whereupon Dulin communicated with Field Glore & Company. Dulin
and Bent have had daily discussions with Bauer on the possibility of placing
$15,000,000 25-year SWs with one or two institutions.
Yesterday, as I advised you by wire, Bent stated that he felt our program
was in the interests of the company and that he would withdraw from discus-
sions looking toward a private placement of a relatively small issue. Today
he came in to see me to talk about Edison Company matters (he did not raise
the subject of Union Oil and I kept away from it) and he stated that his
position was rather delicate and that he thought that he should probably con-
tinue to talk with Bauer. I advised him that that would be perfectly agreeable
to us and expressed the hope that nothing I had said had lead him to believe
that we had an agreement with the company with respect to the financing
becaus9 the contrary was the truth.
I told- him we were merely working on the Registration Blank and there was
no indication as far as I knew of how Mr. Bauer would finally do his financing.
Mr. Bent then stated that when Dulin had invited him into the picture and
Bauer had encouraged him to make an offer he assumed we had formed a group
and there would be no place for him in it. He stated that Mr. Glore had talked
to Harry Addinsell about the possibility of an Edison Refunding about six
months ago and had also talked to Mr. A. W. Harris on the same subject.
According to Bent, Harry AddinseU was non-commital and Mr. Harris s'.ated
that nothing was being contemplated. Bent states that no one in Field Glore
has heard from H. M; A. since the time of the Glore conversation.
I pointed out that this was readily understandable because we had taken no
definite steps in the direction of forming a group and did not expect to do so
until there was a more definite indication of what Mr. Bauer wanted us to do.
Bent expressed the thought that it might be well for H. M. A. to talk with
Glore and I said I would pass this suggestion on to New York. He ask^'d
if we would like him to discontinue his discussions with Bauer and I replied
that in view of all the circumstances we could not possible ask him to dis-
continue his efforts. As we left the matter he will probably continue talking
to Bauer although I think he feels that we will probably do the business and
he is more concerned with getting into our group than anything else. If
Harry Addinsell had a conversation with Glore I suppose, depending on Its
tenor, you and he should give it consideration when and if we start to form
a group.
Dulin tells me that he thinks a 70,000,000 to 75,000,000 operation with a rep-
resentative group is In the best interests of the company and I think that early
next week he will probably Ulave occasion to so advise his friend Bauer.
In passing I might say that neither Dulin nor Bent have any idea who the
maker of the 40,000,000 private deal proposal may be.
Very truly yours,
OSOBOE D. VfOODB.
GDW:g
11730 CONCENTRATION OF KCONOMIC POWER
Exhibit No. 163S-5
[F'rom the flies of The First Boston Corporation]
March 22, 1935.
$68,000,000 Southern California Edison Co., Refunding Mortgage 25 Year
3%% Bonds
These bonds are to be sold to provide for the call of $55,000,000 5s due 1951
and $13,000,000 5s due 1939. The call will have to be published on May 1st
and called June 1st and the company wishes to be in possession of the funds
before the call is published.
The company is therefore bending every effort to get the registration certificate
compiled and filed by April 1st on the theory that it will then become effective
on April 20th, giving them ten days leeway. To this end Mr. Woods has re-
mained in Los Angeles and Mr. Arthur Dean of Sullivan & Cromwell flew
out there on Friday last. The Chicago firm of Butler, Pope, Ballard & Eltinge
who have apparently acted for the Harris Trust in past Southern California
Edison bond issues will be brought into the situation, although it is not clear
in exactly what capacity.
We understand that the proposed bond issue will have to be sold at a net
price to the company which makes the cost of the money not over 4% or they
will not do the business. The principle of a 21/2 point spread has been agreed
upon, which would make it necessary to sell the bonds to the public on a 3.83
basis. Mr. Macomber and Mr. Ramsey arrived at an understanding with
Mr. Bauer, President of the Southern California Edison Company, that if this
business is done we are to head it and handle it, the question of what partners
we have to be discussed with and approved by Mr. Bauer.
March 22nd, 1935. ^- ^^- Addinseix.
Exhibit No. 1639-1
[From the filea of The First Boston Corporation]
On basis of calling 5s of 1939 avd 5s of 1951 aggregating approximately
$68,000,000 the following has been set tip on a pvrelu tentative basis
I. Tlie First Boston Corporation (1-25-1) 30% ,$20,400,000
•2. E. H. Rollins & Sons, Inc. (2-11 V2-2) 10% 6,800,000
♦3. Blyth & Company (4 3-10-3) 10 0, 800, O0<)
*4. E. B. Smith & Co. (5 .5-7M:-6) 7.5 5.100,000
5. Brown Harriman & Company (3 4-7V2-4) 7.5 5,100,000
6. Lazard Freres, Inc. (6-7i/>-5) 7.5 5,100,000
*7. Wm. R. Staats Company (7-4 9) 3 2,040,000
*8. Dean Witter & Company (9-714-7) 3 2,040,000
9. [1 mil.] Kidder Peabody & Company (10-4-10) 2 1,360,000
♦10. Field Glore & Company (11-5-8) 2 1,360,000
II. [73%] White, Weld & Company (4-11) 3 1,360,000
12. Coffin & Burr, Inc. (3V.-12) 2 1,360, 000
13. [1 mil.] Lee Higginson Corporation (S) 2 1,360,000
*14. E. F. Hutton & Co 2 1, .360, 000
1.5. [1 rpa.] Stone and Webster & Blodgett, Inc 1 680,000
16. ri rpa.] F. S. Moseley & Company (S) 1 680,000
17. Bonbright & Company 1 680,000
18. [750—1%] Estabrook & Company (S) 1 680,000
19. [756—1%] Starkweather & Co. (S) 1 680,000
20. [750— 1%1 Whiting Weeks & Knowles (S) 3ya 680,000
21. Unallotted (213 3% 2,380,000
[3%— Pacific Co.] 100% 68,000,000
[5C0, y2— Ballon, Adams & Whittemore]
[Paine Webber (S) Cranberry (S)]
[Hornblower & Weeks (S) Seligman — Original]
[Arthur Perry (S) H. M. B. & G. (S)]
[73m W. C. Langley (S) Aldred & Co.]
Matter in parentheses written in.
Matter In brackets written in margin.
•Indicates people Mr. Bauer wants to talk to himself.
CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1639-2
11731
[From the files of The First Boston Corporation]
$30,000,000 Southern California Edison Compant, Refunding 5's, Due
Sept. 1, 1952
offered sept 15, 1927 — COST 97 OFFERED AT 100 IcSS M% TO BANKS, DEALERS,
INSURANCE COMPANIES
Sales
Principals:
Harris, Forbes & Co
E. H. Rollins & Sons..
National City Company
Coffin & Burr, Inc
First Securities Co., of Los Angeles
Blyth, Witter & Co
Wm. R. Staats, Los Angeles
Security Trust Co., Los Angeles
American National Bank, San Francisco...
Bond & Goodwin & Tucter, S.«n Fnnc',:::o
Wholesale:
New York Territory
Chicago Territory
Boston Territory
Selling Commission
30%
$6,750,000
30%
6, 750, 000
10%
2, 250, 000
3%
675. 000
7%
1,400.000
4%
900.000
4%
720.000
2M%
500.000
2%
375, 000
7h%
1.500.000
100%
$21,820,000
$3, 048, 000
4, 386, 000
1,744,000
9,178.000
1%
30,998,000
Shortage
998,000
Exhibit Na 1639-3
[From the flies of The First Boston Corporation]
The Fibst of Boston Cobpoeation
private wire
Received from San Francisco 3-21-1935.
No. 360.
RAMSETf, N. Y. :
Regarding Edison syndicate Bauer yesterday stated he would not wish have
Bonbright or Byllesby in group but called attention to fact we had omitted
Pacific Company. Stop. Latter strong local Institution in which Cochran Direc-
tor Edison has interest and was in previous business. Stop. Many of its execu-
tives were with bond department Security First National Bank. Stop. Have
this firm in mind for some participation.
Woods, LA.
Exhibit 1639-4
[From the files of The First Boston Corporation]
The First of Boston Corporation,
215 West Sixth Street,
Los Angeles, Calif., March 23, 1935.
Air mail
Mr. George Ramsey,
The First of Boston Corpoi-ation, 100 Broadway, New York, N. T.
Dear George: With reference to your long wire of today:
1. I do not believe Stanley Russell makes any impression on Bauer.
In ray presence yesterday Bauer wired him that the syndicate leader would
be announced at "12 noon P. S. T. Monday."
2. I do not think Bauer has any interest, in the relative position of the names
Smith, Brown, and/or Lazard. If he has I will transmit them to you Monday
afternoon. My strong personal preference is to have Lazard appear in the
11732 (CONCENTRATION OF ECONOMIC POWER
position we placed him in our original list. I think Russell treated us badly
in San Francisco and I wish to remind you so that you can tell H. M. A., that
he stated the reason he placed Smith ahead of us in the gas business was
because of "x)ersonpl preference." I suggest Smith's name be kept in the position
in our original list because they brought us the Chesapeake business. If Brown
would put us in the Distilleries deal I would vote to make the order of these
three names — Brown, Smith, and Lazard.
3. Regarding Rollins, I think Howe, because of his close personal relationship
with two and possibly three directors could have muddied the waters to some
degree if he had been inclined to do so. leaner ijidicated yesterday that he
expected Rollins would be second in the business. He stated that they were
anxious to have a '60'/o interest and he asked if I thought they rated any
such position. I said I did not, and he replied that he thought 10% was
about right but cautioned me not to quote him because if I did he would deny
having made the statement.
I said we would handle the Rollins' situation and he suggested that we should
do it carefully because some of his directors were quite keen on the company's
relations with its historic bankers. Howe does not expect, in my judgment,
to receive as large an interest as we do or to participate in making up the
group or to participate in any management fee we may charge. If we had
suggested 20%, he would nevertheless be asking for a larger interest. I think
you fellows in New York will have to decide his interest and I am sure what-
ever we decide will be okay with Bauer. I think Howe is leaving here tomorrow
in which event he will be in New York Monday. If you find he Is in New
York we can be much less delicate and spend much less time talking than if he
stays out here because it will not be as easy for him to communicate with his
friends on the Board.
4. With respect to Blyth, I think Bauer feels that we have them in about
the proper position although I do not recall that he has commented specifically
on this firm.
5. As I wired you, Bauer wishes to black ball Bonbright In addition he
commented unfavorably on the inclusion of Lee Higginson in our list because
they were mixed up with some major "fiascos". When I pointed out that the
first eight names, plus Pacific Company and perhaps one or two others, would
be the only people appearing, he replied that in that case he did not care who
we included from the standpoint of selling tlje bonds.
Generally speaking, Bauer is about fed-up with discussing the syndicate. I
think he will accept whatever we submit to him, generally along the lines, of
course, of the discussions you are familiar with and those summarized in this
letter.
6. Bent of Field Glore has been very decent and Bauer stated yesterday that
he thought it was a good name. I am sure, however, they can be included
or left out as you and John and the others may decide.
In passing I must say that as I have gotten to know Bauer better I have
developed a great admiration for him and I think you should revise your opinion
as it was voiced just before you left here.
Very truly yours
Geobob D. Wows.
GDW : g
Exhibit No. lfi3»-5
[FVoin tlie flies of The First Boston Corporation 1
[Copy]
Lettertiead of
American Capital Cobpobation
los anofxes, caufoknia
April 8, 1935.
Sidney A. Mitchell, Esq.,
Rotibright d Company, Inc.,
25 Nassau (Street, Los Avgclcs, California.
Deae Mb. Mitchell: Thanks for your letter of April 4th. I was surprised to
note that Bonbright & Company was not included In the list of underwriters of
No. 408 Night
CONClONTliATION OK E<<>N().MIC FOWEU il7;^8
the Southeiu Callforuia Edison issue, and I had assumed that possibly you
had reached the conclusion that the issue was coming out on too low a yield
basis, or that you had not considered it attractive for some other reason. I
note your continued interest in the situation, however, and I shall be pleased to
pass on to you any information that may come to me witli respect to the later
offering.
I l?ave checked the situation a little since receipt of your letter, and I get the
impression that your close connection with Electric Bond and Share Corporation
and association with other financing of "holding companies" was considered a
negative factor from a political angle. You will recall that Mr. Bauer in his
address to shareholders at the annual meeting euiphasized that the Edison Com-
pany had no holding company afilliation.s. I do not know that this is important,
but 1 paK.s it on for what it may be worth, and I would suggest that it would
be well to emphasize the large volume of financing which you have done for the
operating companies — the underlying issues. I recall that you referred to this
volume of business in the discussion with Messrs. Mcye:' and O'Melveney at the
Union Bank & Trust Company. If you will send me these figures perhaps I can
use them in some way that might be helpful.
Yours very sincerely,
(Signed) J. B. iiOVKLACK.
JBL GBA
Exhibit No. 1639-6
[From the flies of The First Boston CJorporatlou]
Thk Fikbt Boston Coki»ok.\ i ion
PUIVATE WIKE
Received from Los Angeles, Mnv. 2n, jy3.'">.
yesterday's wire
Ramsey, N. Y. :
Bent Field Glore Just advised that he had recommended to Bauer yesty that
we head business Stop He is hopeful we will invite his firm in Stop for
your information he states Field Brown Harriman Haydon Stone Blyth has
made trade with National Distillers for fifteen million ten year 4Vis with
strong sinking fund but no conversion Stop If you include Field in Edison
busine^ having in mind Blyth & Brown will also be in it think we should
have opportunity of considering participation on original terms National DL*
tillers
Woods I^ 46 A 4i/j
Exhibit No. 1639-7
[B^om the flies of The First Boston Corporation ]
Thu B^nsT Boston Cobpobatiok
pbiyate wise
73N Issue Telegrams, Vol. 15.*
H. M. A.'
Phoned '
No. 499 Night
Received from LA 3-25-1935.
testebday's wibk
RAMSunr, N. Y.:
Field name included for five per cent at A W Harris suggestion also because
Bauer and Kemp felt we did not have good middle western firm Stop
Nevertheless hope you will try get interest their distillerie.^ business in ex-
change for participation
Wo<M)8 LA
> In pendl on original.
11734 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1639-8
[From the flies of The First Boston Corf oration]
The Fikst Boston Corporation
private wire
No. 502 Night
Received from Los Angeles 3-25-1935
yesterday's wire
Long 502, Ramsey, N. Y. :
Conlirming teleptione conveisation participations are Boston 25 Rollins 10
Brown Lazard Smitii Blyth Witter IY2 each Field 5 Staats Kidder 4 each Coffin 2^
Paciiic Company 2 Stop This totals 90 percent and this group will api)ear on
imderwriting contract and in registration statement Stop I left it with Bauer
that remaining 10 percent would be pro rated among this group for contract
and registration blank purposes but would be offered on original terms subject
our management fee of one eighth or one fourth to the remaining names on our
list Stop That is agreeable to him excepting that Seligman is to have Hutton's
interest Stop I suggest you add one percent to each of first ten names and
have agreement with them that thev will give up one percent at our request
Stop Bauer not interested in remaining names excepting to see list of them after
we have decided upon them in order to be sure they are what he considers
respectable Stop He authorizes us to say that foregoing participations were
arrived at after discussion witli and have been agreed upon by Bauer Stop
Please advise me when we are free insert foregoing names and percentages as
adjusted to take care of extra ten percent in registration blank and forward
by wire holdings each participant in stocks and bonds company as of December
31 1933 and December 31 1934 Stop Do you wish me talk with Witter Staats
Pacific Company.
Woods LA.
25 10 71/2 5 4 21/2 2 90 10 31 1983 31 1934.
Exhibit No. 1639-9
[From the flies of The First Boston Corporation]
private wire — incoming
$73N Issue Telegrams, Vol. 15.
286/408 LOSA.
Pis Dlr Fllg Thru George Woods to Harry J. Bauer, Southern California.
On reaching office this morning and analysing the suggested makeup of syn-
dicate I am terribly disappointed to see the firm of White Weld & Co. eliminated
Stop In view particularly of our relations with this firm I would very much like
to see them reinstated for a suggested three percent imless it is contrary to
your wishes. This house is important here in the East particularly in the New
England market and for the good of the deal would like to see them in. How
do you feel about it.
John Macombeb.
( Stamped : )
CONCENTRATION OF ECONOMIC POVVEK 11735
I'^XHiBiT No. 1639-10
[From the fllee of The First Boston Corporation J
The Fibst Boston Corporation
pkivate wikf.
$73 M Issue Telegrams Vol. 15.
No. 461 A
Received from New York.
Itefer to 461 G. D. Woods, LA.
Understand percentages and order now as follows First Boston Corporation
twenty five percent Rollins ten Blyth ten Brown Harriman seven one-half
Lazard seven one half E. B. Smith seven one half your wire 502 indicates Witter
seven one half instead of five and we are assuming that figure for- them Field
Glore five Staats four Kidder Peabody four White Weld three Coffin & Burr
two one half Pacific Company two stop this adds up to ninety five one half
percent stop Rollins making strong representations that they should have
larger interest on account of historical situation stop because of their past
association how would Mr. Bauer feel about giving some of left over to them
say two one half percent additional stop we had already spoken to Brown in
accordance your 502 and they are naturally much disappointed to be displaced
in third position and raised question as to w^hether in advertising they could
appear in third position in the East Blyth appearing" in same position in West
H. M. Addinsei.i., N. Y.
Exhibit No. 1639-11
[From the Files of The First Boston Corporation J
The Fibst Boston Coupokation,
Ncio York, N. Y., March 21th, 1935.
Mr. William Edmunds,
Boston.
Deab Bustek : You probably thought I was very stupid in regard to the White
Weld-Aldred matter but I have always connected the White Weld firm with
the Aldred interests naturally and just when you telephoned I was struggling
with Los Angeles to keep White Weld & Company in the original syndicate,
from which their name had been eliminated, and when you spoke of Aldred
and not Aldred & Company I associated it with the matter on which I was
working at that particular moment. In all justice to myself I just do not
think your conversation was any too clear as to whom you were talking about,
but that I always have to contend with and L admit I should have been smart
enough to have unraveled your thoughts.
As you know, we kept White Weld in the syndicate not only for the 3% which
we originally had them down for but, having worn down the officials in the
last few days with recommendations I rather imagine they just threw their
hands up and said, "Let's call it a day" and approved the revised 4% for
White Weld which we had been fighting for.
I just have your telegram regarding this and am delighted that Bill Barron
and his associates are appreciative of our efforts. As I told him, they were
♦efforts and without them they certainly would not have been in the business.
As you well know, this was not handed to us on a silver platter to do with
as we saw fit, but we have been subject to Mr. Bauer's approval all through.
Anyway, it has unwound very satisfactorily for them and I am delighted.
Now in regard to Aldred & Company's position in Southern Cal. there has
noC been and there isn't a chance in the world of getting them in the buying
syndicate. I think we can take care of them substantially in the selling syndi-
cate and I have Frank Stanton now forecasting about what is going to be
available. If you will telephone me on Thursday before you meet with Mr.
Aldred I perhaps can give yon a general idea of what we are going to be
able to do for them, but it's pretty hard right now, as you can well imagine,
to say anything very definite on participations in the sales end but I will do the
best I can, but give me a ring.
124491 — 40— pt. 22 26
11736 CONCENTRATION OF ECONOMIC POWER
Everything has gone along extraordinarily well, all things considered, in the
Southern California deal and I hope the registration certificate will be in perhaps
Saturday of this week, so if that's so the bonds can be offered along about April
19th or 20th.
Mr. Bauer Is coming East on the 13th to trade out the final price, which I
am not awfully keen to tackle, but it's something that will have to be decided
about that time I guess.
I am enclosing herewith a li.«:t of the underwriters and their order in the
advertising with the amount.s on which we have finally agreed. Please show
this to Bill Potter, reserving commonts until I return to Boston because it won't
do any good to try to revise this now as this is a closed book.
We stepped Coffin & Burr up from 2V> to 3%, which was just I think in view
of their old connection with the business and they are very much pleased. We
finally gave Rollins 11 M; instead of the original 10 as they felt very badly at
being cut down from their old participation of 30%. I also at the last minute
got Stone & Webster and Blodget in it for 1%, which will help us on wholesale
bonds.
Keep this list confidential of course.
I shall be here the rest of the week and at a wedding in Hartford on Satur-
day, so 1 shall not be in the office until Monday. Do not have the flowers sent
in until Monday morning.
Cordially,
J. R. M. (?).
Ex HI HIT No, lf«!) 12
[From the files of The First Boston Corporation]
$73 M. Issue Telegrams, Vol. 16.
The First BoarfoN Corporation
PRIVATE WIRE
Received from Boston 4-12-1935.
No. 216.
Refer to : 216 Macomrer.
In view coming Narragansett do you think advisable to raise Bodell in So.
Cal. he is down for 3.i bonds of course we can juggle our wholesale list to
increase him if you think wise.
Edmunds. 35.
Exhibit No. 1639-13
[From the flies of The First Boston Corporation]
Date April 17, 1935.
So. Cal. Ed.*
73,000,000.
BE BRIEF WRITE PLAINLY
Transmit via Western Uinon
Albert W. Harris,
695 So. EI Moliiio Avenue,
Pasadena, Calif.
C'onfidential. Underwriting agreement signed this morning. Stop. Price to
conipany 96 fiat, price to public 98% flat. While we did not receive as much as
I hiid expected I am satisfied that it is a fair price. Stop. I think you selected
a worthy successor. Am sure our relations with First Boston will be happy.
Your friend John is enouirh like you .so that he and I will be able to talk the
same language. Wish you had been here. Best regards to Mrs. Harris and
yourself.
•In pencil on original. Harbt. [J. Batter]
CONCENTRATION OF ECONOMIC POWER 11737
Exhibit No. 1639-14
[From the flies of The First Boston Corporation]
RlEMO 4-22-35
$73,000,000
Southern Califoenia Edison Company, Ltp.
rkfunding mobtgage gold bonds — series of h%% due 5/1/1960
Date Offered— April 22, 1935.
Underwriting Group — Purchase Price 96 Flat.
Gross Spread — 1%%. All expense chargeable.
Service Compensation — A%.
Selling Syndicate Commission — 1%% Net.
Offering Price— 98 M; Flat.
Reallowance — ^4 to Registered Dealers.
Syndicate Termination Date — May 31, 1935.
Underwriters
First Boston Corporation . . .
E. H. Rollins & Sons
Blyth & Co., Inc
Brown Harriman & Co., Inc
Lazard Freres & Co., Inc
Edward B. Smith & Co
Dean Witter & Co..
Field, Qlore & Co _
Wm. R. Staats & Co
Kidder, Peabody & Co
White, Weld& Co
Coffin & Burr, Inc
Pacific Co. of California
Stone & Webster & Blodget.
25
IIH
10
7H
7%
7H
5
4
4
4
3H
2
1
Original Sales to
participa- | insurance
tion I cos
250, 000
395, 000
300. 000
475, 000
475, 000
475. 000
475, 000
650,000
920,000
920. 000
920, 000
555, 000
460,000
730,000
100 $73, 000, 000
$400, 000
184, 000
160, 000
120,000
120,000
120. 000
120,000
80, 000
64,000
64.000
64.000
56,000
32, COO
16,000
Selling
syndicate
participa-
tion
$5, 658, 000
2, 603, 000
2, 2G.3, 000
1,697.000
1, 697, 000
1, 697. 000
1, 697. 000
1,132.000
905.000
905, 000
905,000
792,000
453, 000
226, 000
$1,600,000 $22,630,000
Net par-
ticipation
$12,192,000
.5, 608. 000
4, 877. 000
3, 658, 000
3, 658, atO
3, 658, oon
3, 058, 000
2, 438, 000
1,951.000
1,951,000
1,951,000
1, 707, 000
975. 000
488.000
$48, 770. 000
Sales to Insurance Companies at y^'/j Flat
Mutual Life Insurance Co. of New York $300,000
Mutual Benefit Life Insurance Co., Newark 300,000
Aetna Life Insurance Co., Hartford 500,000
Penn Mutual Life Insurance Co., Phila 500.000
$1, 600, 000
There were $10,000,000 offered to (11) Insurance Companies of which only
$1,600,000 were accepted. The remainder turned down due to low coupon rate
of 3%%.
There were 657 dealers invited into the Selling Syndicate amounting to
$22,630,000. Of these dealers 24 declined amounting to $480,000. which wert^
redistributed among the 633 dealers who accepted.
(Handwritten:) 73M.
After the offering of these bonds, It was necessary to form a Special Syndicate
Account to keep a trading market. These bonds were purchased and sold only
to Selling Syndicate members. We purchased $2,640,000, which represented re-
purchases of $2,124,000 from West Coast principals, ,$209,000 frOm other Coast
participants, and $307,000 from remaining participants. Reports Indicate that
at least $800,000 additional bonds were purchased from Coast principals by
others.
Syndicate Closed— May 4, 1935
11738
(lONCENTKATION OK KCOMOMIC POWER
Territorial Distribution
Number of
Dealers
Ac-
De-
ccpled
clined
40
6
54
1
36
2
24
74
1
18
6
]5
21
115
6
49
55
25
1
15
82
6
4
1
633
24
nVrritory
Atlanta
Boston
New Eneland
Baltimore
Chicago
St Louia..
Kansas City
Minneapolis
Cleveland .._
New York City
Upstate, N. J., Conn.
Philadelphia
Pittsburgh
Washington
West Coast.^
Canada
Orig. Addl-
flUotment tional
455M
4,615
580
605
1,975
450
65
350
690
6,350
735
1,175
330
290
3,765
185
22, 615M
lOM
25
325
35
10
495M
De-
clined
65M
10
20
60
'm'
140
25
480M
Balance
400M
4.615
560
605
2,030
460
65
300
715
6.505
770
1,185
325
310
3,625
160
22, 630M
The physical delivery of these bouds on May 1, 1935 was as follows:
New York $46, 137, 000
Boston 11, 185, 000
Chicago 7, 093, 000
San Franci.sco 8, 585, 000
Total $73,000,000
Exhibit No. 1639-15
[From the flies of The First Boston Corporation]
George O. Muhlfei^d
President, New York
Chaiu.es a. Stone, Edwin S. Webstek,
Chairman of the Board, New York. Vice Chairman of the Board, Boston.
Stone & Webstke, I NCORPouATEn,
90 Broad Street, Netv York, N. Y., April 1, 1935.
Office of the President
(Handwritten:) $70,000,000 Issue.
Mr. John R. Macomber,
too Broadway, "New York City.
Dear John: When I returned troin Washington, Van told luo that .von had
included us in the Southern California business and I am certainly obliged to
you. He also tells me that there is a large Duquesne issue coming and as you
and I decided it would be better to discuss these things over a cocktail instead
of exchanging a barrage of letters, I will be brief now and call you up when
you arrive in New York.
I think that our special reasons for asking you to include us in the Minne-
apolis General Electric and Wisconsin Public Service purchase groups were
sound, but I recall that these groups were not enlarged at all. Van assumes
that the Duquesne group will be enlarged on account of the size of the issue
and he and I would appreciate a chance to talk to you about this one. He tells
me, however, that we have no special historic relationships with this Company,
but if there is room for new blood in this part of the Byllesby system, you might
be able to include^ us here as sort of a substitution for the other issues where
there was no room for us.
' (Handwritten) D I.
CONCENTKATION OF ECOxNOMIC POWER 11739
Not knowing whether you will be here tomorrow, I am sending a copy of this
letter to Boston.
Yours sincerely, d ^- Mithlfexd.
Exhibit No. 1639-16
[From the files of The First Boston Corporation]
Grou offering — Southern California Edison Company 3%% due May 1, 1960 —
to insurnnce conipaniorj 4/22/35
Mutual Life Insurance Co.
of New York, N. Y $300,000
Mutual Benefit Life Insur-
ance Co., Newark 300,000
Aetna Life Insurance Co.,
Hartford 500,000
Penn Mutual Life Insur-
ance Co., Philadelphia— 500,000
Total acceptances— $1,600,000
Equitable Lile >Assurauc-e
Society of U. S $500,0(iO
John Hancock Mutual Life
Ins. Co. Boston 1,000, 00. »
Metropolitan Life Insur-
ance Co 2,500,000
New England Mutual Life
Insurance Co. Boston 200, 000
New York Life insurance
Co 1,700,000
Prudential Insurance Co.
Newark 2, 000, 000
Travelers Insurance Co.
Hartford 650, 000
Total declinations.. $8, 550, OW
Syndtcate Department.
Exhibit No. 1639-17
[Frmn the files of The First Boston Corporation]
inter-offioe communication
The First Bosi'On Corporation
Boston Office, .} October 19S9.
Mr. George D. Woods,
Vice President, New York Office.
Dear Mr. Woods : In accordance with your request to Mr. Gerade, we list
below profit distributed to the various underwriters in connection with
$73,000,000. Southern California Edison Co. Ltd. 3%s 5-1-60—
The First Boston Corporation $461,978.05
E. H. Rollins & Sons, Inc 149, .543. 46
Blyth & Co. Inc 130,044.37
Brown Harriman & Co., Inc 97, 536. 72
Lazard Freres & Co 97,536.72
E. B. Smith & Co 97,536.72
Dean Witter & Co 97,536.72
Field Glore & Co 65,015.31
William R. Staats Co 52.020.49
Kidder. Peabody & Co 52,020.49
White, Weld & Co 52,020.49
Coffin & Burr, Inc 45,516.22
Pacific Co. of California 26,003. 3S
Stone & Webster and Blodget, Inc 13,008.56
$1, 4.37, 317. 70
Very truly yours,
J. B. DOBHINS.
(J. B. Dobbins)
A-fftistdnt Coniplroller.
11740 COxNCENTRATlON OF ECONO.MIC POWKK
Exhibit No. 163&-18
[From tlie files of The First Boston Corporation)
[File copy]
The Fibst Boston Corporation
New York Office
memo&aj^dum
April 6, 1935.
To: Mr. John R. Macomber
Suliject :
We have received from Lazard Freres & Co., Inc. the final and complete
record of the Selling Group on Pacific Gas & Electric Company First & Refund-
ing Mortgage Series G, ^io Bonds due 1964. For your information, I am enclos-
ing a list of the special cases in Bo.ston and New England which we are consid-
ering for the Southern California Edison deal together with the allotments
they received in the Pacific Gas deal.
Sliaw, Aldrich & Co. have been in communication with us, and at the present
time they are on our list for ten bonds.
A. C. Allyn & Co. are on our Chicago list for $100,000 bonds, but Duncan is
very anxious to have this raised if possible.
At the present time we are trying to confine the wholesaling on the Coast to
$4,(00.000 and the Middle West to $4,000,000, making $8,000,000 west of the
Mississippi. This would leave $10,000,000 for the entire East. Of this total the
ten names assigned to the New England territory account for $4,900,000 and
Bill Potter needs $1,500,000 for the small dealers in addition. This makes sv
total of $6,400,000. The special names assigned to the New York area at the
mon.ent voial $4,785,000. In addition we estimate $1,250,000 necessary tor liie
smaller dealers just in New York City alone. This does not take into consider-
ation Ohio, Pennsylvania, Suburban New York, New York State and the entire
South. In other words, to keep our special list at the present figures and to
take care of some of the smaller dealers throughout the country would require
an additional $0,000,000 of bonds in addition to the amounts mentioned for New
York City and New England dealers. Roughly speaking, that would be a gross
figure of $18,000,000 east of the Mississippi and at the moment we have only
$10,000,000. This means a lot of cutting down of allotments and cutting out
smaller dealers, the type who are working with our Trading system daily. Con-
sidering the obligations that we are under in the special interests it looks to me
as if $18,300,000 is not enough. In the Pacific Gas deal 'only $5,000,000 were
(ffered to the insurance companies, and Jim is contemplating $12,000,000 in our
deal. It is possible that tliis figure might be cut down and the amount saved
allocated to wholesaling. To do a moderately fair job we would need at least
$21,000,000, and to do a good job $26,000,000.
You have plenty of things to take up your time without being thrown intti
this part of the picture, but I thought you might like a report of the present
situation. George Woods and I are now actively working on the problem.
F. M. S.
FB 701-2
Handwritten : 73m.
CONCENTRATION OF ECONOMIC POWER 11741
Exhibit No. 16:^9-19
[From the flies of The First Boston Corporation]
(Hand written:) So. Cal. Ed.
The First Bo.six)n Corporation
NETW YORK office
Memorandum
To : Subject
BOSTON
Ballou, Adams & Whittemore, Inc. (2.5) 200,(100 (100)
R. L. Day & Co. (75) 400,000 (200)
Estabrook & Company (175) 750.000 (300)
Hornblower & Weeks (150) 200,000
Jackson & Curtis (100) ^ 250,000
Lee Higginson Corp. (300) . 750,000
F. S. Moseley & Company (150) 1,000,000
Paine, Webber & Co. (100) 100,000
Arthur Perry & Company, Inc. (50) 250,000 (150,000)
Whiting, Weeks & Knowles, Inc. (100) 1,000,000
NEW YORK
Aldred & Company (25) ._ 500,000
Bancamerica-Blair Corp. (150) 80.000 (100)
Bonbright & Co. (P) 100,000
H. M. Byilesby & Co., Inc. (P) 500,000
Eastman, Dillon & Co. (150) 100,000
Goldman, Sachs & Co. (100) 200.000
Granbery, SafEord & Co. (50) 2.10,000 (150)
Hayden, Stone & Co. (150) 200,000
W. E. Hutton & Co. (250) 200,000
Ladenburg, Thalmann & Co. (100) 100,000
W. C. Langley & Co. (250) 250,000
J. & W. Seligman & Co. (250) 200,000
Starkweather & Co., Inc. (225) 400,000
Tucker, Anthony & Co. (50) 75,000
SAN FRANCISCO
Weeden & Co. (15) 400,000 (250)
FB 701-2
[Figures in parenthesis are hand writtea.]
ExHirar No. 168f»-2n
[Prom the fi[etof The First Boston Corporation]
SlOl CB ew York N. T. A. 1159A Apr. 22, 1935.
IIabry Addinseli.,
Chairman of Executive Committee,
First of Boston Corpn., Pgtn.
Af'-'^v constant requests ^ver a period of weeks for reasonable consideration
in Southern California Edison bonds and representation of our needs we have
this morning been alloted forty five bonds to meet needs of an organization of
alfljfist two hundred salesmen and subscriptions for several millions of the
securities Stop We believe "'iat for one of largest distributing organizations
11742 GH)NCENTRATlON OP ECONOMIC POWER
of this country to be alloted forty five bonds out of seventy three million comes
pretty near being insulting Stop We greatly hope that you will use your good
ofRces to secure for us some approximation of fair treatment in this offering.
73 1\I.* Stanton Gbiftis,
For HEMPHfLx Notes and Company.
1208P
*In pencil on original.
ExHiniT No. 1()3» 21
f From the flies of The First Boston Corporation]
The First of Boston Cobpobation,
100 Broadway, New York, April 22vd, 193n.
Stanton GRr>Fis, Esq.,
Hemphill Noj/es d Co.,
15 Broad Street, New York City.
My Dear Mb. Griffis : I received you wire about the Southern California
Edison bonds. Mr. Bauer also received a similar wire from you, but he was
leaving for the west coast this afternoon and I don't know whether he had a
chance to communicate with you before he left. If he did not you will doubt-
less hear from him after he gets home.
I am sorry we were not able to get more bonds for you, although I understand
we were able to increase somewhat the original amount. In spite of the size
of this issue the amount that a fairly long list of principals were willing to
wholesale, combined with the desire of the company to take good care of the
California dealers and to obtain wide distribution throughout the country, made
it difficult to satisfy most of our friends.
Yours sincerely,
H. M. Addinskii..
Exhibit No. 1639-22
[ From the files of The First Boston Corporation ]
Shiei-ds & Company
AtEMBKKS new YORK STOCK EXCHANGE
44 Wall street
New York, April 25, 1935.
(Handwritten) : Having lunch tomorrow with Cornelius Shields re this.
The First Boston Corporation
100 Broadway
New York, N. Y.
(Attention of H. M. Addinsell, Esq., Pres.)
Gentlemen
We wish to explain to you our reasons for turning down your offering
to us of twenty bonds in the Southern California Edison selling group.
We had firm orders spread among our twelve offices for one million of these
bonds at the issue price. We were in constant touch with your Syndicate
Department for the three weeks preceding the wholesaling and gave you our
commitment in writing for up to five htuidred bonds in the selling group
regardless of issue price. On being offered twenty bonds out of ah issue of
seventy-three million, we preferred to tell our salesmen and offices that we
CONCENTRATION OK ECONOMIC POWER 11743
were not in the business at all rather than try to allot twenty bonds thruugli
our organization.
We assure you we should be glad to be included in any of your future
selling groups where you may find it possible to offer us an anxiunt com-
mensurate with our distributing ability.
Very truly yours
[Signed] Shiexds & Co.
H. W.
(Handwritten:) Very recently they have developed the bond end of their
business. Dick de la Chappelle is with them. Old line bond houses are getting
preference.
11744
CONCENTBATION OF EC)(>Nf)AJIC FOWEH
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CONCENTRATION OF ECONOMIC POWER
11745
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11746 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 164()-1
[Prom the flies of Harris, Hall & Company]
Los Angeles, Cauk., iVov. i, 19S5.
NoBMAN W. Harris,
Harris Trust and Savings Bunk, PNW:
Lageco officials say deal all made with underwriters too late include us only
chance would be to get Blyth who will head tleal to give us position. Stop.
Please pass information on to Bower and Hall and suggest they see Blyth in
New York soon as possible. Regards.
G. B. Heywood.
139P
Exhibit No. 1640-2
[From the flies of Harris, Hall & Company]
Pasadena, Calik., Nov. 5, 1935.
I.,. V. BowEE, HAiiKis Hall and Co.,
Ill West Monroe St., Chgo.:
Though personally friendly president has apparently had past differences with
bank which does not make him particularly anxious recognize historical position
under circumstances or go out of way our behalf at tliis late date so claims
matter closed issue and unwilling to do anything. Stop. Miller president of
Pacific Lighting has final say but doubt if could accomplish anything without
going San Francisco and then problematical as scarcely know gentleman.
Stop. Tied up here for few days but could go north later in week if think worth
while. Stop. Stanley or A. W. may know Miller and have some ideas.
Gene B. Heywood.
I In ink: A. W. out. Might talk to Stanley but think doubtful.]
Exhibit No. 1640-3
[From the flies of Harris, Hall & Company]
Habbis Tbust and Savikos Bank
CHICAGO
Telegram
Send the following message via Western Union Teleg. Co.
Charge — Department: Harris, Hall & Co.
CONFIRMATION COPT
G. B. Heywood, No\t;mbeb 7, 1935.
96S N. Oakland Ave., Pasadei\a, Calif.:
Hall obtained half million'' interest in Los Angeles deal so unnecessary go to
San Francisco.
NOBMAN W. Habkis.
Exhibit No. 1640-4
[From the files of Harris, Hall & Company]
C. E. Mitchell. Cable address
Chairman. BLYTHCO
Blyth & Co., Inc.,
120 Broadway,
ilARKis, Haix & Co., New York, November 6, 19S5.
Ill W. Monroe Street, Chicago, III.
Attention Mr. Hall
Gentlemen: Following your call upon us this morning, Mr. Addinsell of The
First Boston Corporation came to see me regarding the underwriting of the
CONCENTRATION OB^ ECONOiMlC POWER 11747
proposed issue of $40,000,000. Los Angeles Gas & Electric Corp. First and
General Mortgage bonds, series of 4's due 1970, now in registration. Under the
circumstances as discussed when you were in our office. The First Boston
Corporation has agreed to give up $500,000. of the amount of their participa-
tion in this underwriting, and we are thus enabled to offer to you a participa-
tion of $500,000. and would be glad to have your early reply as to whether
this Is acceptable.
The issue will be broadly advertised throughout various states of the country
and to the extent that you are registered as a dealer, we shall be glad to
include your name. Assuming that you will want to be so included, please
let us know to what extent you are registered or will be registered, bearing
in mind that it is expected that the issue will be ready for offering on November
18th.
Copies of the registration and other necessary documents for study will
be sent to you by mail tonight.
Very truly yours,
C. E. Mitchell.
P. S. — We find that we do not have extra copies of the documents that could
be sent from this office and have wired our San Francisco office to forward
them to you from there by airmail today.
Exhibit No. 1640-5
[Prom the flies of Harris, Hall & Company. Letter from L. V. Bower to George D. Woods]
February 15, 1936.
Mr. George D. Woods,
Vice President, The First Boston Corporation,
100 Broadway, Neiv York City, N. Y.
Deab George: We have been looking around for bonds to employ a portion
of our capital and surplus funds and began to examine into the Central
Illinois Electric and Gas Company with this in mind.
However, the further we get into the situation, the more it seems to us
that under present market conditions a refunding operation could be carried
out which would be of benefit to the Company, and we are writing to ask
whether you have had occasion to check this Company lately, and if so, whether
or not you agree with us.
When we were talking last December about having a possible purchaser for
the New York and Richmond Gas Company, you indicated that as a matter of
policy ^ou did not believe your organization should have any part in such a
transaction. I hope you do not have the same feeling about a refunding job
for the Central Illinois Electric and Gas Company, because you certainly are
entitled to whatever perquisites go with this business. If, however, for any
reason you feel that this prospective business should not be done in your
shop, and would care to give us a boost with the Company, we should be happy
to talk with whomever is the right party, and if, on the other hand, you do at
the proper time work out something for the Company in your office, we hope
you will find a place for us in the business and use our facilities to whatever
extent they might be the least bit helpful to you in connection with the job.
With kind regards.
Very truly yours,
L V B
LVB : EW
Exhibit No. 1640-6
[From the files of Harris, Hall & Company 1
Thh First Boston Corporation,
100 Broadway,
New York, February J 8, 1936.
Mr. L. V. Bower,
Harris, Hall d Company,
111 West Monroe Street, Chicago, Illinois.
Dear Lahman : This will acknowledge your letter of the 15th relative to Cen-
tral Illinois Electric & Gas Company financing.
11748 CONCENTRATION OF ECONOMIC POWER
I do not have the same feeling respecting finnncing by snbsidinries of
Consolidated Electric & Gas Company that I liad in connection with acting as
broker for the sale by Washington and Snbnrban Companies of New York &
Richmond Gas Company. As a matter of fact, within the past few months we
headed a gronp which offered Atlanta Gas Light Company General Mortgage
Bonds. It seems to me that this type of operation is in the ordinary conrse of
our business and involves a function which the Company itself can not
perform.
We have given considerable thought to the refunding of the Central Illinois
bonds at various times and last fall we put the matter off for reconsideration
after February first of this year because the call price on the largest block of
bonds dropped IV2 points at that time. Mr. Frye of the Central Republic
Company has an important interest in this business and he checks in with us
and with the Company regularly.
It is a coincidence that about the time I received your letter Mr. Frye sent
us a comprehensive memorandum on the refunding possibilities, which I am
now having checked and studied by Jim Howe of our own offiie.
Off-hand, it looks to nie as though a sound refunding job can be done in
the very near future although our figures are not entirely complete as yet.
I have in mind that when and if it is possible to work out a refunding plan,
we will discuss the matter with you with a view of inchuling your firm in the
business on some basis. Meanwhile, if you have any concrete ideas or have
prepared any figures which would be interesting or iielpf'ul to us, I would be
glad to have a copy of them.
Very truly yours,
George D. Woods.
GDW : mms
Exhibit No. 1640-7
[From the flies of Harris, Hall & Company. Letter from L. V. Bower to George D. Woods]
Febkuary 21, 103G.
Mr. Gfx)roe D. Woons,
First Boston Corporation,
100 Broadicay, New York, New York.
Dear George: Thanks for your letter of February 18 relative to the Cen-
tral Illinois Electric & Gas Company. If this was free business I did not
want to be asleep at the switch, and that was my main reason for checking
with you.
We have not made any careful study of the situation other than to be con-
vinced that if the company should be willing to devote a substantial part of
an interest saving to at least a temporary debt reduction program, it should
be pos.sible to sell a refunding issue of 4% bonds to refund outstanding "is and
6s. Whether the debt reduction is accomplished in a way to yield the greatest
benefit to the company by providing a sinking fund or by using available
funds for serial payments on notes, as has been done in otiier cases with which
you are familiar, we are not sure but lean to the latter.
In my letter to you I referred to the use of our facilities and meant this
to mean physical facilities, because of our closeness to the company's office.
In other words, I thought that if you wanted something from the company and
didn't care to make the trip out here at this time, we could hop over to Rock-
ford for you and act as sort of a post office. However, I note fr<mi your letter
that Newt Fry of the Central Republic Company is probably performing this
service for you.
I have been in Iowa the past four days and the business I discussed with
Dune Linskfy and Jim Lyles a couple of weeks ago seems to be coming along.
We expect to have something to talk about in the next two or three weeks, and
hope that you will be interested.
With kind regards, I am
Very truly yours,
L. V. B.
LVB : IB
CONCENTRATION OF ECONOMIC POWER 11749
Exhibit No. 1G40-8
[From the flics of Harris, Hall & Company)
Habbis, Hall & Company
(Incorporated)
111 WEST MONBOE STREET
Telephone Randolph 5422
Mr, George D. Woods, Chicago, August SO^ 19S8.
The First Boston Corporation,
100 Broadway, New York, N. T.
Dear George; Since you telephoned me several days ago. Gene Heywood has
been spending practically all his time working over figures pertaining to Cen-
tral Illinois Electric «& Gas Company, and just this morning received some late
data from Ed Boshell.
Lahman liower is back on the job but has not returned to Chicago, and Gene
left town this afternoon to join Lahman on a little special job he has been
working on a long time. So they will have an opportunity to go over the prob-
lem together and when they get back in two or three diiys we shall all give it
close attention. As you predicted, we find it is not an easy problem to solve,
but we are delighted to be working on it.
Your.j very truly.
Edward B. Hall
IMN
Exhibit No. 1640-9
FFrom the titps of Harris, Hall & Companyl
The First Boston Corporation
100 broadway
New York, September 2, 19SS.
-Mr. Edward B. H.\ll>
Hairis, Hall d Compavij (Incorporated),
111 West Monroe Street, Chicago, Illinois.
Dear Ed; Thank you for your note of the 30th. There is no breakneck rush
about Central Illinois and 1 am gl.-id that you are going at it.
When you are ready to talk about it, we would like to sit in, and Ed Boshell
and I will be glad to see you in New York or. if more convenient, we can go
to Chicago.
Vpry truly yours.
Geokoe.
George D. Woods
elm
Exhibit No. 1640-10
fFrom the files of Harris, Hall & Company]
Mr. George D. Woods, September 2, 1938.
The First Boston Corporation,
100 Broadway, New York City, N. Y.
Dear George; I have been trying to pay you a social visit by telephone the
last two days since I have returned to the office, but without success. I merely
wanted to thank you for thinking of us in connection with the Central Illinois
Electric and Gas; to promise that it would receive our very best attention;
to remind you that the prospects are not glowing for finding a workable for-
mula; and to express the hope that the negotiations might at least be made
11750 CONCENTRATION OF ECONOMIC POWER
sufficiently interesting to require your own participation out here where we
may have the chance to reciprocate some of the hospitality you are always
so ready to show us when we come to New York.
With kind regards,
Very truly yours,
L. V. B.
Lahman V. Bower
EW
Exhibit 1640-11
[Prom the files of Harris, Hall & Company]
June 10, 1939.
Mr. George D. Woods,
The First Boston Corporation,
100 Broadway, New York, N. T.
Dear George : I am glad we were able to satisfy Mr. Goodwin as to our
financial responsibility.
Regarding the advertising program for the Central Illinois Electric and Gas
Co. financing, I am fiirling with the idea of including all 19 firm names in the
advertisement and enclose a typewritten dummy to give a rough idea of how
it would look.
Incidentally, Charlie Glore came over a couple of days ago to let me know
in a nice way that he felt his firm's position in this account is not quite
appropriate to their importance and said he would prefer not to appear in the
advertising. He said, however, that if we were going to put everybody in
and wanted him to go along, he would not refuse, but would still prefer to be
left out if agreeable.
I would just as soon cut the list off after F. S. Moseley & Co., but that would
make Bob Weeks feel badly, at least with respect to the Boston advertising,
because his firm has only fifty less bonds than Moseley, and then the Illinois
Company, who claim an historical interest, would feel injured. If those two
were included, the number left out would be so small as to seem a little funny,
and that is the train of thought that led to consideration of using the whole
list.
I apologize for troubling you with this and shall appreciate any comments
you have to make.
Yours very truly,
Edward B. Hall
IMN
Exhibit No. 1640-12
(From the files of Harris, Hall & Company]
This is an announcement and is not to be construed as an offer to sell or as a
solicitation of an offer to buy the securities herein mentioned. The offering
is made only by the Prospectus
$14,750,000 CENTRAL ILI-INOIS ELECTRIC AND GAS CO., FIRST MORTGAGE BONDS, — %
SERIES DUE 19 64
Dated June 1, 1939 Due June 1, 1964
Price and accrued interest
$3,000,000 — % — % — % SERIAL DEBENTURES, DUE SEMI-ANNUALLY DECEMBER 1,
1939 TO JUNE 1, ,1949
Priced variously according to maturity, plus accrued interest from June 1, 1939,
to yield approximately —
The Prospectus may be obtained in any state in which this announcement
is circulated from only such of the undersigned as are registered dealers and
are offering these securities in compliance with the secr-ities law in such state.
Harris, Hall & Company (Incorporated); Central Republic Company; Halsey,
Stuart "; Co. Inc.; Bonbright & Company Incorporated; H. M. Byllesby and
CONCENTRATION OF ECONOMIC POWER 11751
Company ; Kidder, Peabody & Co. ; E. H. Rollins & Sons, Incorporated ; A. G.
