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Full text of "Investigation of concentration of economic power. Hearings before the Temporary National Economic Committee, Congress of the United States, Seventy-fifth Congress, third Session [-Seventy-sixth Congress, third Session] pursuant to Public Resolution no. 113 (Seventy-fifth Congress) authorizing and directing a select committee to make a full and complete study and investigation with respect to the concentration of economic power in, and financial control over, production of goods and services .."

Northeastern University 




School of Law 
Library 



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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 

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 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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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 T