Becker & Co., Incorporated; Glore, Forgan & Co.; Lee Higginson Corpora-
tion; Stone & Webster and Klodget, Incorporated; Coffin & Burr, Incorpo-
rated; F. S. Moseley & Co.; Whitting, Weeks & Stubbs, Incorporated; The
Illinois Company of Chicago ; The Wisconsin Company ; Bodell & Co. ; Stark-
weather & Co. ; Granbery, Marache & Lord.
June — , 1939.
Exhibit No. 1640-13
fProm the flies of Harris, Hall & Company]
Mr. Lahman Bowee,
October 20, 1938.
Via air mail.
Mr. D. C. McClxjee,
President, Central Illinois Electric and Gas Co.,
Rockford, Illinois.
Dear Don: As I have told you, Mr. Bower has contacted Mr. Bell of Equi-
table Life Assurance Society and Mr. Ricter of Northwestern Mutual Life Insur-
ance Company relative to the possibility of a private placement of the proposed
new First Mortgage Bonds of Central Illinois Electric and Gas Co. Last week
I sent to you a list of data which the Equitable would like to have as soon as
possible in order that they may make up their minds as to whether or not they
believe a private placement of the bonds is possible. I hope that Jim Murray
is going right ahead with the preparation of this information. I would give it
the right-of-way over the preparation of data for the registration statement,
for much of the material is similar and if A private placement can be arranged,
registration can be avoided.
I talked on the phone with Mr. Bell again today, and he is hoping that he
and Mr. Ricter can make a personal inspection of the property of Central
Illinois sometime next week. Mr. Bell wants to make the inspection in con-
junction with another trip to Chicago, and he can't be definite now as to when
he will get there. However, he will let me know in advance, and I will com-
municate with you.
Best regards.
Yours very truly,
E. O.' Boshell/mn.
cc. to : Lahman Bower.
Exhibit No. 1640-14
[Prom the files of Harris, Hal! & Company]
December 6, 1938.
Mr. Donald C. McClure,
President Central Illinois Electric and Oas Co.
Rockford, Illinois.
Dear Don : Thank you for your letter* of December 5 covering additional
copies of the material which has been assembled for the insurance companies
who are considering a mortgage loan to Central Illinois Electric and Gas Co.
You will be interested to know that it appears now as though the response
of the John Hancock Mutual would be favorable for $2,000,000 which leaves
us in the position of having interest shown in $8,000,000 of the mortgage bonds
by three companies, and indicates that our efforts from here on, for a while
at least, had best be directed at the unsecured portion of the loan.
With kind regards,
Very truly yours,
L. V. B
Lahman V. Bower.
IB.
124491— 40— pt. 22 26
11752 CONCENTRATION OP ECONOMIC POWEK
Exhibit No. 1640-15
fFrom the files of Harris, Hall & Company]
Apbel 26, 1939.
Mb. D. C. McClube,
Prexident Central Illinois Electric and Gas Co..
Rockford, Illinois.
Dear Don : I am sorry to havp missed you last week, but am glad to know
you have returned from Hot Springs as we interpret that to mean you are
feeling in perfect health again.
As you undoubtedly know, the Chase' Bank has affirmed a renewed interest
in some unsecured lending to the Central Illinois Electric and Gas Co. but
required, as a preliminary to taking the matter up, a chance to examine the
findings of the Securities and Exchange Commission in connection with the
Company's application for the $2,000,000. The order was published but
the lindings have never been assembled and released, and inasmuch as these
go into certain questions of valuation write-ups. etc., it is proper for the Chase
Bank to be interested in the attitude of the S. K. C. on these matters before
going much further into the loan. Ed Boshell has been trying to get a copy of
the.se findings for the past two weeks and has repeatedly been promised them
without any fulfillment of the promi.se to date. The trouble seems to h" that
Mr. Ginsberg of the S. 10. C. was supervising these matters and upon Mr.
Douglas' appointment to the Supreme Court, Mr. Ginsberg went over to the
Supreme Court Building as Mr. Douglas' clerk, and it seems to be hard in thO'
ensuing shuffle to get somebody to transcribe these records for public release.
It seems too bad not to pursue this matter more actively, but the fact remains
that the unsettled European situation has had a deadening effect on the market
for all but a few of the very highest grade securities, and the Chase Bank at
the moment seems to be the most likely key to unlock your whole refunding
program provided we can interest them in a sizeable unsecured loan. There is
nobody in the field who has been as active as the Chase people and nobody who
is as familiar with the various aspects of your Company.
I came out through Rockford the week before last hoping t<> catch you in,
and left word with the young lady in your office that I wanted full credit for
an effort to pay you a call.
With kind regards,
Very truly yours,
L. V. B.
Lahman V. Bower.
IB.
Exhibit No. 1640-16
[From the files of Harris, Hall & Company]
Americ.vn Sterl Foundries
Early In January HWF told me he had talked further with Mr. George
Scott on the sub.1ect of a possible financing for his Company to retire their
7% preferred stock. He was told by Mr. Scott that George Murnane of Monnet
Murnane & Company, 30 Broad Street, New York (Hanover 2-6646, 2-2700). a
director of American Steel Foundries, and formerly a partner of Lee, Higginson
& Co., had been assigned the duty as a director of listening to propositions on
the subject of new financing, and HWF recommended that I call on Mr. Mur-
nane at the first opoprtunity. .
I made such a call about January 6 or 7. Mr. Murnane said George Scott
had told him I was going to call. He said further that the Company does not
plan to retire this 7'^ preferred stock very soon. They feel that the holders
of this SiOck went through the depression with them without dividends and are
entitled to a great deal of consideration. They have now had all their back
dividends paid up, but he thinks they ought to continue to draw 7% for a while
without being disturbed. Eventually, however, if present favorable market con-
CONCENTRATION OF ECONOMIC POWKU 11753
ditions contiuue, they will probably want to retire it. For this purpose they now
feel that a new issue of preferred stock with or without conversion privilege,
or an offering of common stock to the present shareholders would be the best
way to raise the money.
Mr. Murnane said that Mr. Scott certainly would not make a move In the
matter without consulting HWF, and that he knew Mr. Scott would prefer our
house to any other if it were bnsini>ss of a kind that we were able and desirous
of handling.
Edwabd B. Hall.
2-3-37
Exhibit No. 1640-17
[From the files of Harris, Hall & Company]
Harris Trust— Harris Hall f'GO Calling Mr. Hall or Mr. Collins.
Neither hr rite now but will GV MSG on return.
Re Steel Foundries my final considered recommendation is to carry over any
obligation to Becker to our next deal making two top interests sixteen per cent
five interests at thirteen per cent which is million stop To me cutting inter-
ests finer does not really repay obligation to Goldman or Smith or Byllesby
stop Moseley is now coming in thru company and I desire to be able say group
formation concluded stop Obligations to Goldman Smith and Byllesby ante-
date obliiiation to Becker and think we can carry latter along for a while stop
Glore and Loe Hig represent company suggestion which cannot be ignored stop
Have vague feeling company might prefer inclusion of only one between Goli-^
man and Becker stop Re National Bond u have in mind meeting there at
eleven this morning stop Suggest follow up Great Northern by encouraging
Stillman to buy next good issue, pis advise us now next sale at which we will
bid so we can get our Information here in better shape for sales department
scop Suggest follow up matter of enlarging Atchison account.
Exhibit No. 1640-18
[From the flies of H.nrris, Hall & Company]
New Yokk, N. Y., Nov. 8, 1935.
J. H. Collins,
Harris Trust d Savings Bk. Chgo:
Continental spent hour Brown this afternoon stop Believe we must decide
go on or (luit Friday morning stop Favor going on in silent underwriting
posi'ion subject to satisfaction investigation by JMoseley and selves stop
Necessary put end to company shipping deal stop Favor two "quarter points
gross and pay bank, quarter fee stop Will keep in touch Moseley Boston
and here.
L V Bower.
Exhibit No. 1640-19
[From the flies of Harris, Hall & Company]
NOVEMBEB 18, 1035.
Mr. NiLEs Chapman,
Chairman of the Executive Committee and Treasurer,
Continental Steel Corporation,
KoJcomo, Indiana.
Dear Mr. Chapman; Referring to your telephone conversation today with
Mark Brown, we are writing to say that we suggest to you the preparation
and registration of an issue of $2,000,000 Serial Debentures maturing $200,000
each year from one to ten years and containing provisions generally similar
11754 CONCENTRATION OF ECONOMIC POWER
to those writttMi into the notes held by the Harris Trust and Savings Bank,
which represent a part of your presently outstanding banlc credit.
Assuming these notes were available for public offering today and we had had
a chance to make some examination of the property and business and satisfy
ourselves that the situation is as satisfactory as we believe it to be, we would
be prepared to pay you a price for this issue of notes which would mean a
net cost of money to you of not to exceed 4.^/>%.
Where we above refer to an inspection of property, you understand we
mean spending only a matter of three or four days, which we are ready to do
at any time upon word from you.
Very truly yours,
Vice President.
Lahman V. Rower
EMW
Exhibit No. 1640-20
[From the files of Harris, Hall & Company]
November 20, 1935.
Mr. NlLES CnAPMAN,
Chnirrnan and Treasurer, Continental Steel Corporation,
Kokomo, Indiana.
Dear Mr. Chapman : This is the "letter" I promisetl to write you relative
to raising $2,000,000 for Continental Steel Corporation.
We suggest you issue $2,000,000 one to ten year serial 'debentures maturing
$200,000 per year ($100,000 each six months if the Company desires) to be
registered, underwritten, and sold at public offering by the underwriter.
Such debentures should be issued in accordance with the terms of an inden-
ture which .should contain certain covenants the more important of which we
discussed in Kokomo and which are :
1. A covenant not to mortgage existing properties while any of the deben-
tures are outstanding.
2. A covenant not to pay cash dividends except out of earnings available
for the purpose subsequent to (I would like June 30, 1935,
but am willing to be convinced January 1, 1935, would be better).
3. A covenant not to pay cash dividends to reduce current assets below
150% of current liabilities.
4. A covenant not to pay cash dividends which will reduce net current
assets (working capital) to a figure less than either (a) $1,000,000,
or (b) the aggregate amount of these debentures plus any other funded
debt maturing on or before the last maturity of debentures at the time
outstanding, whichever is greater.
5. A covenant that a decline of current as.sets to 110% (I think 115%
might be better but would not insist) of current liabilities shall be
published by the Trustee and constitute a default upon request of
holders of 50% of the debentures at the time outstanding.
0. Customary indenture covenants relating to independent annual audits
and monthly financial statements, disposition or sale of major physical
properties, to pay taxes, interest, etc., none of which, I am sure,
will be difficult to arrive at on a mutually satisfactory basis.
For the purpose of avoiding high premiums on the early maturities and to
make it possible to set a more favorable scale of call prices (which would
have to be high if the debentures were sold at a high premium) we suggest
that the debentures be issued as 2's, 3's, and 4's. With these coupons the
call price could start at 102 for two years and drop % of 1% each year which
leaves the last year 100. In the event of partial call of debentures the retire-
ment should be in inverse order of maturities.
Upon being satisfied with the legalities, the corroberntion of figures by the
auditors and a slight further check into the nature of the business, particu-
larly from the sales end, we could today pay you a price for such an Issue
that would make the money cost you between 4.30% and 4.40%. This would
CONCENTRATION OF ECONOMIC POWER 11755
include our profit which we think should be about 2^4 points on the business.
Because of the suggested 2%, 'SVv, and 4% coupons I cannot give you a single
per centage price which would mean anything but you can figure that if the
debentures were all fours the Company would receive about 98 '/^ on a 4.30
basis and about 98 on a 4.40 basis. As 2's, 3's, and 4's the Company would
receive about 913. In any event regardless of the coupon rate the cost of money
to the Company in today's market would be within the range stated.
Now, with respect to a proposition to raise $1,000,000 by sale of stock and
$1,000,000 by borrowing, I must say that we think such borrowing should be
bank borrowing to show best results to the Company. With an additional
$1,000,000 of equity money in the picture you should iiave no trouble arrang-
ing a five year bank credit for $1,000,000 on favorable terms. That, of course,
lets us out.
A $1,000,000 ten year Debenture issue with a sinking fund to retire by
maturity, if the only funded debt, could probably be sold as 4^4 's at 99 to
99V2 — which is the interest basis we had in mind for the last serial maturity
of the other issue. We think since the work would be the same in setting a
$1,000,000 loan as in setting up a $2,000,000 loan we would be entitled to at
least 3 points gross margin of profit. If the company received, say, 90 the
money would cost about 4%%. The covenants would be essentially the same.
While no opinion was asked, we still hold to the opinion expressed in discuss-
ing a convertible issue that if business continues for a while as at present and
this debt job is done at attractive rates, the present owners should be able
to take in partners on a more favorable basis to themselves a little later
than just at present.
Enclosed is a check for the money I owe you.
Very truly yours,
, Vice President.
Lahman V. Bower.
IMN.
Exhibit No. 1640-21
[From the files of Harris, Hall & Company]
January 7, 1936.
Mr. Habold E. Wood,
First National Bank Building, St. Paul, Minnesota.
Dear Habold: I have you letter of yesterday about the Continental Steel
business and regret to say that it looks as if we shall not be able to do
anything worth while for any of our good friends in connection with it. There
were circumstances attending this loan which made it appropriate for us to
share the issue with F. S. Moseley & Company. That cut it in two. Then,
there is a certain bank with which we have historical relations which has
born down on us to supply a fair sized block of bonds. We considered the
matter and came to the conclusion that to have a selling group- at all would
cause a lot of grief and could not do any of our friends very much good.
Accordingly, the prosp«6t is for an offering at list price less one-quarter to
dealers, and that's all.
I very much hope we are going to be able to originate some business
before long in connection with which we can enlist the assistance of good
friends like yourself and reward them suitably for their co-operation.
With kindest regards, I am
Yours very truly,
President.
Edwabd B. Hall.
IMN.
11756
CONCENTRATION OP ECONOMIC POWER
Exhibit No. 1640-22
[From the files of Harris, Hall & Company]
$14,750,000 — Centrai, Illinois Electric and Gas Co., First Mortgagk, Rvind.s.
3%% Series Dub 1964
Following is a list of the Underwriters of the ahove issue, the principal amount
of bonds underwritten by each and the total purchase price paid to the Company
at 981/^ plus accrued interest from June 1, 1939, to June 27, 1939:
Underwriter
Harris, Hall & Company (Incorporated)
Central Republic Company
Halsey, Stuart & Co., Idc
Bonbriqht & Company, Incorporated
H. M. RvUesby and Company, Incorporated
Kidder, Peabody & Co
E. H. Rollins & Sons, Incorporated
A. O. Becker & Co., Incorporated
Olore, Forgan <t Co
Lee Hippinson Corporation
Stone & Webster and Blodget, Incorporated..
CnfRn & Burr, Inc
F. S. Moseley & Co
Whitinp, Weeks & Stubbs, Incorporated
The Illinois Company of Chicago
The Wisconsin Company.
Bodell & Co -
Starkweather & Co
Qranbery, Marache & Lord
Principal
Amount
000. 000
500,000
5(X).000
000,000
000,000
000, 000
000,000
700,000
700,000
700,000
700,000
son, 000
500. 000
450.000
400,000
400.000
300,000
2,10, 000
150,000
$14,750,000
Total Cost
$1, 975,
1,481,
1,481.
987,
691,
691.
691,
691,
493.
493.
444.
395,
395,
296.
246,
148.
416. CR
562. .50
562, 50
708 33
708. 33
708 33
708. 33
395. 83
395. 83
395. 83
395. 83
8,54.17
8.54. 17
468.75
0S3. 33
083.33
312. ,50
927. 13
156.25
$14, 568, 697. 93
Exhibit No. 1640-23
[Fom the file.s of Harris, Hall & Co.\
.$3,000,000 — Central Illinois Electric and Ga3 Co., 3%-3y2%-^% Serial
Debentures
Following is a list of the Underwriters of the above issue, the principal amount
of debentures underwritten by each and the total purchase price paid to the
Company at QQV2, Pl"S accrued interest from June 1, 1039, to June 27, 1939 :
Underwriter
Harris. Hall <t Co. (Inc.)
Central Republic Company. .,
Halsoy. Stuari <fe Co., Inc
Bonbrl^ht dk Co.. Inc
H M. Bvllesby <{• Co., Inc
Kidder. Poabndy <t Co
E. H. Rollins* Sons, Inc
A. G. Becker <Jr Co., Inc
Olore, Forpan <t Co
Lee Hippinson Corp .
Stone <fe Webster and Blodget, Inc
Coffln <fe Burr, Inc
F. S. Moseley <t Co
Whitlne. Weeks <fe Stubbs. Inc
The Illinois Co, of Chicago
The Wisconsin Company
Bodell <6 Co
Starkweather <fe Co
Oranbery. Marache <t Lord
Principal
amount
$410, 000
310,000
310,000
205,000
2a5,000 1
205,000
205,000
140,000
140,000
140,000
140, 000
100,000
100,000
90.000
80,000
80,000
60.000
50,000
30,000
Cost
$408. 999. 71
309, 243. 08
309, 243. 68
204, 499. 86
204. 409. 86
204. 490. 86
204. 499. 86
139, 658. 44
139, 658. 44
139. 658. 44
139. 658. 44
99. 758. 03
99. 756. 03
89. 780. 42
79. 804. 82
79. 804. 82
69. 8,53 62
49, 878. 01
29.926.81
$3. 000. 000 $2. 992, 680. 83
Grand total
$2, 384,
1, 790.
1, 790.
1, 102,
1, 192.
1, 192.
1, in2,
831.
831,
831.
831,
693,
693.
634,
474,
474.
356,
296.
178,
416. 37
.S06. 18
806.18
.'>n8. 19
208 19
2a8 19
?f8 19
054.27
054.27
054.27
054 27
610. 20
610 20
249 17
888 15
.888.15
166. 12
805.14
083.06
$17, 561, 378. 76
CONCENTRATION OF ECONOMIC POWER 11757
Exhibit No. 1640-24
[From the files of Harris, Hall & Company]
May 23, 1936.
Wisconsin Power & Ljght Company
The proposed financing is to take the form of $82,000,000 in first mortgage 4%
honds and $3,7OO,OU0 in 1 to 10 year notes.
We had a meeting this morning in Mr. Glore's office attended by Mr. Schrader
and Mr. Hough of Halsey, Stuart & Company, Mr. Stern of A. G. Becker &
Company, and myself. After some discussion it was tentatively arranged that
the imderwriting syndicate would be made up substantially as follows.
Field, Glore & Co $3, 750,00u
Harris, Hall & Company 3,750,000
Halsey, Stuart & Co 3,750.000
A. G. Becker & Co -___ 3,750,000
Bonbright & Company 2,500,000
Brown Harrimar & Co., luc 2,500,000
First Boston Corporation 2, OlX), 000
Securities Co. of Milwaukee 1, 500, 000
Blyth & Co., Inc 1,000,000
Lazard Freres & Co., Inc 1,000,000
E. H. Rollins & Sons 1,000.000
Lee Higginson Corporation 1,000,000
A. C. Allyn & Co 8(K), 000
Central Republic Co 650,000
Lawrence Stern & Co 050,000
Stone & Webster and Blodget 650,000
Paine, Webber & Co 500,000
Tucker, Anthony & Co 500,000
Bacon, Whipple & Co 250,000
Blair, Bonner & Company 250,000
Illinois Co. of Chicago 250,000
The notes would be underwritten by the same people in the same percentages.
Mr. Glore said that he was going to charge the syndicate a fee of $50,000
for the work of his firm in managing the account in both bonds and notes.
This amounts to about $1.40 a thousand on the total financing. This was dis-
cussed, but not agreed to. Halsey's people thought Mr. Stuart would object.
Mr. Glore said that if they were going to object and talk to Ned Brown or any-
one else about it, he wished they would do it immediately because if this is
not agreed to ho wants to take a little larger amount of bonds than the rest
of us. I expressed the view that I thought his firm was entitled to something
for management and that it was a question of a reasonable amount.
Edward B. Hall.
Initialed (EBH)
EBH-IMN
Exhibit No. 1640-25
(Prom the flies of Harris, Hall ,<: Comp.niiy. Letter from L. V Bower 1<> Isaar H. Smith!
.lANUAKY is. 1936.
-Mr Isaac B. Smmh,
President, Iowa Electric Light and I'oircr Company,
Cedar Rapids, Iowa.
Dear Isaac B. : Iteferring to the brief discussion we had at our Directors' Meet-
ing Thursday on the po.ssibility of refunding the Company's outstanding 5's of
1946. and readjusting the terms of its unsecured note issue, I have the follow-
ing ideas which I am submitting in duplicate to you, Sud Dows and Carl Myers.
First, I suggest that we go to the twelve holders of the Company's 4%% bonds
and secure their consent as relating to the bonds of this series to eliminating
from the mortgage of 1925 the restriction on maturity of bonds under that
mortgage to twenty years. I think this can be done easily, particularly if as a
quid pro quo we can offer to register the 4%% bonds.
11758 CONCKNTKATION OF ECONOMIC POWER
I suggest we refund the $3,600,000 5's of 1948 with $3,500,000 4's to net the
Compauy par.
Third, I suggest the supplemental indenture under which the 4's are issued,
accept the modilication of the indenture as to the twenty year restriction
referred to above.
Fourth, I suggest that the new bonds be sold as twenty-five year bonds which
will, however, be twenty year bonds unless the modification of the indenture
relating to maturity is modified by holders of all the bonds issued thereunder.
In other words, the new 4's would become twenty-five year bonds when the 7's
of 1942 are paid. This is tricky and may not b^ feasible, but I am sure it is
feasible to get the indenture modified as far as the holders of the 4's (hand
written: and 4i/4's) are concerned, so that the least we can do will be to
eliminate the twenty year restriction in 1942.
Fifth, I suggest that we register an issue of $1,440,000 3% unsecured notes
maturing, $60,000. quarterly over the next six years. The notes should net the
Company at least par, and would eliminate the current asset — current liability
restriction which is now so burdensome to the Company.
The proceeds of the $1,440,000 new notes would be used to repay the bank loan
in the amount of $1,175,000 as of March 1st, take up $100,000. of the mortgage
debt, and leave $165,000. for corporate purposes.
In favor of these suggestions I may mention the fact that the greatest benefit
conferred on the Company would, of course, be the saving of $40,000. a year
in mortgage bond interest. Of next importance I would think possibly the
easing up of the present debt reduction program might be mentioned. I am
particularly proud of the idea that this is the time to go after the elimination
of the twenty year maturity restriction in the mortgage.
The Company's present high credit is due partially to the well founded notion
which has gone abroad that this Company is engaged in reducing its debt. I
think this idea can be furthered by refunding $3,600,000 mortgage 5's with
$3,500,000 mortgage 4's, and the throwing of this $100,000. into unsecured debt
to be paid off is offset by expanding the pay-ofiP period over the next six years.
I would be glad to have you gentlemen consider these proposals, and if you
feel there is merit in them I think no time should be lost in advising auditors
and counsel that a registration is contemplated because it will take a con-
siderable period of time to whip all the necessary information into shape.
Very truly yours,
L. V. B.
LVB :CW
Exhibit No. 1640-26
[From the flies of Harris, Hall & Company. Letter from L. V. Bower to Isaac B. Smith]
Harris, Hall & Company, Incorporated
111 West Monroe Street. Telephone Randolph 5422
Chicago, February 4, i936.
Mb. Isaac B. Smith,
President, Iowa Electric Light and Power Company,
Cedar Rapids, Iowa.
Deab Isaac B. : I sat in at a meeting of the Senior Loan Committee at the Harris
Trust and Savings Bank yesterday during the period they gave consideration
to the request we made by letter to amend the present agreement so as at
no time to require the inclusion in current liabilities of the Company more
than the next succeeding quarterly Instalment of principal.
There was .some discussion on the part of some members of the Committee
to minimize the importance of this restriction to the Company, and I took
occasion to make it clear that the Company regarded the matter of such suffi-
cient importance, to be prepared to pay off the loan with the proceeds of a
publicly offered note Issue, if the banks would not agree.
It was finally the consensus of the meeting that the modification asked for
was not material as affecting the soundness of the loan and was agreed that
subject to being satisfied with budgetary figures through the end of the present
year, the Harris Trust and Savings Bank would recommend to the other two
participating banks that the modification sought be granted.
CONCENTRATION OF ECONOMIC POWER 11759
Will you please have Carl Myers send to Mr. John Broeksmit, Vice President
of the Harris Trust and Savings Bank, our budget figures of cash income and
outgo through to the end of the present year.
With respect to the additional funds that might be required if we refund
the outstanding 5% bonds due 1916, it was the consensus of the meeting that
such additional borrowing as may be required should be lumped as a maturity
three months after the last maturity of the present loan ; should become subject
to the same conditions covering the present loan, and should be offered first to
the banks participating in the present loan.
I think this matter Is in excellent shape at this time, and if the budget
figures can be in Mr. Broeksmit's hands not later than Friday, he can take the
matter up with the Chase Bank next week when he expects to be in New York.
Very truly yours.
Vice President.
LVB :CW.
Exhibit No. 1640-27
[From the flies of Harris, Hall & Company. Letter from L. V. Bower to Isaac B. Smith]
February 22, 1936.
Mr. Isaac B. Smith,
President, Iowa Electric Light & Power Company,
Cedar Rapids, Iowa.
Dear Isaac B, The enclosed letters are self-explanatory. I spent most of
yesterday morning in conference at the Bank relative to the Light Company's
bank loan. The Chase have not shown any particularly cooperative disposition
and I, unfortunately, got a little sore and said we were getting a trifle fed up
on the way the matter was being handled when we were simply trying to do
the Bank a favor as both the Company and Harris, Hall & Company could
make a little money by paying the Bank loan and selling a note issue. After
a few sharp words which were to be regretted, this position eventually had the
desired result and the Bank down-stairs authorized me to say —
(1) That the Company can consider that the bank loan agreement will be
modified as requested ;
(2) That no definite undertaking on the part of either party is entered into
with respect to such additional borrowing as may be needed in connection with
rhe present refunding, but that if the Company should ask the present Banks
to provide these additional funds, it is probable that the present Banks will
ask that such funds be borrowed as an additional maturity under the loan
agreement at the rate of the last present maturity, namely, 4i/4%.
I have taken the position that we can borrow this money elsewhere for 3%%
to S%%, which aroused some further debate without settling anything and
in my opinion we should either provide these additional funds out of our
current assets or endeavor to borrow them elsewhere at a low rate if possible.
The elimination of the Northwestern Light & Power $50,000 obligation from
current liabilities would provide half the leaway necessary to take the funds
required out of current assets.
Very truly yours,
L. V. B.
LVB : IB
Exhibit No. 1640-28
[Prom the files of Harris, Hall A Company. Letter from G. B. Heywood to Duncan R.
Linsley ]
Mabch 4, 1936.
Mr. Duncan R. Linsley.
The First Boston Corporation,
100 Broadway, New York City, N. T.
Dear Dunc: I am enclosing herewith the following documents with regard
to the proposed financing we had under discussion with you :
(a) One copy of the Registration Statement on Iowa Electric Company;
(b) Two copies of the Prospectus on Iowa Electric Company;
11760 CONCENTRATION OF E4'ONOMlC F(n\KK
(c) Ont' copy nf the Kesisfrntion Stiitenieiit on Iow.l Electric Light aud
Power Company ;
(d) Two copies of the Pro.spectus on Iowa Electric Light and Power
Company.
The Kegistratiou Stalemerit and Pr(jsi)eotus on Iowa Electric Company, en-
closed herewith, are as to ho filed in Washington tomorrow. The Iowa Electric
Light and Power Company Registration Statement and Prospectus will be filed
in Wa.shington on Friday. In order to get the necessary signatures of the
Company olJicials in Cedar Rapids, the Iowa Electric Light and Power Com-
liany Registration Statement will probably be filed in the form as per the
enclosed copy, but there may be a few further changes made in ink before
filing. We have made a few further changes in the Prospectus, which havi-
gone to the printer, but I doubt if a new proof will l)e back in time to be sent
to you in the air mail tonight.
As I told you over the phone today, we have not discussed this business
with anyone else and do not want to do so until we have heard whether
or not you .nre interested in the business. On the other hand, we feel that
we should say .something rather proinoily to the other people who have had
past historical positions in both pieces of financing at the earliest date possible,
before any publicity has reached them in regard to the filing of Regi.stration
Statements, so that they will know Ihat wo have had them in mind before any
of them come back at us.
I need not tell yoti, of course, I hat we would like nothing better than to
liave you as our principal partners on an efpial basis with us in both accounts,
and hope that you can let us hear further from you as early Thursday morning
as possible.
Sincerely yours,
G. R. H..
Vire-President.
GBH :EW
End.
ExHiBtT No. 1G40-20
[From the files of Harris, Hnll & roiiipanyl
March 9, 1936.
Mr. Harry M. Audinseix,
The First Host on Corporation,
100 Broadioay, New York, N. Y.
Dear Harry: Our underwriting group for the .$3,000,0(10 Iowa Electric Light
& Power Company. First Mortgage 4s, and $l,2r)0,000 one to five year notes, is
now pretty well organized, sub.lect fo the usual conditions, and the respective
interests areas follows:
Ponds
Notes
Harris, Hall A Co _
$1,325,000
1,32.S,000
400,000
30ft, 000
250,000
$4fi0.000
First lioston Corporation..
460,000
Brown Harriman A Co. -
140,000
Coffin A Burr...,
104,000
F. S. Moseloy A Co
86,000
Apparently the public offering of the Notes will not amount to anything, and
I don't see any necessity for mentioning the Note Issue in the advertising
unless it seems best to do so as a matter of record. It Is expected that the
Notes will all be sold by us for syndicate account, and the arrangements
with the Company are such that if these notes are all taken by the banks
that have the loan, to be paid off from the proceeds, there will be only a
nominal profit to the underwriters in that pari V>f the business.
With re.spect to the Mortgage Bonds, our pnv'ient idea is to advertise them
in n couple of papers each in New York and Chicago, and perhaps in the
(lONCJENTH.VI'fON OF KCONOMKJ POWER 11761
Wall Street Journal, including the I'acitic Coast edition, over the names of
all of the underwriting group arranged as follows.
Harris, Hall & Company The First Boston Corporation
(Incorporated)
Brown Harriman & Co., Inc.
Coffin & Burr. Inc. F. S. IVIoseley & Co.
The gross margin of profit in the bonds is to be 2i/j% and we contemplate
asking the other underwriters to allow us a quai'ter of 1% for originating the
business and managing the account.
Exhibit No. 1640-30
[From the files of Harris. Hall & Company. Letter from L. V, Bower to Fred Poor]
Sefiembeb 30, 1936.
Mr. Fred Pock,
Poor and Company, SO Eaxl Jaclcsi/n Boitlcixird, Vhica<jo, Illinois.
Delvr Mr. Poor. Mr. Boatner and I continued our discussioii of the rail-
way business for some little time after you left us at the Chicago Club today,
and I am much indebted tct you for the privilege of meeting Mr. Boatner under
such pleasant circumstances.
It would be a great pleasure to employ Mr. Boatner to represent us in
making a brief memorandum report on Ihe business of Poor and Company in
connection with the business which we still hopefully look forward to doing
for your Company. In fact. I was tempted to engage him on the spot this
noon on the theory that would be unthinkable for you to use the services of
other investment bankers.
With kind regards.
Very truly yours,
L. V. B.
ExHiniT No. 1640-31
[From the flies of Harris, Hall & Company]
OCTOBKR 21, 1036.
Mr. Lahman V. Boweb:
POOK A COMPANY
Phil Moore telephoned this morning and spoke fo me when he learned you
were absent. He reported, and I had the same word from John Broeksmit,
that the stand-by arrangement has been signed and immediate steps are
being taken to call the outstanding bonds of Poor & Company. Phil said that
he wished we would do anything we could to push along the legal work. 'He
said he had spoken to his lawyers about it and thought it might be a good
thing for us to say something to our counsel.
Accordingly, I telephoned John Dern to tell him that the stand-by arrange-
ment had been made and that we were all anxious to have the work go forward
as expeditiously as possible.
Very truly yours,
E. B. H.
Bdward B. Hall
IMN
Exhibit No. 1640-32
[Krom the flies of Harris, Hall & Company. Letter from L. V. Bower to Frank Fratcher]
January 20, 1936.
Mr. Frank Fratcher,
Dows Building,
Cedar Rapids, Iowa.
Dear Frank : I am vn-iting to say that if there is any merit in the thought
that Iowa Electric Company can do a gederal refinancing job this spi-ing, and
11762 CONCENTKATION 01" KCONOMIC I'lnVPJK
the first call has to be issued March 15th, then there is really very little time
to spare in the preparation of all the material that has to go into a registra-
tion statement.
This is just a gentle jog for the purpose of urging you to forward in here
the papers on the Eastern Iowa Electric Company matter, because unless
handled promptly this phase of the thing may provide the delays to make
impossible the kind of a job we are thinking about.
Very truly yours,
L. V. B.
LVB : CW
Exhibit No. 1640-^8
1 1'loiu the tiles (»l" HaiTis, Hull &. t'ompany. f.ettci- from 1.. V. Hovver to Krank Kinfcher |
Febbuaby 4, 1936.
Mr. Frank Fratcheb,
C/o Iowa Electric Company,
Dows Building, Cedar Rapids^, Iowa.
Dear Frank : I sense from our talk on the phone this morning that you
would probably be best pleased to discuss the possibility of an arrangement
to purchase Iowa Electric Company Convertible 6s early next week, when you
may have the opportunity to discuss the matter with Senator Reed, and upon
thinking over the matter, I am of the opinion it would be better for us to
reach some kind of an arrnngement when we can be together to discuss it,
than to try to set down the terms of any proposition in a letter.
I suggest, however, that in order that no time may be lost, you might wl.sh
to call Gene Heywood on the phone and give him an order to buy up to 5(1
bonds at current market prices, say not to exceed 103. This would take care
of all the bonds that would normally come into the market over the next few
days without committing you for an amount which you would find it diflficult
to take care of if you decided not to try to do the job on a larger scale after
talking with us and with Senator Reed.
I hope to see you here not later than Monday of next week.
With kind regards.
Very truly yours,
L. V. B., Vice Fresident.
LVB : EW
Exhibit No. 1640-84
[From the files of Harris, Hall * Coinpan^v. I.ettei- froin I.. V. Bower to Scott Mclutyiv]
February 14. 1986.
Mr. Scott McIntyre,
Scott McIntyre if- Compnyiy,
Second Avenue at Third Street, Cedar Rapids, lotva.
Dear Sir: I have your letter of February 22 relating to the Iowa Electric
Company, and wish to say that while it Is true that to pur knowledge the
Company has given consideration to a refunding operation, there remain many
obstacles in the way of consummating the business. These have to do with
balance sheet charges, certain matters of public relations, and other factors
which make consideration of any refunding operation more inVolved than the
mere replacement of one issue of bonds with another issue.
We are studying this situation with the Company but neither of us is com-
mitted to a program at this time.
I am pleased to have your letter and to know of your interest in the business
if it should develop.
Very truly yours,
L. V. B., Vice President.
LVB : IB
CONCENTRATION OF ECONOMIC POWER 11763
Exhibit No. 1640-35
I From the flies of Harris, Hall & Company. Letter from L. V. Bower to Frank A.
Fra teller]
Febbuaby 24, 1936.
Mr. Frank A. Fbatcher,
Dows Building, Cedar Rapids, loxca.
Deab Frank : Enclosed is a letter I received today from Scott Mclntyre,
together with my answer to it. I am also enclosiug a memo of bonds pur-
chased to date and their cost. We had some of these bonds prior to the
time of active consideration of any refunding, just as we also had bonds
of the Central States Electric Company and a small dab of Northwestern
Light & Power Company bonds. I think it would be fair for us to turn any
bonds you had prior to February 1 over to the Company at prices as of
February 1.
As you will note, we are beginning to accumulate a larger block of these
bonds than we should without some kind of commitment on the part of the
Company to protect us if no refunding should come about and the market
should break.
How would you feel about writing us a letter asking us to buy for y/our
account bonds of the Iowa Electric Company at not to exceed the prevailing
call prices and without further authorization, not to exceed an aggregate
amount of $300,000. Such a letter should, I believe, contain an agreement
on the part of the Company to make payment for such bonds on or about
April 1, 1936.
You will note that while the savings on this operation do not run into many
thousands of dollar.s, they do nevertheless aggregate an amount which it is
quite well worthwhile for the Company to save, and they reduce propor-
tionately our costs in connection with this financing.
Very truly yours,
LVB : IB
L. V. B.
Exhibit No. 1640-36
[From the files of Harris, Hall & Company. Letter from L. V. Bower to Frank A.
Fratcher]
Febbuaey 25, 1936.
Mr. Fr^nk a. Fbatcher,
Dows Building, Cedar Rapids, Iowa.
Dear Frank, Referring just briefly to your telephone conversation of today,
I want to say to you that from the moment it becomes generally known that
the Iowa Electric Company contemplates some financing you will be beseiged by
investment bankers from all over the country, each of whom has some reason
through blood relationship or blood spilled for the sake of the Company,
why he should have a greater or lesser interest in the underwriting. We know
this is true because we have been through it a couple of times in our short
existence in the position of a principal underwriter, and have on many more
occasions pulled every string we know how to pull to try to wedge In to busi-
ness where others have been the principal underwriters.
From this experience, our advice to you is to say (when the market opera-
tion is over) that the formation of this account is entirely in the hands of
Harris, Hall & Company. This means these people will flock in to us and,
very frankly, our answer will probably be that the formation of the account
Is entirely in the hands of the Company. This sends them back to vou and
you stick to your original story and by that time all but the most persistent
ones have dropped by the wayside and it is then possible to form the account
on the basis of who will do the most good for the success of the issue which
is, after all, the major consideration in the whole proposition. I don't mind
saying, even at this early date, that in my humble opinion, ii it should prove
to be possible to run the Iowa Electric business over the names of two or
11764 CONCENTRATION OF ECUNOMIC POWER
three widely aud favorably known organizations (modesty makes me blush)
this will have a whole lot more influence toward your getting the best price
possible than if the account is littered with the names of entirely reputable
but small aud local firms.
As I said to you over the telephone, this whole matter is something we
can sit down to leisurely and discuss.
With kind regards,
^'ery truly yours,
LVB : IB
Exhibit No. 1G40-S7
IFrom the files of Hanls, Hall & Company]
lowA Electric Compant
GENEBAJL OFFICE
Cedar Rapids, Iowa, February 29, 19S6
Mr. Lahman V. Bower,
111 W. Monroe Street, Chicago, III.
De.\r Lahman : Several things have prevented my replying earlier to your
letter of I''ebruary 24th relating' to the bonds which you have acquired for the
account of this company. Naturally we will be very glad to take over all of
the bonds which you have on hand now, including those which we will take
over on a February first basis as you suggested.
We would also like to have you continue to secure, for our account, bonds
of the company at not to exceed prevailing call prices and in an aggregate
amount not exceeding $300,000. We will make payment for any such bonds so
obtained on or about April 1st, 1936. Of course, if the proposed refunding is
not consummated as now planned, it will be necessary .for us to make some
temporary arrangements in connection with the taking up of the bonds. There
should be no dilllcnlty al»<>ut that and undoubtedly some arrangement can be
worked out to meet the requirements of both you aod ourselves.
I am returning the letter from Scott Mclntyre which you sent me.
Very truly yours,
F. A. Fratcheb.
FAFratcher/b
Exhibit No. 1640-38
y-. L
lall]
from the files of Harris, Hall & Company. Letter from H. M. Addinsell to Edward B.
Hj---
H. M. ADDINSEI.Ii,
Chairman Ejectttive Committee.
The First Boston Corporation,
One Hundred Broadioay, Neic York. March 5th, 1936.
Edward B. Hall, Esq.,
Harris Hall & Company, 111 West Munroe Street, Chicago, Illinois.
Dear Eddie: I don't want you to think that we were either unappreciative or
(to use the current slang of the day) high hat about the Iowa Electric business.
All of us did really appreciate very much your inviting us and we think you have
a fine set up and sound secuuity of the two classes to be created. When we got
down to price talks, howevei', and discussed the matter with the good old Sales
Department, we found that for the securities to be created on this size company
we could get practically no encouragement from them.
As you know, our business is so largely with institutions and professional
buyers of one sort or another in what might perhaps be regarded as more general
market securities that we were just plain afraid we could not be of very much
help on distribution on this particular issue.
Again thanking you and hoping to see you again before long, I am
Yours sincerely,
Habbt.
CONCENTKATIOX OF ECONOMKJ PCJWEK 117()5
ExHiDiT No. 1G40-39
[From the fllea of Harris, Hall & Company]
Deokmbkk 4, VJ3r>.
Mr. John E. Barber,
Vice-President, Middle West Corporation,
20 East Wacker Drive, Chicago, Illinois.
Dear John: I am writing you to say that the firm of Harri.s, Hall &. Com-
jtany is actively engaged in business, having joined in underwriting several old
Harris utility issues and having up for consideration several originations of
our own.
You know, I bink, that we have succeeded to the coriioration bund busines.s
of thr Harris Trust and Savings Bank. Under the Banking Act of 19;53, the
. 3ank can no longer perform its longstanding function as investment banker
for a large group of corporations, many of them utilities. We have thouglit
that the passing of the Harris Trust and Savings Bank out of this field in
Chicago, left a gap and we are going to attempt, with due modesty, but with
lots of confidence, to fill this gap. AVe think we have fallen heir to a unique
position in the middle west, and are anxious to bring before your Company our
facilities for serving you.
I know that you must have your hands full just now with matters pertaining
to the recent reorganization of your ('onii)any and I feel sure you would not
welcome any effort to discuss banking matters at tliis time. I do not, however,
want to fail to tell you that, from such information as we have, it appears to
us that several refunding orperations are worth careful consideration in the
Middle West system. One of the.>^e is in connection with the Public Service
Company of Oklahoma. So when, as, and if the pi'oper time comes to discuss
these matters — and particularly the Oklahoma situation — I trust we may have
the opportimity to sit in on such di.scussions with the hope that we may act
as underwriter for some (jf your Companies. A word from you to the effect
that the door is open for consideration of the.se matters will bring us to your
office.
With kind repards.
Very truly yours,
E. B. H.,
President.
Edward B. Hall.
EV.
Exhibit No. 1640-40
[From the flle.s of Harris, Hall & Company]
The Middle West Corporation,
20 North Wacker Drive, Chicago, Illinois, December 5, 1935.
Mr. Edward B. Hall,
Pre.ndent, Harris, Hall d Company,
111 West Monroe Street, Chicago, Illinois.
Dear Eddii; : Thank you for your letter of December 4th, expressing your
interest in the possible refunding of the outstanding bonds of the Public Service
Company of Oklahoma.
It is not practicable at this time to discuss even tentative arrangements for
luiderwriiing any possible financing of Public Service Company of Oklahoma.
However, T have liscussed your letter with Mr. Green, President of The
Middle West Corporation, and he has asked me to express his own appreciation
jilso of the offer of your facilities.
Sincerely,
John E. Barber.
Vice President..
]^]^7(5() CONCKNTKATION 01' ECONOMIC POWKU
Exhibit No. 1640--41
[From the files of Harris, Hall & Company]
Decembeb 27, 1935.
Mr. Walter J. Cummings,
Chainiian. Continental Illinois National Bank d Trust Co.,
208 South La Salle Street, Chicago, Illinois.
De.\b Mu. Cummings : We have indicated to the management of the Middle
Wei^t Corporation the fact that we believe a constructive job of financing can
he done for the Oklahoma properties and we understand that such a matter is
under consideration. We should, of course, greatly appreciate the opportunity
(jf working with the Company on this piece of business and to the extent that
you feel you might consistently do so, we should appreciate anything you may
care to say that would give the firm a boost.
If the business took one form (which we should at least like to suggest for
the Company's consideration) it appears that some short term paper would be
forthcoming that, in our opinion, would make a very desirable bank investment.
Very truly yours,
L. V. B.
L. V. Bower
EV
Exhibit No. 1640-42
[Proui the fllew of Hai-ris, Hall & t'ompany 1
January 22, l!»36.
Mr. <'HARLES F. GLOiy:,
Field, Olore d Co.,
I2S South Tin Salle Street, Chirago, Jllinoit.
Dear Charlie: I am leaving for New York this afternoon and apparently
shall not be able to reach you by telephone before I go. I wanted to tell you
how we feel about the suggestion you made that Field, Glore & Company should
take a management fee of one-quarter of one percent of the whole amount in
the Public Service Company of Oklahoma deal.
As you know, I was opposed to the idea when it was first brought up and
after thinking it over as you .suggested, we in this office feel that such a cliarge
would not be at all appropriate in all of the circumstances attending this
piece of business.
If you make sotue figures, assuming a normal prcifit on the deal, you will
find that a fee of one-quarter on the whole amount would substantially exceed
the gross profit to be realized on the deal by any one of the major partici-
pants. Expressed another way, such an arrangement would give Field, Glore iV;
Company more than twice the amoiuit of profit accruing to any one of the other
six major participants, and that would not conform to the arrangement that the
six houses were to have equal interests.
If the (piarter were to be divided among the six there could be no serious
objection on the part of any one of us, but Ihat would mean such a small
amount to each that it would seem to us very nmch bettor to handle the busi-
ness without any management fee at all.
We realize that as head of the account yonv firm will carry something of a
burden, but any one of us would be very ha[)py to assume that burden for the
privilege of appearing in first position.
For these reasons we want (o register our vote against such an arrangement.
I am very sorry not lo have had a chance to talk with .von about this before
leaving and am writing you about it simply in order that you may know how
we feel in case the matter coum's up for consideration before I get back.
Yours very truly,
President.
Edward B. Hall
IMN
CONCENTJiATION OF ECONOMIC POWER 11767
Exhibit No. 1640-43
[From the files of Harris, Hall & Company]
Field, Globe & Co.
chicago new yokk
123 South La Salle Street,
Chicago, January 23, 1936.
Mr. Edward B. Hall,
Harris, Hall d Company, Chicago, Illinois.
Dear Ed: I have just received your letter of January 22. As I stated at our
meeting here the day before yesterday, if there was any decided feeling against
our charging the Public Service Company of Oklahoma account a management
fee, the matter would be dropped.
Apparently you feel quite strongly about it, so I don't see that there is any
need for further consideration of the matter. I don't agree with, your conclu-
sion, but that is neither here nor there. I do agree with you that to divide
a management fee among six houses would probably be a mistake.
Very truly yours,
C. F. Globe.
CFG/M
ExHiurr No. 1640-44
[From the files of Harris, Hall & Company]
Harris, Hall & Company, Incorporated
111 West Monroe Street. Telephone Randolph 5422
Chicago, Fehruary 6, .1936.
Memorandum for Mr. Gene Heywood.
Mr. Glore advised that the underwriting syndicate for $16,000,000 Public
Service Company of Oklahoma 4s, is now made up as follows :
Six Principals— $2,100,000 each $12, 600, 000
First Boston Corporation 1,000,000
Tucker, Anthony & Company 600,000
Lee Higginson Corporation 550, 000
Stone & Webster and Blodget 250,000
Central Republic Company 250,000
Lawrence Stern & Company 250, 000
Bacon, Whipple & Company 100,000
Blair, Bonner & Company 100, 000
Sills, Troxell & Minton 100,000
Illinois Company of Chicago 100, 000
A. C. Allyn and Company 100,000
Total $16, 000, 000
H. M. Byllesby & Company were offered an interest of $250,000, which they
declined, principally for the reason apparently that they could not appear in the
advertising.
It is planned that the issue will be advertised over the names of the 4 Chicago
principals, namely.
Field, Glore & Company
Halsey Stuart & Company
A. G. Becker & Company
Harris, Hall & Company
Yours very truly,
B. B. H.
Edward B. Hall
IMN
124491 — 40 — pt. 22 27
11768 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1640-45
[From the files of Harris, Hall & Company]
June 23, 1939.
Centbal Illinois Electric and Gas Co.,
SOS North Main Street, Rockford, Illinois.
Dear Sirs: This is to advise you that a public offering of the First Mortgage
Bonds 3% Series due 1964 and the 3%-3y2%-4% Serial Debentures of Central
Illinois Electric and Gas Co., purchased pursuant to the Underwriting Agree-
ment dated June 17, 1939, was made by us on June 20, 1939 and that the
Bonds were initially offered at 100.50% of the principal amount thereof plus
accrued interest from June 1, 1939 to the date of delivery and the Debentures
were initially offered at various prices depending upon the maturity thereof,
as speciiScally set forth on page 27 of the prospectus relating thereto, dated
June 20, 1939.
We understand that all of the other Underwriters named in said Under-
writing Agreement made a public offering of their Bonds and Debentures on
June 20, 1939 at the above-mentioned offering prices.
Yours very truly,
Harris, Hall & Company (Incorporated),
As Representative of the Several JJndernyriters.
By Norman W. Harris, Vice President.
"Exhibit No. 1641'" intmduced on p. 11550 was marked for identiflcation only.
Exhibit No. 1642
[From the files of Blyth & Co., Inc., Letter from C. E. Mitchell to Charles R. Blyth]
July 31, 1935.
Confidential.
Deiar Charley: I am satisfied as a result of my talk with Whitney this
afternoon that the Morgan-people will shortly be back in the investment
banking business, possibly within the next fortnight and certainly by the
first of September. I think they are waiting at the moment to see if the
underwriting amendment in the banking bill will pass, and regarding this
they are more optimistic than they have been. If it does not pass I am
sure they arq prepared to act in another direction, my guess being that they
will set up Drexel & Company as an investment banking house, leaving J. I*.
Morgan & Company in the commercial banking business.
I have a feeling that their re-entry in one form or another will be to our
benefit, as they will be constructive in leadership and I am sure will count
us as close allies. The only lingering doubt that I have regarding our posi-
tion In their groups lies in the fact that historically they have what you
and I would probably consider an undue respect for capital and are inclined
to use that yard-stick in their line-ups to far too great a degree.
I am sure that they are already laying out fall business in volume and
that this will include a substantial amount of Telephone business and, I regret
to say. Consolidated Gas business.
Sincerely,
Mr. Charles R. Blyth,
San Francisco Ofllce.
CONCENTRATION OF ECONOMIC POWER 11769
Exhibit No. 1643
[From the files of Blyth & Co., Inc. Letter from Cbarles R. Blyth to Charles B. Mitchell]
For interoffice use only
New Tokk San Feancisco
Chicago Los Angeles
Boston Seattle
Philadelphia Poktland, Oreo.
Atlanta
London
Blyth & Co.. Inc.
120 Broadway
Cable address : BLYTHCO
NEW YOKK
San Feancisco, Calif., August 2. I'.>.','i.
Mr. Charles E. Mitchell.
New York Offlte.
Dear Charles : This, I am sure, is the last letter I shall write you for a
while at least, because very soon Joe Ripley and I will start for the Grove
and from there I go to Lake Tahoe.
I have ju.st read your letters of July 81st and have acknowledged the message
which Tom McCarter conveyed in his letter to you. It is too bad this deal
didn't work out, but the best fisherman in the world cannot catch all the
fish.
I'm not particularly concerned that J. P. Morgan & Co. are going to return
to the Investment Banking business — it was inevitable. Our main job is to get
under the covers and as close to them as is possible. While I recognize the
eloquence of adequate capital, I also am a believer in the efficacy of strong
personal relationships. That you have such with the Morgan institution, is a
certainty.
I wonder if we would not make our weather eye function better if we were
to open an account with J. P. Morgan & Co. — whether or not that organization
or the Drexel organization are to be active in Investment Banking. I should
think our cash capital must be at the moment, or very shortly will be, $3,000,000
or more and if it seemed desirable to have an account with Morgan we ought
to be able easily to maintain a balance of $400,000 or $500,000, which, in
their way of looking at things isn't of much importance, but it is a very
definite evidence of our desire and ability to cooperate to some extent.
My feeling is that our capital should be of course concentrated in New York,
but second and third should come San Francisco and Chicago. .1 think we are
carrying a little more than is necessary in the Northwest and in Los Angeles,
both of which places are of no use when it comes to getting credit, because their
rates are much higher than we need to pay. Our only need for them is in con-
nection with small local transactions and a nominal balance only should be-
enough for that. In San Francisco we can get money quite cheap, although
not as cheaply as in New York, but our tie-ins here are so numerous that we
need to maintain our bank relationships on a satisfactory basis.
Of course Morgan & Co. will naturally fall heir to some of the bigger
utility accounts, but that doesn't mean they won't recognize us in a substantial
way — certainly in distribution and probably also in underwriting.
Best always,
Ghakley.
CRB.
H.
11770 CONCENTKATION OF KCONOMIC POWER
Exhibit No. 1644
I From thp files of Biyth & Co., Inc. Letter from C. E. Mitchell to C. R. Blyth]
SEPTElfBEB 26, 1935.
DicAB Charley: Harold Stanley, of the new firm of Morgan, Stanley & Com-
pany, asked me to hinch with him yesterday and we had an hour and a half's
discussion, the main points of which I am sure you will find of interest.
He opened the conversation by saying that he wanted to get the bad news off
his chest first and he was doing that not only because of our relations, but
because George Whitney, who had to leave town the night before for several
days, asked him particularly to see me and explain the situation. The bad
news was that we were not going to be in the underwriting of the Bell Tele-
phone of Illinois. To make a long story short, they found that if they were to
g-o beyond the very short underwriting list that they have, and are bound to
more or less by past relations to the business, to a point of including us, they
would necessarily have to include four or five firms more. For this reason,
and the added reason that they are eliminating completely four houses who
have heretofore been connected with that business, they felt that they were
under the necessity of not including our name. He assured me at the same time
that this would not in any sense be considered a telephone group, that they
intended to consider each individual business separately, and as an illustration
indicated that if they were to do a piece of Pacific Telephone business, they
would certainly see that we were in a strong position in the underwriting. He
then went over the Consumers Power underwriting list and the Dayton Power
and Light list in detail, and showed me how impossible their situation was there,
as far as the inclusion of our name.
He added that not having our name on these first three pieces of business
that they are going to do is a real embarrassment to them, as they recognized
it must be to me, because they are very anxious indeed to give public evidence
fo the close relationship that they have always had with me, and continue to
feel. He said that he could assure me in every way that there would never be
an issue where our name as a possible underwriter would be forgotten, and that
we could rely upon their including us in every piece of business where there
was an opportunity to do so. He was good enough to say that he considered
that there was no one on the Street with whom he had had as close relations
in the issuance business over a long period than myself, or whom he considered,
by reason of talking the same language, could be more helpful than I could.
He asked me for my advice regarding their taking underwriting positions in
the issues of others, their name to be eliminated from public advertising, the
firm not having to date developed a policy on this point. I urged him to do it.
and the next sizable issue that comes along I want to give them an opportunity
of accepting such a position with us.
Stanley's views on the is.sue business by the way. are that originating houses
are entitled to a bigger over-ride than they are now taking and that the per-
centage of .spread given to the wholesaling group for retailing is larger than
justified by the existing pEactices, which in reality call upon the wholesaling
group for no real commitment. His firm are going to follow the practice on
their own issues of calling upon the underwriters to give them as managers full
nuthority to wholesale the entire issue, then to make up a wholesaling grouj.
on the basis purely of distributing power, advising the underwriting houses
along with others of the wholesaling group on the day of offering, the amount
of bonds which they will have for retail. The wholesaling group will be given
a day and a half in which to accept all or any part of the bonds allotted, the
original underwriters thus becoming the guarantors, so to siK'ak. of the per-
formance of the wholesale group as it is determined by the managers.
He assured me that we would have full consideration in the allotment of
bonds In the wholesale grouping of all issues. I told him quite a little of our
distributing power and gave him our records on a number of issues both as to
primary and secondary distribution, and I felt that he was duly impressed.
He asked me to see to it that other members of his firm who would have the
wholesaling list to determine be thoroughly advised as to our ability to dis-
tribute, and George Leib is going to contact the proper partners on the matter
within the next few days.
Stanley was particularly interested in what our policy might be with regard
to the distribution of preferred or common stocks. T told him the nanu' of a
CONOENTKATION OF ECONOMIC POWER 11771
security meaut little to me as I could name many preferreds that were better
than bonds, and many commons that were better than preferreds, and I felt
that our policy would be to handle any security that was prime in the category
in which it was placed. I told him that we were now looking into a prime
public utility common stock with the idea of developing a syndicate for na-
tional distribution and he expressed the hope that we would find conditions
right to go ahead with this kind of business, and indicated that with the prob-
able necessity of breaking up stock holdings of some of the public utility holding
corporations that they had to do with, they would be glad to see such a house
as ours to whom they could turn.
Incidentally, speaking of public utilities he voluntarily remarked that while
he did not want to be committed, he would pf^rsonally consider that my contact
with Consolidated Gas and its subsidiaries in past years would justify the
expectation that Blyth & Co. would be in the second underwriting position in
that business as it developed, and he thought he would want to be talking to
me about future financing for that Company within the next ten days. I judge
this would be on business likely to develop before the end of the year.
Though I am not altogether happy about these first issues of Morgan Stanley,
1 am completely reassured by ray talk with Stanley and am certain that our
future relations are going to be always close and on the whole of a most satis-
factory character.
When I came back from luncheon I fouTi4 Ford with George and brought
rhem both in to give them at first hand a syt,wsis of my talk and my impres-
sions. When he gets back to the Coast, Ford may tell you something more
than I have remembered in this somewhat hurri^ note.
I presume you will see from the press that Anaconda went into registration
yesterday, wliich means that the public offering is scheduled for October 15th.
Tuesday I got together a group to consider the Revere Brass & Copper busi-
ness, consisting of E. B. Smith, Brown Harriman, The First Boston Corp.,
Hayden Stone and Kuhn Loeb, and we had a meeting in the office yesterday on
the subject of that financing. Without being too strong on the matter of price,
we are going to proceed to have the registration completed, which will inciden-
tally involve a new audit. I doubt if the issue can get into registration before
the 25th of October. By then we will have had the test of the market on Ana-
conda and will have a better view of the market in general, which I hope by
that time will have become more settled.
With kindest regards,
Sincerely,
Mr. C. R. Blyth,
Son Francisco Office.
Exhibit No. 1645
(From the flies of Blyth & Co., Inc. Letter from C. R. tJlyth to Charles E. Mitchell]
For inter-oflQce air mail use only
Blyth & Co., Inc.,
San Francisco, Septemher SO, 1930.
Mr. Charles E. MiTCHEnx,
New York Office.
Dear Charies: I seem to have a few moments to reply to your letters of
the 20th and 27th, having momentarily discontinued my job as stump speaker
for the Connnunity Chest. Several thousand workers are now organized and
the party starts tomorrow morning.
There is no question of the great importance to us of the Anaconda under-
writing and followed up as it will be with some other excellent business which
we control and can hand out to those of our friends who possess reciprocal
power.
I have before me your memorandum to George on the make-up of the Revere
Copper & Brass group. The question naturally arises— How can Harriman,
Smith and First Boston, among others, continue to accept, and then show indif-
ference when they have something we want.
11772 CONCEXTIIATION OF ECONOMIC POWER
Your talk with Harold Stauley was by no means disappointing t(j me. I do
not for one minute think we can expect to preempt the entire field of original
financing and in all cases be a major participant or the originator. It als4>
seems true that, notwithstanding discontinuance of the City Company, Guaranty
Company and others, that their mantles have fallen, to a considerable extent,
upon Brown Harriman, E. B. Smith and so on. Otherwise Stanley wouldn't
have apparently felt obligated to a continuation of certain groups formerly
associated together, even though under different names. Aside from your per-
sonal relationship with the Morgan firm, and perhaps the .scarcity of major
league players, there is no particular reason why Morgan Stanley should do
moi-e for us than the business advantages involved in the deal would amount to.
If they adopt a policy of taking positions in other business, as Kuhn Loel) does
and if we are able to bring them business which shows substantial profits, that
is a horse of another color. I do not know how much, if any, good would come
of establishing banking relations with J. P. Morgan & Co. I had at one time
thought as soon as we could maintain a reasonable balance, say nothing less
than $500,000, it might be well to try to get under the tent in that way, but
of course I realize that we would then be somewhat in competition with other
banking organizations which perhaps could keep several times that amount on
(leijosit and if the deposit line were an influencing factor, would far over-top us.
The manner in which they propose handling their syndicates is of great
interest. Among other things, it may go a long way toward solving what
unquestionably is a very dangerous practice, for which I suppose everybody is
guilty, namely — gun-beating. If the participating firms are kept in complete
ignorance of how much of an issue they will receive, it will be a little ditficult
for them to convey through their organization to investors any assurance of
making delivery. Also the proposal of Stanley's that they assume complete
charge of the allotments to distributing groups, irrespective of underwriters, is
excellent. Of course you are proposing to do much the same thing in Anaconda,
which I believe is the right way to handle the make-up of the distributing
group.
Incidentally, on the subject of Amtconda, you raise the point of our inter-
office index system. I will say this is an old subject, one which we have re-
peatedly tried to get away from, because we all recognized its objectionable
features, but none of us has had the ingenuity to develop an alternative plan
that was anywhere near as good, to say nothing of being better.
Of course in the Anaconda business, with our control over the make-up of
the distributing group, the question of interoffice index won't arise, because
you can divert that amount of bonds for retail which we can safely and properly
handle, thereby obviating any question of index.
You appreciate of course that the indp-r was only in use when we received
thoroughly inadequate amounts of bonds in a national distributing group or-
ganized to handle a popular issue. If we were allowed 750 bonds and had a
pressing need for five times that amount, the only way we could handle our
.salesmen so as not to either discourage or infuriate them, was to make a divi-
sion on some prearranged arithmetical formula. I do not believe our troubles,
due to extreme shortage of interest in new issues, will be anywhere near as
acute in the future as it has been in the past and therefore I believe the question
of division on index ^jll become large'jr academic- and will drop of its own
weight.
With respect to the Hearst business, we of course had very little opportunity
to make an analysis of Joe's report, because of our desire that you have it
without undue delay. I am sure we should have come to exactly the same
conclu.sion as you and George did, but as a matter of per.soual interest I think
lloy and I would have liked to have one last look at it before the final word
was passed. My relations with Jack Neylan have always been very intimate
and because of this relationship he and Mr. Hearst were willing that we shouM
liave a preliminary look at the report, even before they had made up their
minds to let any one else have it. However, everything is in good order — Jack
is happy and our position is strengthened, if anything, which fact, after all.
is what is mo.st important.
I am in the midst of discussions now with Mr. C. O. G. Miller, in the hope of
inducing him to make his impending Los Anpeles Gas d- Eirrtric issue an abso-
lute first mortgage security by retiring approximately $5,tV>0,000 bonds due in
1939. This would give us a fir.st mortgage 49r bond with earnings, after depre-
dation, approximately 3.8 times charges, which should make a thoroughly
iiosirable bond anywhere you offered it. In case the matter comes up while
CONCENTRATION OF ECONOMIC POWER
11773
Bob Miller is in the office, I hope you will use your influence, as I know George
is doing, to convince him the plan should be followed.
Best always,
Chablet.
CRB
H
Exhibit No. 1646
Ulyth d Co., Inc., participations in issues of Consolidated Edison Co. of New
York, Inc., and its subsidiaries, June H, 1934-June 30, 1939
[Prepared by the staff of the Investment Banking Section, Monopoly Study, Securities and Exchange
Commission]
Date of
Issue
Size of issue
Participations
Net
profit
before
over-
head
offering
pros-
pectus
Amount
Per-
cent of
total
11/25/35 -
2/27/36
4/9/36
4/9/36
5/25/36
7/24/36
7/22/37
1/13/38
4/21/38
8/12/38
New York and Queens Electric Light and Power
Company, 3J^s of 19f)5.
New York Edison Company, Inc. 3Ms of 1965
Consolidated Edison Company of New York,
Inc., •6Ms of 1946.
Consolidated Edison Company of New York,
Inc., 3H3 of 1956.
Brooklyn Edison Company, Inc. 33-4S of 1966 ..
New York Edison Comp.any, Inc. 3'4s of 1966- -
Westchester Liehting Company 3Hs of 1967
Consolidated Edison Company of New York,
Inc., 3^s of 1958.
Consolidated Edison Company of New York,
Inc., 3>^s of 1948.
New York Steam Corporation 3Hs of 1963
Totals
$25, 000, 000
55. 000, 000
35, 000, 000
35, 000, 000
55, 000, 000
30, 000, 000
25, 000, 000
30, 000, 000
60, 000, 000
27, 982, 000
$4,000,000
5, 000, 000
3, 000, 000
3,000,000
5, 000, 000
2, 700, 000
2, 500, 000
2, 575, 000
3,700,000
2, 275, 000
16.0
9.1
8.6
8.6
9.1
9.0
10.0
8.6
6.2
8.1
$44,988
58,072
35, 421
37, 761
57, 693
24, 050
23,210
25.620
44,861
24, 027
$377. 982, 000
$33, 750, 000
$375, 703
Source: From data supplied by Blyth & Co., Incorporated.
Exhibit No. 1647
[From the files of Blyth & Co., Inc.]
October 5, 1937.
Dear Chaelet: Harold Stanley, of Morgan Stanley & Company, telephoned
yesterday and told me that in light of certain commitments of Street houses
where losses were likely to be substantial, and in view of the further heavy
commitments that must be taken on additional business in the near future, they
were making a general survey of Street conditions and asked if I would care
to let them see our picture. I naturally acceeded and spent a full hour with
him yesterday afternoon.
I gave him, as of September 30th, our figures of net worth ; our nine montlis
operating profits; a general statement of our inventories broken down as to
classes; a statement of our cash and loan position, and a full statement of our
commitments. I also gave him a description of our operating set-up and its cost
and a "horseback" opinion as to how rapidly, under pressure, we could liquidate
inventories, and to what extent and how rapidly we could cut operating
expenses. When I got through he was most laudatory in his expression and
indicated that from the standpoint of profit record, inventory and commitments,
our record was one of the finest that lie had seen on the Street.
In turn he gave me a confidential look at the Morgan Stanley statement,
which showed a net worth of about $10,000,000 and was practically 100% liquid.
Stanley showed me the records that lliey currently keep with respect to our
performance. On, certain Items where they took back securities from us where
we had been slow in selling, the record was not so good, but on the whole I
thought it made a pretty good showing, especially with respect to the bonds
11774 CONCENTRATION OF ECONOMIC POWER
that they had bought back in the open market from our distributions. My im-
pression was that they considered the record fair to good. He showed me one
memorandum of the so-called profit that we had had from their underwritings
since they started business. With his consent I took the sheet away with me
and am attaching hereto a copy.
I talked the Consolidated Edison situation over with him thoroughly and
after ceding (1) that I had been instrumental in bringing Floyd Carlisle into
that situation; (2) that I had been influential in getting a pcsition on the Board
for George Whitney, and (3) that Carlisle had promised me in the Spring of
1935 that if Morgan & Company did not get back into the investment banking
business, the financing of Consolidated Edison would be thrown over to me, be
allowed that we had a real right to our present position in all Consolidated Edi-
son business and assured me that if there was any re-arrangement in the account
we would in no case be cut in percentage beyond the percentage cut that
Morgan Stanley themselves took. In other words our position would be
maintained.
In discussing current underwritings, Stanley did not belittle the probable losses
in such accounts as Bethlehem, Pure Oil and Northern States Preferred, but
added that his analysis, as far as it had gone, did not indicate that any under-
writers would get into financial difficulties as a result, but he thought a good
many of them would be badly hurt and that in many cases any hope of profits
for the year 1937 would be shattered.
I talked to him a few minutes ago on the telephone. He concedes that Beth-
lehem looks like a pretty bad "flop", but with the success that has occurred in
Idaho Power (which checks with our findings) and with the indications that are
coming through to them this morning from Street houses and dealers on Central
New York Power, he felt that that issue could be priced as high as 100 and
move out successfully. I urged a price of 99 'A-
Certainly it looks as though we were completely in the clear except for our
loss on Bethlehem, on which we set up a special reserve in September of about
$55,000. As of this writing I should think that it was not enough. If George
and I had been less brilliant in our work in prying our way into Bethlehem,
we would have a high rank for smartness.
Sincerely,
C. E. Mitchell.
Mr. Charles R. Bltth,
San Francisco Office.
Exhibit No. 1648
[From the flies of Blyth & Co., Inc.]
March 29, 1938.
Memorandum to Messrs. C. R. Blyth, Bernard Ford, Roy Shurtleff, J. L. Pagen,
Stewart Hawes, H. O. Wetmore
Consolidated Edison Company of New York
The above Company has in registration an issue of $60,000,000 par value
debenture bonds, due to come out of registration April 13th. The maturity,
issue price and underwriting spread have as yet not been determined.
Morgan Stanley & Company are as usual managing the underwriters' ac-
count and have determined that for this issue only, and not as a precedent,
they will increase the number of underwriters from 29 to 66. To allow for
this increase they will reduce their own percentage of interest in the business
!ind will ask the leading houses in the account to reduce proportionately.
Morgan Stanley's interest will be $9,000,000
we will be second with an interest of 3, 600, 000
followed by Kuhn Loeb with an interest of_. 3,000,000
Brown Harriman 2, 100. 000
Lazard, First Boston, Smith Barney and Bonbridge will have
interests of 1, 900. 000
etc.
We have advised Morgan Stanley that, subject to the usual provisions, we
will consider ourselves morally committed to the foregoing intere.it of $3,600,000
in this underwriting.
CONCKNTKATIOX OF ECONOMKJ J'OWEli 11775
The underwriters will be called upon to sigu tbe underwriting contract ou
April 12th and the offering is scheduled for April 14th. There will be a meeting
of underwriters on Monday, April 4th at 10: 30 at the offices of the Consolidated
Edison Company. Mr. Hawes will attend the meeting for us.
C. E. ^Mitchejj:-.
CEM.R
Exhibit No. 1649
IFiom the files of Blyth & Co., Inc. Letter from C. K. I'.lyth to George l^^ib]
(For iuter-offlce use only>
New York l^os An^fles
Chicago I.O.S ,\iif,ales
Best on Sfcaltli'
Philadelphia I'ottland, Ore.
Atlanta
London
Blyth & Co. Inc.
120 Broadway
Cable address : BLYTHCO
NEW YORK
San Francisco, Calif., AnyuHt 2, 1!)35.
Mr. George Lelu, New York Office.
Dear George: I think this will be my last letter from tho office as Joe liipley
and I are about to leave for the Grove and from there I go to the Tavern at
Lake Tahoe.
I have just talked with Hockenbeamer, telling him that both Roy and I
would be away for a month, but that we could return at a moment's notice. He
is, as you know, proceeding with plans to issue more bonds — some $3o.0fl0,(J00
to $40,000,000, which will be done if his hearing before the Railroad Commis-
sion next Monday works out satisfactorily, as he anticipates it will.
1 have just had two letters from Charlie Mitchell, one about Morgan and
the other about the Public Service of New Jersey business. The latter of course
I knew was out, unfortunately for us.
In the other letter he discusses the probability of Morgan again becoming
active in the Investment JBauking business, either through their own organiza-
tion or through Drexel. I suggested to him what you and I talked of when I
was in New York, and that is the advisability of opening an account with
Morgan & Co. I should think with the $3,000,000 cash capital which we now
have and with the prospects of Its becoming considerably larger in the near
future, that we could rather comfortably maintain a balance tliore of from
$400,000 to $500,-000, if it seemed such a move would tend to develop better
business relations.
I think we have always tended to scatter our balances, particularly in the
Northwest and Southwest, to a point that produces complete inefficiency. It
seems to me that what might be called a nominal working balance is sufficient
for Los Angeles and the Northwest and that our balances should be concentrated
first in New York, second In San Francisco, and third in Chicago. I should think
three accounts in New York, namely Guaranty, City and, as suggested, Morgan,
would be ample and all that Is necessary, three in Chicago, three in San Fran-
cisco and the minimum elsewhere.
What are you going to do about some leisure time this summer? Need I
call to your attention the fact that you have been on the go pretty violently
for about two years and that, irrespective of business, I would very strongly
recommend a solid month, when you abandon both society and business, and give
yourself a real recreation. I think you owe it to yourself and family and that
failure to do this would be short-sighted dumbness. I cannot possibly go East
In time to enable you to get away during good weather, particularly because
I have to do the Community Chest job this year, but things can go along and
must go along, even If you aren't there.
Best always,
Charley
CRB
H
Iln Ink: Please write me ««e« twice In a while at Tahoe. Thanks!]
11770 CO.XCKNTRATIO?: OF ECONOMIC POWER
ExniniT No. 1650
[From the files of BIyth & Co., Inc. I-etter from C. R. Hl.vth to ('harles E. Mitchell 1
Now York Los Angele.'.-
Chicago Seattle
Boston Portland
San Francisco Blytu & Co., INC.
Russ Building
Cable address: BLYTHCO
-Mr. Charles E. Mitchki.i., . San Francisco, Janiiarii 4. I'-'SS.
New York Office
Dear Chaulls : A.s I wired yon, on further thought and talking the matter
over with Roy Shurtleff, we both feel the idea of opening an account with
J. P. Morgan & Co. has nuich that might prove valuable, and certainly nothing
that could be a di.sadvanlage. It is true our account won't be very important,
at least at the beginning, ijut it should show that our hearts are in the right
place and also it cannut produce any less than have oiu' accoiuits, particularly
with the Guaranty and, to a lesser degree, with the City. I know the Guaranty
people like us ; they say many nice things about us, but if you can show me
any direct business that has come from them over some ir> years when we
made them our principal bankers (whatever that was worth), I should be
surprised. I carmot help bu.t believe that even a modest balance, as Morgan
would consider it, will to some extent influence the already cordial feelings and
desire to cooperate which they have toward us, because of you.
I was impressed with the thoroughness with which you had checked West
more Willoox. It sems to me in this business where we are taking gambles
every day that there is no gamble so harmless and yet so full of unlimited
po.ssibilities as that represented by an investment in a man who appears to
liave character and ability. I wired George that we had only one condition in
connection with Willcox' association and election to Vice-Presidency and that
was the elimination of Patterson, regarding wliom I think we are all in agree-
ment. Patterson is one of the cases which needs attention and not temporizing.
I have every feeling of friendship for him, but no regard whatever for his value
to this organization.
I am extremely interested to hear what Harry Sinclair said to you with
reference to Ricli field. My information led me to the point of believing that
w(! should cash in on at least half of our Richfield bonds while the market
appears ready to take them, but it may be that is wrong, based on information
which you have.
I am liaving lunch with Jim Black the first of the v»-eek and at that time I
expect to expose myself to certain assurances from him with reference to our
position in future Pacific Gas & Electric financing. It will be very much better
to have him tell me what he is going to do tlian to ask him to do it and I
believe he is in a position where he can do that, if he wishes to.
Regarding the San Francisco Oakland Bridge, as I wired you there just isn't
any inside to this, unless it be through the Reconstruction Finance Corporation
which owns the bonds. It so happens one of my most intimate friends is one of
the active directois in this project. At the moment he is South, but will return
in a week or so, at which time I shall have a full talk with him regarding this,
but you can put it right down in your book that Brown Harriman, or no one
else has any drag that enables them to run away with this busine.ss and I think
rather *^han submit to their leadership, although feeling most cordially toward
them, we should go it alone — at least at this stage of the game. I do know
that a lot of the spectacular names which are to l)e associated in this business
in the Witter group won't be worth much when it comes to selling bond.s. I
will report more on this when I liave the opportunity.
I notice the hedge clause in the postscript of your letter dated December 31st.
in which you apparently are now trying to change the terms of the business
arrangement I had with you with reference to occupancy of our new offices, by
making it seem iis if the understanding was — as and when my individual office
would be ready for occupiincy. No wonder our President refers so slightingly
to the tactics of Wall Street. In order that there may be no niisun(U>rsiandings,
let mo repeat th;it when T discussed occupancy of 14 Wall Street, I meant com-
l)lete occupancy and not the carpentry .nnd shining u]) of jusi one room.
Best always.
QJJJ5 Chari-k*-.
H
Dictated but not read.
CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1651-1
11777
[Letter from .T. P. Morgan & Co. to Investment Banking Section, Monopoly Study,
Securities and Exchange Commission]
23 Waix Stkeet,
New York, September 22, 19,W.
PhTtR R. Nehemkis, Jr., Esq.,
Speeml Counsel, Investment Bank'nig Seetiov,
Monopolji Stiidii, Seeurifies and Exchmnje Commission,
Wasliington, D. C.
Dear Mr. Nehemkis : I wish lo acknowledge receipt of your letter of Septem
her 19, 1939.
I am enclosing schedules which we have prepared and are submitting in
response to your inquiry of August 17, 1939.
Some time after the 1st of October I will connnunicate with you and arrange
a time to talk with you along the lines which I mentioned in my letter of
September 18, 1939.
Yours very truly,
Henry C. Alexamu r.
Exhibit No. 1651-2
DEPOSIT ACCOUNTS OF INVESTMENT BANKING FIRMS (I. E. MEMBERS OF INVEST-
MENT BANKERS ASSOCIATION OF AMERICA) WITH J. I'. MORGAN & CO.— DREXEL
& CO. AS OF 7/1/39 i
Name
A. E. Ames & Co., Ltd., Toronto, Canada _
Blyth & Co., Inc., 14 Wall Street, New York, N. Y
Bonhright & Co., Inc., 2.') Nassau Street, New York, N. Y .
Butcher & Sherrerd, 1500 Walnut Street, Philadelphia, Pa..-
Clark Dodge & Co., 61 Wall Street, New York, N. Y
Dominick & Duminick Special Account, 115 Broadway, New York,
N. Y -
Dominick & Dominick— Fiscal Agents, 115 Broadway, New York,
N. Y :
Elkins, Morris & Co., 305 Land Title Building, Philadelphia, Pa
First Boston Corporation, The, 100 Broadway, New York, N. Y,
Robert Garrett & Sons, South & Redwood Streets, Baltimore, Mary-
land -
Goldman Sachs & Co., 30 Pine Street, New York, N. Y
Hemphill Noyes & Co., 15 Broad Street, New York, N. Y
Hornblower & Weeks, 40 Wall Street, New York, N. Y
Kean, Taylor & Co., Special Account, 14 Wall Street, New York,
NY --
Lazard Freres & Co.. 120 Broadway, New York, N. Y
Lehman Bros., 1 William Street, New York, N. Y ,
Lee Higginson Corp., 37 Broad Street, New York, N. )^ .
Morgan Stanley «t Co. Incorporated, 2 Wall Street, New York, N. Y
W. H. Newbold'.s Son & Co. Agent A/C, 1517 Locust Street, Philadel-
phia, Pa
Salomon Bros. & Hutzler, 60 Wall Street, New York, N. Y
J. & W. Seligman & Co., 54 Wall Street, New York, N. Y ,.
Smith, Barney & Co., 1411 Chestnut Street, Philadelphia, Pa
Smith, Barney & Co. "C. C. B. Account", 1411 Chestnut Street,
Philadelphia, Pa
Smith, Baraey & Co. Special Credit Account, 14 Wall Street, New
York, N. Y
White, Weld & Co. Special, 40 Wall Street, New York, N. Y
The Wisconsin Company, Milwaukee, Wisconsin
Dean Witter & Co., San Francisco, California _. .
Period froi
I 6/14/34 to
7/1/39 or from date ac-
count opened (if sub-
sequent to 6/14/34) to
Date
7/1/39
account
opened
Maximum
Minimum
monthly
monthly
average
average
balance
balance
6/29/39
$30, 000
$30, oro
5/5/36
250,000
71,000
1/10/35
500, 000
58, 000
6/22/34
24, 500
5,600
6/25/34
1, 094, 000
100, 000
6/15/34
418,000
100, 000
7/15/38
2,016,000
15,000
1/7/37
50,000
28.100
1/22/35
103, 000
77, 000
Prior to
6/14/34
5,000
300
10/1/36
100, 000
7\ 000
6/8/38
100, 000
100,000
Prior to
0/14/34
50, 000
50,000
6/18/34
117,000
10. COO
1/3/38
1, 526, 000
4<-'2, 000
5/5/36
500. 000
253. 000
9/25/34
$200, OOO
$103,000
9/16/35
10, 620, 000
3, 018, 300
4/27/38
260, 500
116, 100
0/28/34
100, 000
IS, 000
7/9/34
538, 000
26, 000
12/31/37
65, 600
27,300
12/31/37
400,000
100,000
1/3/38
470, 000
100, 000
7/3/34
200, 000
90,000
3/20/39
61, 000
50, 000
5/26/39
102,000
100.000
1 See ''Exhibit No. 1H68," appendix, p. 11827, for supplementary memorandur
11778 CONCKNTRATION OF ECONOMIC POWER
ExHiRiT No. 1651-3
(Prepared by J. P. Morgan & Co.)
rOAXS BY J. I'. MOUGAN & CO.-DREXEL & CO. TO INVESTME.VT BANKING FIRMS
(1 K MEMBERS OF INVES TiMlCNT BANKERS ASSOCIATION OF AMERICA)
HAVING DEl'OSrr ACCOIINIS WITH THEM AS OF JULY 1, 19.f9
Loans during period from 6/14/34 to 7/1/39 Owing 7/1/39
Clark Dddge & Co., 61 Wall Street, New York, N. Y.
Elkins, Morris & Co., 305 Land Title Building, Phil-
adelphia, Pa.
First Boston Corporation, The, 100 Broadway, New
York, N. Y.
Hemphill Noyes & Co., 15 Broad Street, New York,
N. Y.
W. H. Nevtbold's Son & Co., 1517 Locust Street,
Philadelphia, Pa.
Salomon Bros. & Hutzler, fiO Wall Street, New York,
N. Y.
Ranging from no loans to $1,000,000
Ranging from $50,000 to $100,000-
Ranging from no loans to $4,500,000
Ranging from no loans to $300,000
Ranging from no loans to $190,000
Ranging from no loans to $4,700,000 . . .
$100,000
50,000
No Loan
200,000
No Loan
2,425,000
Exhibit No. 1652-1
[From the files of Blyth & Co., Inc. Letter from E. M. Stevens to C. E. Mitchell]
Los Anseles
Seattle
I'ortlund
Chicago
Boston
San Francisco
Blyth & Co., Inc..
35 South LaSalle Street,
Chicafjo, April 11th, 1936.
The Crane Company,
Mr. C. E. MiTCHEix,
New York Office.
Deak Charley : Late Friday afternoon I saw Walter Cummings again relative
to the Cr;ine Company business. As you know, for reasons which seemed to
them potent and ostensibly connected with some of the stock transactions with
Morgan and Clark Dodge, the Crane Company Board had voted to give this
business to Morgan Stanley. Mr. Nolte, the President of Crane Company,
seems to have the idea that having turned this business over to Morgan on
the instructions of his Board he could not with propriety attach any strings
to it thereafter and does not appear to be willing to make any suggestions to
Morgan as to what they should do w^th the business.
Of course, I explained to Walter Cummings that such action was customary
and would not be considered improper, which Cummings thoroughly understood.
He apparently is interested to do what he can and again called Nolte yesterday
to tell him that the Continental Bank as Executor of the Crane Estate and
largely interested, would like to have him make suggestions to Morgan that
the Company would be pleased to have us in the business in a major way.
Cummings tells me that he has done everything he could in suggesting such
action on Nolte's part but, of course, he cannot force him to do so.
I see no impropriety in your advising Morgan frankly of this situation and
letting them know that Mr. Cummings has so expressed himself on behalf of
the Continental Bank. Furthermore, if there is anything in the heritage rights
it was the Continental Bank which did the last financing for the Crane people
and, as you know, it was handled directly by myself with Mr. Crane personally.
NoUe evidently has a mistaken idea about the propriety of his injecting a
suggestion of this kind to Morgnn at this time, but I see no reason why you
should not let them know directly of Mr. Cummings' attitude.
Cummings is apparently very friendly to us and considerably distre!=sed about
Nore's attitude. We are doing everything we can at this end. Driver under-
stood previously that Nolte had promised him that he would either head the
business or at least have a major jiosition in it. Doubtless he had m.'iny solici-
tations and obviously thinks that he has disposed of any embarrassment with
other houses by turning it nil over to Morgan. There is every reason however.
of course, why Chicago should be prominently in this piece of business and
CONCENTRATION OF ECONOMIC POWER 11779
there is obviously every logiciil reason why we should be the people. We ngain
discussed the matter this morning with Lowell, Vice President of the Conti-
nental, who is on the Crane Board and who apparently is desirous of having us
in, and who has told us today he is thinking over what they may farther do to
help this situation. In the meantime, I see no reason why you cannot discuss
it all frankly with the Morgan people if you choose — explain the entire situa-
tion, the attitude of Cummings and his bank and the logic of our being the
Chicago partner. My guess is that Nolte may have made so many partial prom-
ises that he does not want to be in a position of embarrassing himself with the
other people here by suggesting us. On the other hand, I am sure that it will
be perfectly all right if we came into this business presumably through Morgan
rather than at his insistence. This I take to be his attitude.
We will follow this further here and await any further suggestions from you.
Hope you can get the Morgan people to see the light.
Yours sincerely.
Gene.
EMS : MP
Copy sent to M. Stanley and C R B
Exhibit No. 1652-2
[From the files of Blyth & Co., Inc.]
April 1.3, 1936.
Dear Harold :As you know, when you were away from the office last week
I talked to Perry Hall about the Crane business and made a plea for special
consideration of our firm on three counts — first that we had for a very long
period been working assiduously with the Crane people on an acceptable financial
plan ; second that our Vice Chairman, Gene Stevens, when President of the
Continental, had personally handled the issue which you are now refunding;
and third that Mr. Cummings the present President of the Continental Bank
which is Executor of the Crane Estate, had told Stevens that he ha<l said to
Nolte that he would be particularly pleased if our firm could be prominently
connected with this business. Perry Hall told me that the first plea would liave
little weight because there were many firms who claimed to be in a similar
position, he passed over the second plea without comment but with regard to the
third said that if such a word actually came through to them from Cummings,
it would have weight.
I parsed that word on to Stevens and have received a letter from him this
morning of which I enclose a copy. It was obviously not written with the idea
that I would show it to you but it so completely tells the story that I think I
better do so and "let the chips fall where they may." I hope you will see your
way clear to give us special consideration under the circumstances as detailed.
Sincerely,
C. E. Mitchell.
Mr. Harold Stanley,
Morgan, Stanley d Co., 2 Wall Street, New York.
Copy to E. M. S.
C. R. B.
Exhibit No. 1052-3
[From the tiles of Blyth & Co., Inc. Letter from Harold Stanley to Charles E. Mitchell]
2 Wall Street, New York, April 17, 1936.
Mr. Charles E. Mitchell,
Blyth d Co., Inc., IJf Wall Street, New York City.
Dear Charlie; I went to Washington the day after receiving your letter of
April 13th about the Crane business and have neglected to answer it since then.
All I can say at present is that I do not know what sort of a group we will form,
if any. However, I have read Gene Stevens' letter and we will certainly have
your request in mind when the time comes to make a decision.
Sincerely yours,
HaboU).
11780 CONCENTRATION OF ECONOMIC POWEIJ
Exhibit No. 1652-4
[From the files of Blyth & Co., Inc. I
'SIay 26, 1936.
Dear Charley: Just for your information, Harold Stanley called me today to
give me in advance two pieces of bad news.
First, that we would not be in the Crane business which is disappointing as
■we had four claims for placement: (1) that Gene Stevens had negotiated the
previous issue; (2) that we had done a "great deal of work with the Company
on their financial sot-up in Chicago; (3) that we had been assured by the Com-
pany that they wanted us in the business, backed by the fact that Lee Lim-
bert's brother-in-law is an oflScial there and had given us considerable inside
information; and (4) that Mr. Ciunmings, the President of tlie (.'ontinental Bank
who are Trustees of the Crane Estate, had indicated that they would like to see
us prominent in the business and had so notified the Company. Those in the
business with Morgan Stanley are Clark Dodge, who assisted in the flotation of
common stock for the Company some years ago ; Lee Higginson, who were prom-
inent in the last bond financing, and E. B. Smith & Company, who by virtue of
being lieirs of the Guaranty Company are given the old Guaranty position.
Second, we are not in tlie Niagara Falls Power issue. Regarding this Stanley
says that they are forced to recognize houses having previously to do with the
companies in that system and in this issue will recognize four or five such
hou.ses only.
Harold was most apologetic regarding both of these situations and told me
thai he wanted me to have the news before it came from any other quarter
and that they would hope to make it up to us in some other way.
Sincerely,
C. E. Mitchell.
Mr. Chaules R. Blyth,
San Fraticisco Office.
Copy to E. M. S.— C. E D.
(Handwritten:) Cross filed Niagara.
Exhibit No. 1652-5
[From the files of Blyth & Co., Inc.]
KuGKNB M. Stevens. Cable address
Vice Cliairmaii. BLYTHCO
Blyth & Co., Inc.
135 South La Sallk Street
Chicago, May 27th, 1936.
Dear Charlie: I have the copy of your letter of tlie 26th to Charley Blyth
about the Crane and Niagara Falls business. I am. of course, very much dis-
appointed about the former. It seems to me we used all the pressure that we
could. The irony of it is that Lee Higginson, and Smith, as heirs of the Guar-
anty Co., are given a position by reason of their last financing, and I was the
one who gave them that position by inviting them in.
I am quite confident that the Company originally expected to give the business
to us to head but it was finally turned over to Morgan, for reasons which you
understand, and without recommendation as to who they would take along.
The matter, therefore, was actually in Morgan's hands but I can hardly under-
stand their reasoning in taking along the others through inheritance and ex-
cluding us when it seemed to me our claim on this grouind was much stronger
than either of the others.
As you know, this business was well under way before I came in. I do not
know whether I could have changed it at an earlier stage or not.
Sincerely yours,
Gene.
Mr C. E. Mitchell,
New York Office.
CONCENTRATION OF ECONOMIC POWER 1 1781
Exhibit No. 1652-6
[From the files of Blyth & Co., Inc.]
(Handwritten:) Crane Co.
May 29, 1936.
Dear Gene: I have your letter of the 27th regarding the Crane business and
t-nu understand your disappointment. Tliis is a cise which sliows us very
definitely what we are up against and how hard we have to fight.
Talking with Harold Stanley a couple of days ago about this, he remarked
that it would be as far fetched for us to claim a position in this business by
virtue of your present relationship with us as it would be for him to claim
business that the Guaranty Company had handled years ago when he headed
that Company. We are bound to have an uphill fight against those existing
entities which, though they have no legal claim to heirship, represent in large
measure in their personnel a large body of employees of former issuing and
now defunct companies.
In the long run however, they and we will occupy the position that our brains
and organization justify and we might just as well approach the problem on that
basis.
Sincerely,
C. E. MiTCHELl,.
Mr. E. M. Stevens,
Chicago Office.
Copy C. R. B.
Exhibit No. 1653-1
[From the files of Blyth & Co., Inc., Memorandum given to Charles F. Mitchell, Blyth & Co., Inc., by
Harold Stanley, Morgan Stanley & Co. Incorporated.)
[Copy]
Blyth d Co., Inc.
I Selling Group
: Concessions
1935 _-.. $16,284.40
1936 I 39,598.60
1937 - _ i 17,156.25
Plus ©hio Edison 4s '67 i 2,250.00
$75, 289. 15
Underwrit-
ing
$63, 191. 67
566. 802. 38
288, 536. 87
I $918, 530. 92
$918, 530. 92
75, 289. 15
$993, 820. 07
" This includes $769,425. being theoretical i)rofit on Bonds and Stocks retained by them.
October 1, 1937.
ExHiRiT No. 1653-2
[From the flies of Blyth & Co., Inc. Letter from C. R. Blyth to Charles E. Mitchell]
Fbr Inter-Office Air Mail Use Only
Blyth «& Co.. Inc.,
Mr. Chari.Es E. Mitohkix, San Francisco, October 7, 19S7
Nciv York Office.
Dear Chakue : Your letter of October 5th is naturally of the greatest interest.
What is most surprising, I think, is the chang'j in times and customs which
makes possible with Morgan & Company an exchange of the most confidential
kind of information. Aside from that, I get no little satisfaction in having
authentic and informed opiniun confirming our own belief, or maybe it was hope,
that so far this year our organization has handled itself about as well as con-
ditions would allow.
11782 CONCENTRATION OF ECONOMIC POWER
Furthermore, it is a satisfaction to liave our affairs in such shape that we can
freely expose them to Harold Stanley, while harboring no mental reservations,
or anytliing to be ashamed of.
I dun't mean that I am at all satisfied with what we are doing, nor with the
capacity of our organization. I am happy over its general reputation and orer
its very extensive list of friends. I am not unduly alarmed over operating
losses, except in certain quarters which we have under close observation, and I
flo think we have a future that is continuously brightening. It is impossible for
any group, starting from scratch as we did, to conquer the financial world in
twenty-four years, but if we have been able to get as far as to enable an un-
prejudiced banker of Stanley's position to realize that our cargo hasn't shifted
(yet), and that we are right on our course, it is rather comforting.
The big question which we have asked a thousand times, and which in good
markets I think we are apt often to consider as only another cry of "wolf", is —
"What about future commitments of large proportion, extending over a 30-day
period while stockholders are given the right to act and the market an oppor-
tunity to collapse?" Really, it doesn't make sense to underwrite .$50,000,000 of
securities for a two point spread, which at the end of the stymie may become an
Irish dividend of 5 or more points. Bethlehem Steel gave us a good taste of
that, although for a rather small fee from us. W^hen you visualize what might
have been a possibility, namely the underwriting by us of a convertible Ana-
conda issue, with performance comparable to Bethlehem, it makes one realize
our capital in the business might not prove such a dependable thing after all.
I am delighted over your clarifying the Consolidated Edison business with
Morgan. Certainly if anybody is entitled to a real place in that picture we are,
because of you. and apparently Morgan agrees, so we seem to be set.
Before you have a chance to jump on me on the question of fallibility of
Charley Meek and his chart work, I will put up the defense I have always used,
by saying that if Charley Meek can be right 80% of the time, or even 65% of
the time, we will profit by paying some attention to his market opinions. The
break of last Tuesday not only caught him wholly unprepared, but in the posi-
tion of having clearly indicated we were in an upward movement. I do not
believe this at all disproves Charley's value. I also never would advocate any
very drastic moves to fit in with Charley's ideas. If we had a big inventory
position and he felt rather certain that a slump was about to occur, I should
think we would be well to act, because we could do nothing worse than lose some
possible profits. If, however, he urged heavy commitments during a period of
depression, I would be most reluctant to move, because I would consider that
nothing short of gambling, and I don't think we want to gamble.
•I hope you will give some thought to the question I raised with George, re-
garding a stock brokerage house to become interested and actively spons'or
Rayonier. Incorporated stocks. I think it is very important we get action in
that quarter.
Best always,
CRB Chablet.
H
Exhibit No. 1654
[From the files of Blyth & Co.. Inc.]
Mr. Charles R. Blyth, Octorer 21, 10.S7.
San Francisco Office.
Dear Charley: I have had occasion to sit down for informal chats today
with both Harold Stanley and Elisha Walker and to each of them I said about
this: "It may possibly be that before the year-end there will be some readjust-
ments among the investment banking hoiises that will mean consolidations, buy-
outs or takings-over. We have no desire to change our own status but if there
is any development in which it would be helpful to the situation for us to act,
and at the same time distinctly to our benefit to act, we would be glad to
have it at lea.st brought to our attention."
Elisha Walker said that he would consider it more than probable that
there would be some readjustments and if they came to their attention he
certainly would bear us in mind. Harold Stanley said that it was the view
of his firm and of the "corner" that there were too many houses in the business
now, that there ought to be a smaller number and that number ought to be
stronger, that he was delighted to know how we would view the situation in
case developments might occur, and he further added that he would make our
attitude known to the "corner".
CONCENTRATION OF ECONOMIC POWER 11783
Stanley said that since our talk of a week ago the question had arisen as
to whether any part of our capital was "special", and when I answered in the
negative lie asked whether we would he receptire to a suggestion of "special"
capital coining into our husiness. In reply I told him that I naturally* could
not answer for the firm but off-hand I would think it very doubtful if wie
would be receptive to that kind of suggestion. I haven't the slightest inkling
of what he was trying to get at and your conjecture would be just as good
as mine. It is interesting to know, however, that the subject has even been
under discussion.
Sincerely,
C. E. Mitchell.
CEM.R
Exhibit No. 1(355
[From the files of Biyth & Co., Inc. Letter from C. E. Mitchell to Cbarlea R. Blyth)
August 8, 1938.
Mr. Charles R. Blyth,
VoTahoe Tavern, Lake Tahoe, Calif._
Dear Charley; Here is a matter of more than passing interest. Last Friday,
John Young, of Morgan, Stanley & Co., talked with Roy on the telephone, and
asked him if we would mind giving them, in confidence, a statement of the
amount of underwriting we had done during the past three years.
Enclosed is a copy of Jack Pagen's memorandum to Roy which gives the
specific questions and answers in the form requested, and which Roy is sending
over to the Morgan Stanley office this afternoon.
One can merely conjecture what they are getting at. I do not know whether
they want to get an idea of how we are treating ourselves and being treated
by others so that they may have some yardstick to apply to us, or whether,
as seems more likely to me, that they are requesting this information gen-
erally in order to be able to build up an argument that the combined capital
strength of underwriters is altogether out of proportion to the underwriting
done, and ought to be increased by the development of some process permitting
bank capital to enter the situation.
Of course, the information asked for is of a character that we would not
want to give to any other inquirer than Morgan Stanley or the Federal Reserve
Bank ; but I see no reason to withhold it, and in any event it makes a pretty
good showing for us in comparison with what the majority of other houses
will be able to present.
If I casually find out — as it is more than probable I will in the next few
days — the reason back of this questionnaire, I will advise you.
Sincerely,
CEM.JD.
ExHinrr No. 1656-1
[Letter from Blyth & Co., Inc., to Investment Banking Section, Monopoly Study,
Securities and Exchange Commission]
C. E. Mitchell Cable address
Chairman BLYTHCO
Blyth & Co., Inc.
14 WaU Street
New York, August 16, 19S9.
Mr. Peter R. Nehemkis. Jr.,
Special Counsel, Invealment Banking Section, Securities and Exchange
Commission, Washington, D. C.
Dear Mr. Nehemkis: I have your letter of August 16 requesting a copy of the
figures furnished Morgan, Stanley & Co.. Incorporated with respect to the un-
derwritings by our firm for the years 1935, 1936, and 1937.
A copy of the letter embodying this data is enclosed herewith.
Very truly yours,
C. E. Mitchell, Chairman.
Enclosure.
CEM :CB.
124491—40 — pt. 22 28
11784 CONCENTRATION OF ECONOMIC POWER
Exhibit No. 1656-2
[Enclosed with "Exhibit 1656-1'" 1
New York San Francisco
Chicago I-os Angeles
Boston S attle
I'liiladclphia Portland
Blyth & Co., Inc.
14 Wall Street
New York, August 8, 193s.
Morgan Stanley & Co., Inc.,
Tioo Wall Street, New York, N. Y.
Attention: Mr. John Young, Vice President.
Dear Sibs : Answering your questionnaire of August 5, regarding a record of
our underwritings from September 1, 1935 to August 15, 1938, inclusive, we
submit the following:
1. (a) Number of issues in which Blyth & Co., Inc., was an
underwriter 222
(b) Aggregate principal amount of such issues $5,442,581,404
(c) Aggregate underwriting commitments of Blyth & Co., Inc.
therein $387, 211, 452
2. Included in the above figures are:
(a) Number of issues managed by Blyth & Co., Inc 39
(b) Aggregate principal amount of such issues $392,875,537
(c) Aggregate underwriting commitments of Blyth &
Co., Inc., therein $124,757,937
Very truly yours,
Blyth & Co., Inc.
By: (Signed) Roy L. Shurtleff,
Vice President.
RLS.C
"KxHtiiT No. lf'57" appears in full in text on p. 11594
Exhibit No. 1658-1
I From the files of Blyth & Co., Inc.]
Morgan, Stanley & Co.
}!>:ir,
Nov. 25/35 : $25,000,000 New York and Queens Electric Light & Power
first & cons. mtge. 31/28, due Nov. 1. 19n5 : Gf»-oss pro/It
Buying group— $4,000,000 (16%) $47,405
Nov. 20/35: $43,963,500 *Ohio Edison Company first & cons. mtge.
4% series, due Nov. 1, 1965:
♦Buying group— $1,000,000 (2%%) 10,000
*This reciprocal obligation is divided equally with Bonbright
& Co. ($1,000,000— 2i4%—$10,000 each.)
Our total buying group interest was $2,000,000, 4%%.
Total for 193.) $57,405
Avr. int. 9.13%— 2 deals.
*Mr. Willkie told Mr. Hoover he suggested our name in Ohio
Edison.
19S6
Feb. 27/36: $55,000,tR;0 New York Edison Co. first lien & ref. mtge.
3%%, ser. "D", due Oct. 1, 1965:
Buying group— $5,000,000 (9Hi%) 31,250
C(;nce:ntration of e€Onu.mic poweu lITsr,
Morgan, Stanley & Go. — Continued
1936
Mar. 19/36 : $5r),S30.000 Consumers Power Co. 31/2% first mtge. bonds
due Nov. 1, 1970: Gross profit
♦Buying group— $500,000 (%c of 1%) $6,230
*(We had a total interest of $1,000,000, divided 50-50 between
Morgan Stanley & Bonbright).
(No reciprocal credit is due as Mr. Willkie requested our
inclusion)
Apr. 6/36 : $15,000,000 New York Central R. R. Co. secured notes due
serially from April 1, 1937-41.
Buying group— $7r)O.(KJ0 (5C', ) 2,131
Apr. 6/36: $40,0COOO0 New York Central R. R. Co. S. F. 3%%
bonds due April 1, 1946 :
Buying group— $2,000,000 (5%) 20,000
Apr. 9/30 : $3:,000,OCO Consolidated Edison Co. of N. Y. Inc. deben-
tures, 3V2%j_due 1956:
Biivlng group— $3.0C0,O0O (Stv'/c) 37,500
Apr. 9/36: $35,000,000 Consolidated Edison Co. of N. Y. Inc. 3Vi%,
due 1946: '
~~B lying group— $3 000,000 (8'/7%) 33,750
Apr. 16/33: $30,rO0,GGO Pacific Telephone & Telegraph Co. 3V4%,
due April 1. 1936:
Buying group— $2,300,000 (7%%) 23,000
Apr. 30/38: $10,362,000 Chesapeake & Ohio Railway Co. rof. & imp.
mtge. 31/2% "D", due May 1, 1096:
Buying group— $2,500,003 (6%%) 21,875
May 1/36: $24 000 000 Cincinnati Union Terminal Co. 31/2% mtge.
'•D" bonds due May 1, 1971:
Sub-underwriting group— $1,000,000 (4',(j%) 8.750
May 27/30: $85,000,000 Standard Oil Company, Inc. of New Jersey
3% debentures due June 1, 1961 :
Buying group— $2,000,000 (21/3%) 17,500
May 25/36: $55,000 000 Brooklyn Edison Company, Inc. 3^4% mtg.
due May 15, 1966:
Buving group— $5,000,000 i9Vii%) 18,750
June 25/36: $26,000,000 Louisville & Nashville R. R. Co. first ref.
mtge. 3%%, due April 1, 2003:
Sub-underwriting group— $1,500,000 (0%) 11,250
July 15/36 : $15,300,000 Chesapeake & Ohio Railway Co. serial notes
issue of 1936. due July 15, 1937/46 :
Buying group— $^00,000 (6%) 3, 37."i
July 24/36: $30,000,000 New York Edison Co. Inc. first lien & ref.
mtge. ser. "E" 314%, due April 1, 1966:
Sub-underwriting group— $2,700,000 (9%) 23,625
July 30/36: $29,500,000 Chesapeake & Ohio Railway Co. ref. & imp.
mtge. .ser; "E" 31/2%, due Aug. 1. 1996:
Buving group— $1,800,000 (6%) 15,750
Aug. 20/36: $50,000,000 General Motors Acceptance Corp. 3V4% de-
bentures, due Aug. 1, 1951 :
Buying group— $1,750,000 (3V2%) 13,125
Aug. 20/36 : $50,OUO 000 General Motors Acceptance Corp. 3% deben-
tures due Aug. 1, 1946:
Buying group— $1,750,000 (ZV2%) 10.937
Oct. 15/36: $175,000,000 American Telephone & Telegraph Co. sVi'/'
debentures due Oct. 1, 1961 :
Buying group— $5,000,000 (2%%) ^ -13,750
Nov. 19/36 : $23,500,000 Argentine Republic S/F external conversion
loan 41/2%. due Nov. 15, 1971:
Buying group— $1,250,000 (5%%) 12,500
Dec. 2/36 : $140,000,000 American Telephone & Telegraph Co. deben-
ture 314% due December 1, 1963:
Buying group— $ 1,000,000 (2%%) 3.', 000
Dec. 17/36: $25,000,000 Pacific Telephone & Telegraph Co. 3^4% re-
funding Mtge. Ser. "C", due Dec. 1, 1966:
Buying group— $1,900,000 (73/5%) :6, 625
11786 OONCENTKATION OP ECONOMIC POWER
Morgan, Stanley & Co. — Continued
1936
Dec. 30, 1936: $26,834,000 Ohio Edison Co. first Mtge. bonds 3%%,
due Jan. 1, 1972 : ^ross profit
Buying group— $1,100,000 (4%) $9,625
(Mr. Willkie also interceded strongly for us in this business)
21 Deals— Avr. Int.— 6% Total for 1936 $410,068
19S7
Jan. 14/37: $.^0,000,0(JO Great Northern Railway Co. general mtge.
3%%, ser. "I", due January 1, 1907:
Buying group (sub-underwriting)— $2,C00,0CO (4%) 17,500
Jan. 21/37 : .$55,000,000 Government of the Dominion of Canada 3%
due January 15, 1967:
Buying group— $1,61S,000 (2i%i%) 14,158
Jan. 21/37: $30,0C0,C00 Government of the Dominion of Canada
214% due January 15. 1944:
Buying group— $SS2,000 (2^-*/i5%) 7,717.50
Feb. 10/37: $7O.(;O0,CO0 Argentine Republic S. F. ext. conversion loan
4% bonds, due Feb. 15. 1972 :
Buying group— $3.O0O,Of:O (4%%) 30,000
Mar. 11/37: $130,000,000 Philadelphia Electric Co. first & ref. mtge.
bonds, 3V>%, due Mar. 1, 1967:
Buying group— $4,000,000 (3%) 26,250
Mav 6/37: $45,000,000 Southern P.ell Telephone & Telegraph Co.
3%% debentures due April 1, 1902:
Buying groui>— $1,000,OCO (2%9o) 8,750
Apr. 22/37: $35,000,000 Argentine Republic S. F. external 4% con-
version loan, due April 15. 1972:
Buying group— $1.. 500,000 (4%%) 13,257
June 22/37 : 192.S03 Shares Crane Co. 5% cumulative convertible pre-
ferred stock ($100 par value) :
Buving group — 1660 shares of unsubscribed stock — $1, 840. 66
9640 '• —5% of 192,803 shares__ 19,280.30
21. 120. 96
Less management fee 3, 615. 06
17, 506
June 30/37: 500,000 shares E. I. DuPont DeNemours & Co. $1.50
preferred stock (without par value) :
Buying group — 15,000 shares (3%) 16,875
June 23/37: 200,000 shares Standard Brands Inc. $4..50 preferred
cumulative stock (without par value) :
Buving group— 10,000 shares (5%) 8.250
July 2/.37: $20,2S5.000 Phelps Dodge Corp. 3'/o% conv. debentures
due June 15, 1952 :
Buying group— $760,687.50 (3%%) 10,758
July 22/37: $25,000,000 Westchester Lighting Co. 3'/.% geul. mort-
gage bonds due July 1, 1967:
Buving group- $2,500,000 (10%) 21,875
Oct. 7/37: $48,364,000 Central New York Power Corporation 3%%
general mortgage bonds due Oct. 1, 1962 :
Buying group $1,-500,000 (3%) 9, 375. 00
13 deals— Average interest 4%. Total for 1937 $2n2. 273. 50
10H8
Jan. 13/:58: $30,000,000 Consolidnted Edison Co. of New York, Inc.
31/.% debentures due Jan. 1, 19."8:
Buving group— $2..575,000 (8V2%) 22,531
Mar. 31/38: $30,000,000 Duluth, Misf^abe & Iron Range Ry. Co., first
mtge. 3'/.% bonds due Oct. 1, 1962:
Buying group— $1,200,000 (4%) 10,500
Apr. 21/38: $60,000,000 Consolidated Edison Co. of N. Y., Inc. lO-yr.
31^% debentures due Apr. 1, 1948:
Buying group— $3,700,0C0 (Wo) 27,750
CONCENTRATION OF ECONOMIC POWER 11787
Morgan, Stanley & Co. — Continued
193S
Mny 5/38: $45,000,000 Sonthorn Bell Telephone & Telegraph 3i/4%
debentures due Apr. 1, li)G-> : ^oss profit
Ruving groui*— $1,00J,U0J (2%%) $8,750.00
June 2/38: $100,000,000 United States Steel Corporation 3i/4% de-
bentures due June 1, 1948:
Buying group— $S,3G0.(I00 (3i%%) 24,750.00
June 9/38 : $30,000,000 the Mountain States Telephone & Telegraph
Co. 3%% debentures due June 1, 1968:
Buying group— $750,000 (2i/j'^0 6,562.50
July 7/38: $35,000,COJ Standard Oil Co. (Inc. in N. J.) serial notes
(over) due $7,000,000 eacli July 1943-47, Inc.:
Buying groui)— $1,340,000 (3%%) 8,375.00
July 14/38: $30,(!00,000 Soutliwestern Bell Telephone Co. first & ref.
mtge. 3% due July 1, 1908:
Buying grouiJ— $700,000 (2i/?%) 6,125.00
July 7/38: $50,0^0.000 Standard Oil Co. (Inc. in N. J.) 2%% deben-
tures due July 1, 1953 :
Buying groui>— $2.160 000 (4%%) 16,200.00
Aug 12/38: $27,982,000 New York Steam Corp, first mtge. 314% due
July 1, 19G3:
Buying group— $2,275,000 (8Vh%) 22,750.00
Aug. 31/38: $10,000,000 Gulf States Utilities Co. first & ref. mtge.
"C," 47o, due Oct. 1, 1966:
Buying group— $'i90,000 (5%o% ) 5, 900. 00
Nov. 17/38 : .$40,000,000 (Jovernment of the Dominion of Canada 5%
bonds, due November 15, 1968:
Buying group— $1,(;00 000 (2J/.%) 8,750.00
Nov. 3/38 : $25,000,000 Argentine Republic sinking fund external loan
4'/.%— Due Nov. 1. 1948:
Buying group— $1,000,000 (4%) 12,500.0€
13 deals— avr. int. 4%% Total for 1938 $181,443.50
Nov. 18/35: $40,000,000 Los Angeles Gas & Electric Corp. 1st &
genl. mtge. 4s, due 1970:
We offered them an interest of $5,000,000 (12y-%)— $56,250
but they declined as they did not have time to make a sufiiciently
thorough investigation to join in this business, and in addition
their shop was over-crowded with their own deals.
1D36
Mar. 24/3G: $90 000,000 Pacific Gas & Electric Company 3%% mtge.
ser. "11" due December 1. 1961 :
We ceded them— $10,000,000 (11%%) $75,000.00
Exhibit No. 1658-2
[From the files of Blyth & Co., luc]
KUHN LOEB & Co.
ins5
April 12/35: $16.ron,000 Chicago Union Station first mtge. 4s 1963:
Buying group— $.300,000 (1%%) $1,500.00
July 2/35 : $55,000,000 Bethlehem Steel Corp. cons. mtge. 25 year 4%s
due 1960:
Buying group— $.")00.r00 (10/llths of 1%) $8,125
July 9/35 : $4S 0 0 000 Armour & Co. of Delaware first mortgage 20
year 4% bonds due Aug. 1. 1955:
Buying group— .$2.orO 0:0 (4Vr,%) 35,000.00
Aug. 11/35: $24,000,000 Republic Steel Corp. genl. mortgage conv.
41^.% ser. "A" due Sept. 1, 19.50:
Sub-underwriting group— $1,0C0,0D0 (4Vs%)_ 8,750.00
11788 CONCENTRATION OF ECONOMIC POWER
KxJHN LoEB 4 Co. — Continued
1935
Aug. 29/35: $50,000,000 Pennsylvania Company 28-year 4% secured
bonds due Aug. 1, 1936 : Cfross profit
Sub-underwriting group $1,250,000 (2V2%) $3,250.00
Total for 1935 $48,500.00
Average int. 3.17% — 4 deals.
Jan. 22/36: $35,000,000 Inland Steel Company first mtge. 314%
bonds series "D" due Feb. 1, 1961 :
Buying group $1,000,000 (2%%) 15,000.00
Jan. 15/36: $35,000,000 Wheeling Steel Corp. first mortgage 41/2%
bonds, ser. "A" due Feb. 1, 1966:
Buying group— $1,400,000 (4%) 21,000.00
Jan. 29/36: $15,000,000 Republic Steel Corp. 41/2% gen. mtge. bonds,
series "B" due Feb. 1, 1961:
Buying group— $1,2.50,000 (2%%) 12,500.00
Jan. 23/36: $40,000,000 Pennsylvania Railroad Company genl. mtge.
ser. "C", 3%%, due Apr. 1, 1970:
Sub-underwriting group— $750 OCO (I'/g^ ) 1. 875. 00
Mar. 3/36: $44,000,000 Chicago Union Station first mge. 3%% ser.
"E", due July 1, 1963 :
Sub-underwriting group— $600,000 ( 1 4/11 % ) 3. 030. 00
Apr. 8/36: $26,835,000 Union Pacific Railroad Company, 31/2% deben-
tures due May 1, 1971 :
Sub-underwriting group— $900,000 i3y^%) 6, 7.50. 00
July 1, 1936 : $19,250,000 General American Transportation Corp. 3%
serial notes due 1937/42 :
Sub-underwriting groui>— $748,0C0 (3ys%) 3.740.00
April 23, 1936: $30,000,003 Youngstown Sheet and Tube Company
cv. 3%% debentures due Feb. 1, 1951:
Sub-underwriting group— $1,333,000 (4%%) (half credit to B. B.
Smith & Co.— 2%%) 8,505.00
(Full profit $17,010— divided between Kuhn Loeb and E. B.
Smith & Co.)
April 23, 1936: $60,000,000 Youngstown Sheet and Tuba Company
first mtge. S. F. 4% bonds due May 1, 1961 :
Sub-underwriting group— $2,667,0CO (4%%^ half credit to E. B.
Smith & Co.— 2%% 13,570.00
(Full profit $27,140— divided between Kuhn Loeb and E. B.
Smith & Co.)
June 10/36: $60,000,000 Southern Pacific Co. 10-year 3%% sec. due
July 1, 1946:
Sub-underwriting group— $1,250,000 (2i^%) '7,812.50
June 30/36: $50,000,000 Consolidated Oil Corp. conv. 3%% S. F. de-
bentures due June 1, 1951 :
Buying groui>— $2 000,000 (4% ) 17, 500. 00
Aug. 6/36: $20,000,000 Pennsylvania R. R. Co. Gen. Mtge. 3%%
series "C" due April 1, 1970 :
Sub-underwriting group— $375,000 (1%%) 2,812.00
Sept. 18/36: $20,000,000 Union Pacific R. R. 31/2% debentures due
October 1, 1970:
Sub-underwriting groui>— $600,000 (3%) 7,500.00
Nov. 10/36: $25,000,000 Republic Steel Corp. Gen. Mtge. 41/2% series
C, due November 1, 1956 :
Buying group— ,$375,000 (1^2%) M,219. 00
Dec. 22/36: $20,000,000 Armour & Co. of Delaware first mtge. 4%
S. F. bonds, series "C" due Jan. 1, 1957 :
Buying group— $750,000 (3%%) 937.50
15 Deals— A vr. Int.— 23/4%- $126,720.50
' There was a loss of $14.001.2.=; on $87."?, 000 bonds sold bv tbe N. T. D.
' Our full participation was $750,000. and the profit $8,4;18, divided ."50-50 between
Kuhn Loeb and Field Glore. Same method applies to our percentage of 3% In the deal.
CONCENTRATION OF ECONOMIC POWER 11789
KuHN LoEB & Co.^ — Continued
1937
Jan. 19/37: $40,000,000 Tidewater Associated Oil Co. 31/2%
S. F. debentures due Jan. 1, 1952:
Buying group $2,000,000 (5%) $15,000
Feb. 16, 1937 : 500,000 shs. Tide Water Associated Oil Co.
$4.50 cum. pfd. (without par value) :
Buying group— 3.167 shs (6%%) *26, 625
Apr. 15/37: $52,670,700 Pennsylvania R. R. Co. conv. debentures
314% due April 1, 1952: . Gross profit
Sub-underwriting group, $1,250,000 (2%%) $16,545.00
June 14/37: 74,950 shs. Inland Steel Co. common stock:
Buying group— 2,503 shs (31/3%) : 2,225.00
Total for 1937 $18, 770. 00
2 deals— avr. 283'>c.
July 20/38: $7,500,000 Industrial Rayon Corp. first mtge. S. F. 41/2%
series "A" due July 1, 1948:
Buying group— $800,000 (10%%) 9,000.00
(This business was also headed up by Brown Harriman, but we
understand that the business came originally through Kuhn
Loeb and that they suggested our name as second in the
business. )
Sept. 8/39: $30,000,000 Youngstown Sheet & Tube Co. conv. 4%
debentures due Sept. 1, 1948:
Buying group— $637,500 (2%%) *7, 968. 75
Total for 1938 _' $16, 968. 75
2 deals — aver. int. 6%'^t.
1939
April 25/39: $50,000,000 National Steel Corporation first Mortgage
(collateral) 3%, series April 1, 1965:
Buvin^ group— $1,000,000 (2%) '8,750.00
June 27/39: $25,000,000 Bethlehem Steel Corp. 3i/4% cons. mtge.
series "F" due July 1, 1959 :
Buying group— $750,000 (3%) 6,562.50
July 29, 1935: $15,000,000 Southern California Gas Company 1st
mtge. & ref. 4s, due Aug. 1, 1865 :
We ceded them— $1,000,000 (6%%) 12,500.00
Oct. 15/35: $.55,000,000 Anaconda Copper Mining Company 41/2%
S. F. debentures due Oct. 1, 1950 :
We ceded them— $2,000,000 (3%i%) 25,000.00
Total for 1935 $37,500.00
Avr. percent : 5% — 2 deals.
1936
Jan. 7/36: $9,200,000 Revere Copper & Brass, Inc. first mtge. S. F.
4M%, due Jan. 1, 1956:
We ceded them— $1,600,000 (17%3%) 26,000.00
Mar. 24/36: $90,000,000 Pacific Gas & Electric Company 3%% mtge.
bonds, ser. "H" due Dec. 1, 1961 :
We ceded them— $7,500,000 (81/3% )_ 56.250.00
Total for 1936 $82,250.00
2 Doals— Avr. int. 12%%.
» Our position was completely dictated by the management, therefore no reciprocal
credit Is due.
« Original participation $1,275,000. with $15,937.50 profit, 4%% interest, divided 50-50
between Kutin Loeb and Fmith Barney.
• This business was offered to us jointly by Kuhn Loeb and Harriman Ripley —
$2,000,000 (4%), profit $17,500.
11790 CKJNCENTKATION OF ECONOMIC POWElt
Exhibit No. 1658-3
[From the flies of Blyth & Co., Inc.]
FiEST Boston CoiiPORATioN
1935
May 1/35: $73,000,000 Southern California Edison 3=>4s, due 1960:
Buying group— $7,500,000 (10^^%) '$78,228.00
June 10/35: $15,500,000 San Diego Cons. Gas & Elec. first mtg. 4s,
due 1965: Orosx profit
Buying group— $1,550,000 (10%) . $27,500.00
July 1/35: $35,000,000 Southern California Edison Co. Ltd. ref.
mtge. ser. "B", 3%%, due 1960:
Buying group— $'3,500,000 (10%) $26.2.50.00
July 18/35: $70,000,000 Duquesne Light Company first mortgage
3y2%, due 1965:
Buying group— $3,500,000 (5%) 35,000.00
Aug. 12/35: $76,000,000 Government of the Dominion of Canada
21/2% due Aug. 1.5, 1945:
Buying group— $2,000,000 (2%%) 20,000.00
Sept. 19/35: $13,000,000 Southern California Edison Co., Ltd. 21/2%,
31/^% debentures due Sept. 1. 1936/40:
Buying group— $600,000 (4%% ) '(4, 000. 00)
Sept. 19/35: $14,500,000 Southern California Edison Co., Ltd. 3%7c
debentures due Sept. 1, 195:
Buying group— $1,4.50,000 (10%) '$11,025
Sept. 19/35 : $30,000,000 Southern California Edison Co., Ltd. first &
ref. mtge. 4%, due Sept. 1, 1960 :
Buying group— $3,000,000 (10%) '$2.5,625
Nov. 14/35: $15,600,000 Central Maine Power Co. first & genl. mtge.
4% due October 1, 1960 :
Buying group $979,000 (6 3/11%) 10,050.00
Nov. 21/35: .$30,000,000 K.Tnsns Power & Light Co. first 4V2S. 1965:
Buying group, $2,000,000 (6%%) $23,000.00
Average int. 6.19%i4 deals. Total for 1935 .$92. 550. 00
19S6
Jan. 14/30: $18,000,000 Governmt'nt of the Dominion of Canada
3%% bonds due January 15. 1! 61 :
Buying group, $1,220.COO (2'/..) 14,105.00
April 6/36 : $13„500,000 California-Oregon Power Company first mtge.
4% bonds due April 1, 1966 :
Buying group, .$1 200,COO ( 8 8/9% ) 15, 000. 00
April 20/36: $10,500,000 Wisconsin Gas & Electric Company 3y2%
mtge. due April 1, 1966:
Buying group, $750,000 (7 1/7%).
Mar. 26/36: $75,000,000 Eastern Gas & Fuel Associates 4% mtge. &
coll. trust bonds due March 1. 1956:
Buying group, $1,.500,000 (2%) * 9, 375. 00
July 30/36 : $14,500,CO0 Southern Kraft Corp. first leasehold & genl.
mtge. 414% due June 1. 1946:
Buying group, $1,.500,000 (lOVa^') 10,875.00
July 31/36: $10,500,000 Wisconsin Michigan Power Co. first mtge.
3%% due July 15, 1961:
Buving group. $750,000 (7 1/7%) 6,502.00
June 15/36: $25,000,000 Commercial Credit Co. 4^4% cumulative
conv. preferred stock :
Buying group, 3,500 shares (1 2/5%) '6,125.00
^ No obligation here as our position was dictated by the Southern California Edison
Company.
(No reciprocal obHsratlon as we participated at the direction of the
Southern ("nlifnrnia Edison Company.)
* No reciprocal oblliration, as t'^e Company dictated our participation.
»Our totai Buying Croup position was $3,000,000- -4 7r — divided equally between First
Boston & Mellon Securities.
♦Total Interest 7,000 shB., 2%%, profit fi:i,250, divided 50-50 between Flfst Boston 4
Kidder Peabody.
CONCENTRATION OF ECONOMIC POWER 11791
FmsT Boston Corporation — Contiuwed
1936
Oct. 8/36: $30,000,0(jO Commercial Credit Co. 314% debentures due
October 1, 1951: Gro^y.^ profit
Buying group, $500,000 (1%%) '$4,-375. 0(»
Oct. 26/36: $14,000,000 Central Maine Power Co. first & genl. mtge.
ser. "H" 3%% due Aug. 1, 1966:
Buying group, $900,000 (6 3/7%) 6.750.00
Dec. 15/36: $9,000,000 Missouri Power & Light Co. first mtge. 3%%
bonds due Dec. 1, 1966 :
Buying group-$825,000 (9V6) $8,250
Dec. 15/36: 15,000 shs. Mis.souri Power & Light Company $6 cumu-
lative preferred stock :
Buying group-1,350 shs (9%) $1,250
8 deals— Average interest 5%. Total for 1936 — — $79, 167. 00
1937
June 16/37: $35,000,000 Commercial Credit Company 2%% deben-
tures due June 15, 1942:
Buying groui)— $500,000 (13^7%) "$2,62.5.00
Oct. 6/37: $18,000,000 Idaho Power Conip:>ny iirst mtge. 3%% bond.f
due October 1, 1967:
Buying group— $500,000 (2%%) 3,750.00
Total for 1937 $6,375.00
2 Deals— A vr. int. 2.10%.
1938
Aug. 10/38: $30,000,000 the Toledo Edison Co. first mtge. 3yo%,
due July 1, 1968 :
Buying group— $1,000,000 (3%%) 10,000.00
Sept. 8/38: $25,000,000 Phillips Petroleum Co. convertible 3% de-
bentures, due Sept. 1, 1948:
Buying group— $1,000,000 (4%) 10,000.00
Total for 1938 $20,000.00
Avr. int.— 3%%— 2 deals.
1039
Apr. 24/39: $52,500,000 Gatineau Power Co. first mortgage 3%%
series "A", due April 1, 1969 :
Buying group— $1,155,000 (21/5%) 7,33o..00
July 26/39: $26,500,000 Kansas Power & Light Co. first mortgage
S1^% series, due 1969:
Buying group— $600,000 (2%%) '6,000. On
1935
June 26/35 : $30,000,000 Pacific Gas & Electric Co. first & ref . mtge.
bonds, 4%, ser. "G", due 1964 :
We ceded them $2,700,000 {9%) 20,250.00
July 29/35: $15,000,000 Southern California Gas Co. first mtge. &
ref. 4% bonds due Aug. 1, 1965 :
We ceded them $1,2.50,000 {8%%) 15,625.00
Oct 15/85: $55,000,000 Anaconda Copper Mining Co. 414% S. F. de-
bentures due Oct. 1, 1950 :
We ceded them $4,000,000 (7%i%) 50,000.00
Nov. 18/35 : $40,000,000 Los Angeles Gas & Elec. Corp. first & genl.
mtge. 4%, due 1970:
We ceded them-$2,500,000 (6%%) 28,125.00
Total for 1935 $114, 000. 00
Avr. % — 7%% — 4 deals.
•Total profit $8,750, divided 50-.')0 between K. P. aii<l First Boston. Total particlpa
tion $1,000,000.
•Entire interest $1,000,000, profit $5.250 — dividpd ."0-50 betv.een First Boston &
Kidder Peabodv.
'Total interest and profit — $1,200,000, 4Va%--?1 2,000 divided 50-50 bet. First
Boston * Dillon Rend.
11792 CONCENTRATION OF ECONOMIC POWER
First Boston Corporation — Continued
19S6
Mat. 24/36: $90,000,000 Pacific Gas & Electric Co. 3%% mtge. bonds,
ser. "H", due Dec. 1, 1961 : 07')s« profit
We ceded them $8,000,000 (8%%) .$60,000.00
Apr. 28/3(3: $30,000,01)0 Pacific Gas & Electric Co. first & ref. mtge.
.stT. "H" 3%%, due Dec. 1, 1U61 :
We ceded them .$3,700,000 (12%%) 27,750.00
Oct. 22/36: $35,000,000 Pacific Gas & Electric Co. first & ref. mtge.
3V>% bonds, ser. I, due June 1, 1966:
We ceded them $4,.300,000 (12%%) --- 37,02;-). 00
Total for 1936 $125,375.00
3 deals— 'Avr. int.— 10y2%.
1937. None.
1938. None.
1939.
.\r.iv 12/30: 200,000 Shs. Pacific Lighting Corp. $5 preferred stock:
We ceded them-20,000 shs. (10%) 12,500.00
Exhibit No. 1658^
[From the files of Blyth & Co., Inc.]
Dillon, Read & Co.
1935
May 2/85: $7,500,000 Union Oil Company of California 4% convert-
ible debentures due 1947: Gross profit
Buying Group— $750,000 (10%) $11,400.00
May 2/35 : $6,000,000 Union Oil Company of California serial deben-
tures 114% to 314%, due 1936/40:
Buying Group— $600,000 (10%) 4, 5(X). 00
(Our $600,000 interest was sold for Syndicate Accoimt at
100 and % allowed offices based on index.)
July 15/35: $40,000,000 Cleveland Electric Illuminating Company
general mortgage 3%, due July 1, 1965 :
Buying Group— $2,000,000 (5%) $20,000.00
Oct. 29/35: 235,225.4 shares Cleveland Elec. Illuminating Company
$4.50 preferred stock :
Buying Group— 14.113 shs. (6%)'- $19,056.00
Nov. 21/35: $30,000,000 Kansas Power & Light Company first 41/38
due 1965:
Buying Group— $2,000,000 (6%%) $24,208.75
Average int. 10% — 2 deals.
Total for 1935 $15,900.00
1936
Jan. 3/36 : $9,000,000 Skelly Oil bonds, and $3,000,000 serials :
Dillon Read (iffered us a 10% interest, but we declined due
to market judgment.
Feb. 25/36: $15,000,000 Loew's, Inc. 31/2% S. F. debentures due
2/15/46:
Buying Group— $1,875,000 (121/2%) $16,015.00
June 16/36: $60,000,000 The Texas Corporation 31/2% debentures
due 6/15/51:
Buying Groui)— .$3,400,000 (5%%) 25.800.00
Total for 1936 $41,815.00
Aver. Int. 9:40%— 3 Deals offered.
CONCENTRATION OF ECONOMIC POVVElt 11793
Dillon, Read & Co. — Coiitiniioil
1937
Jan. 5/37: $10,000,000 Union Oil Co. of California SVa'/o deben-
tures due January 1, 1952 : G'o«« P'-«/^*
Buying GrouiJ~$l, 000,000 (10%) ^ — *$8.215.00
♦(Our position in this business was dictated by the Company
Officials, and we therefore owe no rociprocity.)
June 28/37: $80,000,000 Union Electric Co. of Missouri first mtge. &
coU. trust 3%% bonds due July 1, 1962:
Buying Group— $3,800,000 (4%%) 28,500.00
Note. — We had between a 6% and 7% position in the past
three or four issues of Union Electric Company financing — both
bonds and notes.
June 28/37: $15,000,000 Union Electric Co. of Missouri 3% notes
due July 1, 1942:
Buying Group— $1,320,000 (8%%) 4,950.00
Note. — We had between a 6% and 7% position in the past
three or four issue.'* of Union Electric Company financing — both
bonds and notes.
Total for 1937 $33,450.00
2 deals— Avr. int. 6.77%.
1938
May 26/38: $16,500,000 San Antonio Public Service Co. fir.st mtge.
4% due April 1, 1963 :
Buying Group— $485,000 (.029%)* *$4, 243. 75
* (Total interest— $970,000— 5/8%— $8,487.50 profit, divided
50-50 between Mellon Securities and Dillon, Read & Co.)
M;iy 26/38: $2,500,000 San Antonio Public Service Co. 4% notes
due serially:
Buying Group— $73,500 (.029%)* *735.00
* (Total interest— $147,000— 5%%— $1,470.00 profit, divided
50-50 between Mellon Securities and Dillon, Read & Co.)
Oct. 6/38 : $34,000,000 Michigan Consolidated Gas Co., 1st Mtge. 4%
bonds due Sept. 1, 1963:
Buying Group— $1,000,000 (3%) i *$8, 750.—
*Mellon Securities also headed this business, but our interest
was offered to us by Dillon Read.
Oct. 21/38: $55,000,000 The Ohio Power Co. 1st Mtge. 3%% bonds
due Oct. 1, 1968:
Buying Group— $1,500,000 (2%i%,) 11,250.00
Oct. 25/38 : $55,000,000 Wisconsin Electric Power 1st Mtge. 31/2%
bonds due October 1, 1968:
Buying Group— $1,750,000 (3%) 13,125.00
Oct. 6/88: $8,000,000 Michigan Consolidated Gas Co. 4% serial notes
due 1939-1948 :
Buying Group— $171,500 (2%%) *1. 063.75
♦(Original interest $343,000 (414%)— profit $2,127.50, divided
50-50 between Dillon Read and Mellon Securities.)
Dec. 7/38 : 375,000 Shs. North American Co. common stock ( not a
new issue) :
Buying Group— 12,000 shs. (3%%,) 6,000.00
Nov. 28/38 : 130,000 Shs. Union Electric Co. of Missouri $5 preferred
(uo par value) :
Buying Group— 6,500 Shs. (5%) 6,362.12
Total for 1938 $51,529.62
Avr. Int. 3% aw'rox. — 8 Deals.
1939
Feb.i/39: 696,580 shs. The North American Co. 5%% preferred
stock :
Buying Group— 24,500 Shares (31/2%) $13,781.00
11794 CONCENTRATION OF ECONOMIC POWER
Dillon, Read & Co. — Contiuueil
J939
Feb. 1/39: if20,COO,000 The North American Co. 31/2% debentures,
due February 1, 1!149: Oross profit
Bu.viiig Groui)— $700,000 (3%%) $5,250.00
Feb. 1/39: $2."),000,000 The North American Company 3%% deben-
tures due February 1, 1954 :
Buying Groui)— $875,000 (3V2%) - 7,656.00
Feb. 1/39 : $25,000,000 The North American Company 4% debentures
due February 1, 1959 :
Buying group— $875,000 (31/2%) 8,750.00
Apr. 12/39 : $40,000,000 The Texas Corporation 3% debentures due
April 1, 1959:
Buying Group— $2,000,000 (5%) 17,500.00
July 26/30: $26,500,000 Kansas Power & Lifeht Co. First Mortgage
31/2% Series, due 1969:
Buying Groui>— $600,000 {2Vs%) 6,000.00
*( Total interest and profit— $1,200,000— 41/2%— $12,000 divided
50-50 bet. First Boston and Dillon Read.)
Nov. 1935 : $40,000,000 Los Angeles Gas & El. 4s, due 1970:
Wp ceded them an interest of ♦$2,000,000 (5)
*They declined as they only appear in business which they
head (unless they have a silent position which they were not
granted in this instance).
Total for 1935— No actual profit.
Mar. 24/36: $90,000,000 Pacific Gas & Electric Co. 3%% mtge. Bonds
series '11" due Dec. 1, 19G1:
We ceded them $7,500,000 (81/3%) $56,250.00
SUPPLEMENTAL DATA
The following documents are included at this point in connection
with the testimony regarding the Cliicago Union Station Company,
supra, p. 11452.
Exhibit No. 1670'
Lee Higginson Corporation
37 Broad Street, New York
NEW YORK
BOSTON
CHICAGO
December 13, 1930.
Mr. Pbtter R. Nehemkis, Jr.,
Special Counsel, Investment Banking Section,
Monopoly Study, Securities & Exchange Commission,
Washington, D. C.
Dear Mr. Nehemkis : In accordance with your request made yesterday at the
hearnig, I wish to advise you that my associate, Mr. N. Penrose Hailowell, remem-
bers distinctly discussing Chicago Union Station underwriting with Mr. Harold
Stanley of the lirm of Morgan. Stanley & Co., and he also feels reasonably sure
that the partner in J. P. Morgan & Co. with whom he discussed this business in
the early part of 1935 was Mr. Arthur M. Anderson.
Sincerely yours,
E. N. Jesup.
ENJ:R
Exhibit No. 1756 '
[From the flle-s of the Chicago, Milwaukee, St. Paul and Pacific Railroad Company.
Memorandum by W. W. K. Sparrow]
Wheh I had my meeting with Commissioner Meyer and Commissioner Mahaffie
and Director Sweet in Washington on March 22nd, in connection with the
refinancing of $16,000,000 of Chicago Union Station Company 61/2% First Mort-
gage Bonds, I told them that I had the previous day agreed with the bankers, on
behalf of the Station Company, to .sell them, .subject to tlie approval of the
Commission, $16,000,000 of Chicago Union Station Company First Mortgage 47r
Bonds, at a price of 981/2, and $2,1CO,000 of Guaranteed 4% Bonds, at a price of
99, both issues to be offered to the public at 101. I told them I believed this was
a good price and that Mr. County, who had been a party to the transaction,
thought the same. Director Sweet expressed his opinion that the price was a
very good one.
I explained to Division 4 that while we could sell the bonds subject to the
approval of the Commission and there was no commitment made until we had
the Commission's approval that did not hold true as to making the call of the
outstanding bonds. We could not call the bonds subject to the approval of the
Commission and, therefore, before issuing the call I had to have the assurance
of the Commission that this financing had its approval and that the order would
be forthcoming.
Commissioner Mahaffie raised the question of competitive bidding. He said
there were several firms that were quite active in urging the Commission that
it should require competitive bidding that it was quite likely that when this
offer became public some of them would make representations to the Senate
1 Introduced December 15, 1939. See Hearings, Part 2.% p. 11SR2.
2 Introduced on December 10, 1939. Hearings, Part 23, p. 12040.
11795
11796 CONCEISTRATION OF ECONOMIC POWER
Committee that here was a case where the Commission should have required
competitive bidding. My answer to this was that the last date for publication
of the call was April 1st; that there was not sufficient time between now and
that date to take competitive bids. Commissioner Meyer inquired as to what I
would have to say if I was asked why we had not started the thing earlier and
allowed ourselves time to take competitive bids. In answer to that I said we
could not start on this until the decision in the Gold Ca.se had been handed down
by the Supreme Court, because prior to that it was impossible to talk about soiling
bonds to anybody; that I had been working on the thing as actively as r)ossible
since the decision was handed down and that I could not have gotten the matter
in shape for presentation any earlier than I had. I was given to understand
quite definitely that on the facts as stated the plan had the approval of Division 4
and that I could go ahead with the sale of the new bonds and the calling of the
outstanding bonds.
Last Tuesday night in New York Mr. Fairman Dick told me the bonds were
being quoted on the street at 104 to 104i/t. The next day, Wednesday. Mr.
Marony confirmed this and said brokers were offering them at about those prices.
On my arrival this morning I checked with Mr. Marony as to the j)rices, and he
called me back to confirm that they were ranging from 103% bid to 104% asked.
I decided, first, as to my duty (which no one could decide but myself) that
the fair and honest thing for me to do in the circumstances before I allowed the
call to go out. on the basis of the understanding I already had with Commis-
sioners Meyer and Mahaffie, was to see that they at least knew about the prices
at which these bonds were being quoted on the street ; second, I concluded that I
was taking considerable risk in permitting the Station Company to issue the
notice of call without the order of the Commission because in that event the
Commission might feel I had not dealt with them fairly and refuse to issue the
order, leaving the Station Company with a conunitment of .S17.600,0r:0 without
means of meeting it.
I, therefore, called up Commissioner Mahaffie at noon today. I referred to the
meeting I had with him, Commissioner Meyer, and Director Sweet last Friday
in the matter of the Station Company bonds and the price at which we agreed
they should be .sold to the bankers, which I represented to them as a good price
and which the Director had confirmed. I told them I had the Division's assur-
ance that the order would be forthcoming and that I could proceed with the
calling of the bonds; that notice had to be given to the press in New York and
Chicago by Saturday noon for publication Monday morning; that I had heard
before leaving New York yesterday afternoon that these bonds were being quoted
on the street at around 104. I said these prices, of course, were imofficial and
irregular as the bonds could not, I understood, be regularly traded in until after
they had been delivered; that the amounts were probably small and, of course,
no one could say what the price might be next week ; that in my opinion the
price we had received for the bonds was a good one and they would probably be
selling much lower when the next call date came around, which was October 1st.
I further stated this was one- of the first refunding operations put on the market
and that with the amount of offerings now hanging over the market the appetite
later on would be less keen ; furthermore, T thought there was every likelihood
of several railroad receiverships taking place between now and next October,
which I thought would quite seriously affect the price of these bonds. I said,
therefore, I wanted to make it quite clear that T was still quite strongly of the
opinion the plan should be carried out and not in any way influenced by the fact
that there were unofficial quotations for these bonds on the street at the prices
referred to. I said, however, I thought it was only fair to him and Commissioner
Mayer that T saw to it that they were acquainted with these facts. Commis-
sioner Mahaffie asked me if the bonds had alre.uly Ik'pii sold. I told him they had
and that a contract with the bankers bad been signed by General Atterbury as
President of the Station Company on Friday, March 22nd: that the bankers had
put otit their circulars offering the bonds subject to the provisions of the Bank-
ers' Code on the same date, the offering by the hankers for both issues being 101.
Commissioner Mahaffie asked me as to the call future of the bonds. I told him
the new issue of First Mortgage Series "D" bonds may be redeemed in whole but
not in part at the option of the company on any interest date on and after July
1, 1040, at lOi and accrued interest on ninety days' notice. The Commissioner
said he thanked me for calling his attention to this. T told him I wished he
would iise his own channels for checking up and confirming the information as to
the prices at which the bonds were being offered on the street, and in what
quantities, and get his own independent data. He said he would do this. I then
CONCENTRATION OF ECONOMIC POWER 11797
left it with him that unless I heard from him before tomorrow night that there
was a change in their plans I would proceed to issue the call.
I telephoned Mr. County as soon as I could get in touch with him about 3 : 00
PM., and advised him what I had done. I also advised Mr. Geo. Buveuizer, of
Kuhn, Loeb & Co. I also informed Mr. S<\indrett, who was in Washington, over
the telephone.
Mr. County did not agree with me as to the necessity of taking the action I
did. He said he thought I should have gone ahead and put out the call. I told
him that was a matter I had decided myself as to what I thought the proper and
honest thing to do. I also told him my understanding with Commissioner Ma-
haflSe wa? if I heard nothing from the Commission as to any change in the
original pians the call would go out Saturday, and if I heard from the Commis
sion that they would not issue the order the call would nut go out.
(Signed) W. W. K. Sparkow.
Chicago, March 28, 1935.
(Friday, March 29th)
I telephoned Mr. Pierpont Davis this morning and advised him of my action.
He said I had done what he would have expected me to do and he fully under-
stood and appreciated my reasons for doing so. I explained the matter to Mr.
Budd on his arrival this morning. He said he thought I had not only taken the
proper course but a wise one and it had his full approval.
(Signed) W. W. K. S.
Exhibit No. 1759-1 '
[Letter from Investmeut Banking Section, Monopoly Study, Securities and ICxchange
Commission, to George W. Bovenizer, Kuiin, Ixieb & Co.]
Mr. Geougk W. Bovenizek, December 14, 1939.
Kulw, Loeh & Co., 52 William Street,
New York, Neiv York.
Deak IMi{. Bovenizer: In your testimony before the Temporary National
Economic Committee on December 12 relative to the $6,150,00 J Chicago Union
Station Co. fust mortgage bonds 5% Series B, dated January 1, 1919, due July
1, 1963, and dffered in May 1922, the following appears :
"Mr. Nkhemkis. The percentage participations, Mr. Bovenizer, on the interest
divided uj) by Kuhn, Loeb were exactly the same as in the preceding issue, in
other words KL took 33 per cent, National City took 16.
•'Mr. BovKNizER. The percentage figures are right but the dollars are wrong.
■'Mr. Nehemkis. Would you be good enough to let me have the cori-ect in-
formation V
"Mr. Bovfnizee. Yes.
"Mr. Jesxip. This checks with the information I have.
"Mr. Nehkmkis. We can correct that at a little later time.
"Acting Chr.irman Reixe. It may be admitted subject to correction of the
tigures.
"(The Chicago Union Station Company data on $6,150,000 First Mortgage Issue,
5 per cent. Series B, was received in evidence, and marked Exhibit No. 1555.)"
The perceli) ages and amounts referred to are as follows :
T.. , T 1 * r^ ^pnTr.nnn rr^nc' J Kuhn, Loeb & Co. $2, 050,000 (33.33%).
Kuhn. Loeb & Co. $3,075,000 (50% ) | National City Co. $1, 025, OOO (10.07% ) .
My staff has checked on the figures again from the percentages which you
stated were correct, and on the basis of their calculations the amounts seem
to be correct as well. 331/3% of $6,150,000 is $2,050,000 and IG.67% of $6,150 000
is $1,025,000, which are the amounts stated in the exhibit to be the participations
of Kuhn, Loeb & Co. and the National City Co. in the half interest "of Kuhn.
Loeb & Co. in this issue.
In accordance with my request at the hearing, may I ask that you be kind
enough to confirm this calculation or supply a correct amount from your own
books, with an explanation of the method by which it was arrived at.
Your assistance in this matter, as well as at the hearings, is appreciated.
Sincerely yours,
Peter R. Nehemkis, Jr.,
Special Counsel, Investment Bankino Section, Monopoly Study.
SMK : FL
^Introduced in record on December 19, 1939, see Hearings, Part 23.
I 1798 UONOKNTltATlON OF ECOMO.MJC POWER
ExHimx No. 175'.»-2 '
I Letter from Geo. W. Bovenizer, Kuhn, Loeb & Co., to Investment Banking .Section,
Monopoly Study, Securities and Exchange Commiasion]
Kuhn, Loeb & Co.
Willlnra and Pine Streets
Nkw Yoek, December 18, 1939.
PKTFUt R. NcHEMKls, Jr., Esq.,
Special Counsel, Investment Unnkwig Sertiun,
Monopoly Study, Securities and Exchange ConmiissLon,
1778 Pennsylvania Avenue, Washingtun, D. C.
Dkab Mk. Nehemkis: I have your letter of the 14th instant in connection
with my testimony of the other day on Chicago Union Station bonds and I find
upon further examination that your figures are quite correct, not only as to
percentage but as to amount also.
Regretting that my error should have caused you this additional trouble and
with appreciation of your courtesy, I am
Sincerely yours,
Geo. W. Bovenizeb.
0/J
Maech 15, 1940.
Chicago Union SxAnoN Company,
210 South Canal Street, Chicago, Illinois.
GE^^TLEMEN : In connection with our studies of investment banking which the
(Commission has been directed to undertake by the Temporary N'ational Eco-
nomic Committee, established pursuant to Public Resolution No. 113, 75th
("ongress, will you be good enough to make available to us the following:
(1) A list of the firms to whom invitations to bid were extended on the
$10 003,000 31/8% Bonds;
(2) Copies of the replies received in response to your invitation;
(3) The details of the bids received.
Will you also furnish us with a statement setting forth the reasons for the
re.ection of the bids submitted.
The Wall Street Journal of this date reports that Kuhn Loeb & Co. had
offered a negotiated price of lOiy^ for the bonds as 3ViS some time in February.
Will you be good enough to furnish us with a statement describing these
negotiations together with the reasons which led to the request for bids.
Sincerely yours,
Petee R. Nehemkis, Jr.,
Special Counsel,
Investment Banking Section, Monopoly Study.
PRNehemkis : lb
Chicago Union Station Company
broad street station building
1617 Pennsylvania Boulevard
Philadelphia, Afyril 8, 19.'t0.
Peter R. Nehemkis, Jr., Esq.
Special Counsel, Investment Banking Section — Monopoly Study,
Securities and Exchange Commission, Washington, D. C.
Dear Sir: In compliance with the request contained in your letter of M.irch
15, 1940, addressed to the Chicago Union Station Company at 210 South Canal
Street, Chicago, 111., which was acknowledged by me on March 20, 1940, 1
am supplying to you the following information :
There is forwarded herewith a list of 107 bankers, banks and insurance
firms to whom invitations to bid were extended on the proposed issued of
$16,000,000, principal amount, First Mortgage Bonds of the Chicago Union
» Idem.
CONCENTRATION OF ECONOMIC POWER 11799
Station Company, the said bonds to be of Series "F" and to bear interest at
the rate of 3%% per annum. A copy of letter of invitation to bid, mailed on
March 5, 1940, to the said 107 bankers, banks and insurance firms is also
forwarded.
Tliere also are enclosed copies of the following letters received fcn reply
to the invitation, but which were not accompanied by bids :
Letter of March 8, 1940, from Morgan, Stanley & Company, Inc., in New
York City; letter of March 9, 1940, from Stern, Wampler & Company, Inc., in
Chicago ; letter of March 6, 1940, from Freeman & Company, in New York City ;
letter of March 7, 1940, from Goldman, Sacks & Company, in New York City ;
letter of March 6, 1940, from Evans, Stillman & Company, in New York City.
In addition, there is enclosed a copy of a -bid received on March 12, 1940,i
from Halsey, Stuart & Company and associates, this being the only bid re-
ceived. The details will be found in the letter of invitation and the bid.
The bid of Halsey, Stuart & Company and associates was rejected because
it was deemed too low for bonds of the high rating these bonds enjoy. They
not only are secured by a first lien on the properties of the Station Company
but are guaranteed, by endorsement, jointly and severally, by the Chicago,
Burlington & Quincy Railroad Company, The Pennsylvania Railroad Company,
The Pittsburgh, Cincinnati, Chicago and St. Louis Railroad Company, and the
Trustees of the Chicago, Milwaukee, St. Paul & Pacific Railroad Company,
which are the proprietors of the Station Company.
The purpose was to reduce fixed charges by refunding $16,000,000, principal
amount, of Series "D" First Mortgage Bonds, issued in 1935, bearing interest
at 4% per annum, which were subject to call on April 1, 1940, for redemption
on July 1 1940, at 105.
Since Kuhn, Loeb & Company and associates had purchased all past issues
of First Mortgage Bonds of the Station Company, conferences commencing in
December, 1939, were had with that firm, and early in February an offer was
made by them to purchase new Series "FV bonds, bearing an interest rate of
3%% per annum, at 101 1^- This was on a basis of 3.16 to the Company and
was regarded as an attractive offer.
Inasmuch, however, as the issuance of new Series "F" bonds would require
the approval of the Interstate Commerce Commission, it was deemed advisable
to have an informal conference with members of that Commission in the hope
of obtaining an expression from them with regard to the method of sale; and
on February 26, 1940, a representative of the Station Company conferred in-
formally with certain members of the Commission who expressed the thought
that the proposed issue was one which might lend itself particularly to com-
petitive bidding.
Subsequently, the Board of Directors of the Station Company approved the
Issuance of Sys% bonds and authorized the invitation for competitive bids
which was mailed on March 5, 1940, to the 107 bankers, banks and insurance
firms.
After the unsatisfactory bid of Halsey, Stuart & Company and. associates had
been received, prices in the bond market softened, and there was no reason
to believe that a more favorable bid would be received if another invitation
to bid were extended. It was then decided that, in the interest of the Station
Company, of the public served by that Company, and of the proprietary com-
panies, the bid should be rejected and an effort should be made to enter into a
contract with Kuhn, Loeb & Company at a price that would approximate the
more attractive basis which they had offered early in February for 3%%
bonds and which it was believed that the bonds merited.
After the rejection of the bid of Halsey, Stuart & Company and associates,
such a contract was made with Kuhn, Loeb & Company, Lee Higginson Cor-
;poration, and Harriman, Ripley & Company, Inc., in which those firms and
associates agreed to purchase the bonds, subject to the approval of the Inter-
state Commerce Commission, at 99.43. This was the same basis for 3%% bonds
that had ben offered early in February for 3%% bonds. The associates in this
transaction were Smith, Barney & Company, Glore, Forgan & Company, The
First Boston Corporation, White, Weld & Company, Lazard Fr&res & Company,
and Morgan, Stanley & Company.
Up to and including the -time of the execution and delivery of the said con-
tract and the time of filing with the Interstate Commerce Commission of a
supplemental application setting forth facts with respect to such contract, the
price which has been offei^ by Halsey, Stuart & Company and associates had
not been made public or disclosed by any officer or representative of the Station
124491 — 40— pt. 22 29
11800 CONCENTRATION OF ECONOMIC POWER
Company to Kuhn, Loeb & Company or any member of the purchasing
syndicate.
By its report and order of March 28, 1940, in Finance Docket No. 12797, a copy
of which is forwarded herewith, the Interstate Commerce Commission approved
the issue; and the bonds have been delivered by the Station Company and set-
tlement has been made in full by the purchasers. There also is enclosed here-
with a copy of the proceedings at a public hearing held by the Interstate Com-
merce Commission on March 23, 1940.
Yours very truly,
M. W. CiJatENT,
President.
List of Bankers, Banks, and Insurance Companies lNvnEa> to Bid on
$16,000,000 Chicago Union Station Company First Mortgage, Series "F",
3%% Bonds
Date Mailed: Mar. 5, 1940.
Bancamerica-Blair Corporation, 44 Wall Street, New York, N. Y.
Bank for Savings In the City of New York, 280 Fourth Avenue, New York, N. Y.
Bankers Trust Company, New York, N. Y.
Bear, Stearns & Company, 1 Wall Street, New York, N. Y.
A. G. Becker & Co., 100 South LaSalle Street, Chicago, 111.
Beneficial Savings Fund, 1200 Chestnut Street, Philadelphia, Pa.
Biddle, Whelen & Co., 1606 Walnut Street, Philadelphia, Pa.
Blyth & Co., Inc., 135 South LaSalle Street, Chicago, 111.
Bowery Savings Bank, 110 East 42nd Street, New York, N. Y.
Alex. Brown & Sons, 135 South LaSalle Street, Chicago, 111.
Calvin Bullock, 120 South LaSalle St., Chicago, 111.
Cassatt & Co., Incorporated, Commercial Trust Building, Philadelphia, Pa.
Central Savings Bank, Broadway and 73rd Street, New York, N. Y.
Chase National Bank, New York, N. Y.
Chemical Bank and Trust Co., New York, N. Y.
Clark, Dodge & Co., 61 Wall Street, New York, N. Y.
E. W. Clark & Co., Locust at 16th Street, Philadelphia, Pa.
Cofiin & Burr, Inc., Boston, Mass.
Curtis & Sanger, Boston, Mass.
R. L. Day & Co., 14 Wall Street, New York, N. Y.
C. J. Devine & Co., Inc., 135 South LaSalle Street, Chicago, 111.
Dick & Merle-Smith, 30 Pine Street, New York, N. Y.
R. S. Dickson & Co., Charlotte, N. C.
Dillon, Read & Co., 28 Nassau Street, New York, N. Y.
Dime Savings Bank of Brooklyn, 9 DeKalb Avenue, Brooklyn, N. Y.
Dominick & Domihick, 115 Broadway, New York, N. Y.
Dry Dock Savings Institution, 341 Bowery, New York, N. Y.
Emigrant Industrial Savings Bank, 51 Chambers Street, New York, N. Y.
Estabrook & Co., 40 Wall Street, New York, N. Y.
Eastman, Dillon & Co., I5 Broad Street, New York, N. Y.
Evans, Stillman & Co., 14 Wall Street, New York, N. Y.
The First Boston Corporation, Syndicate Dept., 231 South LaSalle St., Chicago,
III.
First of Michigan Corporation, 135 South LaSalle St, Chicago, 111.
The First National Bank of Chicago, 38 South Dearborn St., Chicago, 111.
The First National Bank of the City of New York, 2 Wall Street, New York, N. Y
Freeman & Company, 30 Pine Street, New York, N. Y.
Glore, Forgan & Company, 123 South LaSalle St., Chicago, 111.
Goldman, Sachs & Co., New York, N. Y.
Graham, Parsons & Co., 1422 Walnut Street, Philadelphia, Pa.
Gregory & Son Co., Inc., 40 Wall Street, New York, N. Y.
Guaranty Trust Company of New York, New York, N. Y.
Hallgarten & Co., 120 South LaSalle St., Chicago, 111.
Halsey, Stuart & Co., Inc., 201 South LaSalle St., Chicago, 111.
Harriman, Ripley & Co., Inc., 135 South LaSalle St., Chicago, 111.
Harris, Hall & Company, Inc., Ill West Monroe St, Chicago, 111.
Harris Trust and Savings Bank, 115 West Monroe St., Chicago, 111.
Harrison & Co., Fldelity-Phila. Trust Bldg., Philadelphia, Pa.
COKCBNTRATION OF ECONOMIC POWER 11801
Hayden, Miller & Co., Union Trust Building, Cleveland, Ohio
Hayden, Stone & Co., 25 Broad Street, New York, N. Y.
Hemphill, Noyes & Co., 15 Broad Street, New York, N. Y.
Hornblower & Weeks, 39 South LaSalle St., Chicago, 111.
W. E. Hutton & Co., 14 WaU Street, New York, N. Y.
The Illinois Company of Chicago, 231 South LaSalle Street, Chicago, 111.
Jackson & Curtis, New York, N. Y.
Janney & Co., 1529 Walnut Street, Philadelohia, Pa.
Kean, Taylor & Co., 14 Wall Street, New York, N. Y.
Kidder, Peabody & Co., 135 South LaSalle Street, Chicago, 111.
Kissel, Kinnicutt & Co., New York, N. Y.
Kuhn, Loeb & Co., Williams and Pine Streets, New York, N. Y.
Ladenburg, Thalmann & Co., New York, N. Y.
Lazard Freres & Company, Inc., 135 South LaSalle Street, Chicago, 111.
Lee Higginson Corporation, 231 South LaSalle St., Chicago, 111.
Lehman Brothers, 231 South LaSalle St., Chicago, 111.
Mackubin, Legg & Company, 222 E. Redwood Street, Baltimore, Md.
Laurence M. Marks & Co., 49 Wall Street, New York, N. Y.
McMaster Hutchinson & Co., IO5 South LaSalle Street, Chicago, III.
Mellon Securities Corporation, Pittsburgh, Pa.
Morgan Stanley & Co., Inc., 2 Wall Street, New York, N. Y.
F. S. Moseley & Co., 135 South LaSalle Street, Chicago, 111.
National City Bank, New York, N. Y.
W. H. Newbold's Son & Co., 1517 Locust Street, Philadelphia, Pa.
The Northern Trust Company, N. W. Cor. LaSalle & Monroe Sts., Chicago, 111.
Otis & Company, 105 West Adams Street. Chicago, 111.
Paine, Webber & Co., 25 Broad Street, New York, N. Y.
R. W. Pressprich & Co., 135 South LaSalle Street, Chicago, 111.
E. H. Rollins & Sons, Inc., 231 South LaSalle Street, Chicago, III.
Roosevelt & Son, 30 Pine Street, New York, N. Y.
L. F. Rothschild & Co., 120 Broadway, New York, N. Y.
Salomon Bros. & Hutzler, 60 WaU Street, New York, N. Y.
.7. & W. Seligman & Co., 54 Wall Street, New York, N. Y.
Smith, Barney & Co., 105 West Adams Street, Chicago, 111.
Spencer, Trask & Co., New York, N. Y.
Speyer & Co., New York, N. Y.
Stein Bros. & Boyce, 6 South Calvert ' Street, Baltimore, Md.
Lawrence Stern & Co., 231 South LaSalle Street, Chicago, 111.
Edward Lowber Stokes & Co., 1708 Lucust Street, Philadelphia, Pa.
Stone & Webster & Blodget, Inc., 33 South Clark Street, Chicago, HI.
Stroud & Company, Inc., 1429 Walnut Street, Philadelphia, Pa.
United States Trust Co., New York, N. Y.
White, Weld & Co., 40 Wall Street, New York, N. Y.
Whiting, Weeks & Knowles, Inc., Boston, Mass.
Williamsburgh Savings Bank, 1 Hansen Place, Brooklyn,. N. Y.
Dean Witter & Co., New York, N. Y.
Wood, Struthers & Co., 20 Pine Street, New York, N. Y.
Yarnall & Co., 1528 Walnut Street, Philadelphia, Pa.
Aetna Life Insurance Co., Hartford, Conn.
Connecticut Mutual Life Insurance Co., Hartford, Conn.
Equitable Life Assurance Society of the United States, Henry Greaves, Treas-
urer, 393 Seventh Avenue, New York, N. Y.
Metropolitan Life Insurance Co., F. W. Bcker, Vice President, 1 Madison
Avenue, New York, N. Y.
Mutual Benefit Life Insurance Co., Milo W. Wilder, Jr., Treasurer, 800 Broad-
way, Newark, N. J.
Mutual Life Insurance Co. of New York, Dwight S. Beebe, Vice Pres. & Fin.
Mgr., 34 Nassau Street, New York, N. Y.
New York Life Insurance Company, A. H. Meyers, Treasurer, 51 Madison
Avenue, New York, N. Y.
Northwestern Mutual Life Insurance Co., F. E. Wilman, Supt. of Bonds, 720
E. Wisconsin Avenue, Milwatikee, Wis.
Penn Mutual Insurance Co., D. Newhall, Vice President, Philadelphia, Pa.
Prudential Life Insurance Co., Newark, N. J.
Travelers Insurance Company, G. W. Baker, Treasurer, Hartford, Conn.
The Union Central Life Co., Cincinnati, Ohio.
11802 CONCENTRATION OF ECONOMIC POWER
Hai.sey, Stdart & Co., Inc.
Chicago Union Station Company,
Chicago, III, March 5, 19^0.
Dear Sibs : Chicago Union Station Company proposes to redeem on July 1,
1940, at 105% of their principal amount, its present outstanding $16,000,000
First Mortgage 4% Series D Bonds, due July 1, 1963, and in order to provide
in part, the cash necessary for such redemption, proposes to issue and sell a
like principal amount of First Mortgage 3%% Series F Bonds.
Accordingly, up to 12:00 o'clock noon (Central Standard Time) on March
12, 1940, sealed bids will be received, by the Company for the purchase of
$16,000,000 principal amount of bonds of the Company, to be dated January 1,
1940, to mature July 1, 1963, to be of Series F, and to be issued under the Com-
pany's First Mortgage, dated July 1, 1915, to Illinois Trust and Savings Bank,
Trustee, (Continental Illinois National Bank and Trust Company of Chicago,
Successor Trustee), copies of which mortgage are available for inspection at
the office of the Company in Chicago, 111.
The said First Mortgage 3i^% Bonds, Series F, are to be guaranteed by en-
dorsement as to both principal and interest, jointly and severally, by Chicago,
Burlington & Quincy Railroad Company, The Pittsburgh, Cincinnati, Chicago
and St. Louis Railroad Company, The Pennsylvania Railroad Company and
Henry A. Scandrett, Walter J. Cummings and George I. Haight as Trustees
of the property of Chicago, Milwaukee, St. Paul and Pacific Railroad Company,
pursuant to an agreement to be dated as of January 1, 1940, between said
guarantors, the Station Company, and the Trustee under said First ^Mortgage.
Said guarantors own in equal shares the Company's outstanding capital stock,
amounting to $2,800,000 par value. As will be provided in said agreement, the
guaranty of said Railroad Trustees will be their obligation solely as Trustees
and not individually and will be a general obligation of the trust estate. Such
guaranty will be subordinate to all existing mortgages on the trust estate and
all liability of the trust estate in respect thereof will terminate if the guaranty
is assumed (as a general obligation without lien) by receivers or a corporation
succeeding the said Trustees in the possession of the trust estate. Copies of
safd agreement, dated as of January 1, 1940, are available for inspection at
the office of the Company in Chicago, 111.
Bids for only a part of the issue will not be accepted.
The Company reserves the right to reject any and all bids. The acceptance
of any bid, the issue and sale of the Bonds by the Company and the assumption
of obligation and liability in respect thereof by the Guarantor Companies and
Railroad Trustees will be subject to the approval of the Interstate Commerce
Commission. The acceptance of a bid by the Station Company, and the assump-
tion of said obligation and liability by the Railroad Trustees, will be subject
also to the approval of the Court. Notice of acceptance, subject to approval
by the Interstate Commerce Commission, and of the Court, will be mailed to
the successful bidder not later than March 14, 1940.
Bids for the entire issue must be in writing and enclosed in sealed envelopes
addressed : Chicago Union Station Company, Tender for First Mortgage Bonds,
Series F, and reenclosed in envelopes addressed : Chicago Union Station Com-
pany, % J. W. Besch, Secretary, 210 South Canal Street, Chicago, 111.
Each bidder must furnish with his bid a certified check for $800,000, payable
to the order of Chicago Union Station Company, as security for the faithful
performance by the bidder of the contract of sale if his bid shall be accepted. In
the ca.se of the successful bidder, such check will be retained by the Company
as security for the faithful performance by such bidder of his obligation to
take and pay for the Bonds in accordance with his bid, and in the absence of
default on the part of such successful bidder, will be applied upon the purchase
price of the Bonds. In the case of unsuccessful bidders, such checks will be
returned promptly after the award has been made, but no interest on the
amount thereof will be allowed.
Payment in full for the Bonds (less the $800,000 hereinabove mentioned)
shall be made by certified check, or checks in New York or Chicago funds
at the office of Continental Illinois National Bank and Trust Company of
Chicago, Trustee, in Chicago, 111., or at the office of any agent designated
by the Trustee, on such date as the Company may designate in subsequent
notice to the successful bidder, such date of payment to bo as soon as prac-
ticable after the Interstate Commerce Commission shall have given its ap-
proval, not later, however, than April 15, 1940. If the Interstate Commerce
CONCENTRATION OF ECONOMIC POWER 11803
Oommission shall uot have given its approval as aforesaid on or before April
15, 1940, then the Company shall no longer be bound and the certified check
(hereinabove mentioned) deposited with the bid shall be immediately returned
to the bidder, but no interest on the amount thereof will be allowed.
Upon payment in full of the balance of the purchase price as above set
forth, the Company will execute the Bonds in temporary form in such denom-
inations as may be requested, and deposit same with the certified check which
accompanied the accepted bid with the Continental Illinois National Bank
and Trust Company of Chicago, Trustee, with instructions to the said Trustee
to authenticate and deliver the Bonds to the order of the successful bidder
as soon as possible after the proposed call for the redemption of the Series
D Bonds has been made, which call in no event shall be later than April 1, 1940.
Following is information with respect to Chicago Union Station Company
and a description of the Bonds to be sold :
Chicago Union Station Company owns extensive station and terminal proper-
ties in the City of Chicago, extending for about twelve blocks from Carroll Ave-
nue to West Roosevelt Road, a distance of approximately 1.43 miles, principally
between the Chicago River and North and South Canal Streets, and including
the present city block bounded by West Adams, West Jackson, South Clinton
and South Canal Streets. In the opinion of counsel for the Station Company,
the First Mortgage is a first lien on all of the properties of the Station
Company, subject to easements of no material importance, exclusive of two
parcels consisting of so-called "air rights" which the Station Company has
heretofore conveyed and leased in accordance with the provisions of the
First Mortgage: one, to Chicago Daily News Printing Company in the area
east of Canal Street, between Madison and Washington Streets, now occupied
by the Chicago Daily News Building with its plaza and appurtenances ; the
other, to the United States of America, in the area east of Canal Street between
Van Buren and Harrison Streets, now occupied by the Chicago post office
building and appurtenances. The conveyances and lease excepted and reserved
the tracks, structures and appurtenances of the Station Company and the
perpetual right to occupy and use for the construction, operation, maintenance
and renewal of its tracks, stations, platforms, yards, structures, facilities
and improvements in the subjacent space therein described. Under an agree-
ment dated July 2, 1915, and supplements thereto, the proprietary companies,
or those who succeed to their obligations, are obligated to use the property
during the corporate existence of the Station Company which extends to
July 3, 1963, and for such further time as the station and facilities may be
used or the term of the corporate existence of the Company may be extended
or renewed. Under this agreement and its supplements, each of the proprietary
companies obligates itself to pay as rental its share of a sum of money suf-
ficient to pay, among other things the interest on the bonds and other capital
obligations of the Chicago Union Station Company, and all taxes and special
assessments, together with a proportion of the expenses of operation and
maintenance. The Alton Railroad Company also makes use of the property as
a tenant.
In its valuation report on the Station Company (Valuation Docket No. 1,198)
the Interstate Commerce Commission found a final value, for rate-making pur-
poses, of the property owned by the Station Company, as of December 31, 1927,
of $49,340,000 (excluding working capital of $50,000). If the property classified
and valued by the Interstate Commerce Commission as "non-carrier" (and in-
cluded in the Station Company's balance sheet in investment in road and
equipment) is included, the total as of December 31, 1927 would be $54,195,011
(excluding working capital of $50,000). This valuation brought down to De-
cember 31, 1939, by adding the cost of additions and betterments and deducting
retirements, is reduced to $48,859,071. Investment of the Station Company in
the same property as of December 31, 1939, as shown by its books, was
$84,097,604. The difference between the valuation of the Commission and the
investment account is due principally to two items : "Value of Land" carried
on the books of the Station Company at $18,752,307 in excess of the valuation
determined by the Interstate Commerce Commission and "Interest During Con-
struction," which is charged in the accounts of the Station Company at
$16,479,179 in excess of the Commission's figure. The amounts carried on the
books of the Station Company represent the actual cost to it of the land and for
interest during the construction period.
In arriving at its final value of the properties as of December 31, 1927, the
Interstate Commerce Commission took into consideration, among other things.
11804 CONCENTRATION OF ECONOMIC POWER
the depreciation of road. The Station Company, as permitted by the acconntire
regulations of the Interstate Commerce Commission, sets up no reserve for
depreciation of road.
The proceeds of sale of these bonds, together with the proceeds of not ex-
ceeding $600,000 of guaranteed bank loans and cash in the treasury of the
Station Company, will be used to redeem on July 1, 1940, at 105% and accrued
interest $16,000,000 principal amount of the Station Company's First Mortgage
4% Bonds, Series D, due July 1, 1963.
The First Mortgage by its terms limits the amount of outstanding bonds to
$60,000,000. After the issue of $16,000,000 Series F Bonds and the redemption
of the Series D Bonds as planned, there will be outstanding in the hands of
the public, in addition, $44,000,000 Series E 3%% Bonds. The only other debt
of the Company (other than current operating debt and said guaranteed bank
loans) is $6,895,000 31/2% Guaranteed Bonds due September 1, 1951, $827,000
Guaranteed Bonds due April 1, 19i4 and $13,594,995.09 indebtedness to the
proprietary companies for advances. As a result of the operation of the Sink-
ing Fund on April 1, 1940, there will be a reduction in the amount of 4%
Guaranteed Bonds due April 1, 1944 by $350,000.
There are attached hereto (a) copy of the Balance Sheet of the Station Com-
pany as of December 31, 1939, and (b) copy of the Income Account of the
Station Company for the calendar years 1937, 1938 and 1939, both in the form
prescribed by the Interstate Commerce Commission.
All, but not part, of the Series F Bonds may be redeemed at the option of
the Company on ninety days' published notice, on July 1, 1945, or on any
interest date thereafter up to and including July 1, 1956 at 106% ; thereafter
up to and including July 1, 1957 at 105% ; thereafter up to and including July
1, 1958 at 104% ; thereafter up to and including July 1, 1959 at 103% ; there-
after up to and including July 1, 1960 at 102% ; thereafter up to and including
July 1, 1961 at 101% and thereafter at 100% ; in each case with accrued interest.
They are to be issued as coupon bonds in $1,000 denomination with
the privilege of registration as to principal and as fully registered bonds in
authorized denominations! coupon bonds and registered bonds to be inter-
changeable under the provisions of the mortgage.
Both the principal and interest of the Series F Bonds are payable without
deduction for any tax or taxes (except any Federal Income Tax) which the
Station Company or the Trustee may be required to pay or retain therefrom,
under any present or future law of the United States, or of any State or County
or Municipality therein.
While, under the terms of the First Mortgage, the Series F Bonds will, by
their terms, be stated to be payable "in gold coin of the United States of
America, of or equal to the standard of weight and fineness as it existed on
July 1, 1915," nevertheless in accordance with Public Resolution No. 10 of the
73rd Congress of the United States of America, approved on June 5, 1933, the
Series F Bonds will be payable in any coin or currency of the United States
of America which at the time of payment is legal tender for public and pri-
vate debts, and the Bonds will bear a suitable legend which will call specific
attention to such Public Resolution.
The temporary Series F Bonds will be exchangeable without expense to the
holders for definitive Series F Bonds when prepared. The Company agrees to
have the definitive bonds prepared as promptly as possible.
The issue, guaranty and sale of the Series F Bonds are subject to authoriza-
tion by the Interstate Commerce Commission and, in respect of said guaranty
of said Railroad Trustees, to authorization by the Court.
The Company will in due course make application for the listing of the Series
F Bonds on the New York Stock Exchange, and, in connection therewith, for
their registration under the Securities Exchange Act of 1934.
Very truly yours,
Chicago Union Station ('ompany,
By M. W. Clement, President.
CONCENTRATION OF ECONOMIC POWER 11805
Chicago Union Station Company — General Balance Sl^eet as of
December SI, 19.39
ASSETS
Investments
Investments in road and equipment $84,097,604.77
Sinking fund 1,000.00
Other investments 5, 070. 31
Current Assets
Cash 96, 013. 39
Special deposits
Enseal agents' bond interest
account $1, 149, 64(3. c.t;
Oontl. 111. Natl. Bank & Trust
Co., Trustee,
For redemption of First Mort-
gage Bonds :
Series "A" and
" B " called
7/1/36 $4, 000. 00
5% Premium - 200. 00
$84, 103, 675. 08
For redemption of
5% Guaranteed
Gold Bonds- 8, 000. 00
5% Premium- 400. 00
12, 000. 00
Miscellaneous 958. 91
. 1_ 163^ 205. 57
TraflBc and car-service balances receivable 22. 30
N'et balance receivable from agents and conductors 377. 55
.Miscellaneous accounts receivable 634, 498. 74
Material and supplies 27, 719. 67
Rents receivable 3,871.00
Deferred Assets
Working fund advances 150. 00
lusurance and other funds 50,703.13
Other deferred assets 856,860.66
Unadjusted Debits
Discount on funded debt 216,803.51
Other unadjusted debits 1, 460, 888. 83
1, 925, 708. 22
907, 713. 79
1, 677, 692. 34
Total Assets 88, 614, 789. 43
LIABILITIES
Capital Stock $2, 800, 000. 00
Long Term Debt
Funded debt unmatured $60. 000, 000. 00
First mortgage bonds due
July 1. 1963 :
Series "D" 4% $16,000,000.00
Series "E" 44, 000, 000. 00
Guaranteed 3%% bonds due September 1, r951- 6, 895, 000. 00
Guaranteed 4% bonds du? April 1, 1944 827,000.00
67, 722. 000. 00
Nonnegotiable debt to affiliated companies 13, 594, 995. 09
81, 316, 995. 09
Current Liabilities
Audited accounts and wages payable 105, 385. 45
Miscellaneous accounts payable 7, 700. 89
Interest matured unpaid 1, 149, 646. 66
Funded debt matured unpaid 13,000.00
Unmatured Interest accrued 88, 711. 67
Other current liabilities 600.00
Unadjusted Credits
Tax liability 1, 548, 464. 97
Other unadjusted credits 1,154,284.70
1, 365, 044. 07
2, 702, 749. 67
Corporate Surplus
Pjinded debt retired through income and surplus 430, 000. 00
Total Liabilities $88, 614, 789. 43
11806
CONCENTRATION OF ECONOMIC POWER
Ohicago Union Sfnfwn Company — Income account for the years ended Deremher
31, 1937, 1938, and 1939
1937
1938
1939
Operating Income:
$1,487,413.89
$1, 168, 8S9. 35
.«1, 478, 449. 39
1 $1, 487, 41S. 89
i $1,168, 889. S5
' $1, 478, 449. S9
Total Operating Income .
1 #/, 487, US. 89
i$l,]68,8S9.S5
1 $1, 478, 449. S9
NON-OPERATINO INCOME:
$4,197,810.20
36, 374. 40
12, 358. 69
1, 718. 75
$3, 876, 165, 06
36, 374. 40
2, 947. 39
1,718.75
$5, 056, 177. 27
36, 374. 40
Income from Funded Securities
78. 12
Income from Sinking and Other Reserve Funds
1, 640. 63
122, 188. 89
58.40
9.60
1.60
$4, 248, 320. 44
$3, 917, 215. 20
$.5,216,460.91
Gross Income - -
$2, 760, 906. 55
.$2, 748, 325. 85
$3,738,011.52
Deductions from Gross Income:
$3, 270. 01
659. U
2, 597, 231. 66
10.36
16, 188. 48
3, 516. 93
$4, 439. 34
659. 11
2, 583, 166. 67
56.97
16,249.08
3, 275. 62
$2, 507. 35
1,059.11
2,568. 591. 67
Interest on Unfunded Debt_ , ...
22. 915. m
Amoritization of Discount on Funded Debt
15, 41 3. .^0
2,974.63
Total Deductions from Gross Income
$2, 620, 906. 55
$2, 607, 846. 79
$2, 613, 551. 75
$140, 000. 00
$140, 479. 00
$1, 124, 459. 77
Disposition op Net Income:
$140, 000. 00
$140, 000. 00
$140, 000. 00
Income Balance Transferred to Profit and Loss
» $479. 06
3 $984, 459. 77
' Italics denote loss.
1 Net income consisting of $674.37 loss sustained in sale of Investment securities, les.s $195.31 credit, un-
claimed wages written off. Net amount cliarged to proprietary companies and included in Station Com-
pany income, ofl.sctting corresponding amount in profit and loss account.
' Net income resulting largely from an accounting adjustment of unamortized discount and expenre on
Series "A" and "B" Bonds retired July 1, 1936. Such unamortized discount and cxpen.se charged to pro-
prietary lines and included in Station Company income in 1939, offsetting similar charge in profit and loss
account.
[Copy]
Morgan Stanley & Co., Incorporated
Two Wall Street, New York
New York, March S, 19J,0.
M. W, Clement, Esq.,
President, Chicago Union Station,
Chicago, Illinois.
Dear Sir : We beg to acknowledge receipt of your letter of March 5, 1940
relating to $16,000,000, principal amount of Chicago Union Station First
Mortgage 31/8% Bonds.
Very truly yours,
Morgan Stanley & Co. Incorporated,
(Signed) Alfred Shriver, Fice President.
CONCENTRATION OF ECONOMIC POWER 11807
[Copy]
Steen, Wamplek & Co. Inc.
Telephone Franklin SS44. 231 South LaSalle Street,
Chicago, March 9, 1940.
CHICAGO — NEW YORK
Mr. M. W. Clement,
President, Chicago Union Station Company,
210 South Canal Street, Chicago, Illinois.
Deab Mk. Clement: We appreciate being invited to bid for the contemplated
issue of Chicago Union Station Bonds.
Apparently your records contain our firm name as Lawrence Stern & Co.
Please be advised that the title of our company was changed on June 1, 1938,
to Stern. Wampler & Co. Inc.
Very truly yours,
(Signed) E. C. Wampleb,
(E. C. Wampler)
ECW : AV President.
[Copy]
Leon S. Freeman Cable Address :
E. Kirk Haskell "Manfree New York"
Joseph s; Se ''l?(,Ji•h'„^^'^/lli$?°"
Philip H. Ackert Whitehall 4-3344
Frank L. Cole Philadelphia Telephone
Fbeeman & Company
30 Pine Street, New York
Rittenhouse 6161
IMabch 6, 1940.
Mr. M. W. Clement,
President, Chicago Union Station Company,
Chicago, Illinois.
Dear Sib : We wish to thank you for your letter of March 5th relative to bids
for your proposed issue of $16,000,000 Chicago Union Station First Mortgage
3%% Series F Bonds and we will be glad to give this matter our consideration.
Very truly yours,
Freeman & Company,
Bv (Signed) Phiup H. Ackeet
JM
[Copy]
Boston
Chicago
Philadelphia
St. Louis
Goldman, Saohs & Co.
30 Pine Street, New York
March 7, 1940.
Mr. M. W. Clement,
President, Chicago Union Station Company,
Chicago, Illinois.
Dear Sir : We acknowledge receipt with thanks of your circular letter dated
March 5, 1940 advising us that sealed bids will be received by your Company
for the purchase of §16,000,000 principal amount of Series F, Fii'st Mortgage
iJonds.
We beg to advise you that we are not submitting a bid for the reason that
it is a policy with our Firm not to engage in competitive bidding, excepting
only in the case of State and Municipal obligations. We see no reason for
departing from that principle in this case. We believe that the method of
competitive bidding is unsound in principle and, in the long run, against the
public interest.
Believe us to be
Yours very truly
(Signed) Goldman, Sachs & Co.
11808 CONCENTRATION OF ECONOAIIC POWER
[Copy]
Walter N. Stillman Cables
James McMlllen "Stilvans New York*'
Howard A. Plummer Codes
.1. Gould Remick All Universal Codes
Robert W. Morgan
Langley W. Wiggin Limited
Evans, Stilt.man & Co.
MEMBERS NEW YORK STOCK EXCHANGE
14 Wall street, New York
March 6, 1940.
M. W. Clement, Esq.,
President, Chicago Union Station Company,
210 South Canal Street, Chicago, niinois.
De.\b Mb. Clement: We acknowledge with thanks your letter of Mf>reh 5
inviting us to submit a bid on March 12 for $16,000,000, principal amount of
the bonds of your Company, to be dated January 1, 1940, and to mature July 1,
1963.
While we appreciate your courtesy, our firm is definitely opposed to the
principle of competitive bidding for new issues, excepting State and Municipal
obligations, and must, therefore, decline your invitation.
Cordially yours,
(Signed) Evans, Stillman & Co.
JMcM : VW
[Copy]
Halset, Stuart & Co. Inc.
201 So. LaSalle St., Chicago, March 12, 1940.
Chicago Union Station Company,
210 South Canal Street, Chicago, Illinois.
(Attention: Mr. J. W, Besch, Secretary.)
Dear Sirs : Pursuant to the terms and conditions set forth in your circular
letter dated March 5, 1940, copy of which is attached hereto, relating to the
sale by you of $16,000,000 principal amount of your First Mortgage 3%% Bonds,
Series F, to be dated Jan. 1, 1940 and to become due July 1, 1963, the under-
signed hereby bids 98.05% of the principal amount of said bonds, plus accrued
interest on the principal amount of said bonds at the coupon rate to the date
of payment therefor.
It is understood that payment in full for the Bonds (less $800,000 deposited
with this bid) is to be made, against delivery of said Bonds in temporary form,
by the successful bidder by certified check, or checks, in New York or Chicago
funds at the office of Continental Illitiois National Bank and Trust Company of
Chicago, Trustee, in Chicago, Illinois, or at the oflice of any agent designated
by the Trustee, on such date as the Company may designate in subsequent
notice to the successful bidder, such date of payment to be as soon as prac-
ticable after the Interstate Commerce Commission and the Court shall have
given their approval, not later than April 15, 1940, as provided in your circular
letter.
In accordance with the terms of said circular letter of March 5, 1940, we
enclose herewith certified check for $800,000, payable In Chicago funds to the
order of the Chicago Union Station Company as security for the faithful per-
formance by the undersigned of the contract of sale if this bid shall be accepted.
Very truly yours,
(Signed) Halsey, Stuabt & Co., Inc..
On behalf of itself and associates, none of whose partners, officers, or
directors is a director or officer of the Chicago Union Station Com-
pany or of any of the Guarantors.
March 15, 1940.
Mr. Hauky L. Stuabt,
Halsey, Stuai-t & Co., Inc.,
201 S. La Salle Street, Chicago, Illinois.
Dear Mb. Stuart: As you may recall, the Commission's Investment Banking
Section presented to the Temporary National Economic Committee considerable
CONCENTRATION OF ECONOMIC POWER 11809
data on the past financing of the Chicago Union Station Company. In connec-
tion with the offering by the Chicago Union Station Company of $16,000,000
3%% Bonds by a syndicate headed by Kuhn Loeb & Co., it has occurred to me
that you might care to let us have a memorandum setting forth your interest
in the situation, and particularly the bid which your firm made.
Sincerely yours,
Peter R. Nehemkis, Jr.,
Special Counsel, Investment Bankvng Section, Monopoly Study.
PRNehemkis :ib
March 21, 1940.
Mr. Peteb R. Nehemkis, Jr.,
Securities and Exchange Gotnminsioti,
Washington, D. C.
Dear Me. Nehemkis: Your courteous inquiry of March 15 was received on
March 18. We had hoped that it would not be necessary for us to comment
on the Chicago Union Station Company bond issue and we have held your note
until now to determine how we would like to reply to it. We, of course, have
in mind our previous experience with your courteous requests and also I have
keen recollection of the seven days I was held in compuLsory attendance at the
meetings of your Committee during the Investment Banking Section inquiry
and I am well aware of your determination to get what you are after, so we
are reluctantly giving you the history of this transaction from our point of
view. I enclose the following:
1. Copy of memorandum I wrote on February 15, the day following my talk
with Messrs. Scandrett and Severs.
(You will note that the type of bond I suggested and the price was quite
different from a marketability standpoint than the one on which bids were
invited. )
2. Printed invitation from the Chicago Union Station Company dated March 5.
(We presume you have the application made by the Company to the Inter-
state Commerce Commission in which the Company declares its expectation to
award the bonds to the liighest bidder. Also you will get the list of those to
whom the invitation was sent.)
3. Copy of our bid dated March 12.
(You will note that there are no conditions attached to our bid. The second
paragraph was inserted after consulting with an officer of the Station Company
to clarify a paragraph in the invitation. There was also no reservation as to
our attorney's opinion ; we preferred to take the moderate commercial risk that
our lawyers would agree with the Company's lawyers in the event that the
bonds were awarded to us. We understand also that this bid was the only
one received.)
4. Copy of letter from the Company rejecting our bid and returning our
check, which was delivered to us about noon March 14.
(This was the last word we had from the Company.)
5. Copy of letter I have written to Mr. J. W. Severs today, so that he may be
fully posted as to what we are doing.
I think the foregoing are all the essentials from our standpoint. As to
whether our bid, backed by a deposit of $800,000, was accorded treatment
demanded by high ethics, we of course are unable to say. Also as to whether
there was an organized opposition to the policy of public bidding, in view of
the fact that we were the only bidder, we likewise have no information. We
do know that we invited a total of approximately fifty houses to join our group
and only twenty (excluding ourselves) accepted, the balance declining for one
reason or another. Also we have no information as to whether the same state
of affairs continues to exist as indicated by the testimony which you brought
out in December at the hearing before your Committee. If this is so, then ol
course it is questionable whether our bid or any bid made by a house outside
the group previously identified with Chicago Union Station financing would
have received any different consideration than that accorded to us. Cer-
tainly we do not suggest that any investigation be made on these points, much
less have we any desire to take part in such investigation. I think it is per-
fectly fair, in behalf of our bid, to state that there was a very large improve-
ment in the market for high grade securities between the date of our bid and
forty-eight hours later when it was rejected and that if we had had a proper
opportunity we would have been glad to have improved our bid substantially,
11810 CONCENTRATION OP ECONOMIC POWER
lOr during that short period of time several large syndicates which had been
slow were either cleaned up or rapidly in the process of successful liquidation.
The Interstate Commerce Commission is holding a hearing on this matter
at ten o'clock March 23 and they sent a notice of this meeting to our New York
oflSce, which was received theie on March 16. This notice was not accompanied
by an invitation to attend and we are relieved that we have no such invitation,
because we have not in mind registering any objection to the sale. We trust,
however, that the Commission will inform itself fully, principally to satisfy
itself whether the sale was handled as it should have been and for guidance in
future cases where the Commission suggests or orders competitive bidding.
There is no question but that all bids should be opened in the presence of
the bidders, which was not done in this case, and that proper consideration
should be given to the highest bidder if private negotiations are later under-
taken. This Company still has $44,000,000 of bonds which will be callable in
the not distant future and we are hoping for an opportunity of bidding on
those under fair conditions.
The present bond issue, we understand, was unofficially offered by the suc-
cessful purchasers on the afternoon of the date of the rejection of our bid
and the next day there appeared the usual advertisements and which contained
a notice that the circulars were ready. On the assumption that no negotiations
were undertaken until after the rejection of our bid, the successful purchasers
made a most remarkable record in the speed with which they got the offering
to the public.
We trust that we have answered your inquiry as fully as you wish and that
the matter is at an end so far as we are concerned.
Very sincerely yours,
H. L. Sttjabt.
HLS-F.
[Copy]
F.K.S.
C.F.C.
T.E.H.
Memorandum^ — Re Chicago Union Station Company
Yesterday I called on Mr. Henry Scandrett, formerly president of the Chicago.
Milwaukee, St. Paul & Pacific Railroad and now one of the trustees in bank-
ruptcy of this road. I told him that we wanted an opportunity of bidding on
$16,000,000 of bonds which will become optional on July 1st of this year and
will have to be called on April 1st. -I told him the business should be done
in Chicago but replying to his question as to whether everybody should be
given a chance to bid, I replied that^ anybody should be permitted to bid.
He said that the matter was under active discussion now by a committee
of three, composed of Mr. George H. Pabst, Jr., of the Pennsylvania, located
in Philadelphia, Mr. Johnson of the C. B. & Q. and Mr. J. W. Severs, who is
Mr. Scandrett's assistant, and that he wanted me to see Mr. Severs right away
and Mr. Severs was leaving within an hour for New York. He telephoned Mr.
Severs and said that I would be right down to see him and I repeated to Mr.
Severs everything I had said to Mr. Scandrett, emphasizing the fact that this
business should be done in Chicago if possible. Mr. Severs said he was very
glad that I called because he did not have any contacts among investment
bankers and was consequently at a disadvantage, as his associate on the com-
mittee, Mr. Pabst, had contact with several investment bankers and Mr. Severs
felt that he was compelled to rely more or less on Mr. Pabst's views.
I told Mr. Severs that replying to Mr. Scandrett's question I had told him
that a 25-year bond with a service fund of $640,000 a year throughout the life
of the bonds and a 3% coupon could bo sold to the public at somewhere around
100. Mr. Severs stated that his committee were hoping they could sell 3s at
100 without a sinking fund and he thoiight that perhaps because of the terms
of the mortgage it would be impossible to establish a sinking fund until the
refunding of $44,000,000 of bonds which do not become optional until next year,
when the mortgage can be cancelled and a new mortgage made. Also they
may wish to borrow the premium of $800,000 to call the $16,000,000 bonds, for
two years. I told him we would be glad to buy the guaranteed notes or he
could borrow the money at a bank. I told him we would take the two year
notes with the guarantee of the three railroads on a 2% basis.
CONCENTRATION OP ECONOMIC POWER 11811
Mr. Severs said lie would come in to see us sometime next week and that
lie would discuss the matter with us very freely, as he wanted our advice,
lie also said that there was another matter which he was not permitted to
mention at this time but of more importance than the Union Station bonds
and that he would like also to discuss this with us later on. Mr. Severs also
expressed his opinion that his property should do all of its business in Chicago
and that he thought they were moving that way rapidly.
HLS-F.
CC Mr. E. W. Niver, New York Office.
2/15/40.
II. W. Johnson
Vice i'resident & Comptroller
Chicago Union Station Company
210 South Canal Street
Chicago, Illinois, March l-i, 1940.
Halsey, Stuart & Co. Inc.,
201 So. LaSalle Street,
Chicago, Illinois.
Gentlemen : I thank you for the bid made by your firm, on behalf of itself
and associates, none of whose partners, officers or directors is a director or
officer of the Chicago Union Station Company or of any of the Guarantors,
under date of March 12, 1940, for the purchase of $16,000,000 principal amount
First Mortgage 3%% Series "F" Bonds of the Chicago Union Station Company,
to be dated January 1, 1940 and to mature July 1, 1963.
Pursuant to the right reserved in its communication of March 5, 1940 to
reject any and all bids, the Chicago Union Station Company has decided to
reject your bid and this letter is accordingly sent to you for the purpose of
notifying you that your bid is rejected.
Your certified check in the sum of $800,000 is returned to you herewith.
Yours very truly,
H. W. Johnson,
Vice President, Chicago Union Station Company.
enc.
MH
Makch 21, 1940.
Mr. J. W. Severs,
Chicago, Milwaukee, St. Paul & Pacific Railroad,
Chicago Union Station, Chicago, Illinois.
De^ar Mr. Severs : I enclose herewith copy of letter received from Peter R.
Nehemkis, Jr., Special Counsel, Investment Banking Section of the Temporary
National Economic Committee, and copy of my reply. I also enclose my memo-
randum referred to ; the other papers you already have. I trust that my
memorandum is correct in so far as you are concerned and if it is not that you
will promptly advise Mr. Nehemkis direct.
I beg to femind you that throughout this negotiation I heard nothing from
you but had to do all of the calling myself, but this was easily understood
because of the activity you must have been under In connection with the
preparation of all the details in connection with the invitation and the issue.
When I called you after our check had been returned and you told me that
you could not give me any information, I could easily understand that also,
because you might have been in the position where you had to choose between
going along with a given policy and your job. However, failing to get any
information from you I endeavored to reach Mr. Scandrett and he was reported
to be in Arizona, so I had nowhere else to go except to my friend Mr. Walter
Cummings of the Continental Bank in his capacity as trustee of your road and
he later called me back to tell me that our bid was the only one received and
had been rejected but that he could not give any further information. The
various newspapers and ourselves were busy telephoning each other trying
to find out what happened and what was going to happen but without result.
When I telephoned you I mentioned that somebody from Harriman, Ripley &
Co. had called up a member of our underwriting group and had advised that
the rumor was out that our bid had been rejected, and this happened at least
an hour before our check was returned.
11812 CONCENTRATION OF ECONOMIC POWER
I certainly wish no misunderstanding with yourself or Mr. Scandrett, as
you certainly treated me with the greatest possible courtesy on my first and
only visit to you, at which time I am sure that you gave me all the information
you were at liberty to give at that time. I shall be obliged if you show this
letter and the enclosures to Mr. Scandrett on his return.
One of the newspapers stated that an inquiry from Mr. Nehemkis had also
been sent to the Chicago Union Station Company and if either you or it feel
like sending us a copy of your reply we will be grateful.
Very sincerely yours,
HLS-F
ENC
[Stenographers' minutes]
BBFOBB the InTEESTATE C0MMB25CE COMMISSION
Finance Docket No. 12797
APPLICATION OF CHICAGO UNION STATION COMPANY
Hearing Room "C", I. C. C. Building, Washington, D. C, Saturday,
March 23, 1940, 10 A. M.
Bei^be: Commissioner Porter and Examiner A. C. DeVoe. Met pursuant to
notice.
Appearances : Albert Ward, 1740 Broad Street Station Building, Philadelphia,
Pennsylvania, appearing for Chicago Union Station Company.
PROCEEDINGS
Exam. DeVoe. The Interstate Commerce Commission has assigned for hear-
ing at this time and place the application of the Chicago Union Station Com-
pany for authority to issue $16,000,000 First Mortgage Bonds, Series "F", and
not exceeding ijeOOjOOO guaranteed notes, and of Chicago, Burlington & Quincy
Railroad Company, Trustees of Chicago, Milwaukee, St. Paul & Pacific Railroad
Company, Pittsburgh, Cincinnati, Chicago & St. Louis Railroad Company, and
Pennsylvania Railroad Company for authority to assume obligation jointly and
saverally as guarantors of the bond.s and notes.
Who appears for the applicants?
Mr. Ward. Albert Ward.
Exam. DeVoe. Are there any other appearances?
(No response.)
Exam. DeVoe. You may proceed, Mr. Ward.
Mr. Ward. I will call Mr. Pabst.
Geoege H. Pabst, Jr., having been duly sworn, testified as follows:
Direct examination by Mr. Ward:
Q. Will you please state your name and address? — A. George H. Pabst, Jr.
I live in Philadelphia, Pennsylvania.
Q. What position, if any, do you have with the Chicago Union Station Com-
pany?— A. I am a director in the Chicago Union Station Company.
Q. How is the outstanding stock of the Chicago Union Station Company
handled? — ^A. The outstanding capital stock, aggregating $2,800,000 par value,
of the Chicago Union Station Company is owned in equal shares by the Chicago,
Burlington & Quincy Railroad Company, the Chicago, Milwaukee, St. Paul &
Pacific Railroad Company, the Pennsylvania Riiilroad Company, and the Pitt'<-
burgh, Cincinnati, Chicago & St. Louis Railroad Company. The.se four com-
panies, each owning one-quarter of the total outstanding stock of the Station
Company are the proprietary companies of the Station Company.
Q. What position, or positions, if any, do you hold with any of the proprie-
tary companies? — A. I am Assistant Vice-President-Treasurer of each the Penn-
sylvania Railroad Company and the Pittsburgh, Cincinnati, Chicago & St. Louis
Railroad Company. The properties of the Pittsburgh, Cincinnati, Chicago &
St. Louis Railroad Company are leased to and operated by the Pennsylvania
Railroad Company under a long term lease.
CONCENTRATION OP ECONOMIC POWER 11813
As Assistant Vice-President-Treasurer of each of these companies, I have
supervision over their financial affairs.
Q How and by what processes are problems of financing for the Chicago
Union Station Company customarily handled?— A. By reason of the ownership
of the proprietary companies of the stock, and the use of them of the properties
and facilities of Station Company, problems of financing in connection with the
Chicago Union Station Company are customarily handled by oflacers of the
proprietary companies. The Board of Directors of the Station Company consists
of officers of the proprietary companies and all of the executive oflicers of the
Station Company, except the Secretary, are officers of one or more of the
proprietary companies.
Q. Have you taken any part in the financing which is contemplated by the
application of the Station Company, which is the subject matter of this
hearing? — A Yes. I have cooperated with Mr. Clement, President of the
Station Company, and President of the Pennsylvania Railroad Company, and
with officers of the Chicago, Burlington & Quincy Railroad Company and of the
Chicago, Milwaukee, St. Paul and Pacific Railroad Company, or Trustees of
that Company, in considering the advisability of refunding the outstanding issue
of $16,000,000 principal amount of Series D Bonds of the Station Company.
Q. Are you familiar with the details of the plan of financing and its pur-
pose?— A. Yes.
Q. Describe the plan and its purpose. — A. At the present time, the Chicago
Union Station Company has outstanding $16,000,000, principal amount, of
Series D Bonds, bearing interest at the rate of 4% per annum, said bonds being
dated January 1, 1935 and maturing July 1, 1963. These bonds are callable on
April 1st for redemption on July 1, 1940, at 105. The present plan proposes an
issue of $16,000,000 of Series F Bonds at an interest rate of 3%% per annum,
such bonds to be dated January 1, 1940, and to mature July 1, 1963, and the
calling of the Series D Bonds for redemption. The Series F Bonds are to be
guaranteed by endorsement, jointly and severally, of the Chicago, Burlington &
Quincy Railroad Company, the Pittsburgh, Cincinnati, Chicago & St. Louis
Railroad Company, the Pennsylvania Railroad Company, and .the Trustees of
the Chicago, Milwaukee, St. Paul and Pacific Railroad Company. The premium
which must be paid in connection with such redemption will aggregate $800,000 ;
and in order to provide a portion of the funds to pay such premium, the
Station Company proposes to borrow from a bank, the sum of $600,000, and to
issue as collateral for such bank loan semi-annual notes bearing interest at
the rate of 11/^% per annum, which will mature in equal amounts over a period
of five years — that is, there will be paid on each semi-annual interest date the
sum of $60,000 of the principal of these notes. The notes will be dated not
later than April 15, 1940. They will be guaranteed by endorsement in the
same manner as the bonds. The difference between $600,000 and $800,000 will
be supplied by the proprietary companies, and in addition, the Station Company
and the proprietary companies will furnish further cash to meet necessary
expenses involved In this financing. The purpose and intent is to reduce by a
substantial amount the fixed charges of the Station Company.
Q. State whether or not competitive bids were invited for the purchase of
the proposed $16,000,000 of Series F Bonds. — A. Competitive bids were invited.
Q. When and how were these bids invited? — A. A letter of invitation to bid
was sent on March 5, 1940, to a total of 107 banking firms, insurance companies
and savings funds.
Q. Now, I hand you a letter dated March 5, 1940, purporting to have been
sent out by the Station Company.
Can you identify that as the letter to which you have referred? — A. This is
a copy of the letter referred to by me.
Q. That's the letter of invitation? — A. That's the letter which was sent out
to the 107 firms, — insurance companies and savings funds.
Mr. Ward. I would like to offer this letter in evidence as Exhibit No. 1.
Commr. Porteb. It will be received.
(Exhibit No. 1, Witness Pabst, received In evidence.)
By Mr. Ward :
Q. Could you say when this letter was mailed, Mr. Pabst? — A. This letter
was mailed from Chicago the afternoon of March 5th, that is, addressed to
New York, were placed in the United States Mail, and timed to go East on the
Broadway Limited to insure their delivery In New York on the 6th, the same
time that letters addressed to firms with addresses in Chicago would be received.
11814 CONCENTRATION OF ECONOMIC POWER
Q. Now, Mr. Pabst, I hand you a statement which is headed "List of Bankers,
Banks and Insurance Companies Invited to Bid on $16,000,000 Chicago Union
Station Company First Mortgage Series "F", 3%% Bonds." Could you identify
that statement as the one which lists the hanks, bankers, and insurance com-
panies to which you have reference? — A. This is a complete list of the bankers,
banks and insurance companies invited to bid on the Seried F Bonds, and to
which I have referred.
Mr. Wabd. I would like to offer this statement as Applicant's Exhibit No. 2.
Commr. Potiter. It will be received.
(Exhibit No. 2, Witness Pabst, received in evidence.)
By Mr. Ward:
Q. Mr. Pabst, was any publicity given in the newspapers to the invitation
to bid? — A. The Vice-President of the Station Company announced to the re-
porters in Chicago the evening of March 5th, that these invitations had been
extended and publicity occurred in newspapers the following day, particularly
in New York and Chicago, and in subsequent days.
Q. How many bids, if any, were received in response to this invitation? — A.
One bid was received.
Q. Who was the bidder? — A. The bidder was Halsey, Stuart & Company,
Incorporated, and associates.
Q. Do you know the names of the associates of Halsey, Stuart & Company,
Incorporated?— A. I do not know the names of those associates. The names
were not disclosed in the bid.
Q. What was the amount of the bid submitted by Halsey, Stuart & Com-
pany, Incorporated? — -A. Halsey, Stuart & Company, Incorporated, and associ-
ates, offered to purchase the bonds at 98.05%, plus accrued interest from
January 1, 1940, to the date of delivery of the bonds.
Q. Were any other replies received from those who were invited to bid? —
A. Yes. The receipt of the invitation was acknowledged by Evans, Stillman
& Company, by a letter dated March 6th, from New York ; by Morgan, Stanley
& Company, Incorporated, by a letter dated March 8th, from New York ; by
Stern, Wampler & Company, Incorporated, (formerly Lawrence, Stern & (Com-
pany), by a letter dated March 9th, from New York; by Freeman & Company,
by a letter dated March 6th, from New York ; and by Goldman, Sachs & Com-
pany, by a letter dated March 7th, from New York.
Q. None of those firms or persons or companies submitted any bid? — ^A. No;
no bids were received from any of them.
Q. Why were competitive bids invited? — A. Having in mind that the Series D
Bonds were coming up for first redemption on July 1, 1940, and that the call
wt)uld have to be made not later than April 1, 1940, Mr. M. W. Clement, the
President of the Station Company and President of the Pennsylvania Railroad
Company, gave instructions late in 1939 to be on the lookout for an opportunity
to refund the bonds at a time most favorable to the Station Company ; and
thereafter, from time to time, informal discu.ssious were had with Kuhn, Loeb
& Company, who had, with associates, purchased the bonds of the Station
Company heretofore.
In January it appeared that new bonds might be sold at an attractive price
and representatives of the proprietary companies met to discuss the details
of the proposed refunding. Early in February, Kuhn, Loeb & Company indi-
cated that 3%% bonds might be sold at a price to the Station Company of
101Vo%, or a 3.16% basis, and the likelihood that the refunding might be
undertaken was informally brought to the attention of certain members of
the Interstate Commerce Commission. It was indicated by the Commissioners
to the repre.sentatives of the Station Company, who informally brought the
matter to their attention, that it was their thought that this issue might
lend itself particularly to competitive bidding, and as a result, after further
consideration by officers of the Station Company and the proprietary companies,
the Board of Directors of the Station Company, on February 29th, authorized
the issuance and sale of 3%% bonds at competitive bidding.
Q. Was the bid of Halsey, Stuart & Company and associates regarded by the
Station Company as a favorable bid? — A. This bid was not regarded by the
Station Company as favorable. It was their belief that a higher price should
be received for these bonds.
Q. What action was next taken? — A. On March 13th a representative of the
Station Company outlined to certain members of the Interstate Commerce
CONCENTRATION OF ECONOMIC POWER 11815
Commission the result of the invitation to bid on the Series F Bonds, and indi-
cated that it was liliely that the bid of Halsey, Stuart & Company would be
rejected and, in that event, an effort would be made to effect a sale, which it
was hoped could be made, to Kohn, Loeb & Company on a basis approximating
the basis which had theretofore been offered by them for the 3Vi% bonds.
The Commissioners were asked whether it would be possible for the Commis-
sion to act on the application of the Station Company before April 1st, in the
event the bid was rejected and a private sale negotiated, so that there would
be time to arrange for the required advertising in connection with redemption of
the Series F Bonds, if the application should be approved. The Commissioners
indicated that if the Halsey, Stuart bid were rejected, and a private sale made,
the application would be set down for a public hearing on a date which would
allow time for consideration and disposal of the application, either by approval
or disapproval, on or before April 1st.
Q. What action was taken by the Station Company with respect to the bid
of Halsey, Stuart & Company^and associates? — A. The Station Company decided
to reject the bid, and accordingly, on March 14, 1940, a letter was delivered by
the Station Company to Halsey, Stuart & Company, Incorporated, formally
rejecting the bid.
Q. After the bid of Halsey, Stuart & Cotopany was rejected, what action was
taken on behalf of the Station Company ?^A. The Station Company, through
its President, Mr. Clement, contracted to sell to Kuhn, Loeb & Company, Lee
Higginson Corporation, and Harriman, Ripley & Company, Incorporated, and
associates, subject to the approval of the Interstate Commerce Commission, the
§16,000,000, principal amount. Series F. 3%% Bonds, at a price of 99.43, which
was on the same basis, viz., 3.16%, on which the bankers had indicated their
willingness in February to purchase 3i/4% bonds.
Q. Up to and including the time that this contract was made, and the supple-
mental application was filed with the Commission, had the price which Halsey,
Stuart & Company had offered, been revealed by the Station Company to Kuhn,
Loeb & Company, or Lee Higginson Corporation, or Harriman, Ripley & Com-
pany, Incorporated, or any of their associates? — A. It had not. I also have
reason to believe that the amount of the bid was not so revealed by any officer
or representative of the Station Company, or of any of the proprietary com-
panies.
Q. Who are the associates of Kuhn, Loeb & Company, Lee Higginson Corpora-
tion, and Harriman, Ripley & Company, Incorporated, in this transaction? — A.
Smith, Barney & Company, Glore, Forgan & Company, The First Boston Cor-
poration, White, Weld & Company, Lazard Freres & Company, and Morgan,
Stanley & Company.
Q. State how and in what respects the price which Kuhn, Loeb & Company,
Lee Higginson Corporation, and Harriman, Ripley & Company, Incorporated,
and associates have agreed to pay is more satisfactory from the standpoint of
the Station Company than the bid of Halsey, Stuart & Company, and associates. —
A. The difference between the bid of Halsey, Stuart & Company, Incorporated,
and associates, and the offer of Kuhn, Loeb & Company, Lee Higginson Cor-
poration and Harriman, Ripley & Company, Incorporated, and associates, is
1.38%. This means that the Station Company will receive for its Series F
Bonds $220,800 more than it would have received if the Halsey, Stuart bid
had been accepted. It also means that the proprietary companies will not be
called upon to furnish as much cash as they would have been required to
furnish if the Halsey, Stuart bid had been accepted. Further, expressed in
terms of the respective bases, the difference of .8625% between the 3.24625%
basis of the Halsey, Stuart «& Company bid and the 3.16% basis offered by
Kuhn, Loeb & Company, Lee Higginson Corporation and Harriman, Ripley &
Company, Incorporated, and associates, represents a net annual saving to the
Station Company of $13,800, or $317,400 over the life of the bonds.
Q. From what bank is it proposed to borrow the $600,000? — A. It- is proposed
to borrow $600,000 from the Northern Trust Company of Chicago.
Q. How was this bank selected? — A. As a result of inquiries which were
made of a number of banks, twenty-five in all, in Chicago, New York, Phila-
delphia, and elsewhere.
Q.. What rate of interest will be paid on the bank loan?— A. The interest rate
will be 11/2%!.
124491— 40— pt. 22 30
11816 CONCENTRATION OP ECONOMIC POWER
Q. What savings will be realized by the refunding, as proposed, of the Series D
4% Bonds? — A. It is estimated that the refunding will produce a net saving
of approximately $2,000,000 over the life of the bonds. Such savings are shown
in detail in a statement which has been prepared under my supervision, and
which I would be glad to file as an exhibit.
Q. Mr. Pabst, I hand you a statement which is headed "Estimated Savings,
Refunding of Chicago Union Station Company First Mortgage Series D 4%
Bonds." Is that the statement to which you have reference? — A. This is the
statement referred to by me.
Mr. Waed. I woijd like to offer that as Exhibit No. 3.
Commr. Pobtee. It will be received.
(Exhibit 5^0. 3, Witness Pabst, received in evidence.)
Mr. Ward. That is all I have, Mr. Commissioner, except I would like to offer
for the record all the exhibits which have been filed with the application, and
the supplemental application ; they consist of the agreement and the resolutions
and so forth, which are furnished in response to the Commission's rules and
regulations.
Commr. Poktee. Do I hear any objections from anyone?
(No response.)
Commr. Porter. They will be received and considered as part of the record,
in the absence of any objection.
Mr. Ward. Then, that is all I have, Mr. Commissioner.
Commr. Poktek. Is there anyone present that desires to cross examine or ask
the witness any questions?
(No response.)
Exam. DeVoe. Mr. Pabst, you spoke of receiving several letters of acknowl-
edgement from other firms to whom invitations were sent.
What is the substance of those letters?
The Witness. In the main, they acknowledge receipt of the invitation, but
in no case was a bid received.
Exam. DeVoe. Mere acknowledgements — no expressions
The Witness (interposing). In one or two cases, there were expressions. I
have copies of the letters ; I will be glad to go into, specifically, the remarks made
by those particular houses.
Exam. DeVoe. Have you them with you?
The Witness. Yes, sir.
Exam. DeVob Will you read them into the record?
The Witness. Yes, sir.
Mr. Ward. We have several copies of each and could introduce them as exhibits
and that would avoid reading them on the record.
Commr. Porter. That will be very well, then, if the letters or copies are to be
offered.
Mr. Ward. We offer for the record, a copy of a letter dated March 9, 1940,
written to the Station Company by Stern, Wampler & Company, Incorporated,
New York.
Commr. Porter. You might just keep them all together and offer them as
one exhibit — Exhibit 4. Offer two sets of them, one for the Reporter and
one for us.
Mr. Ward. Yes, sir. Another letter, which is dated March 8, 1940, addressed
to the Station Company by Morgan, Stanley & Company, Incorporated ; another
letter, which is dated March 7, 1940, addressed to the Station Company by
(ioldman, Sachs & Company; another letter, which is dated March G, 1940, and
addressed to the Station Company by Freeman & Company ; another letter,
which is dated March 6, 1940, addressed to the Station Company by Evans,
Stillman & Company. These are all New York firms and the letters were sent
from New York, except the first one — the letter from Stern, Wampler & Company
was sent from Chicago.
We offer these letters as Exhibit No. 4.
Exam. DeVoe. These are copies, aren't they?
Mr. Ward. These are copies, but we have the originals.
Exam. DeVoe. Will you have the witness identify them as true copies?
Commr. Porter. These copies that are being offered are accurate, true copies
of the letters that were received by the Station Company?
The Witness. They are, sir.
Commr. Pobteb. You have seen the originals and compared them with these
copies?
CONCENTRATION OF ECONOMIC POWER 11817
The Witness. I have seen the originals.
Commr. Pobter. They may be received.
(Exhibit No. 4, Witness Pabst, received in evidence.)
Commr. Porter. Mr. Pabst, the bid rejected, as the only one that you received
at the public offering, of Halsey, Stuart & Company, Incorporated — have they
entered to the Company, or anyone that you know of, any objections to the
rejection of their bid?
The Witness. We have had no communication, of my knowledge, from Halsey,
Stuart & Company following the letter of rejection which was sent to that firm.
Commr. Porter. Now, you sent out, according to Exhibit 2, I believe, this offer
addressed to some 107 concerns, including banks, insurance companies, invest-
ment companies, and the like?
The Witness. Yes, sir.
Commr. Porter. And received five acknowledgements, merely ; one bid ; and
from the others, nothing at all in answer to your public offer?
The Witness. That is correct.
Commr. Porter. Among the 107 that received the public offering, they included
all of the parties that are now with Kuhn, Loeb in making the purchase at 99.33;
is not that correct?
The Witness. That is correct, sir.
Commr. Porter. And none of them responded in any way, however, to the
public offer?
■^ The Witness. Except in one case — Stanley, Morgan and Company.
Commr. Porter. Yes — that's right.
The Witness. They acknowledged receipt
Commr. Porter. And that is just a bare acknowledgement of receipt.
The Witness. That is correct, sir.
Commr. Porter. You say that when the contract was closed with Kuhn, Loeb
& Company, and their associates, so far as you or any member of the Station
Company are concerned, the bid of Halsey,' Stuart & Company had not, in any
way, been made known, so far as you know?
The Witness. That is correct, sir.
Conamr. Pokter. Have you any explanation that you can make of why, on
an offer such as you made to 107 responsible banking, insurance, and invest-
ment concerns of the country, that you only received one bid, and none from
th^ concerns that afterwards took this bid at less than a jwint and a third
better than you did receive?
The Witness. I have no explanation to make, except that it has been gen-
erally known that the principal members of the group have not been in sym-
pathy with competitive bidding for certain securities and have not participated
in any bids for any such securities in the past.
Commr. Porter. Do you know of any communications or correspondence that
came to your personal attention between any of the 107 as to any understanding,
or otherwise, that they would not bid?
The Witness. Nothing of that nature has come to my attention.
Commr. Porter. From any source?
The Witness. From any source whatsoever.
Conamr. Porter. And you personally have no way of accounting for the fact,
other than the one you have given, that you received but the one bid?
The Witness. That's all ; that's the only explanation that I can find.
Commr. Porter. Sort of a sit-down strike on the part of Capital, wasn't it?
The Witness. I have heard it referred to as that.
Commr. Pobtek. I guess that's all.
The Witness. Thank you.
Mr. Ward. Thank you, sir.
Commr. Porter. Any other witnesses?
Mr. Ward. No other witnesses, sir.
Commr. Porter. Several gentlemen have come into the room since the At-
torney-examiner made the first announcement. Is there anyone that has any
appearance to enter or who desires to be heard in any way at this hearing?
(No response.)
Commr. Porter. Let the record show that no one further desires to enter an
appearance.
If there are no others, we might as well close.
Exam. DeVob. Since there are no other witnesses, or appearances, this hear-
ing will be closed.
(At 10: 35 o'clock, a. m., March 23, 1940, hearing closed.)
11818 CONCENTRATION OF !:CONOMIC POWER
Interstate Gommeuck Commission
finance-docket no. 127 ql
Chicago Union Station Company Securities
Sulmitted March 23, 1940. Decided March 27, 191,0.
1. Authority granted to the hicago Union Station ompany to issue
$16,000,000 of first-mortgage series-F 3%-percent bonds, and not
exceeding $600,000 of iyj%-percent guaranteed notes of 1940, the
bonds to be sold at not less than 99.43 percent, and the guaranteed
notes at par, in both cases with accrued interest, and the proceeds
used in connection with the redemption of $16,000,000 of the sta-
tion company's 4-percent first-mortgage bonds, series-D.
2. Authority granted to the Chicago, Burlington & Quincy Railroad
Company, the tru.stees of the property of the Chicago, Milwaukee,
St. Paul & Pacific Railroad Company, consisting of Henry A.
Scandrett, Walter J. Cummings, and George I. Haight, the Pitts-
burgh, Cincinnati, Chicago & St. Louis Railroad Company, and the
Pennsylvania Railroad Company, to assume obligation and
liability, as guarantors, by endorsement, in respect of the payment
of the principal of and interest on such bonds and notes.
F. J. Loesch and Albert Ward for Chicago Union Station Company ; J. G. James
for Chicago, Burlington & Quincy Railroad Company ; A. N. Whitlock for
trustees of the Chicago, Milwaukee, St. Paul & Pacific Railroad Company ; and
Henry Wolfe BlkU for Pittsburgh, Cincinnati, Chicago & St. Louis Railroad
Company, and Pennsylvania Railroad Company.
Report of the Commission
division 4, commissioners porter, MAIIAFFIE, AND MrLlER
By Division 4:
The Chicago Union Station Company, hereinafter called the station company,
the Chicago, Burlington & Quincy Railroad Company, the trustees of the Chi-
cago, Milwaukee, St. Paul and Pacific Railroad Company, consisting of Henry
A. Scandrett, Walter J. Cummings, and George I. Haight, The Pittsburgh,
Cincinnati, Chicago and St. Louis Railroad Company, and The Pennsylvania
Railroad Company, hereinafter referred to collectively as the proprietary
companies, by a joint application filed on March 6, 1940, as amended March 15.
1940, applied for authority for the station company to issue $16,000,000 of
first-mortgage series F 3%-percent bonds and not exceeding $600,000 of IVo-per-
cent guaranteed notes of 1940, and for the proprietary companies to assume
obligation and liability, as guarantors by endorsement, in respect of the pay-
ment of the principal of and interest on such bonds and notes. A hearing was
held on the application, at which time full opportunity was given any one
desiring to do so to be heard, to cross examine, or to ask questions. No objec-
tion to the application has been offered.
The station company is a corporation organized under the laws of the State
of Illinois for the purpose of constructing, establishing, maintaining, and operat-
ing a union passenger station in the city of Chicago. The authorized capital
stock is $3,500,000, of which $2,800,000 is issued and outstanding, and is owned
In equal shares by the proprietary companies, the Chicago, Milwaukee, St.
Paul & Pacific Railroad Company being represented in this proceeding by its
trustees in reorganization proceedings. By order dated March 15, 1940, the
District Court of the United States for the Northern District of Illinois, Eastern
Division, in proceedings for the reorganization of a railroad entitled In the
Matter of Chicago, Milwaukee, St. Paul and Pacific R. Co. debtor, No. 60^63,
authorized the trustees to participate in the proposed refinancing plan and in
any commitments necessarily incident thereto.
CONCENTRATION OP ECONOMIC POWER 11819
Our order of April 6, 1935, in Chicago Union Station Co. Bonds, 207 I. C. C.
155, among other things, authorized the station company to issue $16,000,000
of 4-percent first-mortgage bonds, series D, dated January 1, 1935, bearing
interest at the rate of 4 percent per annum, maturing July 1, 1963, and redeem-
able as a whole on July 1, 1940, or any interest date thereafter at 105 and
accrued interest.
To effect a reduction in interest, the station company proposes to call these
series-D bonds for redemption on July 1, 1940, and to provide part of the
funds for their payment will issue under the first mortgage dated July 1, 1915,
to the Illinois Trust & Savings Bank, Continental Illinois National Bank &
Trust Company, successor trustee, $16,000,000 of its first-mortgage series F 3%-
percent bonds, such series having been created by resolution of its board of
directors. The series-F bonds may be issued as coupon bonds in the denomina-
tion of $1,000, dated Januarv 1, 1940, or as registered bonds in the denomina-
tions of $1.0n0, $5,000, $10,009, and multiples of $10,000; will bear interest at
the rate of 3% percent per annum payable semiannually on January 1 and
.Tuly 1, and will mature July 1. 1963. The principal and interest of the series-F
bonds will be stated as payable in gold coin of the United States of or equal
to the standard of weight and fineness as it existed on July 1, 1915, but there
will be imprinted on the face of the bonds a legend calling attention to the
provisions of Public Resolution No. 10 of the 73d Congress and a reference to
this legend will be placed on the coupons. The bonds will be redeemable as a
whole at the option of the station company on .Tuly 1, 1945, or on any interest
date thereafter up to and including July 1, 1956, at 106, and thereafter at a
reduction of 1 percent in premium each year until July 1. 1961, after which
they will be redeemable at par with accrued interest in each case. Pending
preparation of permanent bonds, temporary bonds without coupons, registrable
as to principal or negotiable by delivery and substantially of the tenor pre-
scribed by the first mortgage, may be issued in denominations of $1,000 or
multiples thereof.
The first mortgage, which is now closed, contains neither a provision for a
sinking fund for the bonds issuable thereunder, nor provisions broad enough
to give the station company the right to incorporate a sinking fund in any
particular series, or to execute supplemental indentures. The station company
believes that it would require the consent of all outstanding bondholders to
create a sinking fund for the first mortgage and that it would be impossible
to obtain such consent. It states that if a sinking fun's were esablished for
the series-F bonds it would result in a differentiation of treatment as to the
holders of these bonds and those now outstanding. For these reasons and also
because existing indentures require sinking-fund payments aggregating $400,000
annually, the station company made no provision for a sinking fund for the
proposed bonds. Such payments would increase its indebtedness to the pro-
prietary companies so that no net reduction in debt would result. In view of
these circumstances and because of the benefit which will accrue to the appli-
cants under the proposed refinancing, we will not require that provision be
made for a sinking fund for the series-F bonds.
The cost of the proposed refinancing is estimated at $1.092,9.^10. and includes
a 5-percent premium on the bonds to be retired, amounting to $800,000, discount
on the sale of the proposed bonds ,$91,200. 3 months' duplicate interest to
July 1, 1940, on proposed bonds, $125,000, interest on bank loans for 5-year
period at 1Vi percent. $24,750, calling expenses, series-D bonds $10,000, taxes on
the proposed bonds $16,000, and other expenses $26,000.
To provide in part for the expenses of redemption, the station company will
issue not exceeding .$600,000 of guaranteed notes of 1940. to evidence a bank
loan of like amount, sur'h notes to be dated the day of issue, to bear interest,
payable semiannually, nt a rate of IV^ percent per annum, one-tenth of the
principal amount to be payable in equal, semiannual installments, the station
company reserving the option on 30 days' notice prior to any semiannual
maturity date to anticipate the payment of the remaining maturities in whole
or in part. Expenses not paid from the proceeds ftf the guaranteed notes will
he paid from cash in the station company's treasury or from advances by the
proprietary companies.
The station company, the proprietary companies, and the Continental Illinois
National Bank & Trust Company of Chicago, as trustee, will enter into an
11820 CONCENTRATION OP ECONOMIC POWER
agreement to be dated January 1, 1940, which is to be supplemental to an
operating agreement dated July 2, 1915, as supplemented February 1, 1919,
December 1, 1924, April 1, 1935, and September 1, 1936, whereby the proprietary
companies will agree to endorse on each of the series-F bonds and on each of
the guaranteed notes, substantially in the form given in the agreement, their
joint and several unconditional guaranty of the payment of the principal thereof
and of the interest thereon, and they request our authority to assume such
obligation and liability. This agreement will modify existing agreements as
to the rents payable by the proprietary companies, so as to provide for the
additional obligations to be imposed upon the applicants by the issue of the
guaranteed notes.
For the purpose of affording the station company an offset to a charge to
its profit and loss account required under our accounting rules, the proprietary
companies, in consideration of the redemption of the series-D bonds and the
saving to them resulting therefrom, will cancel obligations of the station com-
pany to them on account of cash advances theretofore made in an aggregate
amount of not exceeding $810,000, of which each proprietor's share will be one-
fourth. To afford an offset to a profit and loss charge on account of unamor-
tized discount on the series-D bonds to be redeemed, the proprietors will con-
tribute approximately $207,137 in cash; and to provide in part the additional
cash required in connection vnth the refunding operation, will make further
payments aggregating approximately $84,063, making the total cash to be con-
tributed approximately $291,200, of which each proprietor's portion will be one-
fourth, or approximately $72,800.
By a letter dated March 5, 1940, and mailed that day, the station company
sent invitations to bid, up to noon March 12, 1940, for the purchase of the
series-F bonds to 107 banking firms, insurance companies and savings funds.
Five letters of acknowledgment and one bid were received, the sole bid being
made by Halsey, Stuart & Company, Incorporated, and associates, who offered
to purchas the bonds at 98.05 and accrued interest, which would make the
annual average cost of the proceeds approximately 3.246 percent. Pursuant to
the right reserved by the station company to reject any and all bids, this bid
was not regarded as favorable and was rejected, and the station company
subsequently contracted, subject to our approval, with Kuhn, Loeb & Company,
for the purchase by them and associated firms of the series-F bonds at 99.43
and accrued interest, which woittld make the average annual cost of the pro-
ceeds approximately 3.16 percent. Associated with Kuhn, Loeb & Company
are Lee Higginson Corporation, Harriman Ripley & Company, Incorporated,
Smith, Barney & Company, Glore, Forgan & Company, the First Boston Cor-
poration, White, Weld & Company, Lazard, Freres & Company, and Morgan,
Stanley & Company.
By letter dated March 9, 1940, the station company sent invitations to 25
banking firms and trust companies to bid for the making of a loan, to be evi-
denced by the $600,000 of guaranteed notes, and received two bids, the lowest
rate for the loan of 1.5 percent being made by the Northern Trust Company, of
Chicago, which was accepted.
The proposed refinancing will result in interest savings of $3,220,000 over
the life of the series-F bonds, or approximately $140,000 a year. Of the latter
amount, the station company will use $120,000 annually to retire the guaranteed
notes, such payments to be made semiannually. The total net saving to the
maturity of the series-F bonds, after allowing for expense of refinancing as
well as interest on the proposed bonds from date of sale to July 1, 1940, will be
approximately $2,127,050.
The trustees are officers of the court and are acting under its authority.
While the assumption by the trustees of obligation and liability, as guarantors
by endorsement, requires our approval under section 20a of the Interstate
Commerce Act, it is not to be understood that by giving our approval we pass
upon or anywise determine or affect the nature of the rights or liens to be
enjoyed under the bonds, or their priority in relation to other liens.
We find that the proposed issue by the Chicago Union Station Company of
not exceeding $16,000,000 of first-mortgage series-F S^/s-percent bonds and
.$600,000 of 1%-percent guaranteed notes of 1940, and the proposed assumption
of obligation and liability, as guarantors by endorsement, in respect of these
bonds and notes, by the Chicago, Burlington & Quincy Railroad Company, the
trustees of the property of the Chicago, Milwaukee, St. Paul and Pacific Railroad
Company, consisting of Henry A. Scandrett, Walter J. Cummings, and George
CONCENTRATION OF ECONOMIC POWER 11821
I. Haight, The Pittsburgh, Cincinnati, Chicago and St. Louis Railroad Company,
and The Pennsylvania Railroad Company, as aforesaid, (a) are for lawful ob-
jects within their respective corporate pui'poses and within the duly authorized
purposes of the trustees, and compatible with the public interest, which are
necessary and appropriate for and consistent with the proper performance by
them of service to the public as common carriers, and which will not impair
their ability to perform that service, and (b) are reasonably necessary and
appropriate for such purposes.
An appropriate order will be entered.
Oedeb
At a Session of the Intekstatb Commerce Commission, Division 4, held at its
office in Washington, D. C, on the 27th day of March, A. D. 1940.
finance docket no. 12797
Chicago Union Station Company Secubities
Investigation of the matters and things involved in this proceeding having
been made, a hearing having been held, and said division having, on the date
hereof, made and filed a report containing its findings of fact and conclusions
thereon, which report is hereby referred to and made a part hereof:
It is ordered. That the Chicago Union Station Company be, and it is hereby,
authorized to issue not exceeding $16,000,000 of first-mortgage series-F 3%-
percent bonds, and $600,000 of l^^-percent guaranteed notes of 1940; said first-
mortgage bonds to be issued under and pursuant to, and to be secured by, the
first mortgage, dated July 1, 1915, and supplements thereto, made to the Illinois
Trust & Savings Bank, trustee (Continental Illinois National Bank & Trust
Company of Chicago, successor trustee) to be in the forms and denominations,
to be dated and to be redeemable as set forth in the application and report
aforesaid, to bear interest at the rate of 3% percent per annum, payable semi-
annually on January 1 and July 1, and to mature July 1, 1963 ; said guaranteed
notes to be dated the day of issue, to bear interest payable semiannually at
a rate not to exceed 1% percent per annum, one-tenth of the principal amount
to mature semiannually; said bonds to be sold at 99.43 and said notes to be
sold at par, in both cases with accrued interest, and the proceeds used in con-
nection with the redemption of $16,000,000 of the carrier's 4-percent first-
mortgage bonds, series D.
It is further ordered. That the Chicago, Burlington & Quincy Railroad Com-
pany, the trustees of the property of the Chicago, Milwaukee, St. Paul and
Pacific Railroad Company, consisting of Henry A. Scandrett, Walter J. Cum-
mings, and George I. Haight, The Pittsburgh, Cincinnati, Chicago and St. Louis
Railroad Company, and The Pennsylvania Railroad Company be, and they are
hereby, authorized to assume obligation and liability in respect of the bonds
and notes of the Chicago Union Station Company herein authorized to be issued,
by endorsing thereon their unconditional joint and several guaranty of the
payment of the principal thereof and of the interest thereon, substantially in
the form set forth in the agreement to be dated January 1, 1940, between said
companies, the Chicago Union Station Company, and the Continental Illinois
National Bank & Trust Company of Chicago.
It is further ordered. That, except as herein authorized, said securities shall
not be sold, pledged, repledged, or otherwi.se disposed of by the applicants, or any
of them, unless or until so ordered or approved by this Commission.
It is further ordered, That, within 10 days after the execution of said supple-
mental agreement of January 1, 1940, the Chicago Union Station Company shall
file a certified copy thereof in executed form with this Commission.
It is further ordered, That the several applicants shall report concerning the
matters herein involved in conformity with the order of the Commission, by
division 4, dated February 19, 1927, respecting applications filed under section
20a of the Interstate Commerce Act.
And it is further ordered, That nothing herein shall be construed to imply
any guaranty or obligation as to said securities, or interest thereon, on the part
of the United States.
By the Commission, division 4.
[REAi,] W. P. B artel,
Secretary.
11822 CONCENTRATION OF ECONOMIC POWER
KUHN, LOEB & Co.,
William and Pine Streets, Neto York, May 10, 1940.
Petkk R. Nehemkis, Jr., Esq.,
Special Counsel, Investment Banking Section, Monopoly Study,
Securities and Exchange Commission, Washington, D. G.
Deab Me. Nehemkis : I have your letter of May 8th requesting ceirtaiji
informatiou with regard to the recent issue of $16,000,000 principal amiount
Chicago Union Station Company Fir.st Mortgage 3%% Bonds, Series F, due
July 1, 1936. In reply I wish to advise you as follows :
The group formed to purchase this issue from the Company consisted of
the following with their percentage interest in this purchase as indicated :
Kuhn, Loeb & Co 31.67%
Lee Higginson Corporation 15.
Harriman Ripley & Co. Incorporated 15.83
Smith, Barney & Co 5.
Glore, Forgan & Co 7. 5
First Boston Corporation 5.
White, Weld & Co 2. 5
Lazard Freres & Co 2.5
Morgan Stanley & Co. Incorporated 15.
For your further information I enclose a list of investment firms which
acted as sub-underwriters for this issue, likewise setting forth the amount of
their sub-underwriting participation.
As to the $600,000 principal amount of 1V2% Guaranteed Notes, I am sorry
to say that I can give you no information concerning any un.'derwTitihg of»
these Notes, for they were not purchased by us or any group for which we
may have acted. To the best of my knowledge they were placed by the
Company direct with a bank or banks.
You stated that the purpose of your letter was to complete your record on
the financing of the Chicago Union Station Company. In the light of this I
enclose a memorandum which I prepared at the time this transaction was
consummated chronologically setting forth the salient steps in this transaction.
I think you will find this memorandum and a prior memorandum to which
it refers and of which I likewise enclose a copy self-explanatory and illumi-
nating for the purposes of your study.
Sincerely yours,
Geo. W. Bovenizer.
GO
Sub-Vndertcriters of $16,000,000 Chicago Union Station Company 8%%,
Series F
New York, N. Y.
Amount
ig'jijQg Sub-Underwritten
Kuhn, Loeb & Co $2,600,000
Harriman Ripley & Co. Incorporated 1,250,000
The First Boston Corporation 500,000
Lee Higginson Corporation 1,300,000
Morgan Stanley & Co. Incorporated 1,200,000
Glore Forgan & Co 600,000
Smith, Barney & Co 500,000
Lazard Freres & Co 300,000
White, Weld & Co 300,000
Boubright & Company, Incorporated 300,000
Blyth & Co., Inc : 300,000
A. G. Becker & Co. Incorporated 200,000
Clark, Dodge & Co 200,000
Cassat & Co. Incorporated 150,000
Dick & Merle-Smith 150,000
Dominick &'Dominick 75,000
CONCENTRATION OF ECONOMIC POWER 11823
Sui-Vndcncritcrs of $16,000,000 Chicago Union Station Company,
SYs%, Series F— Continued
^'^"le Amount
New York, N. Y. Snb-Undcr-written
R. L. Day & Co $75, 000
Estabrook & Co 200,000
Eastman, Dillon & Co 100,000
Goldman, Sachs & Co 250,000
Hayden, Stone & Co 250,000
Hallgarten & Co__ 150,000
Hemphill. Noyes & Co 150,000
Hornblower & Weeks 100,000
W. E. Hutton & Co . 200,000
Kidder, Peabody & Co 250,000
Ladenburg, Thalmann & Co 200,000
Blair & Co., Inc 125,000
G. M.-P. Murphy & Co 125,000
Paine, Webber & Company 150, (MX)
R. W. Pressprich & Co 100,000
L. F. Rothschild & Co 75,000
E. H. Rollins & Sons, Incorporated 150,000
Union Securities Corporation 250,000
Shields & Company 100,000
Swiss American Corporation 100,000
Stone & Webster and Blodget Incorporated 150,000
Spencer Trask & Co 150, 000
Stern, Wampler & Co. Inc 150,000
Baltimore, Md.
Alex. Brown & Sons 150,000
Boston, Mass.
F. S. Moseley & Co 200,000
Whiting, Weeks & Stubbs. Inc 100,000
CHICAGO, ILLINOIS
Bacon, Whipple & Co 100,000
The Illinois Company of Chicago 100,000
Central Republic Company 100, 000
Harris, Hall & Company (Incorporated) 125,000
Blair, Bonner & Company 100, 000
A. C. AUyn -i Company, Incorporated 125, 000
CLEVELAND, OHIO
Hayden, Miller and Company ^ 150, (KX)
MILWAUKEE, WIS.
The Wisconsin Company 100, 000
PHILADELPHIA, PA.
E. W. Clark & Co 150, 000
Elkins, Morris & Co 100,000
Janney & Co 75,000
W. H. Newborn's Son & Co 100,000
Stroud & Company Incorporated 100,000
Taruall & Co 100, 000
Graham, Parsons & Co 100,000
PITTSBUEGH, PA.
Mellon Securities Corporation 300, 0(K)
SAN FBANCISCO, CALIF.
Dean Witter & Co. (N. Y.) 150,000
$16, 000, 000
11824 CONCENTRATION OF ECONOMIC POWER
[Copy]
Mabch 15, 1940.
Memorandum re Chicago Union Station Company Financing
Early in January, 1940, I called to the attention of Mr. George Pabst of
The Pennsylvania Railroad Company that in my opinion they could refund to
advantage in the present market the $16,000,000 of Series D 4% Bonds of the
above Company, which are callable at lt^% on April 1st next. A copy of the
memorandum dravpn at that time is attached, in which we suggested a new 3V^%
bond in order that the Company might get back the full amount of the premium.
Mr. Pabst discussed this matter with his associates in Phalidalphia and at a
meeting in New York on January 30th with the representatives of the other
proprietary companies, at which time he came to me with the suggestion that it
would not be necessary for them to have the full amount of the premium in the
purchase price and would I figure a 3^4% bond. I thereupon sent to Mr. Pabst a
memorandum on February 5th with a proposition to pay the Chicago Union Sta-
tion Company 101%% and accrued interest for a new 23-year 3^% bond which
would show a cost to the Company for this money of 3i%oo%, being a saving on the
refunding, exclusive of expenses ajid double interest, of approximately 52^ per
annum or a total saving over the period of approximately $1,900,000.
After further conferences with the Company's representatives, Mr. Pabst was
authorized to get the informal approval to accept this proposition and went down
to see Division 4 of the Interstate Commerce Commission on February 26th. Mr.
Pabst informed me, after discussing the matter with Division 4, that they unani-
mously told him that this was the type of security for which he should take
competitive bids. After again conferring with the proprietary companies and
the Board of Directors of the Station Company, the Company on March 5th sent
out a letter asking for bids for a 23-year 3%% bond, these invitations going to over
one hundred dealers and institutions. Bids were received at noon time in
Chicago on March 12th and only one bid was received. Mr. Pabst called me up
and told me that they had received only one bid from Halsey, Stuart & Co. and
associates and asked me whether I wo\ild indicate to him what they might get
for these bonds in private sale under present conditions. I told Mr. Pabst I did
not want to be put in the position of making a competitive bid and therefore told
him I could not give him the advice at that time but after they had definitely
and formally turned down this "so-called unsatisfactory bid," I would be glad
to negotiate again with him if he so desired.
On March 14th, after Mr. Pabst had conferred again with the Interstate Com-
merce Commission, he advised me officially that the Station Company had declined
the bid, not mentioning what the bid was and I did not ask him, and stated that
he was free to accept a proposition from us. I told him I would promptly confer
with the members of our group and shortly thereafter advised him that we would
still pay the exact equivalent of 101 V^% for the 3%% bonds, which bid we had
made him on February 6th, viz., 99.43% and accrued interest for the 3%% bond
but that market conditions were not as good as they were at the time we made
the former bid and while we were willing to abide by our bid at that time, it
would be necessary for us to offer the bonds at a lower price to effect a satisfactory
distribution of them. We accordingly closed the transaction at the above-men-
tioned price and offered the bonds at 100%% and accrued Interest, which gave
us a gross margin of only l2%oo% on the transaction, which was really too small
to handle the transaction properly but wishing to offer the Company the same
terms as previously indicated and in order to allow %% selling commission and at
least 57^ underwriting, less expenses, which we felt was the absolute minimum,
Lee Higginson Corporation and we agreed to cut our usual %% for managing to
%% in this instance.
Gex). W. B.
CONCENTRATION OF ECONOMIC POWER 11825
[Copy]
JanxjAbt 1940.
$16,000,000 Chicago Union Station Company First Mortgage 4% Bonds,
Semes D, Due Jult 1, 1963
The above bonds are callable on and after July 1, 1940 at 105% and accrued
interest upon 90 days notice (April 1, 1940). At the call price of 105, the basis
would be 3.676%. If the bond market holds it is entirely possible that a new
issue of 23-year 3%% bonds might be sold at 107, which is a 3.076% basis.
Allowing a spread of 1% would give the Company a price of 105%, which is a
3.176% basis. Such a transaction would result in an annual saving of .50 per
annum, or $80,000. For the full 23-year period this would amount to $1,840,000.
The I. C. C. would most likely request a small sinking fund on the new bonds.
The saving would therefore more than provide for a %% annual sinking fund
or $80,000.
Lee Higginson Corporation
37 Broad Street, New York
New York
Boston
Chicago
Mat 14, 1940.
Mr. Peteb R. Nehemkis, Jr.,
Special Counsel, Investment Bankmg Section,
Monopoly Study, Securities and Exchan-ge Commission,
Washington, D. C.
Dear Mr. Nehemkis: I have received your letter dated May 8, 1940, request-
ing certain information in regard to the syndicate formed to distribute Chicago
Union Station First Mortgage Series F 31/8% Bonds, due July 1, 1963 and
$600,000 11/2% Guaranteed Notes, issued in April, 1940.
Following are the names of the Underwriters and the amounts of their par-
ticipation in the issues above referred to :
Kuhn, Loeb & Co 31.67% $5,067,200
Lee Higginson Corporation 1.5. 2,400,000
Ha rriman Ripley & Co., Inc 15.83 2,532,800
First Boston Corporation 5. 800,000
Smith, Barney & Co 5. 800,000
Glore, Forgan & Co 7. 50 1, 200, 000
White, Weld & Co 2. 50 400, 000
Lazard Freres & Co 2.50 400,000
Morgan Stanley & Co., Inc 15. 2, 400, 000
100% 16, 000, 000
The Underwriters did not purchase the $600,000 Chicago Union Station 1%%
Guaranteed Notes. We understand that this loan was negotiated directly
between certain Chicago banks and the Chicago Union Station Company.
In order to further complete your records, we wish to advise you that the
above group of bankers on February 5, 1940, submitted a bid of lOlVo for
$16,000,000 Chicago Union Station Company 314% First Mortgage Bonds' due
July 1, 1963. Although it seemed that this bid was acceptable to the Terminal
Company, we were advised a few days later that the Interstate Commerce Com-
mission thought that it might be well if the Terminal Company asked for com-
peting bids. This suggestion was followed except that bids were requested for
3%% Bonds, due 1963, with the result that only one bid was received, which was
98.05%.
Inasmuch as this was a less favorable proposal than originally submitted by
the group, the Tenninal Company declined the bid and with the approval of
the Interstate Commerce Commission discussed with the Kuhn, Loeb & Co.-Lee
Higginson Corporation syndicate the question of making a bid for a 3y8%
Bond, due July, 1963. A bid was then made on the same cost basis to the
Company as the bid originally made for a 3^/4% Bond and the result was the
sale to this group by the Terminal Company at a price of 99.43%.
Very truly yours,
E. N. Jesup, Vice President.
ENJ:R
11826 CONCENTRATION OF ECONOMIC POWER
The following telegram is included in connection v»ith the testi
mony of George Leib, supra, p. 11486.
Exhibit No. 1757 '
[Telegram from George Lelb, ISlyth & Co., Inc., to Investment Bankins Section. .Monopoly
Study, Securities and Excliange Commission]
[Western Union]
1939 Dec. 19 I'M 2 27.
WD 71 223 DL Collected 1/141 CD New York, N. Y. 19
Peteb R. Nbihemkis, Jr.,
Special Counsel, Temporary National Economic Committee,
Caucus Room, Senate Office Bldg.:
With reference to my testimony before Temporary National Economic Com-
mittee on Wednesday December 13 you asked me whetlier Mr. Harrison Williams
at any time had any stock interest in Blyth & Co. and I replied never. To
avoid any misunderstand in the minds of the committee I should like to
amplify my resiwnse to said question. Stop Blue Ridge Corporation Com-
mencing March 31, 1930 at which time I understood Mr. Harrison Williams
owned indirectly a substantial interest in said Blue Ridge Corporation did own
forty-nine jjcrcent of the outstanding stock of Blyth & Co., Inc. and continued
to retain such ownership until November 24, 1933 at which time Blyth & Co.,
Inc. purchased the forty-nine percent interest in its own stock then held by
Blue Ridge Corporation Stop Since the date of acquisition by Blyth & Co.,
Inc. of its stock owned by Blue Ridge as aforesaid no stock of Blyth & Co., Inc.
has been directly or indirectly owned by Blue Ridge Corporation or Harrison
Williams and I may further state that since November 24, 1933 all of the out-
standing stock of Blyth & Co., Inc. has been and is now owned by oflBcers
and employees of Biyth & Co., Inc. All of whom are engaged by the corpora-
tion and devote thier entire time to its affairs. Best regards
Geokqe Leib.
The following letters are included in connection with the testi-
mony of George D. Woods, supra, pp. 11528 and 11519.
Exhibit No. 1696 '
[Letter from SulUvan & Cromwell to Investment Banliing Section, Monopoly Study,
Securities and Exchange Commission]
Cable Addresses : "LADYCOURT," New York, Paris
SULUVAN & Cromwei.l
48 Wall Street, New York. 39 rue Cambon, Paris
New York, Decenihcr 16, 1939.
Mr. Peteb R. Nehemkis, Jr.,
Special Counsel, Investment Banking Section, Monopoly Stndi/.
Securities and Exchange Commission, Washington, D. C
Dear Me. Nehemkis : In accordance with your request to Georirc D. Woods
last Wednesday, Mr. Woods made inquiry as to the holdings of stock of Harris,
Hall & Company, Incorporated by Messrs. J. R. Macomber, H. M. Addinsell,
and D. R. Linsley. Mr. Woods stated last Wednesday he owns no stock of
this Company, which fact he confirms. Messrs. Macomber, Addinsell, and
Linsley advise they own no Preferred Stock of the Company. They advise
their holdings of Common Stock are as follows :
J. R. Macomber 300 shares
H. M. Addinsell 100 shares
D. R. Linsley 200 shares
Mr. Woods has left for Cuba and asked me to give you this information.
Very truly yours,
Abthuk H. Dean.
* Entered in the record on December 19, 1030, see Hearings, Part 23, p. 12046.
' Ibid, p. 11958.
CONCENTRATION OF ECONOMIC POWER
11827
The Fib ST Boston Coepo»ation,
100 Broadway, Neid York, February 24, ISJ/O.
Mr. Peteb R. Nehemkis, Jr.
Securities and Exchange Commission,
Washington, D. 0.
De:ab Mr. Nehemkis : Referring to your letter of January 22nd with re-
spect to the ownership of The First Boston Corporation stock by certain in-
vestment banking firms in whose name it is registered, the following is a list
of banking firms whose names appeared on our stockholders' list as of June
17, 1939 and February 10, 1940 (both of these dates were dividend record
dates). Opposite the names is the total amount of stock registered together
with a statement of whether it was held for a customer's account, own account
ur partner's account.
June 17, 1939
Feb. 10, 1940
Auchincloss, Parker & Redpath
Brown Bros. Harriman & Co...
Dominick & Dominick
Qude, Winmill & Co
Harris, Upham & Co
Heidelbach, Ickelheimer & Co..
Jackson & Curtis.
Total..
Kidder, Peabody & Co
Ladenburg, Thalmann & Co
Lee Higginson Corporation
F. S. Moseley & Co
Total....
Tucker, Anthony & Co
cust.
oust.
cust.
cust.
cust
part,
own
cust.
own
cust,
part.
cust.
540 shs.
l,881shs.
0
730 shs.
0
700 shs.
1,760 shs.
1,450 shs.
61 shs.
3,271 shs.
0
806 shs.
2,000 shs.
2,928 shs.
8,502 shs.
11,430 shs.
1,335 shs.
cust.
oust,
cust.
cust.
cust.
cust.
cust.
part,
own
cust.
cust.
own
cust.
part.
cust.
1,000 shs.
2,081 shs.
1,000 shs.
2,380 shs.
550 shs.
700 shs.
972 shs.
1,450 shs.
225 shs.
2,647 shs.
1,687 shs.
906 shs.
1,500 shs.
2,868 shs.
8,502 shs
11,370 shs.
1,335 shs.
The foregoing would indicate that my suspicion at the time I was testifying
was correct.
Please let me know if there is any further information you require.
Very truly yours,
Geobge D. Woods,
Vice President.
George D. Woods
mms
The following memorandum is included in connection with the
testimony of Charles E. Mitchell, supra, p. 11582.
ExHiBn No. 16681
[Prepared by the staff of the Investment Banking Section, Monopoly Study, Securities and
Exchange Commission]
Memorandum Supplementing Table on Deposit Aocottnts of Investment
Banking Firms (i. e.. Members of Investment Bankers Association of
America) With J. P. Morgan & Co.-Drexel & Co. as of 7/1/39 (Exhibit
No. 1651-2)
The table of Accounts 'of Investment Banking Firms with J. P. Morgan & Oo.-
Drexel «& Co. as of 7/1/39 was introduced during the hearings before the Tem-
porary National Economic Committee on the afternoon of December 14, 1939.
This table contains two columns showing the monthly average balances of
such investment banking firms : The first of these columns shows the maximum
monthly average balance; and the second, the minimum monthly average bal-
ance. It is indicated that both of these columns refer to the period from
6/14/34 to 7/1/39, or from date account opened (if subsequent to 6/14/34) to
7/1/39.
Various members of the Temporary National Economic Committee raised
questions after the introduction of this table in r'^gard to the meaning of these
' Introduced on December 15, 1939. See Hoaringa, Part 2:>.
11828 CONCENTRATION OF ECONOMIC POWER
data. This memorandum is intended as an explanation and description of the
data submitted.
The Investment Banking Section of the Securities and Exchange Commission
requested that J. P. Morgan & Co. compile data as follows:
(1) A list of investment banking firms (i. e., members of Investment Bank-
ers Association of America) having accounts with J. P. Morgan & Co. or witli
Drexel & Co. on July 1, 1939.
(2) For those investment banking firms having accounts on July 1, 1939, the
date such account was opened with J. P. Morgan & Co. or with Drexel & Co.
(3) To review the course of the monthly average balances of these accounts
for the period from June 14, 1934, until July 1, 1939, (or if any account were
opened after June 14, 1934, from the date such account was opened until July
1, 1939). By monthly average balances, the Investment Banking Section under-
stood the average of the daily balances. This term, the monthly average
balance, is one that has currency in banking statistics and operations, and was
not further defined in our request. It was expected that J. P. Morgan & Co.
would be able to prepare these data, as customarily defined in commercial bank
literature and practice, without further explanation. Since J. P. Morgan &
Co. raised no question as to the meaning of the term, monthly average bal-
ances, it is presumed that the data submitted by J. P. Morgan & Co. reflect
the definition given above.
For the aqcoimts mentioned above, J. P. Morgan & Co. was asked to submit
the maximum monthly average balance, and the minimum monthly average
balance for the period stated.
(4) The data submitted by J. P. Morgan & Co. were offered in the table of
the Deposit Accounts of Investment Banking Firms with J. P. Morgan & Co.-
Drexel & Co. as of July 1, 1939. The table, therefore, sets forth those invest-
ment banking firms having accounts with J. P. Morgan & Co. or Drexel & Co. as
of July 1, 1939. For each account is shown the greatest monthly average
balance (the average of the daily balances within that month), and the smallest
monthly average balance (average of daily balances) for the period June 14,
1934, to July 1, 1939. If the account was opened subsequent to June 14, 1934,
these data reflect the status of the accovint from the date of opening until
July 1, 1939.
The following, an excerpt from the Congressional Record of May
19, 1933, volume 77, page 3730, is included at this point in connection
"with testimony on page 11403, supra,
Mr. Glass. We have embodied in the bill another rather controversial question.
We did it in the original so-called "Glass bill," but we — I started to say we
cjielded to the importunities of the lobbyists from New York, but we did not
exao,;ly do that. [Laughter.] We regarded the bill without that of so much
importance as that we thought it should pass and become a law, and we feared
if we should retain that provision it would encounter — in fact we knew it had
already encountered — the bitter hostility of large private banking institutions of
the country. Here we prohibit the large private banks, whose chief business is
an investment business, from receiving deposits. We separate them from the
deposit banking business.
Mr. Robinson of Arkansas. That means if they wish to receive deposits they
must have separate institutions for that purpose?
Mr. Glass. Yes.
INDEX
Page
Adams Oil and Gas Company 11429
Adams, Charles T 16S6-7
Adams, Frederick B 11407, 11413
Addinsell, Harry M.:
Activities in financing of:
Los Angeles Gas & Electric Co 1 1528,
1628-1-1628-S, 1628-5-1628-6, 1638-1, 1640-4
Southern Calif ornia Edison Co 11540, 16S3,
1638-1, 1638-4-1638-5, 1639-4, 1639-10, 1639-20-1639-22
Other companies 1 1454-1 1455,
11503, 11514-11517, 1580, 1612, 1617-1621, 1626, 1640-29,
1640-38.
Records of The First Boston Corp.'s reciprocal obligations 1 1529-1 1534,
11597, 1629-1631
Stock interest in the First Boston Corp 11512, 11517, 1622, 1696
Stock interest in Harris, Hall & Co 11527, 1696
Advertisement of security issue, benefits of position in 1 1499
Aetna Life Insurance Co 1639-14, 1639-16
Agreements and understandings for the division of securities business:
Between Harris, Forbes companies and Harris Trust & Savings Bank. 1 1525-
11526, 1626-2
Chicago Union Station Co. financing 11430-11478, 1540-1596-2
Question of agreement between J. P. Ripley and S. A. Russell on
National City Co. accounts 11417,
11484, 11500-11505, 11511, 1600-2, 1610, 1611-1, 1612
Air Reduction Company, Inc . 1 1407
Alden, Edith J 11458, 1585
Aldred & Co., Ltd 1629, 16S9-1, 1639-11, 1639-19
Aldred, J. E 1639-11
Aldrich, Winthrop W 11514, 1616
Alexander, Henry C 11581, 1651-1
AUyn, A- C. and Company, Inc 1629, 1639-18, 1640-24, 1640-44
American Brake Shoe and Foundry Co 1 1429
American Capital Corp 1639-5
American National Bank of Indianapolis 1636-3-1636-5
American National Bank of San Francisco 1 1524, 1639-2
American Securities Company:
Participations 1U90, 1602-1603
Succession to underwriting interests of.. 11494, 11509, 1606, 1611-3, 1611-5
American Ship & Commerce Corp 11385
American Steel Foundries financing 1630, 16 40-1 6-1 6 40-1 7
American Telephone & Telegraph Co. financing 11573-11676, 1631, 1658-1
American Telephone & Telegraph system financing 1 1553-1 1555,
11570-11576, 1642, 1644
"Frozen" character of underwriting syndicate in 11570-11576
American Trust Co. (San Francisco), See American Securities Co.
Ames, A. E., & Co., Liniited -• 11580, 1629, 1651
Anaconda Copper Mining Company financing 11480,
11576, 1614-18, 1644-1645, 1653-2, 1658-2-1658-3
Andersen, Arthur, & Co 1600-3, 1600-10
Anderson, Frank... 11497, 1607, 1611-5
Argentine Republic financing 1631, 1658-1
Armour and Company financing ^ 1658-2
Armstrong, Samuel 1637
Atchison, Topeka & Santa Fe Railway Co. financing.-.' 1640-17
Atlantic Coast Line Railroad Company 11407
Note. — Figures in ordinary type refer to text page numbers ; figures in Italics are exhibit
numbers. For pages on wliich exhibits appear, see ScheSule of Exhibits.
II INDEX
Page
Atlantic Gas Light Company financing 1640-6
Atterbury, W. W 11441, 1666
Auchinchloss, Parker & Redpath 1696
Authenticating agencies, efforts by commercial banks to secure 11538, 16S4
See also Fiscal services.
Babcock, David T 11486
Bacon, Whipple & Co., Inc 1629, 1640-24, I64O-44
Baker, George F., Jr 1545
Baker, J. E., & Co 1629
Baker, Watts & Co . 1629
Baker, Weeks & Harden 1629
Baker, Young & Co., Inc 1629
Baldwin & Co 1629
Ballow, Adams & Whittemore, Inc 1639-1, 1639-19
Bancamerica-Blair Corporation 1629, 1639-19
Bancohio Securities Company 1629
Bank affiliates:
Originations of securities, 1927-30, amount 11415-11416, 1534-1585
Tendency toward monopoly 11603
See also Chase Harris Forbes Corp.; Guaranty Co. of N. Y.; National
City Co.
Bankamerica Company 1629
Bankers Trust Company 1636-3
Banking Act of 1933:
Amendment, proposed, permitting return of commercial banks to
underwriting business 11444, 11453, 11465-11466, 11535,
11551, 1568, 1578-1579, 1632, 1642
Amendments, 1935 1530
Approbation by Charles E. Mitchell 11603
Changes in personnel resulting from 11391, 11393-11395, 11409-11411,
11416-11417, 11486-11487, 11550, 1532
Compliance with by:
Brown Brothers Harriman & Co 11387-11426, 1528-1537
Chase Corporation, The 11513, 1615-1617
Chase National Bank 1616-1617, 1620
First National Bank of Boston 11512, 1615-1618, 1620
Harris Trust & Savings Bank 11535-11537, 11548, 1632, 1640-39
Kuhn, Loeb & Co 11384
J. P. Morgan & Co 11384, 11440, 11461, 11551, 11578-11579, I642
National City Bank of New York 11384, 11391-11394, 1528
Extract from debate on, quoted 11403
Purpose discussed 11402-11403
Quoted 11401-11403, 1530
Realignments of underwriting interests after:
Interests of Harris, Forbes companies 11522-11524, 1624
Interests of Harris Trust & Savings Bank 11524-11526,
11548, 1625, 1640-39
Interests in Chicago Union Station Co. financing 11440-11461,
1565-1580
Interests in Pacific Gas & Electric Co. financing 11490-11495,
160 4, 1606
See also Succession to underwriting interests.
Bank of the Manhattan Co 1636-S
Barber, John E ... 11548, 1640-S9-1640-40
Barney, Charles D., & Co 1629
Barrow, William 1639-11
Bartow, Francis D 11433, 1545
Bashore, Eugene, See Pacific Gas & Electric Co. financing.
Bauer, Harry J., See Southern California Edison Co. financing.
Becker, A. G., & Co., Incorporated 1629,
1640-12, 1640-17, 1640-22-1640-24
Beckett, 1614-3
Beebe, Harry W 11410-11411
BeU, ■ . 1640-13
Bent, Maurice 16S8-S-1638-4, 16S9-4, 1639-6
Besch, J. W 11802, 11808
Note. — Figures In ordinary type refer to text page numbers ; figures in italics are exhibit
niimbers. For pages on which exhibits appear, see Scliedule of Exhibits.
nSTDEX III
Fms*
Bethlehem Steel Corporation financing 11538, 11587, 1647, 165S-2, 1658-2
Bikle, Henry W 11818
Black, James B., See Pacific Gas & Electric Co. financing
Blair & Co . 11519
Blair, Bonner & Company 1640-S4, 1640-44
Blake Bros. & Co 16S9
Blount, Julian W 11416, 15S5
Blyth & Co., Inc.:
Attitude toward handling of stocks 11556-11558, 1644
Bank deposits:
-H With J. P. Morgan & Co_. 11577-11582, 1643, 1645, 1649-1650, 1651-2
«s With other banks 1649-1650
Officers of 11486, 1601
Organization and early operations 1 1485-1 1487
Originations of, and participations in, security issues, and negotiations
therefor:
Securities of:
American Telephone & Telegraph system 11554-11556,
11570-11574, 1642, 1644
Anaconda Copper Mining Co 11482,
11576, 1614-18, 1644-1645, 1653-2, 1658-2-1658-3
Consolidated Edison Co 11553,
11557-11568, 11572, 1642, 1644, 1646, 1648, 1653-2, 1658-1
Crane Co 1652-1-1652-6
Los Angeles Gas & Electric Co 11528,
1628-1-1628-8, 1638-1, 1640-1, 1645, 1658-1, 1658-3
Pacific Gas & Electric Co 11480-11511, 1598-1614-24, 1658-1
Southern California Edison Co 1638-1, 1638-3,
1639-1, 1639-4, 1639-6, 1639-8, 1639-10, 1639-14, 1639-17, 1658-3
Other companies 1620-24, 1644-1645, 1650, 1658-1-1658-4
Participations in issues managed by Morgan Stanley & Co 1653-1
Originations, participations, and profits, amount 11550, 1641
Reported to Morgan Stanley & Co 11592-11594, 1655-1657
Pacific Gas & Electric Co. financing, efiForts to obtain leader-
ship \U%{y-\\5\l, 1598-1614-24
Performance and profit records of, kept by Morgan Stanley &
Co 11584-11586, 1647, 1653-1-1653-2
Reciprocal business:
With Dillon, Read & Co 1658-4
With The First Boston Corp 1629, 1658-3
With Kuhn, Loeb & Co 11601,1658-2
With Morgan Stanley & Co 11599-11600, 1658-1
Impossibility of reciprocating to Morgan Stanley & Co 11600
Records kept by George Leib 11595-11604, 1658-1-1658-4
Relations with Morgan Stanley & Co . 11488, 11551-11568,
11576-11602, 1601, 1642-1645, 1647-1650, 1652-1-1658-1
"Special capital," attitude toward 11589-11592, 1654
Testimony of George Leib 11485-11502
Testimony of Charles E. Mitchell 11549-11604
Blyth, Charles R.:
Activities relating to various security issues 1638-1, 16S8-S, 1645
Letters, etc. concerning Blyth & Co.'s relations with Morgan Stanley
•fe Co---- 11551-11563,
11577-11594, 1642-1645, 1647-1650, 1652-4, 1654-1655, 1657
See also Blyth & Co., Inc.; Pacific Gas & Electric Co. financing.
Blyth, Witter & Co 11542-11543
Boatner, 1640-30
Bodell & Co 1629, 1639-12, 1640-12, 1640-22-1640-23
Boeing Airplane Company financing 11481
Bonbright & Company, Incorporated:
Deposits with J. P. Morgan & Co 1651-2
Participations in security issues, and negotiations therefor:
Securities of:
Pacific Gas & Electric Co 1600-14, I6I4-4, 1614-7
Southern California Edison Co 11542, 1639-1-1639-5, 1639-19
Other companies 11674, 1640-12, 16 40-22-1 6 4O-S4, 1648
Note. — Figures in ordinary type refer to text page numbers ; figures in italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
124491 — 40 — pt. 22 31
IV INDEX
Bonbright & Company, Incorporated — Continued.
Reciprocal busineBs: !•«««
With Blvth & Co., Inc 11598-11599, 1658-1
With The First Boston Corp 1629
Bond & Goodwin, Inc 1629
Bond, Goodwin & Tucker 11452, 16S9-2
BosheU, Edward - 16J!^0-8, 1640-13, 1640-16
Bovenizer, George W.:
Activities relating to financing of Chicago Union Station Co.. 11441-11449,
11822, 1565, 1567-1569, 1756, 1759-1-1759-2
Activities, other j 11514, 1618
Directorships 1 1429
Testimony of 11429-11478
See also Kuhn, Loeb & Co.
Bower, Lahman V.:
Activities relating to security issues of:
Central Illinois Electric & Gas Co 16 40-6- 16 40-8,
1640-1, 1640-1S-164O-15
Other companies I64O-I-I64O-2,
16 40-19-16 40-20, 1640-25-1640-27, I64O-SO-I64O-S8
Boyd, Thomas H 11486
Bradley, Edward W., & Co 1629
Brocksmit, John 1640-26, I64O-SI
Brooklyn Edison Company, Inc. financing 1631, 1646, 1668-1
Brown, Alexander & Co 11387
Brown, Alex., & Sons 1629
Brown Brothers & Co 11386-11387, 11419
Brown Brothers Harriman k Co.:
Capital interest of Harriman family in 1 1400-1 1404, 1536
Compliance with the Banking Act of 1933 11387-11426, 1528-1537
Distribution of profitfe 11400, 1536
Holdings of The First Boston Corp.'s stock 11518, 1622, 1696
Nature of business 11387, 11404
Organization 1 1386
Participations in issues managed by The First Boston Corp 1629
Partners 11385-11386
Admission of . 11399, 1536
Partnership agreement, powers of W. A. and E. R. Harriman under.. 11397-
11401, 1536
Predecessor companies 1 1386-1 1387
Testimony of W. Averell Harriman 11384-11408, 11417-11425
See also Brown Harriman & Co. ; Harriman Ripley & Co.
Brown Harriman & Co., Incorporated:
Attempts to secure outside capital 11420-11421, 11426
Capital interest of Harriman family in 11394-11396, 11401
Choice of name 11389
Oflicers and directors 11388-11390, 1527
Prior affiliations of 11388-11391,
11409-11411, 11421-11422, 1527, 1529, 1532
Organization 11388, 11419-11421
Originations of, and participations in security issues, ^nd negotiations
therefor :
Sp^iirii^iPfl Or*
Chicago" Union Station Co 11440-11443,11447,11460-11461,
11472, 1566-1567, 1570, 1579, 1587-1588-2, 1593, 1596-1-1597^2
Pacific Gas & Electric Co 11495,
11498, 11500-11502, 1600-2, 1600-6-1600-9, I6OO-I4, I6O4-I6O6,
1608-1610, 1611-2, 1611-4-1611-5, I6I4-4.
Southern California Edison Co ; 11543,
1639-1, 1639-4, 1639-6, 1639-8, 1639-10, 1639-14, 1639-17
Other companies 11481, 11492-11493,
11573, 1605, I64O-24, 1640-29, 1644-1645, 1648, 1650
Originations, participations and profits, amount 11425, 1537
Question of control bv Harriman interests 11394-11401,
11405-11406, 11420-11425
Reciprocal business with The First Boston Corp 1629
NoTB. — Figures in ordinary type refer to text page numbers ; figures in italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
INDEX V
Brown Harriman & Co., Incorporated — Continued. Page
Succession to underwriting interests of National City Co 11391-11394,
11416-11417, 11440-11443, 11447, 11491-11494, 11559, 1528,
1666-1567, 1570, 1604-1606, 1610, 1611-1, 1612, 1646.
Testimony of Joseph P. Ripley 11408-11417, 11425-11426
See also Brown Brothers Harriman & Co.; Harriman Ripley & Co.
Brown, Lisle &lMarshall 1629
Brown, Mark i 1840-19
Brown, Moreau D ^ 11386
Brown, Ned . 1640-24
Brown Shipley & Co 1 11387
Brown, Thatcher M 11386
Bryce, T. J 11448-11449
Budd, Ralph 11447, 11451, 11455, 1570-1571, 1590-1692, 1766
Buffalo Niagara Electric Corporation financing 1631
Burns, A. E 1151^,1621
Burr, Gannett &C o 1629
Burr, George L 1600-4
Busch, Prescott T_' . 11386
Butcher «fe Sherred 1661-2
Butler, Pope, Ballard & Eltinge 1638-5
Byllesby, H. M., and Company:
Deposits with Harris Trust & Savings Bank .. 1 1538, 1633
Originations of, and participations in security issues, and negotiations
therefor:
Securities of:
Pacific Gas & Electric Co 11490,
1600-14, 1602-1603, 1614-2, I6I4-4
Southern California Edison Co 11542,
1625, 1633, 1639-1-1639-3, 1639-15, 1639-19
Other companies 1640-12, 1640-17, 1640-28-1640-23
Reciprocal business with The First Boston Corp 1629
Cahn, Frank B., & Co 1629
California-Oregon Power Company financing 1 1530, 1630, 1658-3
Canada, Government of the Dominion of, financing.. 1630-1631, 1668-1, 1658-3
Capital, importance of, in selecting underwriting groups 11543-11545,
11652, 11604, 164:2
Capital position of investment bankers, methods of determining 11543-11545
Carlisle, Floyd L 11562-11565, 1647-1
Cassatt & Co., Incorporated 1629
Castle, Sidney L 11390
Cavalier, Wm., & Co , 1629
Central Illinois Electric & Cos Company financing 1640-5-1640-15,
1640-22-1640-23, 1640-46
Central Maine Power Company financing 11630, 16S0, 1668-3
Central New York Power Corporation financing 1631, 1658-1
Central Republic Company 1629,
1640-6-1640-7, 1640-12, 1640-22-1640-24, 1640-44
Central States Electric Company 1640-35
Certificate of incorporation of investment banking firm, example of 1626
Chace, Whiteside & Co 1629
Chapman, Niles 1640-19-1640-20
Chase Corporation, The:
Dissolutiofa of securities business 1 1514, 1615-1617
Relation to The Chase National Bank 1616
Stockholders of, interests in The First Boston Corp. 11512, 1616-1617
Chase Harris Forbes Corporation:
Disposition of records after dissolution 11513, 1616-1617
Goodwill of, acquired by The First Boston Corp.. 11613-11516,
1616-1620, 1626
History 11616, 1616-1616,.1620, 1626
Persojmel of, affiliation with The First Boston Corp. 1617,1620
Realignment of underwriting interests of, after Banking Act of
1933 11522,1624
See also Harris, Forbes companies.
Note. — Figures In ordinary tyi)e refer to text page numbers ; figures in Italics are exhibit
numbers. For pages on wblch exhibits appear, see Schedule of Exhibits.
VI INDEX
Pace
Chase, Henderson & Tenant 11517, 162S
Chase National Bank of the City of New York, The:
Compliance with the Banking Act of 1933 16W
Fiscal services — - — 16S7
Loans of.. 1640-16, 1640-26-1640-27
Relation to The Chase Corporation 1616
Chase Securities Corporation:
Originations, 1927-1930, amount 15S4
See also . Lejs Corporation, The.
Chemical Bank & Trust Co - 16S6-6-16S6 7
Chesapeake and Ohio Railway Company financing 16S1, 1658-1
Cheston, RadclifiFe, Jr 1566
Chicago, Burlington & Quincy Railroad Company:
Guarantors of Chicago Union Station Co. security issues 11799,
11813, 11818, 11820, 1646, 1649-1-1649-2, 1551-1, 1554-1,
1556-1, 1558-1, 1666.
Stock interest in Chicago Union Station Co 11430, 11812
See also Budd, Ralph.
Chicago Corporation 1 1429
Chicago, Milwaukee, St. Paul & Pacific Railroad Company:
Guarantors of Chicago Union Station Co. security issues 11799,
11813, 11818, 11820, 1645, 1549-1-1549-2, 1551-1, 1564-1,
1556-1, 1668-1, 1565.
Letters concerning use of documents 11427-11428, 16S8-1, 16S9-2
Stock interest in Chicago Union Station Co 11430, 11812
Trustees 11818, 11820
Chicago Union Station Co.:
Description of business 11803
Financial statements 1 1805-1 1806
Organization of 1 1430
Stock interests in 11430, 11812
Chicago Union Station Co. financing 1 1426-1 1 478,
11798-11825, 1538-1-1697-2, 1668-2, 1670, 1766, 1769-1-1759-2
Agreements between bankers concerning future business 11431-
11432, 1540-164S
Guarantors of 11799, 11812-11813, 11818, 11820-11821,
1646, 1649-1-1649-2, 1661-1, 1664-1, 1556-1, 1658-1, 1666
Interest of commercial banks in underwriting group after Banking
Act of 1933:
Continental Illinois National Bank 11447-11451, 1670-1576
First National Bank of New York 11443-11445, 11450-11454,
1146,0-11462, 11465, 11469-11471, 1568, 1576-1579, 1589, 1596
J. P. Morgan & Co 11469-11471, 1696
Tea 1] AC *
$30,000,000 4H% "A" Due 1963, offered Feb. 1916 11432-
11434, 11438, 1546-1548
$10,000,000 6H% "C" Due 1963, offered April, 1920 U435-
11436, 11438, 1549-1-1650
$6,000,000 6>^% "C" Due 1963, offered May, 1921 11436,
11438, 1551-1-1553-4
$6,150,000 57o "B" Due 1963, offered May, 1922 11436-
IU38, 1554-1-1555
$7,000,000 5% "B" Due 1963, offered Jan., 1924 11437-
11438,^555-1-1557
$7,000,000 5% Guaranteed Due 1944, offered Nov. 1924 11437-
11438, 1568-1-1569
$850,000 K% "A" Due 1963, offered Nov., 1924 1559
Summary, 1916-1924 11438,15(50
$16,000,000 4% "D" Due 1944, offered March, 1935 11440-11461,
1566-1588-1, 1766
$2,100,000 4% Guaranteed, Due 1944, offered March, 1935. 11440-11461,
1665, 1569-1678, 1580-1687, 1688-2, 1756
$44,000,000 3?4% "E", Due21963, offered April, 1936 11462-11474,
1589-1597-J.
Note. — Figures In ordinary type refer to text page numbers ; figures In Italics are exhibit
numbers. For pages on wblch exhibits appear, see Schedule of Exhibits.
INDEX VII
Chicago Union Station Co. financing — Continued.
Issues — Continued. P*8e
$7,000,000 3K% Due 1951, offered August, 1936 11474, 1697-2
$600,000 l%% Guaranteed notes offered April, 1940 11804,
11813 11819 11821—11822
$16,000,000 3/8% "F"J)ue 1963 offered April, 194o'. .' 11478,
' ' *5r 11798—11825
$16,000,000 3/8% "F" Due 1963, offered AprU, 1940:
Bid of Halsey, Stuart & Co. and associates 1 1478,
11799, 11802, 11808-11817
Hearings before Interstate Commerce Commission — 11812-11821
Invitations to make competitive bids 1 1798-1 1804,
118ia-11814, 11816-11817
Offers made by Kuhn, Loeb & Co. and associates 11799,
11814-11815
Replies to invitations to bid 11799, 11807-11808, 11814-11817
Subunderwriters 11822-11823
Underwriting group and participations 11 822, 11825
Participations in security issues of 11433-11438,
11459-11465, 11469-11473, 11822, 11825, 15^8, 1650, 1562,
1665, 1557, 1659-1660, 1679, 1688-1-1588-2, 1597-1-1597-2
Refundings, See Issues, (those offered in 1935, 1936, and 1940).
Selection of underwriting associates by Kuhn, Loeb & Co. and Lee,
Higginson & Co 11442-11456,
11463, 11466, 11472-11474, 1666-1569, 1676-1680, 1689, 1596-2
Sources of documents 11427-11428, 1538-1639
Successions to underwriting interests:
Brown Harriman & Co., Inc. to interest of National City Co... 11441-
11443, 11447, 1565-1667, 1670
Lazard Freres & Co., E. B. Smith & Co., and White, Weld & Co.
to interests of First National Bank of New York 11451-
11453, 11460-11461, 11464-11466, 11468, 1676-1579, 1689
Field, Glore & Co. to interest of Continental Illinois National
Bank 11447-11451, 1670-1676
Interest of J. P. Morgan & Co 11451-
11452, 11462-11464, 11468-11471, 1589-1690, 1693-1596
Underwriting documents used in 11802-
11804, 1547-1-1647-2, 1649-1-1649-2, 1551-1-1561-2, 1553-1-
1654-2, 1556-1-1666-2, 1668-1-1668-2, 1575, 1586-1-1586-2.
Underwriting group :
Changes in syndicate necessitated by Banking Act of 1933 11440
Changes in syndicate necessitated by organization of Morgan
Stanley & Co 11462-11472,1689-1690,1593,1595
Extent to which crystallized 1 11473-11476
Chicago & Western Indiana R. R. Co. financing 1631
Chickering, Allen L 11509, 1614-21, 1614-26
Cincinnati Union Terminal Co. financing 1631, 1658-1
City Company of New York, Inc. See National City Co.
Clark, Benjamin 1611-2
Clark, Carr & EUis 11407
Clark, Dodge & Co.
Deposits with J. P. Morgan &Co 1651-2
Loans from J. P. Morgan & Co 1651-3
Participations in issues managed by The First Boston Corp 1629
Participations in security issues and negotiations therefor:
Securities of:
Chicago Union Station Co - 11434r-11436,
11438, 1646-1548, 1660, 1660
Crane Co 1652-4
Clark, E. W., & Co 1629
Clayton Act, interlocking directorate provisions:
Question of apphcability to Glore, Forgan & Co.'s participation in
Chicago Union Station Co. financing 11455-11459, 1681-1586
Quoted -. 11456-11457, 155«-i
Clement, Martin W. 11798-11808, 11814, i57i
Cleveland Electric Illuminating Company, The, financing 1658-4
Note. — Figures In ordinary type refer to text page numbers ; figures In Italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
VIII INDEX
Page
Cleveland Trust Company 11492-11493, 11550, 1604-1605
Cochran, G. I 1639-3
Cofl&n & Burr, Inc.:
Participations in security issues and negotiations therefor:
Securities of:
Southern California Edison Co 11542-11543,
1639-1-1639-2, 1639-8, 1639-10-1639-11, 1639-14, 1639-17
Other companies 1640-12, 1640-22-1640-23, 1640-29
Reciprocal business with The First Boston Corp 1 629
CoggeshaU, James, Jr 11576, 1617, 1621
Coggeshall, Thomas.. 1 16^1
ColUns, J. H 1640-17-1640-18
Commercial banking:
Divorcement from investment banking 11384-11426,
11440, 11535, 1628-1537, 1616-1618, 1620, 1632
See also Banking Act of 1933; Commercial banks, interests in
underwriting groups; Succesaion to underwriting interests.
See also Commercial banks
Commercial banks:
Deposits by investment bankers in 1 1470,
11536-11638, 11677-11582, 1643, 1645, 1649-1650, 1651-2
Fiscal services performed, by (e. g. acting as trustee under indenture,
paying or transfer agent, registrar, etc.) 11470,
11583-11539, 1634-1636, 1636-1, 1636-6-1636-7, 1637
Interests in Chicago Union Station Co. underwriting group after
Banking Act of 1933 11443-11445, 11447-11454,
11460-11462, 11465, 11469-11471, 1568, 1676-1679, 1689, 1596
Loans to investment banking firms 11581, 1651-3
Originations of securities by affiliates of, 1927-1930, amount 1534-1536
Reciprocity with investment bankers 11538-11539, 1633-1636-6
See also Commercial banking
Commercial Credit Company financing 1631, 1668-3
Common stocks, attitude of investment bankers toward distribution of. 11556-
11558, 1644
Competition in investment banking 11523-11524, 11566
Comp)etitive bid on security issue, example of 11808
Competitive bidding:
Opposition to, by investment bankers 11807-11808, 11814, 11816-11817
Suggestion by Interstate Commerce Commission in Chicago Union
Station Co. financing .- 11448, 11478, 11799, 11814-11815, 1756
Consolidated Edison Co. of New York, Inc. financing. 11480, 11563, 11557-11568,
11672, 1631, 1642, 1644, 1646-1648, 1653-2, 1658-1
Relative positions of Blyth & Co., Inc. and Morgan Stanley & Co.
in _-. 11567-11568, 11672, 1647-1648, 1663-2
Consolidated Electric & Gas Company 1640-6
Consolidated Gas Co. of New York, See Consolidated Edison Co. of
N. Y., Inc
Consolidated Oil Corporation financing 1668-2
Consumers Power Company financing 11599, 1630-1631, 1644
Container Corporation of America financing 11481
Continental Casualty Company 11429
Continental Illinois National Trust & Savings Bank of Chicago:
Crane Co. financing 1662-1-1662-2, 1653-4
Succession to underwriting interest of, by Field, Glore &Co 11447-
\Ub\, 1670-1676
See also Illinois Merchants Trust Co.; Illinois Trust and Savings Bank.
Continental Oil Company financing 1631
Continental Steel Corporation financing 1640-19-1640-21
Couffer, James G 11486
County, A. J., activities in Chicago Union Station Co. financing 11441-11442,
11448, 11467-11468, 1665-1667, 1669, 1671, 1590-1592, 1766
CoweU, Eugene I 11516, 1617, 1621
Crane Co. financing 1662-1-1662-6, 1658-1
Crane, Ralph T . - 11390
NoTH. — Figures In ordinary type refer to text page numbers ; figures In Italics are exblblt
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
INDEX IX
Face
Creech, Harris 11492-11493, 11550, I6O4-I6O6
Cross, Milton C .' ^ 11409-11411
Cudd & Co . 11517, 1622
Cumberland County Power & Light Company financing 16 SO
Cummings, Walter J 11811, 11818, 11820, I64O-4I, 1662-1-1652-2, 1652-4
Curtis, Lewis 11386
Cutler, J. W., diary entries concerning Chicago Union Station Co. financing.. 1 1446,
11454, 11468-11469, 1669, 1677-1579, 1693
Dallas Power & Light Company financing 16S0
Davis, Paul H., & Co 1629
Davis, Pierpont V.:
Activities in Chicago Union Station Co. financing 11436,
11441, 155S-2, 1663-4, 1564-2, 1665-1567, 1766
Other activities 11390, 11409, 11411, 11482
Day, R. L., & Co 1629, 1689-19
Dayton Power & Light Company financing 1644
Dean, Arthur H 11534, 11594, 16S8-5, 1696
Dean Witter & Co. -See Witter, Dean, & Co.
De la Chappelle, Richard 16S9-22
Delaware, Lackawanna & Western Railroad Company 11 430
Denton, D. W 16SS
Dern, John I64O-SI
Devoe, A. C 11812-11817
Dick & Merle-Smith 1629
Dick, Fairman 1756
Dillon, Read & Co 11574, I6OO-I4, 1629
Distributing group, selection of 1614-9-1614-10
Divorcement of investment banking from commercial banking 11384-11426,
11440, 11535, 1528-1637, 1615-1618, 1620,1632
See also: Banking Act of 1933; Commercial banks, interests in under-
writing groups; Succession to underwriting interests.
Dobbins, J. D ^ 1639-17
Dominick & Dominick L 1629, 1661-2
Dominion Securities Corp . 1629
Douglas, William O 1640-15
Drexel & Co 11551, 11580, 1642-1643, 1661-2-1661-3
See also Morgan, J. P., & Co.
Dulin, Garry 1638-4
Duluth, Missabe & Iron Range Railway Co. financing 1631, 1668-1
du Pont, E. I., de Nemours & Co. financing 1631, 1658-1
Duquesne Light Company financing 1639-15, 1658-3
Earl, Guy C 11509
Eastern Gas & Fuel Associates financing : 1631, 1 668-3
Eastern Iowa Electric Company 1640-32
Eastman, Dillon & Co 1629, 1639-19
Eastman Kodak Company financing 1631
Edison Electric Illuminating Co. of Boston financing 1624, 1634
Edmunds, William 1617, 1639-11-1639-12
Electric Bond and Share Company 1639-5
Elkins, Morris & Co 1651-2-1651-3
EUis, George O 11407
Elsey, Frederick, See Pacific Gas & Electric Co. financing.
Emanuel & Co 1629
Eppel, William R 11390, 11409
Equitable Life Assurance Society of the United States, The 1639-16, I64O-IS
Estabrook & Co 1629, 1639-1, 1639-19
Evans, Lewis'N., testimony of 11490
Evans, Stillman & Co ! 11800, 11808, 11814, 11816, 1629
Farwell, Chapman & Co 1629
Federal Reserve System 11693, 1666
Federated Department Stores, Inc. financing 16S6-1
Fenton, Howard 11536, 1634
Note. — Figures in ordinary type refer to text page numbers ; flgures in italics are exhibit
uumbers. For pages on -which exhibits appear, see Schedule of Exhibits.
X INDEX
Field, Glore & Co.:
Participations in security issues and negotiations therefor:
Securities of: Page
Chicago Union Station Co 11460,
11463, 11470-11473, 1670-1676, 1679, 1688-1-1688-2, 1689, 169S,
1696-2-1697-2.
Legality of participation, question of 11447-11451,
11455-11459, 1680-1686
Southern California Edison Co 11543, 16S8-S-
1638-4, 1639-1, 1639-6-1639-8, 1639-10, 1639-14, 1639-17
Other companies 1639-6-
1639-7, 1640-11, 1640-17, 1640-24, 1640-42-1640-44
Reciprocal business:
With Blyth & Co., Inc 11601, 1658-2
With The First Boston Corp 1629
Succession to underwriting interest of Continental Illinois National
Bank .... 11447-11451, 1570-1676
Testimony of Charles F. Glore 11429-11478
See also Glore, Forgan & Co.
Filene, Wm., Sons Co 11538-11539, 1636-1-1636-2
Financing of companies:
See names of companies financed.
Firestone, Harvey S., Jr 1605
Firestone Tire & Rubber Company, The, financing 11480, 11493
First Boston Corporation, The:
Acquisition of goodwill of Harris, Forbes companies 11513-
11516, 1616-1620, 1625
Capital structure of 1620
Cession of underwriting interests to Harris, Hall & Co 11528-
11528-11530, 11549, 1640-1-1640-4
Deposits with J. P. Morgan & Co 1661-2
Financial statements of 1617
Loans from J. P. Morgan & Co. to.^ 1661-3
Nature of business 1620
Officers and directors 11516-11517, 1617, 1620-1621
Prior affiliations of 11516-11517, 1617, 1618, 1620-1621
Organization , 11512, 1620
Organizations of, and participations in security issues, and negotia-'
tions therefor:
Securities of:
Central Illinois Electric & Gas Co 1640-5-1640-11
Chicago Union Station Co 11440, 11454-11455, 11461, 11472-
11473, 11822, 11825, 1564, 1679, 1588-1-1689, 1593, 1596-2-1597-2
Los Angeles Gas & Electric Corporation 1628-2-1628-3,
1628-6, 1638-1, 1640-4
Pacific Gas & Electric Co 11495, 1600-14,
1606, 1611-4, 1614-4, 1614-7, 1614-9
Southern California Edison Co 11535-11538,
11540-11543, ^(555-7-;(55P-gS
Other companies 11573, 1639-6-
1639-7, 1640-24, 1640-28-1640-29. 1640-38, 1640-44, I644-
1646, 1648.
Performance records kept by 1639-23
Predecessor companies 11512, 1626
Question of arrangement with Harris, Hall & Co. for division of
business 11528-11530
Reciprocal business:
Records kept by H. M. Addinsell 11529-11534,
11597, 1629-1631
With Blyth «& Co., Inc 1658-S
With Harris,»'HaU & Co i 1152^11530, 1629-1630
With Morgan, Stanley & Co 11532, 1629, 1631
Relations with The First National Bank of Boston 11512, 11514,
11516, 1615-1618, 1620
Relations with Harris, Hall & Co 11528-11530,
11548-11549, 1628-3-1628-8, I64O-4-I64O-II, 1640-28-1640-29
Relations withJA. W. Harris 1626,1632
Note. — Figures In ordinary type refer to text page numbers ; fleures In Italics are exhibit
niimbers. For pages on 'which exhibits appear, sec Schedule of Exhibits.
INDEX iXI
First Boston Corporation, The — Continued. Pae*
Relations with Harris Trust and Savings Bank 1625, 16S2-1634, 1639-7
Relations with Kuhn, Loeb & Co 11514-11515, 1618
Relations with Lehman Brothers 11522, 162Jt.
Selection of trustees, etc. for security issues 1 635
Stock interests in 11512-11513,
11517-11519, 1615-1617, 1620, 1622, 1696
Stock interests by officers of, in Harris, Hall & Co ._ 11527
Succession to underwriting interests of Harris, Forbes companies 11513-
11516, 1616-1620, 1625
Testimony of George D. Woods 11503-11505, 11511-11546
First of Boston Corporation, The 11512, 1616-1617, 1620
See First Boston Corporation, The.
First British American Corporation, Ltd 1621
First National Bank of Boston:
Compliance with Banking Act of 1933 11512-11513, 1615-1618, 1620
Fiscal services performed by 11539, 1636-1
Relations with The First Boston Corp. 11512, 11514, 11516, 1615-1618, 1620
Security affiliates 11512
Stock interests held by, in The First Boston Corp 11512,1616
First National Bank, New York:
Deposits of investment bankers with 11470
Participations in security issues and negotiations therefor:
Securities of:
Chicago Union Station Co 11433,
11435, 11438, 15^5, 1647-1-1651-1, 1652-1664-2, 1656-1, 1567,
1558-1, 1669-1660, 1687.
Interest in underwriting group after Banking Act of 1933.. 11443-
11445, 11450-11454, 11460-11462, 11465, 11469-11471, 1568,
1576-1579, 1689, 1595.
Pacific Gas & Electric Co 1602-1603
Succession to underwriting interest of, by Lazard Freres & Co., E. B.
Smith & Co., and White, Weld & Co 11451-11453,
11460-11461, 11464-11466, 1576-1679, 1689
Testimony of Henry S. Sturgis 11429-11478
First National Corporation, The 1620
First National Old Colouy Corp 11512, 1616. 1620
First of Michigan Corporation 1629
First Old Colony Corp 11512
First Securities Co. of Los Angeles 11542, 18S9-2
Fiscal services performed by banks (e. g. acting as trustee under indenture,
paying or transfer agent, registrar, etc.) 11470,
11538-11539, 1634-1636-1, 1636-6-1636-7, 1637
Fogarty, James F 11508, 1613, 1614-17, 1614-20
Ford, Bernard W 1644, 1648
See also Pacific Gas & Electric Co. financing.
Ford, NevU 11513, 11516-11517, 11522, 1615, 1617, 1621-1622, 1624, 1634
Forgan. J. RusseU 11448-11450, 1571-1676
Fox, Morris F., & Co 1629
Francis Bro. & Co 1629
Fratcher, Frank 1640-32-1640-33, 1640-35-1640-37
Freeman & Co 11799-11800, 11807, 11814, 11816
Frost, Edward J 11538-11539, 1636-1-1636-2
"Frozen accounts" See Underwriting groups, permanence of.
Frye, Newton P 1640-6-1640-7
Garland, Charles S 11390
Garrett, Robert, & Sons 1629,1651-2
Gatineau Power Company financing 1630, 1658-3
Geddes, Donald G 11433-11434, 1546
General American Investors Company, Inc 11480
General American Transportation Corporation financing 1658-2
General Mills, Inc 11430
General Motors Acceptance Corporation financing 1631, 1668-1
Geographical considerations in selecting underwriting groups 11 569
Gerade, Alfred A 1617, 1621
Note. — Figures in ordinary type refer to text page numbers ; figures in italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
XII INDEX
Page
Gillman, Charles H., & Co 1629
Ginsberg, David... . 1640-15
Glass, Senator Carter 1 1403
Glore, Cliarles F.:
Activities in Chicago Union Station Co. financing 11447-11451,
• 11455-11459, 1570-1575, 1680-1581, 1583-1585, 1590-1592
Other activities 1638-4, 1640-11, 1640-24, 1640-42-1640-44
Directorships 11 429
Testimony of . 11429-11478
Glore, Forgan & Co. :
Participations in security issues ^ 11822,
11825, 1629, 1640-12, 1640-22-1640-23
Testimony of Charles F. Glore 11429-11478
See also Field, Glore & Co.
Goldman, Sachs & Co. :
Declines to bid on Chicago Union Station Co. financing 11799,
11807, 11814, 11816
Deposits with J. P. Morgan & Co 1651-2
Participations in security issues and negotiations therefor.. 1639-19, 1640-17
Reciprocal business with The First Boston Corp 1629
Goodwill, acquisition of, from predecessor organizations:
By Brown, Harriman & Co. from National City Co 11391-11394,
11491-11494, 1528, 1604-1605
By The First Boston Corp. from Harris, Forbes companies 11513-11516,
1616-1620, 1625
By Edward B. Smith & Co. from Guaranty Co. of N. Y 11523,
11559, 1625, 1645
See also Banking Act of 1933, realignnaents of underwriting interests
after; Succession to underwriting interests
Goodwin, 1640-11
Graham, Parsons & Co 1629
Granbery, Safford & Co 1629, 1640-12, 1640-22-1640-23
Great Northern RaUway Company, The 1631, 1640-17, 1658-1
Green, D. C 1640-40
Green, Ellis & Anderson 1629
Griffis, Stanton 1639-20
Griffiths, Mansel P 11486
Guaranty Company of New York:
Originations of securities, 1927-1930, amount 1534
Underwriting interests succeeded to by E. B. Smith & Co 11523,
11559, 1625, 1645
Guaranty Trust Company of New York 11384, 11523, 1625, 1634, 1649-1650
Gude, Winmiil & Co h 11827
Gulf States Utilities Company financing 1658-1
Gutman, Monroe C 1624
Haight, George I 11818, 11820-11821
Hale, Waters & Co., Inc. 1629
Hall, Edward B 11526,
11548, 1626, 1628-3-1628-4, 1640-1, 1640-3-1640-4, 1640-8-
1640-11, 1640-16-1640-17, 1640-24, 1640-31, 1640-38-1640-43
HaU, Perry E 1652-2
Hallgarten & Co — 1629
HalloweU, N. Penrose 11452, 11463, 1680
Halsey, Stuart & Co., Inc.:
Competitive bid on Chicago Union Station Co. financing 11478,
11799, 11802, 11808-11817
Participations in security issues 1640-12, 1640-22-1640-24
Reciprocal business with The First Boston Corp 1 629
Hambuechen, Joseph W 11516, 1621-1622
Hammerslough, William J 1624
Hammons & Co., Inc 1629
Hanauer, Jerome J 11433-11434, 1646-1546
Hancock, John, Mutual Life Insurance Co 1639-16, 1640-14
Harriman Brothers & Co 11386
Harriman, Elizabeth 11412
Note. — Figures In ordinary type refer to text page numbera : figures In Italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
INIWBX XIII
Page
Harriman, E. Roland 11386, 11412
See also Brown Brothers Harriman & Co.; Harriman family
Harriman family, capital interests in Brown Harriman & Co. Inc. and
Brown Brothers Harriman & Co 11394-11396, 11400-11404,
11412, 11421, 15S1, 1536
Harriman, Kathleen L 11412
Harriman, Mary Averell . 11412
Harriman, Phyllis 11412
Harriman Ripley & Co., Incorporated:
Capital interest of Harriman family in 11403-11405, 11412, 11421, 15S1
Change of name from Brown^Harriman & Co., Incorporated 11403
Officers and directors 11408-11410, 1532
Originations, participations, and profits 11425,
11440, 11822, 11825, 1SS7, 1562
Voting trust agreement 11403-11408, 11411-11421, 15SS
See also Brown Brothers Harriman & Co.; Brown Harriman & Co., Inc.
Harriman, W. A., & Co 11406
Harriman, W. A., Securities Corporation 11385
Harriman, W. Averell:
Directorships 11385
Extent of activities in:
Brown Brothers Harriman & Co 11405
Brown Harriman & Co., Inc 11405-11406, 11419-11425
Stock interest in Harriman Ripley & Co., Inc 11404, 1631
Testimony of... 11384^11408, 11417-11425
See also Brown Brothers Harriman & Co.; Brown Harriman & Co.,
Inc.; Harriman family; Harriman Ripley & Co., Inc.
Harris, Albert W.:
Activities in Southern CaUfomia Edison Co. financing 11523-
11525, 11535-11537, 1626, 1632, 1638-2, 1638-4, 1639-7, 1639-13
Relations with The First Boston Coip 1626, 1632
Harris, Forbes & Company, See Harris, Forbes companies
Harris, Forbes & Company, Inc., See Harris, Forbes companies
Harris, Forbes companies:
Arrangement with Harris Trust «fe Savings Bank for the division of
business 11524-11526
Goodwill of, acquired by The First Boston Corporation 11513-
11516, 1616-1620. 1625
History of 1620, 1626
Liquidation of 1616
Participations in Southern California Edison Co. financing 11542-
n54Z, 1639-2
Personnel, affiliation with The First Boston Corp lil?, 1620
See also: Chase Harris Forbes Corporation; First Boston Corporation,
The; Harris, Hall & Company
Harris, Hall & Company:
Capitalization - 11519, 1627
Cession of underwriting interests to, by The First Boston Corp 11528-
Ubm, UU%, 1628-3-1628-8, 1640-1-1640-4
Originations of, and participations in security issues, and negotiations
therefor:
Securities of:
Central Illinois Electric & Gas Co 1640-5-
1640-16, 1640-22-1640-23
Iowa Electric Co 1640-23, 1640-32-1640-38
Los Angeles Gras & Electric Corporation 11528-
11548-11549, 1628-3-1628-8, 1638-3, 1640-1, 1640-4
Public Service Co. of Oklahoma 1640-39-1640-44
Other companies 11574,
1640-16-1640-17, 1640-24, 1640-30-1640-31
Relations with The First Boston Corp 11528-11530,
11548-11549, 1628-3-1630, 1640-4-1640-11, 1640-28-1640-29
Question of arrangement for the division of business 11528-11530
Reciprocal business 11528-11530, 1629-1630
Stock interests in 1627
Held by officers of The First Boston Corp 1 1527-1 1528
Note. — Figures in ordinary type refer to text page numbers ; figures in italics are exhibit
numbers. For pages on whicb ezbibits appear, see Schedule of Bxhibits.
XIV INDEX
P«ge
Harris, Norman W 1 1526-11527, 11548, 1627, i688-7-162fi-8, 1640-1
Harris, N. W., & Co 11525, 1620
Harris Trust & Savings Bank:
Arrangement with Harris, Forbes companies for the division of busi-
ness 11525-11526, 1626
Compliance with the Banking Act of 1933 11535-11537.
11548, 16S2, 1640-39
Deposits in 1 1538, 16SS
History of 1620, 1626
Loans by 1640-19, 1640-26-1640-27
Los Angeles Gas & Electric Co. financing 1634-1, 1640-1
Relations with The First Boston Corp 1625, 1632-1634, 1639-7
Succession to underwriting interests of__ 11524^-11526, 11548, 1625, 1640-39
Harris, Upham & Co 11827
Harrison, John D., See Pacific Gas & Electric Co., financing.
Haskell, 1545
Haskins & Sells ' 1617
Hawes, Stewart S 1148G, 1601, 1648
Hawley, Hulles & Co 1629
Hayden, Miller & Co 1629
Hayden, Stone & Co 1629, 16S9-19, 1644
Hearst, William Randolph, interests 1601, 1645
Hecker Products Corporation 11430
Heidelbach, Ickelheimer & Co... 11827
Hemphill, Noyes & Co 1629, 16S9-20-16S9-21, 165 1-2-166 1-S
Henderson, Commissioner Leon, statements by, concerning purpose of in-
vestment banking hearings 11383-11384, 11479
Hershey Chocolate Corporation financing 11480
Heywood, Gene B 11548, 1640-1-1640-3, 1640-8, 1640-28, 1640-33, 1640-44
Higginson, Francis L., Jr 11431, 1540-1541, 1545
Hine, Francis L 11433, 1645
Historical relationship in selecting members of underwriting groups. 11569-11572
See also Chicago Union Station Co. financing
Hockenbeamer, A. F., See Pacific Gas & Electric Co. financing
Holden, 11433, 1546
Hooper, Leverett F 11450-11451,^576-/575
Hoover, Loring 1 1506,
11596, 1608, 161S, 1614-11, 1614-17, 1614-20, 1658-1
Hornblower & Weeks 1629, 1639-1, 1639-19, 1651-2
Hough, T. E 1640-24
Houston, Frank K 1636-6-1636-7
Howe, Burton A 1639-4
Howe, James 1 1 640-6
Huff, Charles H., testimonv of 11392-11393, 11439-11440, 11547-11548
Hutton, E. F., & Co .' 1639-1, 1639-8
Button, W. E^ & Company 1629, 1639-19
Idaho Power Company financing 1630, 1658-3
Illinois Bell Telephone Company financing. 11555, 11573, 1631, I644
Illinois Central Railroad Company 11385
Illinois Company of Chicago, The 1640-11-1640-12,
1640-22-1 640-24, 1640-44
Illinois Merchants Trust Co.:
Participations in Chicago Union Station Co. financing 11437-11438,
1566-1, 1557, 1668^1, 1569-1560, 1587
See also Continental Illinois National Bank & Trust Co. of Chicago.
Illinois Public Service Commission 11433, 1546
Illinois Trust & Savings Bank:
Participations in Chicago Union Station Co. financing 11433, 11435,
11437-11438, 1646, 1647-1-1651-1, 1662, 166S-S, 1554-1-1556
1560, 1687.
See also Continental Illinois National Trust and Savings Bank of
Chicago; Illinois Merchants Trust Co.
Indianapolis Powe: & Light Company financing 16S6-S-16S6-7
Industrial Rayon Corporation financing 1668-2
Inland Steel Company financing — 1668-2
Note. — Figures In ordinary type refer to text page numbers ; flgures In Italics are exhibit
numbers. For pages on wbfcU exblblts appear, ■•• Schedule of Exblblts.
indeb: ky
Page
Insurance companies, purchases of securities by 1639-14, 1639-16
International Agricultural Corporation 11430
Interstate Commerce Commission:
Competitive bidding suggested for Chicago Union Station Co.
financing by 1 1448, 1 1478, 1 1799, 11814-11815, 1572
Hearings on Chicago Union Station Co. financing 11812-11821
Investment bankers:
Borrowings from commercial banks 11581, 1651-3
Deposits in commercial banks 11470,
11530-11538, 11577-11582, 1633, 1643, 1646, 1649-1650, 1651-2
Exchanges of confidential information among 11583-
11586, 1634, 1647, 1663-1-1653-2
Financial responsibility of, under Securities Act of 1933 11575
Houses of issue, compared with distributing houses 11600, 1644
Management fees, determination of 1640-42-1640-43
Methods of determining capital position of 11543-11545
Preferential rights to future financing 11515, 1617, 1619
Selection of distributing groups 1614-9-1614-10
Stockholdings in other investment banking firms by 11517-
11519, 11527-11528, 1622, 1696
See also Banking Act of 1933; Investment banking; UnderwTiting
group; and individual firms
Investment Bankers Association of America 11506, 1613
Investment banking:
Advertisement of security issue, benefits of position in 11 499
By publicly owned as compared with privately owned corporations 11415,
11519-11520
Competition in 11523-11524, 11566
Crisis of October 1937 in 11587-11589, 1654
Divorcement from commercial banking 11384-11426,
11440, 11535, 1528-1637, 1615-1618, 1620, 1632
See also Banking Act of 1933; Conmaercial banks, interest in
underwriting groups; Succession to underwriting interests.
Documents used in, examples of:
Certificate of incorporation 1526
Competitive bid on security issue 11808
Invitation to submit competitive bids 11802-11804
Letter descriptive of securities sold 1649-1
Letters to stockholders 1628, 1616-1617
Purchase group letter 1547-1,
1553-1-1653-2, 1676, 1686-1, 1596-1-1596-3
Purchase group letter, acknowledgement of 1547-2,
166S-S-155S-4, 1686-2
Sales contract i 1549-2
Sales contract, confirmation of 1561-2
Voting trust agreement for stock of investment banking firm 16SS
Importance of capital in 11543-11545, 11552, 11604, 1642
Nature of gross and net profits in , 11561-11562
Personal factor in acquiring and retaining accounts 11388-
11395, 11416-11417, 11486-11495, 11503-11505, 11553-11559,
11562-11567, 1606, 1643-1644, 1652-1-1662-6
Prices of securities, determination of 11575-11576
Professional character of 11394, 11566
Question of excessive number of firms in business 11589, 1654
Reciprocity in. 11528-11634, 11569, 11595-11603, 1629-1631, 1658-1-1658-4
As combination in restraint of trade 11602-11603
"Special capital" in 11589-11592, 1654
Underwriting groups, permanence of 1 1473-
11476, 11507-11508, 11569-11577, 1611-3
See also Banking Act of 1933; Investment bankers; Underwriting
groups; and individual firms.
Investment Service Corporation 1621
Investors Trust Company 1629
Invitation to submit competitive bids on security issue, example of- . 1 1802-1 1804
Iowa Electric Company financing 1640-28, 1640-32-1640-38
NcwB. — Figures In ordinary type refer to text page numbers ; flgTires in italics are exhibit
nnmbers. For pages on wliich ezhibita appear, eee Schedule of Exhibits.
XVI INDEX
Page
Iowa Electric Light & Power Company financing. . 11629, 16S0, 1640-25-1640-29
Jackson & Curtis 11518, 1622, 1629, 1639-19
James, J. C 11818
Jesup, Edward N.:
Activities in Chicago Union Station Co. financing 11443-11444, 11450-
11453, 11463-11466, 11469, 11825, 1668, 1576-1577, 1589
Testimony of 11429-11478
John Hancock Mutual Life Insurance Co . 1639-16, I64O-I4
Johnson, H. W 11810-11811
Jolles, Hendrik R ' 11390, 11409, 11411
Jones, Arnold W., & Co., Inc 1629
Junior Mercantile Co 11430
Kahn, Otto H 1545
Kansas Power and Light Company financing 11530, 16S0, 1658-3
Kaplan, Jack 11539, 1636-1-1636-'/
Kean, Taylor & Co 1629, 1651-2
Kemp, A. N 1639-7
Kenny, Arthur B 1617, .'"^
Kidder, Peabody & Co.:
Participations in security issues and negotiations therefor:
Securities of: Southern California Edison Co 11543,
1639-1, 1639-8, 1639-10, 1639-14, 1639-17
Other companies 11573, 1601, 1640-12, 1640-22-1640-23
Stock interest in The First Boston Corp 1 629, 1 696
Kiefer-Stewart Co 1636-3
Kuhn, Loeb & Co.:
Chicago Union Station Co. financing:
Agreements with other bankers on future business 11431-
] 1432, I64O-I543
Originations, participations and negotiations therefor 11433-11438,
11459-11463, 11469, 11472-11473 11822, 11825, 1545, 1547-1-
1560, 1679, 1687-1589, 1693. 1398-2-1597-2.
Selection of under writing associates 11442-11449,
11466, 11472-11474, 1565, 1567, 1569
Compliance with the Banking Act of 1933 11384
Dominant position in Wall Street 11587-11589, 1654
Letters concerning use of documents 11427-11428, 1538-2, 1539-1
Origingjions of security issues 11431, 11481, I6OO-I4, 1644, 1648
"Reciprocal Dusiness:
With Blyth & Co., Inc \1&Q\, 1668-2
With The First Boston Corp 11514-11516, 1618-1619, 1629
Testimony of George W. Bovenizer :.- 11429-11478
Testimony of Percy M. Stewart 11456-11457
Kuhn, R. Parker. _-•- . 1617, 1621
Ladenburg, Thahnann & Co WblS, 1622, 1629, 1639-19
Laird, BisseU & Meeds .- 1629
Laird & Company 1629
Lanahan, W. W., & Co 1629
Langley, W. C, & Co 1629, 16S9-1, 1639-19
Law, H. S 11393, 11490
Lazard Freres & Co.:
Deposits with J. P. Morgan & Co ----- 1661-2
Originations of, and participations in security issues, and negotiations
therefor:
Se-.-'-ities of:
Chicago Union Station Co 11461,
11469-11471, 11822, 11825, 1677, 1679, 1687-1689, 169S, 1696-2-
1597—2.
Pacific Gas & Electric Co 11480-11511, 1698-1614-24
Southern California Edison Co 11543,
1639-1, 1639-4, 1639-8, 1639-10, 1639-14, 1639-17
Wisconsin Power & Light Co 1640-24
Reciprocal business with The First Boston Corp -- 1629
Succession to part of underwriting interest of First National Bank of
New York 11452, 11461, 11465, 1676-1677, 1679, 1689
Teotimony of Stanley A. Russell 11480-11485, 11511
Note. — Figures in ordinary type refer to text page nnmbers ; flgnres in italics are exhibit
lumbers. For pages on whicli exiiibits appear, see Schedule of Exhibits.
INDEX XVII
Page
Leadenhall Securities Corp 1629
Leadership in underwriting syndicate, See Advertisement of security issue;
Investment banking; Underwriting groups; and various security issues
Lee, Higginson & Co.:
Chicago Union Station Co. financing:
Agreements with other bankers on future business 11431-11432,
1540-154S
Participations in security issues and negotiations therefor 11433,
11435-11438, 1545, 1548-1553-2, 1554-1-1556-1, 1667-1560, 1587
Selection of underwriting associates 11443-11456,
11463, 11466, 11472-11474, 1568-1569, 1576-1580, 1689, 1596-2
Participations in other security issues 11573,1640-17
See also Lee Higginson Corporation
I>ee Higginson Corporation:
Deposits with J. P. Morgan & Co 1661-2
Originations of, and participations in security issues, and negotiations
therefor :
Securities of:
Chicago Union Station Co 11463,
11471-11473, 11822, 11827, 1579, 1687-1689, 1593-1597-2
Other companies 11573-11575, 1689-1, 1639-4,
1639-19, 1640-12, 1640-22-1640-24, 1640-44, 1662-4, 1652-5
Relations with the First Boston Corp 11518, 1622, 1629, 1696
Testimony of Edward N. Jesup 11429-11478
See also Lee, Higginson & Co.
Lee, James J 1575
Lehman Brothers:
Deposits with J. P. Morgan & Co 1861-2
Relations with The First Boston Corp 11522, 1624, 1629
Selection of J. P. Morgan & Co. as registrar in security issue.. 11538-11539,
1636-1-1636-2
Lehman, Robert 1624, 1636-5
Leib, George 11505-11507, 1613, 1628-1, 1644, 1649
Records of Blyth & Co., Inc.'s reciprocal obligations, kept by 11595-
11604, 1668-1-1668-4
Testimony of 11485-11502
Cited ., 11550
See also Pacific Gas & Electric Co. financing.
Letter descriptive of securities sold, example of 1649-1
Letters to stockholders of banking firms, examples of 1628, 1616-1617
Lewisohn, Adolph, & Sons 1629
Limbert, Lee M 11486, 1601, 1652-4
Linsley, Duncan R 11516, 1617, 1620-1621, 16S4-16S6, 1640-7, 1696
Stock interest in Harris, Hall & Co i 11527, 1696
"Little Black Books". See First Boston Corporation, The.
Lockhead, James K 1600-^8
Loesch, F. J 11818
Logan, John S _^ 1601
Long, 1 1639-8
Los Angeles Gas & Electric Corporation financing 11528, 11548-11549,
1628-1-1628-8, 1638-1, 16 40-1-16 40-4, 1645, 1668-1, 1668-3
Los Angeles & Salt Lake Railroad Company 11385
Louisville & Nashville Railroad Company financing 1631, 1658-1
Lovelace, J. B . 1639-6.
Lovett, Robert A ^ 11386
Lovett, Robert S 11419
Lowell, 1662-1
Lyles, James 1634, 1640-7
Lynch, B. W 1635
Mackubin, Legg & Co . 16S9
Macomber, John R.:
Activities in Southern California Edison Co. financing 11523-11524,
11535-11537, 1626, 1632, 1634, 1638-1-1638-2, 1638-6, 1639-9,
1639-11-1639-12, 1639-16, 1639-18.
NoTTH. — Figures In ordinary type refer to text page numbers ; figures In italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
XVIII INDBX
Macomber, John R. — Continued. P»»Ke
Other activities 11512, 11514-11516, 1617-1618, 1620-1621
Stock interest in The First Boston Corp 11617, 1622, 1696
Stock interest in Harris, Hall & Co 11527
MahafEe, Commissioner Charles D 1756
Maine Securities Co 1629
Management fees, determination of amount of 1640-4^-1640-43
Mann, Henry 11390
Marks, Lawrence M., & Co 1629
Martine, Reginald ., 11390, 11409
Mathers, Lloyd C, testimony of 11521
Mathews, 1601
Maxson, L. Meredith 1617, 1621
Mayer, Harry F 11390
Mazur, Paul M 11538-11539, 1624, 1686-1-1636-2
McCarter, Thomas 11578, 1643
McClure, Donald C 1640-13-1640-15
McDonnell, Donald M 11486
McEldowney, Howard V 1615
McGregor, W. E 1626
Mclntvre, Scott 1640-34-1640-36
Mclntyre, Scott, & Company 1640-34-1640-36
McLeod, Young, Weir & Co., Ltd 1629
McNair, Frank 1626
McRoberts, Samuel 11431, 1543, 1545
Meek, Charles 1653-2
MeUon Securities Corporation 11574, 1629
Merchant Sterling Corp 11412
Merrill, Turben & Co 1629
Metropolitan Life Insurance Co 1639-16
Meyer, Commissioner Balthasar H 1756
Meyer, Ben R 1639-5
Middle West Corporation 11548, 1640-39-1640-41
Miller, C. O. G 1640-2, 1645
See also Pacific Gas & Electric Co. financing
Minneapolis General Electric Company financing 1639-15
Minsch, Monell & Co., Inc.. 1629
Mississippi Valley Corporation 11385
Missouri Power & Light Company financing 1 630, 1 658-S
Mitchell, Charles E.:
Activities concerning Blyth & Co., Inc.'s relations with Morgan
Stanley & Co 11488, 11551-11568, 11576-11602, 1601, 1642-1645.
1647-1650, 1652-1-1652-6, 1653-1, 1654-1656-1, 1657, 1658-1
Activities in financing of Anaconda Copper Mining Co 11482,
11576, 1644-1646, 1653-2
Crane Co 1652-1-1652-6
Consolidated Edison Co. of N. Y., Inc 11553,
11557-11568, 11572, 1642, 1644, 1647-1648, 1653-2
Los Angeles Gas & Electric Corporation. 11528, 1628-6-1628-8, 1640-4
Activities, other 11416, 1535
Affiliation with Blyth & Co., Inc 11487-11488, 11549, 1601
Claim of heirship to business of National City Co., discussed 11492-
11493, 11550, 1604-1605
Relations with J, P. Morgan & Co 11551-11555,
11559, 11572-11573, 11577-11580, 164S, 1645, 1647, 1649-1650
Testimony of 11549-11604
MitcheU, Sidney A I6I4-4, 1639-5
Mitchum, TuUy & Co . 1629
Monnet Murnane & Co 1640-16
Montgomery, John C llbl&, 1621
Montgomery Ward & Co., Inc 11429
Mooney-M ueller- Ward Co 1636-3
Moore, Horace D 11454, 1578-1579
Moore, Leonard & Lynch 1629
Moore, PhiUip . I64O-SI
Note. — Figures In ordinary type refer to text page numbers : figures in italics are exhibit
numbers For pages on which exhibits a]fpear, see Schedule of Exhibits.
INDEX XIX
Pace
Moore, Walton 1601
Morgan, J. P., & Co.:
Compliance with Banking Act of 1933 11384,
11440, 11461, 11551, 11578-11579, 1642
Deposits by investment bankers with 11577-11582,
1643, 1645, 1649-1660, 1651-g
Dominant position in Wall Street 11552,
11578-11580, 11583, 11588-11591, 1643
Fiscal services preformed by 1 1 1539, 16S6-2
Loans to investment banking firms l\5%l, 1651-S
Originations of and participations in security issues, and negotiations
therefor :
Securities of:
American Telephone & Telegraph system 11573-11574
Chicago Union Station Co 11433, 11435, 11438, 1146&-11471,
1545, 1548, 1550, 1658, 1555, 1557, 1669-1560, 1587, 1695
Pacific Gas & Electric Co 160S-160S
Relations with Morgan Stanley & Co ._-- 11579-11580,
11589-11591, 164S, 1645, 1651-2
Stock interests in public utility companies 1 1 556- 11558, 1644
Succession to underwriting interests of, by Morgan Stanlev & Co 11462-
11471, 11554, 1689, 159S, 1595, 164S-1644
See also Drexel & Co.; Morgan Stanley & Co.
Morgan Stanley & Co., Incorporated:
American Telephone & Telegraph system financing 11554-11556,
11570-11576, i(?,^«
Deposits with J. P. Morgan & Co 1651-2
Dominant position in Wall Street 11551-11553,
11578-11580, 11583-11594, 164S
Charge of monopoly anticipated 11593-11594, 11602-11603, 1656
Guarantee of solvency of syndicate members 11 575
Questionnaire on underwritings by other first 11592-11594,
1655-1657
Suggestions of consolidations, buy-outs, etc., made by 11587-11591,
1654
Survey of Wall Street conditions 11583-11589, 1647, 1653-2
Nature of business as "house of issue" 11588, 1644
Organization .-. 11551, 1642-164S
Originations of and participations in security issues, and negotiations
therefor:
Securities of:
American Telephone & Telegraph system 11554-11556,
11570-11576, 1642
Chicago Union Station Co H462-11464,
11469-11472, 11799, 11806, 11814^11817, 11822, 11825, 1587,
1589, 1593, 1596-2, 1597-1-1597-2.
ConsoUdated Edison Co. of N. Y., Inc 11480, 11553,
11557-11568, 11572, 1642, 1644, 1647-1648, 1653-2, 1658-1
Other companies 11554, 1600-14, 1644, 1652-1-1652-6
Participations ceded to:
Blyth & Co., Inc 11595, 11597-11600, 1658-1
The First Boston Corp 115Z2, 1629, 1631
Performance and profit records kept by 11584^11586,
1647, 1663-1-1653-2
Relations with Blyth & Co., Inc 11488,
11551-11568, 11576-11602, 1601, 1642-1645, 1647-1650, 1652-
1-1658-1.
Relations with J. P. Morgan & Co 11579-11580,
11589-11591, 1643, 1646, 1651-2
Succession to underwriting interests of J. P. Morgan & Co 11462-11471,
11554, 1689-1590, 1693-1595, 1643-1644
See also Morgan, J. P., & Co.
Morris, Ray 11386
Note. — Figures in ordinary type refer to text page numbers ; figures in italics are exhibit
numbers. For pages on wiiich exhibits appear, see Schedule of Exhibits.
124491—40 — pt. 22 32
XX INDEX
Moseley, F. S., & Co.: Pskb
Holdings of The First Boston Corp.'s stock 11517, 1622, 1696
Participations in security issues and negotiations therefor 1 629,
1639-1, 1639-19, 1640-11-1640-12, 1640-21-1640-23, 1640-29
Mountain States Telephone & Telegraph Co. financing 11574, 1631, 1658-1
Mudge, Louis G 1617, 1621
Mueller, G. H 1636-3
Muhlfeld, George O 1639-15
MuUendore, W. C 1638-2
Mumane, George 1 640-16
Murphy, G. M.-P., & Co . 1629
Murray, James 1640-13
Mutual Benefit Life Insurance Co., The ± 1639-14, 1639-16
Mutual Life Insurance Co. of New York, The 1639-14, 1639-16
Myers, Carl 1640-26
Nantz, 1636-3
Narragansett Electric Company financing 11530, 1630, 1639-12
National Bond and Share Corporation financing 1 640-1 7
National City Bank of New York, The:
^Compliance with the Banking Act of 1933 11384, 11391-11394, 1548
Deposits in 1649-1650
Participations in Chicago Union Station Co. financing 11433,
11435-11438, 1545, 1547-1-1547-2, 1548, 1550, 1560, 1587
See also National City Company, The.
National City Company, The:
Disposition of former accounts 11391-
11394, 11416-11417, 11440-11443, 11480-11484, 11491-11494,
11500-11505, 11511, 11559, 1528, 1565-1567, 1570, 1600-2,
1604-1606, 1610-1611-1, 1612, 1645.
Question of agreement between J. P. Ripley and S. A. RusseU. 11416-
11417, 11484, 11500-11505, 11511, 1600-2, 1610-1611-1, 1612
Underwriting interest succeeded to by Brown Harriman & Co. 11391-
11394, 11416-11417, 11441-11443, 11447, 11491-11494, 11559,
1528, 1565-1567, 1570, I6O4-I6O6, 1610-1611-1, 1612, 1645.
See aZso Pacific Gas & Electric Co. financing.
Goodwill of 11393-11394, 11492-11494, 1528, 1604-1605
Liquidation of . 11393-11394, 1528
OflBcers and directors of, subsequent affiliation.. 11391, 1529
With Brown Harriman & Co 11389-11391, 11409-11411, 1529
Originations of securities, amount 11416, 11492-11493, 1534
Originations of, and participations in security issues, and negotiations
therefor:
Securities of:
Chicago Union Station Co... 1549-1-1549-2,
1551-1, 155S-1-155S-S, 1553-4-1556-1, 1557-1558-1, 1559-
1560, 1587.
Other companies 11489, 11542, 11564, 1602-1703, 1639-2
Relation to National City Bank of New York 11414
See also Bank affiliates; National City Bank of New York.
National Distillers Products Corporation financing 1639-6-1639-7
National Steel Corporation financing 11481, 1611-2, 1658-2
Nehemkis, Counsel Peter R., Jr., correspondence concerning exhibits 11798-
11801, 1180^11812, 11822-11825, 1536, 15S8-1-1539-S, 1583,
1685, 1615, 1621, 1660, 1666-1, 1696, 1757, 1759-1-1759-2.
Newbold'Sj W. H., Son & Co 1629, 1651-2-1651-3
Newcomet, H. E. . 11441, 1565
New England Fiber Blanket Company . 1608
few England Mutual Life Insurance Co 1639-16
New Jersey General Security Company 11430
Newton, Abbe & Co - 1629
New York Central Railroad Company financing 1631,1668-1
New York Edison Co., Inc. financing J 16S1, 1646, 1658-1
New York Life Insurance Co .-■. 1639-16
New York & Queens Electric Light & Ppwer Company financing 11595,
16S1; 1846, 1658-1
Note. — Figures in ordinary type refer to text page numbers ; figures In italics are eriiibit
numbers. For pages on wtiich exhibits Appear, .see Sctiedule of Exhibits.
INDEX XXI
Page
New York & Richmond Gas Company financing I64O-6-I64O-6
New York State Electric & Gas Corporation financing 1630
New York Steam Corporation financing 1681,1 646, 1 658-1
New York Stock Exchange 11544
New York Telephone Company financing 11547,/ 631
Neylan, John 1645
Niagara Falls Power Company financing 1631, 1652-4-1652-5
Niagara Hudson Power Corporation financing 11554
Nolte, C. B - 1652-1
North American Company, iSee Pacific Gas & Electric Co. financing.
North Boston Lighting Properties financing 1 630
Northern States Power Company financing 11 587, 1647
Northern Trust Co. of Chicago 11815, 11820
Northwestern Light & Power Company financing 1640-27, 1640-35
Northwestern Mutual Life Insurance Co 1640-13
O'Brien, 1626
O'Brien, John 1633
Ohio Edison Company financing 11595, i(9Si, 1658-1
Ohio River Company 1 1430
Old Colony Corp. See First National Old Colony Corp., The.
Old Colony Trust Co. See First National Bank of Boston.
O'Melveney, Donald 1639-5
Orama Securities Corp 11412
Oregon Short Line Railroad Company 11385
Oregon- Washington Railroad & Navigation Company 11385
Originations of securities, amount, 1927-1930 1634-1535
See also under various investment banking funds.
Orr, James H 11516, 1621
Osswalt, Robert L ^ .- 11486
Otis & Co 11481, 1629
Pabst, George H., Jr.:
Activities in Chicago Union Station Co. finansing 1 1428,
11810, 11812-11817, 11824, 1538-3, 1566
Testimony before the Interstate Commerce Commission 11812-11817
Pacific Company of California 11542-11543,
1629, 1639-1-1639-4, 1639-8, 1639-13-1639-14
Pacific Gas & Electric Company:
Relation to North American Co 11489, 11495-11496
Pacific Gas & Electric Company financing 11480-11511, 1698-1614-24
Blirth & Co. '8 eflForts to obtain leadership 11480-11511, 1698-1614-24
Brown Harriman & Co., Inc.'s negotiat'ons over position in under-
writing group 11495, 11498, 11500-11502, /<500-;?,
1600-6-1600-9, 1604-1605, 1608-1610, 1611-2, 1611-6, I6I4-4
Distributing group for 1930-1931 issues , ^... 1602-1603
Tssups '
$25,000,000 4H% "F", due 1960. oflFered July 1930 11490, 1602
$25,000,000 4>^% "F", due 1963, oflFered January, 1931.. 11489-11490,
1603
$95,000,000 4% "G", due 1964, oflFered March, June and Sep-
tember, 1935 IIA9% 1698-1600-9, 1600-16, 1606-1614-17
$120,000,000 3%% "H", due 1961, oflFered March and AprU,
1936 11599, 1600-11-1600-15, 1614-18-1614-26
Lazard Freres & Co., Inc.'e eflForts to retain leadership 11480-11511,
1598-1614-26
Participations ._ 11490, 11495,
11599, 1600-14, 1602-1603, 1606, 1611-4, 1614-2, I6I4-4, 1614-7
Realignments of underwriting interests after Banking Act of 1933 11491-
W^^b, 1604, 1606
Pacific Lighting Corporation financing 1638-3, 1640-2, 1658-3
Pacific Telephone & Telegraph Company financing 11574, 1631, 1668-1
Pagen, J. Lawrence.. 11486, 11593, I648, 1655
Paine, Webber & Co 1629, 1639-1, 1639-19, 1640-24
Partnership, advantages and disadvantages of, in banking business 11400
Pask & Waldridge 1629
Note. — Figures In ordinary type refer to text page numbers « figures in italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
XXII INDEX
Poca
Patterson, 11497, 1607, 1660
Paying agencies, attempts by commercial banks to secure 1 1538-11539,
1634- 16S6, 1636-6-1636-7, 1637
See also Fiscal services.
Payson, H. M., & Co 1629
Peirce Fair & Co 11490, 1602-1603
Penn Mutual Life Insurance Co., Tiie 1639-14, 1639-1
Pennroad Corporation 1 1429
Pennsylvania Company:
Financing of . 1658-2
Guarantors of Chicago Union Station Co. security Lssues 1545,
1649-1-1549-2, 1661-1, 1554-1, 1656-1
Stock interest in Chicago Union Station Co 11430
See also Pennsylvania Railroad Co.
Pennsylvania-Dixie Cement Corporation 11480
Pennsylvania Power & Light Company financing 1630-1631
Pennsylvania Railroad Company:
Financing of . 1658-2
Guarantors of Chicago Union Station Co. security issues 11799,
11813, 11818, 11821, 1558-1, 1665
Letters concerning use of documents 11427-11428, i555-S, 255.9-3
Stock interest in Chicago Union Station Co 11430, 11812, 11818, 1545
Seg also Pennsylvania Co.
Performance record cards kept by:
The First Boston Corp 1639-23
Morgan Stanley & Co 11584-11586, 1647
Perkins, James H 11391-11394, 11494, 1528, 1606
Perry, Arthur, & Co., Incorporated . ... 1629, 1639-1, 1639-19
Phelps Dodge Corporation financing 1 1631, 1658-1
Philadelphia Electric Company financing 1631, 1658-1
Phillips Petroleum Company financing 1630, 1658-3
Pitchard, H. T 1636-7
Pittsburgh, Cincinnati, Chicago & St. Louis Railroad Co.:
Guarantors of Chicago Union Station Co. security issues 11799,
11813, 11818, 11821, 1546, 1649-1-1649-2, 1551-1. 1554-1,
1666-1, 1658-1, 1565.
Stock interest in Chicago Union Station Co ... 11430, 11812, 11818
See alto Pennsylvania Railroad Co.
Pittsburgh, Fort Wayne and Chicago Railway Company 1545
Ponting, A. E 11486
Poor & Company financing 1640-30-1640-31
Poor, Fred 1640-30
Poor's Register of Directors and Executives 11429
Pope, Allan M . 11516, 11522, 1601, 1617, 1621, 1624, 1638-1
Porter, Commissioner Claude R 11812-11821
Position in underwriting syndicate See Advertisement of security issue;
Investment banking; and various security issues.
Potter, William H.,Jr \\b\^, 1617. 1621, 1639-11, 1639-18
Preferential rights to future financing . — 11515, 1617, 1619
Preferred stocks, attitude of investment bankers toward distribution of 1 1556,
11558, 1644
Preseprich, R. W., & Co 1629
Prudential Insurance Company of America, The 1639-16
Public corporations, investment banking by, discussed 11415, 11519, 11520
Public Service Company of Northern Illinois financing 1637
Public Service Company of Oklahoma financing 1640-39-1640-44
Public Service Corporation of New Jersey financing 1649
Public Service Electric & Gas Company financing 1631
Public Utility Holding Company Act of 1935 11505-11506, 1613, I6I4-S
Pullman Company . . 1 1430
P-JUman, Inc - 11430
Purcnase group letters, acknowledgements, examples of 1547-2,
166S-S-1 663-4, 1586-2
Pu rchase group letters, examples of 154 7-1 ,
1563-1-1563-2, 1575, 1586-1, 1596-1-1696-3
NoTK. — Figures In ordinary type refer to text page numbers : figures in Itallca are exhibit
numberR. For page* on which exhibits appear, see Schedule of Exhibits.
INDEX XXIII
Pace
Pure Oil Companies financing 11583, 11587, 1647
Putnam & Co 1629
Quantrell, Ernest E 11518, 1622
Railroad Finance Investigation, See U. S. Senate Committee on Interstate
Commerce.
Ramsey, George - 11504, 1600-lS,
1612, 1617, 1620, 1638-2, 16S8-4-16S8-5, 16S9-4, 1639-6, 1639-8
Raybum Bill, See Public Utility Holding Company Act of 1935.
Rayonier, Incorporated financing 1653-2
Rea, Samuel 11437, 1556, 1558-1
Reciprocity in selection of underwriting groups 11529-11534,
11569-11604, 1629-1631, 1658-1-1658-4
Reconstruction Finance Corporation 1567, 1650
Reed, Senator Clyde M 1640-33
Registrars!] ips, efforts by commercial banks to secure 11538-11539, 1636-1
See also Fiscal services.
Reppy, R. V J6S8-2
Republic Steel Corporation financing 11601, 1658-2
Revere Copper & Brass, Incorporated financing 1601, 1644-1645, 1658-2
Reynolds & Co 1629
Reynolds, J. E 1576
Richardson & Clark 1629
Richardson. Dorsey 11522, 1624
Richfield Oil Corporation financing 1650
Ricker, Edgar, & Co . 1629
Ricter, -, I64O-IS
Ripley, Joseph P.:
Activities in securitv issues 11481-11482,
11491, 11493, 1605, 1612, I64S, 1649
Prior affiliations of 11390, 11406-11409, 11411, 11414-11415
Question of agreement with Stanley A. Russell concerning disposi-
tion of former National City Co. accounts... 11416-11417, 11484, 11500-
11505, 11511, 1600-2, 1610-1611-1, 1619
Selection as trustee under Harriman Ripley & Co. voting trust agree-
ment 11403, 1140&-11408, 11414-11415
Testimony of 11408-11417, 11425, 11426
Riter & Co 1629
Robinson, Senator Joseph T 1 1403
Rochester Gas & Electric Corporation financing 16S0
Rogan, James S 1636-3-1636-4
Rollins, E. H., & Sons Inc.:
Participations in security issues and negotiations therefor:
Securities of:
Pacific Gas & Electric Co 11490,
11495, I6OO-I4, 1602-160S, 1606, 1611-4, 1614-2, I6I4-4
Southern California Edison Co 11542, 1639-1-1639-2,
1639-4, 1639-8, 1639-10-1639-11, 1639-14, 1639-17
Other companies 1640-12, 1640-22-1640-24
Reciprocal business with The First Boston Corp 1629
Roosevelt, President Franklin D 1650
Roper, Willet C 11388, 11390, 11409, 11425, 1537
Roval Securities Corp., Ltd 1629
Royce, Donald 11486
Russell, Stanley A.:
Activities in security issues 11480, 11566, 1639-4
Directorships of ■. 11 480
Question of agreement with J. P. Ripley concerning disposition of
former National City Co. accounts 11416-
11417, 11484, 11500, 11505, 11511, 1600-2, 1610, 1611-1, 1612
Testimony of 11480-11485, 11511
See also Pacific Gas & Electric Co. financing.
Sage, Rutty & Company, Inc 1629
St. Joseph Railway, Light, Heat & Power Company financing 1630
Sales contract between issuer and underwriters, example of 1649-2
Confirmation of, example 1657-2
NoTB. — Fibres In ordinary type refer to text page numbers ; flgurea In italica are exhibit
numbers. Tor pages on which exhibits appear, see Schedule of Bxhlbita.
XXIV INDEX
Pa«e
Salomon Bros. & Hutzler _ 1651-2-1651-5
San Diego Consolidated Gas <fe Electric Company financing 11535-
11536, 1625, 16S2, 1635, 1658-S
San Francit. j Bay ToU Bridge Company financing 1 650
San Joaquin Light & Power Corporation financing 11 508
Sargent, — — 11448, 1572
Scandrett, Henry A 11428,
11809-11811, 11818, 1538-1, 1756
ScarfF, James G 11410-11411
Schenley Products Company : 16S6-S-16S6-5
SchiflF, Mortimer L 11431, 1540-1541, 1643-1544
Schoellkopf, Hutton & Pomeroy, Inc 1629
Schroder, J. Henry, Banking Corporation 11517, 1622
Schroder, Rockefeller & Co., Inc 1629
Schweppe, Charles H 11431, 11446, 1540, 1669
Scott, Bruce 11443, 1667, 1585
Scott, George 1640-16
Scranton, Chas. W., «fe Co 1629
Seager, George B 1621
Securities Act of 1933 1600-3-1600-4, 1600-10
Registration of various security issues 1 638-4, 1 639-8,
1639-11, 1640-28, 1640-32
Several responsibility of underwriters under 11426, 11575
Securities Co. of MQwaukee, Inc., The 1629, 1640-24
Securities and Exchange Commission, See Henderson, Commissioner Leon;
Nehempis, Counsel Peter R., Jr.; Securities Act of 1933; Whitehead,
WiUiam S.
Security Trust Co., Los Angeles 11542, 1839-2
Seligman, J. & W., & Co 1614-26, 1629,
1639-1, 1639-8, 1639-19, 1651-2
Severs, J. W 11809-11812
Shaw^ Aldrich & Co.. 1639-18
Shea, J. J 1604-1605
Shell Union Oil Corporation financing 1631
Shields & Co 1639-22
Shrader, F. K 1637, 1640-24
Shurtleff, Roy 1648-1650, 1655, 1656-2
See also Pacific Gas & Electric Co. financing.
Sills, Troxell & Minton, Inc 1640-44
Simpson, James 11 603
Sinclair, Harold 1650
Singer, Deane & Scriber 1629
Skelton, T. F. C, & Co 11517, 1622
Smith, Barney & Co 11439, 11591, 11822, 11825, 1563, 1629, 1648, 1651-2
See also Smith, Edward B., & Co.
Smith, Edward B., & Co.:
Participations in security issues and negotiations therefor
Securities of:
Chicago Union Station Co 11445-11447,
11449, 11452-11453, 11460-11461, 11468-11469, 11471-11474,
1569, 1574, 1576-1579, 1687-1589, 1593, 1696.
Pacific Gas & Electric Co 11495,
1600-14, 1606, 1611-4, 1614-4, 1614-7
Southern California Edison Co 11543,
1639-1, 1639-6, 1639-8, 1639-10, 1639-14, 1639-17
Other companies 11 573- 1 1 575,
1640-17, 1644-1646, 1662-4-1652-6
Reciprocal business:
With Blyth & Co., Inc 1668-2
With The First Boston Corp 1629
Succession to part of underwriting interests of First National Bank of
New York 11451-11453, 11460-11461, 11464-11406, 1576-1579, 1589
Succession to underwriting interests of the Guaranty Co 11523, 11559,
1625, 1645
See also Smith, Barney & Co.
NoTK. — Figures in ordinary type refer to text page numbers ; figures In Italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
INDEX J XV
Page
Smith, Elwood D 11409
Smith, Isaac B 1640~?,6-1640-27
Southern Bell Telephone & Telegraph Company financing. _ 11575, 1681, 1668-1
Southern California Edison Company financing ._ ._ 11525
11535-11587, 11540-11543, 1600-3, 1600-10, 1625-1326, 16SS,
1638-1-1639-23, 1658-S.
Division of, before 1930, between Harris, Forbes companies and
Harris Trust & Savings Bank 11525-11526
Participations in security issues _. _ 11542-
11543, 1639-1-1639-2, 1639-8, 1639-10, 1639-14
Profit to underwriters " 1639-17
Sales to insurance companies 1639-14, 1639-16
Selling group 1639-12, 1639-14, 1639-16, 1639-18-1639-23
Territorial distribution of 1639-14
Southern California Gas Company financing 1 658-2-1 668-3
Southern Kraft Corporation financing 11 530, 1 630, 1 668-3
Southern Pacific Company financing 1668-2
Southwestern Bell Telephone Company financing 11575, 1631, 1668-1
Sparrow, W. W. K., activities in Chicago Union Station Co. financing 11441-
11443, 11457-11458, 1666-1566, 1570-1671, 1681, 1584, 1756
"Special capital" in investment banking firms 11589-11592, 1654
Speer, G. W 11471-11472,1555
Speyer & Co 1629
Staats, William R., Co . 11542,
1629, 1639-1-1639-2, 1639-8, 1939-10, 1639-14, 1639-17
Standard Brands Incorporated financing 1 631 , 1 658-1
Standard Oil Company (N. J.) financing 1631, 1658-1
Stanley, Harold:
Activities relating to:
Chicago Union Station Co. financing 11463-11464, 1589
Consolidated Edison Co. of New York, Inc. financing 11563-11565,
11572, 1644, 1647, 1663-2
Morgan Stanley & Co.'s relations with Blyth & Co., Inc. 11487-11488,
11554^11559, 11565-11567, 11583-11594, 1644-1646, 1647,
1652-2-1653-1, 1654, 1667.
See also Morgan Stanley & Co.
Stanton, Frank M 1617, 1620-1621, 1639-11
Starkweather & Co 1629, 1639-1, 1639-19, 1640-12, 1640-22-1640-23
Stein Bros. & Boyce 1629
Sterling Iron & Railway Co 11412
Stern, David B 1640-24
Stern, Lawrence, and Company Incorporated 1629, 1640-24, 1640-44
Stern, Wampler & Co. Inc '. 11799, 11807, 11814, 11816
Stevens, Eugene M 11492-11493, 11502, 11550, 1604-1605, 1662-1-1652-6
Stewart, Percy M.:
Activities in security issues 11449, 11455-11457, 1673, 1581, 1584
Testimony of 11456-11457
Stewart, Robert M - 11409
Stone & Webster and Blodget, Inc. :
Participations in security issues and negotiations therefor 1 1543,
1639-1, 1639-11, 1639-:14, 1639-17, 1640-12, 1640-22-1640-24,
1640-44.
Reciprocal business with The First Boston Corp 11 520- 11521,
11534-11535, 1628, 1629
Stone & Webster, Inc . 11518, 1622, 1639-15
Stone & Webster Investing Corp 1621
Stout, Ehner W . 1636-3-1636-5
Strather, Brogden & Co . 1629
Stroud & Co., Inc 1629
Stuart, Harold L.:
Activities in security issues ■. 1640-24
Bid on Chicago Union Station Co. financing 11808-11810
Studebaker Corporation 1 1429
Note. — Figures in ordinary type refer to text page numbers ; figures in Italica are exhibit
numbers. For pages on which exhibits appear, see Scliedule of Exhibits.
XXVt INDEX
Sturgis, Henry S.: Pae«
Activities in Chicago Union Station Co. financing 11443-
11445, 11452, 11461-11466, 1B68, 1589, 1593
Directorships of 11429-11430
TestiEQony of 11429-11478
Successions to underwriting Interests:
Field, Glore & Co. to interests of Continental Illinois Bank 11447-
11451, i570-/57^
The First Boston Corp. to interests of Harris, Forbes companies 11513-
11516, 1616-1620, 1625
Interests of Harris Trust & Savings Bank. 11524-11526, 11548, 1625, 1640-89
Interests of National City Co. :
Succeeded to by Brown, Harriman & Co 11391-
11394, 11416-11417, 11440-11443, 11447, 11491-11404, 11559,
1528, 1556-1567, 1570, 1604-1606, 1610-1611-1, 1612, 1645.
Claim of others to business 11417, 11484, 11492-11493,
11500-11505, 11511, 11550, 1600-2, 1604-1605, 1611-1, 1612
Lazard Freres & Co., E. B. Smith & Co., and White, Weld & Co., to
interests of First National Bank, N. Y 11451-
11453, 11460-11461, 11464-11466, 11468, 1576-1579, 1589
Morgan Stanley & Co., to interests of J. P. Morgan & Co 11462-
11471, 11554, 1589-1590, 1593-1695, 1643-1644
Edward B. Smith k Co., to interests of Guaranty Co. of N. Y 11523,
11559, 1625, 1645
See also Banking Act of 1933, realignments of underwriting interests
Sullivan k Cromwell 11506, 11534, 1600-3, 1613, 1638-2, 1638-5, 1696
SulUvan, Winthrop E 1617, 1621
Swan, .Joseph R 11446, 11523, 1569, 1625
Sweet, Oliver E 1567, 1756
Sweeiey, Eustace B 1554-2
Sylvester, Horace C, Jr 11390, 11409-11410, 11500, 1610
Tenney & Co 1629
Texas Corporation financing 1634
Thomas, Joseph A 1636-3, 1636-5
Tide Water Associated Oil Company financing 11601, 1658-2
TiflFt Brothers 1629
Tighe, Lawrence 11 390
Toledo Edison Company financing 1630, 1658-3
Transfer agencies, efforts by commercial banks to secure... 11538-11539, 1636-1
Transportation Act of 1920, interlocking directorate provisions:
Question of applicability to Field Glore & Co.'s participation in
Chicago Union Station Co. financing 11447-11451,
11455-11459, 1583-1585
Quoted 11456-11457,^55:8-^
Trask, Spencer, & Co 1629
Travelers Insurance Company 1639-16
Trott, D. M 1638-2
Trust companies, originations of securities, amount 1534-1535
Trusteeships, efiforts by commercial banks to secure 1635, 1636-6-1636-7
Tucker, Anthony & Co 11518, 1622. 1629, 1639-19, 1640-24, 1640-44, 1696
Turner, Arthur C 11516, 1617, 1621
Turner, J. J .11435-11436, 1549, 1551, 1554
Underwriting, documents used in, See Investment banking, documents
used in.
Underwriting groups, factors considered in selecting members 1 1442-1 1443,
11508, 11541-11544, 11569-11572. 1652-4
Historical relationship 11 569- 1 1572
See also Chicago Union Station Co. financing.
Industrial specialization 11569, 11598
Personal relationships 1 1388-1 1395 ,
11416-11417, 11486-11495, 11503-11505, 11553-11559, 11562-
11567, 1606, 1643-1644, 1652-1-1652-6.
Reciprocity.-- 11529-11533, 11569, 11595-11603, 1629-1631, 1658-1-1658-4
Wishes of issuing corporation 11442-11443, J 1467-1 1468,
11542-11543, 11601, 11603, 1590-1592. 1658-1-1658-2
Note. — Plijures In ordinary type refer to text page numbers ; figures In ItAllcs are exhibit
numbers. For pages on nbich ezbibits appear, see Schedule of Exhibits.
INDEX XXVII
Page
Underwriting groups, permanence of 11473-11476,
11507-11508, 11509-11577, 1611-S
See also Chicago Union Station Co. financing.
Union Oil Company of California financing 1638-4, 1658-4
Union Pacific Railroad Company 11385, 1658-2
United Aircraft Corporation financing 11481
United Air Lines Transport Corporation financing 1 1481
United Corporation 11 565
U. S. Senate, Committee on Banking and Currency 11416, 1635
U. S. Senate, Committee on Interstate Commerce, Railroad Finance
Investigation 1 1472
United States Steel Corporation financing 1631, 1658-1
Utilities Power & Light Securities Company 1 636-7
Virginian Railway Company, The financing 11481
Voting trust agreement for stock of investment banking firm, example of.. 1533
Walker, Burnett 11523-11524, 11535-11536, 1625, 1632, 1638-3
Walker, Elisha 11587-11589, 1654
Walker, G. H., & Co 1629
Wall Street Journal 11415-11416, 1534
Ward, Albert 11812-11817
Wasserman & Co 1621
Weeks, Robert 1640-11
Weisheit, Karl 11446, \l^%^, 1569, 1594
Weld, Francis M 11432
Welldon, Samuel A 1 1453-1 1454, 1576-1578
Wenzell, Adolphe H 1617, 1620-1621
West Indies Sugar Corporation 11407
West Penn Power Company financing 1630
West Texas Utilities Company financing 1630
West Virginia Coal & Coke Coiporation 11430
Westchester Lighting Company financing 1631, 1646, 1658-1
Western Union Telegraph Company 11385
Wetmore, Horace O 11486, 1648
Wheeler, Senator Burton K 11427
White, Alexander 11453, 1577
White, J. G., & Co 11406
White, Weld& Co.:
Deposits with J. P. Morgan & Co 1651-2
Holdings of The First Boston Corp.'s stock '.'11518, 1622
Participations in security issues and negotiations therefor:
Securities of:
Chicago Union Station Co 11432,
11821, 11825, 1544, 1577, 1579, 1588-1-1588-2, 1589, 1593,
1696-2, 1597-1-1597-8.
Southern California Edison Co 1639-1,
1639-9-1639-11-1639-14, 1659-17
Succession to part of underwriting interest of First National Bank of
New York 1 1452-1 1453, 1578-1577, 1579, 1589
Whitehead, William S 11525-11626, 1626
Testimony of 11439
Whiting, Weeks & Knowles, Inc 1639-1, 1639-19
Whiting, Weeks, & Stubbs Incorporated 1640-22-1640-23
Whitlock, A. N 11818
Whitney, George 11487, 11551-11555, 11563-11565, 1669, 1642, 1644, 1647
Wiggln, Albert H 11517, 1622
Wilde, Bertram M 11517, 1622
Willcox, Westmore 1650
Williams, Harrison 11486, 11509, 1614-23-1614-26
Willkie, Wendell L 11596, 1658-1
Wilson, Herbert T. C 1617, 1621
Wing, Daniel G 11514, 1617
Wisconsin Company, The . 1640-12, 1640-22-1640-23, 1651-2
Wisconsin Gas & Electric Company financing 1630, 1658-S
Wisconsin Michigan Power Company financing 1630, 1658-3
Note, — Figures In ordinary type refer to text page numbers ; figures In italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
XXVIII INDEX
Pace
WiBconflin Power A Light Company financiug 1640-^4
Wiaconsin Public Service Corporation financing i6S0, 1639-15
Witter, Dean, & Co.:
Deposits with J. P. Morgan «fe Co 1651-2
Participations in security issues and negotiations therefor:
Securities of:
Pacific Gas & Electric Co 11495,
1600-14, 1606, 1611-4, 1614-2, 1614-4, 1614-7, 1614-21
Southern California Eklison Co 11543,
1639-1, 1639-8, 1639-10, 1639-14, 1639-17
Other companies 11574, 1650
Participations in issues managed by The First Boston Corp 1629
Wood, Harold E 1640-21
Woods, George D.:
Activities relating to financing of:
Central lUinois Electric & Gas Co 1 640-5-1640-1 1
Southern California Edison Co 1638-2-1638-4,
1639-4, 1639-6-1639-10, 1639-17-1639-18
Activities, other 11516, 1600-9, 1617, 1620-1621
Stock interest in Harris, HaU & Co 11527, 1696
Testimony of_ 11502-11505, 11511-11546
WooUey, Knight 11386
Yazoo and Mississippi Valley Railroad Company, The 11385
Young, John M -' 11593, 1655, 1656-2
Youngstown Sheet & Tube Company, The, financing 1658-2
Note. — Figures in ordinary type refer to text page numbers ; figures in Italics are exhibit
numbers. For pages on which exhibits appear, see Schedule of Exhibits.
o
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